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January
02
2021

Is 2021 the Death of Fiat Currency?
Marin Katusa

Do you have FOMO yet?

If you didn’t put your cash to work in 2020, then you’re fighting the tide ignited by the Fed.

Never in the history of the world has so much money been printed.

Plus, if you’re an accountant and love seeing balanced books, you’ve likely never had your eyelids twitch more than this year.

The reason is simple: countries have seen their balance sheets decimated deep into the red this year.

Countries like Canada have seen their Debt-to-GDP ratios jump from 89% to 115%.

The European Union is forecast to hit 102%. And the United States is currently at 131%.

And depending on whose numbers you believe, total Chinese debt to GDP is forecast to go as high as 318%…

The New Era of Helicopter Money

During the 2008 global financial crisis, Fed Chairman Ben Bernanke famously earned the nickname “Helicopter Ben” as the federal asset relief programs set the course for enormous money printing and fiscal aid.

In 2020, helicopter money took on a whole new meaning.

This past year alone, the United States printed 21% of all U.S. Dollars in existence. Look at the unprecedented surge in fiat currency…

It began with a liquidity crunch back in March, ignited by the Russia and Saudi Arabian oil price war, and was followed by the eruption of the coronavirus pandemic.

Economies and global trade went to a complete standstill.

It’s these types of events that alligator investors like myself and other major financiers with capital – waiting for the moment to deploy en masse – salivate at.

Long-time readers saw this coming…

Governments are not shying away from negative rates and printing money. I call these Financially Transmitted Diseases and it’s something that I’ve pounded the table on for a long, long time.

• How much of that money is making it into bank accounts and circulation, you ask?

Good question…

Below is a chart which shows the increase in the M2 money supply. M2 is a broad money supply measure which includes cash, checking deposits and easily convertible near money.

• The key takeaway? Everyone is printing money, and fast. 

And there’s no going back.

The Death of Fiat and Rise of Assets

This new world backed by Modern Monetary Theory (MMT) will fuel a bonanza of ultra-cheap money.

And we’re seeing it in real time.

A stock like Tesla seemed expensive at $80 (post-split) at the beginning of 2020. But two factors led to speculative excess on a scale that no one’s seen before:

• The entry of a massive new generation of investors (Millennials and Generation Z) thanks to platforms like Robin Hood, and
• Trillions of new dollars and currency units chasing a home.

With most people working remotely and stuck in their houses, that money went into online shopping and stocks. And there are no signs that this is slowing down.

• As a result of this incredible money printing in the United States, the U.S. dollar is under siege. It currently faces its largest short position since 2014. 

This means that investors are betting against the US Dollars at levels not seen in years.

Below is a chart which shows the net positioning of non-commercials from the CFTC’s Commitment of Traders (COT) report. The wall of shorts has been aggressively piling on all year.

This weakness in the dollar has reverberated through the markets and set the course for real assets to perform exceptionally well.

Explosive Gold and Silver Breakouts

I cut my teeth for 2 decades in the resource sector and let me tell you, there is absolutely no mania like a gold and silver mania.

• What we saw in 2020 is just a prelude to what I see coming in the Gold and Silver markets.

After a multi-year consolidation period, gold took the world by storm in 2020. This year gold took out its old high from 2011, and briefly surpassed $2,000 per ounce.

While gold has taken all the fanfare this year, silver has quietly been building momentum and is still well below its 2011 record high.

Silver tends to be much more volatile than gold. That’s why silver manias are truly wild and can deliver staggering returns.

You think Bitcoin returns are huge?

You’ve never seen a junior silver stock explode higher in a silver bull market.

And we’re just in the early days of a major silver bull market…

You’re going to want to fasten your seatbelt on the way up and even tighter on the steep chops down. Below is a chart showing the historical returns of silver’s bull markets.

As you can see, silver has A LOT of room to run much, much higher.

The Death of Fiat: Rotating into Bitcoin, Ethereum and Cryptocurrency

While the shorts piled on the U.S. Dollar, those looking for a global devaluation bet went not just to gold and silver, but to Bitcoin as well.

Bitcoin smashed through previous highs of $19,000, breaching $24,000…

For good reason, the Bitcoin rocket ship has every crypto bug shouting from the rooftops. Yet, no one is hearing them…and we can see that below with the trends in search activity through Google search.

You can see that search interest is 80% lower today than in late 2017, even though prices are higher now than they were then.

Maybe it’s because many retail investors got burnt in the downswing and have already written Bitcoin off.

Yet the price of Bitcoin has made an incredible comeback and noteworthy funds and companies are either already buying it, or building the groundwork to buy it.

• Square, one of the world’s largest digital payment processors, bought $50 million worth of Bitcoin and have their own dedicated cryptocurrency team.
  
  
• Grayscale, the largest digital asset manager in the world, reported inflows of over $1 billion in the third quarter of 2020. Currently it has over $6 billion under management.
  
  
• And billionaire hedge fund managers like Paul Tudor Jones have made significant bets on Bitcoin as hedges against inflation.

But DO NOT Count Out the Almighty Dollar Just Yet…

The U.S. Dollar dominates as a payment currency for global trade with a 79.5% share of inter-regional currency usage, by value.

If this past March was any indication, the world still needs U.S. Dollars.

In a race to zero, the U.S. Dollar is still the best option.

• Personally, I hold a large percentage of my cash position in U.S. Dollars.

I always call myself a profit bug because I’m not tied to a single asset, currency or mandate.

My job is to find unique investments that have incredible upside potential.

The nominal price rise in assets is continuing a trend set in motion decades ago.

• Could 2021 be the start of the new commodities super cycle? 

What I do know for certain is that I am actively putting my money alongside my subscribers into investments with fantastic risk-reward profiles.

These aren’t dinky, illiquid juniors that have no real assets or management without skin in the game.

These are companies that trade real volume, have world class assets and management are big time owners of their own stock.

Our hit list of stocks keeps growing and we’re always on the hunt for next deal.

Looking back 3 years from now, you might wish you owned more assets.

And for now, and the foreseeable future, all of those assets are denominated in U.S. Dollars.

Here’s to a wild year and a safe, healthy and prosperous 2021!

Marin

 

Katusa Research is an independent investment research firm founded by professional investor Marin Katusa.

Starting from scratch, Marin has built a large personal fortune… all through his ability to find great investments. During his career, he has sat on the board of a public company, arranged over $1 billion in financings, and written the New York Times bestselling book, The Colder War.

Marin’s insight has been featured in The Wall Street Journal, The New York Times, Bloomberg and CNBC. He has traveled over one million air miles visiting over 500 resource projects in more than 100 countries.

Unlike some financial firms, Katusa Research does not accept money from companies in return for coverage. We turn down all offers of kickbacks, brokerage commissions, and referral fees. We have no hidden agenda and we are not for sale. We work for our subscribers, not advertisers. And the investment guidance we provide is the guidance we follow ourselves.

Katusa Research is committed to helping individual investors learn how to navigate the complex investment world. To that end, we’ve created a large amount of educational material that can help anyone become a smarter, better investor. To access these valuable materials for free in Katusa’s Education Center, click here.

Katusa Research created a Market Intelligence Center where you’ll find gold stock screen results, gold buyout candidates, oil stock screen results, and other useful data you can use to generate natural resource investment ideas. This data is free to anyone, so feel free to send to a friend. (Note that this data is for informational purposes only and it does not provide or constitute investment recommendations.) To access Katusa’s Market Intelligence Center click here.

 

 

 

 

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