Why is Bitcoin doomed to be worth millions? Because we are entering a hyperinflationary era.
Inflation and debts
For the first time in a long time, advanced nations have had the bitter experience of double-digit inflation.
The cause is the disruption of global supply chains and the Western embargo against Russia, the world’s leading energy supplier. Without forgetting the money printing press which allows you to go into debt to wipe the dishes. So much new money which acts like a ratchet effect on prices.
Translation : “These 33,500 billion in public debt will become 50,000 billion. And this 50,000 billion will become 100,000 billion. But since real GDP will not match this exponential increase in debt, the only way to pay the interest is to simulate this productivity via monetary expansion [dette] and inflation. And so, in the end, it’s you who will pay the bill.”
But what exactly is productivity? This is the relationship between production and the means necessary for its realization (humans, energy, machines, raw materials, loans [capital], etc). Productivity is important because it allows wages to keep up with inevitable inflation.
The system of money creation through debt with interest is a ponzi by definition. The debt MUST increase for the building to stand up financially. Everything is fine as long as we can increase productivity as fast as debt. But then more and more machines are needed. And whoever says machine, necessarily says energy.
Black gold, pillar of civilization
Bitcoin is a hedge against inflation that emanates from the scarcity of inexpensive fossil fuels (coal, oil and natural gas).
The first and most obvious use of fossil fuels such as oil is the manufacture of gasoline and diesel. Without these fuels, our entire civilization would collapse.
Remove oil and cities immediately stop being supplied with food. More than 600,000 trucks crisscross France and their work is equivalent to that of 2.4 billion humans…
Not to mention the fact that most people in developed countries need gasoline to get to work. Hence the sudden goodwill in Europe for teleworking, by the way…
Without the giants of the seas who burn between 140 and 300 tonnes of fuel oil per day, there would no longer be globalization. The decline in oil will be accompanied by inflationary supply disruptions.
Aside from gasoline, our precarious civilization needs at least four other things: cement, steel, plastic and ammonia. Each year, we manufacture 250 kg of steel, 500 kg of cement and 50 kg of plastic per earthling. Nothing would be possible without fossil fuels.
We need cement and steel for construction projects (dams, high voltage lines, wind turbines, machines, etc.). Plastic is used in the manufacture of almost everything. Ammonia makes it possible to produce nitrogen fertilizers without which we could not feed eight billion people.
Fossil fuels are essential to our civilization. However, we are already starting to run out of it. Of the forecasts serious estimates that oil production will be halved by 2050…
Peak
The advent of energy-intensive machines created the bulk of productivity. The mechanical and thermal force enabled by fossil fuels has significantly increased physical flows per person. These flows of oil, gas, coal, copper, iron, sand, lithium, cobalt, cereals, cotton, electrons and information have profoundly modified human life.
Unfortunately, productivity growth, which increased at an average annual rate of nearly 2.5 percent between 1950 and 2000, has increased only 0.50 percent on average over the past five years.
The primary reason for this slowdown is the growing difficulty in extracting more and more energy than the previous year. The first energy is oil, the peak seems well and truly crossed. If you’ve never heard of it, it’s when the amount of oil extracted peaks before decreasing year after year.
A peak is considered to have passed after five years. This will be the case for oil globally next month. Overall, oil and gas discoveries are at their lowest level since 75 years old.
It is no coincidence that the growth of global debt has soared alongside that of the price of a barrel:
It is also no coincidence that the 2008 crisis was triggered exactly at the same time as the peak conventional oil (that which is inexpensive to extract). At the time, the price of a barrel had flirted with $150.
As energy becomes more and more expensive to come out of the ground, we will inevitably reach hyperinflationary production peaks.
Energy is the main driver of inflation
The United States reached peak conventional oil production in 1971. Until new fracking technologies allowed it to exploit source rock oil. This “miracle of shale oil allowed the United States to get out of the rut by once again becoming the world’s leading oil producer (13 million barrels per day).
However, this boom appears to be short-lived. This oil is not as abundant as conventional oil. Above all, its extraction costs more!
Technically, we will never run out of oil. The problem is that the remaining reserves will be too expensive to operate. The fruits of the lower branches have been plucked, so to speak.
Of course, oil is not the only fossil fuel. There is also the coal and natural gas. But they too will reach their peak production in the decades to come.
It is important to understand that humanity has consumed more fossil fuels in the last 30 years than in all of previous history. At this rate, it is certain that there will not be enough for everyone within thirty years, or even much sooner.
Unfortunately, global demand for energy is increasing unabated. Just like debt. The headlong flight into debt is closely linked to the increase in energy extraction prices, which undermines productivity.
There is no miracle. Money creation faster than production results in inflation. But no one gets into debt for fun. It is above all a symptom of a physical pitfall. All states, whatever their political color, prefer debt to recession.
Renewable energies, you say? Problem is, we cannot use renewable energies to produce cement, steel and ammonia. Worse, we cannot build wind turbines and solar panels without fossil fuels.
From green mirage to Bitcoin
We need oil to extract the materials needed to create wind turbines and solar panels. It’s not bicycles, but trucks and diesel-powered boats that transport materials from mines to factories, then wind turbines and solar panels to their destination.
Parts of solar panels and wind turbines are literally made from petroleum (plastic). Wind turbine blades are oil. Most electric vehicles are composed of 50% of plastic. A Tesla is at least three barrels of oil for its various parts. Much more if we count the energy needed to manufacture the battery.
This is the sad irony of the so-called green energy revolution. If we stop using fossil fuels, we will also lose wind and solar farms that need to be rebuilt every 20 to 30 years.
To create computers, solar panels, electric vehicles, and all kinds of other technology, we need metals. Europium, indium, manganese, scandium, neodymium, terbium, and many more.
One of the most important metals for the “energy transition” is lithium. This has the particularity of being the least dense of the metals (3 protons). It stores a lot of energy relative to its mass. Hence its use in electric car batteries.
Renewable energies only provide 11% of global energy consumption (including 3.3% from solar and wind). Hard to believe that we will manage to do without the 84% of primary energy coming from fossil fuels without inflation.
Faced with physical limits to growth, humans will seek, as always, to protect their small fortune. And we haven’t talked about the Third World War which is upon us… Bitcoin will be the gold of the 21st century.
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