The Genius Act legalizes private stablecoins backed by cash, treasuries, and gold, potentially allowing major companies like Amazon or Walmart to issue their own digital dollars, bypassing banks and their fees.
Stablecoins are seen as the most significant threat to the crony banking system in 50 years, potentially disrupting traditional financial institutions and their business models.
The legalization of private stablecoins undermines the case for a government-run cryptocurrency (CBDC), which could potentially be used to monitor spending and control money.
The Genius Act mandates same money laundering rules for stablecoins as banks and prohibits paying interest on stablecoins to prevent complete disruption of the banking sector.
Crypto has gained significant political influence, enabling it to challenge the established banking system, with the Genius Act representing a major legislative victory for the cryptocurrency industry.
Gold is historically undervalued from a monetary perspective, with its price increasing only 294% since 1980 compared to the 3,500% surge in the US monetary base.
The gold price has not kept pace with the massive expansion of US federal debt, global money supply, and median house prices since its secular highs in 1980 and 2011.
Central banks have purchased over 3,000 tons of gold in the past three years, driven by a loss of trust in the international monetary system and a desire to diversify reserves.
Gold’s price is expected to rise as the US dollar weakens, potentially igniting the next leg of gold’s bull market.
Trump-era trade policies and potential devaluation efforts could further drive the weakening of the US dollar, benefiting gold prices.
The US dollar index currently trades at 99, compared to 86 in 1980 and 75 in 2011, indicating potential room for dollar depreciation and gold appreciation.
The dollar’s dominance stems from its efficiency as the language of business, not from US military force or mandate, with oil pricing in dollars making it a de facto global currency.
Triffin’s dilemma led to the US delinking the dollar from gold in 1971, creating the Eurodollar market where global trade in dollars flourished without the gold exchange “put option”.
The world is trapped in a “Chinese finger trap” of dollar dependence, making it impossible to leave without painful economic consequences due to the network effect and existing US dollar debt.
The “permanent portfolio” strategy allocates 25% each to cash, equities, real estate, and commodities like gold for consistent returns and minimal drawdowns.
Compounding is crucial for long-term wealth growth, but drawdowns can derail it, necessitating a diversified portfolio with uncorrelated assets to offset declines.
Gold has historically performed well over 20-year periods, serving as a crisis-resilient asset and portfolio foundation.
Hedging strategies like options, tail risk hedges, and uncorrelated assets provide insurance against unexpected losses and credit crises.
Currency pegs like the Hong Kong dollar are artificially stable and cheap to hedge against, but breaking them can yield thousands of percent returns after decades of stability.
The “dollar milkshake theory” warns that unexpected dollar strength is the biggest risk, potentially causing global economic disruptions.
Current dollar sentiment is bearish, but a rapid rise to 105 could be bad for portfolios while benefiting risk assets if it falls.
Monetary Metals’ gold yield products offer a way to own gold and earn a yield on it, potentially developing an alternative to traditional fiat banking.
The Santiago Capital team, including Brent Johnson, provides insights through Twitter, Substack, and a weekly YouTube show called “Milkshakes, Markets, and Madness”.
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