Joe Withrow, Author at Zenconomics

Bitcoin’s Morality is the Killer App

“No man sews a piece of new cloth into an old garment, because that new cloth will pull away from the garment, and the tear will be made worse. Neither do men put new wine into old wine-skins, or else the skins will burst, the wine will be spilled, and the skins will be ruined.

Men put new wine into new wine-skins, and both are preserved.”

That’s a quote from Jesus of Nazareth. He was trying to explain why his proposed system of morality was incompatible with what came before it.

Jesus’ model of morality is the golden rule. On the surface it’s very simple. But there’s a big nuance in there that I suspect a lot of people miss.

That nuance is this: Jesus defined an entirely new way of judging right and wrong.

Previously, laws and commandments from authority figures determined what was right and what wasn’t. With the Jesus model, a person’s actions towards others are what matter.

By treating others in ways that they would not like themselves, people condemn their own actions. And by treating others in a manner that they would like themselves, people justify their actions.

As simple as this model is, it threatened to completely upend the established hierarchy in Jesus’ day. That’s because it was simple, easy to understand, and better. For everybody.

Now I know we may be wondering – what in the world does this have to do with Bitcoin?

How to Profit From the Crypto Bank Run

Old fashioned bank runs are remarkable to behold.

We got a glimpse of one back in 2008. There was all kinds of chaos and excitement for a few days. Iconic investment bank Lehman Brothers even collapsed in a heap.

But then the U.S. Treasury and the Federal Reserve (the Fed) stepped in to bail everybody out. Show over.

Well, last week one of the world’s largest cryptocurrency exchanges, FTX, gave us another show.

To set the stage, FTX was handling billions of dollars in crypto transactions every day. This drove over $1 billion in revenue last year.

And as a company FTX was valued at $32.5 billion at the start of last week. That’s thanks to pulling in nearly $2 billion in venture capital investment since its founding in 2019.

And look at who invested in FTX…

Sequoia Capital… Tiger Global Management… SoftBank… Ontario Teachers’ Pension Plan… Singapore’s sovereign wealth fund… Tom Brady and his former wife… Steph Curry… the list goes on.

These are all people who should have known better.

What is Passive Income?

Yesterday we observed how wages, adjusted for inflation, have stagnated since 1971. And we suggested that the answer is to fill in the gap with passive income.

But what exactly does that mean? What is passive income?

Simply put, passive income is money that we make without constantly working for it. That’s it. It’s the holy grail of personal finance.

That said, passive income is a buzz word that’s thrown around everywhere these days. And there are a lot of misconceptions out there.

When we talk about passive income, we’re not talking about a way to make money without effort or investment. That’s impossible… outside of criminal activity and perhaps politics.

Remember, there’s no such thing as a free lunch.

Why Passive Income is Critical

“Your dollar will be worth just as much tomorrow as it is today,” President Nixon proclaimed on television with a straight face.

“The effect of this action, in other words, will be to stabilize the dollar.”

The date was August 15, 1971. President Nixon just announced that he was closing what was known as the “gold window”. This was the system through which foreign countries could redeem U.S. dollars for physical gold upon demand.

The gold window was a fixture of the Bretton Woods System of 1944. That was the international agreement which established the U.S. dollar as the world’s reserve currency.

What we’re talking about here is trust. The idea was that if the U.S. started printing too much money, the rest of the world could trade their dollars in for gold.

Makes sense, right? Nobody wants to hold a currency that can be created from nothing at will.

President Nixon got rid of this restraint on money-printing in 1971. The story behind that move is very nuanced. But what followed isn’t…

The Rules of Money Just Changed… Forever

2022 is the year the rules of money and finance changed.

If we look at a chart of the S&P 500 going back to the early 80s, it’s only gone up over time.

Sure there were plenty of dips. But for the last forty years we could buy a simple mutual fund or index fund and two years later we would have made money. Fifteen years later we would have made a lot of money.

Meanwhile, if we were to overlay a chart of the 10-year Treasury rate – which is a proxy for interest rates… It’s only gone down over the last four decades.

This dynamic – stocks going up, rates going down – is largely thanks to the Federal Reserve (the Fed). It’s had a hand in both. Through loose monetary policy.

But the game’s over.

The Biggest Financial Development Nobody Noticed

We’re at an inflection point in history right now. Things aren’t going back to how they used to be.

I don’t think the financial media understands this yet. But in hindsight, the bread crumbs were right there in plain sight. It comes down to an arcane change at the core of our financial system.

This is the first year in which the Secured Overnight Financing Rate (SOFR) went live across the board.

I bet very few people out there even know what this is. And of those who do, I doubt many understood SOFR’s significance.

SOFR is a benchmark interest rate for dollar-denominated loans and derivatives.

We don’t need to go down a deep rabbit hole on this. What’s important to understand is that the interest rates for all loans in the U.S. are now influenced by SOFR.

The London Interbank Offered Rate (LIBOR) used to hold that privilege. Before this year those who controlled LIBOR could influence interest rates in the U.S.

And that means the Fed did not previously have full control over U.S. monetary policy.

SOFR changed that.

That’s why the Fed’s been raising rates aggressively this year. Even though everybody has been screaming at them to stop.

And it’s why they will keep going. The Fed is playing the long game here. It’s all about self-preservation.

What to do as the world burns

Everywhere we look, it seems like the world is falling apart.

The stock market is crashing. Consumer prices are ballooning. Interest rates are on the rise.

It certainly feels like a recession is bearing down upon us. And it’s hard to feel secure about our finances in this environment.

Everywhere we turn there’s another reason to worry. Stuffing money under the mattress now seems like a good idea to many.

The good news is there is a solution.

Getting Banned From the Hospital’s Rehab Unit

Occasionally I sit back and reflect upon my life’s milestones.

Graduation. Marriage. The birth of my daughter… then my son. These were incredibly formative events.

And I just added another milestone to the list. Getting banned from the hospital’s rehab unit.

I was visiting a family member who just had a stroke last week. Upon entering the facility, the person at the front desk informed me that masks were required. And he asked me to take a mask from a box on the counter.

So I did. And then I made my way to the elevator and up to the seventh floor.

It turns out the floor’s nursing station is right there as you get off the elevator. And the director happened to be on duty.

She was talking with somebody as I made my journey towards the room. But she immediately called out as soon as she saw me. Sir, you need to have a mask.

I smiled and called back. “It’s okay – I do!”. Then I held up the mask I was carrying in my hand.

Sir, you must put the mask on! She snapped back.

I repeated that it was okay as I walked around the corner. I figured that would be the end of it.

Wrong.

What Strokes Can Teach Us About Life

I spent a lot of time in the hospital last week.

A family member endured a stroke, and my duty was to be there for him. My job was to offer support and encouragement.

I saw this as a one-sided affair at first. But I quickly realized this experience had a critical lesson to teach me. That’s what I want to share with you today.

Strokes strip people of everything they take for granted.

Speech. Eye-hand coordination. Basic motor skills. Autonomy… Strokes reveal just how precious these things are. We can lose them at any time without notice.

Strokes also strip away all those layers of social conditioning that gradually build up on us over time.

We all are conditioned to think and act in certain ways, depending on the situation and the people we are around. That’s our social conditioning. It’s about conforming to preset expectations.

Well, that all fades away when you’re lying in a hospital bed unable to speak or move.

At least that’s my observation. What’s left is purely the human spirit that exists underneath it all. It’s beautiful to behold.

To me, this is a stark reminder of what’s truly important in this life.

Family. Friends. Shared experiences. Integrity of character. I believe these are the things that matter in the end.

But there’s one problem here…

What I Learned From a Saturday in the ER

I spent all day in the emergency room (ER) last Saturday.

Not for myself. A family member endured a stroke, and I wanted to be there for moral support.

As anyone who has been through such an experience knows, there are lots of lessons hidden in this type of thing. I’m still working through some of them.

Today I want to share with you what jumped out at me very quickly in the ER. It isn’t pretty. But I think there’s a valuable insight we can take away from this.

To set the stage, there aren’t actual rooms in the ER. Patients have their own spaces separated by shower curtains.

So you hear everything going on around you. And when you’re there for over six hours, you pick up on quite a bit. Here’s what jumped out at me…