Pakistan, Taiwan, China Need Bitcoin – Bitcoin Magazine
“Fed Watch” is a macroeconomics podcast, true to bitcoin’s insurgent nature. In each episode, we question mainstream and Bitcoin narratives by examining current events in macroeconomics from around the world, with an emphasis on central banks and currencies.
On this episode of “Fed Watch,” CK and I went through several charts, providing market updates on bitcoin, the dollar (DXY), and the Hong Kong dollar. We then examined the worsening situation in Pakistan and asked the question, is Sri Lanka next? Finally, we discussed the Taiwan/China situation and I read several key excerpts, one from Chinese Foreign Minister Wang Yi and the other from think tank expert Wang Wen.
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Bitcoin and other currencies
We opened by looking at a weekly chart of bitcoin. We’ve done this for the last few shows because it’s a good way to anchor our conversation in bitcoin. As you can see below, the price has been very stable, sitting on the fence relative to the volume-for-price indicator on the right.
Bitcoin price has been very stable
If we zoom out, the last period of weekly candles corresponding to today was back in September/October 2020, right before the monster rally from $10,000 to $40,000. Of course, we’re not saying it will happen again exactly like this, but it’s possible.
The Bitcoin price today is similar to when it experienced a monster rally in 2020.
The dollar index (DXY) is the other major currency we took a look at. I think it’s important to check the dollar almost every episode because it’s the main competition for bitcoin.
It seems to have peaked for now, but there are no signs that it will crash. Instead, it is most likely that the dollar will form a new elevated area above 100 in the next few years. This is similar to how it formed a new higher area from 2015 to 2021.
Source for the images above: bitcoinandmarkets.com
I would add that a strong dollar is not bearish for bitcoin. Perhaps, initially, a strong dollar is correlated to lower bitcoin, but after the dollar stabilizes in a higher range, that’s when bitcoin has traditionally rallied.
Below is a screenshot from the website of the Hong Kong Monetary Authority. Every month it publishes statistics on its foreign exchange reserves, which it uses to stabilize the peg. Last week I speculated that maintaining the Hong Kong dollar (HKD) is quickly depleting reserves. However, according to this press release, it only used a little more than 1% of reserves in July to maintain the bond. That means HKD is likely to be able to keep the plug (if it wants to) for several years.
Source: HKMA
Pakistan on the brink
The development situation in Pakistan has many things in common with the recent collapse in Sri Lanka. In the podcast I pointed to i5w engagement with the World Economic Forum (WEF). Pakistan has received hundreds of millions of dollars in funding to revamp its agricultural sector and add national parks.
Source: Twitter
Another similarity between Pakistan and Sri Lanka is the important role that Chinese funding has played over the past decade. Sri Lanka lost control of its major port because it could not repay Chinese loans, and now Pakistan is saddled with approximately $20 billion in high-interest loans to China and Chinese companies.
With just two months left in its budget, Pakistan is desperately courting new lenders. The Chinese have refused, the Arab states are thinking twice, the only place to turn is back to the IMF. And that means severe austerity.
Perhaps, not surprisingly, both Sri Lanka and Pakistan are important nodes in the Belt and Road Initiative (BRI).
Source: Asia Green
As I have said on many occasions, the BRI is doomed to failure. China is trying to make places and routes economically viable, where the long span of history has not. No amount of money can overturn millennia of culture and eons of geography.
Well, once again one of the important links of the BRI has been bankrupted by the Chinese central planners.
Taiwan/China situation
Source: AZ quotes
I have been discussing the Pelosi situation and the Chinese response for several days on my Telegram live streams.
In this episode of “Fed Watch,” I read some excerpts from a well-known Chinese minister and a Chinese think tank expert. You can read Wang Yi’s full comments here. Suffice it to say for this article, he repeated “One China” many times, calling the US the side trying to change the status quo. He also had very harsh words for Tsai Ing-wen, the sitting president of Taiwan. He said she “betrayed the ancestors.” In another translation, I heard that Yi’s original comments also suggest that she betrayed her ancestors (and her race).
The next comments I read were from Wang Wen, Executive Dean of the Chongyang Institute for Financial Studies at Renmin University of China (RDCY) and Executive Director of the China-US People-To-People Exchange Research Center. You can read his comments and several others here. He tries to explain why China’s response was so weak, and that China should not provoke an armed conflict with the United States until it can “surpass the United States in terms of economic power, achieve economic and military strength comparable to that of the United States, and develop an overwhelming capacity to counter international sanctions.”
Sounds far away. I would simply advise the reader not to get caught up in fear-mongering rhetoric about Taiwan and China. They are disciples of Sun Tzu, who said, “Show your strength when you are weak.” Wen also quoted Sun Tzu:
“A major military clash with the United States is not the goal of China’s foreign policy, nor is it the path to a better life for ordinary people. Remember what Sun Tzu wrote in ‘The Art Of War’: ‘Do not act unless there is something to gain 非利不动; don’t use military force without certainty of victory 非得不用; don’t go to war unless the situation is critical 非危不战.’”
We ended the podcast talking about the upcoming CPI data release and other things relevant to bitcoin.
This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
