Trump, Xi Jinping, Putin, and Erdogan: these four men are the embodiment of Strongman Bully leaders. Global trends indicate we will soon have more world leaders with similar mindsets.
Over the past 30 years, throngs of Chinese, Russians, and Turks have become rich. The masses held their tongue, while the elite shamelessly lined their pockets. In China, the wealth amassed in coastal cities like Shanghai, Beijing, Shenzhen, and Guangzhou stands in stark contrast to the developing and rural interior. Similar disparities exist in the metro areas of Russia and Turkey.
Xi, Putin, and Erdogan are all promising to restore the bargain with labour at the expense of capital. In previous decades, the masses have accepted disproportionally slow wage growth so long as their standard of living continued to increase. As global growth sputters, the bargain has become less tenable. The plebes are getting restless.
The marginal effectiveness of printing money to generate GDP output is waning. To make matters worse, population growth is shrinking in end markets like America and Europe. In response, central banks are reducing asset purchases. The net result will be higher interest rates and less trade.
All strongman bullies in all countries cannot be successful at the same time. Instead of trading for what they need, these leaders are likely to threaten to take what they need through war. A desperate leader can apply physical force to take resources, disrupt competing markets, and distract the local population from failed promises.
During times of war, assessing financial counterparty risk becomes a key investment survival skill. Will a USD deposit held in a Russian bank be worth the same as one held in an American bank? Every asset that you own must be evaluated on the basis of two concerns: beating domestic inflation and movement friction. In times of war, we are very likely to see inflation in necessity goods and deflation in other goods.
Where will the masses turn? Gold has value everywhere and is likely to triumph during these times. Recently, gold rallied when Trump authorised a missile strike against Syria, and when North Korea announced a potential nuclear missile test. Further rallies will come if global instability grows.
Bitcoin fits into this dynamic. Despite all of the issues it faces, it has persevered for over 8 years and still has substantial global value. Consider that as a vote of confidence in its ability to serve as a safe haven asset for a small pool of global capital.
Regardless of your political stance, the next 30 years will not be like the last. Highly intense regional conflicts are likely to flare up again. As desperate citizens look to store and transport wealth in the digital era, Bitcoin looks more attractive than ever.