The Lifecycle of a Ponzi Scheme and Crypto Liquidity

<p>With the Federal Reserve set to begin raising interest rates in a few weeks, I thought it was time to return to a discussion of crypto now that the era of 'easy money' post-COVID is over.</p> <p>Many people still don't believe the Fed can stop QE, let alone reduce its balance sheet, and as a result, the refrain "You can't taper a Ponzi" can be heard from every corner of financial media.</p> <p>I tend to agree with that sentiment because, of course, all Ponzi schemes necessitate the constant inflow of new funds in order to maintain the asset values of the previous round of funding. After all, this is exactly what a Ponzi scheme is.</p> <p>But in a world of Ponzis built on top of Ponzis built on top of Ponzis, the notion that the biggest one, on which all the others are built, can't save itself for a while by popping all of the daughter Ponzis is a little disingenuous, if not outright obtuse.</p> <p>That isn't because debt-based currency regimes aren't inherently Ponzi schemes. Yes, they do. It's because, once the currency pile is created, it has the ability to move to where it is best treated and away from assets that are most vulnerable to liquidation.</p> <p>So, in the real world, as it unfolds in real time, the situation is far more complicated than "You can't taper a Ponzi." That is correct in the long run. However, when it comes to deciding where to invest one's money in order to earn a profit, this is simply not the case.</p> <p>And this has been the most difficult lesson I've attempted to teach my readers and patrons over the years. It's one thing to accurately predict a system's end state. Total and complete collapse is unavoidable in the case of the US dollar reserve system.</p> <p>It's another thing entirely to predict when this will happen and in what order the system will fail.</p> <p>This was the main issue I had to deal with in the early stages of my financial writing career. It simply isn't good enough in 2013 to say, "In ten to fifteen years, all of these losing picks in gold or oil will