TradeSmith Daily

September 2020

Hyperinflation Lessons from Weimar Germany

September 4, 2020John Banks

In a rampant monetary inflation, the rich can become super-rich, and wealthy industrialists can become out-of-this-world rich, like Greek gods living atop a financial Mount Olympus. If you sit atop an industrial empire when runaway inflation comes, and if you deploy the right strategies, you can find ways to grow your horde of treasure by 10X to 100X, or maybe even 1,000X. The opportunities in a runaway monetary inflation episode are so great, in fact, that some participants will actually

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How Weimar Germany Got Hyperinflation — and How America Could, Too

September 8, 2020John Banks

The Weimar Germany period is a recurring historical topic. It seems to pop up every few years. But when historians and columnists refer to Weimar Germany, they are usually focused on the years of 1930-33, when Germany experienced crushing deflation (as did most of the world, after the Crash of 1929, the Smoot-Hawley Tariffs, and the Great Depression) and the Nazis prepared to seize power. In thinking about hyperinflation, we are interested in events from a full decade earlier, as

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Germany’s Expanding Debt Footprint is Bullish for Europe (and Bearish for the Dollar)

September 10, 2020John Banks

Germany is taking a historic step toward issuing more debt. This is long-term bullish for Europe, and the euro, and long-term bearish for the U.S. dollar. That, in turn, makes it a bullish development for precious metals, and base metals in general, to the extent commodities will benefit from a multi-year dollar decline. Why would Germany’s debt issuance be bullish for Europe and bearish for the dollar? It sounds strange, until we connect the dots between supply and demand issues

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Bitcoin’s Future is Not Outside the Banking System

September 11, 2020John Banks

Imagine losing $16 million to hackers because you installed the wrong program on your computer. This actually happened to someone, according to a recent post on GitHub, a popular software development platform and message board. The poster reportedly had 1,400 Bitcoin — worth more than $16 million at the time — stolen from their Electrum crypto wallet after installing a “security update” from a malicious source. The problem was that, for older versions of Electrum wallet software, hackers had figured

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The U.S. and China are Falling into the Thucydides Trap

September 21, 2020John Banks

In 2015, Harvard professor Graham T. Allison argued that the United States and China could be at war within a decade. Five years later — and with five years left to go — Allison’s prediction is slowly coming true. We aren’t there yet, but the story is unfolding in a warlike direction. Military conflict between the United States and China is conceivable by 2025, if not before then. Here and now, in 2020, U.S.-China tensions are approaching a boiling point.

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Echoing the Roman Financial Crisis of 33 A.D.

September 24, 2020John Banks

The markets of today are the same as markets not just hundreds of years ago, but thousands of years ago. This is possible because human nature has not changed. The technology is different, but human nature is the same. The basic mechanisms of financial markets — regarding things like credit and lending, speculation, government intervention, and even quantitative easing — are also ancient. The first known instance of quantitative easing (QE) is ancient, too. We explained this week how an

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In Both Investing and Poker, sometimes a Weak Hand Beats a Strong One

September 28, 2020John Banks

Say you have an investment choice between two gold mining companies. They are similar except for a single variable, the average production cost per ounce. One miner produces gold at an average production cost of $900 per ounce; the other does so at $1,800 per ounce. Which miner is the better investment, in terms of 12-month price appreciation? It’s actually a trick question. The answer depends on the price of gold, the price action history for both companies, and what

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October 2020

Indoor Drones and Clouds Beneath the Ocean: Welcome to the Information Age

October 1, 2020John Banks

As if 2020 didn’t have enough going on, there is a fourth age of human civilization rushing toward us. The prior three ages were the Stone Age, the Agrarian Age, and the Industrial Age. In the Stone Age, humans discovered language, fire, and the use of sophisticated stone tools. This enabled group cooperation and the birth of art and culture. In the Agrarian Age, humans learned to grow crops and develop permanent settlements. This led to the rise of towns,

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