"Trumponomics" may lead to massive money printing, and Bitcoin reaching $1 million is just a matter of time.

What do you think the price of Bitcoin will be on December 31, 2024? Will it be over $100,000 or below $100,000?

There is a famous saying in China: "No matter if it's a black cat or a white cat, a cat that catches mice is a good cat."

I will refer to the policies implemented by President Trump after his election as "American capitalism with Chinese characteristics."

The elites ruling America do not care whether the economic system is capitalism, socialism, or fascism; they only care whether the implemented policies help maintain their power. America has not been purely capitalist since the early 19th century. Capitalism means that when the rich make wrong decisions, they will lose money. This situation was prohibited as early as 1913 when the Federal Reserve System was established. With the impact of privatized gains and socialized losses on the country, and the extreme class divide created between the so-called "despicable" or "lower-class" people living inland and the noble, respected coastal elites, President Roosevelt had to correct the course by offering some crumbs to the poor through his "New Deal" policies. Then, just like now, expanding government relief for the disadvantaged was not a policy welcomed by the so-called wealthy capitalists.

The shift from extreme socialism (in 1944, raising the top marginal tax rate to 94% on incomes over $200,000) to unrestricted corporate socialism began in the Reagan administration of the 1980s. Subsequently, the central bank injected funds into the financial services industry by printing money, hoping that wealth would gradually flow from the upper tiers to the lower tiers. This neoliberal economic policy continued until the COVID-19 pandemic in 2020. President Trump, in response to the crisis, exhibited the inner spirit of Roosevelt; he directly distributed the most funds to the entire population since the New Deal. The United States printed 40% of the world's dollars between 2020 and 2021. Trump initiated the distribution of "stimulus checks," and President Biden continued this popular policy during his term. When assessing the impact of the government's balance sheet, some peculiar phenomena emerged between 2008 to 2020 and 2020 to 2022.

From 2009 to the second quarter of 2020, was the peak period of what is known as "trickle-down economics," where economic growth during this time primarily relied on central bank printing policies, commonly known as quantitative easing (QE). As you can see, the growth rate of the economy (nominal GDP) was lower than the accumulation rate of national debt. In other words, the wealthy used the funds they received from the government to purchase assets. Such transactions did not bring about substantial economic activity. Therefore, providing trillions of dollars through debt to wealthy holders of financial assets has instead increased the ratio of debt to nominal GDP.

From the second quarter of 2020 to the first quarter of 2023, Presidents Trump and Biden took different approaches. Their treasury departments issued debt purchased by the Federal Reserve through quantitative easing (QE), but this time it wasn't given to the rich; instead, checks were sent directly to every citizen. Poor people's bank accounts did indeed receive cash. Clearly, the CEO of a certain large bank profited significantly from the transaction fees from government transfers... He is referred to as America's Li Ka-shing, and you can't avoid paying him fees. The reason the poor remain poor is that they spend all their money on goods and services, and they did so during this period. With the velocity of money circulation significantly increasing, economic growth accelerated rapidly. In other words, $1 of debt generated more than $1 of economic activity. As a result, the ratio of U.S. debt to nominal GDP miraculously decreased.

However, inflation is exacerbated as the supply of goods and services does not keep pace with the increase in purchasing power gained by people through government debt. The wealthy who hold government bonds are dissatisfied with these populist policies. These wealthy individuals have experienced the worst total returns since 1812. In response, they sent out Federal Reserve Chairman Powell, who began raising interest rates at the beginning of 2022 to control inflation, while the general public hoped for another round of stimulus checks, but such policies have been banned. U.S. Treasury Secretary Yellen intervened to offset the effects of the Federal Reserve's tightening monetary policy. She depleted the Fed's reverse repo facility (RRP) by shifting debt issuance from long-term bonds to short-term notes. This injected nearly $2.5 trillion of fiscal stimulus into the market, primarily benefiting the wealthy who hold financial assets; as a result, the asset market thrived. Similar to after 2008, the government relief for these wealthy individuals did not lead to actual economic activity, and the U.S. debt-to-nominal GDP ratio began to rise again.

Did Trump's incoming cabinet learn lessons from the recent economic history of the United States? I believe they did.

A person widely regarded as Trump's replacement for Yellen as the U.S. Treasury Secretary has given many speeches about how he plans to "fix" America. His speeches and column articles detail how to implement Trump's "America First Plan," which bears a striking resemblance to China's development strategy (which began in the 1980s during the Deng Xiaoping era and continues to this day). This plan aims to stimulate the repatriation of key industries (such as shipbuilding, semiconductor factories, automotive manufacturing, etc.) through government-provided tax credits and subsidies, thus promoting nominal GDP growth. Eligible companies will be able to obtain low-interest bank loans. Banks will again actively lend to these operational companies because their profitability is backed by the U.S. government. As companies expand their operations in the U.S., they will need to hire American workers. Higher-paying jobs for ordinary Americans mean increased consumer spending. If Trump restricts immigration from certain countries, these effects will be even more pronounced. These measures stimulate economic activity, and the government generates revenue through corporate profits and personal income taxes. To support these plans, the government deficit needs to remain at a high level, with the Treasury raising funds by selling bonds to banks. As the Federal Reserve or legislators paused the supplemental leverage ratio, banks can now re-leverage their balance sheets. The winners are ordinary workers, companies producing "qualified" products and services, and the U.S. government, which sees its debt-to-nominal GDP ratio decline. This policy is akin to super quantitative easing for the poor.

Sounds great. Who would oppose such a prosperous American era?

Losers are those who hold long-term bonds or savings deposits, as the yields on these instruments will be deliberately kept below the nominal growth rate of the US economy. If your salary cannot keep pace with higher levels of inflation, you will also be affected. It is worth noting that joining unions is becoming popular again. "4 and 40" has become the new slogan, which means a 40% raise for workers over the next four years, or a 10% increase each year, to encourage them to continue working.

For those readers who consider themselves wealthy, don't worry. Here is an investment guide. This is not financial advice; I am just sharing my operations in my personal portfolio. Whenever a bill is passed and funds are allocated to a specific industry, read carefully and then invest in stocks of those industries. Instead of putting money into government bonds or bank deposits, it is better to buy gold (as a hedge against financial repression for the baby boomer generation) or Bitcoin (as a hedge against financial repression for the millennial generation).

Clearly, my investment portfolio prioritizes Bitcoin, other cryptocurrencies, and stocks of companies related to cryptocurrencies, followed by gold stored in a vault, and lastly stocks. I will keep a small amount of cash in a money market fund for paying my credit card bills.

In the remainder of this article, I will explain how the quantitative easing policies of the rich and the poor affect economic growth and the money supply. Then, I will predict how the exemption of banks' supplementary leverage ratio (SLR) will once again make unlimited quantitative easing for the poor possible. In the final section, I will introduce a new index to track the supply of bank credit in the United States and demonstrate how Bitcoin performs better than all other assets after adjusting for the supply of bank credit.

Money Supply

I sincerely admire the high quality of a series of articles by a certain economist. During my recent long weekend in the Maldives, I finished reading all of his works while enjoying surfing, yoga, and massages. His works will appear frequently in the remainder of this article.

Next, I will present a series of hypothetical accounting entries. On the left side of the T-shaped account are assets, and on the right side are liabilities. Blue entries indicate an increase in value, while red entries indicate a decrease in value.

The first example focuses on how the Federal Reserve's quantitative easing through bond purchases affects the money supply and economic growth. Of course, this example, as well as the subsequent ones, will be slightly humorous to increase interest and appeal.

Imagine you are Powell during the banking crisis in the United States in March 2023. To relieve some stress, Powell goes to the Racquet and Tennis Club at 370 Park Avenue in New York City to play squash with a billionaire old friend. Powell's friend is very anxious.

This friend, whom we call Kevin, is an experienced financial professional. He said: "Jay, I might have to sell the house in Hampton. All my money is deposited in a certain bank, and clearly, my balance exceeds the limit of federal deposit insurance. You have to help me. You know how hard it is for a rabbit to stay in the city for a day in the summer."

Jay replied: "Don't worry, I'll handle it. I'm going to do $2 trillion in quantitative easing. This will be announced on Sunday evening. You know the Federal Reserve always supports you. Without your contributions, who knows what America would be like. Just imagine if Trump had to take over again because Biden was dealing with a financial crisis. I still remember in the early 80s when Trump stole my girlfriend at a restaurant, it was really annoying."

The Federal Reserve has created a Bank Term Funding Program, which is different from direct quantitative easing, to address the banking crisis. But allow me to add a little artistic touch here. Now, let's take a look at how $2 trillion in quantitative easing affects the money supply. All figures will be in billions.

1. The Federal Reserve purchased $200 billion in government bonds from an asset management company and paid for it with reserves. A major bank acted as an intermediary in this transaction. The bank received $200 billion in reserves and credited the asset management company with a $200 billion deposit. The Federal Reserve's quantitative easing policy enabled banks to create deposits, which ultimately became money.

2. Asset management companies that have lost government bonds need to reinvest this capital into other interest-bearing assets. The company's CEO typically collaborates only with industry leaders, and at this moment, he is quite interested in the technology sector. A new social networking application called Anaconda is building a user community to share photos uploaded by users. Anaconda is in the growth stage, and the asset management company is eager to purchase their bonds valued at $200 billion.

3. Anaconda has become an important player in the U.S. capital markets. They have successfully attracted