After the Argentine government put a limit on dollar transactions, hundreds of people lined up to get their savings out of the bank. If you don\u2019t live in Argentina, you may think this doesn\u2019t impact you. It has to do with something called the \u201cGreat Unwinding.\u201d The central bank says it won\u2019t hinder people from withdrawing money from their accounts. But Argentines don\u2019t trust the government \u2014 and for good reason…<\/p>\n\n\n\n
In the crises of 1989\u20131990 and 2001\u20132002, the government blocked citizens from withdrawing their savings.<\/p>\n\n\n\n
The second time around, riots broke out. Supermarkets were looted, and angry depositors vandalized bank ATMs.<\/p>\n\n\n\n
That\u2019s why hundreds lined up at banks across Buenos Aires last week. They wanted to withdraw their savings after the latest government-authorized currency controls.<\/p>\n\n\n\n
Even though we\u2019ve never had a situation where all global currencies got crushed at once, a broad-based currency meltdown is in the offing.<\/p>\n\n\n\n
The current economic crisis in Argentina was triggered last month when the opposition candidate defeated President Mauricio Macri in a primary election.<\/p>\n\n\n\n
That result spooked investors, who feared a return of interventionist policies. The main Argentine stock market crashed more than 30% \u2014 in one day.<\/p>\n\n\n\n
The Argentine peso collapsed over 25% (and continues to fall).<\/p>\n\n\n\n
To keep it afloat, the government announced the new capital controls. But emerging-market currencies aren\u2019t facing just political uncertainty. The main problem is debt.<\/p>\n\n\n\n
Total emerging-market debt has tripled since 2007 \u2014 and now stands at $69 trillion. (Just last year, Argentina took out an emergency $56 billion loan from the International Monetary Fund to cover its short-term debt.)<\/p>\n\n\n\n
To make matters worse, many of these loans must be paid back in U.S. dollars. And as the dollar rises, their currencies get weaker. So the loans are more expensive to service.<\/p>\n\n\n\n
Now, emerging markets need to pay back (or refinance) $1.5 trillion in debt over the next 18 months.<\/p>\n\n\n\n
But guess what? They don\u2019t have the money.<\/p>\n\n\n\n
Countries are issuing debt they can\u2019t service \u2014 and printing too much money to try to cover it. Nothing kills a currency faster than that.<\/p>\n\n\n\n
We\u2019d never seen negative interest rates before, either. Yet now, about $17 trillion worth of government bonds worldwide (25% of the market) trade at negative yields.
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Think about that. Lenders are actually paying borrowers. That\u2019s insane.
So it\u2019s possible we\u2019ll see the world\u2019s currency bubble pop.
And when it does, investors will look elsewhere for alternatives \u2014 like bitcoin.<\/p>\n\n\n\n
Without getting into the weeds, bitcoin runs on something called a blockchain. No individual person runs the bitcoin blockchain. It\u2019s peer-to-peer, with no intermediary. So governments can\u2019t shut it down. They can\u2019t confiscate or put controls on it.<\/p>\n\n\n\n
Even China \u2014 with one of the more repressive governments in the world \u2014 has tried to ban bitcoin. Yet trading still flourishes there. Russia, Vietnam, and Colombia have all tried and failed, too.<\/p>\n\n\n\n
For those who have lived through several currency devaluations (like Argentines), bitcoin is a substitute for putting their money in banks. In fact, they\u2019re willing to pay a $1,000 premium or more for bitcoin.<\/p>\n\n\n\n
The government can stop them from buying U.S. dollars\u2026 But it can\u2019t stop them from buying bitcoin.
<\/p>\n\n\n\n
Even with bitcoin\u2019s wild volatility, they\u2019d rather have 20% of something than 100% of nothing.<\/em><\/strong><\/p>\n\n\n\n Now, if you\u2019re from a country with an established fiat currency, you probably won\u2019t place your savings into a volatile asset like bitcoin. Central banks can paper over problems for a very long time \u2014 but not forever. At some point, the fiat currency bubbles around the world will burst.<\/p>\n\n\n\n And when they do, more people will rush into bitcoin. And that will send prices soaring.<\/p>\n","protected":false},"excerpt":{"rendered":" After the Argentine government put a limit on dollar transactions, hundreds of people lined up to get their savings out<\/p>\n","protected":false},"author":4,"featured_media":565,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"yoast_head":"\n
But consider a small stake; it could turn into life-changing gains as the Great Unwinding unfolds.<\/p>\n\n\n\n