Emerging market currencies are getting hammered…
Last week, China’s yuan fell to fresh 11-year lows amid trade war worries with the U.S.
Earlier this month, the Argentine peso crashed 30.3%—in one day.
And last year, the Turkish lira lost 30% against the U.S. dollar. (It continued to fall this year, too—plunging over 4% back in March.)
In the currency markets, a 5% annual move is huge. And all these moves are more than three times greater than that.
Keep in mind, if your home currency drops 40% against the dollar, it means anything you buy from America costs 67% more than before.
This surge in import costs can devastate emerging market economies relying on key U.S. imports (food, heavy equipment, technology, etc.).
And today, I’ll share why the world’s fiat currencies are imploding—and what it means for bitcoin and other cryptocurrencies…
Mountain of Debt
The main problem emerging market currencies are facing is debt. Emerging market debt has tripled since 2007—and now stands at $69 trillion.
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. This means their loans are more expensive to service.
Now, emerging markets need to pay back (or refinance) $1.5 trillion in debt over the next 18 months. But guess what? They don’t have the money.
So countries are issuing debt they can’t service—and printing too much money to try to cover it. Nothing kills a currency faster than that.
Take Russia, for example…
When I visited the country last year during its currency crisis, I asked people what they were doing about the falling ruble. And you wouldn’t believe what they told me.
They simply just stopped saving! They said saving was pointless—so they spent all their money as soon as they earned it.
Now, as a Daily reader, you probably know what I’ll say next…
Crypto to the Rescue
The only thing some of these people can do to maintain purchasing power and pay their bills is turn to bitcoin.
Most Americans can’t understand this. We have a relatively stable currency here. So we don’t see the need for bitcoin for everyday use.
Most of us won’t be paying for our daily coffee with it anytime soon. That’s why I’ve always said bitcoin is a great speculation for Americans.
But in emerging markets, bitcoin can be a valuable medium of exchange…
Between August 25 and September 22, bitcoin trading volume in Turkey exploded 120% while the lira crashed. Priced in bolívars, it’s up more than 1,450% in Venezuela since the beginning of the year. In Argentina, it’s nearly up 48% since March.
And as I told you last week, even China can’t stop the flow of cryptos in the country:
The yuan’s sharp fall on August 5 coincided with a 7% gain for bitcoin and a 9% surge in the overall crypto market cap. And according to Reuters, analysts speculated some Chinese investors were selling the yuan and buying cryptos.
So when emerging markets have currency crises, their citizens turn to bitcoin. It’s proven itself as immune to capital controls…
The Great Unwinding
Again, a new narrative is emerging. And it’s, “Oh my goodness, the spaghetti just hit the fan all over the world.”
While we’ve never had a situation where all currencies got crushed at once… I believe a broad-based currency meltdown is in the offing.
So bitcoin and a slew of other cryptos will benefit as money flees fiat currencies and looks for an alternative place to hide.
If you’re from a country with a 1–2% annual interest rate and an established fiat currency, you probably won’t place your savings into a volatile asset like bitcoin.
But for the Chinese, Argentines, and Turks who have lived through several currency devaluations, bitcoin offers a substitute for putting their money in banks.
While inflation and currency devaluations eat away at their savings, bitcoin has made gains of as much as 300% since the start of this year.
So faced with bitcoin’s volatility versus their home currencies collapsing, bitcoin becomes a no-brainer option for emerging market citizens.
Friends, hear me out when I say a currency crisis is coming. And if you don’t own any bitcoin or other crypto assets, you’ll be sitting on the sidelines filled with regret as their prices skyrocket higher on the back of global currency devaluations.
Let the Game Come to You!
Teeka Tiwari
Editor, Palm Beach Daily