The Next Economic Period Will Resemble 1930s, Says Hayes

Arthur Hayes, the co-founder and former CEO of crypto exchange BitMEX, said in a recent blog that the current global economic and geopolitical climate resembles the conditions in the 1930s and 1970s—and while that's bad for almost everything, it's good for Bitcoin.

Crypto exchange BitMEX co-founder and former CEO Arthur Hayes recently shared his thoughts on the current global economic and geopolitical climate in a blog post. Hayes compares the present conditions to those of the 1930s and 1970s, highlighting their potential impact on Bitcoin.

According to Hayes, the world is currently witnessing an inexorable march toward war, with nations turning inward and pivoting their economies toward war preparation. As a result, investors and savers will be asked to contribute to this war expenditure and will be subjected to “financial repression,” akin to what occurred during the 1930s.

Billionaire hedge fund manager Ray Dalio of Bridgewater Associates recently stated that the chances of a third world war have increased to about 40%, considering the Israel-Hamas conflict, political divisions in the US and tensions between the US and China.

Despite concerns that the latest crypto bull market has ended, the former BitMEX CEO maintains that Bitcoin remains the best game in town. Hayes argues that Bitcoin serves as a store of value situated outside the state-controlled financial system and will soon be the only viable option for investors seeking returns that outpace nominal growth rates.

He cautions against the looming debasement on the horizon, arguing that crypto remains the best investment option for the upcoming cycle.

The Next Economic Period Will Resemble 1930s, Says Hayes

In his essay, Hayes asserts that there have been three major economic cycles since the Great Depression.

The 1933-1980 era, according to Hayes, was characterized by financial repression, with a ban on private gold investment, caps on bank deposit rates, and fixed-income securities yields that fell short of inflation. As a result, the stock market became the sole investment option.

However, Hayes notes that once investors were permitted to “bet against the system” once more by investing in gold on December 31, 1974, gold massively outperformed the stock market.

Hayes describes the 1980-2008 era as the period when America was at the height of its power, further opening its economy to global trade and becoming the world's sole superpower. During this time, the stock market outperformed gold as confidence in the financial and political system soared.

Hayes posits that the 2008-Present era is similar to the 1930s, in that America has experienced another “deflationary economic collapse.” But this time, instead of banning private gold ownership, the state has employed quantitative easing to salvage the economy.

As nations prepare for war, investors will be called upon to finance the military spending, and investors will be “financially repressed” like they were in the 1930s as the banking system aims to “allocate the majority of credit in the state's direction to accomplish certain political goals,” Hayes argues.

So Why Would This Financial Disaster Be Good For Bitcoin?

Hayes maintains that Bitcoin has performed exceptionally well since its 2009 launch because it offers a “stateless currency,” comparable to gold but capable of moving at lightning speed, providing investors with a store of value situated outside the traditional financial system—essentially a bet against the system, like gold was in the 1970s.

And what about Bitcoin's future? Well, Hayes says he is confident that we are “in the midst of a new mega-local, nation-state first, inflationary cycle”—precisely the kind of cycle that is very good for Bitcoin. As further evidence for this belief, Hayes points out the Congressional Budget Office’s projection of a massive increase in the government's 2024 budget deficit:

This level of government spending, says Hayes, makes it “mathematically very difficult” for the US economy to enter a recession in the near future.

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