The holiday season is upon us… it’s such a magical time of year.
We visited my aunt at the old family home this past week. It always brings back fond memories.
My great grandfather Joseph Ellis built the house in 1934. It’s a beautiful two-story brick house with round white columns supporting the front porch. The architecture is very Jeffersonian – in a simple kinda way.
Ellis was born in Beirut, Lebanon in 1878. Seeking the American Dream, he immigrated to the US in 1895 – along with his wife Zelpha and a few other Lebanese families.
They entered the country through the Ellis Island immigration station and went through the examination and registration process. That’s where he got the surname “Ellis”. I’m not sure if it was his choice or the immigration officers’ decision, but somebody decided it would be better for him to have the last name Ellis rather than his Arabic name.
Upon completing the registration process, Ellis and his wife were deemed “Naturalized” and permitted to enter New York City. From there, this cohort of Lebanese families traveled south. They eventually settled in a small paper mill town up in the Virginia highlands. The mountains reminded them of home.
Once settled, Ellis opened a restaurant in Covington. I’m told they were the first restaurant in town to have pizza on the menu. The Italian immigrants wouldn’t show up for another several decades.
Ellis worked seven days a week in the restaurant for much of his life. But it afforded him the ability to have four children and eventually build the family home in 1934. It’s perched atop a large hill overlooking the town.
Here’s a picture I took this past week:
That’s the town of Covington below, tucked in-between the rolling Alleghany mountains.
It’s not very clear from this image, but the old high school football stadium is in the back left. When he was still alive, my great uncle (Ellis’ son) would set up a lawn chair in the yard on Friday nights and watch the games.
What this picture doesn’t show is the garden on the backside of the hill. Ellis cut three tiers into the hill to create a tiered garden.
That’s a customary practice in Lebanon. The vegetable gardens are on the first two tiers and the fruit trees are on the bottom.
Ellis died in 1960. He had 26 years to enjoy the home he built… and the home is still in the family today. Four generations later we can enjoy it also.
As I reflect upon this story, I don’t know how it could be any better of an example for the American Dream. It’s a beautiful thing.
What bothers me is that this dream is largely out of reach for people today. As we’ve discussed, five decades of financialization has hollowed out the middle class and indeed the American economy.
Fortunately, it appears that there’s a sincere effort in place to recapitalize the United States. That’s what the markets are signaling right now.
Yesterday we discussed how the Dow Jones Industrial Average (DIJA) and the US Dollar Index (DXY) are a big part of this story. But we noted that both Bitcoin (BTC) and Ripple (XRP) are sending the same signals – which is rather curious. How do they fit into the picture?
Wyoming Senator Cynthia Lummis recently introduced a bill to establish what’s effectively a Strategic Bitcoin Reserve for the US government. The legislation proposed that the Treasury and the Federal Reserve (the Fed) purchase 200,000 bitcoins annually for five years.
The goal is to accumulate one million bitcoins. That’s nearly 5% of all the bitcoins that will ever exist. At current prices that equates to over $100 billion worth of Bitcoin. But if the feds actually followed through with this plan, the dollar-based price of Bitcoin would go much higher – probably by 5X or more.
Incoming president Donald Trump has voiced support for this plan. As have numerous corporate executives.
Marc Andreessen – founder of Netscape and Silicon Valley-based venture capital (VC) firm Andreessen Horowitz – is one of those. Curiously, Andreessen recently revealed that he’s spent about half his time at Mar-a-Lago working with incoming Trump administration since the election.
When asked about what this Strategic Bitcoin Reserve would be for, they give fluffy answers about economic stability and national security… so we don’t know for sure what the real intent is here.
My bet is that Bitcoin will be collateralized within the existing financial system in some capacity. It could be used to recapitalize the banking system and perhaps backstop the US Treasury markets. Bitcoin would be perfectly suited for this.
Of course, that isn’t the original purpose of Bitcoin. This isn’t why I gravitated to it in 2014. Back then we were interested in Bitcoin as private money… not as a mechanism to help recapitalize the legacy financial system.
Still, I’ve learned not to let “perfect” be the enemy of “better”. And it’s become clear that America is teetering on the edge as we speak. If the financial system falls, it would almost certainly be replaced by something much worse.
That leaves Ripple (XRP).
For those unfamiliar with it, Ripple is a blockchain-based digital payment network designed to help financial institutions facilitate fast, secure, and low-cost international payments.
We used to clown on Ripple back in the early days. Back then we were witnessing the rise of truly independent money in Bitcoin… and here was some project that wanted to help the banks and the government send money to other countries better.
What’s more, the Ripple network is owned by a centralized corporation. That baffled us. Bitcoin proved that you don’t need a centralized entity to run a blockchain network… why does Ripple want to remain in the past, we wondered?
Well, Ripple faded into obscurity for much of the last four years. The Securities and Exchange Commission (SEC) sued Ripple Labs, Inc., and it’s been tied up in that lawsuit ever since.
The fact that Ripple surged higher after the election suggests that there’s been a major sea-change on this front. The incoming SEC Chair has been notably pro-cryptocurrency – perhaps the market is banking on the lawsuit being dropped.
That begs the question… could there be plans to incorporate Ripple into the American financial system as well? It could replace SWIFT and the old-fashioned concept of “sending wires” overnight.
I’m not sure. But it appears Ripple may be part of the plan to recapitalize the United States as well. Bitcoin could help shore up the balance sheet… and Ripple could help make future financial transactions cheap, secure, and efficient. Of these, the ‘secure’ part might be the most important.
We’ve been hearing a lot about how certain government departments consistently fail their financial audits. The Department of Defense (DoD) has failed its audit for seven straight years – despite having a budget that now approaches $1 trillion a year.
And we know that most of the money sent out as foreign aid isn’t even audited. This includes the hundreds of billions sent to Ukraine in recent years.
Guess what?
If the US government integrated Ripple as its means of international transfer, every single dollar spent would be accounted for in real time. There would always be a perfectly transparent record of where the money went.
I’m just speculating here – but perhaps there are bigger plans in place for Ripple. I can’t say for sure… but its massive rise in price indicates that something is up.
More to come next week…
-Joe Withrow