Same same but different

Sitting at a ramen restaurant on a rainy Sunday afternoon, I couldn't help but notice many empty seats. Why? I asked the owner. A jovial lad who said they had many cancelations in the past 30 mins. Such irony is when a hot bowl of noodle soup is the cure for the dreadful gloomy day. He proceeded to engage in conversation with me about the state of his business during and after the pandemic. It was tough, he said, as any small business owner would agree. As everyone did during the lockdown, we succumbed to ineluctable boredom. Flushed with stimulus and employment checks, young ones who moved back in with their parents dabbled in placing bets on stocks and crypto. This led to many so-called pandemic stocks like Robinhood, Coinbase, Zoom, and Peloton to grow at breakneck speeds to stratospheric prices. Sensing my little knowledge and hesitation about learning this industry, he explained to me how investing in crypto was exhilarating. He explained how bitcoin and the US dollar are practically the same with nothing behind supporting either. So investing in bitcoin was preferable because of the obvious volatility. His portfolio ballooned to $10,000 at one point which was a considerable amount to him. I wasn't sure if I should respond that he was absolutely ignorant about what he was saying. So I elected to not explain the difference between investing from trading. Just stick to the basics.

"Have you seen the Euro lately? It's trading at .98 vs the dollar. What about the Pound? It's trading at 1.11. The Yen is at $1.44. I don't believe you and I were born yet when the dollar was this strong. Why does this matter? Well, the US has experienced tremendous growth with fiscal stimulus and zero interest rates which had led the Fed to raise borrowing rates. Servicing US dollar-denominated debt is now costlier for countries. But why do other countries keep buying US Treasuries? Because it is a safe haven backed by the good faith of the government of the biggest economy in the world. Or the biggest GDP. Your business contributes to the GDP so the better your business does, the faster the GDP will grow, and the greater the demand will be for US dollars because the world knows the US has the ability to pay back its debt at any time. That is why the US dollar is not as volatile as Bitcoin. And that's why you and I leave currency trading to the professionals. It's just a tiny bit more complicated than Bitcoin."

His face turned blank as clean as a whiteboard. So I asked him for another beer and told him I'll pay in bitcoin. Good luck paying your heating bill from the value of one ramen and two beers. Green eggs and ham. Uncle Sam, I am.