Why prolonged Bear markets are no longer allowed (the Playbook)
In a low Gross Consent Product, financialized U.S., equity drawdowns are fiscal events. Falling stocks dent tax receipts, widen the deficit, and threaten funding optics.
This is easily the most important article I’ll ever write on here.
If you had infinite resources and the mandate to keep the machine running, you would not leave financial markets to chance.
You would make prices, volatility, and liquidity into knobs serving Survival, Control, Growth, Stability, Comfort — in that order. The “tells” are already on the tape. The winners are the companies that turn policy into parameters and output admissible decisions on supervised rails.
Financial markets are used as a tool to further the system’s goals, namely:
Survival of the System (Base Layer) — the system itself must survive — continuity of the State, currency, command structure.
Control — the ability to shape, limit, and direct population behavior. Survival without control is fragile. Control extends survival indefinitely.
Growth — the expansion of productive capacity and innovation inside the controlled frame. Growth supplies legitimacy and rewards insiders; it is the carrot to balance the stick of control.
Stability — maintenance of societal calm, avoidance of revolts or chaos. Stability prevents resource diversion into repression. Think — welfare programs, bread-and-circus entertainment, debt forbearance, stimulus.
Comfort (Top Layer, Optional) — distribution of surplus comfort to keep populations docile. Comfort is expendable. It gets cut the moment survival/control require it.
If you run the system and treat markets as interfaces, not sacred temples, you tune prices, volatility, and liquidity to serve five goals.
So what does this have to do with prolonged bear markets not being allowed?
In a low Gross Consent Product, financialized U.S., equity drawdowns are fiscal events. Falling stocks dent tax receipts, widen the deficit, and threaten funding optics — so the revealed preference is short, policy-managed shocks, not cleansing bear markets.
Consent levels have dropped significantly after COVID. Your measurements may vary, but mine show a significant drop-off since 2019.
The main goal of the Controllers’ in a low Gross Consent Product (GCP) environment is to restore governability without rebuilding genuine consent (too slow/uncertain). In other words, replace consent with defaults, knobs, and rails.
Some of the characteristics of such regime are:
Crisis cadence: run short, intense shocks (2–8 weeks) that justify new controls; slam in backstops so pain doesn’t birth alternatives outside the systems.
Narrative sequencing: problem (fear) → provisional order (“emergency standards”) → relief → permanence (sunsets slip).
Liquidity tools: standing swap lines, facility templates, bill-heavy issuance to avoid duration tantrums.
Push near-identical templates (ID, provenance, AML, e-invoicing, incident reporting) to allies so compliant vendors scale globally; non-compliant ones suffocate.
Inflation: tolerate 3–4% CPI “repression band” over deep recessions.
Liquidity: choppy but net-accommodative; bill-heavy issuance, facility templates; quick pivots on vol spikes.
In other words, current consent levels are incompatible prolonged crises. Crises will be kept long-enough so that citizens ask their governments for a solution (knobs implementation), but not long-enough to birth alternatives outside the system.
Most of the time, it is better for the Controllers to stay in the background, keep the printer at a financial repression level (3-4% CPI) and not cause crises unless they have knobs to install. Crises are never wasted.
The only response to a crisis is a big print anyway, so you want to run the world at 3–4% CPI, ~0% real front end, mild positive 10y reals, choreograph liquidity, and keep crises brief.
That quietly taxes savers, preserves order, and funds rails (ID, provenance, audit).
Why stocks → taxes → deficits (the real pipes)
Tax receipts are equity-sensitive.
Capital-gains realizations: The cap-gains base is pro-cyclical. A –20–30% drop compresses gains and kills voluntary realizations; retail/High-Net-Worth individuals simply don’t sell winners. States like CA/NY (highly reliant on top-bracket cap-gains) see double-hit: fewer gains + income volatility among the top 1%.
Options/IPO/vesting income: In a drawdown, comp comp (Restricted Stock Units/Incentive Stock Options) shrinks, bonuses reset lower, and withholding falls.
Corporate tax: Lower equity prices correlate with margin pressure and fewer buyback-funded EPS beats → quarterlies under-withhold, estimated payments fall.
Wealth effect on consumption: Lower stock wealth reduces high-end discretionary spend → less sales tax (states) and profit taxes (feds via corporate).
Net: a sharp drawdown pulls receipts down fast (with a 1–2 quarter lag for final settlement; immediate for withholdings/estimates).
Deficit optics worsen mechanically.
Automatic stabilizers (unemployment insurance, SNAP, Medicaid matching) tick up even on modest labor softness.
Interest expense doesn’t fall with stocks; it follows the term structure and coupon stock the U.S. government already sold.
Treasury funding doesn’t wait; auctions keep coming. If receipts wobble, TGA rebuilding becomes market-visible just as risk appetite is fragile.
Balance-sheet collateral feedbacks:
Buybacks slow (largest structural bid fades) when spreads widen/boards flinch.
Securities financing haircuts rise; basis trades unwind; Value-at-Risk pops → more de-grossing, reinforcing the tax shock.
Political constraint: Low Gross Consent Product = no appetite for “cleansing recessions”. The cheap lever is financial repression (managed floors, not free falls).
The stock market drawdown cascade (what actually happens, in order)
–10–15%: Jawboning & “data-dependence” guidance; buybacks continue but slower; High Yield Option-Adjusted Spread (HY OAS) +75–100 bps; VIX 25–30.
–20% zone:
Issuance mix shifts to bills (duration supply throttled).
RRP drains encouraged; TGA managed to avoid net liquidity cliff.
Facility smoke: standing repo, dollar swap lines “ready”, window times extended.
Supercore talk cools; “financial conditions” enters every sentence.
–25–30% with MOVE/VIX spiking:
Explicit backstops hinted (credit/stability facilities, MBS reinvestments, QT taper).
Supervisory guidance loosens (capital relief optics) to keep banks lending.
Buyback blackout workaround (Automated Storage and Retrieval Systems / 10b5-1) tacitly tolerated to restore the corporate bid.
Exhaustion & floor: A violent reversal day; vol bleeds; bills flood; term premium cools; receipts stabilize expectations.
Why short shocks, not long purges (in low GCP)
Receipts dependency: A prolonged bear starves federal + state coffers; that raises the political cost more than a little inflation.
Pensions & solvency optics: Long drawdowns lift required contributions; public plans squeal; headlines worsen consent.
Strategic spend is non-discretionary: AI governance, Defense, biosecurity, identity/compliance, and energy transition cannot slow without strategic cost. Money must flow.
Therefore: Shocks are time-boxed (≈2–8 weeks) and policy-patched. The goal is not “no downside”; it’s preventing a receipts/funding doom loop.
The macro plumbing they actually turn
Bills over coupons: Push duration risk to money funds; net liquidity improves as RRP bleeds into bills and markets.
QT taper / reinvest tweaks: Slow the reserve drain; “technical adjustments” that are de-facto easing.
Dollar swap lines / Standing Repo Facility: Keep USD funding calm; stop cross-border panic.
Collateral haircuts & margin coordination (quiet): Nudge Central Countryparty Clearing Houses/Prime Brokers to avoid pro-cyclical hikes.
Super-safe rhetoric: “We will ensure market functioning” = code for volatility-targeted support.
Inflation & liquidity expectations
Inflation band: U.S. 3–4% sticky is the path of least resistance in low GCP. It quietly taxes without riots.
Liquidity path: Net liquidity choppy-up — mini drains around tax/TGA rebuilds and coupon waves; offset by bill skew and quick facilities when vols jump.
Term premium: Managed. If it rises too far, expect the issuance knob first, then QT taper talk.
Concrete scenario map
Drawdown −12%: Guidance & jawbone; wait.
Drawdown −18–22% + vol/spreads up: Start bids; look for bill-skew announcement, facility smoke.
Drawdown −25–30% + margin hikes: Add size on the exhaustion reversal; that is the policy floor being drawn.
Post-patch 4–8 weeks: Distribute some into clarity; keep core in the state-embedded names (their budgets don’t get cut).
How far must equities fall to dent tax receipts and blow out the deficit?
Use three pipes: (A) capital-gains + equity comp, (B) high-income withholding, (C) wealth/credit effects on consumption. Rough elasticities from past cycles give a workable map.
Back-of-envelope elasticities (US):
Cap-gains & equity-linked receipts: ~0.6–0.8% of GDP at peaks; sensitivity ≈ 0.3–0.4% of GDP per −10% S&P over the next filing year (lags 6–15 months).
High-income withholding (bonuses/RSUs): ≈ 0.05–0.1% of GDP per −10% S&P within 1–3 quarters.
Consumption/wealth knock-on (sales taxes, profits): ≈ 0.05% of GDP per −10% with a 1–2 quarter lag.
Scenario table (order-of-magnitude impact on the federal deficit, cumulative over 4–6 quarters):
−15% S&P: receipts −~0.3–0.5% of GDP; automatic stabilizers + discretionary patches take total deficit wider by ~0.5–0.8% of GDP.
−25% S&P: receipts −~0.6–0.9% of GDP; deficit wider by ~1.0–1.5% of GDP (add stabilizers/aid).
−35% S&P: receipts −~1.0–1.4% of GDP; deficit wider by ~1.8–2.5% of GDP as policy response scales.
Translation: the true pain threshold where DC reaches for visible “patches” (QE-adjacent facilities, QT taper, bill-heavy issuance, swap lines, forbearance) tends to be somewhere around −20% to −30% fast — because below that, the cap-gains base collapses into the next filing season and the optics on unemployment/credit widen.
Why this makes the tape semi-predictable (low-GCP regime)
Controllers’ objective function: avoid long recessions; preserve nominal growth; keep funding smooth.
Revealed preference: when drawdowns approach −20–30% with spreads/vol spiking, the response moves from jawboning → issuance mix shift (more bills) → facility hints → ratcheted support.
Therefore: expect 2–8 week “Value-at-Risk shocks” followed by fast patches; deep, prolonged purges are disfavored because they crater tax receipts and raise social control costs.
Predictions you can anchor to
Floor-setting reflex: rapid −20–30% drawdowns are more likely to be truncated than extended — not because of ideals, but because tax/deficit math + consent costs force action.
Multiples resilient at the top end of quality: policy spend + vol management props policy-adjacent compounders.
Liquidity management via issuance: more bill-heavy supply when markets wobble; coupon deluge deferred — equity-friendly at the margin.
Index concentration persists: allocators crowd into “safe” megacaps with compliance consoles; dispersion remains high beneath.
Inflation: sticky 3–4% band favored over recession to preserve nominal optics.
Where you can be early (alpha)
Front-run Policy Synchronization Coefficient/Legibility Pressure Index verbs (“attest, revoke, lineage, rollback, trace”) in standards/Requests For Proposals → those budgets don’t wait for the economy.
Buy the exhaustion day of Value-at-Risk shocks in policy winners; most PMs are forced sellers of their best holdings to meet outflows. You’ll often see volatility uptick → mechanical de-risk → scapegoat to justify macro backstops.
Fade “deep purge” narratives absent a funding seizure; the fiscal/tax math makes prolonged purges politically expensive in low-GCP.
Expect “clarity rallies”, not all-clear: use them to roll hedges and harvest IV, not to chase beta.
What typically happens to Treasuries in a –20% to –30% stock-market drop
Two forces hit at once
1) Safety buying (the classic “flight to quality”).
When stocks fall hard, investors rush into the safest, most liquid U.S. Treasuries — especially the most recently issued ones (“on-the-run”).
Result: Yields fall the most at the front and middle of the curve as markets price in rate cuts and seek safety.
2) Forced unwinds in a popular hedge-fund trade (the “Treasury basis” trade).
Many funds run a levered position: long cash Treasuries (financed in repo) and short Treasury futures. In stress, this can get squeezed:
If repo haircuts rise, margins tighten, or futures jump, funds may have to sell their cash Treasuries fast.
That selling often hits older, less liquid bonds (“off-the-run”), making them cheapen versus futures and versus the newest issues.
Net result: even while headline benchmarks rally, some specific cash bonds can see yields rise temporarily — this is the same pattern markets saw in March 2020.
Why this usually doesn’t snowball like 2020
Standing Repo Facility (SRF) = a ready cash valve.
The SRF lets dealers turn Treasuries and agency MBS into cash on demand, easing funding stress. Record end-of-month usage lately shows the circuit breaker works.
Treasury buybacks = targeted cleanup.
Since 2024 (and expanded in 2025), the U.S. Treasury can buy back those cheaper, off-the-run bonds and issue bills instead. That directly shrinks the dislocation created when basis trades unwind.
Policy signaling and mix tweaks
If needed, officials move quickly:
Slow quantitative tightening,
Adjust the issuance mix (more bills, fewer coupons),
Activate dollar swap lines with other central banks.
The operating rule is stability first — deploy tools early to prevent a spiral.
Why this is Semi-Predictable in a Low-GCP World
Incentives beat ideals.
Authorities will not let a funding freeze snowball. Expect them to use the tools already in place — Standing Repo Facility (SRF), Treasury buybacks, and issuance-mix shifts (more bills, fewer coupons). We’re already seeing these switches used (record SRF usage; expanded buybacks).
Control beats fairness.
When stress hits, off-the-run bonds (older, less liquid issues) often cheapen first. Later, buybacks come in to narrow those gaps. That is the trade: some holders take the pain; policy then compresses the dislocation.
Stability beats “pure truth”.
If the term premium (the extra yield for holding long bonds) spikes, officials will signal relief — hinting at slower quantitative tightening or tweaked auction calendars. Major institutions (e.g., BIS, the Federal Reserve) have been explicit that they watch this channel and will act to steady it.
The Fed’s post-2008 patch kit
I am a big fan of the concept of “revealed preference” - you look at what a system does to understand what it intends to do, in the same way you look at what people do, not what they say.
This is the most reliable way to read any system — especially one that isn’t resource-constrained.
Ignore slogans, infer truth from resource flows, constraints, and trade-offs.
What a system funds, staffs, codifies, and enforces = what it is.
What it says = branding.
To read institutions (government, corporations), you have to ask: “If this talk were true, where are the dollars, jobs, laws, and penalties?”. If you can’t point to them, it’s not real.
Let’s have a look at the Fed’s post-2008 patch kit (the facilities they stood up) — what each tool is, when it ran, and the revealed preference reason it existed.
The goal here is not to learn these or even understand them — it is to see what the revealed preference is — namely, furthering the five goals of the system that I started the article with (Survival, Control, Growth, Stability, Comfort — in that order).
Term Auction Facility (TAF) — 2007–2010
What: Term loans to banks via auction instead of the stigma-soaked discount window.
Revealed preference: Hide the bodies. Let banks borrow without the “panic” headline. Liquidity without scarlet letters.
Primary Dealer Credit Facility (PDCF) — 2008–2010; 2020
What: Overnight funding to primary dealers against broad collateral.
Revealed preference: Keep the broker-dealer heart beating. If dealers die, markets die. Loosen collateral to keep Street pipes open.
Term Securities Lending Facility (TSLF) — 2008–2009
What: Lent Treasuries to dealers in exchange for weaker collateral.
Revealed preference: Swap the good stuff for the bad stuff so funding doesn’t seize. Collateral alchemy to defrost repo.
Commercial Paper Funding Facility (CPFF) — 2008–2010; 2020–2021
What: Fed SPV bought 3-month CP from issuers.
Revealed preference: Nationalize short-term corporate funding so payrolls don’t bounce. Replace fleeing money funds with the Fed.
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) — 2008–2009
What: Loans to banks to buy ABCP from MMFs.
Revealed preference: Stop money-market breaking the buck by handing banks a carry trade to hoover toxic paper.
Money Market Investor Funding Facility (MMIFF) — 2008–2009 (authorized, barely used)
What: SPVs to finance purchases of MMF assets.
Revealed preference: Threaten a bazooka you hope not to fire. Confidence theater to arrest runs.
Maiden Lane I/II/III — 2008–2014
What: SPVs to warehouse Bear Stearns/AIG assets.
Revealed preference: Put the worst assets in a dark room and let time + Zero Interest Rate Policy heal. Socialize losses, privatize survival.
Term Asset-Backed Securities Loan Facility (TALF) — 2009–2010; 2020–2021
What: Non-recourse loans to buy AAA ABS (consumer/SME credit).
Revealed preference: Reboot shadow credit by offering leverage on “safe” tranches. If private bid won’t form, subsidize it.
Large-Scale Asset Purchases (QE1/2/3/“QE-infinity”) — 2008–2014; 2020–2021
What: Trillions of UST/MBS purchases.
Revealed preference: Crush term premium, levitate asset prices, and signal “we’ve got your duration”. Wealth effect over purge.
Maturity Extension Program (“Operation Twist”) — 2011–2012
What: Sold short USTs, bought long USTs; balance sheet size flat.
Revealed preference: Bend the curve without expanding totals — optics of prudence, function of ease.
Central Bank Dollar Swap Lines — 2007–2010; 2011–; expanded 2020; standing with majors from 2013
What: FX swaps to supply USD to foreign CBs.
Revealed preference: Globalize the Fed. Prevent foreign USD squeezes from boomeranging home. Protect the dollar’s plumbing first.
Overnight & Term Repo Operations (ad hoc) — Sep 2019–2020 (then stood down)
What: Daily/term repos to calm funding after repo spike.
Revealed preference: Quietly acknowledge reserves weren’t “ample”. Patch the pipes while denying structural fragility.
Standing Repo Facility (SRF) — 2021–
What: Permanent backstop repo to dealers and banks.
Revealed preference: Institutionalize the 2019 fix. Put a ceiling on repo rates so the system never re-learns discipline.
FIMA Repo Facility (standing) — 2020–
What: Foreign official holders repo USTs for cash at the Fed.
Revealed preference: Stop fire-sales of Treasuries by allies. Keep the “risk-free” asset from trading like a cyclical.
Overnight Reverse Repo Facility (ON RRP) — tested 2013; tool from ~2014; heavy use 2021–2023
What: Fed borrows cash overnight from MMFs/others against USTs.
Revealed preference: Floor money-market rates and park excess cash where it can’t cause trouble. Sterilize while pretending not to.
Term Deposit Facility (TDF) — 2010– (used episodically)
What: Time deposits for banks at the Fed to drain reserves.
Revealed preference: Optional drain valve to manage optics of “too many reserves” without shrinking the portfolio.
Paycheck Protection Program Liquidity Facility (PPLF) — 2020–2021
What: Non-recourse loans to banks against PPP loans at par.
Revealed preference: Turn banks into pass-through fiscal pipes. Zero credit risk, instant liquidity — politics by balance sheet.
Money Market Mutual Fund Liquidity Facility (MMLF) — 2020
What: Loans to banks to buy MMF assets (again).
Revealed preference: Admit that “2a-7 reform” didn’t fix runs. Same playbook, faster trigger.
Primary & Secondary Market Corporate Credit Facilities (PMCCF/SMCCF) — 2020–2021
What: SPVs to buy IG/HY corporate bonds/ETFs (with Treasury equity).
Revealed preference: Draw a line under credit. Even a whiff of buying ETFs is enough — talk is the tool, not the tape.
Municipal Liquidity Facility (MLF) — 2020–2021
What: Lending to states/large cities via notes.
Revealed preference: Put a bid under muni funding so locals don’t slash spending into a crisis. Political firewall for austerity.
Main Street Lending Program (MSLP) — 2020–2021
What: Fed-backed loans to mid-sized firms via banks.
Revealed preference: Backstop the part of the economy not plugged into bond markets. Uptake low, signaling high.
Primary Market Corporate Credit Facility’s ETF signal (SMCCF ETF buys) — 2020 (brief)
What: Direct purchases of LQD/HYG-type ETFs.
Revealed preference: Weaponize announcement effects. A few billion of flow to move a trillion-dollar perception.
Bank Term Funding Program (BTFP) — 2023–2024 (loans roll off later)
What: 1-year term loans to banks against UST/MBS at par.
Revealed preference: Paper over unrealized losses from QT/rate shock. Pretend duration risk isn’t real for a year so deposits stop running.
Standing Discount Window “modernization” (ongoing tweaks, esp. 2023–)
What: Collateral schedules, pre-positioning, rate tweaks to destigmatize.
Revealed preference: Rebrand the scarlet letter. Make the oldest tool look like SRF-lite.
QE-for-Dollar-Funding by Proxy (Swap Lines + ON RRP choreography) — 2020–
What: Time-bound USD auctions to foreign CBs; ON RRP to smooth domestic floors.
Revealed preference: Manage global dollar tightness without admitting “QE again”. Optics of precision, function of backstop.
Emergency 13(3) SPV Architecture (Treasury equity + Fed leverage) — 2020 template
What: Treasury takes first-loss; Fed lends into SPV; buys whatever category needs a bid.
Revealed preference: Pre-wire future nationalizations of market segments with deniability: “it’s just liquidity”.
QE Reinvestment & MBS Roll-down Management — 2014–2017; 2020–2022
What: Reinvest paydowns to keep balance sheet from shrinking too fast.
Revealed preference: Avoid tantrums. Let portfolios decay on your schedule, not the market’s.
Not-a-Facility but a Patch: IOER/IORB (Interest on Reserves/Balances) — 2008–
What: Pay banks on reserves to control fed funds in a floor system.
Revealed preference: Accept that reserve scarcity is gone; buy control by paying a stipend to the banking system.
Not-a-Facility but Critical: SLR/LCR “relief” (temporary tweaks) — 2020
What: Temporarily exclude UST/reserves from leverage ratios.
Revealed preference: Tell banks “hold the bag for us, we’ll fix the rule later”. Regulatory cosplay to create balance-sheet space.
UST Buybacks / Treasury Cash Management (Treasury, not Fed; coordination) — 2023–
What: Bill/coupon mix, buyback pilots to smooth duration.
Revealed preference: Fiscal-monetary pas de deux: calibrate supply so the Fed doesn’t have to blink publicly.
How to interpret the list of the Fed’s post-2008 patches
Every line above says the quiet part: protect the funding rails, conceal insolvency with time, and turn runs into queues. When you see the same playbook telegraphed (repo spikes, swap-line chatter, margin hikes, bill-heavy calendars), you buy the state-embedded rails, self-custody Bitcoin and physical gold and step in as liquidity when the forced sellers hit the tape.
Why 2022 could be a full bear market
I’ve been telling you about these short, intense shocks (2–8 weeks) that justify new controls, and then fast patches.
However, the 2022 bear market wasn’t a short shock — so let’s cover why 2022 was “allowed”, while today is run as short, policy-managed shocks.
1) Credibility reset was the priority (not consent).
Inflation had ripped multi-sigma. The system needed to re-anchor expectations and show the Fed/Treasury “will take pain”. Letting assets fall signaled control after the 2021 everything-bubble. In my lens: stability > truth required a public ritual of “discipline”.
2) Consent reservoir was still usable.
Post-COVID stimulus left households with buffers and political patience. Most people had not yet figured out what a complete scam the whole COVID thing was. Gross Consent Product wasn’t yet scarce — people were irritated, not brittle. That gave air cover for a year-long drawdown to puncture speculation.
3) Plumbing setup favored a purge.
QT + coupon-heavy issuance steepened term premium and drained duration risk capacity.
RRP was stuffed; Treasury wasn’t yet leaning on bills to cushion markets.
No standing habit of fast backstops outside crisis moments; the 2023 BTFP-style “patch kits” didn’t exist yet.
4) Speculative excess needed a controlled burn.
Memestocks/zero-rate zombies/VC carry — career and moral hazard needed a visible cull to justify the coming “knobs”: tighter margin, more compliance, slower liquidity.
5) Asymmetric “containable” casualties.
Crypto collapses (Luna/3AC/FTX) and growth multiple compression bled retail and levered funds, without threatening core funding rails.
UK Liability-Driven Investment (LDI) mini-crash served as a teachable micro-crisis to justify future standing facilities.
6) Political timing tolerated pain.
No immediate wartime mobilization or mandated industrial policy blitz yet. Rearmament/AI/energy-security capex hadn’t fully turned on. The system could let markets reset first.
Why now is different (low-GCP, short shocks only)
1) Consent is scarce; fiscal optics matter daily.
Drawn-out equity declines now slam cap-gains receipts and widen the deficit, raising funding optics. In a low-GCP regime you can’t run prolonged despair — you run short, intense shocks (2–8 weeks) to win legal/tech knobs, then patch.
2) The playbook matured: standing backstops + bill bias.
Standing Repo Facility/discount window stigma lower; swap lines normalized; “template facilities” can be hinted/rolled in days.
Issuance tilted to bills to avoid choking duration and to feed RRP → markets; coupons are timed/managed.
QT flexibility: taper/adjust on vol spikes instead of “set it and forget it”.
3) Industrial policy + national security capex are now core.
Defense, semis, energy security, compliance/identity rails — policy-mandated spend wants smoother risk premia. You don’t fund long cycles with a demoralized equity base.
4) Market structure now dampens extremes on command.
Buybacks always-on; ETF plumbing deeper; options market-making (0DTE) recycles shocks faster.
Paperization (ETFs/futures/notes) absorbs flows and caps upside blow-offs / cushions downside once officials nod “clarity”.
5) Learned brittleness: fewer uncontained accidents.
2022–23 taught exactly where things snap (LDI, regional banks). Guardrails are pre-installed; hints of support appear before Value-at-Risk spirals metastasize.
6) Election/legitimacy window.
Low GCP + political calendars = avoid multi-quarter despair. The system prefers inflation 3–4% and rolling mini-panics over a cleansing bear.
7) Bitcoin taught people the plumbing.
Bitcoin’s biggest contribution to the world has been that it taught people the plumbing of the financial system. More people now than ever know what a complete scam fiat currency is. The same governments that are moralizing people about saving the planet, ending poverty and hunger, are robbing almost everyone blind with taxation and inflation, testing experimental “medicines“ on people, and now producing more, and bigger bombs than ever.
Fiat isn’t a “scam” in the legal sense; it’s a control technology with policy utility (war finance, crisis response, domestic coordination) whose costs (inflation tax, asset inflation, moral hazard) were obscured. Bitcoin dragged those trade-offs into daylight. That exposure is Bitcoin’s durable gift.
Bitcoin is an alternative outside the system (to a certain degree). You will hear Bitcoiners say “Bitcoin is decentralized and secure“. I don’t think it is very decentralized, but the Controllers have incentives to allow it to look decentralized.
Trying to ban or completely castrate Bitcoin wouldn’t make sense. Ban = high cost, low control. Pushes activity off-grid, destroys visibility, creates martyrs, shocks balance sheets. The preferred strategy is containment.
Containment = low cost, high control. Capture flows at perimeters (KYC rails, app stores, banks, clouds), harvest data/taxes, steer behavior toward CBDC/stablecoins for Medium-of-Exchange; let Store-of-Value persist mostly in wrappers.
Long crises push people to look for alternatives outside the system — some might adopt Bitcoin, some Monero, some might try to use the lessons we can draw from 17 years worth of Bitcoin data and try to create more robust solutions.
Bitcoin might become a more robust solution.
Only changes that (1) harden fee predictability, (2) make privacy and self-custody defaults, and (3) blunt perimeter levers can keep Bitcoin useful as money.
However, these are exactly the changes most of Bitcoin’s developers aren’t prioritizing.
Bitcoin still improved personal sovereignty options and truth-finding — but its mass role is being canalized toward Store-of-Value with supervised access.
More context:
Net of it (revealed preference)
2022 objective: re-establish control/credibility and puncture excess — bear market allowed.
Now objective: implement knobs (ID, provenance, AI governance, payments rails) without birthing alternatives — so only short, policy-managed shocks.
Expectations for the current regime
1) Expect “shock cycles”, not secular bears.
2–8 week drawdowns around issuance/TGA windows, policy hearings, sanctions, cyber scares. Then hint → facility → squeeze.
2) Inflation = repression band.
Plan for 3–4% CPI tolerated, not 2%. That floats nominal GDP, taxes, and equity revenue lines while quietly eroding real debt.
3) Liquidity = choppy-accommodative.
Bill-heavy calendars, RRP → risk, QT adjustable, facilities on call.
Your triggers: Net Liquidity 4-week Δ, MOVE/VIX, USD trend, Policy Synchronization Coefficient/Legibility Pressure Index language.
4) Buy the rails that get budget regardless, self-custody Bitcoin, physical gold.
5) Sell “clarity”.
Distribute into regulatory-clarity PR and big-award headlines; overwrite calls while IV elevated; reload on the next mini-panic.
2022 was a controlled bonfire to rebuild policy authority and clear excess with consent still spendable. Today’s low-GCP regime runs brief, instrumental crises to justify new control knobs — and then plugs leaks fast. Price the world that actually exists: incentives > ideals, control > fairness, stability > truth.
Bottom Line
In a low Gross Consent Product, financialized U.S., equity drawdowns are fiscal events. Falling stocks dent tax receipts, widen the deficit, and threaten funding optics — so the revealed preference is short, policy-managed shocks, not cleansing bear markets. Your edge is to read the plumbing, not the speeches: when issuance tilts to bills, facilities whisper, and vol peaks, step in — particularly into the admissibility-grade software governments must fund whether the S&P is up or down.
None of this should be considered investment advice.
More context: