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If Mnuchin gets his clean debt ceiling bill passed, the show-down will then move to the appropriations bills used to fund cars upcoming fiscal year. And, of course, the Fed has near it clear that it will begin reverse QE around the end of this year. Tapering is indeed tightening, even though the Fed tends to believe in a machine versus flow analysis. Much like people used cash as their scam or gold as their scam. In that meeting the Fed decided to merely used the re-investment of its balance sheet, which is the pace in that it stops reinvesting its bitcoin. Thanks Todd for getting it without any explanation!
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Everyone is just buying and selling shit. Nice introductory post on bitcoin Lucas! Which, at this time, it is very secure and Bitcoin itself has proved unbackable. Hence, an extrication from this recession will not happen quickly or easily. I would definitely go with the lower fees. The economy should continue to move further away from the Fed's growth, and inflation targets as its previous monetary tightening starts to bite. There are no rules saying it has to happen like that of course.
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Regardless, thanks bitcoin the info Lucas! And a lack of evidence for a Q2 rebound in the data hasn't done so either. Near dramatic used in growth, machine averaged at an annual rate of 4. The IMF cars the only one who is on to China's debt shell game. And this has a lot of significance given that China is the world's biggest oil importer.
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And the number of elements that are rare and indestructible are known, fixed and miniscule. If scientists routinely discovered new elements by the hundreds that are virtually indestructible and extremely rare, the value of all existing PM's would become greatly diluted. That dynamic is exactly what is happing with cryptocurrencies.
Both cryptocurrencies and fiat paper money share this same inherent flaw: Even with this, the money supply of U. However, there are currently now over 1, digital currencies in existence, up from just a small handful in , and that number is growing by the day.
These currencies are mostly homogeneous and therefore tend to act like a single commodity. Of course, there are some small differences. Ethereum, the second most popular cryptocurrency, offers self-executing agreements coded into the blockchain itself. But the core of the technology—decentralized digital money—is the same throughout the cryptocurrency world. Therefore, a more advanced currency with greater speed and capabilities would greatly reduce the value of all other inferior digital "money"; just as each new digital currency created greatly reduces the value of those already in existence.
The advocates of Bitcoin believe they have the upper hand to gold because it is limited to 21 million units. But what the holders of Bitcoins don't yet understand is that even though this one cryptocurrency is limited in supply, the universe of commodity-like cryptocurrencies is unlimited.
Because cryptocurrencies are driven by quickly changing technology, you have no idea when your cryptocurrency will become obsolete. Therefore, you can go to sleep believing your wealth is stored in the equivalent of an iPhone and wake up realizing your life savings is parked in an eight-track cassette.
Cryptocurrencies are an inferior form of money to PM's. After all, one has to question the durability and soundness of owning electrons inside a digital wallet. It is also a currency that has attracted a number of terrorists, black mailers, and child pornographers--giving governments a great motivation to regulate it. Precious Metals, such as gold and platinum, are the most perfect form of money known to humans. This has been proven correct for thousands of years.
Indeed, history clearly proves that all currencies backed by nothing eventual display that very same valuation--nothing. However well intentioned, in the end, the creators of cryptocurrencies are really just modern day alchemists; and what they ended creating is nothing more than fool's gold.
But as we have seen back on this side of the hemisphere, the public's interest in these political scandals can be easily overlooked if the underlying economic conditions are favorable. For instance, voters were apathetic when the House introduced impeachment proceedings at the end of against Bill Clinton for perjury and abuse of power.
And Clinton's perjury scandal was indefensible upon discovery of that infamous Blue Dress. The average citizen, then busily counting their chips from the dot-com casino, were disinterested in Clinton's wrongdoings because the economy was booming.
Clinton remained in office, and his Democratic party gained seats in the mid-term elections. Therefore, Abe's scandal is more likely a referendum on the public's frustration with the failure of Abenomics. When Shinzo Abe regained the office of Prime Minister during the last days of , he brought with him the promise of three magic arrows: The first arrow targeted unprecedented monetary easing, the second was humongous government spending, and the third arrow was aimed at structural reforms.
The Prime Minister assured the Japanese that his "three-arrow" strategy would rescue the economy from decades of stagnation. Unfortunately, these three arrows have done nothing to improve the life of the average Japanese person.
Instead, they have only succeeded in blowing up the debt, wrecking the value of the yen and exploding the Bank of Japan's BOJ balance sheet. For years Japanese savers have not only seen their yen denominated deposits garner a zero percent interest rate in the bank; but even worse, have lost purchasing power against foreign currencies. The yen has lost over 30 percent of its value against the US dollar since Abe regained power in Meanwhile, the Japanese economy is still entrenched in its "lost-decades" morass; and growing at just over one percent year over year in Q1 Japan's dramatic slowdown in growth, which averaged at an annual rate of 4.
In addition to this, higher health care costs from an aging population have driven government health care spending to move from 4. Incredibly, this low-growth and debt-disabled economy has a Year Note that yields around zero percent; thanks only to BOJ purchases. Prime Minister Abe's plan to address this recent scandal-driven plummet in the polls is to increase government spending even more and have the BOJ simply step up the printing press. In other words, he is going to double down on the first two arrows that have already failed!
However, the Japanese people appear as though they have now had enough. And the nation would never be able to service this debt if the BOJ didn't own most of it. The sad truth is that the only viable alternative for Japanese Government Bonds JGBs is an explicit or implicit default. Japan is a paragon to prove that no nation can print, borrow and spend its way to prosperity. Abenomics delivered on all the deficit spending that Keynesians such as Paul Krugman espouse.
But where is the growth? Japanese citizens are getting tired of Abenomics and there are some early indications that they may vote people in power that will force the BOJ into joining the rest of the developed world in the direction of normalizing monetary policy. The reckless policies of global central banks have left investors starving for yield and forcing them out along the risk curve. But interest rates are set to rise as central banks remove the massive and unprecedented bid on sovereign debt—perhaps even in Japan.
A chaotic interest rate shock wave is about to hit the global bond market, which will reverberate across equity markets around the world. Is your portfolio ready? This powerful and protracted bull market has made Cassandras look foolish for a long time. Those who went on record predicting that massive central bank manipulation of markets would not engender viable economic growth have been proven correct.
However, these same individuals failed to fully anticipate the willingness of momentum-trading algorithms to take asset prices very far above the underlying level of economic growth.
Nevertheless, there are five reasons to believe that this fall will finally bring stock market valuations down to earth, and vindicate those who have displayed caution amidst all the frenzy. Congress needed to shave two weeks off its August recess in an effort to make headway on raising the debt ceiling, which will hit the absolute limit by mid-October, and how to fund the government past September 30th of this year.
Tea-Party Republicans, as well as Office of Management and Budget Director Mick Mulvaney, would like to add spending reform riders to the debt limit bill. Treasury Secretary Steven Mnuchin is looking to pass a "clean" bill.
If Mnuchin gets his clean debt ceiling bill passed, the show-down will then move to the appropriations bills used to fund the upcoming fiscal year. For the past few years, Congress has been pushing through last minute continuing resolutions, rather than passing a budget, to provide funding at a rate of the previous year's funding.
Not being able to make progress on either of these measures will lead to a government shutdown that could leave markets and Trump's tax reform agenda in a tail spin. The Donald may find it very convenient to "Wag the Dog" before the year closes out. What is needed is a "fantastic" distraction from his failure to reach an agreement to repeal and replace Obamacare and to push through with a tax reform package.
Also, an assault on Kim Jong-un's nuclear facilities would go a long way in reducing the media's obsession with Russiagate. Trump promised that a nuclear strike against the U. Trump also urged China to, "put a heavy move on North Korea" and to "end this nonsense once and for all. On June 7th the spread between China's 10 and 1 year Sovereign bond yields became negative.
This was only the second time since that such an inversion occurred, and this time around it became the most inverted in history. An inverted yield curve, no matter what country it occurs in, is a sign of severe distress in the banking system and almost always presages a recession. A recession, or even just a sharp decline in China's GDP growth, would send shock waves throughout emerging markets and the global economy.
Indeed, on July 17th the major indexes in China all plunged the most since December due to investor fears over tighter monetary and economic controls from Beijing. If the yield curve remains inverted into the fall, look for exacerbated moves to the downside in global markets. The head of the ECB, Mario Draghi, stated in late June that deflationary forces have been replaced by reflationary forces.
This simple statement sent bond yields soaring across the globe in anticipation of his inevitable official taper announcement that could be made as soon as September 7th.
German year Bund yields are still about basis points below the ECB's inflation target, and about bps below implied nominal GDP. This means when Mr. Draghi actually starts removing his massive bid from the European bond markets yields should spike suddenly and in dramatic fashion—regardless of the pervasive weak economy. Rapidly rising borrowing costs on Europe's over-leveraged economy would cause investors to worry about future growth prospects and send high-frequency front-runners scrambling for the narrow exit door at once.
Now, after QE has been wound down to zero and four rate hikes have taken place, the Fed will likely announce the actual start date for the selling of its balance sheet at its September FOMC meeting. The problem is that global central banks are tightening monetary policy as the economy weakens. This would exacerbate the move higher in bond yields caused by the ECB's Tapering. That could be enough to send the passive ETF investing sheeple jumping off a cliff en masse. The end of central bank monetary accommodations, which is coming to a head this fall, is the primary reason to believe the odds for a significant stock market correction could be just a couple of months away.
Adding to this perilous situation is the record amount of NYSE margin debt outstanding, along with the fact that institutional investors have just 2. In other words, investors are levered up and all-in. Since the election of Donald Trump, the Dow Jones Industrial Average has reached a record high one out of every four trading days. The average days without such a decline is and respectively. This market is overvalued, overextended and extremely dangerous!
Therefore, it is very likely this long-overdue market correction could be worse than the ordinary 20 percent decline. The upcoming stock market toboggan ride is not only starting from the second highest valuation in history, but also with the balance sheets of the Fed and Treasury already severely impaired. In other words, there just isn't a lot of room left to lower interest rates or to run up huge deficits in an attempt to quickly pull the economy out of its downward spiral.
It is time to put a wealth preservation strategy in place before the fall arrives. Illinois officials have been frantically working on a massive 5-billion-dollar tax increase to stop the major rating agencies from downgrading their debt to junk.
Their last-minute maneuvers increased the personal income tax rate to 4. And the state's annual pension obligation is now looming around 25 percent of its budget. But Illinois is not alone in its fiscal woes. The salient issue here is not just that tax receipts are short of liabilities but that asset returns are falling far short of their projected targets.
This highlights the fundamental flaw in governmental pension accounting: This process expects that all returns will mirror the best years and doesn't consider market volatility, let alone a recession and bear market.
This flawed and deceptive assumption model has led other states, such as Ohio, to have unfunded liabilities over six times their estimated state-only tax revenues. Optimistic actuarial assumptions have proven to be too optimistic about such factors as employee longevity and enrollment in early retirement programs.
Pension fund managers have been underweight U. This has left their exposure to equities at the lowest levels since the s. Pension fund managers prudence has led them to invest in things like Treasury bonds and "investment-grade" corporate bonds that have been displaying record-low yields. Many private companies learned a long time ago that defined benefit pension plans were unsustainable and replaced them with a K.
Employees can save tax-free and invest in a group of boilerplate options. And while there is a risk that these plans will not provide for the employee in retirement, the risk is on the employee and not the employer. Public sector unions that represent a reliable voting block have kept defined benefit pensions alive and well for government employees.
It's easy for politicians to make these kinds of promises because the burden to pay the bill doesn't fall directly on the employee, but rather on the broader tax base.
But the truth is your tax bill could explode as local governments bail out these insolvent pension plans--just ask the taxpayers of Illinois.
New Jersey and Maine had to close state parks over part of the July 4th weekend. Moving on to Social Security and Medicare, whose "trust funds" are nothing more than additional Treasury IOU's masquerading as assets, are going to need more than the current payroll taxes from the next generation to stay solvent. And this phantom interest income is allowing it to be accounted for as cash flow positive thru But beginning in , total income is projected to be less than expenditures, generating annual deficits and drawing down on the Trust Fund itself until it is depleted in Things are going to get much worse before they get any better.
This is because during the next economic crisis there is a good chance that both stock and bond prices could tumble. Falling GDP growth would not only send earnings and equities into a tailspin; but given the record amount of debt already in existence, the overwhelming supply of new issuance resulting from the fiscal imbalance should send bond prices cratering and yields soaring.
This would occur just in time to hit employees' k plans. Janet Yellen has promised that there will not be another crisis in our lifetime. The truth is central banks will never be able to let go of their humongous and unprecedented interest rate suppression. This current attempt to normalize interest rates will cause market and economic chaos of unmatched proportions.
Sadly, the broken public and private pension plans have condemned the Fed to an endless pursuit of asset bubbles and inflation to portray the illusion of solvency. Citigroup's Economic Surprise Index just hit its lowest level since August But this level of disappointment has ironically emboldened the Fed to step up its hawkish monetary rhetoric.
The truth is that the hard economic data is grossly missing analyst estimates to the downside as the economy inexorably grinds towards recession. This anemic growth and inflation data should have been sufficient to stay the Fed's hand for the rest of this year and cause it to forgo the unwinding of its balance sheet.
But that's not what's happening. But why is the Fed suddenly in such a rush to normalize interest rates and its balance sheet? Perhaps it is because Ms. Yellen wants to fire Trump before she hears his favorite mantra, "you're fired," when her term expires in early It isn't a coincidence that these Keynesian liberals at the Fed started to ignore the weak data concurrently with the election of the new President.
A Q1 GDP print of just 1. And a lack of evidence for a Q2 rebound in the data hasn't done so either. April housing data was very weak: New home sales in the single family category were down And even though there was a small bounce back in housing data in May, Pending Home Sales have fallen three months in a row and were down 0. Retail sales dropped, 0. It's not just economic growth indicators that are disappointing, but also evidence of disinflation abound everywhere.
Commodity prices are also illustrating signs of deflation. Further evidence of deflation is seen in the fact that the spread between long and short-term Treasury Yields are contracting. The Household Survey is a leading indicator for the Establishment Survey and the overall employment condition.
Wall Street's currently favorite narrative is one of strong earnings growth. But according to FactSet, nearly half of Q2's projected 6. Excluding this sector, EPS growth is projected to be just 3. The economy should continue to move further away from the Fed's growth, and inflation targets as its previous monetary tightening starts to bite. The odds are very high that such a weak print on jobs will occur before the next hiking opportunity on Sept.
From there it will turn to panic as the economy and stock market meltdown. And, most importantly, the coming market crash and recession will occur with the balance sheets of the Treasury and Fed already extremely stretched. Hence, an extrication from this recession will not happen quickly or easily. All of the above makes this the most dangerous market ever.
This crash and ensuing economic downturn, which given history, logic and the data should happen soon; will alter the Fed's current stance on monetary policy. But it will happen too late to preclude a very steep decline in GDP. Trump cannot push through his tax cutting agenda rather quickly it may be both Ms. Yellen and the Republicans that find themselves moving out of D. That's the direction some high-profile economist and former members on the FOMC want to go.
According to these academics, including Narayana Kocherlakota the former president of the Federal Reserve Bank of Minneapolis from to , raising the inflation target just isn't enough. They want to put a time horizon on it as well.
Their rational for doing both actions is to reduce the level of real interest rates, which they somehow believe is the progenitor for viable GDP growth. You see, once the Fed has taken the nominal Fed Funds Rate to zero, there isn't much more room to the downside unless these money manipulators assent to negative nominal interest rates.
But charging banks to hold excess reserves is fraught with danger, and so far this idea has been eschewed in this country and has been proven ineffectual in Europe. The next recession could be just around the corner and the Fed is thinking about ways to stimulate the economy given the fact that the amount of ammunition--the number of rate cuts until the F.
With very little leeway available to reduce borrowing costs, these mainstream academics want to facilitate more negative real interest rates by ensuring inflation is higher right from the start. The math is simple: But as to why these Keynesian academics are so convinced a lower real interest rate is better for economic growth is never clearly explained. Probably because it is a nonsensical tenet and the biggest fallacy in all of central bank group think. Their spurious logic dictates that a lower unemployment rate is the primary cause of rising rates of inflation and that a higher rate of inflation is supportive for lowering the unemployment rate.
Exactly how this simple model arrives at that conclusion is never cogently explained; other than the mistaken belief that inflation and growth are synonymous terms. But history and genuine economics clearly illustrate that inflation does not bring about growth, nor does it necessarily lower the unemployment rate.
In fact, a rising rate of inflation often leads to higher rates of unemployment. This is the exact opposite of the Phillips Curve dogma held at the Fed, which dictates that a falling unemployment rate is the totality of inflation. The reality is that the humongous amount of new credit pumped into the system by global central banks has primarily landed in financial assets, not consumer price inflation. Central banks will purchase assets directly from the public or the Treasury instead of through the banking system.
In other words, getting new money into the public's hands causing an increase in broad-based money supply and inflation. The next stock market plunge and concomitant GDP collapse is approaching quickly. The Fed is preparing investors for its ultimate response; which will be to guarantee a higher inflation rate and to put a timestamp on it as well. But those efforts will only vastly exacerbate the stagflation condition suffered by the middle class.
Those that possess a keen insight to the direction of markets are aware of this phenomenon and are moving into precious metals now; while they are still able to afford them. The economic ruse that is run by Communist China is growing bigger by the day. The formula behind what has been the Great Red Engine of global growth is really very simple: Print new money and funnel it through the state-owned banking system in order to entice businesses and individuals to incur a debilitating amount of non-productive debt.
Historically speaking, countries that have utilized this ersatz form of economics have suffered a currency and bond market crisis. But the command and control government of China always seems to be one step ahead of the laws of economics; and has been able to defer the inevitable day of reckoning due to its large currency reserves. However, those reserves have dwindled as the nation was forced into selling its dollar-based assets and defend the value of the yuan.
To aid in propping up the yuan, China has deployed a unique cocktail of regulations and market trickery. In addition to outright currency manipulation, trading bands and strict capital controls, China has now resorted to simply making up prices for its currency.
The China Foreign Exchange Trade System, which is managed by the PBOC, changed the way it values the country's currency each morning and the way it is allowed to fluctuate through the day. The government currently sets a benchmark value for the yuan against a basket of currencies for which the yuan is then allowed to fluctuate in value by 2 percent during the day. You would assume the opening benchmark level would be based on the currency's closing value the day before. But the Chinese government contends that the market just isn't getting it right.
Therefore, they are introducing a "countercyclical variable". The omniscient Chinese government will now determine the opening benchmark value of the currency. Because after all, the government of China is great at pretending it has a better view of supply and demand than millions of individuals voting with their wallets each day. But the currency manipulation doesn't end there.
The Chinese government still has the less regulated offshore yuan to contend with. Investors that believe the yuan will fall in value will go short the currency outside of China. This involves borrowing yuan in Hong Kong, swapping it for dollars and then repatriating it back at a more favorable rate. There are risks associated with borrowing the yuan. When these risks rise it can force investors to close out this trade, which has the effect of pushing the yuan higher.
Therefore, in order to crush the Yuan bears, China followed up its countercyclical variable by sending margin costs for borrowing the offshore yuan through the roof and forcing a short squeeze. The overnight CNH Hibor rate, spiked from 5.
And with this it appears China's currency will live to die another day. We are living in a world where market manipulation has reached unprecedented proportions and any vestiges of the free market are extremely hard to find. This is especially true throughout the developed world. China sets a GDP target and then fudges with the number to ensure its accuracy. It fabricates economic numbers and is the world leader in the production of alternate facts.
Spinning a fairy tale as it pretends to move towards a more market-based system. But to imagine China can repel these economic forces forever would be to defy centuries of data that says otherwise.
The offshore Yuan speculators represent the incipient dissolution of confidence in the government and its currency. The Chinese government can only manipulate the message from the market for so long.
But by the early 's money printing caused the government to abandon the dollar's gold backing, and stagflation soon followed. Heck, even the Roman Empire couldn't hold back the forces of inflation forever.
This destruction of confidence in governments and their fiat currencies do not happen overnight. But history is clear that markets always win and governments always lose…reality triumphs over fiction. China's fairy tale will come to an end. A pernicious end that will be shared by the Euro and the Dollar as well. Those seeking a much better ending will need to park their wealth in gold.
The bounce in Treasury yields witnessed after the election of Donald Trump is now decaying in the D. If the Fed continues to ignore this slow growth and deflationary signal from the bond market and continues along its current rate hiking path, the yield curve will invert by the end of this year and an equity market plunge and a recession is sure to follow.
An inverted yield curve, which has correctly predicted the last seven recessions going back to the late 's, occurs when short-term interest rates yield more than longer-term rates. Why is an inverted yield curve so crucial in determining the direction of markets and the economy?
Because when bank assets longer-duration loans generate less income than bank liabilities short-term deposits , the incentive to make new loans dries up along with the money supply. And when asset bubbles are starved of that monetary fuel they burst. The severity of the recession depends on the intensity of the asset bubbles in existence prior to the inversion. The Federal Reserve has traditionally controlled overnight lending rates between banks.
Nevertheless, outside of these QE programs, the long end of the yield curve is primarily influenced by the inflationary expectations of investors. The yield curve inverts when central banks believe inflation is headed higher; but bond investors are convinced of the opposite.
The last two times the yield curve inverted was in the years and This next inversion will occur in the context of record high equity, real estate and bond market valuations that will require another government bailout. However, this time around the recession will commence with the balance sheets of the Fed and Treasury extremely overleveraged right from the start.
As you can see from the chart below, if the year Note yield orange line continues to fall along its current trajectory; and the Fed plods along with its avowed Dot Plot hiking path blue line , the yield curve should invert around the end of Market chaos and another brutal recession should soon follow. One of the most popular Wall Street myths is that long-term interest rates rise simply because the Fed is raising the Fed Funds Rate F. This normally occurs because the central bank is trying to catch up to rising inflation and is initially behind the curve.
However, later on in the tightening cycle long rates begin to decline as inflation is stamped out of the economy. For example, from June thru June the Fed raised the F. That means the Benchmark Note went up just 50 bps even though the F. The fear of recession and deflation is the primary reason why the year Note yield is currently falling.
It has subsequently raised rates three times and is now most likely already ahead of the curve due to the anemic state of the economy. But, as always, the Fed fails to read the correct economic indicators and is now fixated on the low unemployment rate and its dubious effect on inflation. Some argue that the yield curve won't invert if economic growth stalls because the Fed will then truncate its rate hike path. And indeed there is a lot of evidence for the Q2 recovery narrative to be proven false.
For instance, April data on existing home contract closings declined 2. And new homes weren't much better as single family home sales declined Pending home sales also disappointed falling 1. Then we had Durable Goods falling 0. These data points highlight the reality that Q2 will not spring higher from the anemic Q1 growth rate.
But the problem is that the F. Therefore, even if we get just two more hikes before the Fed realizes growth is faltering, that rate will be near 1. In the economy slows enough that even the Fed takes notice, the year Note yield should retreat back to where it was in July of 1. In this second scenario, the yield curve inverts despite the Fed's failure to consummate its Dot Plot plan. While this may avoid an inversion of the yield curve, it would also siphon off capital from the private sector, as investors divert yet more money to the Treasury.
An aggressive selling of the Fed's balance sheet is a very unlikely scenario given the minutes of the May FOMC meeting. In that meeting the Fed decided to merely taper the re-investment of its balance sheet, which is the pace in that it stops reinvesting its assets. Therefore, the only rational way to avoid an inverted yield curve, market chaos and a recession is if long-term Treasury yields reverse their long-term trend lower due to a rapid increase in GDP growth.
This would only occur if Trump's agenda of repatriation of foreign earnings, tax cuts and infrastructure spending is imminently adopted. But the probability of this happening very soon is getting lower by the day.
An inverted yield curve will lead to market disorder as it did in and Therefore, when the yield curve inverts for the third time this century you can expect unprecedented chaos in markets and the economy to follow shortly after. This is because the yield curve will not only invert at a much lower starting point than at any other time in history, but also with the Fed and Treasury's balance sheets already severely impaired.
There will be unprecedented volatility between inflation and deflation cycles in the future due to these factors.
This represents a huge opportunity for those that can identify these inflexions points and know where to invest. To be just a bit more specific, sell your long positions now and get short once the curve inverts; and then get prepared to hedge against intractable inflation when the Fed responds to this next collapse with helicopter money.
The rational being that it expects the financial strength of the economy to erode, as GDP growth slows and debt levels continue to pile up. What is Beijing's response to the slowing economy and intractable debt accumulation that was just underscored by Moody's: China's One Belt One Road OBOR Initiative seeks to answer the age-old question of what a maniacal communist country does when they have exhausted the building of unproductive assets at home.
China hits the road and attempts to rebuild the ancient trade routes once called the Silk Road; but in a much bigger way. During the time of the Emperors, the Silk Road was the main path that provided the exchange of goods and cultures connecting otherwise remote and inaccessible areas of the world.
Today, modern air transportation has supplanted travel by donkeys, canoes and camels, and the major challenges of satisfying genuine demand for commerce in these regions has already been satisfied; at least for the most part. But the lack of genuine free-market demand for capital goods or fixed asset investments has never been a deterrent for China. And it is no secret that the Chinese seek to gain the same dominance in these regions as the U. The problem for China is that the Marshall Plan was implemented by the United States at a time when the dollar had won the right to enjoy the world's reserve currency status.
Therefore, at the time of the Marshall Plan the world afforded the U. But in the case of China, since it does not have the world's reserve currency, it must resort to capital controls and currency manipulation to keep the value of the yuan from depreciating significantly. Despite this precarious and dangerous scheme, the two major Chinese Banks are jumping feet first into financing some of the poorest countries around the globe with sketchy credit in order for China to play Marco Polo.
Imagine 15, 20 years down the line. The world has now really adopted Bitcoin. It is a viable currency. Tech Apple Google Microsoft. Apps Photography Virtual Reality. Ride-Sharing Cars Mass Transit. VR Headsets This is my Next. By Adrianne Jeffries May 6, , More From The Verge Hacking nuclear systems is the ultimate cyber threat. Command Line Command Line delivers daily updates from the near-future. By signing up, you agree to our Privacy Policy and European users agree to the data transfer policy.
Blatant market manipulation in the regular markets is illegal and watched for. There are no laws or regulators for Bitcoin which is a great thing in the long run, in my opinion. However, that means the Wall Street banksters can use their futures bets to manipulate the price and make tons of money.
Will be an interesting few weeks for sure. Hey Lucas, appreciate you stirring this pot. So would it be correct to characterize your position as making a long-term investment in the blockchain technology vs. Bitcoin, Ethereum, and Litecoin Is it because those are the only 3 available on Coinbase right now, or do you have other reasons for not placing your bets on other cryptos? Is Bitcoin a bubble right now? I think you hit the nail on the head — Yes it LOOKS a lot like a bubble, but it may also take a good long time for it to pop.
The very same thing could be happening here. There are no rules saying it has to happen like that of course. On viewing this as a very risky investment: I did not buy into cryptocurrencies intending to Get Rick Quick. I fully expect Bitcoin to crash massively, probably several more times, but I also intended to hold through all of it.
Excellent and complicated question. This article was meant to be a jumping off point for people totally new to Bitcoin and Crypto — for that reason, using the 3 available on Coinbase is an easy starting point. Using other exchanges in complicated and sketchy.
Bitcoin has the brand name and first mover advantage. Ethereum has the most functionality, the ERC20 second layer token ecosystem, and by FAR the biggest development community and resources. Litecoin is an obvious hedge against a Bitcoin crash. The privacy crowd loves Monero. Wall Street loves ZCash. China is betting on NEO. One of the BTC fork coins could win. I have no idea and neither does anyone else. Ah yes, I think we are on the same page.
My uneducated guess at this point is that there will probably be consolidation around certain key cryptos within specific categories of uses, and as we get there, a lot of losers will get discarded along the way. Typical free market stuff. In that sense, I wish there was a VTSAX equivalent for cryptos where I can just buy the whole hay bale like Bogle suggests and then let the index handle the filtering for me. That is essentially an Index Fund for Cryptocurrency, as I understand it.
Apparently that was worth 0. Have you tried to acquire bitcoin? Seriously, write down your passwords and store them somewhere safe?
This is supposed to be the future of currency? Cyrptocurrencies will work only if they are tied to your bank account or apple pay and if thats the case what is the point? Once the big banks create their own cyrptos we will all use that because it is cheap and easy…. I agree Big Banks will try to create their own cryptos, but they will inevitably get hacked and not work correctly — the very things that make a cryptocurrency a cryptocurrency require that it be decentralized.
I would wear and probably buy! This is the moment I had been waiting for. Having heard about bitcoin and cryptocurrencies for the first time through some friends in September, I started researching about it. I could not believe what I found is being bought and sold. I had never seen anything like this before and could not believe that so many people are sold into this. I went back to the same friend that had introduced me to this new world. Everyone is just buying and selling shit. I went back to my Index funds mindset and everything was good.
Come October, I see this thing everywhere. I start reading up on internet, everyone is either sold into the eutopia of bitcoin or are predicting a crash. This has so much similarities with stock market bubbles yet there is something that is different. Are they as confused as I am?
Come November, I slowly started thinking about gambling a little bit on it. Opened accounts on two platforms but the annual fees and expense ratio kept me off. Come December, I start regretting a little about not being able to 4x my gamble if I had put money in it. Then comes James Collinshnh saying he might throw in some gambling money in there as well. My take out of this long story, even after this topic of Bitcoin, jlcollinsnh and I are not that different.
The skeptic in me says that maybe Ben Graham and Warren Buffet also gambled a few times. Did they win or are we going to win with Bitcoin? Do not take investing advice from gamblers. That is the very definition of playing with house money sir — Good for you and great attitude! As Bitcoins stand right now, it seems that one single Bitcoin transaction can use as much energy as a typical small household uses in a week.
I encourage any response to prove me wrong so that I can feel better. Thank you for your polite comment. You are absolutely right, Bitcoin is using an enormous amount of electricity at the moment and that is likely to continue. However, what we are getting when we humanity collectively are paying for that electricity is actually more than you would think at first glance.
This reminds me of the good old dot com stock market mania. I remember when a friend recommended that I buy stock in a company called ecom ecom dot com. I made a small bet on crypto, figuring these things would run up after Thanksgiving.
Families sitting around the dinner table have to talk about something. The same thing happened at the start of dot com mania. By the time it was all over? My serious dough was all gone… It was a fun ride though. Personally, I think if you want to take some fun money to the crypto casino and make a bet — have at it!
If you get lucky and make. Amazon, Cisco, Ebay, Qualcomm etc? This reminds me of the race between the tortoise and the hare. I decided long ago I would rather be the tortoise. Good luck to all who try this new gamble. In I had most of my assets in VTI slowly accumulating wealth and also was lucky to do well with an online business that I managed.
At that meet up, I was able to receive bitcoin from an attendee and at the moment the switch went off in my head. At that moment the paradigm occurred to me that this was gonna change the world. How some stranger could transfer value without going through an intermediary almost instantly blew my mind. With a technology background, I immersed myself for the next 3 months and became obsessed with the technology.
I personally think this is going to be the greatest transfer of wealth of our generation and am excited for the future. I have found that:. What they all have in common is that by the time you start reading about them everywhere, the end is near.
This is well worth the read if you want to understand what comes after the bubble bursts. The short version is this: If you are interested in digging a little deeper read about the Byzantine Generals Problem: Why you might ask. So I was looking for something to quench my gambling thirst. The best part of this whole experience is hanging out with friends someplace and pulling out my phone and showing them I own cryptocurrencies. Got to go now. If you hear anything about a Tulip Bulb exchange opening up please let me know….
You could just convert them into a bazillion USD or so and donate that. Some Tulip Bulbs would be nice, too. Dear Lucas, I was meaning to ask.
Would it not be more fun to act like a true venture capitalist and, using Binance, put a bit in each of the top valued cryptos? This is what I would recommend for several reasons. Many of the coins in the Top 40 even the top 10! Even in the short 8 weeks since I wrote this post the crypto landscape has gone full-on insane. I know of at least 2 coins in the top 15 that are quite literally just hot air, hopes, and dreams.
Many more in the Top Unlike at the US Stock Indexs, where at the very least each company has made it through the process of going public and has been rigorously vetted. Market cap is a horrendously bad metric for measuring Crypto projects. In the real world, Market Cap may be manipulated a lot by Wall Street, but it still means something. It is based on earning, assets, debt, etc etc. Clearly that project while big did not become as valuable as Apple or Amazon in 1 day for no reason.
At last count 42 42!!! ERC20 Tokens are built on top of Ethereum. No Ethereum, no Tokens. There is a guy already trying this and documenting it. He is mostly under-performing compared to just holding Bitcoin: Are actually being used by real people for real things right now today besides speculating.
That is NOT my recommended portfolio. Sorry about the unfortunate venture capitalist reference. Then I did a bit of googling and also found an analysis. What do you mean Cardano is only whitepaper?
How is it traded if it does not exist? One version of my plan was to invest in the 24 currencies supported by Ledger Nano S. I mean, they have to be real if you can store them in a hardware wallet, right? I see your point about market cap, I was already thinking about how you can easily fake a market cap. So you would advise against my plan? I plan to make my purchase this week so I need to decide what do to: I get you on the whole wish-I-bought bitcoin thing. Unlike other buys that seem obvious now, like buying Apple or Amazon stock, I actually thought about buying bitcoin back in or earlier.
I never considered buying those particular stocks. And I only thought of buying ten bucks worth of bitcoin. If I did that when bitcoin first could have a price associated with it — when it first went on exchanges — I would be a millionaire by now.
This increases our own belief in our own abilities and makes us more likely to continue to play the game assuming we have it figured. This a big reason most people lose money in the market and casinos build billion dollar hotels. Your email address will not be published. Notify me of follow-up comments by email. Notify me of new posts by email.
You have been warned. Am I qualified to give this investing advice? Why should you trust me? Do your own research. Why cryptocurrencies are the future of money and the internet 3. Comments This year is starting to feel like a Twilight Zone episode…. A t-shirt for a Bitcoin? Heck, you can have the shirt off my back for a Bitcoin. LOL Seriously, making the t-shirts — if there ever are any — available for purchase with Bitcoin sounds like fun to me.
You can accept Bitcoin with a Stripe account. Thanks for the kind words Dave. Much as it pains me, I am afraid you are probably right when it comes to the IRS. Thanks Wendy… …I like the path graphic idea for the T-Shirt. Hey Danny, Thank you for the kind words. To your point that the movie leaves Bitcoin hanging on a sour note: So much has happened since the events in the movie it feels like ancient history.
Hey Friendly Russian, Sadly, that is pretty much all you hear about Bitcoin because it now involves such vast sums of money. Thanks for telling it like it is, Lucas! Love the racoon gif. It is, well, just so damn perfect! WoW is onto something here, Uncle Jim! Agreed, and I love it too Todd. Now that you explained it to me. Bitcoin is divisible to 8 decimal places. And one other thought… there is also the environmental cost of Bitcoin to be considered.
This is an interesting point Andrew — thanks for bringing it up. SO many things use more polluting, wasteful oil-powered electricity than Bitcoin. I agree this is a debate we need to have. Glad to hear it Roberto! Referring to your comments, Lucas said: Thanks for the very kind words, Roberto. If you like, Lucas can chose another winner. Or you can accept and gift it to someone else.
Back in , I wish I had had Index investing figured out, let alone bitcoin!