Category Archives: Currencies

Where Crypto Went Wrong, by Charles Hugh Smith

Posted on November 15, 2022 | Leave a comment

Cryptos have become just another way for those who have to get more. From Charles Hugh Smith at oftwominds.com:

You want to fix the world with finance? Then fix this: wages’ share of a financialized, globalized, speculative-bubble dependent economy have been falling for decades. Fix this and you really will change the world. Anything less changes nothing.

Let’s start by stipulating my perspective on cryptocurrencies is neither positive nor negative in the usual context of “to the moon” or “worthless,” nor does it track any of the conventional narratives (decentralized finance will conquer the world, etc.)

I’ve thought a lot about “money” and its role in the economic-social order, and its role in the extreme asymmetries of wealth-power-income inequalities that are dismantling the social order in broad daylight. I’ve also thought a lot about work and its role in social cohesion, individual fulfillment and a productive, level-playing-field economy.

I’ve written two books on “money” and the potential utility of cryptocurrencies in reversing the extremes of wealth-power inequality that are destabilizing the social order. I invite you to read both books if these topics interest you:

Money and Work Unchained (2017)

A Radically Beneficial World: Automation, Technology and Creating Jobs for All: The Future Belongs to Work That Is Meaningful (2016)

Once you grasp the potential of community-based labor-backed cryptos, you realize cryptos took the greed-soaked path to the Dark Side of a destructive asymmetry of wealth and power: those who issued blockchain cryptos (in all their forms) would become the new Extractive Elite, the new Power Elite, the New Parasitic Elite, buying the wealth generated by the labor of others for peanuts.

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Keynesian Policies Have Left High Debt, Inflation and Weak Growth, by Daniel Lacalle

Posted on November 14, 2022 | Leave a comment

Keynesian so-called economics just offers politicians an excuse to do what they always want to do: tax, inflate, borrow, and spend. From Daniel Lacalle at dlacalle.com:

The evidence from the last thirty years is clear. Keynesian policies leave a massive trail of debt, weaker growth and falling real wages. Furthermore, once we look at each so-called stimulus plan, reality shows that the so-called multiplier effect of government spending is virtually inexistent and has long-term negative implications for the health of the economy. Stimulus plans have bloated government size, which in turn requires more dollars from the real economy to finance its activity.

As Daniel J. Mitchell points out, there is evidence of a displacement cost, as rising government spending displaces private-sector activity and means higher taxes or rising inflation in the future, or both. Higher government spending simply cannot be financed with much larger economic growth because the nature of current spending is precisely to deliver no real economic return. Government is not investing; it is financing mandatory spending with resources of the productive sector. Every dollar that the government spends means one less dollar in the productive sector of the economy and creates a negative multiplier cost.

When society decides to use a certain part of the resources generated by the productive sector for non-economic return activities, be it social spending or mitigation of threats, it can only do it by understanding how much of the productive capacity of the economy is able to sustain a larger cost. When costs are not considered as a burden, but considered as entitlements that can only grow, the productive capacity is not strengthened, but weakened.

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The FTX-Alameda nexus, by Frances Coppola

Posted on November 13, 2022 | Leave a comment

The Sam Bankman-Fried-FTX story grows increasingly convoluted. From Frances Coppola at coppolacomment.com:

How did it all go so wrong, so quickly? Less than a month ago, Sam Bankman-Fried was the golden boy of crypto, with a net worth in the $billions, and his exchange FTX was valued at $32bn. Now, FTX has a gaping hole in its balance sheet, thousands of people have lost their money, and Sam is facing personal bankruptcy and, potentially, fraud charges.

The short answer is – it didn’t. The hole in FTX’s balance sheet has existed for a long time. We don’t know exactly how long, but the size of the estimates (ranging from $6-$10 billion) suggests several months if not years. Sam has been trading while insolvent. He’s not the only crypto oligarch to do so: Celsius’s Mashinsky also traded while insolvent for an extended period of time.

Trading while insolvent is illegal, of course. But in cryptoland scant attention is paid to such niceties. It is (or would like to be) a lawless, self-regulating space in which conventional courts and regulators have no place. And anyway, there are plenty of creative ways of hiding a black hole. Issuing your own token, for example. And using your own hedge fund to pump its value.

Here’s how it works. The young, dynamic, ambitious owner of a crypto hedge fund – let’s call him “Joe” – sets up a crypto exchange. To start with, this just enables his hedge fund can trade without having to pay margin or exchange fees. But Joe has larger ambitions. He wants to run the biggest and best exchange in the world. And he wants to make money from it. Lots and lots of money. Trillions of dollars, in fact.

Now, his hedge fund can make money by taking risky leveraged positions, but it has to raise funds, and that’s not cheap. And his exchange can make money by charging fees on transactions, but although that can be a nice slow steady income, it’s not going to make him the trillions of dollars he wants.

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A Rogues’ Gallery, by Raúl Ilargi Meijer

Posted on November 12, 2022 | 1 comment

FTX, the cryptocurrency exchange that just vaporized $32 billion, has Democrats’ fingerprints all over it. From Raúl Ilargi Meijer at the automaticearth.com:

Me, personally, I can’t get rid of the notion that all the stablecoins and shitcoins and altcoins that have been initiated and “legalized”, are just a way of “shining” bitcoin in a light of uninvestable darkness. And for that, a bunch of “trading places” (pun intended) were called for. One of the biggest, FTX, just went from $32 billion to $0 in a single day. Not even Enron could beat that.

Dr. D., yes him again, ties together an interesting history behind it. Which in turn ties into the DNC too. And Dr. D. doesn’t even mention yet that just this morning, FDX claimed they were hacked: “FTX Possibly Hacked, $895m Drained From Customer Wallets.” Should I believe that? How do you drain $895m out of $0?

“Early Saturday morning, Mr Bankman-Fried resigned as chief executive officer and FTX commenced Chapter 11 bankruptcy proceedings due to a massive liquidity crunch. A rescue deal with rival exchange Binance fell through earlier this week, precipitating crypto’s highest-profile collapse in recent years. Mr Bankman-Fried’s quant trading business (aka quantitative cryptocurrency trading firm) Alameda Research has also filed for bankruptcy.”

Here’s thinking that the DNC links will sink this as a story. Bankman-Fried will be renditioned to Barbados -or Gitmo-, and we all live happily ever after. Except for those who put their money into FTX. But then, what were they thinking in the first place? Crazy thought: was Hunter Biden a investor? Or The Big Guy?

Dr. D.: We really need to keep a rogue’s gallery. It’s like Dick Tracy and Batman. Bernie Made Off. Mr. Kash-n-Karry. Sam the Bank Man, Fried. You can’t make this up.

Am I hearing this right, FTX was invented 16 days after the Biden Campaign? In a foreign nation not of his birth or residency, the Bahamas? His mother is involved with Vote Blue and other DNC money people? Then within a month or two, Sam has made so many billions he was the single largest donor to Biden? With this A-Mazing multi-billion influx that come out of nowhere? But everybody, all the “good” people instantly and telepathically KNEW they had, HAD to invest there? People like the Teacher’s Union?

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Posted in Collapse, Currencies, Financial markets, Politics

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One Veteran’s story: An Orange-Pilled Green Beret

Posted on November 12, 2022 | Leave a comment

He thought he was fighting for freedom as a Green Beret. Now’s he fighting for freedom with Bitcoin. From Adam R. Gebner at bitcoinmagazine.com:

This is an opinion editorial by Adam R. Gebner, a Green Beret and West Point graduate.

The opinions expressed throughout this piece are mine alone, and in no way reflect official policy or opinions of the U.S. Army or the U.S. Department of Defense. Though I am by no means a writer, I hope that by publishing this, more service members consider working in the Bitcoin industry and Bitcoin companies consider expanding their efforts to hire Veterans. Additionally, I am always learning more about Bitcoin, how it works, and the potential value it may bring to our world. Please let me know where I am off base, thanks!

Early in my life, I knew I wanted to be a Green Beret officer. Fighting to liberate oppressed people by working by, with, and through local populations was at the core of my motivations to choose this path. I saw the Special Forces’ mission as a cost and risk-efficient way to prevent large-scale conflict while enabling people to defend themselves and secure their own freedom. After graduating from West Point in 2014 and serving with the 173rd Infantry Brigade Combat Team (Airborne) for three years, I ultimately earned my Green Beret and an opportunity to lead a detachment of America’s Chosen Soldiers. Now that I’ve accomplished what I set out to do with my military career by commanding an “A-team” for two years, I am looking forward to the next mission in my professional life: contributing to the adoption and integration of the best freedom-protecting innovation in modern history — Bitcoin.

Like so many others, I had a few touch points with Bitcoin before seriously considering the validity of the technology. In 2010, during my first year at West Point, I overheard a few Computer Science majors discussing this “internet money” and I foolishly dismissed it without trying to learn anything else. Then in 2013, when I started learning about investing and economics, I stumbled across bitcoin again. I read a little bit more into it, but not enough to understand how it could replace gold as a sound money system (thanks Peter Schiff…).

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The 3rd Largest Bond Market Is Flashing Red… Could a Financial Crisis Be Near? By Chris MacIntosh

Posted on November 11, 2022 | Leave a comment

The Japanese bond market is cracking wide open. From Chris MacIntosh at internationalman.com:

Bond Market

At a macro level it is worth understanding that for US hegemony to continue to exist it has relied on a level of global order – legal, political, and always backed up with the military.

The Mackinder Doctrine

The Mackinder doctrine essentially states that “who rules the World-Island -mainly the area ruled by Russia- commands the world”.

In order to retain this global power the US has been fueling both sides of proxy wars for decades, but these countries which have been subjugated have been relatively inconsequential in terms of global trade, like Afghanistan, Somalia, Iraq, etc. and certainly inconsequential in terms of military power.

But this has now all changed. The issue now is that the US is fighting multiple proxy wars on a much grander scale. This means that the cost of maintaining influence among all existing vassal states rises, and as this rises, the countries on that periphery (because they’re typically most heavily impacted) seek alternatives.

This is what we’re seeing with the BRICS becoming more and more emboldened. It is what we have been discussing with respect to OPEC+’s recent middle finger to the hegemon. It is much more a political statement than it is about oil. To highlight my point, consider that the US receives 7.5m barrels per day (bb/d) from OPEC+. That’s bugger all when the US is releasing 1m bb/d from the SPR right now. So clearly there is more at play than oil.

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Legal definitions of money and credit, by Alasdair Macleod

Posted on November 11, 2022 | 2 comments

The title is dry but the article is not. If you don’t know the difference between money and credit, what’s happening in the world’s financial system and what’s about to happen will be incomprehensible. This is a great tutorial, from Alasdair Macleod at goldmoney.com:

At these times of growing confusion over the future of currencies’ purchasing power, it is time to remove all doubt in the definitions of the differences between money, currency, and credit. This article traces the history and legal background to these relationships.

Despite the failure of the Bretton Woods agreement in 1971 and the state propaganda that followed, the position is clear. Both historically and legally money is and remains metallic coin — principally gold — and the rest is credit. 

As a result of statist puffery of their fiat currencies, the public now wrongly believes it is fiat currencies that are money and that currencies have no price, except against each other. I show that this is factually incorrect. However, in financial markets legal money is always priced in legal tender, usually US dollar currency, when it should be the other way round. This inversion of the truth will turn out to be a costly error for those making this mistake.

In this article, I also show that the adverse consequences for prices from changes in the level of total commercial bank credit are significantly less than they are for changes in the level of central bank credit. Now that we are on the verge of a severe contraction of commercial bank credit, governments and their central banks are sure to respond by ramping up inflation of their currencies in a vain attempt to avoid deflation.

The consequences for fiat currencies are likely to be calamitous for them. 

That will be the penalty we all face for ignoring the wisdom and findings of the Roman jurors, thinking that we know better with our economic models, macroeconomic policies, and statist control of markets.

Over two millennia of their careful deliberations, it was the Roman jurors who thoroughly examined and properly defined the difference between money and credit, upon which all economics and modern banking depend. Current monetary and economic fashions are mere ephemera in that context.

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Posted in Banking, Business, Capitalism, Currencies, Debt, Economics, Economy, Financial markets, Governments, History, Money

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World Dollar Hegemony Is Ending (and That May Be a Good Thing), by Patrick Barron

Posted on November 9, 2022 | Leave a comment

The reserve currency status of the fiat dollar allows the U.S. to get a lot of something with a lot of nothing. The world has grown tired of that. From Patrick Barron at mises.org:

The end of world dollar hegemony is coming and hardly anyone in government is taking notice or even understands what this means. Since the Bretton Woods Conference in 1944, the dollar has been the only currency accepted throughout the world for settlement of international trade accounts among nations.

Prior to 1944, physical gold was used for international settlement. When an exporter in country A sold goods to an importer in country B, country B would pay with its own currency. But country A would have no interest in allowing country B’s currency to build up in its vaults beyond an amount required to settle its own importers’ needs. Thus, country A would demand that country B redeem its own currency in gold. Sometimes country B would ship physical gold to country A. Or perhaps gold held in safekeeping in a third country would be designated as now belonging to country A, a book entry transaction that is more convenient than physical movement.

The Bretton Woods Agreement and Its Demise

The Bretton Woods Agreement added the dollar as tantamount to physical gold at $35 per ounce. The reason was simple: at the end of World War II the United States had accumulated a preponderance of gold, due primarily to its role as the “arsenal of democracy.” Thus, central banks could exchange dollars for settlement rather than moving or redesignating the ownership of physical gold. The weakness of this system was that the world had to trust the USA not to create more dollars than it could redeem for gold at $35 per ounce. But central banks always had the option to demand physical gold from the USA and hence ensure that their trust in the measure of $35 per ounce was fully supported.

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Posted in Currencies, Debt, Economics, Economy, Eurasian Axis, Foreign Policy, Geopolitics, Governments, Trade

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The Petrodollar-Saudi Axis Is Why Washington Hates Iran, by Gary Richied

Posted on November 8, 2022 | Leave a comment

Iran is committing the unforgivable sin: allowing payment for its oil in currencies other than dollars. From Gary Richied at mises.org:

Kish, since you are wondering, is an Iranian island in the Persian Gulf famed for its tourist and shopping attractions. It is becoming a serious rival to other nearby vacation hubs in Doha and Dubai.

Along with pristine beaches and extensive malls, Kish is—or rather ought to be—known more widely for another feature and institution which the Iranian mullahs established there way back in 2003; namely, the Kish Bourse (i.e., Kish Stock Exchange). بورس کیش if you prefer the Farsi.

Think of it as the Chicago Mercantile Exchange of Iran, a country stacked with natural resources, a relatively well-educated and sophisticated population (the literacy rate is 97 percent among young adults, which, if you consider the deplorable state of secondary education in the United States, means that Iranian youth are most assuredly smarter than your average young American adult), and an economy burdened by mismanagement of their own Islamic theocracy and crippling, long-duration sanctions from the American secular theocracy.

That American secular theocracy has considered it a dogmatic rite of passage into the state and corporate media (their temples) that one must, at the very least, excuse the economic, cultural, and political warfare against Iran as necessary for a variety of spurious reasons. Who really has enough free time to investigate and then suggest otherwise? After all, Iran is plagued by terroristic Islamic fundamentalists who have pledged—like their former president, Mahmoud Ahmadinejad—“to wipe Israel off the face of the earth.”

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Can the Government Ban Bitcoin? Three Things You Need To Know Today, by Nick Giambruno

Posted on November 8, 2022 | Leave a comment

It will be difficult for the government to ban bitcoin. It will require a coordinated effort among governments. From Nick Giambruno at internationalman.com:

Ban Bitcoin

The notion that the US government will ban Bitcoin is popular for a good reason.

Bitcoin threatens a significant source of the government’s power—the power to create fake money out of thin air and force everyone to use it.

That’s because Bitcoin can give monetary sovereignty to the individual and render central banks obsolete—along with their confetti currencies.

That’s no small accomplishment.

It’s a historical development that profoundly alters the status quo between the rulers and the ruled. It’s similar to the invention of gunpowder, the printing press, and the Internet.

There’s no question the US government would want to protect their racket from an encroaching monetary competitor in the same way the mafia does when a rival encroaches on their turf.

The $64,000 question is whether they’ll be successful.

Friedrich Hayek, the great free-market Austrian economist, once said:

“I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”

Hayek is right.

By their very nature, governments never peacefully relinquish power. And if forcefully taking power out of their hands is out of the question, then the only way to do it is through “some sly, roundabout way introduce something they can’t stop.”

Is Bitcoin that solution?

Many people think the answer is “no” because the government will shut it down.

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