Author Topic: Money/inflation, the Fed, Banking, Monetary Policy, Dollar, BTC, crypto, Gold  (Read 513036 times)

ccp

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almost sold my bitcoin and put it all into ethereum 3 weeks ago

but just did not do it

I do own some ether though
and it has way outperformed BC for me

hope others made some in ether

DougMacG

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Babylon Bee is a humor site, but they are having trouble finding spoofs that are not true.
https://babylonbee.com/news/biden-proposes-2-trillion-bill-to-study-whats-causing-inflation-to-rise
Biden Proposes $2 Trillion Bill To Study What's Causing Inflation Rates To Rise

ccp

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Mohammed El Erian CNBC yesterday
« Reply #1402 on: May 13, 2021, 05:15:48 AM »
https://www.youtube.com/watch?v=xAIcuGcxL8g

when this guy speaks I listen

DougMacG

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https://www.youtube.com/watch?v=xAIcuGcxL8g

when this guy speaks I listen

Yes, good concise analysis.

In other analysis, people starting to call it Carter 2.0, disappointing jobs report, higher inflation, and both Congress and White House taking actions to make it worse.

https://thehill.com/opinion/finance/552890-growing-inflation-is-bidens-hidden-tax-on-working-americans
« Last Edit: May 13, 2021, 06:14:03 AM by DougMacG »

Crafty_Dog

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WSJ on inflation and the Fed
« Reply #1404 on: May 13, 2021, 08:13:05 AM »
Federal Reserve Chairman Jerome Powell’s inflation ship has come in, albeit more rudely than he probably wanted. The consumer price index rose a remarkable 4.2% at an annual rate in April, and 3% in the core measure that excludes food and energy. Mr. Powell wanted more inflation, and now he’s got it.

The surge in prices won’t surprise most Americans, who have been paying more everywhere from the grocery store to cars to the housing market. Prices in April rose across the board, but especially for goods and services in lower demand during the lockdowns. Hotel prices increased 8.8% for the month and 8.1% year-over-year. The monthly increase of 0.9% less food and energy was the largest since 1982.

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As vaccines roll out, more people are going out and spending their savings and stimulus checks. Demand is increasing at the same time supply problems frustrate businesses. Used car and truck prices jumped 10%, which accounted for a third of the month’s CPI increase. One reason: New car production has slowed amid a global computer chip shortage. But that’s no consolation to middle-class Americans who buy used cars. The rich buy new Teslas.

Commodities have also been surging and are feeding into consumer prices. Corn prices are up 50% this year and some 125% year-over-year. Overall food prices climbed 0.4% from March and 2.4% over the past 12 months. Fresh produce and meat prices rose even more.

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A worker shortage is also pushing up wages—average hourly earnings rose 0.7% in April—and may be starting to feed into higher consumer prices. Many small businesses were reluctant to pass on their increasing cost of goods and labor when demand was lower. But that may now be changing as consumers are spending more freely.


The benign explanation for the April price surge is that it’s “transitory,” as Mr. Powell likes to say. The April surge compares to a price decline last spring at the height of the pandemic lockdowns, and the comparisons will look less ugly in coming months. Oil prices were also hitting lows last spring as demand plunged. Remove those factors and the CPI increase looks barely above 2%.

Vice Chairman Richard Clarida on Wednesday reiterated the Fed view that the economy remains a long way from full employment and that prices will moderate once supply problems ease. The Fed has said it will allow inflation to exceed 2% as long as it “averages” about 2% over the “long-run” and doesn’t plan to adjust policy until the country gets closer to full employment, which in the past has been a moving Fed target.

***
Yet inflation is always and everywhere a monetary phenomenon, as Milton Friedman put it. For more than a year the Fed has been pursuing an expansionary policy for the ages. It has been keeping rates near zero and expanding its balance sheet to record levels with bond purchases in an economy that has been growing fast for more than nine months. The Atlanta Fed’s GDPNow prediction for second quarter growth is 11%.

The money supply has been growing rapidly, and cash is chasing higher returns across the economy amid near-zero interest rates. Junk bond issuance this year is at a record pace. Asset prices have boomed. The danger is that expectations for higher inflation will rise and become embedded in business and consumer decisions. Transitory then becomes longer and the Fed might have no choice but to end the party, perhaps more abruptly than it wants.

The risk is compounded by the Fed’s political predicament, partly of Mr. Powell’s own making. The Chairman has been a cheerleader for the fiscal blowout of the last year, especially the Joe Biden-Nancy Pelosi agenda. The Fed has monetized nearly all of the new federal debt issuance of the last year, and Democrats are counting on the Fed to keep it up in the years ahead. This makes it harder for the Fed to taper its bond purchases or raise interest rates.

Mr. Powell will need the current inflation surge to be transitory, or he’ll find himself in a political jam if the markets force him to tighten. Better for the Fed to reassert its independence by moderating its policy now, rather than risk more damage down the road.

Crafty_Dog

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Elon Musk/Tesla suspend taking BTC
« Reply #1405 on: May 13, 2021, 09:12:08 AM »
Apparently because of coal being used (China?) to create the electricity to do the mining.

Crafty_Dog

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ya

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BTC consolidation phase will end soon. So far on track.


ccp

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talk about market manipulation : Musk
« Reply #1408 on: May 16, 2021, 02:55:05 PM »
https://www.marketwatch.com/story/elon-musk-implies-tesla-could-dump-its-bitcoin-holdings-11621200452?siteid=yhoof2

he bashes to bring price down
than announces he's in
and price goes up
then he states it is not green enough
 so we get sell off
now another tweet and we retail investors get jerked around like plebes.

ya

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Crafty_Dog

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The Factors Driving Crypto Markets’ Boom and the Challenges Ahead
Bitcoin and other digital currencies have exploded in value during the pandemic, but hurdles to widespread adoption remain
2020
2021
$45,633
Bitcoin
$7,171
Pre-pandemic high
By Peter Santilli, Caitlin Ostroff and Paul Vigna
May 17, 2021 5:30 am ET
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TEXT
RESPONSES



Cryptocurrencies such as bitcoin, ether and dogecoin have surged to highs that few investors would have predicted a year ago. The furious run has even the most optimistic traders asking: Can it last?

The forces underpinning the crypto mania mirror those that saw GameStop Corp. shares tear higher earlier this year. Excess money from stimulus checks aimed at helping the most vulnerable make rent has also found its way to brokerage accounts that offer free trading. Meanwhile, people globally have spent more time at home and in front of screens as the pandemic shut businesses.

Limitations on stock trading by brokerage firms earlier in the year might have pushed some Reddit day traders to crypto, investors say. Tesla Inc. Chief Executive Elon Musk’s embrace of bitcoin and other digital currencies and the U.S. listing of cryptocurrency exchange Coinbase Global Inc. added further fuel to the rally.

Beyond Bitcoin

The craze in NFTs, or nonfungible tokens, has led to a burst of activity on Ethereum, the blockchain-based computer network that backs most NFTs. Ether, the in-house currency on the platform, has risen to record levels as more people adopt the technology. NFTs are bitcoin-like tokens connected to a digital work of art or other real-world item and sold as a unique digital property.

Value in circulation, top seven cryptocurrencies
MAY 2021
Tesla says it has suspended accepting bitcoin as payment for its vehicles, pointing to the increasing use of fossil fuels in mining.
Bitcoin
Ether
Binance coin
Cardano
Dogecoin
Tether
XRP
June 2020
Oct.
2021
May
0
$1 trillion
$2 trillion
Tudor
MicroStrategy
PayPal
MassMutual
Tesla
Coinbase
Tesla
Source: CoinMarketCap

The Power of Social Media

In a year when individual investors have used social media to send asset prices soaring, no move in digital-currency markets has defined the power of memes more than the rise of dogecoin. It is a cryptocurrency that was created as a joke but has risen more than 10,000% in 2021 as of Friday.

Dogecoin’s total market value ballooned to more than $80 billion at its 2021 peak reached earlier this month, up from less than $600 million at the end of last year. Heightened attention on the joke crypto from Mr. Musk and rapper Snoop Dogg, among others, has turned social-media users into day traders who have encouraged new buyers to enter the fray with the goal of pushing it to $1. It is trading around 50 cents now.


Dogecoin’s creators never intended for it to have any meaningful value. Traders instead are speculating that it can keep climbing solely on social-media momentum. That can leave investors more vulnerable to losses and sharp price swings when the hype fades.


Dogecoin’s wild swings are a warning to bitcoin investors as well. While the first cryptocurrency’s backers point to its utility as an inflation hedge or store of value, it has no long-term history as either, and its value is closely tied to sentiment and momentum. If sentiment turns against it, the price can tumble, and a rising price is bitcoin’s biggest draw for new investors.


Tweets by subject, daily

800,000

600,000

DOGECOIN

400,000

BITCOIN

200,000

ETHEREUM

Jan.

April

Jan.

April

Jan.

April

Source: BitInfoCharts

Although bitcoin bulls like to point to widening acceptance among institutional investors as a key driver of the rally, there are signs that institutional demand has flagged in recent months even as the price has soared. The number of large bitcoin transactions, which are typically made by professional money managers, dropped slightly in the first quarter from the fourth quarter, according to a report from crypto exchange OKEx. And flows into crypto exchange-traded products have declined from a peak in January, according to London-based asset-management firm CoinShares.

Futures and Options Trading

Trading volume has climbed during the pandemic as a growing pool of investors have gained access to crypto markets through a variety of platforms. Notably, the value of derivatives volume has overtaken spot trading, with investors placing more than $200 billion in bets on digital assets on the heaviest days this year.

The growing use of cryptocurrency derivatives is significant because investors can use such markets to place outsize bets with only a small amount of money upfront, effectively taking on leverage, the practice of borrowing to amplify returns. Much of the increase in futures and options trading has occurred on lightly regulated cryptocurrency-derivatives exchanges that allow a higher degree of leverage than a U.S. exchange such as CME Group. The use of highly leveraged bets can accelerate losses for traders when prices decline.


Crypto trading volume, daily

$100 billion

0

0

$100 billion

$200 billion

2021

SPOT

DERIVATIVES

2020

2019

Source: CryptoCompare

Crypto in Context
Thanks to the prolific rise of bitcoin, ether and dogecoin, the value of the total cryptocurrency market has swelled to more than $2 trillion, up from $260 billion a year ago. Dogecoin alone—with a market value of about $67 billion—is worth more than 75% of the companies listed in the S&P 500. Although the digital currencies have surged in recent months, as an asset class, they remain a fraction of global markets for stocks, bonds and gold.


Total value of all cryptos in circulation

TOTAL: $2.2 TRILLION

Bitcoin

$902B

Cardano

$74B

Dogecoin

$67B

All others

$682B

Ether

$426B

Binance coin $89B

Total value, by asset

Cryptos

$2.2T

All gold

$12T

All bonds

$128.3T

Apple

S&P 500

$37.7T

Sources: CoinMarketCap (cryptos); World Gold Council (gold); FactSet (S&P 500); International Capital Markets Association (bonds)

Obstacles Ahead

Despite making inroads, bitcoin has struggled to find a use beyond serving as a tool for speculators. Some industry watchers say it must gain traction as a form of payment to become more ubiquitous. Spending it isn’t easy, and its use is generally limited to high-end purchases.

One of the stumbling blocks: transaction fees built into the network’s code, which change depending upon traffic. Users paying higher fees get to move their transactions to the front of the processing queue. The fees have skyrocketed as cryptocurrencies have exploded in popularity, limiting the rationale for using bitcoin for small transactions.

Many of the companies over the years that unveiled plans to accept bitcoin as a form of payment later quietly dropped them. Even Mr. Musk said Wednesday on Twitter that Tesla would suspend accepting bitcoin for electric-vehicle purchases.

He pointed to another challenge facing the industry: worries about the environmental impact of cryptocurrency mining.


Bitcoin relies on different computers competing to unlock new coins by solving mathematical puzzles to secure the network, a process known as mining. A byproduct of bitcoin’s tear higher is that more computers are vying to gain new coins, and the profitability of mining has doubled since the start of the year.

This has led to concerns that bitcoin’s rise could have a larger environmental impact than other cryptocurrencies as more computers are deployed to find bitcoin, using more electricity than previously.


Bitcoin mining electricity usage and revenue, January 2020-April 2021

160 terawatt-hours a year

For comparison, Sweden’s annual electricity consumption (2019)

April

2021

120

MINING ELECTRICITY CONSUMPTION, ANNUALIZED

Netherlands

January

2021

Bitcoin electricity

usage and mining

revenue both have

soared in the

past year.

100

Philippines

80

Chile

January 2020

60

Switzerland

ccp

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wish I had cash to buy more soon

BTC ETHER

DougMacG

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Re: Money, the Fed, Banking, Dollar, bitcoin, crypto, "virtual currency"
« Reply #1412 on: May 17, 2021, 11:52:57 AM »
Doing my taxes today.

IRS 1040, 2020, just below your name and address:
------------------------------------------------------------------------------------------------------------------------------
At any time during 2020, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?
      Yes      No

------------------------

Who wants to know?
« Last Edit: May 17, 2021, 01:05:34 PM by DougMacG »

G M

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Re: Money, the Fed, Banking, Dollar, bitcoin, crypto, "virtual currency"
« Reply #1413 on: May 17, 2021, 02:15:23 PM »
Doing my taxes today.

IRS 1040, 2020, just below your name and address:
------------------------------------------------------------------------------------------------------------------------------
At any time during 2020, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?
      Yes      No

------------------------

Who wants to know?

The Feral Government will try to crush cryptos to keep the US Debtbux alive.

ya

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BTC has undergone a correction, the 2017 bull run had many such corrections. The On-chain data does not suggest this is a bear market.

ccp

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China bans institutional crypto payments
« Reply #1415 on: May 19, 2021, 06:10:44 AM »

ccp

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China will come out with government sponsored coin?

but then what good would that be ?

if government controlled .

Crafty_Dog

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DougMacG

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China will come out with government sponsored coin?

but then what good would that be ?

if government controlled .

Right.  In that sense, they already have one.
https://www.currency-calc.com/USD_CNY

Good luck in China trying to get out from under the control of the government.  If you find a way, tell everyone.

ccp

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blood in the streets with crypto today
« Reply #1419 on: May 19, 2021, 08:47:21 AM »
what a buy opportunity

of course I can never time it right
and never have cash

and did not sell prior
 
uggghhhhh!


Crafty_Dog

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WSJ and Larry Summers say Fed is wrong
« Reply #1421 on: May 21, 2021, 08:53:52 AM »
The Federal Reserve is still printing money and holding short-term interest rates near zero, and today brings yet another signal that too little money is not the problem in the U.S. economy. This new report suggesting that the time for emergency monetary policy is over comes from within the Federal Reserve system itself. The latest manufacturing survey from the Philadelphia Fed finds that companies in its region are seeing the same thing that consumers are seeing all over the country: rising prices. The Philadelphia Fed reports:

Price increases were more widespread this month for the firms’ inputs and own goods. The prices paid diffusion index increased 8 points to 76.8, its highest reading since March 1980. Nearly 77 percent of the firms reported increases in input prices, while none reported decreases. The current prices received index increased 7 points to 41.0, its highest reading since May 1981.

Any comparison to 1980, when consumer price inflation was hitting its ghastly double-digit peak, is not reassuring. Fed officials keep insisting current price surges are just temporary. But the Philadelphia Fed report suggests that business executives aren’t expecting the phenomenon to end tomorrow. Firms in the survey were asked to forecast “the changes in the prices of their own products and for U.S. consumers over the next four quarters.” The Philly Fed notes:

Regarding their own prices, the firms’ median forecast was for an increase of 5.0 percent, an increase from 3.0 percent when the question was last asked in February. The firms’ actual price change over the past year was 2.3 percent. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 4.0 percent over the next four quarters, an increase from 3.0 percent in the previous quarter. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 4.0 percent, an increase from 3.0 percent in the previous quarter.

At least the firms’ forecast for long-run inflation didn’t increase since the last survey, so perhaps the people who run manufacturing companies maintain some faith that Fed officials know what they’re doing.

Meanwhile at the Fed, officials insist they know what they are doing while acknowledging the beginning of a debate about what they ought to be doing. The Journal’s Paul Kiernan and Michael S. Derby reported on Wednesday:



Several Fed officials said this week that the central bank is closely watching economic developments and will be ready to adjust policy when necessary. Minutes from the central bank’s policy meeting in late April, released Wednesday, reported that some Fed officials want to begin discussing a plan for reducing the Fed’s massive bond-buying program at a future meeting.

The massive buys amount to $120 billion per month of Treasurys and mortgage-backed securities. The Fed creates money when it makes such purchases, and its balance sheet continues to chart new highs. The Journal reporters note that officials “dropped the Fed’s first hint” that it might soon be time to begin talking about changing the policy.

Also this week, a former top economic official in the Clinton and Obama administrations continued to move way beyond hinting that the Fed is making an enormous mistake. James Politi noted on Tuesday in the Financial Times:

Lawrence Summers, the former US Treasury secretary, has sharply rebuked the Federal Reserve for its loose monetary policies, accusing the central bank of creating a “dangerous complacency” in financial markets and misreading the economy.

The comments from Summers at a conference hosted by the Federal Reserve Bank of Atlanta marked a significant escalation of his attacks on the US central bank. The Harvard University economist and former top Democratic presidential adviser had already criticised Joe Biden’s fiscal stimulus as overly excessive earlier this year.

Summers said monetary and fiscal policymakers had “underestimated the risks, very substantially, both to financial stability as well as to conventional inflation of protracted extremely low interest rates”.
***

DougMacG

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Re: WSJ and Larry Summers say Fed is wrong
« Reply #1422 on: May 21, 2021, 09:07:30 AM »
"too little money is not the problem in the U.S. economy."

   - The beauty of understatement.

ccp

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it is the likes of Paul Krugman that should take blame for what is coming

he will be no where to be seen
will never admit he was wrong

will explain it away somehow some way some where

people like him never accept blame




ccp

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ccp

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NFT
« Reply #1425 on: May 22, 2021, 07:57:41 AM »
« Last Edit: May 22, 2021, 10:51:17 AM by Crafty_Dog »


G M

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Crafty_Dog

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A Call to ban crypto
« Reply #1428 on: May 26, 2021, 08:46:43 AM »
Ban Cryptocurrency to Fight Ransomware
The existence of bitcoin and the rest benefits nobody except criminals and speculators.
By Lee Reiners
May 25, 2021 1:13 pm ET
WSJ



No one is out of reach from ransomware attacks. The Colonial Pipeline hack made that clear, along with the nearly 2,500 cases of ransomware—a form of malware that encrypts computer files and holds them for ransom—reported to the Federal Bureau of Investigation last year, a 66% annual increase. In 2020 ransomware victims paid hackers $350 million in cryptocurrency. Since many victims pay ransom without reporting the incident, these numbers understate the damage.

The solutions floated after the Colonial hack—improved cybersecurity in the private sector and public-private collaboration to protect critical infrastructure—are pro forma and inadequate. There is a simpler and more effective way to stop the ransomware pandemic: Ban cryptocurrency.

Ransomware can’t succeed without cryptocurrency. The pseudonymity that crypto provides has made it the exclusive method of payment for hackers. It makes their job relatively safe and easy. There is even a new business model in which developers sell or lease ransomware, empowering malicious actors who aren’t tech-savvy themselves to receive payment quickly and securely. Before cryptocurrency, attackers had to set up shell companies to receive credit-card payments or request ransom payment in prepaid cash cards, leaving a trail in either case. It is no coincidence that ransomware attacks exploded with the emergence of cryptocurrency.

Banning anything runs counter to the American ethos, but as our experience with social media should teach us, the innovative isn’t always an unalloyed good. A sober assessment of cryptocurrency must conclude that the damage wrought by crypto-fueled ransomware vastly outweighs any benefits from cryptocurrency.


It isn’t obvious that cryptocurrency provides any benefit at all beyond the chance to make a quick buck. I have been studying the crypto market since its inception, and I have yet to identify a single task or process that crypto makes easier, better, cheaper or faster. Don’t take my word for it. Ask any friend why he owns cryptocurrency, and the answer will invariably be “to make money.” In other words, speculation. (The blockchain technology that underpins crypto does have promising applications in supply-chain management and other areas.)

Because I point this out, crypto enthusiasts call me a Luddite, statist, technophobe or worse. Asset bubbles are maintained by a common narrative, and anyone who dares question it must be attacked. But a growing chorus is pointing out the emperor has no clothes.


A day after the Colonial Pipeline shutdown, cryptocurrency champion and self-proclaimed “Dogefather” Elon Musk went on “Saturday Night Live” and admitted the obvious: The dogecoin cryptocurrency is a “hustle.” He then performed an encore by tweeting that Tesla was suspending the use of bitcoin for vehicle purchases due to the coin’s carbon footprint. The computer “mining” and transfer of bitcoin requires a great deal of energy, much of which comes from burning fossil fuels. In response, the narrative has now expanded to include the absurd premise that crypto encourages the development of sustainable energy.

Aside from Libra, Facebook’s initial ill-fated foray into cryptocurrency, the topic has drawn limited interest on Capitol Hill. There is a Congressional Blockchain Caucus with around 30 members, but it says it has “decided on a hands-off regulatory approach, believing that this technology will best evolve the same way the internet did; on its own.” The issue hasn’t been tarred by the brush of partisan politics, but the crypto industry is hurriedly following the well-trod path to K Street lobbying.

Lawmakers should get serious. The Colonial Pipeline incident disrupted the East Coast’s gas supply. The next attack could be deadly. Imagine one that shuts down the power grid during a heat wave or taints a municipal water supply.

Any solution must at least reduce the use of cryptocurrency. Governments and retailers should be encouraged not to accept payment in it. An outright ban could get the job done, but if it would be too difficult to enforce or get through Congress, regulators could crack down on the off-ramps and on-ramps, the points at which crypto is converted into fiat currency and vice versa.

Cryptocurrency firms serving U.S. customers are supposed to be subject to the same anti-money-laundering requirements as traditional financial institutions, but more can be done. Late last year, the Treasury Department’s Financial Crimes Enforcement Network proposed a rule to establish new reporting, verification and record-keeping requirements for certain cryptocurrency transactions. Last week Treasury proposed granting more resources to the Internal Revenue Service to address crypto and called on businesses to report receipts of more than $10,000 in cryptocurrency. Both proposals should be adopted, but they will be effective only if other countries follow suit.


So long as there are crypto exchanges abroad with lax money-laundering controls, cryptocurrency will maintain its appeal to hackers. Bloomberg reported on May 13 that money-laundering and tax officials at the Justice Department and IRS are investigating the world’s biggest cryptocurrency exchange, Binance Holdings, which is incorporated in the Cayman Islands and has an office in Singapore.

Like climate change, cryptocurrency presents a classic collective-action problem. Some policy makers recognize the dangers but are hesitant to act for fear of driving crypto companies overseas without doing much to solve the problem. Diplomacy may bear fruit in the long run, but meanwhile President Biden should sign an executive order requiring the Treasury secretary, in coordination with all federal financial regulatory agencies and the IRS, to develop a more coherent regulatory framework for cryptocurrency and identify steps each agency can take to counteract its use in financing terrorism and facilitating ransomware attacks.

We can live in a world with cryptocurrency or a world without ransomware, but we can’t have both. It is time for the adults to tell the children: Party’s over.

Mr. Reiners is executive director of the Global Financial Markets Center at Duke Law.



Crafty_Dog

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Gemini
« Reply #1433 on: May 29, 2021, 11:54:02 AM »

ccp

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my "sources" tell me Gemini is very good exchange

Crafty_Dog

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This comes to me from someone intelligent who also does not understand
« Reply #1435 on: May 29, 2021, 02:07:56 PM »
Bitcoin’s Reliance on Stablecoins Harks Back to the Wild West of Finance
To understand the weakness of stablecoins such as Tether, it is worth a quick history lesson from pre-Civil War American finance

An 1837 cartoon published when New York banks suspended specie payments. From left, President Martin Van Buren, Missouri Sen. Thomas Hart Benton and former President Andrew Jackson.
PHOTO: HENRY R. ROBINSON/LIBRARY OF CONGRESS

By James Mackintosh
Updated May 27, 2021 8:00 am E


This article is in your queue.Open Queue
Stablecoins are one of the weirdest things in the whole bizarro world of cryptocurrencies, because they operate on principles directly opposed to the rest of the crypto system. 

Crypto true believers argue that bitcoin and its ilk will supplant “fiat” currencies issued by governments, while the whole point of the innovative blockchain that underlies them is to overcome what pseudonymous inventor Satoshi Nakamoto called “the inherent weaknesses of the trust based model.”

Yet stablecoins, and especially the largest, Tether, are thriving. Tether’s $60 billion of issuance leaves it jockeying for third place in crypto market value behind bitcoin and ethereum. There are scores of others, and Facebook’s Libra, renamed Diem last year, plans to join in with stablecoins covering several currencies.

Stablecoins are a type of cryptocurrency tied one-for-one to dollars or other traditional currencies and whose value relies on trusting the issuer.

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Stablecoins have also become central to the financial infrastructure of crypto. According to data provider Crypto Compare there’s more trading between Tether and bitcoin than between bitcoin and all fiat currencies put together. For crypto traders, at least, stablecoins are a vital tool, because of the speed with which they can be used to move money from one crypto exchange to another, and because they provide a handy way to park cash temporarily in what is basically dollars.

This creates a major vulnerability for crypto. Instead of building a new financial system immune to the problems of the old one, it is reinventing problems long-since mitigated by regulators in traditional finance.

To understand this weakness, a quick history lesson. Stablecoins are the living embodiment of free banking, the system of lightly-regulated and often fraudulent issuers of dollar bank notes that dominated U.S. finance until the government stepped in after the Civil War. Paper money was backed by the assets of these banks. But trust in those assets determined whether and how big a discount to apply to any given dollar bill. Alongside the regulated banks were thousands of issuers of small-value IOUs, such as from a Michigan barber, that were used as money in frontier towns short of cash.

There’s a good reason these stablecoins of yore were eventually junked. Users of money—that is, pretty much everyone—had to keep up-to-date on the condition, and perceived condition, of dozens of bank note issuers to avoid being duped on a transaction. The costs of this alone were incalculable, quite aside from the widespread failures and fraud.

The twin dangers to the scores of stablecoins that have been created are the same as the pre-Civil War scrip: the assets turn out to be worth less than thought, or people come to believe that the assets are worth less than thought and there’s a run.

The biggest stablecoins—from Tether, Circle and Paxos—publish reports from accountants attesting that their assets match the amount issued, in an attempt to ensure trust. So far, all three have succeeded, with their stablecoins proving remarkably stable around $1.

In Bitcoin's Shadow, Stablecoins Thrive but Face Challenges
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In Bitcoin's Shadow, Stablecoins Thrive but Face Challenges
In Bitcoin's Shadow, Stablecoins Thrive but Face Challenges
Bitcoin’s volatility has limited its adoption for payments, so entrepreneurs created stablecoins: cryptocurrencies pegged to assets such as the U.S. dollar. But the recent settlement of a probe into the most popular stablecoin, tether, shows the need for transparency in the growing industry. Photo illustration: Sharon Shi/WSJ
A glance at the free banking era should remind traders of the risks. Back in the 1830s, banks would fool auditors by shipping the same chest of coins from one to the next to be counted multiple times, or by topping up a barrel of nails with a layer of silver, according to Joshua Greenberg’s enjoyable study of the era, “Bank Notes and Shinplasters.”


The parallel is clear from the details of Tether’s $18.5 million settlement with the New York Attorney General in February. It said Tether was lying about having full backing for its issues, and when Tether tried to head off rumors about its financial situation by employing an accountant to attest to the assets, cash was put into its new account only on the day of the assessment. Tether also lent $475 million to work with Bitfinex to help it through a cash crunch, this time the day after publishing the balance of a new bank account in the Bahamas. This is the modern version of mobile chests of silver.

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What do you make of stablecoins? Join the conversation below.

Stuart Hoegner, Tether general counsel, said the firm is “taking steps to obtain audits for several financial years“ and will publish them. “To be clear, these kinds of transfers are not happening,“ he said by email when asked about assets being moved just before or after an assessment.

Tether doesn’t do business in the U.S., with a few exceptions, and agreed in its February settlement not to take on customers in New York. Circle has a “bitlicense” issued by New York state, while Paxos is regulated as a trust in the city, in an effort to boost confidence. This being crypto, there is of course a full crypto stablecoin too, called Dai, which gives each user a “vault“ to store collateral; it will be liquidated by “keepers” if its value falls too low to support the Dai issued against it.

My worry is that it isn’t enough to be regulated, transparent and solvent, as the run on money-market funds in 2008 and again last year showed. Ultimately nothing beats access to Federal Reserve loans when large numbers of depositors are demanding their money back. Unlike with banks and funds, there’s no chance of the Fed helping out stablecoins in a crisis. That means the assets they hold are vital, along with their terms. Paxos’s accountants’ attestation shows it holds cash and Treasurys in accounts with unnamed U.S. banks, while Circle says it holds “cash, cash equivalents and short-duration investment-grade assets.”


As part of its legal settlement Tether disclosed more detail of its assets, showing a big exposure to commercial paper, a form of short-term lending to companies. Mr. Hoegner said the company uses in-house traders to invest in commercial paper, “always ensuring that we have an adequate amount of liquidity to meet any eventual redemptions.“

JPMorgan interest-rates strategist Josh Younger points out that Tether’s scale ranks it alongside the biggest money-market funds and companies as a major owner of commercial paper.

In one way Tether has more protection against a run than an ordinary bank if something goes wrong: Its terms allow it to suspend payments or repay with a chunk of its assets instead of dollars. That’s unlikely to be reassuring to users, however.

It surprises me that Tether is so popular given the revelations from the New York case, the ease with which it can suspend payments and the concern among regulators, including the Fed, about stablecoins. But there is a key difference to the earlier era that helps stablecoins avoid the discounts that plagued the bank notes of the Wild West.

Back then the effort of traveling to a bank’s branch to swap its notes for solid silver dollars meant it was hard to arbitrage away discounts, especially for notes from faraway banks. In the digital world it isn’t much of a hassle to cash in a stablecoin, so any discount quickly vanishes.

At least so long as the stablecoin issuer has ready money to pay back claims.

Write to James Mackintosh at james.mackintosh@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the May 28, 2021, print edition as 'Stablecoins Hark Back To Wild West

G M

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Scam alert!
« Reply #1436 on: May 29, 2021, 07:38:54 PM »

ya

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Discussion on the China Ban of BTC
https://docsend.com/view/dwmgj4bhbky866bw

G M

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DougMacG

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Re: Anything that can't go on forever...
« Reply #1439 on: May 30, 2021, 05:59:51 PM »
https://raconteurreport.blogspot.com/2021/05/and-another-thing.html

A dollar is worth 2 cents since the Federal Reserve started - and no one sees a problem?

G M

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Re: Anything that can't go on forever...
« Reply #1440 on: May 30, 2021, 07:11:55 PM »
Ask around in your social circles, Doug.


https://raconteurreport.blogspot.com/2021/05/and-another-thing.html

A dollar is worth 2 cents since the Federal Reserve started - and no one sees a problem?

ya

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State of btc


Crafty_Dog

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Uhhh , , , what is that chart telling us?

ya

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Recent buyers (within prior 3 months) sold and are at a loss. Long term holders are accumulating, as are the miners. Miners accumulating, means they expect higher prices in the future. Miners finance their operations by selling BTC when prices are high. Overall, nothing suggests that a bear market is imminent, though the consolidation could last a while.

Crafty_Dog

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Thank you.  That is the level of explanation that I needed.

ccp

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"ESG" Movement
« Reply #1445 on: May 31, 2021, 02:35:20 PM »
Here we go

another letter acronym. ESG hoisted upon us

"Environmental Social and Governance" and its' movement:

https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp

Cath Woods blames latest coin drop on ESG movement . FWIW :
https://www.coindesk.com/video/ark-invests-cathie-woods-blames-bitcoins-drop-on-esg-movement

I guess big tobacco is off the list  :wink:

Crafty_Dog

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GBTC breaking below the 200 day line?
« Reply #1446 on: June 01, 2021, 10:26:48 AM »

ccp

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Baseball card NTFs
« Reply #1447 on: June 01, 2021, 01:52:45 PM »
on ethereum platform on block chain

https://www.ledgerinsights.com/mlb-baseball-collectibles-firm-topps-launches-nfts/

Today on CNBC was noted MLB (aka BLM). is going to be selling NTFs on blockchain

  first one the famous 1939 speech wherein Lou Gehrig calls himself the luckiest man on the Earth for charity

with regards to the cards I guess flipping them with friends or building skyscrapers with them is now all just ancient history


Crafty_Dog

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Russia getting out of dollars
« Reply #1448 on: June 03, 2021, 11:09:48 AM »
English translation available:

https://www.rbc.ru/finances/03/06/2021/60b896829a7947ff39ed48fb?from=from_main_1

"The dollars will be 0%, the euro - 40%, the yuan - 30%, gold - 20%, pounds and yen - 5%," Siluanov said."
===========================

The Government has decided to withdraw completely from investments in dollar assets by the National Welfare Fund. This was announced to journalists at the St. Petersburg International Economic Forum by Finance Minister Anton Siluanov, RBC correspondent reported.

"We, like the Central Bank, have decided to reduce the investment of the FNB in dollar assets. If today we have about 35% of FNB investments in dollars, 35% in euros, then we have decided to withdraw from dollar assets completely, replacing investments in dollars with an increase in the euro, an increase in gold. The dollars will be 0%, the euro - 40%, the yuan - 30%, gold - 20%, pounds and yen - 5%," Siluanov said.

He said the substitution would happen "quickly enough within a month." How specifically to carry out these operations will be decided by the Bank of Russia, which acts as an agent of the government for the purchase or sale of currency, Siluanov said.

Later, the Ministry of Finance specified that the dollar in the FNB has not been available since May 20, and from June 1, the regulatory structure of liquid funds of the FNB includes gold in anonymized form with a share of 20% (i.e. gold is not in physical form, but on metal accounts in the Central Bank).

"As an alternative to assets in U.S. dollars, which until recently accounted for about 35% of liquid assets of the FNB, the Chinese yuan and the euro are defined as currencies of the countries acting as russia's leading foreign economic partners, as well as gold as an asset capable of protecting the FNB's investments from inflationary risks," the Ministry of Finance explains.

Loko-Invest Investment Director Dmitry Poleva believes that gold will be a functional equivalent of the dollar in the FNB (in particular, because it is quoted in dollars on world exchanges), which is "pretty elegant".

How the FNB is now arranged


The currency structure of the fund, which used to consist only of investments in dollars, euros and pounds sterling, the government began to change since last year - in April, Prime Minister Mikhail Mishustin signed a resolution allowing to invest funds in the FNB in yuan and Chinese government bonds. In the future, it was decided to add to the basket FNB and the Japanese yen - both currencies in the structure of the fund the Ministry of Finance included in February 2021.

The share of the yen was 5%, the yuan - 15%. At the same time, the Ministry of Finance reduced the share of dollar and Euro assets in the FNB from 45 to 35%. The level of investments in the pound sterling left unchanged. The changes were explained by the need to converge with the structure of international reserves of the Bank of Russia, which was adjusted in 2018 to minimize sanctions risks.

The Central Bank did not see a significant impact of the abandonment of dollars in the FNB on the market
economics

Now about $39.8 billion in the FNB accounts for dollars. As of May 1, 2021, the volume of liquid assets of the FNB amounted to the equivalent of 8.66 trillion rubles, or $116.4 billion, the Ministry of Finance reported. This is less than 20% of all international reserves of Russia(more than $600 billion at the end of May), which are generally managed by the Central Bank.

The reserves of the Ministry of Finance also include dollars purchased from the beginning of 2021 as part of operations under the budget rule, but not yet transferred to the FNB. According to Dmitry Kulikov, director of the sovereign ratings and macroeconomic analysis group of ACRA, from January to May it is $4.2 billion.

What explains the decision

The government directly linked the decision to zero the dollar's share in the sovereign fund with U.S. sanctions. "This is also due to the threat of sanctions, which we received and perceived from the American leadership," First Deputy Prime Minister Andrei Belousov said. The Ministry of Finance sees the risk of blocking the Russian government's dollar assets abroad. In 2019, the U.S. administration for the first time extended sanctions on the Russian Central Bank (as well as the Ministry of Finance and the FNB), prohibiting its banks to participate in the initial placement of debt obligations of these institutions, nominated in foreign currency. In April 2021, the U.S. extended such sanctions on the initial purchases of ruble bonds of the Federal Loan (FDB).

Kudrin rejected the idea of complete dedollarization due to the instability of the ruble
economics

Experts interviewed by RBC are confident that the Bank of Russia will sell the bulk of the dollars from the FNB (or all) on the market, as a result of which the share of the US currency in international reserves will decrease. "I think it will be a temporary rebalancing of the FNB and the rest of the reserves, that is, in the rest of the (owned by the Central Bank) the share of the dollar will temporarily increase. And physical sales will probably be somehow scheduled in a pre-known scheme and announced for a much longer period than one month," Dmitry Kulikov told RBC.

Dmitry Poleva believes that "the necessary conversion operations can be carried out on the market or "inside itself" with the subsequent allocation to the market for a longer period of time." The Ministry of Finance indicated that it would inform additionally about the completion of the necessary conversion operations.

"We do not comment on future decisions on gold and currency reserves. Of course, the currency structure of the government's reserves is one of the factors that we take into account ,managing international reserves," Bank of Russia Chairman Elvira Nabiullina told Interfax.

The Central Bank will not follow the Ministry of Finance and will keep the share of dollar assets in its reserves, which are necessary to ensure financial stability in the future, Poleva believes. The share of the dollar in the general reserves will decrease, but is unlikely to reach zero, Kulikov agrees. "All the same, diversification implies the widest possible set of currencies in the portfolio, and the risk that dollar investments will become illiquid for the Central Bank, in my opinion, is less likely," he points out. RBC sent requests to the Ministry of Finance and the Central Bank.

How the economy is dedollarized as a whole

In 2018, President Vladimir Putin supported the plan of dedollarization of the Russian economy, developed by the government in response to the tightening of U.S. sanctions (in particular, the blocking of assets of "Rusal" Oleg Deripaska and "Renova" Viktor Vekselberg). In 2014-2019, the dollar's share in Russia's trade and financial flows fell by an average of 15-20 percentage points, ING bank wrote, including up to 49% in exports of goods and services, 25% in imports, 37% in external debt, etc. yuan and yen.

However, the extended dedollarization (given the currency preferences of the population and private companies) is still in question, as Russian households and corporations must first see a reliable alternative to the dollar, ING stressed in December 2020.
The authorities have chosen the first projects for financing from the FNB
business

U.S. sanctions are a "constant risk" to the Russian economy, Bank of Russia Chairman Elvira Nabiullina told CNBC. To manage the risks associated with foreign exchange ownership, Russia has a policy of dedollarization, she recalled. Many countries, "not only Russia," are moving towards diversification of international reserves, but this process is not going sharply, but gradually, she noted.
« Last Edit: June 03, 2021, 11:26:42 AM by Crafty_Dog »

ya

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El Salvador Prez sending bill to Congress to make BTC legal tender. I dont know enough about the politics, but if that were to happen, game theory would predict that other nations would want to get in.

https://news.bitcoin.com/el-salvadors-president-nayib-bukele-plans-to-declare-bitcoin-legal-tender-next-week/