Skip to main content

Posts

Thinking about ICOs.

The ICO craze is in full swing. Etherium goes from 30 cents to > $300. The Ten-X ICO and others raise millions in no time. The secondary market for it shoots up massively. The two questions I ask in every bubble are:

Where is the money coming from?
How can I monitor that source of money to know when the money is going to stop coming?

 My best guess for where the money is coming from in the ICO bubble is China. China is the home of all the big Bitcoin mines and has a cottage industry of schemes to exfiltrate money out of China and into anywhere else. The "money" is also coming out of Bitcoin to some extent and into other crypto currencies due to high transaction fees.


What Countries are using crypto currency?

 If we look at bitcoin search trends for Bitcoin : We see the U.S is at number 10. And Ethereum, the smart contract cryptocurrency powering the newly hatched ICO world: We see that the U.S is way down the list at number 18. Google underreports China of c…
Recent posts

Where Is The Hyperinflationary Tipping Point?

With all the money printing going on at the Fed, why is the Fed having trouble creating inflation in the economy?

One of the reasons is that asset values are rapidly declining. This leads to a collapse in available sources of consumer credit. For instance, now that home values have fallen, home equity lines are not available. Existing lines are gradually being paid down or defaulted on.

Fed liquidity programs such as TARP, which swaps cash for mortgage backed securities, is going into equities and not into new loans. It also seems to be about the only liquidity entering the system. The rest of the liquidity sits on the bank balance sheets, unable to find a home in an asset bubble. Bank lending needs an asset bubble to get into the economy because Banks are too conservative to lend like venture capitalists. They only really want to lend against assets, which are all falling in price due to the aftermath of the once great asset bubble. Since banks only want to lend against asset…

The curious case of the Yuan and the Yen

Two curious pieces of news today:

Geithner Says U.S. Examining Ways to Push China on Yuan Rise

Treasury Secretary Timothy F. Geithner said the U.S. isn’t satisfied with the pace of yuan gains and is considering ways to urge China to let the currency rise faster.

And

Fed refused to comment on Japan weakening the Yen.

NEW YORK (Dow Jones)--The Federal Reserve Bank of New York declined to comment on Japan's intervention in currency markets that has pushed the dollar sharply higher against the yen.


So why are we perfectly happy, or at least neutral, with Japan, the #3 economy, weakening the Yen and are furious at China, the #2 economy, decreasing the value of the Yuan.

This is a good question for any would be political economist to ponder. The treasury is certainly in charge of the political aspects of the dollar's relationship to other currencies. The Fed's political objectives are somewhat murky but assumed to be largely the same as the treasury's.

Let's call this the Asia…

Why there will be no hyperinflation

I have been reading the inflation/deflation debate for some time now on various parts of the web. The inflationists insist that we will collapse like Wiemar. The deflationists insist that we will collapse like Japan. The memory of the 1970s inflation is strong in many an old gold curmudgeon, so the inflationists seem to be more prevalent. I will in this essay attempt to argue that hyperinflation will not happen if global commodity markets remain priced in dollars. The reason for this is that if inflation increases, the rest of the world will bid commodities up drastically, especially oil, and severely throttle U.S economic growth, leading to a more restrictive monetary policy.



Hyperinflation always happens due to a foreign exchange crisis. The population, sensing a high level of inflation, rushes to change their earnings in for real goods or foreign currency. In the case of Wiemar, or Argentina, the rest of the world is largely unaffected. They see their currencies drastically …

Keeping up to date on China Stock/Economic news

I have been trying to get a daily reading list together so I can more closely follow economic developments in China. I was trying to stay as far away from western viewpoints of China as possible. Reading western news sources is like reading about science in newsweek vs reading china business based and focuses news sources -- which is more like reading the actual technical journal articles.

Ok here's my notes on the topic so far:

http://www.chinaview.cn/business/index.htm

-Decent - basically Xinhua's (Official Chinese News Agency) business section


http://english.gov.cn/service/business/sbw.htm

-brief gov news agency business headlines.


http://www.chinadaily.com.cn/english/bw/bweconomy.html

-Not bad with a lot of original information! for example:
Quote:

"Tax treaty benefits
In this article, we shall analyze the process of adopting a Mauritius company as a holding vehicle. The China-Mauritius tax treaty offers some tax benefits in structuring a tax efficient holding structu…

Behind the "Global Savings Glut"

A recent article in The Arab Times seems to shed some light on where all the money sloshing around the world creating asset bubbles is coming from:

We in Kuwait seem to have run out of ideas for the time being and our past generations were more creative and looked deeper into our human resources to give their best. The overseas investments have their limits and it is time to seriously think of ways of making and creating new job opportunities for our youngsters and improve their capabilities and abilities. This is the only way to move forward as our financial resources are beyond our abilities and capabilities. It may take some time to come with the right answers but this will not happen without passing some laws through our parliament. Most importantly the land utilization law and liberalization laws to allow the private sector to move forward. The government owns more than 95 percent of the Kuwaiti land and with the BOT law still under revision almost all projects have been shelved a…

The Super SIV? Will it work or are there one too many holes in the dike.

The Super SIV appears to be on it's way to sanitize all the sub-prime CDOs.

Will it work?

Probably Not... Why?





Hole in the Dike #1:

The Chinese and the Japanese aren't buying it anymore as outflows of capital show:

Asian Investors Dumping Treasuries

Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries.

Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said.


















See that chart above? That's the August data, before they lowered rates!

Hole in the Dike #2:

The worst isn't even here yet! See below for a timeline of when rate resets are going to hit. It starts in January 2007.

















No foreigners want to buy our debt and there are going to be a ton of people defaulting on their mortgages in the coming months. So all th…