Posts Tagged ‘Currencies’

A Fascinating and extremely pertinent view expressed by MoneyWeek in the following article

A question which has certainly been raised in discussions about the nature and indeed, the durability, of this cryptocurrency, one must decide whether this trend will fall victim to many of the faults of other fiat currencies or does it take of the allure of precious commodities which can potentially outlast humanity itself?

On the surface I cannot think of Bitcoin as anything other than pseudo-fiat, however we may never even know the authority behind it, even if it is everyone of those that use it – can we not fall victim to the same whims of the State? Any man made invention will have its deep flaws and cannot be assumed to be beyond manipulation.

However, I understand the commodity like nature of it too, but as Buffet once remarked about gold, you certainly cannot eat bitcoin, you can’t even touch it, so how much of a commodity can we really think of it as?

..if someone were to hack the algorithm behind a bitcoin, that might have the same effect as a central bank printing money: it could lead to a loss of faith and value. Now there’s an irony! Central bankers are to fiat currencies what hackers are to cryptocurrencies!

My research will continue….

In 1985 a precedent was set, as the leading economies of the day met to agree a way forward for mutual benefit and growth.

Read a summary of the event here

Putting this into perspective, considering modern day interventions, which has become a little too coordinated and frequent. Ultimately the Central bankers continue to take center stage, markets can’t get enough of them. They pour over every word, the syntax and the general impression they give about the coming months, are they feeling too hot or too cold, bull-shit or bear-shit?

These are the puppet masters, managing the stage, setting the scene.

Another example of the manipulation and authoritarian control excercised over our economic reality

 

As the price of this virtual currency continues it volatile rise, these recent articles give a more considered view of the mania around Bitcoin and seek to determine if it really can be considered an alternative to the current monetary system.

Since the last post on this issue, Bitcoin has received verbal endorsements from a US senate committee (CONfidence is essential to any created currency) and an investment by the Winklevoss twins, to name a few examples of its growing acceptance internationally. But there have also been a few negative developments – a ban by Chinese authorities being an example

My own thoughts welcome the perceived independance from any Central Bank or government authority, the absence of debt creation and its controlled circulation, but I have always been uncomfortable about the fact that it is still a form of ‘paper’ money with no intrinsic value, and the same mis-pricing mechanisms are available for the exchange of this ‘money’

Please read these two pieces discussing the downside risk of this digital currency – clearly a big pinch of salt is still needed when considering an investment here and opinion is becoming ever more divided

Bitcoin: The Rise and (Inevitable) Fall

Bitcoins: The second biggest Ponzi scheme in history

Related Ribanomics posts about Bitcoin;

Alternative Currencies: Bitcoins – is it just a fad?

UK_Public_Debt2

Globally, many developed nations have buckled under the mountain of national debt that governments have piled up throughout the decades in order to expand the reach of the state, be it for warfare or for welfare.

A number of nations in Europe have been bailed out by the ECB after their debts became too great to service. Spain, Greece, Italy, Portugal and Ireland are still suffering from the repercussions, but Britain may not have escaped the worst of this crisis.

The current government have added more debt to the nations credit bill than any other single parliament in UK history, despite grand claims that it would actually reign in the ballooning budget deficit.

Again, statistics help with the mis-information being pedalled by various media outlets (see my previous post on this issue). Depending on how you measure national debt, and there are of course many interpretations, this nation has a debt to GDP ratio of anywhere between approximately 80% to 900%!

The later number includes not just current government borrowing, but other factors which need to be taken into consideration when trying to understand total indebtedness such as unfunded future liabilities (ie. pensions to be paid to future populations), household debt, company debt, bank debts and the recent bank bailouts

..all of which means, how long is this sustainable? This is the multi-trillion dollar question. Some would reasonably believe that it is more a question of WHEN and not IF.

A popular UK publication, MoneyWeek, recently published an article on this topic which they feel needs to be taken extremely seriously. Read it here or even watch it here;

The End of Britain by dm_4ffe277495b5a

In order to bring some sense of balance to this debate, it is worth noting the comments of a sceptic. Note however, that the fact that this nation has much more debt than it should, or that expenditure/the deficit is not being managed well is not up for question.

In an effort to present alternatives to the fiat paper money system currently in operation, it is interesting to note the attention the virtual currency of Bitcoin is gaining

Here is a link to the official site;

http://bitcoin.org/en/about

Also note a number a articles recently published giving a view on the merits or otherwise of this currency;

Note this passage of the above article;

“THERE is much to like about what Bitcoin stands for: free-market money, safe from the grabbing hands of a state that cannot wait to debase, devalue and decimate whatever currency it gets its hands on..

… But it is encouraging that governments no longer monopolise money. If the reach and influence of currencies such as Bitcoin continue to grow, the internet may yet eventually achieve what F.A. Hayek, the Nobel prize winning economist, called for many decades ago: competing currencies that finally force monetary authorities to get their act together.”

The rise of Bitcoin comes at a time when a major world currency is believed to be on its last legs; the Euro. The troubles of Cyprus (and those of Greece/Spain to name a few) are rightly pushing populations to understand the major fallacy behind fiat money, thus driving this spotlight on such digital currencies.

As mentioned in the article, the value of Bitcoin has risen sharply, so much so that it is already being dismissed as a bubble. It is important to note that the market mechanisms that are driving this appreciation in value are still one of the components of the global ribanomic system, therefore exposing a key misunderstanding that if one false system is to be replaced, it will not necessarily mean the end of the troubles associated with ‘The Market’

I would also add that digital currencies still allow users to determine the changing value of this currency, albeit with some controls, since it has no intrinsic value – this is a key reason why some observers prefer commodity based currency

The important point behind this is that when we bring forward alternatives, the mechanisms must be holistically free from the workings of the current system; otherwise we are simply dealing with the same problem in a different guise

Those wanting to learn more about paper money system and the thoughts of the renowned economist, Fredick Hayek, can view this site mentioned in earlier blog posts;

http://detlevschlichter.com/

Readers can also Google about the history of other such alternative currencies that have been attempted throughout history for more context on this issue