Wednesday, May 12, 2021

The Smartest Guys in the Room Call Bitcoin “Rat Poison Squared,” “a Colossal Pump-and-Dump Scheme” and “a Big Criminal Scam” but Federal Regulators Look the Other Way

Anne Goldgar wrote of the Dutch Tulip bubble in her 2007 book, Money, Honor, and Knowledge in the Dutch Golden Age, that “the f1000 one might pay in January 1637 for one hypothetical Admirael van der Eyck bulb,” could have bought “a modest house in Haarlem,” or “nearly three years’ wages” of a master carpenter. Comparing that to U.S. dollars in 2007, the year her book was released, Goldgar says it would be like one Tulip bulb selling for $12,000.

Goldgar notes that as historians have looked back at this episode, the tulip mania of the 1630s in Holland has become a “byword for idiocy.”

In his 1841 classic on market bubbles, Extraordinary Popular Delusions and the Madness of Crowds, the Scottish journalist Charles Mackay wrote this about the Tulip bubble: “The rage among the Dutch to possess them was so great that the ordinary industry of the country was neglected…”

Four centuries have apparently not cured the propensity toward idiocy when the lure of riches beckons. The market cap of Bitcoin is now in excess of $1 trillion, despite the fact that it is backed by absolutely nothing.

No amount of disdain toward Bitcoin by the smartest guys in the room can stop the creature’s incessant climb. Bitcoin has multiplied more than five-fold since September, trading yesterday at over $56,000.

Bitcoin has been thoroughly discredited by some of the smartest people in the investment community and global finance, but that hasn’t stopped the oldest futures exchange in the U.S., CME Group, from offering futures and options trading on Bitcoin. CME Group’s federal regulator, the Commodity Futures Trading Commission (CFTC), explains in this podcast that all that CME Group had to do to launch its Bitcoin futures was to “self-certify” its plan with its regulator, the CFTC. The self-certified plan may be just fine – it’s the underlying product based on nothing that the regulator seems to have ignored.

(We’re thinking of submitting a self-certified plan with the CFTC to trade futures on spinning straw into gold. We’re toying with calling it the RumpelstiltskinCoin.)

The CME Group has exchanges that provide for futures trading based on real things: like milk, wheat, soy beans, oil, gasoline, ethanol and so forth. These are real things that fuel economic growth in the United States and/or feed a nation of 331 million people.

To paraphrase Mackay in Extraordinary Popular Delusions and the Madness of Crowds to sum up today’s Bitcoin craze in the U.S.: The rage among speculators to trade Bitcoin was so great that the harm this would do in the long-term to the reputation of integrity in U.S. markets was simply ignored by Congress and regulators.

One of the most respected investors in America, Warren Buffet, summed up Bitcoin like this in May 2018: Bitcoin is “probably rat poison squared.” In January of the same year, Buffet told CNBC in an interview that “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.”

Also in 2018, Bill Harris, the former CEO of Intuit and PayPal, wrote a detailed critique of Bitcoin for Vox, under the headline: “Bitcoin is the greatest scam in history.”

Read the rest here.

Monday, May 10, 2021

Germany's Catholic Church is Schismatic in All But Name

If the German Catholics possessed a shred of honesty they would just join the Anglican Communion or the Lutherans. But they don't, and the only man in Rome who can put a stop to this is pretty obviously in their corner. 

The crisis in the Roman Church is dangerously close to reaching a tipping point. The problem of course, is that Catholic ecclesiology has no contingency plan for when the church is overrun by heretics and the Pope is one of them. 


France: Soldiers are writing open letters warning of civil war

Serving members of the French military have fired a second salvo at Emmanuel Macron’s government in an open letter accusing it of “cowardice, deceit, perversion”, just weeks after a first letter said the country was heading for “civil war”.

Like the first letter, it appears in the rightwing magazine Valeurs Actuelles. It was reportedly signed anonymously “by active military personnel” and is appended with a petition on the magazine’s website for others to sign.

The letter’s signatories refer to the seventh verse of La Marseillaise, the French national anthem, that refers to the “avenging” slain elders or following them to “their coffins”.

It was published in support of the first letter, published on 21 April, the 60th anniversary of a failed coup d’état against General Charles de Gaulle over his support for Algerian independence.

Signed by a number of retired generals as well as at least 18 serving soldiers including four officers, it warned of the “disintegration” of France evoking what it called the “perils” of Islamic extremist and “the hordes from the banlieue”.

It also accused anti-racism groups of creating “hatred between communities” and cautioned that “lax” government policies could spark chaos requiring military action to “protect our civilisational values”.

Afterwards, furious ministers accused the signatories, who were supported by the far-right Rassemblement National party leader, Marine Le Pen, of breaking military rules and threatened legal action against them. The armed forces minister, Florence Parly, said: “The armies are not there to campaign but to defend France”, while the interior minister, Gérard Darmanin, accused Le Pen of having her father Jean-Marie Le Pen’s “taste” for the sound of marching boots.

The second letter, published late on Sunday evening, batted off threats of punishment and launched an all-out attack on the government, accusing it of “trampling” on veterans’ honour and “sullying” their reputation “when their only fault is to love their country and mourn its visible decline”.

Read the rest here.

Saturday, May 08, 2021

As Deficits and Money Printing Increase, So Do Fears of Inflation

The US Federal Reserve and Treasury are repeating one of the most disturbing episodes of the 1940s and risk stoking a destructive inflationary boom, a leading monetary watchdog has warned.

The Centre for Financial Stability (CFS) in New York says US money supply data is flashing a red alert and that excess reserves in the banking sector threaten to set off an “explosion of lending” as the recovery accelerates. The Fed is riding a tiger by the tail and may have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits.

The CFS said its "divisia" measure of the broad M4 money supply rose 24pc in March from a year earlier, and narrow its M1 variant rose 36.9pc. “Those monetary growth rates are potentially alarming,” said Professor William Barnett, the institution’s director.

Barnett said de facto collusion between the Fed and the Treasury is much like the 1940s, when the Fed served as a fiscal agent for Democratic administrations and mopped up the vast bond issuance needed to pay for the Second World War and its aftermath. Inflation reached 17pc by mid-1947 and creditors were gradually expropriated in what amounted to a stealth default stretched over several years.

The US output gap has already closed and President Biden’s $6 trillion fiscal plan is expected to push economic growth above its pre-pandemic trajectory by next year. Five-year "breakevens" measuring inflation expectations have jumped to 2.71pc, the highest since the pre-Lehman boom. Yet the Fed is continuing to buy $120bn of bonds each month.

The situation is fundamentally different from waves of QE after the global financial crisis. Stimulus at that stage was needed to offset a contraction of the money supply as banks slashed lending and sought to beef up their capital ratios to meet tougher Basel rules. Today’s QE is monetisation of fiscal deficits and is leading to a surge in bank reserves. This money will catch fire if monetary velocity returns to normal as the economy recovers. 

The Bank for International Settlements - the venerable club of global central bankers in Basel - also fired a shot across the bows on Thursday, warning that it would be a grave error for policymakers to let rip on monetary growth in the hope that social inequalities could be cured with inflationary stimulus. 

The poor tend to suffer most when the consumer prices suddenly start to rise. Agustin Carstens, the managing director of the BIS, said: “We should not forget the long-lasting scars of uncontrolled inflation on inequality. History abounds with episodes of high and runaway inflation that increased poverty and inequality via sharp reductions in real wages.

Read the rest here.

Thursday, May 06, 2021

German Clergy Defy Vatican On Gay Blessings

Catholic clergy are preparing to bless gay couples across Germany in defiance of a recent Vatican ban on the practice, in the latest sign of how far liberal German Catholics are pushing the boundaries of the Vatican’s authority and teachings to forge a more progressive version of their church.

Priests and some lay ministers are planning coordinated ceremonies blessing gay relationships in about 100 Catholic churches and other venues in Germany, including Essen Cathedral, over the next few days, most of them on Monday. Almost 20 events will be live-streamed.

Such blessings have become common over the past decade in Germany and some other parts of Northern Europe, but they have usually taken place quietly, in places other than churches. Monday’s highly visible ceremonies will mark a protest against a Vatican declaration in March, approved by Pope Francis, prohibiting the blessing of same-sex relationships on the grounds that God “cannot bless sin.”

“It always has been a little bit kind of a secret,” said the Rev. Christian Olding, a Catholic priest in the northwestern town of Geldern, who says he has blessed about 10 same-sex couples in the past eight years. “This is the first time that we are going this way in society, to do it visibly for everyone.”

Since his election in 2013, Pope Francis has contended with deepening divisions in the global Catholic Church between conservatives, including in the U.S. and Africa—who are uncomfortable with his more liberal approach to matters including divorce and homosexuality—and progressives, with Germany in the vanguard, who are impatient with what they see as a reluctance to back substantive change.

The prohibition of gay blessings by the Vatican’s doctrinal office was seen in Germany as an example of that resistance to change. Vatican officials are anxious about a national synod of German Catholics, under way since last year, that is debating a number of overhauls, including the ordination of women, greater roles for laypeople in church governance, and the revision of church teaching on homosexuality.

Conservative bishops in Germany, the U.S. and elsewhere have warned that such changes could lead to a schism in the universal church. Pope Francis and Vatican officials have more than once admonished German church leaders not to go their own way.

The German synod “is an instrument to adapt the teaching of the Catholic Church to the demands of the Western world that has largely fallen away from God. It neither respects the apostolic tradition nor seems to care about the majority of faithful believers in the universal church,” said Gabriele Kuby, a German writer and sociologist.

Read the rest here.

Tuesday, May 04, 2021

Paris in '39

Color home movies of Paris in 1939. I'm guessing this was in the spring based on the absense of summer type attire.

Sunday, April 25, 2021

Holy Week

Wishing everyone a blessed Holy Week. Little or no blogging is likely until Pascha. 

Friday, April 23, 2021

‘Black Swan’ author calls bitcoin a ‘gimmick’ and a ‘game,’ says it resembles a Ponzi scheme

“Black Swan” author Nassim Taleb on Friday criticized bitcoin as a “gimmick,” telling CNBC he believes it’s too volatile to be an effective currency and it’s not a safe hedge against inflation.

“Basically, there’s no connection between inflation and bitcoin. None. I mean, you can have hyperinflation and bitcoin going to zero. There’s no link between them,” Taleb said in a “Squawk Box” interview.

“It’s a beautifully set up cryptographic system. It’s well made but there’s absolutely no reason it should be linked to anything economic,” added Taleb, whose bestselling 2007 book examined highly improbable events and their potential to cause severe consequences. He said bitcoin has characteristics of what he calls a Ponzi scheme that’s right out in the open.

A Ponzi scheme is a type of fraud whereby crooks steal money from investors and mask the theft by funneling returns to clients from funds contributed by newer investors.

Taleb had once held favorable views toward bitcoin, which was created in 2009 and is the world’s largest cryptocurrency by market value. However, he told CNBC he was “fooled by it initially” because he thought it could develop into a currency used in transactions.

“Something that moves 5% a day, 20% in a month — up or down — cannot be a currency. It’s something else,” said Taleb, a former derivatives trader who serves as scientific advisor to hedge fund Universa Investments.

“I bought into it ... not willing to have capital appreciation, so much as wanting to have an alternative to the fiat currency issued by central banks: A currency without a government,” Taleb said. “I realized it was not a currency without a government. It was just pure speculation. It’s just like a game ... I mean, you can create another game and call it a currency.”

Read the rest here.

I think this guy has been reading my blog. Also in today's newsfeed...

$200 billion wiped off crypto market overnight. Bitcoin down over 20% since April 14 (ironically the day I last posted on this subject). 

Thursday, April 15, 2021

First Class Staterooms on the Titanic

Some video recreations of various first class staterooms on the Titanic based on surviving images as also of her near identical sister ship, Olympic, and builder's plans.

Wednesday, April 14, 2021

High Tech Tulips

For those contemplating diving into Bitcoin consider its current valuation...

  • 35 x the value of gold
  • 2,400 x the value of silver
  • 63,000 x the value of the US Dollar
If you are thinking of buying Bitcoin you need to be comfortable with these valuations and expect them to go higher. And IMHO that is not rational. Bitcoin is not a bubble in the traditional sense of the term. The bond market and Tesla might be bubbles. But Bitcoin has moved way beyond that. It has become a speculative mania being fueled by frantic buying on the part of people who are afraid they will miss out on the greatest get rich quick opportunity in the history of investment markets. 

Or to borrow an old line from Wall Street professionals "dumb money chases hot money." And I suspect the hot money has mostly cashed in their profits and left the building. 

But with trillions now parked in Bitcoin, what is likely to happen when this all blows up? The honest answer is, I'm not sure. There isn't really any modern event to compare it to. You'd have to go back almost 400 years to find anything comparable. The Great South Seas bubble of the 1720s was comparatively tame in terms of its overpricing. As was the railroad bond bubble that precipitated the Panic of 1873 and the stock mania that blew up in October of 1929. 

If it deflates slowly (probably the best case scenario) it could limit the systemic risks. But a sudden crash could cause chaos. It could also inflict staggering losses on people who can ill afford to lose a lot of money. If Elon Musk, a big BTC enthusiast, loses a few billion, honestly who cares? But there are a lot of working and middle class people who have been putting a great deal of their hard earned money into this. These people could take a hit they aren't ready for. 

Update: On the subject of smart money cashing in their Bitcoin, CNBC reports that Jim Cramer recently sold half of his BTC and paid off the mortgage on his house. Cramer's description... "Phony money paying for real money."

Tuesday, April 13, 2021

The Jesuits should be suppressed (again)

The evidence for this has been overwhelming for many years. But if more is needed, there is this.