- Paul Craig Roberts Rages Against Trump's National Security Speech
Authored by Paul Craig Roberts,
What do we make of Trump’s national security speech?
First of all, it is the military/security complex’s speech, and it is inconsistent with Trump’s intention of normalizing relations with Russia.
The military/security complex, using Trump’s position as President, has defined Russia and China as “revisionist powers,” Washington’s rivals who seek to put their own national interests ahead of Washington’s unilateralism. Russia and China are “revisionist powers” because their assertion of their national interests limits Washington’s hegemony.
In other words, Washington does not accept the validity of other countries’ interests if those interests are contrary to Washington’s interests. So, how does Trump expect to work with Russia and China when he reads a speech that Russia and China seek to “shape a world antithetical to our interests and values.”
“Our values” means, of course, Washington’s dominance.
Trump begins by honoring the military, police, Homeland Security, and the Chairman of the Joint Chiefs of Staff. In other words, “America first” means domination by Washington over the citizenry as well as over foreign countries.
Trump then cloaks himself in the American people who “voted to make America great again.”
Then Trump’s speech picks up the Israel Lobby’s line about a bad deal with Iran and asserts that previous administrations tolerated ISIS, when in fact they created it and set in upon Libya and Syria.
Then he attacks environmental protection and complains of illegal aliens, while ignoring the refugees Washington’s wars imposed on Europe.
In an era of neoconservative celebration of US world hegemony, Trump accuses his predecessors of losing confidence in America. This is extraordinary.
When a country’s entire foreign policy is based on the assumption that it is the “exceptional and indispensable country,” how is this a loss of confidence? It is massive arrogance and hubris. The problem is not a loss of confidence by the rulers but an overbearing hubris.
Then Trump claims that through him, Americans again rule their nation.
He says that now Washington is serving the citizens. Looking at the tax bill, he must mean that citizens consist of the One Percent.
He next associates making America first with more money for the military.
Then he blames Iran for terrorism, something that Iran lives in fear of, but he does not mention Saudi Arabia’s support for terrorism or that of the US military/security complex’s which encourages terrorism as a weapon against Iran and Russia and as an excuse for its massive budget and power.
Trump then claims credit for the Russian/Syrian defeat of ISIS. It has been proved that ISIS is supported and financed by Washington. Trump’s claim is even more ridiculous than the previous claims of the Obama regime that the US defeated National Socialist Germany. Russia, which did defeat Germany, was not invited to the anniversary celebration.
Trump next demands that the countries we defend pay for it. Who are these countries and who do we defend them from? He can only mean Europe, Canada, Australia, Israel, and Japan. Is Washington defending them from Russia, China, North Korea and Iran or from the terrorists Washington creates, arms, and supplies to overthrow Libya, Syria and whatever countries Washington is successful siccing terrorists on. Apparently, some of these CIA-created terrorist organizations break loose from their creator and conduct operations on their own. So, Washington is a government that creates its own enemies.
Trump next brags on the sanctions he has imposed on “the North Korean regime.” He doesn’t mention, and I would bet he does not know, that Washington has withheld a peace treaty since the 1950s from North Korea. Washington has kept the war status open for 64 years. Having seen the fate of Libya, Iraq, Afghanistan, Syria, Somalia, etc., little wonder North Korea wants nuclear weapons.
Trump, standing there threatening the world, says that Washington will take all necessary steps to prevent North Korea from threatening the world.
Trump then delivers the establishment’s propaganda that unemployment is at an all time low and the stock market at an all time high. So, what is Trump rescuing Middle America from if unemployment is at an all time low? What happened to Trump’s case against jobs offshoring?
This is nothing but feel-good talk. Trump is repeating the lies because the lies make him look good. What Trump should be doing is pointing out the meaninglessness of the unemployment rate, because it doesn’t count the unemployed, only those few who looked for a job in the last 4 weeks. He should be pointing out that the stock market is not a sign of a growing economy but a sign of massive money creation by the central banks of the US, EU, UK, and Japan. The massive printing of money has flooded into paper assets, driving up their price and further enriching the One Percent.
Trump says that one leg of the strategy is to “preserve peace through strength.” What peace is he talking about? In the past two decades Washington has destroyed in whole or part eight countries and overthrown democratic governments in others. Is Trump equating peace with Washington’s wars? No other country has initiated wars and invasions and bombings and aggressive military actions on other countries’ borders. Trump says that America is threatened by enemies and to protect us the military will be enlarged. He said he was overturning the “defense sequester,” something that clearly does not exist.
My conclusion is that Trump has surrendered to the real rulers of America – the powerful interest groups such as the military/security complex, the Israel Lobby, the environmental polluters, Wall Street and the banks “too big to fail.”
America is a country in which despite the hopes flyover America had in Trump, an oligarchy rules.
The American people, regardless of who they elect, have no voice, no input, no representation.
The governments of Ronald Reagan and George H. W. Bush were the last governments that were subject to any accountability. With the Clinton regime the United States entered into the age of tyranny.
- Chinese Fighters Violate Taiwanese, Korean And Japanese Airspace
In keeping with China’s strategy of methodically encroaching on its geopolitical rivals via air force and naval drills in the Pacific, both Japan and South Korea scrambled fighter jets earlier this week as China suddenly expanded the scope of naval drills being held in the waters off the Korean peninsula.
The Associated Press reported that China sent a squad of fighter jets and bombers on a long-range military drill to the Sea of Japan. During their journey, the planes traveled through South Korean, Japanese and Taiwanese air defence zones, a move widely seen as China flexing its military muscles and asserting its dominance in the region.
The drills marked the first time China has sent warplanes through the strait that lies between South Korea and Japan.
Chinese air force spokesman Shen Jinke said the air force dispatched bombers, fighters and reconnaissance planes through the Tsushima Strait to the Sea of Japan to "test its ocean combat ability."
"This is a regular annual training arrangement of China's air force that accords with the relevant international laws and practices and it isn't aimed at any particular state, region and target," Shen said in a statement.
Seoul's Joint Chiefs of Staff confirmed that five Chinese warplanes — two bombers, two fighter jets and one reconnaissance plane — entered South Korea's air defense identification zone off a southern South Korean island all at the same time.
The plane then flew to the Japanese air defense zone above the waters between the Korean Peninsula and Japan, a JCS official said on condition of anonymity, citing department rules.
In what’s perhaps the most galling detail of the story, South Korea used a military hotline to warn China of its planes' entrance to the zone, according to an anonymous official. China replied that the unannounced intrusion was part of its routine training.
Self-ruled Taiwan's military says China's air force held a separate drill Monday morning through the Bashi Channel separating Taiwan from the Philippines and then through the Miyako Strait, which lies north of Taiwan and to the south of Japan.
The Taiwanese defense ministry said Japan dispatched F-15 fighter jets to intercept the Chinese planes. Japan had no immediate comment on Monday's drill.
It was the second time this week that China had conducted drills around Taiwan.
As US generals have warned, China is pursuing an extremely aggressive military presence in the Pacific to assert itself as a dominant power in the region. China’s willingness to test boundaries has caused the number of confrontations between Japanese and Chinese fighter jets to escalate dramatically…
To be fair, China has also been alarmed by US naval vessels conducting so-called “freedom of navigation” missions near the contested Spratley Islands in the South China Sea.
US officials have described China’s repeated confrontations as part of a strategy of normalization, whereby Chinese officials repeatedly test boundaries until regional rivals gradually come to accept their expanded presence. Ultimately, the strategy is aimed at forcing the international community to accept “the nine-dash line” – the contest maritime border surrounding islands in the South China Sea that China has claimed and developed, but has been the subject of an international dispute with several of China’s regional neighbors.
- How Government Inaction Ended The Depression Of 1921
Authored by Lew Rockwell via Mises Canada,
As the financial crisis of 2008 took shape, the policy recommendations were not slow in coming: why, economic stability and American prosperity demand fiscal and monetary stimulus to jump-start the sick economy back to life. And so we got fiscal stimulus, as well as a program of monetary expansion without precedent in US history.
David Stockman recently noted that we have in effect had fifteen solid years of stimulus — not just the high-profile programs like the $700 billion TARP and the $800 billion in fiscal stimulus, but also $4 trillion of money printing and 165 out of 180 months in which interest rates were either falling or held at rock-bottom levels.
The results have been underwhelming: the number of breadwinner jobs in the US is still two million lower than it was under Bill Clinton.
Economists of the Austrian school warned that this would happen. While other economists disagreed about whether fiscal or monetary stimulus would do the trick, the Austrians looked past this superficial debate and rejected intervention in all its forms.
The Austrians have very good theoretical reasons for opposing government stimulus programs, but those reasons are liable to remain unknown to the average person, who seldom studies economics and who even more seldom gives non-establishment opinion a fair hearing. That’s why it helps to be able to point to historical examples, which are more readily accessible to the non-specialist than is economic theory. If we can point to an economy correcting itself, this alone overturns the claim that government intervention is indispensable.
Possibly the most arresting (and overlooked) example of precisely this phenomenon is the case of the depression of 1920–21, which was characterized by a collapse in production and GDP and a spike in unemployment to double-digit levels. But by the time the federal government even began considering intervention, the crisis had ended. What Commerce Secretary Herbert Hoover deferentially called “The President’s Conference on Unemployment,” an idea he himself had cooked up to smooth out the business cycle, convened during what turned out to be the second month of the recovery, according to the National Bureau of Economic Research (NBER).
Indeed, according to the NBER, which announces the beginnings and ends of recessions, the depression began in January 1920 and ended in July 1921.
James Grant tells the story in his important and captivating new book The Forgotten Depression — 1921: The Crash That Cured Itself. A word about the author: Grant ranks among the most brilliant of financial experts. In addition to publishing his highly regarded newsletter, Grant’s Interest Rate Observer, for more than thirty years, Grant is a frequent (and anti-Fed) commentator on television and radio, the author of numerous other books, and a captivating speaker. We’ve been honored and delighted to feature him as a speaker at Mises Institute events.
What exactly were the Federal Reserve and the federal government doing during these eighteen months? The numbers don’t lie: monetary policy was contractionary during the period in question. Allan Meltzer, who is not an Austrian, wrote in A History of the Federal Reserve that “principal monetary aggregates fell throughout the recession.” He calculates a decline in M1 by 10.9 percent from March 1920 to January 1922, and in the monetary base by 6.4 percent from October 1920 to January 1922. “Quarterly average growth of the base,” he continues, “did not become positive until second quarter 1922, nine months after the NBER trough.”
The Fed raised its discount rate from 4 percent in 1919 to 7 percent in 1920 and 6 percent in 1921. By 1922, after the recovery was long since under way, it was reduced to 4 percent once again. Meanwhile, government spending also fell dramatically; as the economy emerged from the 1920–21 downturn, the budget was in the process of being reduced from $6.3 billion in 1920 to $3.2 billion in 1922. So the budget was being cut and the money supply was falling. “By the lights of Keynesian and monetarist doctrine alike,” writes Grant, “no more primitive or counterproductive policies could be imagined.” In addition, price deflation was more severe during 1920–21 than during any point in the Great Depression; from mid-1920 to mid-1921, the Consumer Price Index fell by 15.8 percent. We can only imagine the panic and the cries for intervention were we to observe such price movements today.
The episode fell down the proverbial memory hole, and Grant notes that he cannot find an example of a public figure ever having held up the 1920–21 example as a data point worth considering today. But although Keynesians today, now that the episode is being discussed once again, assure everyone that they are perfectly prepared to explain the episode away, in fact Keynesian economic historians in the past readily admitted that the swiftness of the recovery was something of a mystery to them, and that recovery had not been long in coming despite the absence of stimulus measures.
The policy of official inaction during the 1920–21 depression came about as a combination of circumstance and ideology. Woodrow Wilson had favored a more pronounced role for the federal government, but by the end of his term two factors made any such effort impossible. First, he was obsessed with the ratification of the Treaty of Versailles, and securing US membership in the League of Nations he had inspired. This concern eclipsed everything else. Second, a series of debilitating strokes left him unable to do much of anything by the fall of 1919, so any major domestic initiatives were out of the question. Because of the way fiscal years are dated, Wilson was in fact responsible for much of the postwar budget cutting, a substantial chunk of which occurred during the 1920–21 depression.
Warren Harding, meanwhile, was philosophically inclined to oppose government intervention and believed a downturn of this kind would work itself out if no obstacles were placed in its path. He declared in his acceptance speech at the 1920 Republican convention:
We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend Republican capacity. We promise that relief which will attend the halting of waste and extravagance, and the renewal of the practice of public economy, not alone because it will relieve tax burdens but because it will be an example to stimulate thrift and economy in private life.
Let us call to all the people for thrift and economy, for denial and sacrifice if need be, for a nationwide drive against extravagance and luxury, to a recommittal to simplicity of living, to that prudent and normal plan of life which is the health of the republic. There hasn’t been a recovery from the waste and abnormalities of war since the story of mankind was first written, except through work and saving, through industry and denial, while needless spending and heedless extravagance have marked every decay in the history of nations.
Harding, that least fashionable of American presidents, was likewise able to look at falling prices soberly and without today’s hysteria. He insisted that the commodity price deflation was unavoidable, and perhaps even salutary. “We hold that the shrinkage which has taken place is somewhat analogous to that which occurs when a balloon is punctured and the air escapes.” Moreover, said Harding, depressions followed inflation “just as surely as the tides ebb and flow,” but spending taxpayer money was no way to deal with the situation. “The excess of stimulation from that source is to be reckoned a cause of trouble rather than a source of cure.”
Even John Skelton Williams, comptroller of the currency under Woodrow Wilson and no friend of Harding, observed that the price deflation was “inevitable,” and that in any case “the country is now [1921] in many respects on a sounder basis, economically, than it has been for years.” And we should look forward to the day when “the private citizen is able to acquire, at the expenditure of $1 of his hard-earned money, something approximating the quantity and quality which that dollar commanded in prewar times.”
Thankfully for the reader, not only is Grant right on the history and the economics, but he also writes with a literary flair one scarcely expects from the world of financial commentary. And although he has all the facts and figures a reader could ask for, Grant is also a storyteller. This is no dry sheaf of statistics. It is full of personalities — businessmen, union bosses, presidents, economists — and relates so much more than the bare outline of the depression. Grant gives us an expert’s insight into the stock market’s fortunes, and those of American agriculture, industry, and more. He writes so engagingly that the reader almost doesn’t realize how difficult it is to make a book about a single economic episode utterly absorbing.
The example of 1920–21 was largely overlooked, except in specialized treatments of American economic history, for many decades. The cynic may be forgiven for suspecting that its incompatibility with today’s conventional wisdom, which urges demand management by experts and an ever-expanding mandate for the Fed, might have had something to do with that. Whatever the reason, it’s back now, as a rebuke to the planners with their equations and the cronies with their bailouts.
The Forgotten Depression has taken its rightful place within the corpus of Austro-libertarian revisionist history, that library of works that will lead you from the dead end of conventional opinion to the fresh air of economic and historical truth.
- Shocking Animation Shows Amtrak Train 501 Speeding Around Bend
A day after Amtrak Train 501 derailed yesterday during its first trip on a new high-speed rail line, authorities are releasing more information about what Amtrak and the NTSB can do to prevent future accidents.
Last night, authorities revealed that – contrary to initial reports that an object on the tracks might’ve caused the accident – Train 501 had been traveling 80 mph around a bend where the recommended speed was 30 mph. The National Transportation Safety Board is investigating whether the engineer was distracted by another employee.
The excess speed is shown in this animated simulation released by ABC…
Animation of how the #Amtrak train derailed near DuPont yesterday, from @ABC #LiveOnK2 pic.twitter.com/arHZAKg0No
— KATU News (@KATUNews) December 19, 2017
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And, in another eerie clip, an NBC reporter covering the launch of the new high-speed train line has published footage recorded inside the train on the day of the accident. The reporter and his cameraman were spared when they got off at a stop just 10 minutes before the train tumbled onto Interstate I-5.
NEW: I shot this video on board the #Amtrak501 in the 6 o clock hour this morning. We got off after shooting the video. This specific car on the train derailed minutes after we shot this video. pic.twitter.com/3g25PvMAMe
— Alex Rozier (@AlexRozierK5) December 18, 2017
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The reporter later tweeted that he interviewed the same passenger both on the train and later in the hospital, where he was being treated for a broken back.
Just last month, the NTSB reported that Amtrak had a “weak safety culture,” according to the New York Times. That conclusion stemmed from the fatal accident outside Philadelphia in 2016 that killed eight people and seriously injured dozens more.
During a Tuesday news conference held by the NTSB, a member of the board said that a newer safety system was not in place during the deadly train crash near Seattle because of a Congressional extension.
Bella Dinh-Zarr spoke during a Tuesday news conference about the Monday derailment that killed at least three people, saying that Positive Train Control technology, which was mandated by a 2008 law and is supposed to prevent train-to-train collisions as well as slow and stop trains, was not yet installed on the train line.
There were plans to install the PTC system for the train, which had another safety system in place, but Congress extended a 2015 deadline to be met by the end of 2018, she said.
Sound Transit said Tuesday that the company was on track to have the system installed ahead of a December 2018 federal deadline, according to the local NBC affiliate.
To be sure, it clearly wasn’t installed quickly enough. What’s worse, the circumstances of the crash mirror those of the 2016 crash. In that instance, the train was traveling at 100 mph when it entered a bend in the track, and quickly derailed.
- "What The Hell Is It?" – 74 Cryptocurrency Questions Answered
Authored by Wip via Jim Quinn's Burning Platform blog,
It’s hard to think of something so complicated that has become so popular as fast as bitcoin.
With the price of the cryptocurrency soaring – and mainstream interest surging – Yahoo Finance recently invited readers to send us their top questions regarding bitcoin and other cryptocurrencies. We condensed questions from nearly 3,500 respondents into the list below, and enlisted a team of Yahoo Finance reporters to answer them, including Daniel Roberts, who’s been covering bitcoin since 2012, and Jared Blikre, our authority on trading. Ethan Wolff-Mann and Julia LaRoche contributed as well. Here’s everything you want to know about bitcoin:
1. What the hell is it? In the most general sense, bitcoin is software that forms a decentralized, peer-to-peer payment system with no central authority like the Federal Reserve or U.S. Treasury. It’s fair to call it a digital currency or cryptocurrency, but at the moment, most investors aren’t really using it as currency to pay for things. Instead, they’re using it as a speculative investment to buy in the hope of turning a profit. Maybe a big profit. (And maybe a big loss).
2. What backs or supports it? Bitcoin runs on something called blockchain, which is a software system often described as an immutable digital “ledger.” It resides on thousands of computers, all over the world, maintained by a mix of ordinary people and more sophisticated computer experts, known collectively as miners. Yahoo Finance’s Jared Blikre dabbles as a bitcoin miner, running mining software in the background on his laptop. Here’s how much bitcoin he has generated so far: 0.000000071589. At the current rate, it would take him about 1,200 years to mine one complete bitcoin. That gives you a sense of how complex it is to mine bitcoin, and how much processing power it takes: These computerized mining rigs throw off so much energy that they can heat your home.
All bitcoin transactions are permanently recorded by miners, who upload bundles of transactions, or “blocks,” to the chain, maintained on all those computers. Blockchain as a technology has become popular among banks and other big financial institutions, who want to use it to settle payments on their back-end systems. But they’re mostly interested in blockchain without bitcoin.
3. Who’s running the show? Bitcoin is decentralized, which means there isn’t one arbiter, central party or institution in charge. Blocks of transactions are validated on the blockchain network through computing “consensus,” which is a feature of the software. Bitcoin was created by someone in 2009 using the pseudonym Satoshi Nakamoto, but it isn’t known who that was, and that person or group doesn’t have control over bitcoin today.
4. What is there to value? The price of bitcoin fluctuates based on buying and selling, just like a stock, but there’s a ton of debate over what the price represents. In theory, the value of bitcoin should reflect investors’ faith in bitcoin as a technology. But in reality, investors mostly see bitcoin as a commodity because of its finite supply. Under Satoshi’s blueprint, the total supply of bitcoin will eventually be capped at 21 million coins. At the moment, 16.7 million bitcoins have been created. A fractional amount of new coins gets created every time a miner uploads a block to the blockchain, which is a reward for mining.
5. Is this a scam? It’s not a scam, in the sense of somebody marketing a bogus product. Bitcoin is a legitimate technology. The question is how useful and valuable it will become.
6. Is there actually a physical coin called bitcoin? No. You can’t touch a bitcoin because it’s essentially software. You may have seen images of gold coins with a “?” on them. Those are souvenirs that can’t be converted into actual bitcoin. But they’re better for illustrating news stories than the streams of numbers and letters that resemble the actual blockchain.
7. Is it tangible like gold? Bitcoin has one big similarity to gold, in that some investors consider it a good store of value for financial wealth. You can take possession of your bitcoins — as some people do with gold — by downloading the string of digital codes that represents your holdings onto a gizmo that looks like a flash drive. But you can’t run your fingers through your bitcoin the way you might with a pile of gold doubloons, and bitcoin certainly isn’t pleasingly shiny.
8. Is value completely determined by the free market? For the most part, yes. There’s a known and limited supply of bitcoin, so when demand goes up, so does the price. Technical innovation also contributes to bitcoin’s value. It was a novelty when first created in 2009, and the market has determined (for now) that it’s an invention that’s worth something.
9. How can something that does not exist in the material world have a monetary value? Bitcoin does actually exist in the material world, the same way an operating system for your phone or computer exists in the material world. Remember, it’s essentially software, and it’s very clear that certain types of software have value because of what they allow us to do.
10. If it’s virtual, can’t people make duplicates? Yes, but that’s not a problem. All bitcoin transactions are stored on that public ledger, the blockchain. You can copy the blockchain, but it’s just a record. So you wouldn’t be changing the distribution of bitcoin. To process new transactions in bitcoin, miners with powerful computers solve complex problems that add the transactions in a block to the blockchain. This is called “proof of work” and is one of the core features of most cryptocurrencies. Multiple miners verify the work, which prevents fraud.
11. Is this a legal tender? Not officially yet in the United States. “Legal tender” means the laws of a state or nation require any creditor to accept the currency toward payment of a debt. In the United States, for instance, merchants must accept the U.S. dollar, which makes it legal tender. The U.S. government allows transactions in bitcoin, but doesn’t require every nail salon, car dealership or restaurant to accept it. They do have to accept dollars. Meanwhile, Japan and Australia, among other countries, have officially recognized bitcoin as legal currency.
12. What is the collateral behind bitcoin? Nothing! The bitcoin blockchain records the entire transaction history of all bitcoin, which is validated through proof of work. That’s not collateral, however. There’s no other tangible asset backing bitcoin, the way a car serves as collateral for a car loan or a building serves as collateral for a commercial property loan.
13. Who keeps track of each bitcoin? All of the miners who maintain the system.
14. How do you buy and sell it? There are a number of easy-to-use exchanges now where you can buy bitcoin using money transferred from a bank account, and in some cases by charging a credit card. The most popular mainstream option is Coinbase, which now has more than 13 million customers. Kraken is another one. Here’s our full explainer on how to buy bitcoin.
15. What are you actually buying? You’re buying a digital “key,” which is a string of numbers and letters that gives you a unique claim on the blockchain supporting bitcoin. You can transfer this asset to others for whatever the market price of bitcoin is, minus transaction fees.
16. Can they be purchased in a regular brokerage account? Traditional brokerages such as Vanguard, Fidelity and Schwab don’t yet offer the ability to purchase bitcoin directly. But there are securities linked to the value of bitcoin, such Bitcoin Investment Trust (GBTC), which you can buy through a traditional brokerage. That doesn’t make them a safer investment than bitcoin. Most, in fact, are highly volatile, just like the coin, and they don’t necessarily track the price of bitcoin perfectly.
17. How much money do you need to get started? Not much. Coinbase lets you purchase as little as $1 of bitcoin, ethereum or litecoin, for instance.
18. Can bitcoin be purchased in fractions? Yep. One bitcoin is divisible down to 8 decimal points, or 0.00000001 bitcoin. That’s the equivalent of one one-hundred-millionth of a coin. That unit is known as a satoshi, in honor of the pseudonymous founder of bitcoin. If one bitcoin is worth $15,000, the value of a satoshi would be .015 cents.
19. Can it be traced back to you? Yes. Anyone who buys or sells bitcoin on an exchange such as Coinbase must provide their personal information to that exchange. If law-enforcement agencies or the IRS need to know something about you, the exchange will have to provide the info under the same laws that govern banks or brokerages. But your personal info does not become part of the blockchain and is not visible to miners maintaining the blockchain.
If you trade bitcoin privately with someone else in a peer-to-peer transaction, that person may know something about you, but nobody else would see the transaction. And if you’re a shady character aiming to launder bitcoin, there’s a way, called “bitcoin mixing.” Multiple bitcoin owners send their bitcoins to a service known as a mixer, which pools bitcoin from multiple sources, mixes them up, and redistributes them to the original owners in the amount they contributed (minus a fee, needless to say). This is risky and assumes the mixer doesn’t run off with your coin.
20. Where is my money going when I buy a crypto? When you buy bitcoin or any other cryptocurrency, somebody is selling it to you — so most of the money goes to the seller. Exchanges also charge fees for conducting transactions, which can get very high. Bitcoin miners also earn transaction fees for their role in maintaining the network. Those tend to be tiny.
21. Are bitcoins real money? And can I cash them in whenever I want? Bitcoin has value that can be converted into ordinary currency, or used to make purchases from sellers that accept bitcoin. So in that sense, it’s real money, and it will remain real money as long as there’s a market with people willing to buy it. To “cash in” bitcoin, you need to sell it to somebody, in exchange for dollars or some other currency. Exchanges that handle such transactions have experienced frequent outages that prevent some people from accessing their accounts or executing a trade for a period of time, especially when are there large movements in the price of bitcoin. So don’t assume you’ll be able to sell any time you want.
22. What is the value based on, besides scarcity? What buyers and sellers think bitcoin is worth. In other words, a lot of psychology.
23. How are they stolen? The bitcoin blockchain itself is very secure, but bitcoins can be stolen from an account if thieves are able to log into your account and send the bitcoin to another account they control. Once bitcoin is transferred, it can’t be recovered. Thieves typically break into other people’s accounts by stealing logon and password info. That makes it extremely important to use all possible measures to safeguard a bitcoin account, including two-factor authentication with a mobile phone. You also have a “private key,” which is a third layer of security that you might need at some point, if there are questions about who’s logging into your account. This key is typically a string of keyboard characters that should be stored where it can’t be lost or stolen or accessed through the internet.
24. How does bitcoin generate revenue? Miners earn money–paid in bitcoin–for creating bitcoin, which helps cover the cost of time and computer power that the process requires. They also earn small transaction fees from bitcoin users. Bitcoin itself doesn’t generate revenue. It’s best thought of as a commodity, similar to gold, that has a market price but doesn’t generate economic activity, the way a business does. When the value goes up, bitcoin can create profits. But when the value goes down, it can also create losses.
25. Is there value in this currency outside of black market transactions and ransoms? Yes. Since bitcoin transfers can’t be traced, bitcoin is often used to purchase drugs or stolen gods or finance other types of criminal activity. But it also has legitimate uses, and can be used as a form of payment with anybody who accepts it. Some investors consider bitcoin to be a store of value–an asset that has a long shelf life and whose value generally goes up over time. While that may be the trend of the last several years, however, we still can’t be sure bitcoin will hold its value long-term.
26. What’s the difference between bitcoin and other cryptocurrencies? That depends which currency you want to know about, and there are hundreds of them now. (Yahoo Finance recently added full data and charts for 105 of them.) Some coins, like bitcoin cash, bitcoin gold or litecoin, resulted from forks of the main bitcoin code. Then there are coins that run on their own blockchain, like ether (the token of the ethereum network) or XRP (the token of the ripple network).
27. Why does the price fluctuate so much? There’s a lot of money pouring into a relatively small market, with the added complexity that it’s harder to trade bitcoin than typical securities or commodities on a regulated market. Big price swings happen sometimes when there are relatively few buyers and sellers in the market, which makes it easy to push the price around.
28. How much of the volatility of bitcoin is due to whales influencing the market price versus new or outside investors? Bloomberg reports that about 40% of all bitcoin is owned by roughly 1,000 people, and many people believe these “whales” collude to influence the price of bitcoin. But there’s no proof of this. While we don’t know how many people are trading bitcoin at any given time, the blockchain, which is the transaction log, is public. The blockchain does show large trades taking place every day, but they’re typically not big enough to generate the huge price swings we’ve seen. Also keep in mind that in the stock market, large institutions typically break up their orders into much smaller orders, to hide their size. Big buyers or sellers of bitcoin could easily do the same.
The price of bitcoin has rocketed more than 1,700% year-to-date.
29. Is it a bubble? Nobody knows for sure. The price surge in recent months has certainly been bubblicious. Many recent buyers want to own bitcoin not for its inherent value, but simply because they think it will rise in value. That’s speculation, which is what often fuels a bubble. But it’s also possible bitcoin is a genuine innovation that will be around for a long time and help transform money. It’s worth recalling that the creation of the Internet led to the dot-com boom in the late 1990s, and the painful crash that followed. But the Internet is still here, and some tech companies that crashed in the early 2000s are now among the most valuable companies in the world.
30. If the bitcoin bubble does burst, would all of the cryptocurrencies tank or just bitcoin? The universe of cryptocurrencies tends to move in the same general direction over time. But they’re not all as closely correlated as they used to be. On the Yahoo Finance cryptocurrency index, for instance, you’ll see the daily price movements are quite different for the 100+ coins we track. Still, an outsized move in bitcoin typically has ripple effects (pun intended, and if you don’t get it: ripple, or XRP, is the No. 4 cryptocurrency by market cap) throughout the crypto-verse. If bitcoin were to tank by 90%, it seems quite likely other cryptos would follow suit. The real test would be which cryptos are able to survive a crash, the way Amazon, eBay and Priceline survived the dot-com bust that wiped out hundreds of other companies.
31. I hear wild speculations that bitcoin will reach $1 million or that it will crash and be worthless. What is most likely? Either event is possible, and perhaps both are. Bitcoin could climb all the way to $1 million and then still suffer a huge crash. No one knows how high the price of bitcoin will go, and it’s possible bitcoin has already achieved its all-time high. But bitcoin probably won’t ever become literally worthless, unless something catastrophic happens, such as the discovery of a fatal flaw in its code.
32. What are the risks? Something could disrupt the demand for bitcoin, sending the price plummeting. It could be a technical problem, regulatory interference, or bad publicity arising from the massive amount of electrical power needed to mine for bitcoin. It could also be something totally unforeseen. Or, some new speculative fad could come along, with interest in bitcoin diminishing.
33. Should I use a bitcoin “hardware wallet”? That’s an excellent idea. Dan Roberts explains how to do it.
34. How do we get hold of these companies? They don’t answer emails. Sorry, but that’s kinda the idea. To many of bitcoin’s ardent supporters, one huge benefit is its decentralization—the lack of a central authority and the absence of regulation. Those are the very things, of course, that bring government pressure to bear on financial services companies that underserve or mistreat their customers. Maybe central authority isn’t that bad, after all.
That’s the snarky answer. In reality, it’s in the interest of Coinbase and other intermediaries providing access to bitcoin to do a better job responding to customers who have problems or questions. Keep in mind, most of these companies are startups still getting their footing. Keep pressuring them. They ought to get better.
35. Will there ever be customer service via phone? You mean, like Vanguard or Fidelity? What a novel idea. We’ll see, but for now you’re only likely to hear from Coinbase if there’s a security issue with your account.
36. Will the government keep their nose out of it? Probably not. Governments have already stepped in, to some extent, with Washington, for instance, allowing the trading of bitcoin futures, which is regulated by the Commodity Futures Trading Commission. For bitcoin to become a more established part of the financial system, it will be subject to more regulation. But that’s not necessarily bad. Some bitcoin investors think that if governments regulate bitcoin more, that will actually legitimize the currency and broaden its adoption.
Federal Reserve Board Chair Janet Yellen testifies on Capitol Hill, calling bitcoin “highly speculative.”
37. Are cryptocurrencies going to take over the U.S. dollar and other currencies? It’s hard to see anything dislodging the U.S. dollar, which is the world’s most trusted currency. Cryptocurrencies could gain share in the overall currency market, especially if the U.S. government explicitly authorizes certain cryptocurrencies and allows people to pay taxes with them. But even that probably wouldn’t doom the dollar, which is valued everywhere for the liquidity it provides.
Yahoo Finance’s Justine Underhill asked Federal Reserve Chair Janet Yellen at her last press conference if the Fed was considering issuing its own cryptocurrency. Yellen said central banks, including the Federal Reserve, are indeed investigating digital currencies but stressed that these are different than cryptocurrencies. She said bitcoin is an unstable, highly speculative asset — but she didn’t indicate any imminent interest in regulating it or reeling it in.
38. Will cryptocurrency destroy the global market? Nah. Even if bitcoin crashed, it wouldn’t have a significant impact on the broader financial markets, according to a recent analysis by research firm Capital Economics. For all the attention it gets, bitcoin’s market cap is still small, and the cryptocurrency isn’t woven into the real economy or the banking system. A total wipeout — with the price falling to $0 — would be the equivalent of a 0.6% pullback in stocks, according to the analysis. Spending by a small portion of households might be affected, and some people would suffer million-dollar losses. But many people with large bitcoin holdings were early investors who bought when the price was very low. So they might seem like large losses in terms of bitcoin’s peak valuation, but they’d still represent fairly modest initial investments.
39. What types of products or services can be bought with cryptocurrencies? Though it’s called a cryptocurrency, it’s not clear the best use of bitcoin will ever be buying stuff with it, since you can purchase things in so many other convenient ways. Investors may eventually regard bitcoin principally as a store of value, similar to commodities.
But if you must, you can spend bitcoin right now on Zynga, Overstock.com, Newegg.com, Expedia.com, and some of Microsoft’s online platforms. If you’re booking a trip, CheapAir.com takes the cryptocurrency as payment. An online outfit called eGifter allows you to buy gift cards from more than 200 brands using bitcoin.
You can buy more expensive things, too, such as a reservation for Virgin Galactic, Richard Branson’s commercial spaceflight company. The Montessori Schools in Flatiron and Soho, an elite pre-school in Manhattan, accepts bitcoin for its nearly $32,000 per year tuition. REEDS Jewelers accepts bitcoin for its rings, watches, and other fine jewelry.
Pro sports is getting in on the craze, with the NBA’s Sacramento Kings and the San Jose Earthquakes soccer team accepting bitcoin for tickets and merchandise. So are political parties, with Libertarians accepting donations through BitPay. The annual maximum is $33,900, which, who knows, might be the equivalent of one bitcoin someday.
40. Can I spend it at Home Depot? Not directly. But it’s slowly catching on among some retailers, mostly e-commerce: Overstock accepts bitcoin, as does Microsoft’s Xbox store, and PayPal and Square allow merchants to accept bitcoin.
41. Will it ever be used as currency at regular retailers? It depends on what’s in it for the retailer. If consumers eventually find bitcoin cheaper or easier to use than current methods, then it might be something retailers decide to offer, to gain a competitive edge. They might even encourage customers to pay in bitcoin if it costs them less in transaction fees than credit cards do. But widespread adoption seems unlikely until the price of bitcoin becomes more stable.
42. Is there any reason why a typical consumer would prefer to use a cryptocurrency instead of a credit card? For now, not really, unless you’re trying to remain anonymous. Cash allows that, obviously. For larger purposes, bitcoin does offer both anonymity and the security of an electronic transaction.
43. What percentage of global economic activity is conducted in cryptocurrency? Very little. But bitcoin finances a significant portion of criminal activity.
44. How do you track various cryptocurrencies? Is there a ticker I can follow? Yep. Yahoo Finance now offers full, free tracking tools for more than 100 cryptocurrencies, with a ticker symbol for each. Most people aren’t even aware there are that many cryptocurrencies. We also have a landing page for all cryptocurrency news and our original coverage of it.
45. Are crypto coins more like stocks or currency, as far as investments? It’s complicated, because bitcoin and other cryptocurrencies have features in common with both. People often compare cryptos to a third category, gold. This labeling confusion is why you’ll sometimes hear cryptocurrencies referred to as “digital assets” or “digital gold.”
46. ETF availability? Coming, probably. The U.S. government recently allowed the trading of bitcoin futures, which may well be a precursor to the establishment of exchange-traded funds that would be listed on a major exchange. The Securities and Exchange Commission would have to approve such an ETF. That could be a year away, more.
47. Why are there vast disparities among trading values in cryptocurrencies? First, different cryptocurrencies trade on their own dynamics. There are differences in the number of coins outstanding, different uses for them, and different rules of operation. When bitcoin, the biggest of them all, makes a large move, it tends to have a spillover effect, with other cryptocurrencies moving in tandem. This effect has diminished over time, however, as cryptocurrencies mature and differentiate.
Another issue is the disparity in trading values of a single cryptocurrency across the myriad exchanges — mainly in the markets for bitcoin. This is due to the relatively high cost of arbitrage, or buying the asset on the lower-priced exchange and selling it on the higher-priced exchange, to make a small profit. The catch is it can take time to make each or those transactions, with no guarantee prices will be the same when the trade goes through. These disparities will likely continue as long as there is relatively low liquidity on most exchanges, as well as high transaction fees.
48. Do you have to report bitcoins to the IRS? The IRS considers bitcoin to be the equivalent of property, with profits (or losses) taxed more or less the same as the proceeds from a sale of stock. The IRS recently won a court ruling against Coinbase that requires the exchange to report information on customers who had more than $20,000 in annual transactions from 2013 to 2015. It seems inevitable that the IRS will treat profits and losses from cryptocurrency bets the same as it treats other investment income.
49. Should one put retirement savings into cryptocurrencies? Can you afford to lose it all? If you can’t, then stay out of cryptocurrencies—the volatility and risk of a wipeout is exactly the opposite of what ought to be in a strong retirement plan.
50. Will I be sorry if I don’t put 5% of my retirement savings into cryptocurrency? If you’re comfortable investing a small portion of your savings in high-risk instruments, then sure, do it. But again, don’t do this unless you can afford to lose all that money .
51. How can I get exposure to cryptocurrencies without actually purchasing the currency? Glad you asked! Because Yahoo Finance has now established a list of publicly traded companies with some exposure to cryptocurrencies. There are 13 tickers on the list so far, including familiar names such a Nvidia and Microsoft. We’ll add more as warranted.
More sophisticated investors can trade bitcoin options on the LedgerX platform and bitcoin futures at both the Cboe Futures Exchange and CME Group. At the Cboe, one bitcoin contract represents the price of one bitcoin. At the CME, one bitcoin contract represents the price of five bitcoins. Both settle in cash, so you don’t have to put up or take delivery of any actual bitcoin. You need to open an account with LedgerX to trade bitcoin options. To trade bitcoin futures, you need to open a brokerage account with a broker that’s a member of the requisite exchange. Many large brokers are taking a wait-and-see approach, and still not yet letting clients trade bitcoin futures. Others are requiring high margin, which is the amount of money a customer must put up to trade the futures.
52. How will the bitcoin collapse affect traditional investments? Who said it’s going to collapse? Seriously. But if you want to be a hater, the good news is there doesn’t appear to be any correlation between bitcoin and other risky assets such as stocks, according to that Capital Economics report. While the stock market rally has slowed in recent weeks, for instance, bitcoin has continued to surge higher. As mentioned earlier, bitcoin has been compared with gold, but it’s certainly not a “safe haven” asset. While gold prices have dipped in the last week, the cryptocurrency has continued to climb higher. As Capital Economics put it, bitcoin is a “world of its own.”
53. Why do Jack Bogle and Jamie Dimon tell investors to stay away from bitcoin? Because they think it has no inherent value and that it’s only going up in price because buyers think somebody in the future will pay even more for bitcoin than they paid for it in the present. Embedded in their opinions is the expectation that one day there will be a bitcoin crash where investors lose most, if not all, of their investment. But those are only opinions.
54. How do banks view bitcoin? Friend? Foe? Partner? Banks are not fans (yet). JPMorgan is hostile toward bitcoin. Citigroup is suspicious. Goldman Sachs is curious. Nearly all large banks have brokerage arms that are members of the futures exchanges where bitcoin futures are now being traded. These futures contracts finally bring bitcoin to Wall Street. But it’s going to take time to build the trust of Wall Street brokers. Until then, volume and liquidity will be low, with most trading happening among retail traders rather than institutional ones.
Right before bitcoin futures went live, big banks and brokers, represented by the Futures Industry Association, sent an open letter to the CFTC, which regulates U.S. futures trading, warning that bitcoin futures were being rushed to market without transparency or proper risk assessment. That has led many large brokers to avoid the bitcoin futures markets for now, refusing to let clients trade yet. Others are reserving trading rights for select clients.
55. Are there any publicly traded companies that make markets in cryptocurrencies? None that are well-known in the United States, although there could be overseas, given that there are hundreds of cryptocurrency exchanges and dozens of public stock markets around the world. There are however, a growing number of public companies that have “blockchain” in their name, and claim to gain exposure to this new universe by investing in blockchain technology, mining operations, and specific cryptocurrencies. Beware of these. Many have avoided the rigorous IPO process by performing a reverse merger into an existing public company, which is often engaged in an entirely different business. This adds a level of risk to anyone investing in these companies. It’s possible that in the future, one of the large public Wall Street brokers will become a market maker in bitcoin futures. But it hasn’t happened yet.
56. How will it impact countries’ ability to collect income tax? If bitcoin were to become a substantial gray- or black-market sub-economy where people could hide income, governments would have an incentive to crack down and limit the use of new currencies. Of course, there’s already a large underground economy, where cash and other types of assets are exchanged in ways meant to hide transactions. And there are plenty of offshore tax shelters, as well. The IRS’s recent lawsuit against the Coinbase exchange indicates the U.S. government is paying attention and is willing to be aggressive making sure taxpayers don’t use cryptocurrencies to cheat on their taxes.
Coinbase, one of the world’s largest cryptocurrency exchanges, was iPhone’s number 1 app in December.
57. Is there a way for all the money invested to just vanish because of a virus or hack? When it comes to the bitcoin network itself, that’s a possibility, but an unlikely one. The code that runs the bitcoin network is open source. Over 350 people currently work on it, and anyone can inspect it. With so many well-trained eyes on the code, it’s unlikely to succumb to a virus or hack.
Bitcoin’s weakness is at the individual exchange level, since exchanges have been hacked and others, such as Mt. Gox, have been exposed as outright frauds. Even the largest exchanges experience outages on days when volume surges. A disruption at a large exchange can influence the price of bitcoin, but one exchange probably can’t crash the entire network. It’s never happened, but if the world’s largest bitcoin exchanges were all hacked or crashed at once, it could prove catastrophic for bitcoin.
58. Can blockchain disappear? If every copy of the blockchain were somehow erased, then the entire blockchain would disappear. But that’s unlikely. It is common, however, for parts of the blockchain to disappear as they become invalidated, because of the way the blockchain is designed. For “proof of work” cryptocurrencies such as bitcoin, miners compete to process transactions that allow them to earn new coin, along with transaction fees. The rules require everyone to follow the longest blockchain. Sometimes, concurrent blockchains evolve in parallel, for various technical reasons. When one chain becomes a single block longer than the other, the shorter one is invalidated, along with all the transactions in it. This is undesirable for the losing parties that have invested time and computing power in the shorter blockchain. In general, this creates an incentive for miners to mind the blockchain and keep its size under control.
59. Is bitcoin likely to increase its supply once the 21 million limit happens? It’s possible, if at least 51% of the bitcoin miners agree to change the rules. One concern is that miners who maintain the network will drop out after the last bitcoin is mined, because they’d only earn money from transaction fees, which might not be lucrative enough. Buyers and sellers have a say, too, since it’s up to them to decide if they’re willing to pay the fees. In a way, the bitcoin market will evolve like any other market involving producers, consumers, buyers, sellers and middlemen who continually negotiate over price and terms.
There’s no hurry to decide. Miners aren’t expected to generate the last bitcoin until around 2140, 123 years from now. By then, computing power will be exponentially higher and humans may mate with robots, for all we know. It’s not hard to imagine bigger concerns than whether to lift the bitcoin cap.
60. How easy is it to cash out of cryptocurrencies if I need the money in a hurry? Not as easy as you’d like. Bitcoin is not as liquid as other investments, in part because settlement can take more than a week, under good circumstances. Volatility and surging demand has caused frequent outages on exchanges such as Coinbase and Kraken, and you can’t sell if you can’t access your account. If such outages occur amid panic selling, some bitcoin holders might be unable to sell for a fairly long time, which could make steep losses worse as the price drops and people who want to sell, can’t. That’s one thing that could harm confidence in the asset.
61. Will the banking industry adopt bitcoin into their business practices or is it more likely that they will work together to develop a new type of cryptocurrency? Banks will do what’s in their interest. Right now, there’s not a big, liquid market to trade cryptocurrencies. The new bitcoin futures may become big enough to trade with institutional money. At that point, it’s likely the big banks (which also have brokerage arms) will come to dominate the market for bitcoin, and perhaps other cryptocurrencies.
If the banking industry were to develop its own cryptocurrency, it would make sense for it to be ethereum-like, based on smart contracts. This would allow them to offer and control the process for initial coin offerings (ICOs), which would likely be regulated by the Securities and Exchange Commission at that time. This is speculation and at least several years off.
62. How do we get cryptocurrencies into our 401(k) plan? Careful, cowboy. It could be awhile before financial firms that administer 401(k) plans allow access to cryptocurrencies. For one thing, there are no mainstream mutual funds or ETFs that allow this type of investing. And retail brokerages will probably err on the side of caution when it comes to rolling out crypto products for retirement accounts. The first requirement will be the establishment of a bitcoin ETF, which we estimate to be at least a year away.
63. Can I short bitcoin without opening a futures account or having to pay a very high fee to locate shares of something like GBTC? No. GBTC is the ticker for Bitcoin Investment Trust, an exchange-traded trust that trades on the over-the-counter market (which means it’s not listed on a major exchange, like the NYSE or Nasdaq). This is why traders who want to bet against the price of bitcoin find it difficult to borrow shares of GBTC to short. Also, while GBTC is designed to track the movement of bitcoin, it doesn’t track the price of bitcoin perfectly. Until a bitcoin ETF is listed on a major exchange, the futures markets offer a much better alternative if you want to short bitcoin (though liquidity is admittedly low at this early stage).
64. Could another crypto take over bitcoin? Yes, depending on how you define “take over.” Strains on the bitcoin network, such as persistent outages at some of the exchanges, led some bitcoin miners to take matters into their own hands earlier this year. They banded together to change the bitcoin code in a way that would speed up the network, a change known as a “soft fork.” This created a separate cryptocurrency called bitcoin cash, which is now the third-largest cryptocurrency by market value. And other new cryptocurrencies have been coming to market every month, many through the same soft-fork process. These don’t necessarily amount to a “takeover” of bitcoin, but they do spawn new competition that’s a threat to the dominance of bitcoin.
Bitcoin is the first mover, however, with inherent advantages. It’s the only one with its own futures contracts. And it will probably be the first with a U.S. ETF listed on a major exchange, allowing ordinary people to invest easily. But if the bitcoin network doesn’t catch up with bitcoin mania, users have literally hundreds to choose from, with ethereum, ripple, litecoin and bitcoin cash as leading contenders.
65. How many people are trading bitcoin and when is the market “open?” Bitcoin never sleeps — it trades 365, 24/7. But there’s really no way to determine how many people are trading at any given time on the hundreds of exchanges worldwide. We do know this: Initially, most bitcoin trading was done in the west, but now the lion’s share is done in China (and traded versus the Chinese yuan). Large price swings often happen when it’s dark in America. As bitcoin popularity surges, however, so do the number of U.S. dollar-denominated accounts being opened.
66. How do you buy other cryptocurrencies with U.S. money, as opposed to buying these with bitcoin? It’s up to the exchanges to decide what cryptocurrencies they’ll trade and what form of payment they’ll accept — whether it’s U.S. dollars, Chinese yuan, or bitcoin itself. Most of the altcoins aren’t popular enough to incentivize exchanges to accept payment for them in traditional currencies. The market decides how cryptocurrencies can be bought.
67. How is bitcoin “mined”? By purchasing the costly ASIC equipment that’s best suited to the job, or downloading a mining application to a traditional computer, which is now an extraordinarily slow way to generate coin. Here’s where you can learn the details. (ASICs, which stands for (application-specific integrated circuit, are very powerful and expensive processors.)
68. How does anyone know bitcoin is limited to 21 million units? If it is limited to 21 million units, how do you know when 21 million units have been mined, and there’s no more to mine? The code behind the bitcoin network is available for anyone to inspect, as is the blockchain ledger, which records the entire history of bitcoin transactions. So everyone in the bitcoin community will know when miners produce the 21 millionth coin. The question then becomes, what next?
69. Why are graphics cards used in mining? It makes it sound like currency is being made up. When bitcoin was invented in 2009, miners quickly discovered that the processors in graphics cards (GPUs) were much more efficient at mining bitcoin than the CPUs that run computers. Nowadays, miners use ASICs, which are custom-built for different cryptocurrencies. Their architecture is still similar to GPUs.
70. How will miners get paid when all the bitcoins have been mined? They will get paid by transaction fees, which are determined by supply and demand — ultimately by the agreement of the person sending the bitcoin and the miners that process the transaction. There is a theoretical upper limit on the transaction fee, and there are legitimate concerns that the bitcoin network will become insecure if miners aren’t properly compensated. This could happen before the last bitcoin is mined, as the bitcoin “birth rate” becomes exponentially smaller over time — meaning the miners might not cover the cost of electricity because it takes increasingly large resources to mine a single coin. But this scenario is likely decades away.
71. Does the size of the blockchain grow forever? As long as bitcoin exists, yes. Each transaction adds to the cumulative bitcoin ledger.
72. I have a very fast computer and I want to mine bitcoin and other currency. How do I do it? You might have a very fast computer, but unless the processor is optimized for mining bitcoin, you probably won’t mine bitcoin at an economical rate that covers the cost of electricity. Very powerful processors called ASICs sell for thousands of dollars apiece and are custom-designed for specific cryptocurrencies. But if you’re hellbent on mining bitcoin on your personal computer, there are several mining applications from which to choose.
73. What percentage of total bitcoins are in circulation today? Of the 21 million in bitcoin due to be mined, about 16.74 million, or roughly 80%, are in circulation. Yahoo Finance updates that figure and others on its ticker page for bitcoin.
74. What will the price of bitcoin be in 10 years? When we learn how to predict the future, we’ll get back to you. Here’s one likelihood, though: The technologies underlying cryptocurrencies will be around in some form for a long time.
- In Dramatic Reversal, China Gives Up On Deleveraging Pledge
Last week, when looking at the latest Chinese credit data, we made two troubling observations: first, China’s economic growth was slowing across a number of key data points despite massive new credit injected into the economy over the past year. Second, that the formerly massive credit impulse – which was responsible for pushing the global economy and markets out of the early 2016 rut – was no more, and that overall system credit growth slowed to 14.4% yoy from 14.9% the prior month, which was the slowest total credit growth in the past 27 months.
While there were some nuances, such as where in China’s economy was credit being overstimulated (household) and where it was stifled (shadow banking), the bottom line as we showed in one chart is that absent a significant burst in credit creation, or credit impulse, China’s real estate prices – the backbone of the entire economy and its “wealth effect” – was lookingat a hard landing.
Which led to the conclusion that “in the end, whether China’s deleveraging is premeditated or accidental doesn’t matter: a few more month of China’s credit impulse collapsing and it will be too late to prevent a hard landing, first in China where real estate was, is and will be the most popular and important asset, and then the rest of the world. As we explained in “Why The Fate Of The World Economy Is In The Hands Of China’s Housing Bubble“, to understand what the world economy will do in 6-9 months you only have to follow China’s debt creation and housing market today.”
And right now, both of those are headed straight down, and the worst is yet to come: as Deutsche Bank sumamrizes in its latest snapshot of China’s banking system, “we are likely at most halfway through the financial deleveraging process. New regulations on asset management and liquidity risks will be phased in and more rules will probably follow.”
Which means even less credit creation, even faster slide in property prices, and even greater global credit deflation which is coming just as the world’s central banks are poised to tighten financial conditions expecting a deluge of inflation. The result will be another economic crash in the coming year.
… unless, of course, Beijing capitulates, reverses course again, gives up on its second deleveraging attempt in 3 years, and conceded that its economy can only grow if it is flooded with trillios and trillions in new credit. And, according to the WSJ, this is precisely what happened, because as China prepares to unveil its economic blueprint for 2018 in just a few hours, “people familiar with the plan say it will show that Beijing is finding it hard to cut debt without jeopardizing growth.“
According to the WSJ’s sources, in the blueprint plan to be unveiled on Wednesday, past talk of bringing down debt, the priority for the past two years, is gone in favor of a pledge to just control the rise in borrowing. The softening of the goal – which was to be expected by anyone who did not assume that China would voluntarily unleash a hard landing on its economy – which was decided earlier this month by the Communist Party’s top leadership, is an official acknowledgment of how hard it is for Beijing to wean the economy off debt-driven growth.
In other words, China has just admitted – for the second time – that not only does it have an unprecedented debt addiction, but it will never be able to get over it. Which is a problem for the country which according to the IIF has over 300% in total debt to GDP. In fact, one could make the argument that this is where Chinese rates surge for no other reason, but simple credit and sovereign solvency risk.
Unfortunately, China no longer has a way out, as an official involved in policy discussions told the Wall Street Journal: “Let’s face it, it’s not realistic to reduce leverage when the whole economy relies on banks for financing.”
Bingo…. and also game over, because as even the IMF showed recently, China is now at – or above – its maximum possible debt capacity.
The IMF chart above is hardly a coincidence: both the IMF and the World Bank have urged Beijing to tackle debt even if it squeezes economic expansion in the short term. Well, it appears that Beijing once again has decided to ignore these generally worthless NGOs.
So what does the new posture reveal?
By tempering the stance on debt, Beijing is signaling it still seeks relatively high rates of growth and that more debt will be tolerated to reach that goal. For the world, that means greater demand from China for oil and other commodities, but also continued worries that Chinese debt could spiral out of control and hurt the global economy.
The lightbulb moments continued: “The Chinese government is bowing to the complicated reality it faces, recognizing the risks of debt-fueled growth but unable to wean itself from rising debt levels,” said Eswar Prasad, a China scholar at Cornell University and the IMF’s former top official in China.
Yes, a tricky predicament if there ever was one, or rather an outright dilemma: keep growing your debt and suffer a financial sector paralysis and crash, or slow down the economy and face a working class revolt.
Needless to say, the optics of the reversal are ugly: for the past two years, deleveraging has been a centerpiece of President Xi Jinping’s economic policy. But while regulators reined in borrowing between banks, the kind of practice that enabled smaller lenders to ramp up risky borrowing, the country’s overall debt load continues to climb faster than growth.
As reported at the time, China’s ruling 25-member Politburo decided on the shift on Dec. 8 as it set the agenda for the annual Central Economic Work Conference this week, where economic priorities are laid out in greater detail. A statement after the Politburo meeting listed control of the “macro-leverage ratio,” or the country’s debt-to-GDP ratio, as a major piece of the government’s effort to fend off risks next year. That contrasted with its statement ahead of last year’s economic conference, which described debt reduction as a key task.
The change followed rounds of discussions by Mr. Xi’s economic deputies and financial regulators since the summer, according to the people familiar with the deliberations. An oft-cited issue during those talks, the people said, involved state-owned banks’ outsize role in economic activity.
And the anticlimax: China simply can’t function if the credit-hose is not on max:
That led to the conclusion that with businesses lacking easy access to other forms of financing, such as stock sales, tight restrictions on bank loans would hurt growth too much. A World Bank report issued Tuesday shows outstanding bank loans reached 150% of China’s gross domestic product in November, up from 103% a decade ago.
Ironically, China may have no choice but to unleash the overdrive on debt because of fears of growing trade wars with the US:
Xi has talked about the need to focus less on the speed of growth and more on its quality. That has raised expectations that Beijing will take more meaningful steps to curb its debt binge, especially that of state companies. Macquarie Group estimates state firms’ debt makes up about two-thirds of Chinese corporate debt.
But with threats of trade penalties against China from Washington and a softening property market at home, authorities have grown more wary about the growth outlook.
“All these things have been declared before, such as less emphasis on GDP target, but there has been no effect,” said Anne Stevenson-Yang, co-founder of J Capital Research, which focuses on the Chinese economy.
Even China’s top power officials – those who understand the looming dilemma better than anyone – admit the world’s (formerly) fastest growing economy is trapped.
Senior officials who gathered at Beijing’s Jingxi Hotel for the economic meeting this week are stressing the need to prevent financial risks, such as rampant borrowing among banks that has made the country’s financial system more vulnerable to short-term disruptions.
But they are also wary of taking too-drastic action. Earlier this year, a wave of regulatory measures jolted China’s financial markets. Since then, banks and other financial institutions have seen their funding costs rise, causing concerns that the lenders would then make it more expensive for businesses to borrow, thereby hurting growth. Such worries are adding to Beijing’s wariness of dealing with debt, officials say.
To be sure, some are still holding out hope: “The overall direction of deleveraging won’t change in the long run,” said Zhang Ming, a senior economist at the Chinese Academy of Social Sciences, a government think tank.
Of course it won’t: but when the real deleveraging comes, it will be i) uncontrolled and ii) far more brutal than Beijing’s controlled attempts at reducing debt.
Meanwhile, the biggest risk facing China will get even bigger: the debt bubble feeding the housing bubble in a symbiotic death loop, will make deleveraging without a crash impossible.
Another worry over China’s debt buildup: More than half of new bank loans are flowing into the real-estate market, not to areas of the economy that can improve the country’s competitiveness. The property market, including construction and home furnishings, accounts for a third of overall growth. Beijing is looking for ways to rein in housing speculation without setting off a housing crash that could torpedo the economy.
Finally, since this is China – the country whose modern economy is the very definition of absurd, the economic plan to be released on Wednesday “is expected to outline measures to ward off property bubbles“… even as China formally admit it can no longer exist without a stead supply of non-stop debt.
- America's Shrinking Attention Span
Authored by Hoboken411 via Jim Quinn's Burning Platform blog,
How many of you have thought about the shrinking attention span of the American public?
Not just social media and millennials, but every single person!
The deep-thinkers out there most likely have noticed that the “average” attention span of a typical person out and about has dwindled to nanoseconds.
What’s going on, people?
Has conversation died?
Over the past half-decade, I’ve paid very close attention to not only my own interactions with people but with countless others as well.
From my own perspective – I’ve witnessed the “ability” to listen to other people speak almost vanish.
The necessity to “interrupt” someone speaking has reached an all-time high. Rather than “listening” to a human beings viewpoint on a particular subject, most conversational participants now INSTANTLY interrupt another person the moment they hear something that isn’t congruent with their own thoughts.
After that, the conversation dissolves and turns into a non-productive “debate” or whatever you want to call it.
What is listening? Why does it matter?
Well, first off, listening isn’t just “hearing” someone else. It’s about UNDERSTANDING their perspective. Not just from your shoes, but from their shoes as well.
Secondly – listening is not just about that understanding – but it’s also about CONTEMPLATING about their thoughts as well.
Those things often take time to “digest” in order to TRULY understand a collection of words and feelings.
In other words, you take those tidbits of information back into your brain – and contemplate about them (cook, stew, simmer if need be), and reach a conclusion at a later date.
NOT ALL ideas, thoughts, opinions or scientific theories NEED an immediate response “YAY” or “NAY,” you know what I mean?
TODAY? Everything demands an instant respose
For this – I have no problem “blaming” the effect that technology has had on society as a whole. We’re used to instant responses and answers. “Googling” our lives down the toilet bowls.
Can you see how that has radically changed how people converse? Or even just use their minds?
ALSO, conversations today are “nuggetized” – no long-term philosophical battles
Back in the day – people promoted ideas. They hashed them out. They fought for their ideals.
People had philosophical ideas that they debated. Those ideas shifted, changed, were fluid for the most part. People accepted their wrongs and rights quite nobly.
And also – hardly anyone needed a subject to “be settled” on the spot. Most folks were okay for topics to hold an ongoing “undecided” status while the debate continued. It was part of the fun and mystery about coming to a formidable conclusion about that point.
Today – most conversations are polarized.
Everyone thinks they “know” everything. And you’re either on “this side” or “that side.” Anyone that brings up great ideas why one, the other or BOTH are wrong – is ushered out of that virtual room.
That is horrible and detrimental to society as a whole.
- Andrew Left Discusses His Shorts in $GBTC and $RIOT: 'IT IS SO RIDICULOUS'
Content originally published at iBankCoin.com
Here’s an old man who’s shorting GBTC and RIOT.
Why is he shorting them?
He’s upset that GBTC is trading 85% above its NAV, declaring if people could get short, ”it’d drop a thousand points tomorrow’, casting the recent price gains aside as being ‘ridiculous.’
With regard to RIOT Blockchain, which recently changed its name from Bioptix to capitalize on the crypto fervor. Left chalks them up as opportunists, marketeers operating out of Boca Raton and Canada, trying to get rich by pretending to have a notable crypto business.
Left thinks RIOT will plunge to under $10 and is shorting it via options.
- Wolf Blitzer And Sen. Corker Get Into Heated Argument Over Tax Bill Vote Switching
Senator Bob Corker (R-TN) got into a spat with CNN’s Wolf Blitzer following Tuesday’s vote on the Republican tax bill, after Corker switched his vote from “no” to “yes.”
Corker appeared uncomfortable after Blitzer played a clip of him criticizing President Trump in October, after Corker said Trump had “proven himself unable to rise to the occasion” of being president.
When pressed by Blitzer over whether he still believed what he said less than eight weeks ago, Corker said “Look, I know you’re having a great time with this interview, and I’m happy for you in doing so,” adding “But, look, Wolf, I’ve said what I’ve said. And I’m doing what I’m doing.“
“I don’t appreciate, you know, the front end of this interview,” Corker continued to shoot back. “You and I had a conversation about this yesterday on the phone, and you know that all of these things are totally malicious. They’re not true, and you know that, and people in the press that are responsible know that. I’m disappointed that you chose this opportunity to do what you did.”
Blitzer kicked it up a notch, admonishing Corker in a condescending tone:
“This is not fun. These are critically important issues. You’re a United States senator, Mr. Chairman, you have enormous responsibility”
“These tax cuts are going to go forward. They may be great, they may not be great, but it’s your responsibility as a U.S. senator to answer these kinds of questions, and it’s certainly not something I’m doing because I want to have fun,” the CNN host said. “I’m doing it because I’m a reporter, I’m a journalist and I’m asking you questions that are legitimate, fair questions, sir.”
Watch the exchange below:
h/t Brandon Carter, The Hill
As we reported earlier, the House must vote again on the tax bill after “somebody screwed up” and accidentally missed the fact that three provisions in the Trump tax bill violate Senate budget rules – meaning that the House will need to hold another vote on the bill, most likely on Thursday.
- HOUSE NO LONGER EXPECTED TO VOTE ON SHORT-TERM SPENDING BILL WEDNESDAY, GOP AIDES SAY
- HOUSE MORE LIKELY TO VOTE THURSDAY ON SPENDING BILL
- SHAPE OF HOUSE SPENDING BILL UNCLEAR
- GOVERNMENT RUNS OUT OF MONEY AT 12:01 A.M. DEC. 23
Kennedy cautioned observers not to read too much into the delay, which Republicans have been scrambling to pass before the end of the year. Some exhausted staffer was probably responsible for the oversight, he suggested.
“We have the votes, we’ll have the votes tomorrow. If necessary, we’ll have the votes the day after that,” Kennedy said on MSNBC.
Here’s the statement from the Senate Parliamentarian explaining the bill’s flaws:
Just In: the House has to vote on the tax bill AGAIN.
Why? Dems challenged 3 parts of bill on the Byrd Rule and they won.
The 3 issues are:
1. Using 529 plans for homeschooling expenses
2. The title of the bill
3. Part of criteria used for uni endowment tax pic.twitter.com/g3CzQ1A38s— Heather Long (@byHeatherLong) December 19, 2017
The Senate is still expected to vote on the bill Tuesday night after removing the offending provisions.
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