- Newt Gingrich Likens Russian Hacking Probe to Benghazi, Says 'Profoundly Wrong Things Going On'
Newt Gingrich dropped some redpills during a Fox News interview, wondering out loud ‘what’s going on here?”
Amongst his chief complaints is the fact that NBC obtained the report from the Obama administration before President elect Trump. What was Obama doing to protect against hacks and for how long did he know about them? Why did Obama slap Russia with sanctions a week before the report? What basis did he use to justify them?
Trump wants to know how the fuck NBC obtained the report before him and has called for an investigation.
I am asking the chairs of the House and Senate committees to investigate top secret intelligence shared with NBC prior to me seeing it.
— Donald J. Trump (@realDonaldTrump) January 6, 2017
Content originally generated at iBankCoin.com
- THe EMPeRoR OF HORSe $HiT
- Czech Government Fears Muslim "Super-Holocaust", Urges Citizens To Shoot Them Yourselves
On the heels of Czech President Milos Zeman's warnings of a possible "super-Holocaust" carried out by Muslim terrorists, urging citizens to arm themselves, WaPo reports the country's interior ministry is pushing a constitutional change that would let citizens use guns against terrorists if police are delayed or unable to make their way to the scene of an attack.
Czech president Milos Zeman had previously proposed that economic migrants should be deported from Europe to “uninhabited Greek islands” or to “empty places” in North Africa. The spectacularly incredible president also proposed that the Greek debt should be progressively reduced in return for shouldering the cost of hosting hundreds of thousands economic migrants.
“We are in Greece, and Greece has plenty of uninhabited islands, and big foreign debt. So if you have ‘hotspots’ in Greek islands, this would be a sort of payment of foreign debt,” Zeman told Financial Times in an interview on the islands of Rhodes where he participated in the Rhodes Forum.
As The Guardian previously noted, the Czech president has unleashed a rhetorical fusillade against Muslim incomers of such intensity that it makes the anti-Islamic sentiments of Robert Fico, the Slovakian prime minister, and even Viktor Orbán, Hungary’s prime minister, seem mild in comparison.
Zeman has warned that the Czech Republic – home to fewer than 4,000 Muslims out of a population of 10.5 million, according to official figures – could be targeted in a jihadi attack and urged Czechs to arm themselves against what he referred to as a possible "super-Holocaust." The concern is believed to have prompted the unprecedented introduction of metal detectors to screen the crowds of foreign tourists that visit Prague castle each day.
The alarmist message is particularly striking because unlike most anti-immigrant politicians in western Europe, Zeman, 71, is a social democrat (and former communist) rather than a rightwinger, and the Czech Republic has been largely spared the waves of refugees that have swept into neighbouring Austria and Hungary en route to Germany.
But now, as The Washington Post reports, the rhetoric is getting even louder as the country's interior ministry is pushing a constitutional change that would let citizens use guns against terrorists.
Proponents say this could save lives if an attack occurs and police are delayed or unable to make their way to the scene. To become law, Parliament must approve the proposal; they'll vote in the coming months.
The Czech Republic already has some of the most lenient gun policies in Europe. It's home to about 800,000 registered firearms and 300,000 people with gun licenses. Obtaining a weapon is relatively easy: Residents must be 21, pass a gun knowledge check and have no criminal record. By law, Czechs can use their weapons to protect their property or when in danger, although they need to prove they faced a real threat.
This puts the country at odds with much of Europe, which has long supported much more stringent gun-control measures. In the wake of the 2015 terror attacks in Paris, France pushed the European Union to enact even tougher policies. The European Commission's initial proposal called for a complete ban on the sale of weapons like Kalashnikovs or AR-15s that are intended primarily for military use. Ammunition magazines would be limited to 20 rounds or less.
The Czech Republic came out hard against the directive. Officials warned — somewhat ominously — that the measure would limit the country's ability to build "an internal security system" and make it nearly impossible to train army reservists. And a total ban on military-style rifles that can fire large numbers of rounds would make illegal thousands of weapons already owned by Czech citizens, potentially creating a black market for terrorists to exploit.
Of course, the populist rhetoric may be the driving force behind this bill, as for now the Czech republic is the only country to oppose the EU's directive for being too strict.
This is not the first 'extreme' move by Czech politicians with regard refugees/muslims/terrorists, as we noted previously, police in the Czech Republic are investigating comments made on Facebook by an extremist politician calling for refugees to be placed in Terezin, the former Nazi concentration camp.
Adam Bartos, the leader of the fringe yet vocal far-right nationalist National Democracy Party, published the comments about the site, located in the central European country, on Monday.
Reacting to the establishment of a refugee camp near the country’s border with Slovakia, Bartos wrote, “Why build tent camps for the aliens? We have the beautiful fortress town of Terezin where the aliens could concentrate before they are taken home by trains.”
A police spokeswoman told the Czech News Agency on Monday that the police will probe whether or not the comments constitute a criminal act. According to Czech law, hate speech and comments inciting national, racial or religious hatred can carry penalties of up to three years in prison.
Bartos is under investigation for four incidents involving allegedly racist, anti-Semitic and violence-inciting remarks. He also keeps a blog titled Hall of Jewish Fame that critics say lists politicians, journalists and other public figures of supposedly Jewish origin.
Bartos’ party failed to gain seats in the European elections last year, the only campaign it has run in under his leadership.
Terezin, also known as Theresienstadt in German, is located some 40 miles northwest of Prague.
The town was turned into a concentration and transit camp by the Nazis in 1941. Roughly 144,000 Jewish people were sent there during the Holocaust, most of whom were later transported to extermination camps in occupied Poland. Some 33,000 died in the Terezin camp.
- Confessions Of A Fake News Reporter
“A lie can travel half way around the world while truth is still putting on its shoes.” ~ Mark Twain
I write for those so-called “fake news” websites. You know the ones: the 200 odd deplorable websites, the ones Hillary, the Pope and Michael Moore have attacked as threatening to destroy World Peace, Democracy, Facebook and the Mainstream Media (MSM).
I only write for a handful of them, sad to say, although I’ve been linked to scores more. One of my recent columns went viral and it probably swayed the entire election – for better or worse: Before Trump, Sen Bulworth Spoke Truth To Power . Seriously, the blatant corruption of the losing team, from Super Delegates to Podesta and PizzaGate to hidden Hillary health issues and secret sums of money funneling through the Clinton Foundation in “Pay to Play” accusations cost them the election, despite the best efforts and endorsements of the entire American media.
I’ve written for Rense, Counterpunch, Antiwar and Zerohedge. Most of my best stuff appears here on Strike The Root first, or STR as we call it, a website where Henry David Thoreau rather than Mark Zuckerberg is our moderator. Tragically, STR did not appear on ProporNot and we are devastated, absolutely devastated. Not.
Sometimes I ask my friends: If knowledge is power and ignorance is bliss, which is preferable? I always hope someone will respond, as Socrates or Obi Wan would have: Knowledge of our ignorance is power; bliss in this age is unattainable.
So then, as an average American citizen, is it better to be misinformed or uninformed? Because Disinformation is almost a holy sacrament within the mainstream Operation Mockingbird media. Thus we fake news reporters believe we’re channeling our inner Tom Paine, Mark Twain or Henry D. Thoreau when we blog or post or link. When HDT wrote: “There are a thousand hacking at the branches of evil, to one who is striking at the root,” he was a spreader of fake news, by today’s tender standards. We like to think of ourselves as worldwide root strikers, following in his footsteps.
Cui Bono: Who Benefits?
Cops and crime scene investigators (CSI) always ask that question: Who benefits? Who had most to gain by the murder? We fake news reporters pride ourselves on getting the facts. Like legendary Joe Friday from that old TV show, Dragnet, we interview eyewitnesses, contact insiders and whistleblowers, sift through the circumstantial evidence (Like John Podesta’s creepy artwork) and attempt to deduce the truth. Unlike the TV talking heads and Op/Ed writers for the elite media news, we want to know exactly Who Benefits? Even if it pisses off some elites. Or the elite media.
“There are invisible rulers who control the destinies of millions. It is not generally realized to what extent the words and actions of our most influential public men are dictated by shrewd persons operating behind the scenes.”
Sounds like some fake news screed, right, or some wacky conspiracy theory, right? Nope, this was written almost a hundred years ago by the Father of Public Relations and author of a book on propaganda that greatly influenced Adolf Hitler. Edward Bernays was Jewish and teaching in New York in 1923. Hitler’s Propaganda Minister, Joseph Goebbels, read his book Crystallizing Public Opinion and learned a lot from him a few years later, adopting Bernays’ masterful propaganda techniques.
“There is no means of human communication which may not also be a means of deliberate propaganda,” Bernays wrote and the Nazis adopted. “The American motion picture is the greatest unconscious carrier of propaganda in the world today.”
Maybe the mainstream media should nominate Ed Bernays as the Founding Father of Fake News, for spreading these ludicrous ideas far ahead of his time. But fakery and fudging the facts is best left to those rich and powerful Mockingbirds and their presstitutes of the so-called legacy media. Most of the best and brightest of that media have long since been blacklisted or silenced. Seymour Hersh, Steve Lendman and Paul Craig Roberts rarely appear in the NY/LA Times anymore. Why? Because their stuff, like most of the stuff written by unknown root strikers like me, is exactly like Senator Bulworth’s. Too tough, too true.
“It must be the money; it turns everything to crap,” said Bulworth to some Hollywood elites in that movie, just before the Oscar-winning actor and director, Warren Beatty, was blacklisted from Hollywood for almost 20 years. But money is rarely a factor for fake news reporters like myself. We do it for patriotism and professional pride. In more than a dozen years of devising “fake news,” I’ve been paid about $2,000 or about TEN BUCKS A COLUMN.
“I guess I really do believe that the good is worth doing because it is good,” said peace activist and co-founder of Veteran Intelligence Professionals for Sanity (VIPS), Ray McGovern. “It shouldn’t matter that there is little or no guarantee of success, or even a truthful recounting of what happened.”
A couple years ago, McGovern was manhandled out of a Hillary Clinton speech she gave at George Washington University. The topic of her speech? The need for respect of dissent. Naturally NONE of the so-called legacy media present there covered his dissent, except in a dismissive way. “America’s Fawning Corporate Media is the embodiment of a Fourth Estate that is dead in the water,” McGovern added.
By contrast to my TEN BUCKS a column, Hillary Clinton received a reported $500,000 for an appearance and speech she gave at ASU. The transcript never appeared in public, as far as I know, so it must have been absolutely priceless.
“Hillary Clinton, the woman who voted for a war that was sold on a diet of fake news, a war that killed hundreds of thousands, is now lecturing Americans about fake news putting ‘lives at risk’,” wrote Paul Joseph Watson, on the alleged fake news website Infowars. Watson is like Sherlock Holmes’ sidekick on steroids. “Being lectured by Hillary Clinton about fake news is like being lectured by Ted Bundy about not raping and killing women. It’s a joke, but a particularly sick joke given that Hillary’s role in pushing fake news had actually led to the deaths of countless innocent lives.”
We fake news reporters feed on the efforts and insights of others. We wish them well, Godspeed, Kudos, Bravos, Hurrahs, Links and Likes. Because we know that Pulitzer Prizes for reporting are now reserved for the con artists connected to the crony crime media. True Crime reporters rarely win Pulitzers anymore.
Consider Matthew Allen. He penned a column called: NYT Mocks PizzaGate as Impossible, But Its CEO Covered up Jimmy Savile Scandal. Now if this news reporter Allen is wrong, a malicious spreader of so-called fake news, then why doesn’t the NYT sue him for slander or libel? Most of us would simply Google this fellow Jimmy Savile and then we would try to weigh the facts in PizzaGate objectively.
Allen writes, “It’s important to remember that the CEO of the fabled newspaper is none other than Mark Thompson, the former BBC director who ‘lied’ during the Jimmy Savile investigation, and is at least partly to blame for allowing a monster like Savile (So evil?) to operate within the BBC for so long ‘undetected’.”
As I said, if so many of us fake news reporters are slandering people, why aren’t they suing us? Shouldn’t The New York Times, instead of trying to sublet office space in their diminishing empire, sue writers like Matthew Allen? Why doesn’t the New York Times sue him for malicious slander or libel? “Mark Thompson’s newspaper is a crime against the written word,” Allen added, as a parting shot.
To those of us who seek the truth, guys like Allen and Assange and Anonymous are allies in the fight against the toxic lies of the wealthy, well-connected and woefully corrupt power elites.
Props or Snopes?
Over the holidays, when a huge scandal shocked the cringing mainstream media world, WE CELEBRATED. We celebrated the deliciously karmic news that Facebook 'fact checker' Snopes.com was accused of embezzling company funds. The so-called debunker of “fake news,” deified by the mainstream media without any fact-checking at all, suddenly was a steaming pile of backstabbers, porn stars and alleged con artists and embezzlers. Not that there’s anything wrong with porn stars. Most mainstream media personalities are highly paid porn performers. They just earn MILLIONS more than porn star Jenna Jameson ever dreamed of earning.
Many brilliant fake news reporters remain anonymous while posting as fictional characters in the alt media. Cognitive Dissonance, Miffed Microbiologist and Hedgeless Horseman are funny and always provocative at Zerohedge. Jack Burton, at the same website, offers some astute, thought-provoking insight on an especially timely subject, terrorism.
“ISIS never touches an Israeli head,” Jack opined recently. “They are sworn allies of the Israeli Government. Seeing great benefits to be had from the Middle East Super Power, backed by the USA. The main ISIS allies are: Turkey, Israel, the USA and NATO. All this Obama crying on TV about ISIS threats is bullshit fucking lies. Obama is behind backing ISIS on to final victory in Syria. When Russia began to kill ISIS in earnest, the following governments demanded they cease bombing ISIS at once: Saudi Arabia, Qatar, Jordan, Turkey, USA, UK, Germany and others.”
Now that Aleppo has fallen, the mainstream media is in mourning. Not for all the wars they encouraged these past 15 years, or for the millions of refugees those wars caused, or the tremendous pressure now on European countries to house and feed those refugees. No, not at all. To them, that evil dictator Putin has almost prevailed, and only freedom of the press will keep democracy safe. And you know what? They are right. Only freedom of the press and the Constitution will keep citizens safe. That’s why I guess I’ll log onto George Washington’s Blog, Zerohedge, Infowars, Brietbart, STR, Rense and Natural News to stay informed. Because we fake news reporters must keep informed. Without us, America will certainly fall.
Addendum: While we fake news reporters love to be proven right, quite often we’re proven prescient. When I penned JFK and Obama–Profiles in Courage and Cowardice, I hoped to have been proven wrong. Sadly, ALL of the fake news reporters I quoted in that column EXACTLY eight years ago were proven correct.
Addendum 2.0 No fake news reporter can claim Trump will succeed overwhelmingly. More likely he will sell out his huge core of hopeful believers to the money/power elites, just as almost all presidents have done in the past. If not, Trump will die in some tragic accident or from some lone gunman. We would love to be proven wrong.
- Citi: "There Is Something Strange Going On… Something Doesn't Smell Right"
With the Dow Jones rising excruciatingly close, or within 0.37 points of 20,000 on Friday only to let down the market cheerleaders in the last minute, it would appear that there is nothing one can throw at a market which is determined to keep rising no matter what happens in the world. So leave it to our favorite skeptic, Citi’s Matt King to throw a fly in the ointment by asking how is it possible that “nothing sticks to markets.”
He proposes one possible reason: perhaps analysts were overly pessimistic going into the election and year end, which is possible considering the “most synchronized DM upturn in years”…
… an upturn, which however, has been largely predicated by the reflexivity of soaring stock markets, which in turn have spiked not on actual news, but frontrunning the “everyone’s-a-winner-under-Trump” trade…
… which however may never actually materialize in practice, and which could very well also lead to a recession as the surging dollar leads to a global GDP slump while paralyzing financial conditions (see recent record FX volatility in China).
As King then notes, earnings bullishness gets you only so far, and as the chart below shows, the recent surge in global stock prices is not a function of earnings, but expanding P/E multiples relative to Trasuries, which then prompts him to ask why, now that yields are surging, “shouldn’t we be discounting using higher bond yields.”
This is turn prompts King to propose one of his trademark rhetorical questions: “There Is something strange going on” adding that “something doesn’t smell right” in a world in which uncertainty is soaring yet spreads are collapsing, as SocGen first pointed out last month in its “most frightening credit chart“, even as leverage also keeps rising.
What is the “key ingredient” in the mix that makes sense out of this market chaos? Simple: according to King, central bank buying of anything that is not nailed down is the “missing link.”
Furthermore, despite all talk of a shift from monetary to fiscal stimulus, “central banks aren’t done yet“, not by a long shot:
Which in turn has – so far – allowed markets to ignore the reality that the credit bubble is getting bigger by the day as debt and interest coverage continue to rise while EBITDA still shrinks, resulting in late cycle fundamentals and valuations.
And yet, there is always a tipping point: according to King, such a point would arrive once real yields spike higher “not matched by a pick-up in growth.”
His final rhetorical question: how long until this tipping point happens? The answer: 50 basis points.
Now if only a 50 basis point spike in real yields would also put an end to all the other “strange things” taking place in a world which is burning every day, yet where the Dow Jones is partying like it’s 19,999.
This past November, the filmmaker Adam Curtis released the documentary Hypernormalisation.
The term comes from Alexei Yurchak’s 2006 book Everything was Forever, Until it was No More: The Last Soviet Generation. The book argues that over the last 20 years of the Soviet Union, everyone knew the system wasn’t working, but as no one could imagine any alternative, politicians and citizens were resigned to pretending that it was. Eventually this pretending was accepted as normal and the fake reality thus created was accepted as real, an effect which Yurchak termed “hypernormalisation.”
Looking at events over the past few years, one wonders if our own society is experiencing the same phenomenon. A contrast with what economic policy-makers term “normalisation” is instructive.
Normalisation is what has historically happened in the wake of financial crises. During the booms that precede busts, low interest rates encourage people to make investments with borrowed money. However, even after all of the prudent investment opportunities have been taken, people continue borrowing to invest in projects and ideas that are unlikely to ever generate profits.
Eventually, the precariousness of some of these later investments becomes apparent. Those that arrive at this realization early sell up, settle their debts and pocket profits, but their selling often triggers a rush for the exits that bankrupts companies and individuals and, in many cases, the banks which lent to them.
In the normalisation which follows (usually held during ‘special’ bank holidays) auditors and accountants go through financial records and decide which companies and individuals are insolvent (and should therefore go bankrupt) and which are merely illiquid (and therefore eligible for additional loans, pledged against good collateral). In a similar fashion, central bank officials decide which banks are to close and which are to remain open. Lenders made freshly aware of bankruptcy risk raise (or normalise) interest rates and in so doing complete the process of clearing bad debt out of the system. Overall, reality replaces wishful thinking.
While this process is by no means pleasant for the people involved, from a societal standpoint bankruptcy and higher interest rates are necessary to keep businesses focused on profitable investment, banks focused on prudent lending and overall debt levels manageable.
By contrast, the responses of policy-makers to 2008’s financial crisis suggest the psychology of hypernormalisation. Quantitative easing (also known as money printing) and interest rate suppression (to zero percent and, in Europe, negative interest rates) are not working and will never result in sustained increases in productivity, income and employment. However, as our leaders are unable to consider alternative policy solutions, they have to pretend that they are working.
To understand why our leaders are unable to consider alternative policy solutions such as interest rate normalization and banking reform one only needs to understand that while such policies would lay the groundwork for a sustained recovery, they would also expose many of the world’s biggest banks as insolvent. As the financial sector is a powerful constituency (and a generous donor to political campaigns) the banks get the free money they need, even if such policies harm society as a whole.
As we live in a democratic society, it is necessary for our leaders to convince us that there are no other solutions and that the monetary policy fixes of the past 8 years have been effective and have done no harm.
Statistical chicanery has helped understate unemployment and inflation while global cooperation has served to obscure the currency depreciation and loss of confidence in paper money (as opposed to ‘hard money’ such as gold and silver) that are to be expected from rampant money printing.
Looking at unemployment figures first, while the unemployment rate is currently very low, the number of Americans of working age not in the labour force is currently at an all-time high of over 95 million people. Discouraged workers who stop looking for work are no longer classified as unemployed but instead become economically inactive, but clearly many of these people really should be counted as unemployed. Similarly, while government statistical agencies record inflation rates of between one and two percent, measures that use methodologies used in the past (such as John Williams’ Shadowstats measures) show consumer prices rising at annual rates of 6 to 8 percent. In addition, many people have noticed what has been termed ‘shrinkflation’, where prices remain the same even as package sizes shrink. A common example is bacon, which used to be sold by the pound but which is now commonly sold in 12 ounce slabs.
Meanwhile central banks have coordinated their money printing to ensure that no major currency (the dollar, the yen, the euro or the Chinese renminbi) depreciates noticeably against the others for a sustained period of time. Further, since gold hit a peak of over $1900 per ounce in 2011, central banks have worked hard to keep the gold price suppressed through the futures market. On more than a few occasions, contracts for many months worth of global gold production have been sold in a matter of a few minutes, with predictable consequences for the gold price. At all costs, people’s confidence in and acceptance of the paper (or, more commonly, electronic) money issued by central banks must be maintained.
Despite these efforts people nonetheless sense that something is wrong. The Brexit vote and the election of Donald Trump to the White House represent to a large degree a rejection of the fake reality propagated by the policymaking elite. Increasingly, people recognize that a financial system dependent upon zero percent interest rates is not sustainable and are responding by taking their money out of the banks in favour of holding cash or other forms of wealth. In the face of such understanding and resistance, governments are showing themselves willing to use coercion to enforce acceptance of their fake reality.
The recent fuss over ‘fake news’ seems intended to remove alternative news and information sources from a population that, alarmingly for those in charge, is both ever-more aware that the system is not working and less and less willing to pretend that it is. Just this month U.S. President Barack Obama signed the Countering Disinformation and Propaganda Act into law. United States, meet your Ministry of Truth.
Meanwhile, in India last month, people were told that the highest denomination bills in common circulation would be ‘demonetized’ or made worthless as of December 30th. People were allowed to deposit or exchange a certain quantity of the demonetized bills in banks but many people who had accumulated their savings in rupee notes (often the poor who did not have bank accounts) have been ruined. Ostensibly, this demonetization policy was aimed at curbing corruption and terrorism, but it is fairly obvious that its real objective was to force people into the banking system and electronic money. Unsurprisingly, the demonetization drive was accompanied by limits on the quantity of gold people are allowed to hold.
Despite such attempts to influence our thinking and our behaviour, we don’t need to resign ourselves to pretending that our system is working when it so clearly isn’t. Looking at the eventual fate of the Soviet Union, it should be clear that the sooner we abandon the drift towards hypernormalisation and start on the path to normalisation the better off we will be.
- Democratic Party 'Post-Election' Strategies
Denial is not just a river in Egypt…
- Is A Bitcoin "As Good As Gold"?
The price of Bitcoin seems to have exceeded the price of gold briefly for the first time this week; however, this comparison is completely arbitrary.
Gold is measured in weight, while Bitcoin, much like currency, is an abstract form of money and can only be measured in units of itself. One Bitcoin is worth a lot more than 1 gram of gold, but a lot less than 1 tonne. Despite Bitcoin’s stellar performance in 2016, the size and depth of the cryptocurrency market is dwarfed by the $7 trillion gold market.
Gold remains the only true global money with a size and volatility comparable to that of fiat currency.
Bitcoin – or cryptocurrency itself – is the most exciting monetary experiment in modern times.
Unlike fiat currency, it can’t just be printed, and it mimics the scarcity properties of gold in that it needs an enormous amount of energy to create one coin. The energy-proof of value is what links gold to the primary industries and allows it to maintain its purchasing power over incredibly long periods of time. Without it, any form of money will inevitably be corrupted over time and decay. Bitcoin has some of the same energy-proof of value that makes gold far superior to fiat currency, which can be created with the stroke of a key. Bitcoin, also like gold, is a global currency that may be universally accepted in the future. Even USD can’t make that claim.
Bitcoin has some qualities that are not shared by any other form of money, most notably the potential total anonymity in electronic transactions; however, some might feel that aspect that may prevent the universal adoption of Bitcoin as money. Today, the global stock of Bitcoin is just $20 billion (despite its price rally) and its transaction volume is tiny, even when compared to more exotic currencies. That said, as the adoption of Bitcoin increases, governments may no longer be happy with the fact that it can be used for anonymous transactions and may prevent legitimate businesses from accepting it as money if they see this as a threat. Only time will tell. In the meantime, Bitcoin remains the only alternative to gold (and other precious metals) for savers to escape the built-in decay function of fiat currency otherwise known as inflation.
Bitcoin is currently in the limelight because it has apparently exceeded the price of gold for the first time on some exchanges (although at the time of writing, Bloomberg still shows an average price of Bitcoin hasn’t crossed the gold price yet, but it seems just a question of time). We have no doubt that this will lead to a barrage of headlines in online media, and some mainstream outlets will jump on the bandwagon as well. After all, they already widely reported on a claim made by the Winklevoss brothers in mid-2016 that Bitcoin’s volatility had apparently fallen below the volatility of gold, and thus Bitcoin had become “better at being gold than gold”. We rebutted this claim and surely Bitcoin’s volatility shot back up to 100% shortly thereafter.
Bitcoin has rallied almost USD500 last year and USD100 in the first two days of 2017 alone. At the time of writing, 1 Bitcoin was trading at USD1,135, while 1 oz of gold was trading at USD1,164. To some, it may seem like Bitcoin is about to be more valuable than gold, and though this is of course conceptually incorrect, it probably won’t stop the media pundits from publishing the headline anyway.
Gold and elements can be measured by weight (oz, g, kg, t). Mass and weight are the measuring units endowed by nature. Fiat currencies, or any other abstract commodity or money (including Bitcoin), cannot be measured that way. An abstraction can only be measured in units of itself. Gold and silver are therefore the only form of money today that are traded in weight. Fiat currency on the other hand cannot be measured by anything other than other currency, at least since Nixon ended the convertibility to gold in 1971. In that respect, Bitcoin falls into the same category.
Thus, when comparing units of gold to units of Bitcoin, one must first define what unit it is measured against. Is it grams (currently USD37/g), kilograms (USD37,000/kg) or tonnes (USD 37 million/tonne)? Or are we measuring it in the rather obscure measure of troy ounce (USD1,157/ozt), which, apart from exchange traded metals, is not used for anything else?
Hence comparing the price of 1 Bitcoin vs 1 troy ounce of gold is a little bit like comparing the shares of Seaboard Corp. (USD4,179 per share) to those of Apple Inc. (USD116 per share) and concluding that Seaboard Corp. is worth 35 times as much. Clearly, measured accurately by market cap, Apple is the largest and most valuable company in the world and worth 126 times as much as Seaboard Corp.
The same basic principle applies to money. Combined above-ground gold stocks are currently worth around $7 trillion. As we noted last year, that is more than all banknotes in circulation of all currencies combined (see Eliminating cash will also eliminate the checks and balances on banking policy and practice, February 22, 2016), and it certainly dwarfs the market cap of Bitcoin at around $18 billion. In fact, all crypto-currencies combined (we count 710) have a market cap of just $21 billion (see Figure 2).
There is another obvious obstacle when comparing Bitcoin with gold: Volatility. High volatility is often pointed out against gold being used as medium of exchange and store of value. We will look the volatility of gold in more detail in an upcoming report, but in a nutshell, we find the volatility of gold (measured as standard deviation) is roughly comparable with currency, and gold has proven to be a much better store of value than any currency over the long run – even when interest is taken into account. Bitcoin’s volatility significantly exceeds that of both gold and currency. At times, Bitcoin’s volatility declines for a short period and can even approach the volatilities of gold and currency, but tends to shoot up violently shortly thereafter.
However, standard deviation should not be confused with a measure of risk. The standard deviation quantifies the dispersion of returns; what it does not do is distinguish whether that dispersion comes from upward or downward moves.
For example, an asset that has a 1% return every second day and 0% return every other day would exhibit an annualized standard deviation of 8%. An asset that has a -1% performance every second day and 0% every other day exhibits the same standard deviation. In an asset management context, the two assets may have the same risk. In fact, the negatively performing asset might reduce risk in a portfolio if it is negatively correlated to the other assets. But for a saver, the first asset is clearly less risky.
Hence, instead of measuring volatility as standard deviation, we can measure just the downside deviation. This provides a better idea of the risks of money. How does this look for Bitcoin? Bitcoin’s downside deviation is still several orders of magnitude higher than that of gold or currency. Over the past two years, Bitcoin experienced a downside deviation of >45%. Since the beginning of data in 2010, it was >100%.
The volatility – or to be precise, the downside risk – makes it difficult for Bitcoin to be more widely adopted as money. What speaks for Bitcoin is that it has shown stellar performance over its short lifespan, but this stellar performance comes with considerable downside risk. A merchant accepting Bitcoin as payment is exposed to this downside risk unless he instantly exchanges Bitcoins back to currency following the transaction. Even though a cycle takes about 6 minutes in theory, exchanging Bitcoin to currency actually takes about one hour to confirm the transaction and another hour to confirm the price, during which at the very least the merchant is exposed to the downside volatility. Holding Bitcoins permanently might hold huge upside, but that also comes with intolerable downside risk for a merchant. After all, merchants should spend their time and energy with what they are best at (selling goods) rather than trading currencies and Bitcoin.
Another claim we don’t agree with is that Bitcoin is as free of counter-party risk as gold. What we have seen with Ethereum, another nascent cryptocurrency, is that these virtual currencies ultimately have a master key. With Ethereum, that key is controlled by a council that decides its future inflation rate; with Bitcoin, that key is controlled by Gavin Andresen, an engineer based in Massachusetts. There’s no guarantee that they won’t change the source code for the Bitcoin blockchain in the future, and when you “own” a Bitcoin you simply refer to the blockchain – a distributed ledger that tells you what and how much you own. In this regard, we don’t agree that Bitcoin does not have custodial or counter-party risk; the blockchain itself is the fat tail.
This means that for now, gold remains the only global currency in which individuals and corporations can transact with no time delay, with price volatility comparable to that of major currencies yet without counter-party risk, and one that has been proven as a store of value for thousands of years.
- China’s tighter overseas currency use impacts Canadian real estate landscape
The heavy exodus of the Chinese renminbi from mainland China put pressure on the country’s economy. In an effort to stymie the outflow, the Peoples Bank of China (PBOC) enacted new rules that are meant to help it exert more control over its currency…and that could spell trouble for the Canadian real estate market!
A CANADIAN REAL ESTATE “BUBBLE”
It is well known that the global financial crisis of 2009 was precipitated by a housing “bubble”in the United States. Real estate analysts south of the border, and even some local market watchers here in Canada, have long been predicting a similar bubble of sorts brewing in Canada. However, the Canadian “bubble” seems to have a much different origins.
The Canadian Perspective
It has long been suspected that the booming housing “bubble”, in great Canadian metropolitan cities like Toronto and Vancouver, was partly inflated as a result of foreign buyers. Predominant amongst those foreigners were property buyers and investors from China. Desperate to diversify their investments, and find better use of their capital outside the mainland, Chinese buyers are rumoured to be piling into real estate in large cities like Vancouver and Toronto.
According to industry analysts, home prices in British Columbia increased from 6.6% year-over-year in 2014, to 20.5% in 2016; while Ontario saw increases from 5.2% to 11.6% over that same period. Clearly, by some definitions, this is a bubble in the making.
The Chinese Perspective
Every sovereign nation wants to (in fact must!) have maximum control on its currency, and China is no exception. However, once currency is converted into foreign exchange and sent out of jurisdictions influenced by the country, “control” becomes even more difficult to exert.
The large outflow of currency from China is a concern to the authorities there – and they
decided late last year to do something about it. Among some of the exchange control measures include:
- Making it harder for individuals and institutions to convert renminbi into other currencies
- Enforcing greater restrictions on transferring money from the mainland to other international jurisdictions
- Requiring more transparency on the intent and motivation behind foreign exchange transactions
- Mandating greater punishment for individuals and institutions who run afoul of the new rules
While large Chinese corporations and global real estate players may still be able to skirt around these new regulations, it is expected that a large amount of property investment transactions by individuals could be impacted. As a result, Canada, and especially hot beds like Vancouver and Toronto real estate, should brace for potential fallout.
MORE THAN A CHINA CONNECTION
While China’s new forex rules will definitely put a damper on many Canadian real estate companies business plans, there is more bad news for the industry – largely emanating from within Canada. Both at the federal and provincial levels, governments are concerned about facing similar repercussions as that seen by our southern neighbor because of housing bubbles faced there. As a result:
- In February 2016, the government of British Columbia implemented a new tax rate of 15% for properties sold in excess of $2-million; while also mandating collection of more data on foreign buyers
- At the same time, the BC government also empowered municipalities like Vancouver to tax “empty homes”– mostly foreigner-owned investment properties that are vacant; waiting to be sold at a huge profit
- On October 3, 2016, the federal government imposed more stringent rules for mortgage insurance, raising the barrier for high-ratio borrowers to qualify for loans
- Additionally, through that same legislative move, some loopholes in Canada’s tax code, which were being used for preferential tax treatment by foreign buyers and non-permanent residents, were closed
All of these moves are billed as initiatives that will ultimately make housing more affordable in hot markets like Vancouver and Toronto. However, their impact will be far-reaching in terms of broader impact to the nation’s real estate market.
It is too early yet to tell whether the new regimen will have any impact on Canada’s housing industry. But based on early reports from B.C, it does look like they are having a
cooling effect, at least in the Vancouver area.
Since the new Canadian/B.C rules took effect, there has already been a marked decline in foreign investment recorded in Vancouver. According to the B.C government’s information, foreign purchases in Metro Vancouver, which also includes Chinese purchasers, accounted for roughly 3% of the region’s residential real estate transactions from June 10th to October 31st, 2016. This number has dropped well below the 13.2% rate for similar
transactions prior to the new legislation.
WHAT THE FUTURE HOLDS
The end game for China’s new currency export policy is to detract its citizens from annually spending an estimated $15 to $20 billion overseas. But China-analysts seem to think that, even though the country’s new forex laws are tightening the noose around real estate investors who may be contemplating Canadian investments; such transactions will likely not decline substantially – at least not in the immediate future. New ways to get renminbi out of China will evolve within months of old ones being shut down!
Canadian real estate industry analysts however seem to have a different take on the issue. According to Canadian property market watchers, the number of resale homes projected for resale in 2017 across Canada are expected to fall by around 11.5% (compared to 2016); with B.C leading the pack (-23.8%), and Ontario (-10.5) declining by double-digits.
This one-two punch, by federal and provincial jurisdictions, to the real estate market doesn’t bode well for the real estate industry, but especially for property owners. Researchers believe that the collective impact of the new housing regimens – both from China and from within Canada – will contribute to much slower increases to property values.
Researchers forecast that on a national level, the average Canadian home’s resale value will increase by only 1.6% in the New Year, compared to a robust 9.5% increase in 2016. Ontario homes are set to post their weakest rate of increase in over 8 years – at 3%;
while B.C home prices will rise by 1.9% (compared to a staggering 20.5% in 2016).
With not much information available as of yet, about the impact of the policies discussed here, it is hard to predict what impact they are having on the country’s real estate industry. One thing is definite though: None of the steps implemented so far, by both China and various jurisdictions within Canada, seem “investor friendly”.
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