- World's First Vending-Machine For The Homeless To Be Unveiled In UK In December; LA, NYC Next Year
This is a first, a new charity in the UK called Action Hunger plans to install a vending machine for the homeless in December. The organization describes itself as a charity with a “new approach to combating homelessness.” The initial plan will be installing a machine in the town of Nottingham in the December time-period, then a second machine in Manchester sometime early 2018. If all goes well, Action Hunger plans to do a full release across the UK in attempt to alleviate poverty and hardships– something the government is having trouble in doing.
Action Hunger is working with Tesco and other partners to stock the machines with water, fresh fruit, energy bars, crisps, chocolate, and sandwiches, as well as socks, sanitary towels, antibacterial lotion, toothbrush and toothpaste combination packs, and books. A majority of the food will be provided by a localized network of regional food vendors who will donate excessive food waste.
The charity has partnered with The Friary, an outreached centre in the city, to oversee the people’s access to the vending machines. The machines will operate 24-hours a day accessed by a special card given out by the Friary and can service up to 100 homeless people per day. Key cards are programmed to permit up to three items per day, which offers a low-cost automated solution in dealing with the poor.
Action Hunger explains how the process works:
According to the Independent, homelessness has increased 34% per cent since the Conservatives came to power in 2010, partly due to benefit cuts and welfare changes. A new study reveals that 300,000 people in Britain are now homeless, with the crisis growing as much as 13 per cent last year alone.
Number of rough sleepers across England on a given night
Number of homelessness applications made to local authorities
Action Hunger is targeting Nottingham and Manchester, two areas where homelessness is out of control.
Across England, housing market affordability is once again above 2006 to 2008 levels— signaling that house prices are once more outpacing income.
Besides the exploding homelessness situation in the UK, there is an even larger market in the United States, where Action Hunger will be installing the vending machines next year in Seattle, New York, and LA.
In August, we reported 1 in 7 New York City Public-School students is homeless. On top of that, NYC shelter officials have admitted a record number of homeless to shelters each night.
In a preview of things to come, automation in the form of vending machines seems to be the short term solution in dealing with the homeless in the UK. The next step for Action Hunger appears to be a multi-city rollout in the United States targeting a much larger homeless population as the middle class deteriorates.
For our American audience, an automated vending machine for the homeless is coming to a town near you. The dying middle class will no longer be able to shop at the Dollar Tree nor Walmart, as they will resort to automated vending machines. The future is bleak.
- Blockchain-Based Platform Spurs Confidence In 'Sketchy' ICO Investment Opportunities
If it were a competition, BnkToTheFuture would be a shoo-in for “most meta business plan” of 2017. To wit, the company is building a blockchain-based trading system for selling and trading stakes in blockchain companies in a play to capture a subset of investors who are growing increasingly wary of the sketchy ICO market.
A firm called BnkToTheFuture plans to open a market in the second quarter that will let investors trade equity stakes in companies involved with the blockchain, the transaction-tracking technology that underpins digital currencies like bitcoin. BnkToTheFuture will use a blockchain ledger to keep record of those investments for clients.
While the blockchain tech sector is certainly still in its infancy, there’s little doubt that investors are interested in finding more reputable ways to facilitate investing in blockchain. Presently, the booming market for ICOs, which has seen more than $3.5 billion raised this year, has proven to be rife with incompetence and even outright fraud.
Some of the largest and most widely anticipated ICOs are already floundering with their tokens rapidly losing value, and even drawing lawsuits, in some cases.
Given the lack of honest brokers – and explosion of self-dealing – in the existing market for investing in blockchain solutions, there’s reason to believe BnkToTheFuture’s projection that it will soon facilitated more than 50% of private investments in the space.
“By year-end, we could have 50 percent of the major companies in the sector on our platform,” Chief Executive Officer Simon Dixon said in a phone interview.
As Bloomberg explains, the blockchain is a digital ledger for recording transactions in a secure and transparent manner. The technology is expected to revolutionize industries ranging from finance, to supply chain management to even boring old title insurance, as we recently pointed out.
BnkToTheFuture has already helped some 45,000 accredited investors from around the world invest more than $200 million, Bloomberg reports. It has allowed investors to buy equity in more than 100 companies and projects, including ethereum and storj. The company is planning to implement a blockchain-based ledger to record and facilitate these transactions – something it says it will implement by the second quarter.
It’s worth noting that BnkToTheFuture – despite its implicit challenge to the existing ICO market – is itself an ICO. The company plans to issue a token next year with which customers can pay BnkToTheFuture for deal analysis, due diligence and investor relations. BnkToTheFuture hopes to raise as much as $33 million in an initial coin offering planned for next February. The largest ICO’s have raised more than $200 million. Indeed, some self-styled ICO “experts” have advised their audience that raising $100 million in an ICO can be more trouble than its worth.
As more regulators crack down on the ICO market – China has banned it entirely, and the SEC has opened civil actions against several accused ICO fraudsters – investors could migrate to BnkToTheFuture’s platform. To be sure, the product has not yet launched, and if ICOs like Tezos are any guide, investors in ICOs shouldn’t count their chickens before they hatch, so to speak.
BnkToTheFuture is registered in the Cayman Islands, and holds a stake in a broker-dealer. The company holds equity in several established digital-currency exchanges, including Bitstamp and Kraken.
According to Kyle Samani, managing partner at Multicoin Capital Management, a crypto hedge fund, BnkToTheFuture is already a hit in Asia.
“Their investment opportunities are vetted quite extensively and it seems only very few get accepted judging from the amount of investments that pass through their platform,” Majid Shah, the co-founder of CoinSchedule and a longtime user of BnkToTheFuture, said in an email. “I would say they provide a lower-return but lower-risk way of investing into the blockchain space, whereas ICOs are more high return, high risk.”
However, BnkToTheFuture isn't the only company trying to legitimize ICOs: Overstock.com saw its shares pop back in September after revealing that it is building a platform for launching and trading ICOs.
- The End Of The Syrian War Is The Beginning Of A New Middle Eastern Order
Authored by Federico Pieraccini via The Strategic Culture Foundation,
In the Middle East and beyond, we are witnessing a series of high-level political meetings between dozens of nations involved directly or indirectly in the Syrian situation. It is crucial to understand all this in order to understand the direction in which the region is going and what the new regional order is.
With the liberation of Abu Kamal on the Iraqi border, the last Syrian town controlled by ISIS, the Syrian Arab Army (SAA) and its allies have completed the task of eliminating the Caliphate and its control over Syrian cities.
ISIS returns to its original dimensions of being a terrorist organization without control of any territory or a city-state proclaimed as its capital.
These are important days, with political conferences about the future of the region and Syria itself occurring from Sochi to Cairo and passing through Riyadh. In Sochi, Assad met with Putin to confirm the alliance as well as Moscow’s loyalty to the Syrian State, and to also focus on a political solution. The Russian and Syrian presidents agreed on the need to involve the largest possible number of opposition groups in the reform process. In this regard, the meeting between Rouhani, Erdogan and Putin was also aimed at creating the conditions for an inclusive solution for all those who have agreed to put down arms and engage in talks with the legitimate government in Damascus. Turkey is the country that holds together the ranks of the so-called legitimate opposition, and Erdogan’s moves have confirmed that his strategy in the region is based around pivoting towards Russia through a full-fledged cooperation with Moscow. It is an almost unprecedented diplomatic victory for Russia that in two years it has managed to turn a potential opponent into one of the main guarantors of the peace process in Syria.
Riyadh is in the meantime bringing together the not-so-moderate opposition groups that are very close to Islamic extremism, a sort of spin-off of Al Nusra (Al Qaeda) and Daesh, and attempting to apply on them a makeover in an effort to rebrand them. It is important to note that recent meetings between King Salman and Putin seem to have opened some sort of dialogue with a representative of Moscow present at the Riyadh conference.
Firstly Erdogan, and then King Salman and his son Mohammad bin Salman (MBS), seem to have understood that a military defeat in Syria is now inevitable, and the latest developments have been related to the consequences resulting from the defeat of the terrorists. Turkey has much to gain from a convenient alliance with Moscow, both in terms of energy and transit along the East-West route of the Chinese Belt and Road Initiative (BRI), and along the North-South corridor contained within the agreement between Russia, Iran, Azerbaijan and Turkey. In light of this, Russian planes have been flying over Turkey to reach Syria. A NATO country is letting Russian military aircraft fly over its airspace to reach Syria, something that would have been impossible to imagine not too long ago.
For Saudi Arabia the situation is different. While the meeting between King Salman and Putin represents an absolute novelty, the recent confirmation by MBS of his intentions to oppose the rise of Iran run counter to the possibility of pacifying the region.
The result of the war in Syria has carved out a new Middle East, where the likes of Riyadh, Tel Aviv and Washington, previously regional masters of all they surveyed, appear to have more or less been deliberately cut off from the decision-making process. While it can be argued that Washington has played out its role in the region with the defeat of Daesh, thanks to Trump's "America first" policies that resists direct involvement in conflicts, Riyadh and Tel Aviv do not seem to have any intention of accepting Tehran’s new role in the region, even as it is supported by Turkish and Russian diplomacy and even military might.
The aggression against the Syrian state initially saw a compact front comprising the United States, Saudi Arabia, Turkey, Qatar, Jordan, Israel, France and the United Kingdom. All were at the forefront of arming, training, financing, assisting and treating the injured of the tens of thousands of terrorists sent to Syria. It was a destabilization operation with few precedents in history. Already in 2014, at the pinnacle Daesh’s power, Assad's position seemed firm and immovable. According to the intentions of Western terror planners, Assad was to be expelled within the first twelve months of the conflict. The drawback was the impossibility, for a number of reasons, of NATO and its allies directly intervening a la Libya, foremost among which was Syria’s possession of a good level of air defense, as well as America’s inability to deal with the human and financial costs of yet another conflict in the region, with the inevitable escalation that would follow given Iran's involvement.
After the failure to remove Assad, the next step for Western policymakers was to deploy Daesh to create chaos and destroy the country, this diabolical force having been born as a result of America’s illegal occupation of Iraq.
Russia’s 2015 intervention in Syria, at the invitation of the legitimate government in Damascus, disrupted Western plans, bringing about the inevitable defeat of Daesh and consolidating Assad's power.
There are two events between the Russian intervention and the efforts to Balkanize Syria through use of the Syrian Democratic Forces (SDF) that served to confirm that the Iran-Syria-Russia axis was destined to prevail in the conflict.
The first is Donald Trump becoming president of the United States. Leaving aside all the negatives related to his presidency, his victory has ensured that there is no direct intervention in Syria against Assad and against Russia. This is in contrast to what would have happened had Clinton won the election, the former Secretary of State prepared to trigger a regional conflict between the great powers by giving the order to shoot down Russian planes in Syria, thereby potentially kicking off World War Three.
The other event that has upset the balance of power in the region concerns the events that have occurred in Turkey over the last two years. Both the failed coup and the downing of the Russian fighter plane played an important role. The turning point was reached with the reconquering of Aleppo, which indicated a clear military failure by the opposition to overthrow Assad. Erdogan faced an unavoidable choice: support the terrorists and have to deal with a Kurdish enclave on the Syrian border; or reach a peaceful solution with the Russian Federation in order to contain the Kurdish threat and guarantee the integrity of Syria.
Erdogan has been rewarded by his choice to side with Russia and Iran, leaving Turkey in a better position than that of a couple of years ago, with him now able to influence the fate of many events in the Middle East, as well as allowing him to focus on his own national interests, in particular on the Kurds. The failure of the plan to balkanize Syria, involving the extreme attempt to declare Kurdish independence in Iraq, has only led to the end of Barzani’s reign. Hardliners committed to regime change in Damascus, such as the international coalition led by the US military and the military-industrial complex, have tried in every way possible to sabotage the SAA's fight against Daesh along the Euphrates. Saudi Arabia had even ventured to support Kurdish movements directly within Iraq; and Israel was the only country to openly support the referendum on Kurdish independence.
This strategy foundered on the opposition of Syria, Iraq, Turkey and Iran, which with Russian military support consolidated the front against the Saudi-Israeli-Neocons-Neoliberals. During this series of changes and upheavals, the anti-Assad front managed to alienate even a country like Qatar, which has explicit ties to the Muslim Brotherhood and the neoliberal part of the American establishment. Although anti-Assad propaganda continues on state media such as Al Jazeera, the concrete effects are zero. Moreover, Qatar, following the Saudi crisis, sought to broaden its geopolitical stance, engaging directly with Moscow (there have been many contacts between the Al Thani family and the Kremlin) and Iran, a historic enemy of Riyadh.
The European component of the anti-Assad alliance is in complete disarray, with Macron in France conducting difficult mediation between MBS and Hariri in an attempt to avert further Saudi-Israeli political disasters that risk pushing Lebanon completely into the Iranian sphere of influence. In Germany, Merkel is experiencing a long wave of pervasive challenges between globalist versus national-sovereignty movements, with new elections looming. In England, the consequences and effects of Brexit are still tangible, with an unstable government and a series of difficult negotiations with the European Union. There no longer seems to be any time or resources available to invest in Syria. The falsification of reality continues through the mainstream media that belongs to the neoliberal world-wide elite, such as CNN, Al Jazeera, and the Washington Post. In addition to the usual lies fed through television and newspapers, Europeans and Americans today have no other tool at their disposal.
Trump seems to be contented to have been able to return home from his tour of Asia having secured hundreds of billions of dollars worth of extortion from allies, while not getting embroiled in the type of endless wars that even Saudi Arabia is unable to sustain, as seen with the genocide in Yemen and actions against Qatar. The Trump administration has many flaws as well as a deep aversion towards Iran, but it has no ability or intention to support Israel and Saudi Arabia in their attempt to limit Iranian influence by force. Not even the combined military forces of Israel and Saudi Arabia could pose a threat to Hezbollah let alone the Islamic Republic of Iran.
What we see is a Middle East that is trying to restore a regional order that is practical and functional. Meetings in Sochi between Turkey, Russia and Iran aim precisely to achieve this. In this scenario, Washington's absence is notable, despite attempts from Staffan de Mistura to revive the now-dead Geneva conference. Russia and its allies, after taking the military initiative, are ready to guide the diplomatic negotiations between the Assad government and opposition forces, to be held under the auspices of the trio gathered in Sochi, with the involvement of the United Nations in a role as guarantor rather than decider. The shots are called by Assad, Putin, Erdogan and Rouhani, even though this new reality will never be accepted by MBS, Netanyahu, the European governments and the US deep state (neocon/ neoliberal).
MBS's domestic actions, together with Netanyahu's threats to Iran and Hezbollah, reveal a refusal to acknowledge defeat as well as, in the case of MBS, an extreme attempt to avoid losing control of the country. For Israel, the problem is more complicated. Already in 2006 it was unable to defeat Hezbollah, and now Hezbollah is more developed, better trained, and better able to inflict damage on the Jewish State. Saudi and Israeli military leaders are more than aware that they do not have the ability to defeat Iran or Hezbollah and that only Washington's direct involvement would be able to change the course of events. This hypothesis, however, must also take into account the reality on the ground, with Moscow now allied to Tehran and Trump more than opposed to any new wars involving the US. In this situation that is chaotic for anti-Assad forces, MBS continues his work of arresting anyone opposed to him and recovering money sunk into wars in the context of the collapse of the oil price.
The new Middle Eastern order coincides with the near-end of the conflict in Syria and the intention to find a political solution to the conflict by pacifying all parties. It is a solution that is increasingly successful, especially in light of Turkey's abandonment of the anti-Assad front. Moscow is slowly replacing the US as the fulcrum in the region and beyond, solving conflicts and accompanying the progressive withdrawal of US military and economic influence in the region.
Once again, the strategic triangle between Iran, Russia and China finds itself victorious, inheriting and solving one of the most complicated conflicts since the end of World War II. Kudos to Putin, Rouhani and Xi Jinping, the new giants of the 21st century.
- Caught On Video: ISIS-Driven "Jihadimobile" Explodes In Massive Fireball
Editor's note: The confrontation depicted in the video below is 100% authentic.
In a showdown that demonstrated the destructive power of ISIS-aligned suicide bombers, a tank manned by Iraqi Shia fighters appeared to trigger a massive explosion when it pointed its muzzle at a rickety pickup truck packed to the brim with explosives. First, militia soldiers try to stop the truck with small-arms fire. Then the truck, presumably driven by ISIS fighters, advances toward the tank.
Then suddenly, there's a massive explosion.
Debris flies everywhere, hitting the tank and a combat infantry vehicle, and narrowly missing a group of fighters on the ground.
Combat experience in Iraq and Syria prove that light vehicles including trucks can be converted into dangerous weapons capable of inflicting hundreds of casualties if detonated in a densely packed area.
Shia forces in Iraq even have a nickname for these vehicles: They’ve dubbed them "jihadimobiles.”
They are built with the purpose of killing as many people as possible and causing maximum damage in an attack.
A "jihadimobile" can be built on the chassis of both a civilian or military vehicle, according to Sputnik. Though they’re typically built out of old combat infantry vehicles and trucks, as well as passenger cars that are covered with armor plates. It can also have bulletproof tires, a bulldozer bucket and a machine-gun turret.
- China Hits A Brick Wall: For First Time Ever, Record Chinese Credit Creation Fails To Stimulate Economy
Submitted by Gordon Johnson of Axiom Capital
We believe that exhibit 1 says a lot: it shows that despite a record level of new credit issued by China’s PBoC YTD through Oct. 2017 (which stands in stark contrast to government authorities continued statements that China is de-levering), China’s economic backdrop is currently experiencing:
- (a) monthly construction new start (commercial + residential + office) growth slowing Y/Y (Ex. 2),
- (b) monthly fixed asset investment growth slowing Y/Y (Ex. 9),
- (c) monthly cement output slowing Y/Y (Ex. 5),
- (d) monthly electricity production slowing Y/Y (Ex. 6),
- (e) monthly M2 money supply growth slowing Y/Y (Ex. 7),
- (f) monthly household loan growth slowing Y/Y (Ex. 8),
- (g) monthly private fixed asset investment growth slowing Y/Y (Ex. 10), and
- (h) monthly home price growth slowing Y/Y (Ex. 12) – in fact, select data points have turned negative Y/Y.
Stated differently, while the lion’s share of our client base continues to tell us, with respect to our bearish views on China… “President Xi Jinping will simply stimulate more if/when things get bad”, we would highlight, again as detailed in Ex. 1 below, China stimulated at a record pace in 2017, yet it did not resonate in improved economic activity (in fact, the exact opposite appears to be unfolding – i.e., economic growth is slowing across a number of data points).
Furthermore, underpinning our view that China’s debt stimulus was targeted specifically at the months preceding the 19th Party Congress in Oct. 2017 (i.e., when President Xi Jinping consolidated power to become the strongest Chinese leader since Mao Zedong), implying we may see a phase of debt fatigue, we note that in the first 10 months of 2016, incremental credit issued in China on a month-over-month (“M/M”) basis was negative three times (i.e., May, July, and Oct.), and averaged $189 billion on a monthly basis; yet, in the first 10 months of 2017, incremental credit issued on a M/M basis was positive in each month outside of Oct., and averaged $429 billion on a monthly basis (in Oct. 2017, the month the 19th Party Congress concluded, new credit issued fell by $11.9 billion M/M).
WHAT DOES IT ALL MEAN? The broader point is… when you issue an unprecedented amount of credit targeted at a growing number of negative ROI projects multiple decades, at some point the law of diminishing marginal returns sets in (since 1/1/09, China’s credit has grown by CNY153.9 trillion while GDP has grown by a much more modest CNY 48.5 trillion, or a multiple of 3.17x, meaning a lot of bad investments have stacked up over the years) – keep in mind that China’s $3.6 trillion in credit issued in 2017 YTD through Oct. is more than the entire developed world combined. Put in the simplest of terms, at some point the incremental dollar in new credit created actually does more harm than good.
Ex. 1: China New Credit Created YTD Through Oct.
Note: Credit created = TSF + Local Gov't Debt.
Source: PBoC; NBS; ChinaBond.SO WHERE FROM HERE? When considering China hit the afterburners on new credit issuance in 2017, yet the impact seems to be quickly fading, it would appear we may have reached the point of “no return” (while Consensus, at this point, seems completely oblivious to this possibility, the recent sell-off across the Chinese stock markets suggest investors on-the-ground in China may be catching on).
CONCLUSION: In the face of China’s TTM 3Q17 credit as a percentage of GDP coming in at 250%, to “keep the party going”, Xi Jinping would have to force new credit issuance far in excess of $4.0 trillion in 2018 (which could trigger a number of ratings downgrades, as well as a reassessment by the IMF of China’s “market economy” status).
Moreover, given what we’ve seen this year – i.e., 101.7% Y/Y new credit issuance growth YTD through Oct. 2017 – it seems the level of credit necessary to stimulate growth in China could prove elusive at this point (we don’t recall any economist’s forecasts exiting 2016 pointing to China’s new credit issuance more than doubling Y/Y in 2017, yet that’s exactly what’s happened – had this been our base case, we would have expected all economic indicators in China to be moving substantially higher at this point in the cycle). Thus, to the thesis that rests on a view that: “Xi will just stimulate more”, we would argue that the extent of the stimulus necessary may be so high at this point that President Xi Jinping may have lost sight of how much debt he needs to “get things going again”. Should this prove to be the case, China’s economy will continue slowing, putting pressure on bulk commodity prices, and, ultimately, industrial/steel stocks (CAT, URI, FMG, RIO, X, CLF, GATX, and TRN, all of which we have SELL ratings on).
HOW’S THE DATA LOOK IN THE FACE OF CHINA’S RECORD 2017 CREDIT “BINGE”? So how do the data points look? Well, here’s a few (we feel the charts say it all)…
Ex. 2: Monthly Construction Starts (Residential + Commercial + Office)
Source: National Bureau of Statistics, Axiom Capital Research.Ex. 3: GDP Growth Internals – China (FAI, Industrial Production, & Retail Sales)
Source: National Bureau of Statistics, Axiom Capital Research.Ex. 4: China Monthly Steel Production by Year
Source: World Steel Association (WSA), National Bureau of Statistics (NBS), Axiom Capital Research.Ex. 5: China Cement Output
Source: National Bureau of Statistics, Axiom Capital Research.Ex. 6: Y/Y Growth in Electricity Production by Month
Source: National Bureau of Statistics, Axiom Capital Research.Ex. 7: China M2 Money Growth, Y/Y% – Multi Decade Low (bearish)
Source: Peoples' Bank of China (PBOC), Axiom Capital Research.Ex. 8: 3MMA Household Loan Growth, Y/Y%
Source: Axiom Capital Research, Bloomberg, National Bureau of Statistics.Ex. 9: Monthly Total Fixed Asset Investment and Y/Y Growth
Source: National Bureau of Statistics, Axiom Capital Research.Ex. 10: Monthly Private Fixed Asset Investment and Y/Y Growth
Source: National Bureau of Statistics, Axiom Capital Research.Ex. 11: Private Investment in Industrial Sector and Y/Y Growth
Source: National Bureau of Statistics, Axiom Capital Research.Ex. 12: Average Price Change of New Residential Buildings, by Tiered-Cities, %Y/Y
Source: National Bureau of Statistics (NBS), Axiom Capital Research.In short, we feel China could be the “black swan” that ruins the stock market rally party for many in the industrials space. Caveat emptor.
- Valuing Bitcoin Using Metcalfe's Law
Just over a month a go we discussed Frank Homes, CEO of US Global Investors, who had returned from the LBMA/LPPM Precious Metals conference in Barcelona after giving the key note address on Day 2, “Quant Investing: From Gold to Cryptocurrencies.” Homes’s presentation was voted the best – no doubt helped by the topical subject matter – and he was the recipient of an ounce of gold.
Seeing a role for both gold and cryptocurrencies in portfolios, he aimed a couple of blows at recent Bitcoin detractors, including you know who from JPM. As we noted at the time, however, it was Homes’s observations on Metcalfe’s law, i.e. the economics of network effects, which we particularly enjoyed.
This was his take on the surge in the price of Bitcoin…
“Metcalfe’s law states that the bigger the network of users, the greater that network’s value becomes. Robert Metcalfe, distinguished electrical engineer, was speaking specifically about Ethernet, but it also applies to cryptos. Bitcoin might look like a bubble on a simple price chart, but when we place it on a logarithmic scale, we see that a peak has not been reached yet.
In an article, Bitcoin and Metcalfe’s Law, Stephen Powaga of ETF Momentum Investing acknowledges the challenges of valuing Bitcoin and has also turned to Metcalfe’s Law.
With the recent run up in the Bitcoin price, cryptocurrencies have been garnering much greater attention from the public at large.
A rapid price rise like this presents a difficult situation for potential new investors into the space. On one hand, this price action appears to be a classic asset price bubble, but on the other hand investors can wait years for a meaningful drawdown, all while missing out on the intermediate price appreciation.
How then can one determine a benchmark value for Bitcoin? On the most basic level Bitcoin is a distributed payment network, and like all networks should be subject to Metcalfe’s Law.
Powaga continues by leading us through some of the basics of Metcalfe’s Law.
Metcalfe’s Law states that a network’s value is proportional to the square of the number of users. For instance, it’s obvious that if you’re the only person with a telephone then that network would have no value, when one additional person gets a phone the network has achieved a tiny bit of value, and if virtually everyone has a phone, then the network becomes extremely valuable. This relationship has been observed in many industries where increased adoption boosts the network’s overall usefulness, such as European internet usage, Facebook’s value, and more recently Tencent’s value.
A recent white paper by Ken Alabi finds that blockchain networks also appear to follow Metcalfe’s Law, in his paper he states, “it was demonstrated that the growth in the value of the network was related to the number of unique addresses”. This intuitively comports with our understanding of how Bitcoin’s value should operate, if you’re the only holder of Bitcoin it’s not very valuable because there is no one to exchange it with for goods and services, however if many people hold Bitcoin then it should be much more valuable since there are now many people to potentially exchange it with.
As Powega explains, he can show us how Bitcoin’s valuation has traded over time based on Metcalfe’s Law principles.
Given this information, what can Bitcoin’s network size tell us about its value and the size of the current bubble? Utilizing Alabi’s method we can arrive at Bitcoin’s Metcalfe Value through time and compare historic Price-to-Metcalfe Value ratios for Bitcoin.
This is somewhat analogous to price-to-book ratio in public equity analysis in that a higher ratio implies investors expect a given network to create more value from a given number of users.
As you can see above, the Price-to-Metcalfe Value ratio seen in the previous Bitcoin bubble of 2013/14 was far larger than where it currently stands.
Obviously, the future is unknowable, but given the enormous growth that Bitcoin has seen in its user base, the recent price appreciation may not be as “bubbly” as it appears.
What Powaga can’t tell us, however, is what is the intrinsic value of Bitcoin now, or what it might be in the future. Who knows? As we discussed, high-profile cryptocurrency investor, Mike Novogratz, sees Bitcoin at $40,000 at the end of 2018. In contrast, Peter Tchir, is taking some Bitcoin chips “off the table”.
- David Stockman Slams The GOP Tax Bill: "Fuggedaboutit!!"
Authored by David Stockman via Contra Corner blog,
The GOP has become so politically desperate that they might as well enact a two-word statute and be done with it. It would simply read: Tax Bill!
Actually, that's not far from where they are in the great scheme of things. The Senate Finance Committee's bill is a dog's breakfast of K-Street/Wall Street pleasing tax cuts, narrowly focused revenue raisers that will be subject to withering attack on the Senate floor, nonsensical vote-driven compromises and outrageous fiscal gimmicks—-the most blatant of which is the sun-setting of every single individual tax provision after 2025.
This latter trick is designed to shoe-horn the revenue loss into the $1.5 trillion 10-year allowance in the budget reconciliation instruction and also comply with the Senate's "Byrd Rule" which allows a point of order to strike down a reconciliation bill that increases the deficit after year 10. Save for these gimmicks, the actual 10-year cost of the Senate bill would be $2.2 trillion including interest on the added deficits.
Nevertheless, this and other sunset gimmicks also underscore how threadbare the whole undertaking has become. To wit, the bill provides interim, deficit-financed tax relief of $1.38 trillion during 2018-2025 before these budget gimmicks kick-in, which is not a big number in the scheme of things: it amounts to just 4.2% of current law revenue collections during the eight year period, and only 0.8% of GDP.
Since the bill doesn't even really cut marginal rates during this interim period (the top bracket drops from 39.6% to 38.5%), its hard to see how a mere 0.8% "stimulus" to GDP is going to incite a tsunami of growth and jobs.
As we have frequently pointed out, the Reagan tax cut of 1981—which had no measureable effect on the trend rate of economic growth— slashed marginal rates from 70% to 50% and as a total package paled the current Senate Plan into insignificance: It reduced the Federal revenue base by 26%, not 4.2%; and it amounted to 6.2% of GDP, not 0.8%, when fully effective in the later 1980s.
Moreover, the "fully effective" part is especially salient because the Senate bill's impact does not widen with time, as do most permanent tax cuts which require phase-in periods, but, instead, shrinks into virtual insignificance.
Thus, the bill's net tax cut amounts to $225 billion or 1.1% of GDP in 2019, but by 2022 the net cut shrinks to $199 billion and 0.9% of GDP—and then to just $145 billion or 0.6% of GDP in 2025 when the sunset gimmick kicks in.
Thereafter the bill becomes a small net revenue raiser ($31 billion) by 2027, but, more importantly, the single "cut" item left in the statute tells you who is really driving the show. That is, the Business Roundtable, the K-Street industry lobbies and Wall Street get to keep what they mobilized for—-the 20% corporate rate cut, which stays in place permanently at a cost of $171 billion in 2027 revenue loss.
However, the lopsided math laid out in the Tax Policy Center's price-out of the Finance Committee reported bill underscores why this dog's breakfast will never make it close to the Donald's desk. That's because by year #10 not one of the 150 million individual filers get a tax cut; the reduction for small business "pass-thru" payers is zeroed-out; and the balance of the bill consists of an incredible $202 billion of tax increases in 2027 compared to current law.
That's right. The great Republican "tax cut" slithers off the stage in 2027 raising taxes by a net of $75 billion on individual filers, $123 billion on business filers (aside from the corporate rate cut) and $4 billion on international companies.
So what you have is a sharply downward sloping taper of tax cuts and revenue losses, which makes the bill a classic Keynesian deficit stimulus through the tax code, not a supply side incentive driver; and one so tangled up in the nation's fiscal strait-jacket that it ends up in political la la land.
For instance, the only individual tax provision that is not subject to the 2025 sunset is the tax indexing modification which relies on a shorter ruler to adjust the brackets and standard deduction for inflation. Accordingly, by 2027 approximately 150 million filers will be paying $32 billion per year in higher taxes!
Another fiscal anomaly contained in the bill in order to shoe-horn it into the allotted $1.5 trillion deficit add-on is the repeal of the individual mandate under ObamaCare.
To be sure, as a matter of policy and liberty we would be the first to say, right on!
But here is how the bill reduces the deficit by $53 billion in 2027 and $318 billion over the 10 year period. To wit, it assumes that about 13 million citizens are being forced to join Medicaid or buy subsidized health insurance policies on the ObamaCare exchanges who do not want them, and don't even need the coverage, apparently.
That's completely crazy, of course, but is also par for the course in today's American Welfare State and the fiscal impact and analysis thereof.
Indeed, the intuitive notion would be that repeal of the ObamaCare fines would cause an increase in the deficit, and, in fact, the CBO analysis assumes a $43 billion revenue loss over the 10-year period from uninsured individuals no longer being forced to pay fines to Uncle Sam for exercising their right to self-insure, pay cash for care or go without.
Still, the repeal provision is projected to net $318 billion of "payfors" because a different set of needy people are presumed to reject mandatory welfare.
That's right. The CBO projects that Medicaid costs will be $29 billion lower than current law in 2027 and $179 billion lower over the 10-year period because millions of low income citizens—and this is hard to type with a straight face—-would otherwise sign up for Medicaid, which they would be qualified for but don't want, in order to avoid paying a fine!
Stated differently, CBO essentially assumes that millions of low income citizens are being fined into enrolling in Medicaid when they don't want Uncle Sam's free stuff; and that millions more would give up their ObamaCare tax subsidies of up to $15,000 because they no longer would have to pay a fine of about $2,000.
You can't make this stuff up—but there is a reason for the apparent lunacy. What is going on here, in fact, is that 30 years of fiscal kick-the-can is coming home to roost.
The overhang of $10 trillion of additional built-in deficits over the next decade, and a prospective public debt of $31 trillion is tying the GOP tax-writers in knots, and well it should.
That's because a meaningful tax cut not paid for with spending cuts (preferably) or a more benign revenue raiser like VAT or a consumption levy is simply unaffordable and counter-productive.
A deficit-financed tax cut will result in "crowding out" and higher interest rates in the years ahead—-meaning headwinds to growth, not enhancements. That's because for the first time since the 1980s the Fed and other central banks will be selling government debt, not buying it; they will be in a demonetization and QT (quantitative tightening) mode rather than one of massive monetization and QE.
Yet it was only the latter which permitted the fiscal profligacy that quadrupled the public debt since the turn of the century (from $5 trillion to $21 trillion) to roll forward year after year unchecked by visible, adverse financial and macroeconomic effects. Now comes the payback.
Indeed, given the nation's rapidly aging and welfare-consuming demographics, its $66 trillion albatross of public and private debt on a sputtering $19 trillion economy and Washington's 5% of GDP structural deficit during the next decade even under CBO's nirvana of perpetual full-employment, the very idea of an unfinanced tax cut amounts to what Senate Leader Howard Baker called a "riverboat gamble" back in 1981.
And that get's us the most absurd twist yet in the GOP's futile attempt to fit it's big fat political foot into the purported golden slipper of tax reduction and reform. It happens that Senator Baker's legatee representing Tennessee in the US Senate, the now retiring Bob Corker, has exactly the same concern as his illustrious predecessor.
Namely, the objectively warranted fear that tax cuts do not pay for themselves—-and most especially in the case of the dog's breakfast now heading toward the Senate floor. Indeed, Corker has explicitly stated that he will vote "no" on any bill that increases the Federal deficit—-after any favorable impact on economic growth and the revenue feedback therefrom.
Apparently, the good Senator is not at all convinced that the sole permanent beneficiary of the Senate bill—corporate America—-will use most of its $1.35 trillion in increased after-tax cash flow over the next decade in order to invest in domestic plant, equipment and technology. And in sufficient incremental quantities to generate meaningful revenue reflow.
The skunk in the woodpile here, in fact, is that Corker has been a long-time member of the budget committee and reasonably consistent deficit hawk (except on defense where he is a raging war hawk and spender). Accordingly, he is actually numerate and understands the forbidding math of the corporate tax cut.
To wit, at the permanent 20% rate, the tax cuts would have to generate nearly $7 trillion of incremental pre-tax profits to pay for itself; and given the pre-tax profit share at 12% of national income, the total gain in GDP would need to be in the order of $60 trillion!
At the same time, the corporate C-suites already face the lowest debt and equity costs in history thanks to decades of radical financial repression by the Fed, on the one hand, and are now addicted to financial engineering, on the other. So it is not unreasonable to assume that at least 65% of the corporate rate reduction will be allocated to higher dividends and stock buybacks.
In short, to pay for itself, the 20% corporate tax rate would need to generate $60 trillion of incremental GDP over the next decade from perhaps $500 billion of incremental investment. That is to say, a 120X yield on investment in an economy that has actually not been acutely deprived of investment dollars over the last decade.
In the alternative, of course, added investment might also generate some incremental employment and income and payroll tax revenue. But that would likely be a strictly second order effect: Hardly a single CEO at a recent meeting with Gary Cohn raised his hand when asked with the 20% rate would lead to more jobs or higher wages.
Undoubtedly, Senator Corker (and his fellow deficit hawks including Flake, Lankford and others) will lean hard toward the most favorable assumptions possible about the share of the corporate cut that will be reinvested rather than distributed to shareholders, and the yield of GDP and pre-tax corporate income which will result therefrom.
But they will not get close to a 100% "payfor" conclusion—so they have invented in new morsel to throw into the Senate dog's breakfast. Namely, a "tax cut" written in disappearing ink or what they are pleased to called a "trigger-tax" increase in the event that the dynamic reflow assumptions do not pan out.
"Corker, the retiring Tennessee Republican has staked a hard line against letting tax legislation add to federal deficits – saying that a single penny of new deficits would lose his vote. It turns out the Senate bill would add $1.4 trillion to the deficit over 10 years – at least before accounting for any economic growth – according to a Congressional Budget Office report released Sunday.
The bill’s supporters say it’ll boost economic growth enough to cover that shortfall, but Corker says he’s not satisfied. He wants a backstop mechanism – essentially a tax-increase trigger that would raise revenue in case the promised growth doesn’t result. Arizona’s Flake and Oklahoma’s Lankford also support that kind of trigger.
Needless to say, the crafting of a trigger-tax is beyond the capacity of the US Senate to devise while in full partisan floor battle or at any other time.
The problem is, what is the baseline for measuring any revenue shortfall, and what happens if the short-fall is due to a recession or some other un-programmed economic development? Or even a multi-quarter growth hiatus that may or may not be the on-set of an officially designated "recession" by the authorities at the NBER.
You editor speaks with some authority on this point—having helped devise such a "trigger tax" back in 1983 when Ronald Reagan was looking for a way to raise taxes to stem the exploding deficit caused by the 1981 cut without admitting he was back-tracking. The long and short of it was Reagan's "trigger tax" never got off the ground because even the threat of a trigger release causes it own set of adverse but impossible to quantify economic feedbacks.
Even then, the Senate bill has not yet begun to fix all the other "problems" that would be required to find the 51-votes.
For instance, Senators Johnson and Daines—both former small businessmen and "pass-thru" tax payers—-are holding out for a better deal for the millions of small business owners who won't benefit from the K-Street/Wall Street driven cut in the corporate rate.
As presently written, pass thru payers would face a 30% rate on qualifying business income rather than 20%, and that's only until 2025. After that they get zip—even as the corporate rate remains permanent.
The problem with the "fix" needed for these two Senate votes, of course, is that even the 30% pass-thru rate costs $25 billion per year and there is no room in the fiscal envelope.
Likewise, the latest distributional analysis shows that in 2025—before the sunset—the bottom 30 million tax filers would get an average "tax cut" which amounts to the grand sum of $1.15 per week—-and, no, we did not omit any zeros.
Similarly, the next 30 million filers would only get $7 per week; and the middle quintile—-the 30 million tax filers between $55,00 and $95,000 per year and the heart of the middle class—– would get just $17 per week of tax relief in 2025.
That is, before it all disappears into the sunset!
As we said, the GOP might better pass a two-word tax bill and be done with it.
Better still, it might consider the possibility that the great barrier to growth in America today is not the tax code, but the Fed and its massive inducements for speculation on Wall Street, rather than investment and growth on main street.
Indeed, given the warm welcome that most GOP Senators are giving to the new Fed Chairman—-that is, Janet Yellen in a tie and trousers—that avenue of inquiry is more than warranted.
As we will argue tomorrow, US taxes are always too high and should be cut along with parallel reductions in spending and the deficit. But short of that, it is hard to say that American producers struggle under some kind of severe competitive disadvantage in the global economy.
In fact, only Ireland, Chile and Mexico have lower tax burdens among all OECD countries, and the US rate at 26% of GDP is actually one-fourth lower than the OECD average.
- Maryland Schools Forced To Cancel Baltimore Field Trips Due To "Escalating Violence"
In light of the ongoing wave of violent crime in Baltimore, school officials in nearby Carroll County have been forced to halt school-related trips to the city – including a marching band’s scheduled performance in the Mayor’s Christmas Parade this weekend – citing “escalating violence.” The field trip ban was imposed by the Carroll County Sheriff’s Office “in response to parent concerns regarding the safety of students.” Here’s more from The Baltimore Sun:
Schools spokeswoman Carey Gaddis said the order is based on a recommendation from the county Sheriff’s Office, and will stay in place until the beginning of the next semester in late January, when it will be revisited. She said the order was sent to school principals last week.
Sheriff James T. DeWees recommended the measure during a meeting with school system officials “in response to parent concerns regarding the safety of students during field trips to venues in Baltimore City,” according to a statement from the sheriff’s office. The move is intended to “limit the risk to students and staff.”
“In light of recent violence in the traditional tourist areas of the city, the sheriff agrees that the best course of action is to temporarily suspend travel to Baltimore City venues,” spokesman Cpl. Jonathan Light wrote in the statement.
Of course, as we pointed out recently (see: America’s Urban War Zone: Baltimore Doubles Chicago’s Homicide Rate In 2017), Baltimore is on track to exceed 400 homicides in 2017 for the first time in the city’s history and has more than doubled Chicago’s homicide rate on a per capita basis.
As the Sun notes, two field trips to Baltimore have been cancelled so far after parent’s received a rather disturbing email from Carroll County schools spokeswoman Cary Gaddis citing “escalating violence.”
Field trips are still being considered on a “case-by-case basis,” Gaddis said, but the policy has caused at least two forthcoming trips to be canceled: a planned field trip Friday to the Maryland Science Center by third-grade students from Westminster Elementary School, and Francis Scott Key High School’s band appearance in the Christmas parade in Hampden.
Both schools cited the county’s new policy as the reason for the cancellations.
“Due to escalating violence reported in Baltimore City, and consultation with law enforcement and Maryland Center for School Safety, we will not be sending any students on field trips to Baltimore City at this time,” said an email sent to Westminster parents and guardians Nov. 22.
“When they’re not contained but they’re walking around an area, walking around the city … we don’t have as much control,” she said. The Sheriff’s Office does not send a deputy along with students on field trips, she said.
Of course, support of the field trip ban is mixed with at least one Democratic legislator in Baltimore blasting the decision of the Carroll County Sheriff’s Office as “misguided and disappointing” while declaring the city is “still a safe place to visit and walk around and explore our cultural sites”…
Delegate Brook Lierman, a Baltimore Democrat who lives downtown, called the notion that the city is unsafe for visitors “misguided and disappointing.”
“While we are experiencing an uptick in crime, there’s no denying that, it is still a safe place to visit and walk around and explore our cultural sites,” she said. “I love living in Downtown Baltimore and want and hope students from around the state can come visit the great neighborhoods and institutions we have in the city.”
Andy Smith, the Hampstead parent who sent the email to the sheriff and school officials, said he is satisfied with the school system’s decision.
“This is one of those things where being overly cautious is probably the best policy, rather than waiting for something to happen that you can’t undo,” Smith said.
“We’re trying to keep in mind the safety of our students,” she said. “That’s something we have to pay attention to.”
…it seems that Washington D.C. isn’t the only place where politicians find it convenient to ignore statistics.
- North Korea Says "Completed State Nuclear Program"; Warns "The Whole US Is In Range"
North Korea claims its "new ICBM can put whole U.S. mainland within range," says it has "realized great historic cause of completing state nuclear force"
* * *
Following the successful test-firing of its longest range ICBM yet today, Yonhap News reports, citing North Korean media, that North Korea will make an important announcement at noon Seoul time (10:30pm ET).
Presumably, Kim's comments will be a braggadocio reaction to President Trump and General Mattis' comments (begins around 6:30):
Mattis warned "[North Korea] R&D is accelerating and they now appear to have the capability to launch an ICBM attack on anywhere in the world" to which Trump replied "we will take care of it… it is a situation we will handle."
Trump then tweeted later this evening: "After North Korea missile launch, it's more important than ever to fund our gov't & military! "
North Korea announces that it “successfully” fired a new Hwasong-15 missile with improved technology, according to an announcement read on state-run television on Wednesday.
Kim gave the order to test fire the missile, state-run Korean Central News Agency said.
“After watching the successful launch of the new type ICBM Hwasong-15, Kim Jong Un declared with pride that now we have finally realized the great historic cause of completing the state nuclear force, the cause of building a rocket power,” KCNA said.
The new missile "brings the whole US mainland within North Korea's range."
None of which is news as we already reported these details.
But perhaps the most notable claims is that North Korea says it has "realized great historic cause of completing state nuclear force"
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