The Fed, which has Sprinkled Easy-Money Fairy Dust all over the Economy

I came across that delightful metaphor in an article on how the US economy is in a bubble:

Housing prices are also way overinflated, and another contributor to that household wealth, a big chunk of middle class wealth, he says. Behind it all, is the Fed, which has sprinkled easy-money fairy dust all over the economy. And that central bank is going to bust the household wealth bubble right open, he warns, with rising interest rates and tightening monetary policy.

Analyst who predicted the 2008 crash warns of bubble brewing in U.S. household wealth

So the top blue line is going to “revert to the mean” meaning back to the gold GDP line, which equals a market crash back to reality.

The Train Has Not Left the Bitcoin Station

This is a short excerpt from Venture Capitalist Chamath Palihapitiya on CNBC, Dec 12, 2017.

I wrote an article about bitcoin in 2013. There is so much asymmetric upside here. This is a thing that goes to roughly the value of gold. There’s very little downside.

Take 1% of your money and put it into schmuck insurance. This is now a confidence game, this is a hedge against autocratic regimes and banking structures that are corrosive to how the world needs to work properly. You cannot have central banks infinitely printing currency, you cannot have guys with misdirected and misguided fiscal policy…

So we’ve seen the first few chapters of this and now we have to see the great unwind. [Referring to QT: quantitative tightening]

All I’m saying is its a hedge against the infrastructure that made those decisions without our input is a smart thing.

I think 1 bitcoin will be worth $100,000 in 3 to 4 years, and in the next 20 years, a million dollars a coin.

Former Facebook Exec Chamath Palihapitiya On Social Media, Bitcoin, And Elon Musk (Full) | on CNBC.

Here’s the link: 10:20 in,  Let’s Talk Bitcoin:
https://www.youtube.com/watch?v=5zyRpq2ODrE&t=620s

FUD Vs Foresight


Today on March 16, 2018 bitcoin is sitting at $8,550 USD. Here we have a couple of my favorite investors throwing shade at bitcoin. What’s interesting is that the crypto industry is actually going thru the necessary growing pains of regulation and use scaling. Because both bitcoin and ethereum are testing their scaling solutions (to compete with banks & visa/mastercard, etc), both are poised for more use adoption this year.

So here’s the FUD:

In February, Berkshire Hathaway, Inc. (BRK.A, BRK.B) vice chairman Charlie Munger had harsh words for bitcoin at the Berkshire annual shareholder meeting.

“It’s just disgusting. Bitcoin is noxious poison,” Munger said. Billionaire Berkshire CEO Warren Buffett once famously called bitcoin “a mirage.”

And the Foresight:

Still, bitcoin has plenty of supporters on Wall Street. Fundstrat Global Advisors co-founder Thomas Lee[WD] says Fundstrat’s bitcoin misery index suggests the sell-off is an excellent buying opportunity for long-term investors.

“The BMI is telling us to keep the negative headlines in perspective,” Lee said, according to CNBC. “When the BMI is at a ‘misery’ level, future returns are very good.”

Fundstrat has a year-end price target for bitcoin of $25,000.

CoinPuffs Vs Coinmarketcap

Coinmarketcap’s homepage.

One day I noticed that the bitcoin price dropped alot, and the coinmarketcap as a whole also dropped $50 billion. What?! It turns out someone running coinmarketcap.com decided to drop South Korea off the market index because it’s prices were higher than other countries without telling anyone in advance. What?! Their prices are higher because South Korea makes it hard to move money in and out of country on purpose–that shouldn’t bar the country from being part of of the general index. Anyway, in the process of discovering this info, I found out that CoinPuffs works like CoinMarketCap, but not as capriciously. It seems more like a community site, and it has over 2000 coins listed. Article on coindesk.

So What does the Federal Reserve Do?

I like to listen to economic news at night and recently heard this lady, Nomi Prins, who was a Goldman Sachs manager, then journalist, talk about the history of the Federal Reserve in America. Her book, All the Presidents’ Bankers is a telling of the relationships between US Presidents and powerful bankers from 1907 to the present.

In 1907 there was a potential stock market meltdown, (caused by some bankers (some people are always trying to game the system)) and Teddy Roosevelt called on his friend J.P. Morgan to fix it. That led to the creation of the Federal Reserve in America. So basically the Fed (the US version of a “Central Bank”) acts as a bridge to do what the Government wants in the economy, via handling Government money. Unfortunately, it seems that printing money (called “fractional reserve banking” and “quantitative easing”), and thus devaluing the currency, is what the Fed tends to do, because it’s easier to flood the economy with money than it is to actually solve the economy’s root problems.

And right now, in 2018, it seems like the US is in the middle of a bigger bubble than it was in 2008 when the banking bubble burst, because the US is over 20 trillion in debt, and is at the point of not being able to make interest payments on the debt if the bond market rates keep going up. So buckle your seat belts!