Lie Low Laxing in a Radical February

Whilst world news has been off the crazy charts, Banks have been advertising with dancing transsexuals. Go the pride parade! We have shooting in the USA, and silicon valley ad odds with Washington. Bitcoin and Crypto currency have been remarkably sensible and subdued. Something odd for a juvenile rebel currency, but hey, It's relaxing!

The price has been stable at around $420 USD per Bitcoin (you could say 42 cents per millibit). I'm looking out the window to another sunny day back in Auckland New Zealand and finally starting to eat again. I can even buy fries at the local bitcoin meet up. Its great, I may even pump up the lie low and some rum cocktails, but first I want to take the opportunity to list a few cool things about crypto currency that I have stumbled into.

MyBitcoinSaver - set up an automatic payment and save bitcoin in New Zealand.

Keepkey - a cool looking device to keep bitcoins super secure.

BTproof - Lets you put any data you want into the block chain, so you can prove the truth with a forge proof time stamp. Make predictions or cement your vows.

Abra - a network of people who act like uber human ATM machines.

So on those four notes I'm going to continue chilling, finding new apps, trying to learn to code and to create a bitcoin friendly tourist paradise in Auckland. I have JS just about down. I also have a VR kit in the mail courtesy of Overstock. I guess that makes NZ the on the fore front of tech? Maybe Apple should move it's head office here?

We have radical corporate noodle banks, maybe they'll let you pay your staff in bitcoin. A one cent satoshi doesn't seem so out of place.

Martin Shkreli - Preparing to Steal Your Bitcoins

The Exit Signs

I like the EU but it looks like the exit signs are popping up everywhere. The unified currency is definitely something that is needed in the area.  It's proving hard to get it to work. The difficulty is the cross over with money and politics. Crypto currency can be highly political, but it can also be politically agnostic.

It is a relief that the UK have come to a deal today, however the union is now more politicised and this may be difficult to manage. despite the tweet the drama is far from over, the UK still need to vote on it. All this when the Greeks still stand precariously next to the emergence exit asking for money. How many more exit signs will be turned on? Italian banks may soon need EU bailouts. It feels like the theater might be getting ready for a fire drill. This has got to be a good thing for the bitcoin price.

Martin Shkreli - Super Villains Exist!

Just getting started on this one. Should he be The Joker or Two Face? I'm thinking rubber gloves would suit him.

Ethereum Boom

In the last 24 hours Ethereum market cap has risen over 30%. the price is now over $5 

USD. this make it the second largest crypto currency (alternative to bitcoin). Over taking Ripple and Litecoin, it's a serious currency worth $480mil. It's not the name of a computer game, but as in the sci-fi game, it is not clear whether Ethereum is as innocent as it may seem.

If you thought bitcoin was complicated, Ethereum is a googleplex. It is nerd central and although there are some slick products coming out of it, you really need programming knowledge to be involved. The currencies ambition is huge and its image is good. It's not really even a currency, its like an energy for everything. however in order to attempt this the source code is hugely more complex than that of other crypto currencies. Its an exciting and positive goal, and its more trendy than bitcoin, but is it to ambitious? 

Considering that the public are still struggling to grasp the potential of more simple crypto currencies like Bitcoin and Litecoin, it may unintentionally become a divisive and elitist force. This complexity could put outsiders off crypto currencies as a whole or it could act to divide the crypto community. Anti-bank factions have traditionally been able to rally against Ripple but now Ethereum may be used by R3. This would make Ethereum both good and bad from that point of view. I think Ethereum is a good thing but certainly, what was once a clear is now very cerebral. Much more discussion is needed and it won't sound like a presidential debate.

Nerds and hipsters are angry and it looks like the Ethereum boom is far from over. In line with yesterdays Star Wars theme, the crypto currency dark side could indeed be getting darker. Ethereum enthusiast Woods says “The idea of making certain things impossible to legislate against is really interesting”. It is scary interesting, Ethereum could be a programmatic king hit.

Crypto Star Wars

It seems like there are to many similarities in the crypto story lately, to that of our favorite popular sci-fi film. To many to be ignored. Lets just draw X Wings and post them on the web! It's the force!

#Blockchain

Last week I went to the Auckland bitcoin meet up. The people were pretty cool! Its a great excuse to drink beer and eat chips bought with bitcoins and talk smack! Go the doggy! Here's my latest odes to the blockchain.

#Blockchain "straight out of Compton"

#Blockchain the catch 22 for banks

Bitcoin is gold. everything that it isn't is #Blockchain

#Blockchain, don't even worry about it

Bad Bad Debt

We hate to be negative but there are so many negative things going on in the world economy at the moment. Not only do we have a new default issue in Puerto Rico, but we still have not fixed Greece.
they still have a withdrawal limit on their accounts! In January, new laws passed in the European union that will no longer be able bail out banks. This is a step in the right direction, but what happens next? Without bailouts what is the point in staying in the union? It certainly feels like a precarious position.

Of most concern is the way that debt has developed over the last 10 years. Since the global financial crises debt has not been paid down and has actually increased overall. The cost of dept in advanced countries is very low whilst the cost for developing countries has increased. The most developed counties have the most dept. This phenomenon creates an increasing divide between countries We are also seeing more and more wealth inequality.

Whilst overall debt levels are increasing (somewhat exponentially) this is happening in different sectors than before the global financial crisis. Banking dept has slowed whilst government and corporate dept has skyrocketed. We have a shifting of burden of debt. From our banks and onto our governments and our jobs. Corporations that employ people are bigger and operate internationally fed by cheap dept from their home countries. New debt for governments and corporations has been funded from money printing. It adds up to do the opposite of what was the intended response to the 2008 financial crisis.

See the graph bellow show global dept over the last 14 years.

Although banks can be fairly disposed of, countries don't particularly like to go bankrupt. This could be the difference this round. Over the course of history there is quite a list of countries with sovereign debt issues. It even includes the UK and the United States. These types of events lead to major currency fluctuations and major problems.

So with the destabilised currency environment Bitcoin and crypto currencies become more appealing. They can be transacted with easily despite the external conditions. Also transparent real time accounting offered by crypto currencies can prevent these unseen debt movements in the future. What seems like an uncontrollable issue with debt might finally be able to be cured.

Negative interest rates are on the cards for many countries around the world. Money printing presses are getting warmed up in Japan and Europe. this is not a good sign for savers around the world. Crypto currencies like Bitcoin also starts to look like a much more sound way to store value now having 8 years of history.

New debt is different in that it's not centered around the banks. We can call it bad bad debt because it directly effect our countries and our jobs. Bitcoin offers a solution to this on multiple fronts. It reduces reliance on the country for financial stability, it guards against inflation, negative interest rates and it allows debt free banking and  and encourages a debt free economy. Hopefully with the issue getting closer to home, this time we might really be able to solve it.

The Big Short, High Yeild Bonds and Inevitable Chinese Stock Declines

The stock market crashed 10% in January and as an investor and bitcoin enthusiast I have been unlucky enough follow this closely. It's not looking to rosy for stock and bond traders,  When you listen to mainstream media you just get a blur of intensity and confusion. If you've seen The Big Short, you can probably imagine why. It's worth while to summarise the situation and how the world got here. It may be a major set up for crypto currencies.

Media are blaming the crash on China, but this is not entirely fair. China's stock market has climbed rapidly in previous years and having such high valuations, more than twice the PE levels of the US, it was always more volatile. Also its markets open earlier in the day than those of the US making it easy to blame.

After the dive in global stocks in August the Chinese government bought in a range of policies to control its stock market. These included banning large investors from selling stocks immediately and phasing in circuit breakers, which close the stock market if it moves to much at once.

In January China was due to have their stock sales ban removed but its market crashed the day before.  Their market hit circuit breakers two days in a row. The world market also dropped sharply, pretty much in unison. In response the Chinese government decided to continued the ban on selling stocks until further notice.

Capital controls have become a major attribute of the Chinese economy. Wealthy Chinese citizens are continually trying to find ways to get their money out of the country, often investing in property or family businesses overseas. There is an annual limit of around $50k per person.

The Chinese government have built up huge foreign exchange reserves over the last 20 years in efforts to keep the Yuan at a low price. These overseas investments often go into government bonds built sometime into high rates corporate bonds. This three trillion investment had held up the value of these investments in the US.

The tendency for people to want to get money out of the country is often caused by a depreciating Chinese Yuan. In response to this now the Chinese government are reclaiming their own foreign investments which helps boost the Yuan value and maintain stability against its basket of currencies. With the US dollar rising so much out of sync with this basket it has become increasingly difficult for the Chinese cover this pair.

On December 16 the US Fed raised interest rates, In the days before the rate rise Wall Street high yield bond funds started getting into trouble. this was in part due to the low oil prices which they are exposed to through their investments. After an initial positive pop, the US market continued down within the week. Boosting the USD against world currencies the global divergence of interest rate policy further exacerbated the apparent Yuan/USD devaluing.

In line with Ben Rickerts legacy from The Big Short I have been inspired to research the bond market, in particular High Yield bonds. It has proven difficult but I have found that corporate bonds are highly interdependent with the bond market in general. High Yield bonds make up at least 5 and up to 30 percent of A grade mutual fund portfolios. Bonds are also giving very low returns. At the moment, one year returns are often negative. These returns have been somewhat offset by a strong US dollar, but this is not likely to last much longer.

The situation leaves us with the following factors

• The Chinese stock market cant go up in the shorty term because why would you buy when you may not be allowed to sell? 

• The current pattern will continue at least until we no longer have divergent interest rates and the USD has dropped in line with world currencies. Chinese stabilisation policies will have a negative effect on the US bond markets as they will remove funds from this area

• The problem is exaggerated by low oil prices which are disproportionately bad for the US. If the USD was to go down this would also put pressure on the US bond markets.

So if the Chinese market continues down, the bond markets get clobbered and eventually the US dollar drops around 20% what happens for crypto currency? People in China may well want to move more investments into something less restricted and people in the US may no longer hold so much faith in US dollars and US bonds will become a bad deal. It is a good case for increased crypto currency adoption. Could it also be an opportunity for a bitcoin treasury bond?