QE and Bitcoin

[ant dee]

A world of Bitcoins would have us back in a depression far worse that that of the 1930's

Why are we dealing in absolutes?
A world with Bitcoin as it's only currency , a world without government...

How about a world with Bitcoin. Where everyone has the choice to participate , without asking for permission.
How about a world where governments don't have absolute control over all the currencies.
Why not aim for that ?

 

[TheBigShort]

he thinks the whole shooting gallery is a QE inflated bubble

What do you think yourself?

 

[Duke of Marmalade]

What do you think yourself?

There is no doubt that QE has pumped up asset prices. For bonds that is simply a definition. QE is the act of central banks buying up bonds. For other assets there has definitely been a knock on effect. I wouldn't invest in equities myself just now. But to describe the situation as a bubble warranting a flight to gold is a bit wild and possibly irresponsible.

People who save money have one major goal, that it will be able to purchase goods and services when they need it, at reasonably predictable prices. Inflation of the prices of goods and services is simply not happening and I believe the QE will be managed to ensure it won't happen in any big way. To buy gold is to protect against some hyper inflationary outcome. That is extremely speculative and people rushing for gold are much more likely to find their real spending power in the future precarious.

 

[TheBigShort]

There is no doubt that QE has pumped up asset prices. For bonds that is simply a definition. QE is the act of central banks buying up bonds. For other assets there has definitely been a knock on effect. I wouldn't invest in equities myself just now. But to describe the situation as a bubble warranting a flight to gold is a bit wild and possibly irresponsible.

People who save money have one major goal, that it will be able to purchase goods and services when they need it, at reasonably predictable prices. Inflation of the prices of goods and services is simply not happening and I believe the QE will be managed to ensure it won't happen in any big way. To but gold is to protect against some hyper inflationary outcome. That is extremely speculative and people rushing for gold are much more likely to find their real spending power in the future highly uncertain.

Unless of course the situation is a bubble and warrants a flight a gold? Then the responsible thing would be to inform readers of that situation?

Of course, Hobbs could be way off the mark, but then again, he is simply offering an opinion. The responsible thing to do is to take his opinion and the opinion of various other 'experts', weigh up the probabilities and possibilities and to make an informed decision. Albeit, in the knowledge that such a decision could still turn out wrong.

In any case, I doubt if Hobbs has the reputation to induce a flight to gold.

- I do admire your confidence that QE will be managed to ensure price inflation of goods and services. Perhaps that is where we differ fundamentally? I have little to zero confidence that the central banks can manage economic forces in a way that isn't already resulting in increasing conflicts of self-interest.

 

[Duke of Marmalade]

- I do admire your confidence that QE will be managed to ensure price inflation of goods and services.

If QE causes (hyper) inflation it will because of some very serious misjudgement of monetary economics, and I trust them not to do that.

Examples of where I wouldn't trust the custodians of fiat to manage its price level are as follows:

The need to print money to pay crippling reparations (Weimar)
The need to print money to pay for wars (WWII etc.)
The need to print money to pay for disproportionate defense needs (Israel)
The need to print (reserve) money to devalue massive trade imbalances (oil crisis of the 70s)
The need to print money to cover for disastrous economic mis-management (Venezuala)
The need to print money to fund massive corruption on high (Louis XVI, Robert Mugabe et al)

These are situations where there is a huge imbalance in the demands on the economy versus its capabilities. There is currently no evidence of any such imbalance in the economies that affect us.

QE is a technical monetary tactic to try and boost investment, it is not a desperate attempt to live way beyond one's means. It can be unwound as the need requires in a way the above phenomena could not be unwound.

But I could be wrong

 

[RichInSpirit]

Gold and bitcoin might not be mutually exclusive.
Some gold in the chips mining for bitcoin might speed them up a bit !

 

[TheBigShort]

If QE causes (hyper) inflation it will because of some very serious misjudgement of monetary economics, and I trust them not to do that.

Examples of where I wouldn't trust the custodians of fiat to manage its price level are as follows:

The need to print money to pay crippling reparations (Weimar)
The need to print money to pay for wars (WWII etc.)
The need to print money to pay for disproportionate defense needs (Israel)
The need to print (reserve) money to devalue massive trade imbalances (oil crisis of the 70s)
The need to print money to cover for disastrous economic mis-management (Venezuala)
The need to print money to fund massive corruption on high (Louis XVI, Robert Mugabe et al)

These are situations where there is a huge imbalance in the demands on the economy versus its capabilities. There is currently no evidence of any such imbalance in the economies that affect us.

QE is a technical monetary tactic to try and boost investment, it is not a desperate attempt to live way beyond one's means. It can be unwound as the need requires in a way the above phenomena could not be unwound.

But I could be wrong

It's hard to know where to start with this. If you sincerely believe that QE is a monetary tactic to try and boost investment then I'm not going to even try convince you otherwise.

But for my part QE is a desperate attempt to paper over the consequences of living beyond our means. The imbalances in the global economies are there for everyone to see.
The magic money tree that is the US national debt, financing war after war after, from Korea to Vietnam to Iraq and Afghanistan. It's how a country $20trn in debt can 'afford' a 10% in its military budget.

The magic money tree that is the Federel Reserve, bailing out US banks to the tune of $700bn.
The magic money tree that is the ECB bailing out European banks and nation states, putting the bill on the never-never.

But I accept, I could be wrong also.

 

[Duke of Marmalade]

Okay, some valid counter punches there B/S.

The US could be accused of monetary financing of its debt (to fight wars) although the FED would be totally against monetary financing. They would argue that the debt came first by folk including some significant foreign players willingly lending to the US. In crude monetary financing the central bank simply issues government debt and money simultaneously.

Japan has been at this QE thing for ever and has suffered no inflation.

 

[TheBigShort]

The US could be accused of monetary financing of its debt (to fight wars) although the FED would be totally against monetary financing. They would argue that the debt came first by folk including some significant foreign players willingly lending to the US.

I wouldnt dispute this, but in a normal functioning financial system there is a limit to how much borrowing and lending can occur relative to the growth of an economy and overall management of its finances. I think we are beyond normal now.

Japan has been at this QE thing for ever and has suffered no inflation.

Inflation no, deflation yes, stagnation yes, negative yields yes. Perpetual debt, yes. Financially sustainable long-term, when more big economies are heading for increased debt, no.

A short piece that is broadly in line with my own thinking. Is bitcoin in a bubble at all?

https://www.zerohedge.com/news/2018-01-08/bitcoin-isnt-bubble-global-financial-system

 

[Duke of Marmalade]

The consensus among the very smart experts is unanimous: bitcoin is clearly and indisputably a gigantic bubble that’s set to burst.

That's my line. How perverse human argumentation is. What I have been citing as clear evidence that bitcoin is a bubble, Liberty Blitz uses to claim the exact opposite. It has become increasingly trendy to go against the "very smart experts" such as in Brexit and Trump victories but it is hardly a long term sustainable philosophy.

Liberty Blitz gives us an example of a "true bubble" viz. the oil price going from $150 to $30. I'll give another example. In the morning of the third Sunday in September last tickets to the All Ireland were trading at €300. By that evening they were worth nothing. Of course these two examples are non bubbles. They genuinely represented the supply and demand for the commodity for its intrinsic value. What makes a bubble is speculative demand unsupported by fundamentals.

Liberty Blitz go on to expound on the key tenets of Shortie Syndrome. However given that a primary informer of their reasoning is to reject "the very smart experts" I was not convinced.

 

[TheBigShort]

You may have noticed in my previous post that I ask the question about the bitcoin bubble, rather than confirm or deny it is in one. Im on the fence in that regard that I consider it is showing the traits of the bubble, but my perspective is that because there is relatively little historic price comparisons it is hard to say if it is in a bubble at $200, $2,000, $20,000 OR $200,000? On the face of it, its rapid price rise points to a bubble. But I am not making that call either way.


I cant really prescribe to your analogy of the All-Ireland, as by evening time, the event was completed, the intrinsic value of those tickets had returned to zero, forever. Tickets could never be used again. Unlike oil, if I buy it today, it can be used for a long, long time into the foreseeable future at a time of my choosing.

Liberty Blitz go on to expound on the key tenets of Shortie Syndrome. However given that a primary informer of their reasoning is to reject "the very smart experts" I was not convinced.

That is of course your perogatitve. But bitcoin aside, you appear to have indulged your own perspective by considering that the “very smart experts” are all in tandem when it comes to QE?

https://www.theguardian.com/business/2016/feb/08/whats-holding-back-world-economy-joseph-e-stiglitz

http://positivemoney.org/2016/08/leading-economists-to-chancellor-time-to-support-alternatives-to-quantitative-easing/