The Prophecy
…and it did. It spread all over the globe and now everything you use every day is laced with cryptography. Your phone, messaging apps and email. Much to the frustration of governments around the world.
Then it spread to money. Like everything else it touched, it won’t stop. No matter how much wishful thinking and regulation occurs to bottle it up.
Back in the middle ages at the launch of the printing press, only 5% of the population could read. The expectation was that number might get to 20%, but no more than that, because people were not intelligent enough to understand. Reading though, is useful, empowering and bestows freedom. So people learned to read and they never unlearned.
Human Blights
If you wanted to masquerade as an elected representative with legal authority, you would organise a summit. You would hold it somewhere fabulously beautiful and expensive and then invite lots of politicians, all expenses paid. You would feed them and water them while fawning over their reputations. You would call it, Davos.
Yes. It’s time, and this year they are making up for lost ground.
So, our first nominee for our coveted Davos “Complete Imbecile Award” is one of our very own Australians. Our eSafety Commissioner (yes, we do have one).
“Recalibrate human rights”? Long overdue that we dealt with those pesky annoyances like free speech. The Commissioner used to work at Twitter, where (one assumes) regulating people’s thoughts was part of the day job.
Next up was the IMF Chief, who made an amusing joke to the gathered sycophants that bitcoin cannot be money “by having ‘coin’ in the name”.
That is true, yet misses the point.
As we know, to qualify as money an asset must be fungible, divisible, portable, acceptable, uniform and limited in supply. You know, something like this:
You can believe that money is what the government says it is, or you can believe that it is defined by its features. Crucially, money must be independently arising. This is in contrast to fiat money which arises only by government decree (and so always fails). The IMF has its own kind of fiat money, Special Deposit Rights (SDRs). I recommend trying to use them to buy something at your local shop.
As for the Complete Imbecile Award; rather than declare a winner, decide for yourself.
Germany
This was not a good week in Germany. Their producer price index rose to 33.5%, the highest it has ever been since records began. It is a disaster for German industry which will flow through to retail prices shortly.
The clear explanation was provided by European leaders this week.
Joking aside, it is a grave situation for Germany and Europe. All the while the interest rate is still negative and the ECB continues to buy bonds. Apparently, that will change in August but I’m inclined to believe some new crisis will emerge before that, which will mean that cannot happen. It’s hard not to think that there is some more fundamental problem in Europe that is not discussed.
I suspect that problem is the technical bankruptcy of the Southern States. Nobody wants Italy, Spain or Portugal’s bonds and we will see the yields diverge immediately as the ECB takes its foot off the pedal.
As if to prove this point, Germany has now agreed to a suspension on the budget limits in EU countries for 2023. This will make deficits worse across Europe. The most controversial aspect of those suspended rules is this one:
“Governments must cut debt every year by 1/20th of the excess above 60% of GDP”
In Italy the debt/GDP ratio is 160% and in Greece it is 200%. The rule implies a 5% debt reduction each year for Italy and a 7% reduction for Greece. This is never going to happen and everybody knows it but it’s easier to suspend the rule and pretend than admit failure. These rules are now scheduled to return in 2024. They won’t though, because they are a joke and the EU will come up with something else and I will be here to remind you that they are bankrupt and so is the Euro.
Speaking of reminders, remember that Austrian 100 year bond they issued a few years back which we talked about here, a lifetime ago in August 2019. It’s now down 55%, which for an AA+ rated asset is quite a lot, no?
“Be safe investor, buy bonds or you will lose your money”
Over the next two years, you will be encouraged to buy bonds from every angle. All sorts of fancy “safe” products will be issued. “Green Bonds”, “Peace Bonds”, “I’m a Good Person Bonds”. They will be garbage and you should exercise extreme caution when considering them.
Euro-Trash (part 1)
A thrilling double dose of Euro-Trash this week. First up, Christine attacks bitcoin. Suggesting the “digital Euro” will be a better store of value. Presumably because the not-so-digital one was worse.
“The digital Euro will be a safer store of value”
As usual the issue of ‘crypto’ and ‘bitcoin’ is deliberately conflated. Even so, let’s remind ourselves.
One year ago bitcoin was worth €29,278, today it is worth €27,257 (-7%)
Two years ago bitcoin €8,599 (+216%)
Three years ago bitcoin €7,808 (+274%)
Five years ago bitcoin €1,928 (+1400%)
Yes, bitcoin is down 50% from its high but it is destroying the Euro. If it wasn’t, Christine Lagarde wouldn’t even give it the time of day. Why would she spend resources and time to regulate something that “is nothing”? Why does bitcoin come up at every press conference and every presentation she gives and in every Q&A?
It must haunt her dreams, like the Euro does mine; for different reasons.
Euro-Trash (part 2)
Time to check in on the European Central Bank’s scores on Glassdoor, a website which rates larger employers. Overwhelmingly, the feedback is excellent. 87% approve of the CEO which shows just what a brainwashed bunch the ECB employs. Nonetheless, the score is the score and I feel duty bound to congratulate Ms Lagarde on it.
This former employee, who rated them 5 stars, was initially gushing but the cons looked rather brutal.
Most interesting though was this ultra-critical report. No doubt from a disaffected failure, who laments the lack of ‘onsite benefits’ (they mean the excellent canteen). Anyway, jump to the second last line. It would appear “colleagues” have been talking about how to invest their mega-salaries in bitcoin of all things. Surely not!!
