One of the great examples of political spin was delivered last week by the US Director of the National Economic Council, Brian Deese.
Americans are complaining about rising prices, with food inflation well into double figures. Brian was unleashed on the nation to calm nerves and set the record straight.
He explained to Americans that despite rising prices, those rises could be attributed to three products. Beef, pork and poultry and if we simply remove the impact of those core proteins, prices are actually very stable. Brilliant.
The United Nations has a slightly different view, its inflation adjusted food price index showing prices are now at their highest for 60 years.
Brian has some delicious form of course, he used to work for BlackRock Investments where he was Global Head of Sustainable Investing. When asked about BlackRock’s “heavy investments” in the fossil fuel industry. He explained:
Which transition he didn’t say, presumably the one where burnt coal turns into money for BlackRock. In a sustainable way, obviously.It’s very simple tactic that Brian employs. Simply talk down all the things that don’t fit the narrative and talk up things that are good, or potentially good or might be good in some totally pretend future.
Most people will accept Brian’s ‘facts’, which will explain to you how the USA got away with issuing entirely pretend money to the rest of the world for 40 years.
The daily value transfer on bitcoin hit an all-time high this week at $178 billion (similar to gold on a busy day). Another reference point is foreign currency, which trades $6 trillion in daily volume. So only 3% of that.
Ethereum was a bit quieter with $7 billion transferred daily although it has peaked at double that earlier in the year.
Taken out of context like this the numbers don’t mean that much. A big exchange reorganising can account for large volume on a given day but still it is permissionless value transfer. On average, users paid $1 for every $294,000 transferred on Bitcoin and the network generated $600,000 in fees every day.
Whichever way you look at it, something big is happening.
Fresh from congratulating the US President on the excellence of his withdrawal from Afghanistan, the New York Times turned its attention to Bitcoin this week.
First up, security. The security of the Bitcoin network is not in doubt at all. The IT skills of the general population are another matter. If you take custody of your private keys and you lose them, then you lose your bitcoin. That is the whole point; nobody else knows the password. Nobody else can hack the password, the assets are yours and yours alone. The fact that lost passwords mean lost bitcoins is proof of the security model. There is no password reset, there is no back door and there is no way the government or anyone else can recreate your private keys.
When it comes to the Colonial Pipeline hack, we know the US Government simply tracked the bitcoins down to a US based exchange and subpoenaed them to handover the private keys. Once again, don’t leave your assets on an exchange because you do not control them and the exchange does. They absolutely have not cracked bitcoin’s encryption (we know this because the FBI’s own court submissions explained how they tracked the bitcoins down and recovered them).
Likening what happened here to the work on the Enigma machine is spectacularly false. Alan Turing, a key player in cracking the Enigma machine knew very well the power of properly executed cryptography. Here he is in 1936 explaining the idea to his mother in a letter.
Incidentally, the Enigma machine was not cracked by “basically figuring out the password”. The Enigma machine was flawed, the issue it faced was that particular letters could not be coded as themselves. So, you couldn’t code Q as a Q post encryption. Consequently, it left a trail in its messages with each part of code expressing what it could not be. This is not a huge clue but with enough encoded messages the Bletchley team managed to decode Enigma.
Interesting take here on the gold standard, which also happened to be one of the most stable and highest growth periods in human history. We have high had nominal growth since 1970 of course but not if you denominate that growth in gold.
The better characterisation of bitcoin (or gold historically) is that it protects individuals from political decisions. No protocol is going to prevent bad decisions from happening. The name of the game is protecting yourself from inadvertently paying for someone else’s re-election.
“Difficult and expensive to use”. Try sending a bank wire to another country. It takes days, forms need to be filled in and it will cost you a minimum of $40. It is not just El Salvador though, across Africa and South America in particular people use Bitcoin all the time to transfer money because it is instant, cheap and secure. The growing infrastructure referred to in the article is clearly the lightning network, which couldn’t look much more different to the traditional financial system if it tried.
The mouthpieces of the American government are starting to speak as one, the IMF, the World Bank, the paid economists of the Federal Reserve and the New York Times.
They are worried, and they should be.
When a high-speed quantitative trading firm wants to participate in any given market you have to wonder. Cryptocurrency is still full of bedroom traders 15x leveraging into some fantasy coin with zero chance of success. If you are a billionaire and know how to trade, you too could start a firm that effectively picks that money up from the bedroom floor of teenagers across the globe.
Perhaps this will help bring the same brutal arbitrage efficiency to digital assets that it has brought to foreign exchange.
I personally welcome Steve and his Radikl approach, which isn’t really that radical. I suspect over the years lessons will be distributed evenly across market participants, particularly on the short side.
Trading is a game and good luck to all the players, including Steve.
It seems the ECB is persisting with its cartoon monetary policy updates. The one-line summary is Christine thinks things in Europe are better than she had feared.
We will be buying slightly fewer junk bonds. Here is a lady stealing a drainpipe.
Interest rates will remain negative. You too will be able to put an expensive washing machine in a shopping trolley and enjoy 10 years interest free credit.
Things are getting better, people are going to the beach and making off in the background with the stolen drainpipe.
Only two people in Europe have a job. They both work in an Amazon warehouse.