Thursday, December 2, 2021

Doug Casey on Why Bitcoin Is Money

by Doug Casey, Casey Research:

Bitcoin is up 286{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} this year. Ethereum, another major cryptocurrency, is up 3,222{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} since the start of the year. Smaller cryptos have soared more than 10,000{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}.

Every investor is now wondering if this mania has legs, or if it’s a bubble that’s about to burst.

To answer this question, I called up Casey Research founder Doug Casey. You see, Doug’s been on the winning side of more manias than we can count. He was also an early investor in bitcoin.

Below is a transcript of our conversation. I encourage you to read it closely. It’s one of the more eye-opening Conversations with Casey we’ve ever published.

Justin: Doug, you’ve owned Bitcoin for some time now. How’d you get started in cryptocurrencies?

Doug: I was first introduced to them several years ago in Cafayate, Argentina. A lot of interesting people come through town.

A young Belgian guy came to visit, and I bought him lunch, and we discussed Bitcoin. He was a very early enthusiast. Because I bought him lunch, he gave me a physical Bitcoin as a souvenir. They actually exist. They’re collectibles that have the codes inscribed on them.

I still have that Bitcoin. At the time, a Bitcoin was worth $13. Now, they’re trading for about $4,000.

So, for that reason, that was the cheapest lunch I ever bought anyone. I wish I had listened to his argument, because I could have made millions. About 300-1 over just a few years…

Justin: Yeah, it’s crazy how much Bitcoin’s run over the last few years.

Do you think it’s headed even higher? Or is it a bubble about to burst?

Doug: I’m suspicious of where Bitcoin currently trades. The bright side is that there will never be more than 21 million created. I understand that only about half of them have come into existence.

And there are only about 25 million people in the world that own Bitcoin right now.

That’s a tiny proportion of the people in the world, and it’s going to grow. There’s going to be a lot more buying of Bitcoins and other cryptocurrencies simply because so few people own them right now, and there’s good reason to own them.

Justin: I agree that the market for cryptocurrencies will get bigger. But why exactly?

Doug: Cryptocurrencies are only the first and most obvious application of blockchain technology.

I’m not a computer jock, but that’s unimportant when it comes to seeing the implications of the technology—much as it was unnecessary to be either a driver or a mechanic 100 years ago to appreciate the merits of the automobile. It’s been said that the blockchain technology may be the most important single development since the invention of the internet itself.

It’s going to change the way documents are transmitted, the way real estate is sold and registered, the way stocks and bonds are tracked, the way inventory is tracked. It’s a game changer in many ways.

As far as the cryptocurrencies are concerned, my original objection to Bitcoin was that it’s not backed by anything. So, it’s really a fiat currency. It’s very much like the US dollar, the Zambian Kwacha, the Argentine peso, or any of the other 150-plus currencies in today’s world. It’s a floating abstraction.

But I missed something when I said, back then, that it had no value. It’s a fiat currency, but it has much more value than any other.

Justin: And what did you miss?

Doug: Aristotle defined the five characteristics of good money in the 4th century BC. And his analysis is as accurate now as it was then. It must be durable, divisible, convenient, consistent, and have use value in and of itself. Based on that, Aristotle believed gold and silver were best suited for use as money. Let’s analyze how Bitcoin does by these five criteria.

Durable. Bitcoin and other cryptocurrencies are definitely durable, unless we have an electromagnetic pulse (EMP) or a significant solar flare that wipes out all the computers. They’re not as durable as the metals, but they’re adequate, barring a collapse of civilization.

Divisible. They’re infinitely divisible. Better than the physical metals—although the metals can be accounted in tiny fractions too.

Convenient. Yes—as long as you have a smartphone, Bitcoin is very convenient. But your smartphone, or something like it, may not always be with you. And your counterparty also has to have one. And it’s not very convenient if someone doesn’t know or trust Bitcoin. Right now, that’s probably 98{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of humanity.

Consistent. Absolutely. Every Bitcoin is exactly like another one. It’s at least as good as .999 fine gold that way.

Read More @ CaseyResearch.com

Keiser Report: Last of the Fiat Notes (E1413)

from RT:

In the second half, Max talks to Chris Martenson of PeakProsperity.com about the choice between ‘greatness and oblivion’ in our environmental and economic policies going forward. They also discuss whether or not the U.S. can go negative on their sovereign debt yields and still retain its reserve currency status.

SELL CRYPTOS – BUY GOLD

by Egon von Greyerz, Gold Switzerland:

During the 2006-9 financial crisis, a collapse of the global financial system was avoided by massive money printing, guarantees and allowing banks to value assets at cost rather than market, as well as a panic lowering of interest rates from as high as 6% in the US to zero or negative. Bonds issued by eight major countries currently have negative interest rates from 1 & 2 year debt for Italy up to 15 & 30 year debt for Japan, Germany and Switzerland.

GLOBAL LIABILITIES OF $2 QUADRILLION

Whatever central banks and politicians say, nothing has been solved. On the contrary, risk has grown exponentially since 2006. Global debt has doubled to around $230 trillion since then. If global unfunded liabilities of $250 trillion and derivatives of $1.5 quadrillion are included, the world is now staring at total liabilities and risk of $2 quadrillion.

When the next crisis starts, which is likely to be in 2018, what central bankers have to focus on is not just global debt but also the derivative bubble. Banks will of course argue that the net derivative figure is much smaller. But in a crisis, gross will remain gross as counterparties fail to settle their obligations.

With this background, central bankers must be living on a different planet if they believe they can reduce their balance sheets. Debt in coming years, whether it is government or private debt will go up faster than any time in history.

Just take the US. It is no accident that Jerome Powell will take over from Yellen as Chairman of the Fed. He is a safe pair of hands and has been a Fed governor for 5 years. He is the perfect choice for expanding the Feds balance sheet infinitely.

US Federal debt is guaranteed to continue to double every 8 years as it has done since 1981. That means the US debt will go from $20 trillion when Trump took over to $40 trillion by the end of 2024. Even the Central Budget Office’s forecast is not far from that $40 trillion. But we must remember that this figure doesn’t include all the problems that the US and global economy will experience in the next few years.

EUROPEANS WILL LOSE ECB PROTECTION

And in Europe, Draghi has now made it clear that the Protection Deposit Scheme is no longer necessary. Thus the ECB will no longer guarantee customer deposits up to Euro 100,000. This should come as no surprise. When the crisis starts, no depositor will get real money back from any bank.

When the crisis that temporarily paused in 2009 resumes in earnest, there will be money printing on a scale that the world has never experienced before. That will be the time when the world will learn that “Quadrillion” as a word actually exists although no one can imagine the magnitude of that word.

To put it in perspective, $1 Quadrillion is 15 years’ global GDP. So if global debt goes to $1Q after central banks have tried to save the system, including most derivatives, we would have to spend the next 15 years using the total gross production of the world just to repay the debt. Thus it would mean100% tax for 15 years.

RATES WILL GO TO 15 – 20%

But it doesn’t stop there. When debt defaults start on a bigger scale, central banks will lose control of the interest rates. The manipulation of rates defies all laws of nature and supply and demand. It is not possible to have maximum credit and minimum interest rates. In a free market, if demand for credit is high, the cost of credit will also be very high.

When the $230 trillion world debt starts to implode, central banks can no longer hold rates down as the bond markets panic. It will start with the longer rates going up and eventually higher long rates will pull the short rates up.

In the 1970s and early 1980s rates reached the high teens. This time they are likely to go higher as default and credit risk rise substantially. If interest rates rise to “only” 14.4% annually, debt will double every 5 years. This means that the $1Q debt will have grown to $2Q five years later.

HYPERINFLATION AND THEN DEFLATION

As money printing escalates hand in hand with defaults, the world will experience hyperinflation on a level that no one can imagine today. At that point debt will probably have grown to tens of quadrillions. Most people will of course say that it would be impossible for debt to grow to these levels. Anyone who has studied historical debt defaults, money printing and hyperinflation will realise that during these periods, debt grows to many times the original debt.

Money printing and hyperinflation become a vicious circle that feeds on itself. Powerless central bankers lose total control and just panic into the next level of money creation. In the end it all fails of course, since printed money can never create wealth. At that point, the hyperinflationary depression turns to a deflationary depression. All credit disappears into a black hole and so does a major part of the financial system. The assets backed by the printed money collapse in value by 90% or more.

So can we avoid hyperinflation. Yes, that is possible if central bankers are too slow to react as defaults start. We would then go straight to a deflationary collapse with a total failure of the financial system, and a very severe and long depression.

Thus, either we will see a total destruction of paper money in a hyperinflationary scenario or a collapse of the financial system in a deflationary implosion of assets and debts. The most likely in my view is that we will have both. First hyperinflation and then deflation. But even during the hyperinflationary period, debt and bubble assets will deflate as commodities, including food, hyperinflate.

GOLD AND SILVER – ONLY MONEY TO SURVIVE

In both scenarios, physical gold and silver will be the only real money that will function. In the hyperinflationary case, gold will go to levels that are unimaginable which could be $100s of trillions per ounce. The number of zeros will be unimportant. But vital is that gold will more than maintain its purchasing power. As the gold paper market collapses and the whole world wants to own gold, the price of gold in today’s money is likely to go up much more than 10-fold. We are likely to see a major bubble in the gold price and maybe it will go as much as 50 to100-fold during the crisis. That would mean a price of $65,000 to $120,000 in today’s money. That might sound like a totally unrealistic target, but we must remember that the catastrophic scenario the world will experience in the coming crisis is also totally unrealistic to fathom for most people today.

In a deflationary scenario gold will of course not go to those high levels. Firstly, gold will at least maintain its purchasing power. But since the financial system is unlikely to survive in a deflationary implosion, gold and probably silver will be the only real money available. Thus even in the deflationary case, gold is likely to go up substantially in real terms.

With the troubles the world is facing, gold is clearly not going to be the sole solution to the massive problems we will all experience. There will be a lot of poor people and a lot of hungry people. Owning some gold is at least likely to keep the wolf from the door. But the magnitude of the problems that the world will experience is likely to affect us all badly.

In the meantime, stock markets and cryptocurrencies are ignoring the risks in the world. We are not just looking at financial risk. Political risk is increasing in many areas. In Europe, Merkel has problems forming a government, the Irish government is about to collapse and the Brexit negotiations are a total farce. Theresa May and Britain are totally held to ransom by the unelected, unaccountable and totally irresponsible Brussels elite. They are more interested in maintaining their political power centre than doing what is best for the European people.

Read More @ GoldSwitzerland.com

This Won’t Sit Well: Virtually Nobody Is Reporting Bitcoin And Cryptocurrency Profits To The IRS

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by SilverDoctors:

So few are reporting that “the NSA or IRS could conceivably implement blockchain analysis tools to track down Bitcoin fund transfers around the globe.”

Editor’s Note: Last year we coined the term, pun intended, “War on Cryptocurrency“. Check out our tag for more information on this war being waged all across the globe in a dynamic battlefield. This article no doubt is ammunition for the anti-crypto front.

*****

from Zero Hedge

Despite the IRS’s victory late last year in a lawsuit against Coinbase – the most popular cryptocurrency exchange in the US – that forced the organization to hand over transaction data pertaining to more than 14,000 users, surprisingly few Americans are reporting income from cryptocurrency trading as income this tax season.

That’s even more surprising considering the astronomical gains realized, not just by bitcoin, but by dozens of coins.

Fewer than 100 people out of the 250,000 who have already filed federal taxes this year through Credit Karma reported a cryptocurrency transactionReuters reported Tuesday.

This, despite nearly 57% of the 2000 Americans surveyed by the credit score startup and research firm Qualtrics last month saying they had realized some gains from cryptocurrencies last year, according to a Credit Karma study. About the same percentage of respondents said they had never reported a crypto transaction to the IRS. Meanwhile, about half said they understood how cryptocurrency gains might impact their taxes.

As Reuters explains, the IRS considers cryptocurrencies to be property for federal tax purposes, meaning any profits or losses from the sale or exchange of the virtual coins must be reported as capital gains or losses. Still, it remains unclear exactly how many Americans hold cryptocurrencies, which were initially designed to protect the identities of their holders and can be difficult for federal authorities to trace. Coinbase famously surpassed retail brokerage Charles Schwab in terms of the number of accounts last year, but its unclear how many of those accounts are actively trading.

However, there could be a more innocuous explanation than widespread tax dodging. Jagjit Chawla, general manager for Credit Karma Tax, said the company was not too surprised that few people had reported cryptocurrency gains as Americans with more complex tax situations tend to file closer to the deadline.

“However, given the popularity of bitcoin and cryptocurrencies in 2017, we’d expect more people to be reporting,” Chawla said in a statement.

That, or even simpler: most of those reporting cryptoprofits for public survey purposes are lying.

Around one million people filed their taxes with Credit Karma last year, the company said. The IRS expects 156 million individuals to file taxes this year.

Read More @ SilverDoctors.com

AUTHORITIES LOSING CONTROL AS DOW/NASDAQ SWING WILDLY TODAY

by Harvey Organ, Harvey Organ Blog:

DOW DOWN 53 POINTS BUT NASDAQ UP A TINY 11 POINTS/GE AND DEUTSCHE BANK CLOSE AT OR NEAR THEIR 2009 LOWS WITH GE AT $6.66 AND DEUTSCHE BANK AT 8.33 EUROS/GOLD LOSES $4.85 TO $1241.95 BUT SILVER HOLDS AS IT REFUSES TO GO DOWN: IT WAS UP ONE CENT TO $14.53/:HUGE STORIES WITH RESPECT TO CHINA TODAY: FIRST TWO RETALIATORY MEASURES INITIATED BY CHINA AND THEN THE USA CHARGES CHINA WITH ESPIONAGE ON THEIR PRODUCTS/JAPAN’S SOFTBANK, HUAWEI’S LARGEST SUPPLIER THREATENS TO STOP BUYING THEIR PRODUCTS BECAUSE OF THEIR ESPIONAGE/CHAOS CONTINUES IN THE UK WITH RESPECT TO BREXIT/FRANCE APPEASES ITS CITIZENS WITH FREE MONEY BUT NOW HAS A PROBLEM AS ITS DEFICIT IS NOW OVER 3.5% OF GDP: ITALY IS NOW THRILLED!!/A CLASSIC SHOWDOWN BETWEEN PELOSI AND TRUMP ON THE WALL: A MUST SEE + MORE SWAMP STORIES FOR YOU TONIGHT

Keiser Report: Fear of Missing Out (E1194)

from RT:

In the second half, Max interviews journalist and author, Matt Taibbi, about the political landscape heading into 2018 midterm elections.

There Are Currently At Least 80 Central Banks Around the World Looking at Digital Currencies

by Joe Hoft, The Gateway Pundit:

There are at least 80 countries around the world looking at digital currencies.

We reported on the risks with digital currencies and the opportunities for governments to use them to control and remove individual rights.