Brexit and Covid

[1nvest]

Sign of the times/conditions. Brexit and Covid. Much money has flighted to safety, US$. Down from $1.70 per £1 2014 levels to $1.30 per £1 at more recent times (or lower). A investor in US$ short term treasuries would have seen a 12% total return increase over those 7 years, along with a 1.7 / 1.3 FX benefit, 46% combined gain, 5.6% annualised.

Again just saying/observation. Swings and roundabouts, sooner or later that US$ inflow will turn to a outflow back towards 'better valued' as a primary objective over a 'safety' objective.

Staying the course and sooner or later the wind turns in your favour. Jumping ships tends to lead to overall backward motion.

Moderator Message:
Moved here to keep it on topic. - Chris

[CryptoPlankton]

Sign of the times/conditions. Brexit and Covid. Much money has flighted to safety, US$. Down from $1.70 per £1 2014 levels to $1.30 per £1 at more recent times. A investor in US$ short term treasuries would have seen a 12% total return increase over those 7 years, along with a 1.7 / 1.3 FX benefit, 46% combined gain, 5.6% annualised...

Why compare with 2014 if claiming to illustrate the effect of Brexit? GBP was 1.42 USD a week before the Brexit result in 2016, about 1.39 now. Similarly, it was about 1.30 USD at beginning of 2020 (before enormity of Covid appreciated) so, though there clearly were dips after these two events, the figures you are giving for "those 7 years" (which I am sure are correct) really don't seem to have any direct relationship with them. It's possible they may have had an impact on the recovery of GBP, but the 'damage' to the 1.70 USD exchange rate occurred earlier.

Perhaps I'm missing something?

[odysseus2000]

Invest
Again just saying/observation. Swings and roundabouts, sooner or later that US$ inflow will turn to a outflow back towards 'better valued' as a primary objective over a 'safety' objective.

Staying the course and sooner or later the wind turns in your favour. Jumping ships tends to lead to overall backward motion

It is far from clear, at least to me, that fiat currencies will behave as they have done for decades with the advent of crypto currencies.

Regards,

[NotSure]

It is far from clear, at least to me, that fiat currencies will behave as they have done for decades with the advent of crypto currencies.

Regards,

Why will cryptos have any effect? We do indeed, we have a new asset class, but, for example, the entire market cap of the dominant one (BTC), even after a year of large gains, is still smaller than Facebook alone. All crptos combined are smaller than e.g. Apple. I would have thought that say, the release of a new iPhone would have comparable impact to the entire crypto market?

I do note that 'crpto' is now flagged by my spell-checker, so they have made some impact

[Lanark]

I do note that 'crpto' is now flagged by my spell-checker, so they have made some impact

Cryptography existed long before bitcoin.

[1nvest]

The US since the 1930's has had the capacity to print/spent money. The ending of the Gold Standard meant money was no longer backed by anything tangible. Prior to that physical gold bars were moved around between country cages as part of trade/capital flows, finite/tangible. The US promised as part of ending that standard to 'act responsibly' but as ever opted instead to act irresponsibly, print/spend to buy sufficient military might to maintain its dominant position.

Similarly Germany has the Eurozone in its pockets. It can bet (debt) and if heads they win they keep the benefit, or if tails they lose they swap the debt over to the ECB, rest of the Eurozone, as was the case post 2009 financial crisis.

Germany and the US each support the others positions, little wonder. Crypto currencies are a potential alternative and as such I suspect one way or another concerted US/German efforts will look to try and kill off crypto currencies sooner or later (which includes it no longer being 'secret'), but the market is way too small at present to be a issue.

Could go back to a gold standard, but in preparation for that possibility China pretty much owns all of the worlds gold. If that was called then paper gold/derivatives would collapse. Even funds that suggest they're backed by physical gold could falter/fail. The only way to really hold gold is physical in-hand, but rebalancing that is expensive (spreads), so some paper-gold (funds) risk needs to be tolerated for more cost efficient rebalancing.

Fiat currencies will continue to behave as they have IMO

Moderator Message:
Image removed - Chris

All embedded images (including data and graphs) in posts must:-
Include an additional link (URL) to a web page where the original may be viewed in context, or (where the image is hosted on either a domain owned or controlled by the poster, or a hosting site account e.g. Imgur, Picasa, Dropbox, OneDrive, Google Drive) be followed by a statement that the poster owns (or is legally permitted to post) the content of the image. If this is later found to be incorrect, appropriate action will be taken by administrators. Images which do not comply with these requirements may be removed without warning.

but where there's expansion into the more India style of currency distrust. Hold other assets for store of wealth, only converting into domestic currency at/near the time it is intended to be spent and where that store of wealth is physical/portable/secret (when a state knows where all your wealth is it is no longer your wealth, but a loan, open to be returned/called (confiscated) at any time the state might choose).

I still hold no crypto currency (nor really know much about it at all), instead I prefer 50/50 US stock/gold as my primary 'currency'. Converting some of that each month into Pounds - around enough for the months spending. This is in US$, that in turn the Pound has broadly relatively declined against

Yet another theft is taxation. When interest/gains just pace inflation then taxation of those gains !!! When inflation is driven high then that's another !!!

http://warrenbuffettoninvestment.com/ho ... -investor/

The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislatures. The inflation tax has a fantastic ability to simply consume capital. It makes no difference to a widow with her savings in a 5% passbook account whether she pays 100% income tax on her interest income during a period of zero inflation, or pays no income taxes during years of 5% inflation. Either way, she is “taxed” in a manner that leaves her no real income whatsoever. Any money she spends comes right out of capital. She would find outrageous a 120% income tax, but doesn’t seem to notice that 6% inflation is the economic equivalent.

Driving inflation is as easy as printing/spending money, benefits the 'counterfeitor' at the expense to others via the devaluation of all other notes in circulation.

[odysseus2000]

It is far from clear, at least to me, that fiat currencies will behave as they have done for decades with the advent of crypto currencies.

Regards,

Why will cryptos have any effect? We do indeed, we have a new assest class, but, for example, the entire market cap of the dominant one (BTC), even after a year of large gains, is still smaller than Facebook alone. All crptos combined are smaller than e.g. Apple. I would have thought that say, the release of a new iPhone would have comparable impact to the entire crypto market?

I do note that 'crpto' is now flagged by my spell-checker, so they have made some impact

Currencies, since the ending of the gold standard have been used by central banks as tools to implement government policy and have been printed in large quantities by e.g. the US Fed.

If we are now seeing the beginnings of crypto currencies being used like money as recently happened in El Salvador., the link between politicians and money may be breaking .Currently Although the volume of crypto currencies is small, there was a time when the Internet was tiny whereas now it is a dominant method of selling goodsand services and for many the way they access their money via on-line banking.There is as far as I can see no limit to how big crypto currencies can become.

Whether crypto will remain as agents of private enterprise of become controlled by the government with printing like fiat currencies is unknowable. If one believes the crypto bulls there will be no additional printing of bit coin so that it will behave like "super -gold" without the small additional supply from mining and thence be better protected against inflation than is gold.

I have no idea what will happen. Politicians may find some way to control crypto and we will then see most major nations issue their own crypto currenciesor or crypto will remain private and develop as inflation protection par excellance and become the preferred store of wealth if transactions become easier and more convenient.

One can argue that we are now in the moment when it unknowable as to the survival of crypto ideas and if they do servive and prosper which ones will be the winners, just as when the internet began their was a browser war and the original leader, Netscapess, lost its dominance. Another parallel with the early internet is the current polarisation between the bulls and bears, just as back then there were those who said the internet was a fad and those who said it would grow and grow and influence everything, become far more important than Caxton's development of printing.

Crypto have many of the early characteristics of the intent including exponential growth and a current inability of the politiicianss to control them. Such things can lead to many changes.

To answer another point, yes, cryptography is not new, but having it available in new convenient methods is again like the internet. Before netscape the internet required skill to use, after netscape anyone of average intelligence could use it.

Regards,

[NotSure]

"The Internet was small and became very big". "Crypto is small". Does not follow that crypto will hence become very big.

I could just as well say "The internet grew continually and became very big". "Crypto goes up and down like a yoyo, therefore crypto will not become very big".

But anyway, why do think that crypto will affect the behaviour of fiat currencies? Why would the 99%+ of 'no-coiners' choose to turn the crypto 'whales' into the new masters of the universe, rather than the politicians they democratically elect and can at least identify and lobby etc?

[odysseus2000]

What/who are crypto currencies backed by? Drug cartels? Arms dealers?

Ever tried to pay your taxes in Bitcoin (or Zuckerbucks if they ever get here)?

See:

https://www.marketwatch.com/story/belie ... 2019-01-07

Regards,

[odysseus2000]

"The Internet was small and became very big". "Crypto is small". Does not follow that crypto will hence become very big.

I could just as well say "The internet grew continually and became very big". "Crypto goes up and down like a yoyo, therefore crypto will not become very big".

But anyway, why do think that crypto will affect the behaviour of fiat currencies? Why would the 99%+ of 'no-coiners' choose to turn the crypto 'whales' into the new masters of the universe, rather than the politicians they democratically elect and can at least identify and lobby etc?

This is all true. Currently the size of bitcoin does not tell us whether it will get very big or vanish altogether. I was referring to comments that bitcoin was small that Apple's cap, not saying that small must become large.

However, although crypto prices are volatile, the transaction volume continues to grow. This suggests the odds on Crypto vanishing are low.

Regards,

[SteMiS]

"The Internet was small and became very big". "Crypto is small". Does not follow that crypto will hence become very big.

I could just as well say "The internet grew continually and became very big". "Crypto goes up and down like a yoyo, therefore crypto will not become very big".

But anyway, why do think that crypto will affect the behaviour of fiat currencies? Why would the 99%+ of 'no-coiners' choose to turn the crypto 'whales' into the new masters of the universe, rather than the politicians they democratically elect and can at least identify and lobby etc?

This is all true. Currently the size of bitcoin does not tell us whether it will get very big or vanish altogether. I was referring to comments that bitcoin was small that Apple's cap, not saying that small must become large.

However, although crypto prices are volatile, the transaction volume continues to grow. This suggests the odds on Crypto vanishing are low.

Regards,

I think the crypto sphere is very interesting, one can admire the intent and there are many features within it which I've no doubt will be adopted in a wide range of activities. I don't know whether it will disappear but I would have thought the chances of it displacing 'fiat' money is pretty small. As it stands it's pretty clunky for every day transactions. As to the valuation of these currencies, well, who knows. It's essentially story and momentum driven. Is the intrinsic value of Bitcoin $650bn, half that, double that? I don't know anyone who can give a real answer to that question...

[odysseus2000]

SteMis
I think the crypto sphere is very interesting, one can admire the intent and there are many features within it which I've no doubt will be adopted in a wide range of activities. I don't know whether it will disappear but I would have thought the chances of it displacing 'fiat' money is pretty small. As it stands it's pretty clunky for every day transactions. As to the valuation of these currencies, well, who knows. It's essentially story and momentum driven. Is the intrinsic value of Bitcoin $650bn, half that, double that? I don't know anyone who can give a real answer to that question...

Most things start out as clunky and only for nerds then someone makes the whole process easier, lowers costs and guarantees reliability.

Prior to PayPal buying stuff over the net was a pain and fraught with fears about fraud, but now its easier than going to a shop and most small business have their own card readers such that they can operate without ever having to handle notes or coins. Implicit with the ease of use will be securely stored transaction codes in the cloud sthat will over come the problem of folk forgetting their block chain ID.

Soon I expect one of the crypto to become PayPal like and for the volatility to significantly decline with the block chain ledger being far less energy intensive to operate.

Within a short time I expect crypto transactions to be as easy as a bank accountant and for most business to accept them as payment for goods and services.

If this happens I expect fiat currencies to enter a decline from which they never recover.

I also expect every person will have all their medical records stored on a block chain, probably on an implanted chip for those who accept this option and with appropriate safeguards to prevent misuse.

There are numerous other applications and I expect blockchain technology to become a defining part of the 21st century lifestyle and that we will see many billionaires created.

Regards,

[NotSure]

If this happens I expect fiat currencies to enter a decline from which they never recover.

Fiat has been in decline for centuries - I'm pretty sure we'll never see £5/oz gold again, or a family house for £500, both true in the past. A pound sterling was once literally that - a pound of silver. As recently as 1920, one pound (20 shillings) in coins contained over 3 ozt of physical silver.

But so what? Who or what will force the 99% who have no crypto to volunatarily impoverish themselves to benefit a few oddballs?

[SteMiS]

SteMis
I think the crypto sphere is very interesting, one can admire the intent and there are many features within it which I've no doubt will be adopted in a wide range of activities. I don't know whether it will disappear but I would have thought the chances of it displacing 'fiat' money is pretty small. As it stands it's pretty clunky for every day transactions. As to the valuation of these currencies, well, who knows. It's essentially story and momentum driven. Is the intrinsic value of Bitcoin $650bn, half that, double that? I don't know anyone who can give a real answer to that question...

Most things start out as clunky and only for nerds then someone makes the whole process easier, lowers costs and guarantees reliability.

Sure, but there's an inherent clunkiness in crypto through the reliance on miners to validate transactions, the risk of forks and double spend that will take some getting over. Trustless systems have their benefits but they also have their drawbacks. I do agree that blockchain has a future and maybe it will be the likes of Ethereum, Cardano etc that will be the real winners and the ideas of a non fiat currency will just be seen as the birthing ground for them...

[odysseus2000]

If this happens I expect fiat currencies to enter a decline from which they never recover.

Fiat has been in decline for centuries - I'm pretty sure we'll never see £5/oz gold again, or a family house for £500, both true in the past. A pound sterling was once literally that - a pound of silver. As recently as 1920, one pound (20 shillings) in coins contained over 3 ozt of physical silver.

But so what? Who or what will force the 99% who have no crypto to volunatarily impoverish themselves to benefit a few oddballs?

It will probably come in as a generational transition where internet fluent users, often but not exclusively younger member of society, will opt for what they see as the advantages of cryptos as they build their wealth and meanwhile wealthier folk will move some of their net worth into crypto, especially if they fear inflation and don't trust gold to protect them. Somethings similar to how the internet began its exponential growth and the new versions of Bezos, Musk, Gates etc, will emerge.

Meanwhile legacy financials, banks etc will enter into a period of decline analogous to how the internet (Amazon) has killed high street business.

Regards,

[odysseus2000]

SteMis
I think the crypto sphere is very interesting, one can admire the intent and there are many features within it which I've no doubt will be adopted in a wide range of activities. I don't know whether it will disappear but I would have thought the chances of it displacing 'fiat' money is pretty small. As it stands it's pretty clunky for every day transactions. As to the valuation of these currencies, well, who knows. It's essentially story and momentum driven. Is the intrinsic value of Bitcoin $650bn, half that, double that? I don't know anyone who can give a real answer to that question...

Most things start out as clunky and only for nerds then someone makes the whole process easier, lowers costs and guarantees reliability.

Sure, but there's an inherent clunkiness in crypto through the reliance on miners to validate transactions, the risk of forks and double spend that will take some getting over. Trustless systems have their benefits but they also have their drawbacks. I do agree that blockchain has a future and maybe it will be the likes of Ethereum, Cardano etc that will be the real winners and the ideas of a non fiat currency will just be seen as the birthing ground for them...

Yes, but we are already beginning to see new stuctures like lightening being built on top of bit coin and I expect some entrepreneurs will find ways to make the whole process better, somewhat analogous as to how Musk created Paypal.

Regards,

[1nvest]

If this happens I expect fiat currencies to enter a decline from which they never recover.

Fiat has been in decline for centuries - I'm pretty sure we'll never see £5/oz gold again, or a family house for £500, both true in the past. A pound sterling was once literally that - a pound of silver. As recently as 1920, one pound (20 shillings) in coins contained over 3 ozt of physical silver.

Back in the mid 700's when the Pound came into being as a Saxon Pound weight = 12 troy ounces, 0.8 of a British Pound weight, at a time when the population might have been 650K people. So 100x more people nowadays (65 million population). Share a fixed amount of silver around equally across that number and that's 100 fold smaller amounts each than if the same fixed amount of silver had been shared around the smaller Anglo-Saxo population back in 750. Down from say 12 troy ounces each to 0.12 troy ounces each. So at around around a £9/ounce recent silver price that would mean £9 per troy ounce price of silver x 0.12 = £1.08.

Economic expansion of GDP is easily achieved via opening up migration floodgates. But beyond certain levels that just causes over-availability/congestion/inefficiencies, government should target GDP/capita instead as that better reflects quality of life. At £9/ounce of silver based on the above the quality of life is no different to Anglo-Saxon times. At £18/ounce more recent (spiked) levels then your money buys twice as much as it did in Anglo Saxon times. But all very back of a napkin estimate.

Currencies will continue to decline as directing "inflation only" policies means that you have to invest in order to preserve purchase power, drives economic activity and as part of that the state can tax the interest etc.

Crypto currencies involve counter party risks. Could just vanish, isn't regulated in any meaningfully safe way, is very volatile. Physical in hand gold is tangible, portable, globally recognised/accepted, can equally be hidden away etc. The only benefit of crypto over physical gold is perhaps ease of payments if majors started accepting it, however cash/credit (debit) cards are just as easily used and in some places its just as easy to pay in physical gold as cash/currency. Crypto is useful for the black market/money laundering and/or conveyance across physical borders. Physical gold can be conveyed via liquidation into money and electronic transfer of that money to the target location where physical gold might be repurchased, but that leaves a paper trail. Conveying physical gold across borders is inclined to see seizure, at least for those without valid audit trail. Crypto sidesteps those issues, for the launderers/black market. A risk for other innocents is that a system primarily devised to hide is inclined to see things just disappear or be seized as proceeds of illicit activities.

[odysseus2000]

Invest
Crypto currencies involve counter party risks. Could just vanish, isn't regulated in any meaningfully safe way, is very volatile. Physical in hand gold is tangible, portable, globally recognised/accepted, can equally be hidden away etc. The only benefit of crypto over physical gold is perhaps ease of payments if majors started accepting it, however cash/credit (debit) cards are just as easily used and in some places its just as easy to pay in physical gold as cash/currency. Crypto is useful for the black market/money laundering and/or conveyance across physical borders. Physical gold can be conveyed via liquidation into money and electronic transfer of that money to the target location where physical gold might be repurchased, but that leaves a paper trail. Conveying physical gold across borders is inclined to see seizure, at least for those without valid audit trail. Crypto sidesteps those issues, for the launderers/black market. A risk for other innocents is that a system primarily devised to hide is inclined to see things just disappear or be seized as proceeds of illicit activities.


As far as I understand it, the block chain ledger is open. If it was closed and hidden there would be a need for a banking license. Consequently if I was laundering money I would not want to use bitcoin. The methodology of untraceable fiat currencies is now a mature technology for gansters, terrorists and such and if I was one I would stick with what they know that works.

Regards,