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Buterin Doesn’t Think Crypto Can Replace Traditional Currencies

Buterin doesn’t think crypto can replace traditional currencies since the fiat ones will stay the most dominant form of finance so let’s read more…

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Buterin doesn’t think crypto can replace traditional currencies since the fiat ones will stay the most dominant form of finance so let’s read more about it in today’s latest Ethereum news.

The Ethereum co-founder Vitalik Buterin doesn’t think that digital assets have a chance of stealing the supremacy of traditional currencies. The global economy is not in its best shape in the past few months with the constant growing prices of everyday services and supplies with the war between Russia and Ukraine, now, the future looks even worse.

The negative trends caused most experts to assume that national currencies such as the dollar could lose some of the purchasing power and at the same time, some people might shift their focus towards alternative assets like crypto in order to preserve their wealth. According to Vitalik Buterin, this scenario where BTC becomes more dominant than traditional currencies is unlikely:

“I do not expect cryptocurrencies to take over the world. It’s about cryptos and digital and governments.”

Before the COVID-19 pandemic, Buterin praised fiat money for doing a reasonably good job of being stable in the past 10 years and opined that monetary policy is a complicated matter, saying that one should not blast traditional currencies without understanding how they work. Former minister of finance of Greece Yanis Varoufakis argued that BTC replacing traditional currencies would be a disaster. In his view, the main reason why this should not happen is because of the limited supply of crypto:

“We would all be now in very dire straights. What will happen when we have a pandemic and you need to increase the money supply? You cannot increase the supply of bitcoin because it is of fixed supply.”

On the other hand, plenty of experts believe Bitcoin’s maximum supply of 21 million coins that exist ever is not a drawback. The dollar, the EUR, and other fiat currencies started crashing in value in the past few months because of the infinite printing from the central banks. The investment manager VanEck also forecasted an optimistic future for the price if it replaces traditional currencies as a global reserve asset. The company claimed BTC could start trading between $1,300,000 and $4,800,000 while gold could reach $31,000 per ounce.

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Spread & Containment

FTSE 100 gains as commodity-linked stocks bounce back

The commodity-heavy FTSE 100 gained 0.4%, while mid-cap FTSE 250 index inched up 0.3% UK’s FTSE 100 gained on Monday, as an easing of COVID-19 restrictions…

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The commodity-heavy FTSE 100 gained 0.4%, while mid-cap FTSE 250 index inched up 0.3%

UK’s FTSE 100 gained on Monday, as an easing of COVID-19 restrictions in China brought relief to commodity prices, lifting shares of major oil and mining companies.

As of 0704 GMT, the commodity-heavy FTSE 100 gained 0.4%, while mid-cap FTSE 250 index inched up 0.3%.

The risk sentiment improved after a Wall Street rally late last week and a rebound in copper and iron ore prices on Monday, boosted by an easing COVID-19 restrictions in Shanghai and relaxed testing mandates in several Chinese cities.

The burst of global enthusiasm for equities has put a spring in the step of the FTSE 100 at the start of the week, Hargreaves Lansdown analyst Susannah Streeter said.

Mining stocks led gains on the FTSE 100 index, with Anglo American, Rio Tinto and Glencore rising more than 3%, after Group of Seven leaders pledged to raise $600 billion private and public funds in five years to finance needed infrastructure in developing countries.

It is hoped this scheme, seen as a counter to China’s Belt and Road Initiative, will set off a spurt of spending and demand for commodities around the world, Streeter added.

Among individual stocks, CareTech surged 20.8% after the UK-based provider of care and residential services agreed to be acquired by a consortium led by Sheikh Hoidings in an 870.3 million pounds ($1.07 billion) deal.

Carnival Corp jumped 5.6%, extending its Friday gains after the leisure travel company forecast a positive core profit for the current quarter despite surging costs.

London-listed shares of Rio Tinto added 2% after a U.S appeals court ruled that the federal government may give the UK copper miner a right to lands in Arizona.

BAE Systems inched up 0.4% after the defence company received a $12 billion contract from the U.S Department of Defence.

The post FTSE 100 gains as commodity-linked stocks bounce back first appeared on Trading and Investment News.

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Bonds

Is Bitcoin Really A Hedge Against Inflation?

The long-standing claim that bitcoin is a hedge against inflation has come to a fork in the road as inflation is soaring, but the bitcoin price is not.

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The long-standing claim that bitcoin is a hedge against inflation has come to a fork in the road as inflation is soaring, but the bitcoin price is not.

This is an opinion editorial by Jordan Wirsz, an investor, award-winning entrepreneur, author and podcast host.

Bitcoin’s correlation to inflation has been widely discussed since its inception. There are many narratives surrounding bitcoin’s meteoric rise over the last 13 years, but none so prevalent as the debasement of fiat currency, which is certainly considered inflationary. Now Bitcoin’s price is declining, leaving many Bitcoiners confused, as inflation is the highest it’s been in more than 40 years. How will inflation and monetary policy impact bitcoin’s price?

First, let’s discuss inflation. The Federal Reserve’s mandate includes an inflation target of 2%, yet we just printed an 8.6% consumer price inflation number for the month of May 2022. That is more than 400% of the Fed’s target. In reality, inflation is likely even higher than the CPI print. Wage inflation isn’t keeping up with actual inflation and households are starting to feel it big time. Consumer sentiment is now at an all-time low.

(Source)

Why isn’t bitcoin surging while inflation is running out of control? Although fiat debasement and inflation are correlated, they truly are two different things that can coexist in juxtaposition for periods of time. The narrative that bitcoin is an inflation hedge has been widely talked about, but bitcoin has behaved more as a barometer of monetary policy than of inflation.

Macro analysts and economists are feverishly debating our current inflationary environment, trying to find comparisons and correlations to inflationary periods in history — such as the 1940s and the 1970s — in an effort to forecast where we go from here. While there are certainly similarities to inflationary periods of the past, there is no precedent for bitcoin’s performance under circumstances such as these. Bitcoin was born only 13 years ago from the ashes of the Global Financial Crisis, which itself unleashed one of the greatest monetary expansions in history up until that time. For the last 13 years, bitcoin has seen an environment of easy monetary policy. The Fed has been dovish, and anytime hawkishness raised its ugly head, the markets rolled over and the Fed pivoted quickly to reestablish calm markets. Note that during the same period, bitcoin rose from pennies to $69,000, making it perhaps the greatest-performing asset of all time. The thesis has been that bitcoin is an “up and to the right asset,” but that thesis has never been challenged by a significantly tightening monetary policy environment, which we find ourselves at the present moment.

The old saying that “this time is different,” might actually prove to be true. The Fed can’t pivot to quell the markets this time. Inflation is wildly out of control and the Fed is starting from a near-zero rate environment. Here we are with 8.6% inflation and near-zero rates while staring recession straight in the eyes. The Fed is not hiking to cool the economy … It is hiking in the face of a cooling economy, with already one quarter of negative gross domestic product growth behind us in Q1, 2022. Quantitative tightening has only just begun. The Fed does not have the leeway to slow down or ease its tightening. It must, by mandate, continue to raise rates until inflation is under control. Meanwhile, the cost-conditions index already shows the biggest tightening in decades, with almost zero movement from the Fed. The mere hint of the Fed tightening spun the markets out of control.

(Source)

There is a big misconception in the market about the Fed and its commitment to raising rates. I often hear people say, “The Fed can’t raise rates because if they do, we won’t be able to afford our debt payments, so the Fed is bluffing and will pivot sooner than later.” That idea is just factually incorrect. The Fed has no limit as to the amount of money it can spend. Why? Because it can print money to make whatever debt payments are necessary to support the government from defaulting. It’s easy to make debt payments when you have a central bank to print your own currency, isn’t it?

I know what you’re thinking: “Wait a minute, you’re saying the Fed needs to kill inflation by raising rates. And if rates go up enough, the Fed can just print more money to pay for its higher interest payments, which is inflationary?”

Does your brain hurt yet?

This is the “debt spiral” and inflation conundrum that folks like Bitcoin legend Greg Foss talks about regularly.

Now let me be clear, the above discussion of that possible outcome is widely and vigorously debated. The Fed is an independent entity, and its mandate is not to print money to pay our debts. However, it is entirely possible that politicians make moves to change the Fed’s mandate given the potential for incredibly pernicious circumstances in the future. This complex topic and set of nuances deserves much more discussion and thought, but I’ll save that for another article in the near future.

Interestingly, when the Fed announced its intent to hike rates to kill inflation, the market didn’t wait for the Fed to do it … The market actually went ahead and did the Fed’s job for it. In the last six months, interest rates have roughly doubled — the fastest rate of change ever in the history of interest rates. Libor has jumped even more.

(Source)

This record rate-increase has included mortgage rates, which have also doubled in the last six months, sending shivers through the housing market and crushing home affordability at a rate of change unlike anything we’ve ever seen before.

30-year mortgage rates have nearly doubled in the last six months.

All of this, with only a tiny, minuscule, 50 bps hike by the Fed and the very beginning of their rate hike and balance sheet runoff program, merely started in May! As you can see, the Fed barely moved an inch, while the markets crossed a chasm on their own accord. The Fed’s rhetoric alone sent a chilling effect through the markets that few expected. Look at the global growth optimism at new all-time lows:

(Source)

Despite the current volatility in the markets, the current miscalculation by investors is that the Fed will take its foot off the brake once inflation is under control and slowing. But the Fed can only control the demand side of the inflationary equation, not the supply side of the equation, which is where most of the inflationary pressure is coming from. In essence, the Fed is trying to use a screwdriver to cut a board of lumber. Wrong tool for the job. The result may very well be a cooling economy with persistent core inflation, which is not going to be the “soft landing” that many hope for.

Is the Fed actually hoping for a hard landing? One thought that comes to mind is that we may actually need a hard landing in order to give the Fed a pathway to reduce interest rates again. This would provide the government the possibility of actually servicing its debt with future tax revenue, versus finding a path to print money to pay for our debt service at persistently higher rates.

Although there are macro similarities between the 1940s, 1970s and the present, I think it ultimately provides less insight into the future direction of asset prices than the monetary policy cycles do.

Below is a chart of the rate of change of U.S. M2 money supply. You can see that 2020-2021 saw a record rise from the COVID-19 stimulus, but look at late 2021-present and you see one of the fastest rate-of-change drops in M2 money supply in recent history. 

(Source)

In theory, bitcoin is behaving exactly as it should in this environment. Record-easy monetary policy equals “number go up technology.” Record monetary tightening equals “number go down” price action. It is quite easy to ascertain that bitcoin’s price is tied less to inflation, and more to monetary policy and asset inflation/deflation (as opposed to core inflation). The chart below of the FRED M2 money supply resembles a less volatile bitcoin chart … “number go up” technology — up and to the right.

(Via St. Louis Fed)

Now, consider that for the first time since 2009 — actually the entire history of the FRED M2 chart — the M2 line is potentially making a significant direction turn to the downside (look closely). Bitcoin is only a 13-year-old experiment in correlation analysis that many are still theorizing upon, but if this correlation holds, then it stands to reason that bitcoin will be much more closely tied to monetary policy than it will inflation.

If the Fed finds itself needing to print significantly more money, it would potentially coincide with an uptick in M2. That event could reflect a “monetary policy change” significant enough to start a new bull market in bitcoin, regardless of whether or not the Fed starts easing rates.

I often think to myself, “What is the catalyst for people to allocate a portion of their portfolio to bitcoin?” I believe we are beginning to see that catalyst unfold right in front of us. Below is a total-bond-return index chart that demonstrates the significant losses bond holders are taking on the chin right now. 

(Source)

The “traditional 60/40” portfolio is getting destroyed on both sides simultaneously, for the first time in history. The traditional safe haven isn’t working this time around, which underscores the possibility that “this time is different.” Bonds may be a deadweight allocation for portfolios from now on — or worse.

It seems that most traditional portfolio strategies are broken or breaking. The only strategy that has worked consistently over the course of millennia is to build and secure wealth with the simple ownership of what is valuable. Work has always been valuable and that is why proof-of-work is tied to true forms of value. Bitcoin is the only thing that does this well in the digital world. Gold does it too, but compared to bitcoin, it cannot fulfill the needs of a modern, interconnected, global economy as well as its digital counterpart can. If bitcoin didn’t exist, then gold would be the only answer. Thankfully, bitcoin exists.

Regardless of whether inflation stays high or calms down to more normalized levels, the bottom line is clear: Bitcoin will likely start its next bull market when monetary policy changes, even if ever so slightly or indirectly.

This is a guest post by Jordan Wirsz. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

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Economics

Victor Davis Hanson: America Is More Fragile Than The Left Understands

Victor Davis Hanson: America Is More Fragile Than The Left Understands

Authored by Victor Davis Hanson via AmGreatness.com,

"There is a…

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Victor Davis Hanson: America Is More Fragile Than The Left Understands

Authored by Victor Davis Hanson via AmGreatness.com,

"There is a great deal of ruin in a nation."

- Adam Smith

The Left has been tempting fate since January 2021 - applying its nihilist medicine to America on the premise that such a rich patient can ride out any toxic shock.

Our elites assume that all our nation’s past violent protests, all its would-be revolutions, all its cultural upheavals, all its institutionalized lawlessness were predicated on one central truth—America’s central core is so strong, so rich, and so resilient that it can withstand almost any assault. 

So, we can afford 120 days in 2020 of mass rioting, $2 billion in damage, some 35 killed, and 1,500 police injured. 

We can easily survive an Afghanistan, and our utter and complete military humiliation. There was no problem in abandoning some $70-80 billion in military loot to terrorists. Who cares that we tossed off a billion-dollar new embassy, and jettisoned a $300-million refitted air base, as long as our pride flags were waving in Kabul?

Certainly, we can afford to restructure all our universities, eliminate free expression and speech, and institute Maoist cultural revolutionary fervor in our revered institutions of higher learning—once the world’s greatest levers of scientific advancement and technological progress. 

We can jettison merit in every endeavor, from banning the world’s great books to grading math tests to running chemistry experiments. And still, a resilient America won’t notice.

We assumed that our foundational documents—the Declaration of Independence and the Constitution—our natural bounty in North America, our cherished rule of law, our legal immigration traditions that drew in the most audacious and hardworking on the planet, and our guarantees of personal freedom and liberty led to such staggering wealth and affluence that nothing much that this mediocre generation could do would ever endanger our resilience.

But such inheritances are not written in stone. America, as the world’s only successful multiracial democratic republic, was always fragile. It was and is always one generation away from disappearing—should any cohort become so foolish as to mock its past, dismantle its institutions, revert to tribalism, redistribute rather than create wealth, and consume rather than invest. 

We are that generation. And we have an accounting with nature’s limitations, given there is always a corrective, not a nice one, but remediation nonetheless for every excess. 

Our major cities are no longer safe. Somehow, the Left has nearly wrecked San Francisco in less than a decade. A once beautiful and vibrant city is lawless, dirty, toxic, often boarded up, and losing population. It has turned into a medieval keep of well-protected knights in secure fiefs while everyone else is engaged in a bellum omnium contra omnes.

We know it is so because California public officials talk of anything and everything—Roe v. Wade, transitions to electric cars, hundreds of millions of dollars in COVID-19 relief for illegal aliens—to mask their utter impotence to address feces in the street, the random assaults on the vulnerable, and the inability to park a car and return to it intact.

Ditto the Dodge City downtowns of Chicago, Los Angeles, New York, Seattle, Baltimore, Washington, and a host of others. In just four or five years, they have given up on fully funding the police, aggressive prosecutors indicting the violent, and ubiquitous civil servants ensuring the streets are free of trash, vermin, flotsam, jetsam, and human excrement. 

There are natural reactions to such excess. The most terrifying is that our once-great cities, especially their downtowns, will simply shrink into something like ghost towns—our versions of an out-West Bodie, or an abandoned Roman city in the sand like Leptis Magna, or a Chernobyl. 

But the culprit will not be a played-out mine, or encroaching desert, or a nuclear meltdown, but the progressive leadership of a worn-out, bankrupt people who no longer possess the confidence to keep their urban civilization safe and viable. And so, they either fled, or joined the mob, or locked themselves up in fortified citadels, both in fear to go out and terrified of losing what they owned. 

We are seeing that deterioration already in our major cities. Stores are boarded up. Women cease to walk alone after sunset. Police officers walking the beat are now rare. Hate crimes, smash-and-grab robberies, and carjackings go unpunished. Streets are filthy and littered. Commerce and human interaction cease at dusk, as if in expectation that zombies will emerge to control the streets. Criminals when arrested are not always identified—the media censoring names and descriptions on their own selective theories of social justice.

But again, the culprit is not the COVID plague or want of money. It is us, we who turned over our cities to the incompetent, the selfish, the timid, and the violent. 

There is again an antidote. But doubling the police force, bringing back broken-windows policing, electing tough prosecutors, moving the homeless from the downtown into hospitals and supervised shelters beyond the suburbs, arresting, convicting, and incarcerating the guilty—all that seems well beyond this generation’s capacity. 

Would not such efforts be unfair to the mere rock-thrower? Who says the fentanyl user has no right to defecate on the street? Would not our jails become overcrowded? Would the incarcerated be unduly overrepresented by this or that group?

Joe Biden took a strong economy—albeit one that after three serial spendthrift presidencies faced huge national debt and a rendezvous with fiscal sobriety—and has utterly ruined it. 

He discouraged labor participation with federal checks. He ensured that his minions on the politicized Federal Reserve Board would keep interest rates artificially low. Biden inflated the money supply while debasing the value of the currency. He brought back mindless regulation and put ideological commissars in place to ensure the corporations, banks, and Wall Street would be woke, allowing ideology to warp ancient economic laws that kept prices stable, supply and demand in balance, and incentives to work and profit. 

Many thought Biden would have needed at least four or five years to wreck such a strong economy with such nihilism rather than a mere 16 months.

Yet nature is about to step in with a recession and perhaps even a depression to correct the Biden madness. If interest rates rise, capital dries up, businesses close, employers cut back, consumers no longer have access to easy money, and the nation becomes inert, then the country will be worse off, spend less—and that too will be a brutal solution of sorts to Biden’s hyperinflation and stagflation.

Still, it is hard to see how anyone in the government might prefer the proper and necessary medicine at this late hour. An updated Simpson-Bowles plan still could address long-term insolvency. Meaningless regulations could be pruned back. The tax code could be radically altered and simplified to encourage investment rather than consumption. Entitlements could be calibrated by incentives to become productive rather than to remain inert. All of that might return us to a sound currency, a strong GDP, long-term financial solvency, and general prosperity for all. But are not such medicines perceived as worse than the disease?

There is an answer to the open border, when upwards of 4 million illegal aliens will flow into the United States in a mere two years, for the most part without audits, English, capital, income, and vaccinations—and with no idea how to house, feed, or provide health care for millions without background checks.

At this late date, the corrections of stopping catch and release, ending amnesties, hiring more border patrol officers and immigration judges, or building more detention centers are too little too late.

Eventually, Americans will become acculturated to large enclaves of endemic poverty, as millions with no familiarity with the United States are neither assimilated nor integrated. 

The border will then disappear, and northern Mexico and the southern United States will become indistinguishable, as millions simply drift back and forth in the manner of an ancient Gaul or Germania. Large areas of Texas, Arizona, and California are already returning to such pre-state status.

Or the alternate corrective will be the completion of a massive wall from the Pacific to the Gulf, with strict audits of all would-be immigrants, immediate deportations for lawbreakers, and legal only immigration that is measured, diverse, and meritocratic.

We are reaching the inflection point quickly and will either experience the absolute destruction of the border or a radical backlash, given that the current mess is unsustainable. Either a nation with borders survives or a tribal and nomadic region supplants it.

If America chooses to shut down refineries, put our rich oil and natural gas fields off-limits, cancel pipelines, and demonize the fossil fuel industry, then, of course, prices for carbon fuels will explode. 

The Biden Administration talks nonsensically about Teslas, batteries, and electric replacements. But it is not greenlighting mining for the critical minerals needed for batteries. It is not encouraging nuclear power plants to provide enough power for a clean fleet of 200 million electric cars. There is no Marshall Plan to wean America off mostly non-polluting natural gas and gasoline onto electricity-hungry engines.

Instead, Biden begs the Saudis, the Russians, the Venezuelans, and even the Iranians to pump the fuel he will not. He seeks to drain the Strategic Petroleum Reserve that can supply only a fraction of the oil America gulps daily. He defines his own pre-midterm, self-created mess as a national emergency to tap a reserve he could never fill or refill.

So, what is the natural corrective to unaffordable fuel? 

A likely Biden recession or depression, in which the middle classes simply do not enjoy jobs that pay enough to afford $6-9-a-gallon gas. And so, they will not drive. Vacations, optional shopping trips, and visits to friends—all that and more will taper off. Gas will stabilize at near-European levels, and the people, as planned, will be rerouted into dirty and unsafe subways and mass transit. 

Biden will be happy. But America won’t be the same mobile country. 

America’s bounty was predicated on each generation following the prompt of the prior, modulating when change was necessary, but not daring to tamper with the foundational principles and values that explained our singular wealth, power, and leisure. 

This generation in its arrogance tested fate. It felt itself smarter and morally superior to its betters of the past. It lost that wager and now we the public are paying for its foolishness. To destroy America as we have always known it, there was far less necessary to ruin than our elite believed.

Like a stunned adolescent whose reckless incompetence totaled the family car, the Left seems shocked that America proved so fragile after all.

Tyler Durden Mon, 06/27/2022 - 16:20

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