Archive - Dec 2013

Yesterday it was the US Treasury's Financial Crimes Enforcement Network that tightened its grip on businesses that accept Bitcoin. Today, it is China, where the world's largest Bitcoin exchange by trading volume, BTCChina announced that he had received word from "above" that his platform would no longer be able to accept renminbi from BTC buyers. "As of right now, we have received notice from our third-party payment company that they will disallow customers from making deposits into our exchange," Bobby Lee, a former Yahoo developer who co-founded BTCChina this year, told the Financial Times.  The result, not surprisingly, is an overnight crash in BTC, which crashed by 50% from $900 two days ago to just $455 hours ago.

• MOAR: BOJ Said to See Significant Room for More Bond Purchases (BBG)
• Meltdown Averted, Bernanke Struggled to Stoke Growth (Hilsenrath)
• New Mortgages to Get Pricier Next Year (WSJ)
• Republicans to Seek Concessions From Obama on Debt Limit (BBG)
• Hunting for U.S. arms technology, China enlists a legion of amateurs (Reuters)
• Jury Begins Deliberating in Case of SAC Portfolio Manager (WSJ)
• BP to Write Off $1 Billion on Failed Well (WSJ)
• Rajan Unexpectedly Keeps India Rates Unchanged to Support Growth (BBG)
• Thai protesters say they will rally to hound PM from office (Reuters)
• SEC Brings Fewer Enforcement Actions, Slows Early-Stage Probes (WSJ)

The Federal Reserve's balance sheet is set to exceed a whopping $4 trillion today, prompting warnings its ultra loose monetary policies are inflating asset price bubbles and will lead to a devaluation of the dollar and signifigant inflation in the coming years. 

Of the 8 "most important ever" FOMC decisions in 2013, this one is undisputedly, and without doubt, the 8th. As Jim Reid summarizes, what everyone wonders is whether today’s decision by the FOMC will have a bearing on a few last-minute Xmas presents around global financial markets. No taper and markets probably breathe a sigh of relief and the feel-good factor might turn that handheld game machine into a full-blown PS4 by Xmas day. However a taper now might just take the edge off the festivities and leave a few presents on the shelves. Given that the S&P 500 has pretty much flat-lined since early-mid November in spite of better data one would have to say that some risk of tapering has been priced in but perhaps not all of it. Alternatively if they don’t taper one would expect markets to see a pretty decent relief rally over the rest of the year. So will it be Santa or Scrooge from the Fed tonight at 2pm EST?

All that glitter is not gold.

I normally write about gold and economics, but Edward Snowden has brought to the attention of America—and the whole world—a different issue.

“These Programs Were Never About Terrorism: They’re About Economic Spying, Social Control, and Diplomatic Manipulation. They’re About Power”

Context is key...

Recently some of the more naive, not to mention top-ticking, financial commentators assumed that just because US regulators had not snapped shut a trap surrounding Bitcoin and other digital currencies yet, that this state of blissful cohabitation would continue indefinitely. Unfortunately, as we warned back in March during the initial leg higher in BTC following the Cyprus deposit confiscations, the well-known "honeypot" strategy was meant to draw out as many digital currency fans and participants as possible - who after all were warned by none other than the ECB that the current regime will never adopt a parallel, and quite threatening monetary unit - only to see the regulatory and enforcement fist of the nation that (still) hosts the reserve currency slowly but surely start to clench around the binary currency. Because, finally, after testing the ground long enough, the fist is starting to not only close but squeeze tight. And as Reuters reports, it is the U.S. Treasury Department's anti money-laundering unit that is now warning businesses linked to Bitcoin that they "may have to comply with federal law and regulation as money transmitters, a Treasury spokesman said."

Despite Li Keqiang’s desire for a healthier, more “people-focused” mode of urban growth; this has clashed with local governments’ desire to keep spending on infrastructure and real estate as a coherent urbanization policy has been nowhere to be found.This logjam looks to have finally broken over the weekend, when top Chinese leaders held both the annual Central Economic Work Conference to set policy goals for 2014, and a Central Urbanization Work Conference to lay the groundwork for an urbanization plan to be published next year. On balance, the news from these events is good for current and future residents of Chinese cities - but bad for those investors who may still be bullish on commodity prices.

There are a thousand lessons to be learned from the Third Reich, from the evils of totalitarianism to the dangers of racial thinking. A key economic lesson is that, rather than curing the Great Depression, Hitler’s military Keynesianism on a massive scale left the German people starving and short of goods. It’s a lesson advocates of building tanks to make us rich, from John McCain to Paul Krugman (and now Shinzo Abe), would do well to learn.

With climate change impacting the poles, the potential for trade routes and resource extraction are improving.. and with that the world's powers are rattling sabres over who owns what. From Canada's claims to Russia's defense forces and China's purposeful dependence-building aid to small Arctic states, everyone knows the stakes. So, with very few big new diamond mines having been developed in recent years, the FT reports that scientists have found a site containing the rocks that often produce diamonds – in Antarctica. The problem is that the frozen continent is protected from mining for decades under an international treaty.

China’s crackdown on extravagance and its anti-corruption campaign appears to be having a significant impact as Bain & Co reports that spending on luxury goods is estimated to grow at only 2% in 2013 - its slowest pace since 2000 (and dramatically lower than the 7% growth last year). "The mindset among global brands [in China] is changing from 'where do we find growth' to 'how do we create growth'," Bloomberg reports as "gifting" to high-ranking officials - one of the major growth engines of the industry - has crushed luxury watch sales down 11% in 2013. Ironically, given yesterday's mall-jumping news, female shoppers are picking up some of the slack with shoes growing 8-10%. New store openings fell by 33%.

During 2013, America continued to steadily march down a self-destructive path toward oblivion.  As a society, our debt levels are completely and totally out of control.  Our financial system has been transformed into the largest casino on the entire planet and our big banks are behaving even more recklessly than they did just before the last financial crisis.  We continue to see thousands of businesses and millions of jobs get shipped out of the United States, and the middle class is being absolutely eviscerated.  Due to the lack of decent jobs, poverty is absolutely exploding.  Government dependence is at an all-time high and crime is rising.  Evidence of social and moral decay is seemingly everywhere, and our government appears to be going insane.  If we are going to have any hope of solving these problems, the American people need to take a long, hard look in the mirror and finally admit how bad things have actually become.

On January 29, 1845, the New York Evening Mirror published a poem that would go on to be one of the most celebrated narrative poems ever penned. The poem was entitled "The Raven," and its star was an ominous black bird that visits an unnamed narrator who is lamenting the loss of his true love... So, with the vision firmly planted in your mind's eye of a man completely out of touch with reality, seeking wisdom from a mysterious talking bird - knowing that there is only one response, no matter the question - Dear Reader, Grant Williams presents a chart whose importance is enormous... simply put, this one chart shows exactly why we are where we are...