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China Scrambles To Enforce Capital Controls (Which Is Great News For Bitcoin)

Tyler Durden's picture




 

Officially, China has maintained quasi capital controls for years: on paper no individual is allowed to move more than $50,000 out of the country in any given year while Chinese companies can exchange yuan for foreign currencies only for approved purposes.

Unofficially, China's capital controls had been skirted for years, leading to massive capital outflow from the nation over the past decade, leading to such aberrations as massive luxury housing bubbles in places such as Vancouver, London, New York and San Francisco, and seemingly middle-class Chinese politicians and oligarchs sporting Swiss bank accounts funded in the hundreds of millions (or billions).

Just last March, we explained the schematic of how easy it is to avoid Chinese limitation on outflows, using nothing more than a UnionPay credit card and a trip to Macau. Here are the highlights:

China's underground money is flowing across the border into the gambling hub of Macau, a former Portuguese colony that like Hong Kong is an autonomous region of China. And the conduit for the cash is the Chinese government-supported payment card network, China UnionPay.

 

In a warren of gritty streets around Macau's ritzy casino resorts, hundreds of neon-lit jewellery, watch and pawn shops are doing a brisk business giving mainland Chinese customers cash by allowing them to use UnionPay cards to make fake purchases - a way of evading China's strict currency-export controls.

 

On a recent day at the Choi Seng Jewellery and Watches company, a middle-aged woman strode to the counter past dusty shelves of watches. She handed the clerk her UnionPay card and received HK$300,000 ($50,000) in cash. She signed a credit card receipt describing the transaction as a "general sale", stuffed the cash into her handbag and strolled over to the Ponte 16 casino next door.

 

The withdrawal far exceeded the daily limit of 20,000 yuan, or $3,200, in cash that individual Chinese can legally move out of the mainland. "Don't worry," said a store clerk when asked about the legality of the transaction. "Everyone does this."

 

The practice violates China's anti-money-laundering regulations as well as restrictions on currency exports. Chinese authorities also fear the UnionPay conduit is being used by corrupt officials and business people to send money out of the country.

The practice was so popular it had promptly gained epidemic proportions: "In Macau, UnionPay card transactions reached 130 billion Macau patacas ($16.77 billion) in just the first four months of 2012, up from 88.1 billion patacas in all of 2011, according to a confidential report by Macau's banking regulator, the Macau Monetary Authority reviewed by Reuters. Around 90 percent of those transactions were "highly concentrated in jewellery, ornament and luxury watch sales", the report said.

If that rate persisted for the full year, UnionPay sales in Macau for all of 2012 would have reached nearly $50 billion - nearly $45 billion of it for jewellery-related sales, a figure exceeding even Macau's total gambling revenues that year.

 

"Are these actual transactions? Where does this money come from?" the deputy head of the Monetary Authority, Wan Sin Long, asked in the document.

The answer, of course, is no. Also, the question is not where the money came from - the answer is some of the $22 trillion in deposits accumulated legally and/or illegally on the mainland, the question is where it is going after it was cashed out in Macau (for the answer look at soaring real estate prices in the ultra luxury segment in developed countries), and also why was China allowing this - after all none of this was a secret to either Chinese citizens, regulators or politicians?

To wit: "It's unclear why the central bank, the Peoples Bank of China (PBOC), hasn't cracked down harder on the practice, although the documents Reuters reviewed show the bank was aware it had become a growing problem."

The answer to the second is for years, many top Chinese politicians were themselves using this pathway to bypass the capital controls, leading to hundreds of billions of funds linked to China's most "respected" politicians to find its way into offshore bank accounts.

To be sure, this practice was greattly limited when Xi Jinping came in power and enacted substantial reforms which limited much of this grotesquely open flaunting of Chinese capital account rules. Indirectly, this has led to the recent collapse in Macau GDP - whose businesses no longer booked billions in fake "transactions" - as shown in the chart below:

 

However, judging by what remains the best downstream indicator of Chinese capital outflows, namely the ongoing appreciation of luxury real estate in the US, Canada (see "Chinese buyers spike Vancouver's luxury home market by 79%"), and the UK, while the Macau "money laundering channel" may have been plugged many others, both known and unknown remain.

And now that China has officially commenced a regime of currency devaluation, and has been forced to liquidate as much as an estimated $200 billion in reserves in just the past month to maintain the value of the Renminbi, capital flight has become the biggest and most direct threat to the Chinese regime and the economy.

The reason is that while China may succeed in maintaining an orderly pace of FX depreciation, if the local population is concerned it will lose substantial purchasing power in the coming months and years, it will accelerate the capital flight from the country, forcing even greater reserve liquidation as the government finds itself defending not only the capital but also the current account, not to mention the sheer capital flight panic resulting from the crashing stock market.

This is why as the WSJ reports overnight, "China is imposing fresh controls to prevent too much money from leaving the country, in an effort to keep badly needed funds at home to battle a deepening slowdown in the world’s No. 2 economy."

Specifically, the PBOC said Tuesday that it would make it "more expensive for investors to pressure the yuan to weaken against the U.S. dollar by adding conditions to futures contracts."

Some of the country’s largest lenders, including Bank of China Ltd. and China Citic Bank Corp., are beefing up their internal checks on large amounts of foreign-exchange conversions by their corporate clients, according to Chinese banking executives. Meanwhile, financial regulators, together with the country’s security forces, are stepping up efforts to rein in illegal money-transfer agents who make a living by helping people move money out of China.

The reason, as explained above, is that "China—long a catch basin for the world’s money—is starting to see that money trickle out. A weaker currency generally prompts investors to look elsewhere to put their cash and would complicate the government’s efforts to generate spending and bolster economic growth."

The WSJ correctly points that while it is impossible to accurately quantify just how much capital flows out of the mainland, one can venture a guess: "economists point to indications that money is leaving. China’s foreign-exchange reserves, which last year nearly reached $4 trillion, have shrunk by more than $341 billion since then."

Others look the simplest, and most transparent indicator available - offshore real estate investments: "Property-services firm CBRE recently estimated that Chinese investment in overseas commercial properties, which is a proxy for outbound residential investment, totaled $6.5 billion in the first half of this year, putting it in position to surpass 2014’s total of $10.5 billion."

For now, the administration is seeking to keep the calm at all costs: after all, what better way to spark a capital exodus than with very vocal, and very effective capital controls. Just look at Greece:

PBOC officials have struck a more sanguine note. In recent days, they have echoed comments last month from top central-bank official Yi Gang, who said capital flows in and out of the country had remained “normal,” though he pledged to increase monitoring of cross-border money movements.

 

Outflows don’t appear to have reached alarming levels, and Beijing has plenty of firepower to curtail them. For example, its huge foreign-exchange reserves give it ample room to support the yuan’s value and make it attractive for investors.

Others point to the PBOC's most direct approach when dealing with speculation: any attempts to short the currency from outside will be met with aggressive currency intervention to burn the speculators, as has happened for years.

Longer term, some investors are betting Beijing will continue to open its vast capital markets to the outside world, making its currency more attractive. “It would be dangerous for investors to be shorting the yuan given the stated intention to open up the domestic capital markets over time,” said Andy Seaman, a portfolio manager at London-based investment firm Stratton Street.

Well, no: shorting the yuan in a regime of devaluation is precisely what investors should do, however it is the dramatic intervention by the PBOC in the open market that has driven the relaxed fixing from 6.41 back to 6.36 in a week, that is what is most concerning to shorts. However, as we have explained over the past month, such intervention is costing the PBOC hundreds of billions in liquidated reserves, read sold Treasurys. With every incremental intervention, Chinese reserves drop, and may continue to do so until such time as they reach precarious levels. At this point China would invite the truly big speculators to short its currency a la Soros and the Bank of England. And since China has a very finite supply of reserves to draw from, it will (or should) be very careful how it engages the speculators.

This is also why having launched the devaluation as official policy marked a sea change for China, as Deutsche Bank recently commented, one which most likely will not have a happy ending.

But the reason why China has to scramble is that while historic capital outflows have been moderate, it is the recent devaluation that has sparked a sea change in perceptions about currency stability:

Outflows could worsen in coming months should China’s currency weaken further or its economy show new signs of faltering. Recent negative economic data has called into question China’s ability to meet its 2015 annual growth target of about 7%. “Capital outflows could get worse in the third quarter because of the deprecation expectations for renminbi,” said Zhang Ming, a senior economist at the Chinese Academy of Social Sciences, a government think tank, using an alternative name for the yuan.

Indeed, it's all about expectations: and since China needs to boost exports and stimulate its economy - which is the fundamental reason why it proceeded with devaluation in the first place - any stop gap measures to halt the devaluation are doomed to fail.

Which is why the most recent escalation in capital controls will only get worse. It also includes such gimmicks as a "blacklist" of people with a track record of capital outflow wrongdoing. “Banks [that] fail to spot those on the blacklist or turn a blind eye on it will be punished and fined by the regulator as well,” an official at Citic said.

This war with capital flight also explains yesterday's surprising announcement which we documented previously, to require a 20% margin on all currency forwards:

The new rule instituted by the PBOC starts Oct. 15. It will require banks use a type of financial contract, known as currency forwards, to buy dollars while selling yuan to set aside reserves with the central bank. Under the new requirement, a bank that has sold a total of $100 of the so-called currency forwards over the course of a month must deposit $20 at the central bank. The reserves will be held at zero interest for a year.

 

The reserve requirement is aimed at “fending off macro-financial risks,” the PBOC notice said.

And while some investors saw the move as a way to help the yuan, such as Tommy Ong, head of wealth-management solutions, treasury and markets for Greater China at DBS Bank in Hong Kong, who noted that "The central bank wants to dampen short-term speculation of renminbi selling,” said Tommy Ong, the truth is that such enforcement which reduces market liquidity will hurt first the markets, then the economy.

WSJ admitted as much when it said that "traders Tuesday said they were struggling to give clients quotes for how many yuan a dollar buys onshore on forward contracts, as the cost of holding reserves under the new rules remained unclear."

Additionally capital account crackdowns are taking place domestically:

At home, Chinese officials have intensified a crackdown on what are known in China as underground banks, which Chinese nationals often use to shift money in and out of the country despite tight capital controls. Meng Qingfeng, vice minister of public security, said late in August that those money-transfer agents remained “rampant” despite repeated crackdowns on them, according to the official Xinhua News Agency. Mr. Meng also urged police around the country to better coordinate with the central bank in the campaign, which will run through the end of November.

In summary: while China is doing everything in its power to not give the impression that it is panicking, the truth is that it is one viral capital outflow report away from an outright scramble to enforce the most draconian capital controls in its history, which - as every Cypriot and Greek knows by now - is a self-defeating exercise and assures an ever accelerating decline in the currency, which authorities are trying to both keep stable while also devaluing at a pace of their choosing. Said pace never quite works out.

So what happens then: well, China's propensity for gold is well-known. We would not be surprised to see a surge of gold imports into China, only instead of going to the traditional Commodity Financing Deals we have written extensively about before, where gold is merely a commodity used to fund domestic carry trades, it ends up in domestic households. However,

while gold has historically been the best store of value in history and has outlasted every currency known to man, it is problematic when it comes to transferring funds in and out of a nation - it tends to show up quite distinctly on X-rays.

Which is why we would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented "forking" with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits... 

... in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print.

We bring all this up in case there is any confusion why Bloomberg just carried a huge centerfold piece explaining why CDS-inventor Blythe Masters has suddenly become the digital currency's most vocal pitchman and is betting it all on bitcoin, in "Blythe Masters Tells Banks the Blockchain Changes Everything."

Yes, bitcoin may be slowly but surely leaving the domain of the libertarian fringe, but in exchange it is about to be embraced as the most lucrative and commercial "blockchained" way to capitalize on what may soon become the largest capital outflow in history, with "pioneers" such as Blythe front and center to capitalize on each and every outflowing Bityuan.

 

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Wed, 09/02/2015 - 12:31 | 6500003 Sudden Debt
Sudden Debt's picture

Yeah... put your money in something that doesn't exist... right after you ran away from a imploding stockmarket...

How stupid can you be...

 

Wed, 09/02/2015 - 12:32 | 6500010 q99x2
q99x2's picture

I convert my profits to gold.

Wed, 09/02/2015 - 12:41 | 6500058 PrimalScream
PrimalScream's picture

This wreaks of desperation.  China has got a collapsing stock market bublle, and collapsing real estate market.  There are a lot of people in China who are going to lose their shirts because of this.  They are trying to get their money out.  It's sheer desperation.  But the average "Joe Wang" on the street doesn't stand a chance.  However - the billionaires are also trying to escape, and a lot of them might make it.  

But anybody who goes into BitCoin now - needs psychological evaluation. 

Wed, 09/02/2015 - 12:34 | 6500015 Anopheles
Anopheles's picture

What a bunch of nonsense about Bitcoin.

If there are capital controls of Renminbi, then they STILL can't get much of their money out.   How many people are willing to sell their Bitcoin for Renminbi?

How do you redeem a couple million dollars of bitcoin to buy that luxury condo in Vancouver? 

Wed, 09/02/2015 - 13:06 | 6500242 froze25
froze25's picture

You wouldn't you would sell it for what ever currency you want to at the given bitcoin price in that currency.  For example I have 2 bit coins worth 1000 Yuan, I go to the USA to a bit coin friendly restaurant and pay .05 bit coin for a $20 dollar dinner.  The Restaurant sells the .05 bit coin for the current exchange of 20 bucks using a service like bit pay.  The currency that was used to buy the bit coin originally doesn't matter.

Wed, 09/02/2015 - 13:54 | 6500543 Anopheles
Anopheles's picture

But it does matter.  It's all about liquidity and currency controls.   And that's what the article is talking about. 

Try buying bitcoin in Venezuela.   You can only get "real" bitcoins with hard currency.  Otherwise you get "local" bitcoins, with Venezuelan Bolivars, which are worthless outside the country because the Bolivar is controlled currency.  A person can only exchange Bolivars for a couple hundred dollars a year.  So that's the maximum amount of "real" bitcoin you could potentially purchase. 

 

 

Wed, 09/02/2015 - 14:51 | 6500864 painlord-2k
painlord-2k's picture

Prostitutes in Venezuela get paid in USD by sailors, then they sell the USD for Bolivars to buy good and services (or pay directly in USD).
The same could be done with Bitcoin.

Wed, 09/02/2015 - 14:51 | 6500865 painlord-2k
painlord-2k's picture

Prostitutes in Venezuela get paid in USD by sailors, then they sell the USD for Bolivars to buy good and services (or pay directly in USD).
The same could be done with Bitcoin.

Wed, 09/02/2015 - 14:48 | 6500844 painlord-2k
painlord-2k's picture

Anthony buy goods from China and pay with Bitcoin.
The people inside China pay renmimbi to get Bitcoin.
They use Bitcoin to buy condos in Toronto.

Essentially someone have paid condos in Toronto with goods from China.

 

Wed, 09/02/2015 - 15:05 | 6500947 TheFutureReset
TheFutureReset's picture

Good point. They don't need to buy bitcoin with renminbi, they can accept it for payment,or at least a portion of payments for their exports.  

Wed, 09/02/2015 - 14:48 | 6500845 painlord-2k
painlord-2k's picture

Anthony buy goods from China and pay with Bitcoin.
The people inside China pay renmimbi to get Bitcoin.
They use Bitcoin to buy condos in Toronto.

Essentially someone have paid condos in Toronto with goods from China.

 

Wed, 09/02/2015 - 12:36 | 6500022 anachronism
anachronism's picture

"Bitcoin" has taken the "greater fool" theory beyond where any rational person has ever gone before.

 

Wed, 09/02/2015 - 12:37 | 6500031 PrimalScream
PrimalScream's picture

Well said!

Wed, 09/02/2015 - 12:36 | 6500025 PrimalScream
PrimalScream's picture

Not BITCOIN.

China is trying to stop its billionaires from pulling the plug with all of their money, and sending funds into overseas safe havens.  But realistically - fat chance of this.  Their system is super-corrupt at the top level.  And the billionaires have too many exit strategies.  They will always find a way out with their funds.

The fact that this is GOING ON - shows how desperate the Chinese Central Bank is getting.  And if they are this desperate - it's a pretty good bet that they see a real possibility of bank collapses and contagion within their own system.  WHICH points to the fact that China could be looking at a real recession here, and not just a major slowdown in growth (i.e. not simply a Growth Recession). 

Wed, 09/02/2015 - 12:38 | 6500040 gwar5
gwar5's picture

Been mentioned before at ZH the last year or so but worth mentioning again, there is a quickening pace to the coming collapse. Dumping USDs and capital controls in the world's 2nd largest economy are big deals. And juicy daily developments, instead of every 6 months, or monthly, or weekly. 

Turbulence. Seems like little overhead light is about to come on that says: Sit down, shut up, fasten seat belt, you're no longer free to move about the cabin.

 

 

Wed, 09/02/2015 - 12:48 | 6500047 Chuck Knoblauch
Chuck Knoblauch's picture

The cunt should be in prison.

With the other gang members.

Wed, 09/02/2015 - 12:44 | 6500076 Consuelo
Consuelo's picture

'It's all about the Blockchain'...?

 

Uh...   To me that sorta kinda looks like it's all about the Tranny...  No offense ---

Wed, 09/02/2015 - 12:48 | 6500104 shovelhead
shovelhead's picture

Blythe's not entirely in Bitcoin...

https://www.lelo.com/olga

Wed, 09/02/2015 - 12:50 | 6500114 Yen Cross
Yen Cross's picture

    When the executioner steams Blythe's rope before hanging, he should give it some extra shrinkage so her skinny little pencil neck doesn't squeeze through it.

Wed, 09/02/2015 - 12:49 | 6500118 Rodders75
Rodders75's picture

1/ the reserve drawdown is probably in great part attributable to USD strength that ostensibly reduces the "value" of the non USD portion of reserves. In SDR terms the drawdown hasn't been that large.

2/ the numbers are large in absolute terms but as a proportion reserves the drawdown has been about 5%. Thus, China has space for more outflows before the usual deflationary dynamic kicks in.

While we're on the subject of reserves,  the effect of China selling Treasuries is far outweighed by purchases by investors running scared of global deflation. Buy TLT. 

 

Wed, 09/02/2015 - 12:49 | 6500119 ghostzapper
ghostzapper's picture

FakeBook Market Cap - $245B

Bitcoin - $3B

Nope, nothing to see move along no opportunity there.

Of course Blockchain will dominate FinTech  . . . . . . . eventually.  It's transparent and provides permanent recording of well everything.  Banksters hate it because it will eliminate almost all fraud and counterfeit money priting scams.  The market will eventually embrace it because it simply makes sense and cuts friction and costs dramatically.

BTC been a very tricky little cocksucker.  Still in this huge "running correction" not unlike PMs.  If/when it breaks this long downtrend line with authority won't surprise me to see the ensuing bull take it to 2.5x-3.0x the prior all time high.   

Wed, 09/02/2015 - 12:55 | 6500157 Anopheles
Anopheles's picture

So tell us.  Where does all the liquidity in Bitcoin come from? 

If I buy $5million  bitcoin, exactly HOW do I "cash out"  to buy a luxury condo?  They don't take bitcoin, they want dollars. 

Please be specific, WHICH bitcoin exchange will give me $5 million in cash? 

Wed, 09/02/2015 - 12:58 | 6500178 RazorForex
RazorForex's picture

Remax in London already announced that they accept Bitcoin!

Wed, 09/02/2015 - 13:01 | 6500206 Anopheles
Anopheles's picture

You didn't answer my question.   Which exchange will cash my $5 million in bitcoin, and not do it $10,000 a day for the next 2 years. 

Wed, 09/02/2015 - 13:06 | 6500240 Grandad Grumps
Grandad Grumps's picture

The intent is for you to trade the Bitcoins directly for the condo without going through the dollar.

This is the globalist bankers' wet dream.

Wed, 09/02/2015 - 13:45 | 6500490 Anopheles
Anopheles's picture

Of course that's what they want, but it's never going to happen. 

The truth is that bitcoin has no liquidity, and will never have any liquidity.  

Wed, 09/02/2015 - 13:09 | 6500260 froze25
froze25's picture

There are plenty of exchanges to do that type of volume, use google and do your own homework.

Wed, 09/02/2015 - 13:17 | 6500296 DeProgrammed
DeProgrammed's picture

If there are plenty, they should be easy to name?

Wed, 09/02/2015 - 13:23 | 6500341 froze25
froze25's picture

Yep, you still need to do your own homework.

Wed, 09/02/2015 - 13:43 | 6500459 Anopheles
Anopheles's picture

There are ZERO exchanges that will do that type of volume for a transaction or even a number of withdrawls  . 

They simply don't have the cash reserves.  For an exchage to GET cash, they have to SELL more bitcoin. 

 

Bitcoin, easy to buy, difficult to sell (large amounts), just alike a pyramid scheme.

Wed, 09/02/2015 - 15:21 | 6501054 TheFutureReset
TheFutureReset's picture

So what you are saying is every buyer doesn't have a seller? One of the arguments for the huge potential of bitcoin is just your argument. If companies or individuals want to move large amounts of value through bitcoin the market cap will have to grow to accommodate that. That's a positive.

Look, liquidity is relative. The Chinese can't sell their shares right now. Rule 48 says people in US markets won't be able to sell their shares always either. But those are artificial liquidity restrictions. Bitcoins liquidity is market based. As you are accumulating that $5mil in bitcoin, you'll move the market price up. If you want to sell them all at the same time, you won't be able to get the price you want bc the market will move out from under you. It's a free market.

Liquidity won't be built overnight, but it will be built. During the next 20x run up in the price of bitcoin liquidity will shoot up. Your angry arguments sound so 1980.

Wed, 09/02/2015 - 18:35 | 6501960 Anopheles
Anopheles's picture

A runup in the market cap of bitcoin will in fact REDUCE it's relative liquidity.  There are MANY holders, and a relatively small number of traders.  The supposed value of the holder's coins will technically increase, but there is no liquidity for those holders actually do much with them. 

My arguments aren't "angry" they are reality, which fans of bitcoin chose to ignore. 

Wed, 09/02/2015 - 16:19 | 6501386 overqualified
overqualified's picture

At this right moment you can sell at least (not counting hidden orders) 4755 BTC at once ON ONE SINGLE exchange (Bitfinex), if you accept a splippage down to $214/BTC (i.e. $6/BTC slippage): https://bfxdata.com/orderbooks/btcusd

So I am sure that in less than 24 hours you could convert your many thousands of BTC in 5 millions $ in less than 24 hours with little or no slippage using a few major exchanges.

 

Wed, 09/02/2015 - 15:19 | 6501030 Anopheles
Anopheles's picture

Funny how people downvote, yet don't provide an answer.  

They can't handle the truth.

Wed, 09/02/2015 - 13:57 | 6500560 Anopheles
Anopheles's picture

I looked it up.  Remax only accepts Bitoin for RENTALS, not purchaces. 

Wed, 09/02/2015 - 13:29 | 6500391 ghostzapper
ghostzapper's picture

I never stated the Blockchain/Bitcoin ecosystem is completely mature at this point.  To your specific question there are numerous exchanges operable currently and it is an area that is clearly ripe for maturation and further innovation.  There needs to be much better trust overall by the public and that takes time.  

Obviously the intent longer term is to transact directly with BTC.

"Cash Out?"  I love this question in fact it is the same one I ask those married to stacking.  If the whole world implodes financially, fiat approaches zero, and say Gold measured in USD soars to the moon I would ask why on earth one would want to "cash out" their gold and convert it back to 'worthless" fiat?  We may disagree but if society finds a way to remain viable and functional I see little to slim chance of people transacting in metals.  Rather, perhaps there will be more activity over the 5B smartphones projected to be in use by 2025-2030 (rough estimate not MY data that I am married to).

I don't necessarily see a "cashing out" scenario with BTC.  It is the first opportunity perhaps where over time the unit of account or currency if you will grows in value while providing deflationary pressures on the economy where one would simply hold it for numerous reasons rather than "cashing out".   

Wed, 09/02/2015 - 14:05 | 6500593 Anopheles
Anopheles's picture

If the whole world implodes financially, then gold won't be worth much either.  

Gold is only "valuable" in LOCAL collapses, where gold still have "value" in other parts of the world.   The reality is when SHTF, gold is useless, you can't do anything with it, and it will be valued accordingly.

The best way to prepare is to have income/value producing assets or skills.  They will continue to provide necessities that people are willing to trade/barter for.  

And bartering gold?  That's way down the list of valuable/useful items in a WORLDWIDE collapse.  It will be heavily discounted.  In a collapse, it's a sellers market, and sellers of necessities can ask whatever they want.   Don't like the price?  Shop elsewhere. 

Wed, 09/02/2015 - 14:29 | 6500726 ghostzapper
ghostzapper's picture

Absolutely agree on income producing skills and assets though assets such as real estate can be taxed to death.  Sounds like we also agree (maybe I'm presuming too much you tell me) that in a total collapse in short: who gives a fuck because life will revolve aorund survival and maybe we don't want to even be alive at that point.

So, if society does move forward (the Big Reset or whatever moves us off counterfiet fiat) then at the end of the day what I'm really saying is that in terms of functionality and potential most people have no clue what BTC can and can't do.  I still feel marriage to PMs can block one's willingness to explore and certainly the recent performance of BTC as a store of value has been terrible.  Again, IF society moves forward then in my view FinTech will evolve around the Blockchain and BTC particularly in a mobile world.

I gave up commenting on BTC at ZH months ago when it was obvious few if any would actually absorb what the Blockchain is and what it can do.  To each his own I suppose guys blow cash on booze, drugs, betting, broads, and tons of other shit but because they are SO MUCH smarter than everyone else they won't send $230 to obtain one BTC even if it is just to hedge and learn about it?  Makes no sense to me.   

Wed, 09/02/2015 - 15:16 | 6500931 Anopheles
Anopheles's picture

Yes, we do agree.  

However I don't believe a financial system will ever evolve around blockchain.   It will remain a niche system.   Just becasue something has the best technology, doesn't assure success. 

Wed, 09/02/2015 - 15:12 | 6500992 tmosley
tmosley's picture

You can do it a little at a time using localbitcoin, arrainge to do an off-exchange swap, or use a service like coinbase, or open an account on any of the dozens of exchanges.

It's not much different from buying a condo with gold. If the buyer won't take it, you just have to sell it for local scrip or find an intermediary.  Coinbase is set up to do this already.

Wed, 09/02/2015 - 15:27 | 6501078 Anopheles
Anopheles's picture

What you are saying is exactly my point.  Bitcoin is a medium of exchange for little transactions, not for "moving" any decent sums of money. 

 

An exchange will happily SELL you $5 million in bitcoins, but try and get that cash back?  They will, at $10k a day for the next 2 years. 

Wed, 09/02/2015 - 15:57 | 6501251 overqualified
overqualified's picture

even if you you trade in physical gold, Bullionvault asks to arrange deals with them in advance if you want to move >$1 million at once. And they deal with tons of gold. So just use your brain.

Wed, 09/02/2015 - 15:28 | 6501102 TheFutureReset
TheFutureReset's picture

I hear the swap market is pretty big compared to the exchanges anyway. Look at Bitcoin Investment Trust, Barry Silbert's venture. Lots of money moves in there and won't budge the exchange price. Big investors also had a chance at the Silk Road coins. The bids if I remember are always at a steep premium. 

Wed, 09/02/2015 - 15:49 | 6501216 overqualified
overqualified's picture

several exchanges. You can do it even 1 million here, 1 million there for better liquidity.

Or you can buy real estate for btc directly.

https://www.bitpremier.com/5-real-estate

Thu, 09/03/2015 - 02:06 | 6503275 Pseudonymous
Pseudonymous's picture

For that amount of money it may be a good idea to do what the USMS did with the Silk Road bitcoins - auction it off. You can organize an auction yourself or use the services of a company that does auctions.

You may get a better execution (higher average dollar price) by selling it gradually over regular exchanges though (that will require you to jump through whatever hoops you have to jump when dealing with large amounts of fiat).

Wed, 09/02/2015 - 12:57 | 6500171 RazorForex
RazorForex's picture

If Bitcoin and other digital currencies gain more traction, a lot of money that would have poured into precious metals will instead pour into digital assets, so precios metals holders percieve this as a direct threat to their investmet, thus the animosity.

Wed, 09/02/2015 - 13:03 | 6500221 Grandad Grumps
Grandad Grumps's picture

Who will give you food for your Bitcoins if the electricity is turned off?

Wed, 09/02/2015 - 13:08 | 6500253 LawsofPhysics
LawsofPhysics's picture

^^^this.  Fourth generation farmer, always except PMs and have never had any problem getting the fruits of another's labor with them.  Ask yourself one question, who controls the power grid and the internet?  Much of our properties are self-sufficient, so I control those grids and the internal network, but that's it.  In a society with a real justice (not just us) system (you know where everyone is subject to the same laws and people of all origins actually go to fucking prison) digital currencies would be very useful...

wake us when that happens...

Wed, 09/02/2015 - 13:32 | 6500413 Skateboarder
Skateboarder's picture

The convenience of easily available electricity makes modern man arrogant, to the pont where the importance of 'holding' digital "assets" outweighs that attributed to physical ones. Man is relatively useless without physical resources, and that's something everyone needs to either think about and come to the conclusion to before physical resources are limited in access or availability, or they will learn the hard way.

Wed, 09/02/2015 - 13:13 | 6500280 froze25
froze25's picture

No one but your credit cards and debit cards won't work either.  Bit coin is not a end all be all, its a tool with its uses.  Hell man a carrington event would pretty much make all of modern technology not work that doesn't mean that all modern technology is useless now.  Bit coin has its place and its uses just like Gold and Silver do.

Wed, 09/02/2015 - 13:42 | 6500483 RazorForex
RazorForex's picture

If the electricity is turned off for any extended period of time or if the grid goes down permanently, then you have an Armageddon scenario, you won't have time to think about food.

Wed, 09/02/2015 - 15:17 | 6501028 tmosley
tmosley's picture

Right, because you can only own one thing. Every morning, I sell all my assets so I can buy millions of eggs, I cook a few, then I sell the rest for tonnes of bacon. I shave off a few slices of tht, then sell the rest so I can buy a tanker full of organge juice.

It's all really tiring.  If only I could own multiple things at once. But that would just be crazy. And we wouldn't want people thinking we were crazy, right!!??

Wed, 09/02/2015 - 13:05 | 6500229 LawsofPhysics
LawsofPhysics's picture

If ifs and buts were candy and nuts we would all have a merry X-mas...

sorry, did you have a fucking point?

Don't overthink this, keep it simple stupid, when fraud is the status quo, possession is the fucking law.

In a society with a honest and fair justice system, digital currencies would be great...  ..."if" only...

Wed, 09/02/2015 - 14:23 | 6500696 ultraticum
ultraticum's picture

Last time I checked, "possession" of real property in the USSA is not really possession at all.  You are a share-cropper tenant to Uncle.  There are many affluent suburban areas now where the arbitrarily assessed tax bill exceeds the mortgage.

 

Storing your labor in precious metals has the advantage of not being (easily) traceable or confiscated by the greedy hand.  Ditto Bitcoin if used judiciously and properly.

 

The other day some guy got hassled by US customs because he was wearing a Bitcoin logo t-shirt.  They asked if he was "carrying" more than $10,000 dollars.  They didn't ask if he had any bank accounts, anywhere in the world, with that amount.

 

Any vehicle that is so ill understood and puts so much fear into the hearts of statists and bankers can't be all bad.

Thu, 09/03/2015 - 08:05 | 6503627 Pseudonymous
Pseudonymous's picture

Bitcoin doesn't rely on a justice system. If you're thinking of something that combines reliance on the statist justice system and Bitcoin - you're doing it wrong.

You must be thinking of online wallets and exchanges that have custody of clients' bitcoins. You don't need to go through these.

Bitcoins are a new kind of valuable possession. The blockchain enables an entirely new property type. There are only a handful of property types. One is possession. Another is based on a central authority, like a land register or central securities depository. Another way to own something is via a bearer instrument, like a stock certificate. The latter two of these need a working judicial system, otherwise they are easily abused. Physical possessions and bitcoins don't.

When it comes to the law and the potential for confiscation, it is actually very hard to match bitcoin's security. If you hide your physical possession really well then you can avoid confiscation, but then you also lose the ability to easily access and use that thing. On the blockchain not only do you not need a working judicial system, you can also relatively easily defend against a failing or abused judicial system.

It's not just fraud that is the status quo. Theft is the status quo, too! When theft is the status quo, then two things are the law:

1. Superior physical force;

2. Secrecy.

Undoubtedly 1. is a necessity. However, for the things that you choose to go the second way: you may well find that bitcoins protected by a secret (such as the private key) have both pros and cons compared to a hidden physical object.

Wed, 09/02/2015 - 13:05 | 6500237 Panic Mode
Panic Mode's picture

Is she taking a dump?

Wed, 09/02/2015 - 13:13 | 6500279 foxenburg
foxenburg's picture

If you've got your yuan into greenbacks then you're 90% home and dry. Why take risk and buy bitcoin? I can't believe it's that hard to smuggle cash out. Or gold. If you only have yuan then you won't be able to buy bitcoin anymore than someone with Zimbabwe dollars can. Importers will always arrange to be overinvoiced, remit extra money and ask their supplier to bank the surplus, or if an exporter, underinvoice and ask the recipient to bank the fair value of the surplus for you).

Wed, 09/02/2015 - 13:17 | 6500309 Crocodile
Crocodile's picture

Take the "S" of of She; look at the hands and make note of the large "Adam's Apple".  It was so named because it is indicative of a MAN.

Wed, 09/02/2015 - 13:21 | 6500320 Tarzan
Tarzan's picture
China Scrambles To Enforce Capital Controls (Which Is Great News For Bitcoin)

 

China Scrambles To Enforce Capital Controls (Which Is Greek News For Bitcoin)

 

Minor spelling error, Fixed it for ya...

Wed, 09/02/2015 - 13:22 | 6500339 DeProgrammed
DeProgrammed's picture

The only real use for BTC right now is for agorism. Otherwise it seems like just another speculative junket, which can be as easily manipulated as any other "market". Someone clue me in?

Wed, 09/02/2015 - 13:30 | 6500399 FeelinFine
FeelinFine's picture

Blythe Masters

Voted most likely to say "Let me see your manager." at any Starbucks world wide.

Wed, 09/02/2015 - 13:39 | 6500457 q99x2
q99x2's picture

Ok so an idea may be to F'n wait to buy big into Bitcoin until it shows some upward momentum. Then ahead of the first big futures drop dump it. Ride FAZ all the way down then plow back into bitcoin under $100. The capital flight money stuck in bitcoin will liquidate during a market crash.

Wed, 09/02/2015 - 13:47 | 6500507 VWAndy
VWAndy's picture

So the blockchain stays with the coin? If it was used in the past for illegal stuff tptb can simply swipe it several transactions after the so called crime took place. Whats to keep the IRS from declaring bitcoin a means of tax evaision?

 TPTB  sure do like changing the rules whenever it serves them. When they pull the plug you can count on some rule changes here and there. Most if not all safe havens will not be as safe as people thought they were. Like GM bond holders?

Wed, 09/02/2015 - 15:48 | 6501208 TheFutureReset
TheFutureReset's picture

More correct would be to say the coin stays with the blockchain. Your bitcoin balance is a sum of the bitcoin pieces assigned to your address. Each transaction results in breaking the pieces up again. There are no arbitrary "whole" bitcoins. If you send 1.00 bitcoins it just a nice looking round number. But you can send any denomination. If you take a look at a small piece in your wallet you can trace it's lineage back to its creation. Each stop along the way, can be examined and analyzed for connections elsewhere in the blockchain. Bitcoins can't just be confiscated like from a safety deposit box if it has some criminal tainting on it. It's more secure than that. 

"What's to keep the IRS from declaring bitcoin as a means of tax evasion?" nothing. But it won't help them, it'd only lend credence to bitcoin as a very cool and powerful technology. They could arrest you, but they wouldn't be able to get at your money unless you give it to them.  They can't freeze a Bitcoin address garnish wages paid in bitcoin. If millions of people are doing it, the IRS would have a huge problem. 

Wed, 09/02/2015 - 14:09 | 6500602 Son of Captain Nemo
Son of Captain Nemo's picture

You had to mention the virtues of Bitcoin with that monetary whore of all "monetary whores" Blythe... Going public yet with her full endorsement???

This is tantamount to announcing "Rule 48" for Bitcoin World

So much for ButtCoin!

Wed, 09/02/2015 - 14:12 | 6500631 BeerMe
BeerMe's picture

What a slutty picture.  Hiked up skirt.  Hand on her crotch.

Wed, 09/02/2015 - 14:20 | 6500679 Son of Captain Nemo
Son of Captain Nemo's picture

What a slutty picture. Hiked up skirt. Hand on her crotch

Better still... A long white piece of cotton on the end of a string with the caption Fun with Blythe... "menstruating with the block chain"...  Shedding something that has potential only to be aborted into a sanitary napkin!

Which is pretty much the correct analogy for what will happen to Bitcoin if she gets her and her rolodex of banking crony friends with their meat hooks into that business.

Wed, 09/02/2015 - 14:26 | 6500667 Chuck Knoblauch
Chuck Knoblauch's picture

The nation who enforces its laws will win.

China is that nation, unfortunately.

Wed, 09/02/2015 - 14:36 | 6500761 MSimon
MSimon's picture

No nation ever has been able to enforce its laws sufficiently if it didn't get at least 99% voluntary compliance.

 

Nations are very fragile things.

Wed, 09/02/2015 - 14:42 | 6500818 Chuck Knoblauch
Chuck Knoblauch's picture

The strongest communist wins.

 

Wed, 09/02/2015 - 17:29 | 6501683 MSimon
MSimon's picture

Russia is strong on natural resources and weak in mfg. They are not a digital power either. China is strong on mfg but weak in natural resources. Given their debt their economy may be much weaker than advertized.

 

Could they combine? Well yes. But there is a shipping problem. The US has the only world Navy. That complicates things.

 

As badly run as the US is I wouldn't count out our bankers and military.

 

As to the correlation of forces? Well nothing ever goes according to plan. And both China and Russia have some serious local enemies.

 

If I was a betting man I'd be 60-40 on the USA coming out on top. Our bankers are Jews.

Wed, 09/02/2015 - 16:39 | 6501503 Youri Carma
Youri Carma's picture

Blyth Masters From Silver Witch to Blockchain Bitch.

 

Wed, 09/02/2015 - 17:35 | 6501706 crazytechnician
crazytechnician's picture

You did know Max Keiser has a secret crush on her ?

Wed, 09/02/2015 - 18:18 | 6501887 frenzic
frenzic's picture

wtf is all this noise doing here

think I'm gonna have to change the channel

I might check back once, maybe twice

if I see any more of it I'm out

I can handle the other shit in which the good stuff is usually buried but not this shit

see I'm raysis like that

Thu, 09/03/2015 - 00:24 | 6503154 atomicwasted
atomicwasted's picture

PLEASE CHANGE THE CHANNEL

THE INTERNET HAS BLOCKED THIS CHANNEL TO YOU FOR YOUR CONVENIENCE

THANK YOU AND PLEASE POST AGAIN AFTER SOBERING UP OR TRIPPING BALLS A LOT MORE, YOU ARE IN THAT AWKWARD PLACE WHERE YOU ARE JUST KIND OF FUCKED UP NOW

BEEP

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