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What To Do With Your Cash?

Is it folly to hold cash right now? Or brilliant?
Saturday, July 22, 2017, 12:19 AM

Have you moved a material percentage of your financial portfolio to cash? Have you become so concerned about the meteoric ramp upwards in asset prices that you find it wiser instead to move to the sidelines, build "dry powder", and wait to re-enter the markets at saner valuations?

If so, you have my sympathies.

The past 5+ years have been brutal for savers pursuing this strategy. I know this well, as I'm one of those folks, too.

The Mother Of All Financial Bubbles

As we've chronicled for years here at PeakProsperity.com, the global central banking cartel started flooding the world with liquidity (aka, money printed from thin air) in response to the arrival of the Great Financial Crisis in late 2008. And they never stopped.

The chart below shows how the combined balance sheets of the major world central banks (Fed, ECB & BOJ) are 3.5x higher today than their pre-crisis levels less than a decade ago. (And if we included the PBOC in this chart, the cumulative total would be 18.8 Trillion!): 

(Source)

All that liquidity has to go somewhere. And, as hoped by the central banking cartel, it has found its way into the financial markets, pushing the price of nearly every asset class to record extremes. And then higher still.

Equities have shot the moon, and are now nearly twice as high as they were at the apex of the past two stock market bubbles, as this below chart of the S&P 500 shows (in fact, the S&P price/revenue ratio just hit the highest level in history, aside from the week of the March 2000 bubble peak):

Similarly, bond prices have continued their 30-year march higher, powered by record-low interest rates around the world:

(Source)

And home prices have returned back to the same level seen right before the last housing bubble viciously burst (in many high-demand markets, home prices are well in excess of those 2007 highs):

We've written numerous articles about the dangers of the current central banking policies responsible for today's nosebleed asset prices. But the gist is this: we are currently living within the mother of all financial bubbles. These prices are in no way sustainable.

Why not? While the reasons are legion (and we've spilled plenty of ink writing about them all), the big reason is revealed in this chart:

To support the current level of asset prices, we have been growing our debts more than twice as fast as our national income (GDP). Any household knows that you can't do this for long before insolvency occurs. Nations -- even those with a printing press -- can't escape this same fate in the long run.

See that little wiggle in the debt line from 2008-2009? That's the wiggle that almost destroyed the world during the Great Financial Crisis. Look at those asset price charts above again. See how much higher we are today than we were back in 2008?

So... are you one of those people wondering how much more painful the next downturn will be, when we fall from even loftier heights this time? Are you one of the few folks who haven't already forgotten that the S&P declined over 50% in the short time between the end of 2007 and the beginning of 2009?

If you are, and you've decided not to participate in today's Ponzi scheme markets and instead build cash, it's been a painful ride watching the prices of nearly every other asset vault higher year-over-year while your cash pile simply sits there.

And if the feeling of "missing the rally" isn't bad enough with the mainstream media and your brother-in-law constantly rubbing your nose in it, there's a host of new threats besieging cash these days.

The All-Out War On Savers (aka Financial Repression)

Again, as we've written about often here at PeakProsperity.com, those running today's economy are doing their utmost to keep prudent savers like you from keeping your cash safely on the sidelines. They desperately want your savings pushed out into the economy so that their over-leveraged casino can continue operating a little bit longer.

We discuss this in depth in our recent report Less Than Zero: How The Fed Killed Saving, which explains how the Financial Repression playbook is very intentionally designed to transfer the burden of the government's orgy of debt onto the public. It seeks to do so in a way that is just opaque enough to just enough people that the general public doesn't catch on to what's happening.

The key elements of Financial Repression are:

  • Negative interest rates: These reduce the servicing costs of debt, allowing the system to take on even more. They also destroy any incentive to save, as cash parked in the bank actually loses purchasing power on a real basis. This pushes capital out of savings and into the riskier assets (stocks, bonds, real estate, etc) that all the built-up debt is supporting.
  • Capital controls: These "ring fence" domestic capital, making it difficult for prudent money to avoid the measures of financial repression. Restrictive legislation on international holdings like FATCA and the higher taxes placed on "safe haven" assets like precious metals are examples of these. Other manifestations are bank bail-ins, banking restrictions on withdrawing more than $10,000 (and oftentimes substantially less), civil asset forfeiture, and outlawing bank notes as part of the "war on cash" and the move to a "less cash" or "cashless" economy -- all of these serve to thwart and/or penalize savers who would just rather sit out the current insanity of the markets and accept no return over the risk of substantial loss.

So, with the reckless investors all around us gloating at their returns, with our banks paying us nearly 0.0% on our savings and treating us like criminals if we have the temerity to ask for access to it, and with the government talking about taking it all from us eventually anyways (replacing with Fedcoin, perhaps?) -- is it time for us cash savings holders to throw in the towel?

Hussman's "Choice"

In a word: No

We have to remember that we are living through a massive bubble market that has no precedent in history. Bubble markets are nefarious, as they prey on our mind's hard-wired greed/fear drivers. It is very easy for us be manipulated into thinking "it's different this time". Even the genius Isaac Newton fell victim to the mania of the South Sea Bubble:

John Hussman has done perhaps more work than anyone else demonstrating that today's elevated market pricing is due to pulling future value into today (through debt), and that the BEST investors can hope for going forward is a decade of 0% gains:

Hussman 12-year projected return chart

(Source)

But I think his real masterwork is his very succinct summary of the situation we are all in at this moment in history:

The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. 

2008 is not so far in the past that we can't clearly remember the panic in people's eyes as they watched their retirement portfolios and home prices get cut in half within a matter of months. That's what looking like an idiot after the peak feels like.

As oddball as it may seem to others, as uncomfortable as it may feel as the central bank liquidity party rages on, as painful as it may feel as the system tries its best to separate you from your hard-earned savings, there will come a time when this unsustainable system will falter and then proceed in collapsing on itself.

When that happens, those who decided to look like an idiot early on and refuse to join the party (i.e., positioning their capital defensively), are going to look like geniuses. They will avoid the heartbreak of loss, and they will have capital to deploy when the dust settles, purchasing quality assets at (potentially historic) bargain prices.

It's not an easy choice to make, or to remain steadfast in. It takes foresight, courage, and resolve. But it's a smart choice.

Of course, cash savings is just one of a number of options for positioning your financial wealth defensively right now. For those looking to learn more about other ways to do so, we recommend the following progression:

  1. If you haven't yet read it, read our free report The Mother of All Financial Bubbles to understand the full nature of the situation we're living through today
  2. Read our report How To Hedge Against A Market Correction, to understand the most common strategies for protecting your portfolio from downside risk
  3. For those interested, I've shared how my own personal portfolio is positioned (Note: this is not intended as personal financial advice, but as an example to evaluate)
  4. Schedule a review focused on downside risk management with your financial adviser. If you're having difficulty finding one experienced on this topic, we can suggest one to consider.

It's unknowable exactly how much longer our unsustainable markets can remain at their record levels. But there is one thing we know for certain: we're closer to their day of reckoning than we've been at any point over the past seven years. A recession is due soon by historical standards, and long overdue by fundamental ones.

When it happens, do you want to look like an idiot? Or would you rather choose to look like one now, so that you can look brilliant then?

Choose wisely.

~ Adam Taggart

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40 Comments

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 726
Thanks Federal Reserve

The FOMC federal funds rate is currently in the range of 1.00% to 1.25%. In the past, even this meager rate would have influenced banking institutions to offer commensurate interest rates to entice savers. Sorry! My checking account (although free) offers no interest on the checking balance from month to month. I have a savings account with a modest balance that "earns" 0.15% annual interest. It hasn't changed - even with the recent Fed moves. Then, whatever is "earned" at the end of the year has to have taxes paid on April 15th. My money won't buy as much, but since the nominal value increased, I still have to pay taxes on it. Arrgh!

For all its warts, my savings account is still the least ugly horse in the glue factory. In other words, I don't feel comfortable investing elsewhere. Thanks to Fed policies, everything is out of whack with underlying fundamentals.

Grover

VeganDB12's picture
VeganDB12
Status: Platinum Member (Offline)
Joined: Jul 18 2008
Posts: 713
Thank you PP, Chris and Adam

I think I have been a minor crank of late. I know your articles are brilliant and insightful. And your advice has helped me more than I can state here.

This article by Adam really addresses a sore point for me, I cannot stomach the market again (I used to be an enthusiastic investor in stocks before the crash) especially knowing what we know. And my friends who jumped back in have been gloating gloating gloating.

Still, I sleep at night and never worry about my savings. If my funds evaporate I will be at the end of a long line of others and the situation will have bigger priorities. I hired one of the advisors your site recommends and I am sitting tight.

Thank you as always for what you do as a long time subscriber I am amazed at everything you have accomplished.

Rector's picture
Rector
Status: Gold Member (Online)
Joined: Feb 8 2010
Posts: 463
It's a fait accompli anyway

The time for second thoughts was 2012-2015.  Jumping in now would make you an idiot before AND after.  Stick to the facts and what we know to be true - it's math.

Rector

cowtown2011's picture
cowtown2011
Status: Bronze Member (Offline)
Joined: Sep 12 2011
Posts: 29
Best of Both Worlds

I increased the percentage of cash I hold a number of years ago but also kept a reasonable portion allocated to equities. Even a 25-50% decline from here would still yield a nice gain on the equity portion, markets have been on a long wild ride to these levels. I've found that using a simple momentum trading approach has worked well for me, markets tend not to go up and down in a straight line, as such, once things turn south I will sell my equity allocation. How things play out in the bond sector will be interesting, hard to perdict but I'm using a momentum approach in this area as well. I keep dancing will the music keeps playing. I'm sure I will incur some losses but I've also made some nice gains. Everyone needs to do what allows them to sleep at night. 

nigel's picture
nigel
Status: Silver Member (Offline)
Joined: Apr 15 2009
Posts: 125
Different thoughts

What frustrates me about the peak prosperity community is that we acknowledge the markets are in a bubble and that they are in a state of systemic risk, but we still continue to find some way of taking advantage of them to make money. It seems to be obvious that the system itself is geared towards failure given a long enough time frame. It is a disconnect, or cognitive dissonance of people still trying to get a free lunch. The essence of day trading or investing is trying to make money without working. Instead of producing something and selling it at a profit, you want to make money by doing nothing.

If you want to know where to put your money, take a 1st year economics approach. Divide the economy into three. the primary economy, the secondary economy and the tertiary. The primary being production of resources, so farming, mining, logging, fishing. the secondary being anything that takes primary production and adds value, so the carpenter making furniture with the wood, and so on. The tertiary being anything that derives it's resources from anything else, so banks, accountants, government, stock markets and so on.

Assume the tertiary economy is a bubble and systemically flawed. Invest in those things that aren't related to the tertiary, and can't be influenced by the tertiary. So whilst food production sounds good, if the food is traded on the futures market then stay away. Invest in a small farm and grow mixed food, or a CSA, but don't buy something on the stock market where the wealth is tied up in the tertiary.

So here is where you make money, invest in a farm, or a carpenters workshop, a barber shop, or something small and local that will always be around, something that existed before corporations existed. The bad news is you probably can't day trade and keep your money, you will have to get your hands dirty and do an honest day's work. The good news is that it's not that hard, you can find plenty of jobs for older people, or people that aren't strong anymore.

Ask yourself these questions; if you have all of your money in a bank in the next crisis, what stops a Cyprus style bail in from taking half of it? If you have all of your money at home, and the next crisis takes 10 years with an inflation rate of 6% how much will be left when you need it?

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5239
Thumbs up!
nigel wrote:

What frustrates me about the peak prosperity community is that we acknowledge the markets are in a bubble and that they are in a state of systemic risk, but we still continue to find some way of taking advantage of them to make money. It seems to be obvious that the system itself is geared towards failure given a long enough time frame. It is a disconnect, or cognitive dissonance of people still trying to get a free lunch. The essence of day trading or investing is trying to make money without working. Instead of producing something and selling it at a profit, you want to make money by doing nothing.

Thumbs up for the whole post, but especially the first paragraph.  We are all living on surplus energy and as a result have managed to fool ourselves into thinking that all the accouterments and trappings of tertiary activities are as real, if not more real in many people's minds, than primary or secondary.

To that end, the degree to which each of us is still wedded to our own ideas of "free lunch" tertiary gains is the degree to which we may be pretty disappointed in how the future unfolds.

After all, unsustainable is unsustainable.

In better news, for the first time in what may be 5 years, we have a single Monarch butterfly that now frequents our many plantings in the yard.  I am surprised by how much I value this single butterfly.  Powerful flyer, graceful, extraordinarily beautiful.  It reminds me exactly what I am fighting for.  

All life.  Beauty.   Those are worth fighting for.

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3094
Monarchs

We have seen more monarchs this year than in quite a while, but still not all that many.  We visited a friend who lives on the south shore of Lake Ontario this week.  He hasn't done much planting, but does have a few milkweeds and butterfly bushes.  He had a lot of monarchs that were apparently passing through.  The west end of Lake Ontario and the east end of Lake Erie are a major flyway for birds, but I hadn't heard that butterflies follow the same flyways.  Nonetheless, I was happy to see them.

nigel's picture
nigel
Status: Silver Member (Offline)
Joined: Apr 15 2009
Posts: 125
My weekend

With apologies to Adam as my post was not that of a gentleman, in fairness I still hold gold because of the crash course (and have done quite well from it) and constantly look for good investments. I am the cause of my own frustration often. I avidly read your posts good sir, you introduced me to singing frogs farm, and that alone was worth the price of admission.

My post was rude because you and Chris write for a broad audience, at different stages of being awake, and your post was gentle and good, and just because I didn't get value doesn't mean that someone else might not have needed to hear it, and my criticism of day trading was done without consideration for them. Tact is not my strong area and I usually hold my fingers from being so poorly behaved.

My weekend was spent cleaning out a new garden bed. It will be my lavender and rosemary garden, because they are both beautiful, they smell nice, and the bees will love them, maybe a butterfly or two.

Happy gardening.

brushhog's picture
brushhog
Status: Member (Offline)
Joined: Oct 6 2015
Posts: 18
Timber....the forgotten investment

Great article I am definitely one of those sitting on the sidelines. My main investments have been in my small farm and trying to get as self sufficient as possible. A large part of my land is timbered and recently I had several loggers up to my place to inquire about thinning out my woodlot. After some boundry marking, and cruising of the timber I was quoted a price that really surprised me. It was almost a thousand dollars an acre. This land had been logged 15 years ago, and the logger informed me that it can be logged every 15-20 years. I chose not to do it for now, I am still doing research and making sure that this is a good option for me.
I am by no means an expert on timber, but this is certainly an investment worth looking into. When I bought the place, I never even considered that I was buying a timber investment. I used the woods to cut cord wood to heat my home, hunt, and provide privacy. When I do the calculations, a regular timber harvest pays all my property taxes for the entire 15 year period plus about 7k.
So come to find that the piece of my land that I thought was worth the least, is not only providing free heat for my home, venison for my table, and privacy from neighbors...is no paying my entire property tax bill FOREVER. If I ever get around to tapping those maple trees, It'll also top my pancakes.

Matt Holbert's picture
Matt Holbert
Status: Bronze Member (Offline)
Joined: Oct 3 2008
Posts: 59
Thousands of monarchs

When I was growing up in the mid-late 60's, a fairly large tree in the backyard of our farm property was covered top to bottom with migrating monarchs taking a break. (Western Indiana) It was sight to remember. Unfortunately, the Brownie was out of film. : (

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
timber risks and primary wealth

Timber's generally a good investment but has its risks as well.  Fire is one.  Infestation is another (think chestnut blight, dutch elm disease, gypsy moth, etc.).  Theft is also a possibility.  My ideal property would be one on a body of water filled with fish and other edible aquatic life, edible wildlife, abundant hardwoods, good soil, a gold mine, steady wind (for a wind farm), and abundant sunshine (for solar).  Lots of primary wealth.  So far, still looking.;-)

Dusty272's picture
Dusty272
Status: Member (Offline)
Joined: Jul 24 2017
Posts: 1
Question

The thing I don't understand about this is how all the creation of this new money will effect the next crash. Now that all this printed money exists arent these higher prices just here to stay? I was told that all this money printing would lead to inflation, so aren't we just seeing this inflation now and isnt inflation different than a bubble?

The next crash will look far different from the 2008 crash. Will prices really drop in the same assets areas like they did last time? They won't be able to use the same strategy again to get us out...

MommyTammy's picture
MommyTammy
Status: Member (Offline)
Joined: Jul 25 2017
Posts: 2
What my strengths are.....

Administration

Christian values

Business owner: 16 years Cstore, pizzeria, in resort area.

MommyTammy's picture
MommyTammy
Status: Member (Offline)
Joined: Jul 25 2017
Posts: 2
Newbie

I found this sight thru the Blaze.  I consider myself a bright person.  I run a large business in a resort town that includes C-store, Mobil gas, Pizzeria/deli, liquor store, laundromat and apartments upstairs.  I've been married 33 years and have two teens...one in college so I deal with fafsa, etc. besides dealing with the rules/regulations in NYS dealing with fuel/liquor.  I have just haphazardly had 401ks etc. since I was a young girl working for someone else.  After being self employed I've plugged away on my own.  I bought one stock @ $500 (my first ever) and it's now 15K, I had to rollover my corporate stocks and went to Goldline (a Beck listener).  I don't like stocks so put some in equities which I guess are an expensive way to invest (???).  Also JUST started IRA a couple months ago.  I have NOOOOO idea what I'm doing...I've never even heard of your "three basic economic" trio.  I wish I new where to even begin.  The more I read, the less I know and more confused.  I work 70-80 hrs a week and am an involved Mom.  Where do I begin????

pyranablade's picture
pyranablade
Status: Silver Member (Offline)
Joined: Nov 8 2010
Posts: 195
Mommy Tammy

The place to begin is The Crash Course:

https://www.peakprosperity.com/crashcourse

 

The 3 E's are: Energy the Economy and the Environment.

Welcome to PP. If the crash course makes sense to you then you've found a great website!

Wendy S. Delmater's picture
Wendy S. Delmater
Status: Diamond Member (Offline)
Joined: Dec 13 2009
Posts: 1948
My family has holdings in Timber

No maple trees as we are in the Deep South, but we have stands of forested hardwood pines (yes, they come in hardwood: i was surprised) and the market for them is depressed. At the family meeting I advocated for selling some of them anyhow because if you think the market is depressed now, wait until no one has any money. 

There's enough lumber there we can still cash in the rest later if we make it through to the other side of the coming crash, 

Wendy S. Delmater's picture
Wendy S. Delmater
Status: Diamond Member (Offline)
Joined: Dec 13 2009
Posts: 1948
Welcome MommyTammy

This is a well-run and useful community and we are glad to have you aboard. Start with the Crash Course. It's overwhelming at first but don't despair when watching it, for if you say you are a Christian then there's that saying, "God had everything under control."

PM me with any questions! Be well. 

Carl's picture
Carl
Status: Member (Offline)
Joined: Jul 17 2008
Posts: 14
Newbie

MommyTammy,

Welcome. I second the recommendation to go through the Crash Course first. Then follow along with new posts as you are able. Things will begin to come together.

Andy_in_Hawick's picture
Andy_in_Hawick
Status: Member (Offline)
Joined: Feb 6 2009
Posts: 7
start with the Crash Course

Hey MommyTammy

I understand where you're coming from. There's heaps of new stuff to learn; some more vital than others. Don't get too hung up on what you don't know yet but keep plugging away at it. Listen to the Crash Course on this site; it'll take you through the important stuff and give plenty of background to help you understand the strange language that gets talked about the economy. It sounds like you've got a good head on your shoulders to run a business with all the regulation and paperwork involved so take it steady and work with what you're comfortable with. 

The first stage is getting to understand where your money is and who is doing what with it. Then you start moving it to places where you want it to be; putting it in the hands of people you can trust and supporting projects and businesses that you value. Maybe there's some things around the home that are worth investing in so that you can cut some fututre costs; insulation, solar panels, garden; whatever you are comfortable with. … and pray for guidance; wisdom is given to those who ask for it.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5239
Welcome MommyTammy
MommyTammy wrote:

  Where do I begin????

I will second other people's recommendation to watch The Crash Course.

However, that's a big bite (4.5 hours)

Given your already very busy life, let me suggest you start here with a condensed version of The Crash Course:

http://peakprosperity.com/acc

This version touches all the bases, and if you want to learn more, well, that's why we exist.  We're here to teach and learn from each other.  When you have the time, the full Crash Course is essential information (for troubled times).

Finally, our book Prosper!  Jumps past the problem definition and pretty directly to the solution space.  So if you are already pretty sure things are messed up and you are ready to take action, you can always get the book and start there.

Again, welcome.

 

 

 

 

brushhog's picture
brushhog
Status: Member (Offline)
Joined: Oct 6 2015
Posts: 18
bitcoin

JohnFrank, to me Bitcoin has all the hall marks of a bubble-mania. It is extremely volatile, has no intrinsic value, and its not even really used as a median of exchange [ which is its purported function ]. Its only real function right now is as a way to hide money, and as a speculation of what it might be.I would not invest a large sum of money into bitcoin, but I would consider a small, speculative investment.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2353
Brushhog and Bitcoin...

Brushhog.. I really have to argue against some of the sweeping statements you made above.  Yes, Bitcoin and the other crypto's have looked bubbly this year... and yes, this means volatility.. but in some ways I think that the volatility should be celebrated because it is the result of a mostly free market that is trying to value this very new asset class.  Volatility seems natural here... 

You said,

  (Bitcoin) has no intrinsic value

Really?  Are you saying this because you don't appreciate the, "intrinsic" value of software in general in our information economy, or because you don't think Bitcoin is itself useful software?  It's hard to argue against the value of software in a world where companies like Microsoft and Oracle and Google have a combined market cap of around $1.5T, and between them there are almost no physical products .. in other words they make software. 

Bitcoin, and the blockchain in general, are quite elegant in terms of their decentralization and the benefits thereof, one of which (triple entry accounting) is explored in depth in this paper;

https://www2.deloitte.com/content/dam/Deloitte/de/Documents/Innovation/B...

And to the point about Bitcoin actually being used.. used as a medium (median?) of exchange... well.. the Bitcoin economy continues to percolate, in many cases outside the US;

http://www.zerohedge.com/news/2017-07-26/bitcoin-internet-1995

To me, one event stands out as bitcoin’s Netscape moment. That’s when Japan legalized bitcoin.

Bitcoin’s Moment

Since bitcoin was legalized, here’s what has happened in Japan…

  • More than 260,000 stores in Japan are rolling out bitcoin as a payment method.

  • Stores at famed electronics marketplace Akihabara have started accepting bitcoin.

  • Japan is setting up a bitcoin “testing hub” for fintech companies.

  • Leading Japanese bitcoin exchanges have unveiled plans to accelerate adoption.

It’s all leading to increased usage of bitcoin in Japan.

  And finally, to your point about, "hiding" money..  are you not aware of the impending digitization of the fiat money system, aka the eradication of cash?  Are you an advocate for capital controls?  What are you smoking Brushhog?  Bitcoin and it's ilk are free market alternative forms of money... why anyone on this website would try to slander Bitcoin as a way to, "hide" money is beyond me... from the same article above,

Bitcoin has incredible value as an international transfer mechanism. You can take any amount in and out of any country. You don’t need permission from any government.

You can send it across any border—or any number of borders—as often as you want. And there’s nothing anyone can do about it.

I’ve seen this firsthand in Latin America, where bitcoin helps people get around capital controls. (Governments use capital controls to trap money within their borders so they have more to steal.)

Bitcoin helps people bypass these restrictions. That’s because governments can’t freeze, seize, or block the transactions.

This is why bitcoin is such a disruptive and exciting technology, and why bitcoin should be a critical tool in your international diversification toolkit.

Bitcoin’s use is set to explode… and it could make you a fortune.   

One can argue about the ability of governments to try to clamp down on Bitcoin and the like.. but the idea of free market, decentralized money is really something to celebrate. 

brushhog's picture
brushhog
Status: Member (Offline)
Joined: Oct 6 2015
Posts: 18
Bitcoin response to Jim H

You made alot of points here so Im going to try to respond one by one;

1. Intrinsic value. I stand by my statement that bitcoin has no intrinsic value. You claim that software has intrinsic value...yes if it is formed in a way that is functional. The software in bitcoin isnt formed in a way that can be transformed into something of value. Maybe some computer programmer can get some use from it but the cost of a bitcoin makes use of it's software for other purposes price- prohibitive. There are much cheaper units of software that can be had. Saying bitcoin has value because it is comprised of software is like saying that dollars have value because they are made of paper. Sure paper has SOME value but they do not contribute to the value of a dollar very much.

2. Use as a medium of exchange. This is not even debatable take a look at the velocity of a bitcoin. These are not being used in any real volume for trade. Most are being bought up by people hoping that somebody will be willing to pay more for them down the road.

3. Anonymity and hiding money. Here bitcoin does provide a real value. I never expressed a value judgment. I merely said that Bitcoin's best function has been in allowing people to hide money. I never said that was a bad thing in and of itself. I dont know where you got the idea or why you went off on a rant about my advocating capital controls, smoking something funny, or "slandering" bitcoin for said use since none of that ever happened except in your own mind.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2353
Brushhog..

Brushhog said, 

3. Anonymity and hiding money. Here bitcoin does provide a real value. I never expressed a value judgment. I merely said that Bitcoin's best function has been in allowing people to hide money. I never said that was a bad thing in and of itself. I dont know where you got the idea or why you went off on a rant about my advocating capital controls, smoking something funny, or "slandering" bitcoin for said use since none of that ever happened except in your own mind.

It was not in my mind that you suggested that gov't fiat, "money" is money while Bitcoin is not money.  You suggested that people use Bitcoin to, "hide" money, suggesting that fiat is money (OK) and that Bitcoin, although having market acceptance all over the world as, "money" is in fact not, "money".  This was not in my mind, this was in your words.  Words have meaning, no? 

Possibly you did not think about this in your conscious mind.. but still you expressed an opinion about what does, and does not, constitute money. 

brushhog's picture
brushhog
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Jim H wrote: Possibly you
Jim H wrote:

Possibly you did not think about this in your conscious mind.. but still you expressed an opinion about what does, and does not, constitute money. 

I think what is happening here is that you are so desperate to defend bitcoin that you are hearing fantom criticisms where there are none. This is starting to sound like a persecution complex.

You accused me of advocating for cash controls and implying that hiding money is a bad thing. No such sentiment was expressed in any of my posts. I made that clear in my last response, now you are making the issue about what is or isnt "money". Im not going to engage you in that since it is not relevant to our initial discussion. The definition of "money" is a subject that has been argued all over the place for years. Ive heard every single argument ten times over.

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If you are going to keep your money in the system...

Grover, might want to check out the following article. I never thought I would be excited to see rates as "high" as 1.2% but it beats what I can get in my checking account. 

https://www.forbes.com/sites/robertberger/2017/07/02/7-of-the-best-savin...

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mrees999
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Number one thing to do with bitcoin?
Hold on for dear life.  
 
A special "Two for one" historic moment is coming up quickly in the next few days.  The price is rising as people seem to be rushing in to take advantage of getting both the newer 'BTC Cash' and maintain the equal amount of BTC. - Provided you have it stored on a personal wallet and not coinbase.
 
Two of my favorite words are coming together.
 
Free.
 
Money.
 
 
Listen a while and you might learn something in these parts.  We are always happy willing to help teach new people to get ahead in life. These things are complex and difficult to get your head around - we've all been there.
 
When ethereum forked - we got both Ethereum Classic coins and maintained our original ethereum as well. It was also a rare 'free money' moment.  This is the fun times and reasons for being in this new paradigm early. 
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robie robinson
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Today BC and ethereum

Are worth a lot. The holders of our land trust in a few decades will know of neither, I would love to wager. That being said,,, get your mare settled, and your milch coo too. My family has more joy from the land than from crypto currency. Trying to win the race of acquisition falls far short. The emotion arising from the awareness of ones enchantment, joy, is truly realized thru the recognition of, and fulfillment of ones limits.

i must give Aristotle credit for most of the above, an old wise guy. Till we "get a life", it's gonna suck! Why argue.

 

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mrees999
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Very interesting Robie

Wondering if you can expand on your prediction. What is your reasoning?  How much is you, and how much the philosopher for thousands of years ago?  How are you sure?

 

 

 

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I'm with you philosophically,

I'm with you philosophically, Robbie, but it would be foolish to ignore that TPTB won't haunt the holders of your land trust for taxes and fees in the future.  I'm thinking that *coins may be a prudent attempt to protect your holdings and provide for that eventuality....Aloha, Steve

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robie robinson
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I fully

expect to be indentured to the land to provide for whoever controls TPTP. Not unlikely in my life time. 

I have to go milk. Not a typist.

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robie robinson
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I fully

expect to be indentured to the land to provide for whoever controls TPTP. Not unlikely in my life time. 

I have to go milk. Not a typist.

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If we make it through the bottleneck...
Wendy S. Delmater wrote:

There's enough lumber there we can still cash in the rest later if we make it through to the other side of the coming crash, 

I think about this fairly often (though fortunately I don't obsess about it):  Many of us won't make it through the "bottleneck", i.e., we won't survive the crash.  Whether the crash occurs quickly or "slowly then all at once", the decline will be devastating to a human population in serious overshoot.  Fair enough - we've wiped out other species to serve our purposes, and soon the tide will turn.  

Every day I wake up to rosy economic news from the financial sector and wonder how we became so distanced from nature and reality.  My state has record low unemployment, the housing market is booming, we have a severe shortage of available houses to rent or buy, stocks are at all-time highs (but I missed out on the recent boom, by sitting on cash), our valley is flooded with tourists spending money and filling up our hotels & restaurants & hiking trails.  Gasoline prices are still low, and people seem to have a lot of spending money.  Meanwhile, my mining clients are slow to pay, and some are on the verge of bankruptcy.  My small farm is still losing money, as I build up the soil and plant berries and 'practice' growing food in a cold climate.  There aren't many bees this year, but the raspberries are all pollinated and I'm hand-pollinating the squash.  The trucks keep bringing groceries, and I wonder why I'm working so hard...

Those who make it across the divide will work this hard - and harder - to grow food and build community.  Six months of food in a "deep pantry" won't get us through the bottleneck.  Fruit trees and garden soil will (hopefully) get us through the decades of the bottleneck and beyond.  Someone will be eating the cold-hardy cherries, honeyberries, and apple trees I've planted.  It might not be me.

 

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The Roaring Teens
Waterdog14 wrote:

Every day I wake up to rosy economic news from the financial sector and wonder how we became so distanced from nature and reality.  My state has record low unemployment, the housing market is booming, we have a severe shortage of available houses to rent or buy, stocks are at all-time highs (but I missed out on the recent boom, by sitting on cash), our valley is flooded with tourists spending money and filling up our hotels & restaurants & hiking trails.  Gasoline prices are still low, and people seem to have a lot of spending money.  

History may not repeat, but it sure does rhyme.

Let's review the "roaring Twenties."

For 10 years [during the Roaring Twenties], between the destruction of World War I and the misery of the Great Depression, people in North America were actually happy.

With money in their pockets and a renewed sense of optimism after the end of the Great War, Americans and Canadians developed an insatiable appetite as consumers and a newfound appreciation for leisure during the 1920s.

Innovative, mass-produced goods became available for the first time, making some industrialists fabulously wealthy, and the automobile was all the rage. Zipping around town in their new Ford Model Ts, Americans saw their first movies, flocked to live sporting events and swung their fringed dresses — part of a fashion movement characterized by wild costumes — dancing in liquor clubs.

(Source

The Roaring Twenties were marked by people spending like crazy, partying, buying mansions and yachts, and (most importantly) racking up the 1920's version of the credit card.

The narrative of the day included all the exciting new technologies (radio, telephone, automobiles, etc) that supported the idea that this new prosperity was real and durable.

Now ... about that...where did the prosperity actually come from?  Let's turn back to the credit card:

In November 1930, before anyone knew how Great the Depression would be, Charles Persons published an article in the Quarterly Journal of Economics called “Credit Expansion, 1920 to 1929, and Its Lessons.”

His thesis was stated forcefully in the first paragraph: “The thesis of this paper is that the existing depression was due essentially to the great wave of credit expansion in the past decade.”

He then meticulously documented data on the stunning growth in borrowing by households during the 1920s. As is common in the run-up to severe economic downturns, there was a tremendous growth in mortgage debt. “The great field of credit expansion in the last decade lies in the realm of urban real estate mortgages”, Persons wrote.

In nominal terms, outstanding mortgage debt grew by more than eight times from 1920 to 1929, according to Persons. Persons also highlighted the rise in installment debt, or consumer debt used to purchase new furniture, clothing, sewing machines, and cars. Martha Olney at Berkeley examined the rise in purchases of cars and other durables during the 1920s, and concluded that “societal attitudes toward borrowers changed radically between 1900 and 1920; by the mid-1920s, buying on credit was considered normal, not sinful.”

Persons concluded his 1930 article with a statement that is eerily similar to many we here today: “The past decade has witnessed a great volume of credit inflation. Our period of prosperity was based on nothing more substantial than debt expansion.”

(Source)

Repeat after me: "prosperity" resulting from credit inflation is a false dawn.

It's been tried over and over again and it always fails.  This time the Central Banks feel they have the dynamic under control because they can control the asset markets with greater and more powerful precision.  They routinely interfere with the pricing mechanisms both overtly and covertly.  In this regard, yes, it is different this time.

But what is not different is that the laws of economics still lurk, unrepentant, waiting patiently to emerge, and when they do the next depression will make the Great Depression lose the moniker of "great" because it will be rather minor by comparison.

In the meantime, it's really hard to sit by, being prudent, when all of the forces of government and the private banking cartel are arranged against the prudent, and tilted towards the reckless.  

For example, if you are a corporate CFO and you did *NOT* borrow heavily to buy back shares and ramp up your EPS fraudulently, then your stock was punished.  

So not many sat out the credit boom and remained prudent:

This all works until it doesn't.

When it doesn't look out below.  The damage will be extraordinary and lasting.

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Awesome Depression

Hi Chris,

Perhaps Awesome Depression or Seriously Awesome Depression would be a good, new moniker.  They are some great overused (IMO), contemporary words (at least in my neighborhood among the kids and their parents).

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Different slant?

I really really want to believe in blockchain, but i keep running into alternate ideas (which i seek out to run against my own biases) that say uh uh, no way, just say no.  The article linked below was another reason to look a different direction.  Not saying I'm done investigating, but investigation is leading that way.

http://www.zerohedge.com/news/2017-07-27/globalist-one-world-currency-wi...

Brandon is hit or miss as much as i've read, however this thought process gave me pause, so thought i'd pass it along since it was semi-relevant. 

 

 

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Jim, Who created Bitcoin? 

Jim,

Who created Bitcoin?  And please don't say Sato......if you can't even identify the founder of a concept especially a recent one, how can you possibly trust the origins?  Who is to say this wasn't orchestrated by the powers already in place? 

I play all angles, so I have a bit of money in bitcoin and others though minimal, but it is a pure hedge.  I just don't see how they (powers that be) can't simply wipe you out same as bank account, brokerage, ira, 401k, or simply unplugging the internet.

Simplistic view,

M.O.

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mrees999
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Who Created Euclidean Geometry

Asking who created Bitcoin is akin to asking who created Euclidean Geometry.  Who was Euclid?  Why can we trust the geometry calculations and entire mathematical function and reasoning for deductions? How could a person write entire text books that we base modern mathematics thousands of years ago without knowing who Euclid was? 

Was Euclid a man?  A woman?  A slave? A group of people?  A space alien?  Was he\she\they rich? 

 

Does it matter?  We can all view the math, the rules, and validate that it works as always becomes the proof is of itself.

Break bitcoin down and it's math. It's formulas. It is open source and worked on by tens of thousands of people around the world. It has been rewritten, cleaned up, debugged, forked and modernized so that of the original code it is thought to be over 80% completely rewritten.  Only the skeleton of logical principals remain. Game theory, consensus, encryption. And then it's been copied thousands of times into newer various versions. 

At what point did it become meaningless to continue to ask who Euclid was?  The world benefited from the math and he\she\it\they changed the world.

For a fun, I found and will share a little reminder to help one's road of discovery - is to take a look at the illustrated book of bad arguments. This helps me and hopefully others think critically better to strip away the silly and nonsense from principal truth.

https://bookofbadarguments.com/

 

Jim H's picture
Jim H
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Oppmsu..

I understand the point you are making.. and there are smart people who wonder the same.  Brandon Smith for instance;

  http://www.alt-market.com/articles/3239-the-globalist-one-world-currency...

Enter cryptocurrencies like bitcoin. Bitcoin arrives seemingly from nowhere, conjured by a magical crypto-wizard by the name of Satoshi Nakamoto, a label supposed to represent a person or group of people that no one has ever seen or heard from. We are simply meant to have faith that they don't work for the NSA or a similar entity. But who cares who they are, right!? It doesn't matter because bitcoin is such a work of art it is nearly infallible — the perfect countermeasure to a monetary world lorded over by the dollar and the Federal Reserve.

Numerous libertarians and anarchists collectively orgasm. They join what appears to be a grassroots effort to bring bitcoin and blockchain technology into the mainstream. They stop trading as many of their fed notes for gold and silver as before and buy digital nothings instead. To question the validity of the idea elicits dramatic displays of indignance from the bitcoin cult bordering on zealotry. The "smartest guys in the room" know bitcoin is the solution to everything — don't you want to be one of those guys, too? Bitcoin is the way, the truth, the life...

Some of us are unconvinced, and even rather suspicious, and with good reason. For example, the advancement of cryptocurrencies into mainstream consciousness has been helped expertly by the corporate media, which frankly, does not make sense if they are a real threat to the central banking monolith. As they say, when the real revolution happens, it will not be televised. Bitcoin is televised everywhere.

I don't agree with Brandon that Bitcoin is being pumped by the mainstream media.. but that is one of this salient points. 

I agree with MRees.. it really doesn't matter who created it.. because it is what it is.  It is a completely transparent set of code.. there are no cards being played that you cannot see.. at least not in the code itself.  Bitcoin and the like is an idea.  It uses decentralization and the profit motive in an elegant way, to shepherd and further the network (effect) that creates the underlying value (a trusted ledger).  Much of the hashing now takes place in China.. can our authorities turn off the internet in China?  As long as the DNA (the blockchain) is maintained somewhere on earth (and your BTC are safely stored) ... your claims to it, and use of it, are protected.. for whatever that is worth. 

Nothing is perfect. 

PS.. just now seeing, after posting this, that you referenced the same Brandon Smith article in an earlier post of yours  : ) ... anyway.. doesn't change my comments...  

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Mohammed Mast
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Posts: 63
Same story different day

Here we go again. Not much new information in the post or the comments.

Everyone here is still waiting for TEOTWAWKI. 

Do the Amish take refugees?

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