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Patrick Byrne: Why Cryptocurrencies Matter

They make freedom from the central banking cartel possible
Sunday, July 30, 2017, 3:28 PM

This week we talk with Patrick Byrne, CEO of Overstock.com, and rare courageous voice within corporate America raising concern that powerful interests on Wall Street are destroying US companies for profit, robbing investors and destabilizing our financial system in the process. 

Byrne has been an early advocate for digital currencies and their potential to protect financial wealth from the massive policy missteps being undertaken by the Federal Reserve. (In 2014, Overstock.com became the first major retailer to accept Bitcoin payments.) 

In this week's podcast, Byrne details out the promising potential of cryptocurrencies and the blockchain, as well as his thoughts as to whether they will be able or not to evade subversion by the world central authorities. » Read more

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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. » Read more

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Off The Cuff: The Unsinkable(?) Market

No data is too bad enough to stop its rise
Friday, July 21, 2017, 2:06 AM

In this week's Off The Cuff podcast, Chris and Mish Shedlock discuss:

  • The Unsinkable Market
    • No data is bad enough to stop its rise
  • The Disappearance Of Volatility
    • Gone, but for how long?
  • Failing Pension Plans
    • A truly massive crisis in the making
  • Cash, Gold & Bitcoin
    • The only places for capital to find safety?

During these doldrum days of summer, where no matter the news, today's "unsinkable" markets continue to march ever upwards, Mish shares his thoughts on what will finally cause asset prices to tank.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.
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The Value Drivers Of Cryptocurrency

These factors will determine which coin(s) will win out
Friday, June 23, 2017, 9:27 PM

Executive Summary

  • The critical value of scarcity
  • Understanding the utility of the blockchain
  • Will (can?) governments ban cryptocurrencies?
  • A coming geometric explosion in the price of cryptocurrency?

If you have not yet read Part 1: Understanding The Cryptocurrency Boom available free to all readers, please click here to read it first.

In Part 1, we surveyed the exciting but confusing speculative boom phase of cryptocurrencies. Here in Part 2, we will contextualize this mad swirl by running it through two filters: scarcity and utility.

What’s Scarce? Scarcity Creates Value

Regardless of one’s economic ideology or system, scarcity creates value and abundance destroys value.  When we say supply and demand, we’re really talking about scarcity and abundance and the rise or fall of demand for the commodity, good or service.

In classical economic theory, scarcity is met with substitution: ground beef too expensive due to relative scarcity? Buy ground turkey instead.

But this model has weaknesses.  There aren’t always substitutes, or the substitutes are more expensive or problematic than what is now scarce. 

As a general rule, profits flow to any scarcity of goods and services with high utility value.  We value what’s scarce and useful, and place little value on what’s abundant and of limited utility.

Currency has three basic functions: a store of value (it will retain its purchasing power over time), means of exchange (we can use it to trade goods and services, pay debts, etc.) and as an accounting mechanism to track assets, debts, income, expenses and exchanges/trades.

We assume all currency has this function, but only currency that is easily divisible and easily tradable enables easy accounting.  If a notched stick is a unit of currency, and one stick buys a pig, what do I use for purchases smaller than a pig?

In today’s world, a currency must be.... » Read more

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Understanding The Cryptocurrency Boom

A ground-level assessment
Friday, June 23, 2017, 9:26 PM

Today, there are hundreds of cryptocurrencies, and a speculative boom has pushed bitcoin from around $600 a year ago to $2600 and Ethereum, another leading cryptocurrency, from around $10 last year to $370.

Where are cryptocurrencies in the evolution from new technology to speculative boom to maturation? Judging by valuation leaps from $10 to $370, the technology is clearly in the speculative boom phase.

In trying to predict which forms of cryptocurrencies will dominate the mature marketplace of the future, we know that markets will sort the wheat from the chaff by a winnowing the entries down to those that solve real business problems (i.e. address scarcities) in ways that are cheap and robust and that cannot be solved by other technologies.
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Estimating Bitcoin's Fair Value

Spoiler alert: It's much higher than its current price
Friday, January 6, 2017, 11:13 AM

Executive Summary

  • Why No Nation Truly Has Full Control Over Its Currency
  • Why Sovereign Efforts To Control Currencies Is Driving Capital Into Digital Currencies
  • The Driver's Of Digital Currency & Value
  • Calculating Bitcoin's Fair Value

If you have not yet read Part 1: Why The U.S. Dollar And Bitcoin Keep Rising available free to all readers, please click here to read it first.

In Part 1, we reviewed the dynamics of demand and utility that drive the valuation of any tradeable good, service, commodity and currency.  We established that it’s impossible to understand how a fiat currency such as the U.S. dollar can retain a value above its tangible value of zero unless we accept its utility value and its non-tangible sources of value, i.e. the wealth and wealth generation of the issuing nation and state.

We now turn to the second half of the question posed in Part 1: Why isn’t the market value of a digital currency such as bitcoin zero?

Or perhaps more interestingly: How high might the price of bitcoin go?

To answer this question, we must investigate another question: Can any state control the value of its currency and its place in the global economy? I suggest the answer is no. Beneath a surface veneer of status quo continuity, nations and states are losing the ability to control their role in the global economy and thus the utility of their currency.

To understand why, we turn to socio-historian Immanuel Wallerstein.

Who Controls a Rapidly Changing World-System?

Wallerstein is recognized for advancing the concept of world-system, his term for what I call a global Mode of Production, i.e., the political, social, financial and economic system that governs the relations of power, labor, capital, trade and resources (broadly speaking, our understanding of Nature and the extraction of its resources).  In a recent essay China is Confident: How Realistic?, he observed that "countries (have lost the ability) to control what happens to them in the ongoing life of the modern world-system."

These two paragraphs get to the essence of his analysis... » Read more

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Why The U.S. Dollar And Bitcoin Keep Rising

Understanding utility-driven demand
Friday, January 6, 2017, 11:12 AM

Capital migrates to where it flows with the least resistance, i.e. to forms of capital that are liquid and offer low transaction costs—what I call ease of flow. Capital also migrates to relatively safe havens that are liquid and offer low transaction/holding costs, and to forms of capital with global utility. And it also flows to the highest yield/return with the lowest perceived risk.

Given these fundamentals, it isn’t difficult to understand why capital is flowing into USD-denominated assets and bitcoin.

So what do the fundamentals suggest about the valuation uptrends in the USD and bitcoin? Have they topped out and due for a crash, or have they just started their appreciation cycle? » Read more

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Off The Cuff: The Global Flow Of Money

It's determining the price of everything right now
Thursday, January 5, 2017, 6:42 PM

In this week's Off The Cuff podcast, Chris and Charles Hugh Smith discuss:

  • Cultural Capital
    • How will those around you react during a crisis?
  • The Fragility Within Our Centralized System
    • Lots of dependencies that can fail & bring the entire system to a halt
  • Musical Chairs
    • Who will have to eat the bad debts when the can can no longer be kicked?
  • The Importance Of Global Capital Flows
    • They're determining the price of everything

As 2017 kicks off, Chris sits down with Charles to discuss some of the big themes likely to drive events in this new year. The two focus on the growing instability of our centralized systems -- economic, energy and otherwise -- and pay particular attention to the impact that the huge pool of money sloshing around the world is having on prices everywhere. Right now, that flood of capital -- out of bonds and into stocks, the dollar, etc -- is the primary driver of prices. Of course, this should make us ask: what will happen when those flows change direction? Or instead of continuing to grow, start receding?

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more

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Fortunes Will Be Made & Lost When Capital Flees To Safety

As safe havens are tiny markets
Friday, June 24, 2016, 4:46 PM

Little did I realize when creating the short video below how prescient it would quickly become in the wake of last night's Brexit vote...

It's message is simple: there's a preponderance of data that shows the world's major asset markets are dangerously overvalued. And when these asset bubbles start to burst, the 'save haven' markets that investment capital will try to flee to are ridiculously small. Investors who do not start moving their capital in advance of crisis will be forced to pay much higher prices for safety -- or may find they can't get into these markets at any price. » Read more

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An Everyman's Guide To Understanding Cryptocurrencies

What are they exactly? Why consider owning them?
Friday, June 10, 2016, 5:51 PM

When an asset rises by almost 30% in a few weeks, it tends to attract attention.  Recently, that asset was bitcoin (BTC). The price of BTC in dollars rose from $454 on May 23 to $590 on June 6th.

When an asset doubles in a matter of months, it tends to attract attention.  The cryptocurrency Ether (part of the Ethereum platform) doubled from around $7 in April to roughly $14 in early June.

Are these cryptocurrencies mere fads? Or are they potentially game-changing alternatives to the conventional currencies such as the U.S. dollar, Chinese RMB, Japanese yen or European Union euro? » Read more