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    • Tue, Dec 03, 2013 - 02:19am

      #46

      davefairtex

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      yes we agree!

    No problem Jim.  It astounds me you find so much "stuff" in what I write that I never put there.

    We totally have a debt problem – public and private – and the eventual resolution of that debt problem may well result in a major currency problem.  Our monetary system doesn't work with declining resource issues, and that won't end well.  One possible outcome: a currency collapse.

    But that outcome is not here today.  Nor is that outcome the only outcome possible.

    • Tue, Dec 03, 2013 - 01:15am

      #44

      davefairtex

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      the dollar-is-trash subculture

    Jim, there is an entire group of people who are certain – they've discounted other outcomes to 0% – that the dollar is going to be trash.  Some even go so far to say that the dollar is currently trash.  What an absurd statement.  Others here at PP know what I'm talking about.  Every time I hear that, I think "how about you send me all of your trashy dollars, I'll give them a good home."  This thinking is what I call the dollar-is-trash subculture.

    Big Money – another subculture – doesn't feel this way, at least not today.  The only problem is, Big Money has a lot more votes in the marketplace than the dollar-is-trash subculture does, and they more often than not they dictate where prices end up.

    To be clear: I don't have any prediction on where the dollar will go.  The US is the core economy of the world, its my belief we may well have a currency problem, but I believe it is more likely for us to have a problem after Japan and Europe.  Its possible we could go first, its also possible that we all go together in some large cascade.  So I watch, await the logic of events, and I plan to take action according to things as they unfold.  I do not plan to be caught napping.  While I have insurance against some of the particularly bad outcomes, I am not part of the dollar-is-trash subculture.  I'm part of the driven-by-data subculture.  Now that's a small group of people – I'm in the minority wherever I go.

    The use of this term was just one facet of a post that  I believe was meant to instill in the reader a Bernaysian sense of confidence in the FED and the dollar, and/or make one feel foolish for feeling otherwise.  Why do I get slammed for attacking Dave's point, when he is really slamming most of the folks who frequent this site in his own special way… do most of you even understand what I am saying?  Am I writing in English?

    Ok, you feel put upon because you're trying to defend the honor of everyone at PP whom you think should feel offended that I'm…what am I doing again?  Oh right, I'm saying the dollar hasn't crashed, which happens to challenge what you believe to be the dominant belief system here at PP.  And everyone should feel offended because of this observation of mine?

    From what I can see, you work overtime on stuff like this.  But – and I have to say it – that is Not My Problem.

    • Mon, Dec 02, 2013 - 09:54pm

      #74

      davefairtex

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      BTC market action

    mrees-

    No I've remained on the sidelines with BTC – partly because I don't have all my trading tools available to me, and partly because I've been a bit distracted this holiday.  I can shoot off a quick sense of what the chart is saying, but if I'm going to trade something I need to get a better feel for it before just jumping in.

    I think I need to read the protocol spec so I can get a sense as to what trading information is available.  Maybe some of it would make a good chart.

    I realized recently that over time, bitcoins will disappear from the system.  That guy losing the disk drive with 7500 of them was just one example; how many people will die with bitcoins in some random wallet sitting somewhere unknown?  I just wonder what the loss rate is/will be.  [Its a feature…right up until you lose your bitcoins!  Just like cash though]

     

    • Mon, Dec 02, 2013 - 03:23pm

      #71

      davefairtex

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      btc bounce off 950 support, resistance 1100

    On the rebound, 1050 was no problem – selling didn't emerge until 1100, and/or buying petered out.

    However 950 looks to be decent support.  We need a bit more time for the pattern to develop, currently we're trading in a range.  A break above 1100 is bullish (longs will jump on board, afraid to miss out), and a break below 950 will lead to more selling, where longs will become afraid of losing the money they've already made.  Its all about fear & greed, as always.

    I have to say, BTC is a lot of fun to watch.

    • Mon, Dec 02, 2013 - 08:08am

      #34

      davefairtex

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      bitcoin debate

    mrees-

    Nice data-filled response.  I think it is unfortunate you liberally sprinkled your response with ridicule.  I'm not sure why you do this, since I think your points are interesting.  Perhaps next time you might do me a favor and lose the ridicule.  It makes for a more civilized conversation.

    But I digress.

    As always these things depend on the assumptions we make.  Lets look at some back-of-the-envelope calculations.

    If we put the entire money supply (M2) of the eurozone AND the US into bitcoin, that's 10.9T + 9.2Tx1.35 = 23T US / 12M BTC = $1.9M/BTC.  Your estimate was 1M/coin.  Do I think that 50% of the M2 of Europe AND the US will go into BTC?  No, I do not.

    If we assume bitcoin will replace ALL euro and the dollar cash in circulation we get a valuation of 191k per bitcoin.  (2.3 trillion US / 12M bitcoins = $191k/BTC).  Do I think BTC will replace all currency in circulation?  No, I do not.

    I also don't think it will become the reserve currency.

    I think BTC will have competition.  There's too much money involved for it NOT to have competition.  That competition may take the form of something we haven't seen yet.  Or there might be official competition.  Or a combination of official competition + a law enforcement effort.

    I think once things become serious (12 billion is not serious right now – although I freely admit BTC moved higher than I thought it would on this run) then law enforcement will be dragged in on behalf of rich and powerful entities that will be the losers in a bitcoin world.  How might such a thing work?

    Under such a regime, running a bitcoin validation server might be illegal.  Possessing bitcoins might be illegal.  Selling things using bitcoins?  Illegal.  And sending packets to a bitcoin server – illegal.  Enforcing possession laws = impossible.  But whacking the servers and detecting retailers that execute transactions?  Easy peasy, especially if the NSA gets involved.  Charge all involved with "faciliating money laundering."  The RIAA was unable to stop torrents, but they are toothless wonders compared to the banking cartel's political power.

    And if 95% of retail doesn't go along because of the legal issues, the level of interest will decline dramatically, and with it the BTC valuation.  BTC won't be kllled, but the valuation will drop through the floor, because the amount of stuff you can buy with a BTC will be dramatically limited.

    I understand what remittances are.  I even know someone who used to be in the business.  The choke point is the business where BTC is converted into local currency.  The remittance in BTC ends up happening, but the recipient can't pay rent until the BTC conversion to local currency occurs.  If that sort of BTC-currency conversion is forced underground because of local banker influence, the whole remittance via BTC gets a lot more risky, and thus less interesting.

    As for wire transfers – its an interesting point.  I've done a number of them to my favorite emerging market country.  I pay about 1%.  If I bought bitcoin, dragged it across the border with a slip of paper, and redeemed it in the destination country, I'd have a bunch of cash, I'd pay bid/ask spread on both sides, and if I were dealing with some official entity, it might be worth saving a few hundred bucks to go through the exercise.  If it were unofficial – i.e. black market – I wouldn't even bother.  The risk of "something bad" happening to me just wouldn't be worth it.  Bottom line – the 1% banker skim is not an attractive enough of a market.  9% yes, 1% no.

    As a result, I'm still sticking to the 400B business opportunity, assuming no local law enforcement interference.

    End of the day though, when this much money gets involved, people start dying.  I just don't see it playing out as cleanly as you do.  File sharing is one thing, but picking banker pockets is quite another.  Don't get me wrong, I'm all for disintermediating the bankers – but I don't think it will work out as neatly as you project.  And the more successful it gets, and the more profit it takes away, the larger the effort will be to make it illegal.

    "This guy used BTC to pay for a terror attack.  BTC needs to be illegal."

    Presto.

    • Mon, Dec 02, 2013 - 06:52am

      #33

      davefairtex

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      i look at data all day long

    credit growth is back on track, and it doesn't matter where the bubble is forming, be it student debt (yes) or Gov't deficit spending (yes).. it is still credit growth.

    Interesting.  Here are three simple (related) questions for you.  Since you look at data all day long, answering them should be reasonably easy:

    What level is credit growth today, year over year?

    What level is average credit growth over the last 60 years, year over year?

    How do you define "back on track?"

    If you can answer these three questions, I will be very impressed at your ability to both discover the truth and faithfully report it.

    I believe you are actually the subgroup here Dave.. .one of the few who believes that what the markets are telling us is somehow useful, rather than being a charade .

    I didn't realize that the truth was one of these "majority rules" sorts of things.  Silly me, I guess I'm outvoted.  Extra credit question: what sort of logical fallacy did Jim just use there?

    Most Western nations are on a runaway train to unsustainable debt growth in a world of depleting resources  .. most of us are here to try to understand the implications of that.

    Now here's a point of mostly-agreement.  However, I don't think its debt growth that is the problem, I think it's existing debt that causes the trouble.  And depleting resources – 100% agreement, that means those governments can't expect growth to rescue them from their massive debt burden.

    The way out?  The simple answer is inflation.  But…how?  Not by more debt growth.  That path has been (more or less) cut off.  People are now generally aware they can't grow national debts without limit.  And private bank credit has stopped growing in the US, and its collapsing in the eurozone.

    What's the implication of that?  Inflation?  Yeah, not so much.

    That leaves money printing.  But if money printing (in its current form) led inexorably to inflation, we'd have inflation right now.  But we don't.

    The goal of the Fed extricating the economy via moderately high inflation argument makes sense, but its just not happening today.

    So for me – I await the logic of events, remaining guided by the data I see.

    • Mon, Dec 02, 2013 - 01:51am

      #30

      davefairtex

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      meeting for lunch

    Bowskill-

    Regarding lunch – last I heard, Jim wanted to bring a camera crew, a personal defense team, and had scheduled an interrogation session.  Me, I just wanted to hang out and chat, so, I don't think we have a meeting of the minds here.  The whole affair smacked of the worst sort of MSM adversarial octo-boxes that end up with ego-filled chestbeating with lots of heat and zero light.

    Talk about old paradigm.  So no, I'm not interested in that.

    • Mon, Dec 02, 2013 - 01:44am

      #29

      davefairtex

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      Dave: stealth defender of the dollar

    Dave made a post yesterday that is just pure Paperbug BS…  if you have not realized it before, DaveF is our stealth defender of the dollar and TPTB.  Dave wants you to believe that the current paradigm will go on.. he wants you to feel confident in the FED and the dollar.  That is his message.. and as always, I find it subversive in the context of our discussions here at PP.com.   

    It seems that Jim felt he had to recharacterize my belief systems in order to discredit what I had to say.  For some reason, he doesn't like addressing the merits of my post.  Its just another day here at PP.

    So who am I again?

    1) Apparently I'm a stealth defender of the dollar – his main evidence for this is that I have this sneaky habit of looking at the data to verify my worldview, and I go the next step of having the effrontery to actually point out that the buck isn't crashing when…it's not crashing.  I think he has the same problem with my analysis of the gold market.

    2) Apparently I want you to believe that the current paradigm will go on.  (Jim presents zero evidence – in fact he just manufactured this one from whole cloth – "I see you are still beating your wife" sort of thing)

    3) Apparently I want you to feel confident of the Fed.  (Another manufactured charge, with zero evidence; its not how I feel, but – with Jim, facts aren't so important)

    4) Apparently I want you to feel confident of the Dollar.  (Half true.  If you already have some non-dollar insurance – gold would do for that – then as long as the chart doesn't break down, definitely, you should feel confident of the dollar.  As soon as the data changes, then – gasp – stop being confident!  Subversive and paper-buggy, isn't it?  If your debt payments are in dollars, and your living expenses are in dollars, to me it kinda makes sense to have some dollars around.)

    Now then, on to the merits of my actual post.  Is a hypothetical Fed-provided internet currency directly convertible 1:1 to USD a possible competitor to BTC?  I think so.  Calling me a bunch of names and manufacturing a fake belief system for me doesn't change this risk.

    I think there are significant forces standing in the way of the Fed deploying FDC, but if they did, I believe it would definitely be accepted by internet retailers, regardless of the "non-open-source" nature of the offering.

    I know, I'm a party-pooper.  The future for BTC isn't infinite, and there might actually be some risks.  The dollar isn't crashing.  Gold has yet to rally.  Bad Dave, such a Debbie Downer.

    Regarding debt growth – TCMDO over 5 years is growing at a fantastic 2% per year, the vast majority of that due to government deficit spending, not private borrowing.  During 2000-2008, TCMDO was growing from 8-12% per year, and the vast majority of that was due to private borrowing.  And in the eurozone, overall debt is shrinking pretty dramatically.

    Overall, at best we have zero credit growth in the two main economic zones of the OECD.  The debt bubble has popped.  Debt-money-driven inflation is dead, at least for now.  Without willing borrowers and private credit growth, the Fed and ECB will find it very difficult to inflate "the old-fashioned way" no matter how much they want it to be so.  Which they do, of course.

    • Mon, Dec 02, 2013 - 12:09am

      #70

      davefairtex

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      BTC through 1050 support

    Now 1050 should act as resistance – selling pressure will emerge as the price bounces back up to 1050 on the rebound.  The 1050 level is a good place to go short – or a good place to sell.

    The selling on the breakdown was massive and sustained – 4 hours of high volume selling.

    • Sun, Dec 01, 2013 - 04:19pm

      #68

      davefairtex

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      bitcoin price tracks “google trends”

    I have noticed that the price of bitcoin seems to track "google trends" interest level.  Gold did something similar, although not quite as closely.  Apple stock most definitely tracked its google trends results.

    So regardless of whether or not bitcoin is "the new new thing" (to quote a book from the dotcom boom) as interest in bitcoin wanes, so does the price.  And the opposite is true too – the higher the interest in bitcoin, the higher the price.

    FWIW.

    Only problem is, google trends doesn't update frequently enough to be useful for buy/sell signals in bitcoin.

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