Why the Fed now loves Cryptocurrencies

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billyjoeallen

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Dec 14, 2017
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In the wake of the crash and banking crisis in 2008, there were loud cries to "create another bubble." The Central banks needed to not just save the banking sector from self destruction, but to reflate the economy. Creating such a bubble would be easy: simply print more money, but they didn't know how to do that without endangering the banks when the new bubble inevitably collapsed. We inadvertently gave them the answer.

The crypto bubble is not primarily financed with credit, unlike all recent bubbles such as the dot com bubble of the late nineties and the housing bubble of 2002-2008. Credit cards cannot be used easily or commonly to buy BTC or altcoins because the possibility of chargebacks makes it too risky. It is believed by many that the wall street money currently poring into our sector is comprised mainly of profits from the stock market juggernaut fueled by artificially low interest rates and central bank balance sheet expansion. Simply put, easy money had already saturated every other asset class (stocks, bonds, commodities, real estate) making bargains almost impossible to find. So bargain hunters were forced to search farther afield.

The United States Federal Reserve system is charged with a dual mandate of full employment and price stability. These two missions are contradictory unless prices can be inflated in an area that isn't reflected by the CPI, PPI or other inflation indexes. Crypto fits this need almost perfectly. The Fed can continue to print money, to prop up the stock market and the bond market to keep pension funds and other retirement funds solvent as baby boomers face retirement, while preventing those same boomers' houses from plummeting in value by hikes in interest rates. Basically they want to hide inflation somewhere where economists and consumers won't notice it.

Along with allowing immigration to keep labor costs down, the crypto bubble is the way the Fed is keeping all of that newly printed money from spilling out into the greater economy and hiking consumer prices. We won't spend our new riches. Who in their right mind would spend money that goes UP in value? Almost all masternode owners are now millionaires. The money printing was always a massive giveaway to the rich, we just happen to be part of the 1% now too.

In the long run, cryptocurrencies will be the death of the fiat system, but the Fed and other central banks are too bogged down in more immediate concerns to care. When we start seeing central banks listing crypto as part of their foreign currency reserves, the end will be in sight. Gresham's law will kick into overdrive. Dash will retain it's own lobbying firm on K street. We will start to see people without crypto as we now see people without cell phones: as anachronisms. Cryptographically signing wallets will replace wearing Rolex watches and driving sports cars as the new status signals. The new capital managers will be cryptoprenuers, not banksters, and finally FINALLY savers will replace consumers as the drivers of the economy.

The biggest problem I see is the multi-terawatt electricity suckage from the 100% POW coins. Dash's PR team and lobbying firm(s) can use that issue to drive market share our way, but that's a post for another day.
 
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Hossman

New Member
Dec 1, 2017
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Interesting take.

Yes, I agree, all of this cheap money sloshing around, finds assets to chase. A couple of things to consider?
  1. Money is fungible. Yes, you can't buy crypto with a credit card. But, you can buy crypto with ACH from the money in your bank account, wages that you were going to use to pay down the credit card.
  2. I'm trying to get my head around the mining resource consumption, and how this will play out. I know video gamers don't like crypto guys buying the stores out of video cards.
How inelastic is the demand or supply for electricity? Suppose some uses of power are being displaced, and, we're burning more coal to power these mining rigs. Funny thing from the fed's perspective, this energy consumption shows up in GDP calculations. And, in the real world, it actually employs capital/people. Does this help give the fed cover to raise interest rates, or contract QE? Try to slow down the rush of money into crypto?
 

Kajirisar

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Feb 27, 2018
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The fact that money is interchangeable is for sure. But is this the only problem? I think we need to look at the situation from the other side.
 

camosoul

Grizzled Member
Sep 19, 2014
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That's an interesting, if oversimplified, perspective.

...a man can dream.

Trezorwatch does sound nice tho. But only if it remains a wind-up mechanical skeletonized thing with the diginerd part hidden... :p
 

sinem ejder

New Member
May 3, 2018
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In the wake of the crash and banking crisis in 2008, there were loud cries to "create another bubble." The Central banks needed to not just save the banking sector from self destruction, but to reflate the economy. Creating such a bubble would be easy: simply print more money, but they didn't know how to do that without endangering the banks when the new bubble inevitably collapsed. We inadvertently gave them the answer.

The crypto bubble is not primarily financed with credit, unlike all recent bubbles such as the dot com bubble of the late nineties and the housing bubble of 2002-2008. Credit cards cannot be used easily or commonly to buy BTC or altcoins because the possibility of chargebacks makes it too risky. It is believed by many that the wall street money currently poring into our sector is comprised mainly of profits from the stock market juggernaut fueled by artificially low interest rates and central bank balance sheet expansion. Simply put, easy money had already saturated every other asset class (stocks, bonds, commodities, real estate) making bargains almost impossible to find. So bargain hunters were forced to search farther afield.

The United States Federal Reserve system is charged with a dual mandate of full employment and price stability. These two missions are contradictory unless prices can be inflated in an area that isn't reflected by the CPI, PPI or other inflation indexes. Crypto fits this need almost perfectly. The Fed can continue to print money, to prop up the stock market and the bond market to keep pension funds and other retirement funds solvent as baby boomers face retirement, while preventing those same boomers' houses from plummeting in value by hikes in interest rates. Basically they want to hide inflation somewhere where economists and consumers won't notice it.

Along with allowing immigration to keep labor costs down, the crypto bubble is the way the Fed is keeping all of that newly printed money from spilling out into the greater economy and hiking consumer prices. We won't spend our new riches. Who in their right mind would spend money that goes UP in value? Almost all masternode owners are now millionaires. The money printing was always a massive giveaway to the rich, we just happen to be part of the 1% now too.

In the long run, cryptocurrencies will be the death of the fiat system, but the Fed and other central banks are too bogged down in more immediate concerns to care. When we start seeing central banks listing crypto as part of their foreign currency reserves, the end will be in sight. Gresham's law will kick into overdrive. Dash will retain it's own lobbying firm on K street. We will start to see people without crypto as we now kredi kartı başvurusu see people without cell phones: as anachronisms. Cryptographically signing wallets will replace wearing Rolex watches and driving sports cars as the new status signals. The new kredi kartı başvurusu capital managers will be cryptoprenuers, not banksters, and finally FINALLY savers will replace consumers as the drivers of the economy.

The biggest problem I see is the multi-terawatt electricity suckage from the 100% POW coins. Dash's PR team and lobbying firm(s) can use that issue to drive market share our way, but that's a post for another day.
yes I agree
 
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stan.distortion

Well-known Member
Oct 30, 2014
864
505
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You're missing the 2016 crash, the one that didn't happen 'cos cryptocurrency would have gone off like a bomb if it had. That 7-8 year boom-bust cycle is no accident, it's the FEDs interpretation of "economic stability" and it conveniently allowed fat cats to become even fatter each cycle... but this time around things didn't go quite to plan (thanks Satoshi :) ) and now the markets won't stop going up. Looks great doesn't it, everyone getting stinking rich? They where saying just the same in Weimar Germany in the late 20s and that's one lesson we do not want to forget lest we repeat what came after.
 

billyjoeallen

Member
Dec 14, 2017
51
14
48
50
Interesting take.

Yes, I agree, all of this cheap money sloshing around, finds assets to chase. A couple of things to consider?
  1. Money is fungible. Yes, you can't buy crypto with a credit card. But, you can buy crypto with ACH from the money in your bank account, wages that you were going to use to pay down the credit card.
  2. I'm trying to get my head around the mining resource consumption, and how this will play out. I know video gamers don't like crypto guys buying the stores out of video cards.
How inelastic is the demand or supply for electricity? Suppose some uses of power are being displaced, and, we're burning more coal to power these mining rigs. Funny thing from the fed's perspective, this energy consumption shows up in GDP calculations. And, in the real world, it actually employs capital/people. Does this help give the fed cover to raise interest rates, or contract QE? Try to slow down the rush of money into crypto?
They don't care about money rushing into crypto if it doesn't pose a systemic risk to the banks. It's something else they can (try to) tax and it keeps the fiat money ponzi going by preventing credit contraction.
 

solarguy

Active Member
Mar 15, 2017
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Did you see the latest subcommittee hearing? They were pretty negative on crypto.
They don't like Dash or crypto, but they are realizing that if they try to ban crypto, or regulate it too hard, they will damage their own economy and the crypto market will just migrate to countries that are more pro-crypto. Regulatory arbitrage hard at work. The genie is out of the bottle, and even China and Venezuela realize they can't stop it.
 

solarguy

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Mar 15, 2017
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SimontheRavager

Active Member
May 16, 2017
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Especially as it is very likely that the FED will raise the interest rates in December again. This will lead to an even higher USD and so hit the emerging markets again. Potus and FED act togehter. Be aware ;-)
 

rosita

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Aug 6, 2018
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Everything can be. The centralized system has not been canceled, unfortunately, so someday, some very strong state will receive a cryptocurrency.
 
LOL they're worried we will no longer require the financial institution to be middlemen, scouse borrow our cash an make investments it in anything they want everywhere in the world at the same time as ramping up debt, properly ol valuable banks. When the Central banks speak about security, they may be now not speakme approximately some schmuck at home trying to drag a heist. They imply global warfare. Just disrupting the community can have catastrophic consequences. For a country wide or multi-national crypto.
Hence a global market driven crypto (like Bitcoin) is better, but they (banks) cannot manage or exploit that kind of crypto.
 
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