QUARLES IS WRONG ABOUT CENTRAL BANKING, WHICH OUGHT TO BE REMOVED 

Now it is the Fed’s turn to complain about cryptocurrencies. U.S. Federal Reserve vice chairman for supervision Randal Quarles says that digital currencies and cryptocurrencies could disrupt the larger financial system.

He said in a speech: “Risk management can act as a mitigant, but if the central asset in a payment system cannot be predictably redeemed for the U.S. dollar at a stable exchange rate in times of adversity, the resulting price risk and potential liquidity and credit risk pose a large challenge for the system.”

He also said, “It is not clear … whether the payment system would be able to function, in times of stress.”

Developing digital money rapidly could cause a significant slowdown in economic functions, he said. The technology was “unproven” and could blow up domestic and international functionality.

He did recommend that the Fed continue to look into pursuing digital currencies but this is because central bankers wish to use digital currencies to track spending and saving. If top bankers have their way, every single transaction will be booked one way or another and sooner or later most of those transactions will be taxed or worse. Cash will likely go away.

Quarles believes that the US dollar is stable during times of adversity. In fact, the Fed printed trillions of dollars and sent them abroad after 2008 to stabilize the financial system. However, the money was printed illegally because the Fed is not supposed to stabilize the world, only the US. No one was ever prosecuted.

The money contributed to the US dollar’s inflation rate which is under-reported. That inflation regularly trickles into the dollar economy even though a lot of it still has to register.

It is simply a lie that central banking functions better “in times of stress.” Bankers like to promote this idea because allows them to take command of the value and volume of money. It is a form of price fixing and price fixing never works. It merely makes things worse, generating intense booms and busts over time that would not otherwise take place.

Quarles is wrong about every aspect of central banking which has been created as a form of price control that gives a handful of people the ability to manage trillions of dollars every day.

Money used to be part of the free market and sooner or later it will be so again. Bitcoin is leading the way, but if bitcoin doesn’t work out there are plenty of other cryptocurrencies that may take its place.

BITCOIN MUST GO?

The former chief economist of the World Bank says bitcoin should go away.

“Bitcoin is successful only because of its potential for circumvention, lack of oversight,” Joseph Stigliz said in an interview on Bloomberg Television. Bitcoin is currently trading around $10,000.

“It seems to me it ought to be outlawed. It doesn’t serve any socially useful function,” he said. Predicatably he wants digital money but not with a bitcoin style arrangement.

Digital money should be controlled by government.  “Let’s move away from paper into the 21st century of a digital economy,” he said.

He believes bitcoin is a bubble that is going to burst. It will offer exciting times on the way up and then on the way back down. He believes Washington could stop it any time … and that sooner or later would probably try.

Stiglitz may be correct about Washington’s stance. But not for the reasons he cites. If Washington tries to shut down bitcoin and other cybercurrencies, it will be because the government doesn’t want challenges to the Federal Reserve.

The Fed fixes the value and volume of money and price fixing never works. All around the world, central banks set interest rates and define monetary mass so it is not just the Fed. Hundreds of central banks remove the free market functions from money and operate by decree.

For thousands of years, money was entirely private and not influenced by what people said  about it. People could not influence its value or volume and it was only in the 1500s that money started to come under control of a very few people when the first British central bank was set up.

That bank’s primary function was to provide money for British wars that were directed by the King himself. In return, the King gave the bankers and jewelers a monopoly on currency. The British model now extends around the world.

There are only a handful of countries without a central bank and many of these are under attack. Money will have to return to the free market in order to function effectively once more. In the meantime we will have constant bubbles and crashes because money is directed rather than free flowing.

One response to the article read:

How? All these: “central banks will kill crypto/blockchain” type of comments. It’s easy to type this sentiment out, but HOW? to end crypto?? Not so easy after you consider that it’s online, living and breathing for all to study and make it stronger and better. Remember Napster…? Sure it was eventually shut down but a hundred Napster inspired sites sprang to life offering searches for free music, tv, movies, computer programs, video games, etc. Good luck banksters! You’re going to need it.

It is more likely that central banks will collapse over time than cryptocurrencies. That because central banking doesn’t work in the long term. It collapses and needs to be reconfigured before it collapses again. It is much more likely in the long-term that some form of cryptocurrency will continue and expand.

Central banking is an abomination that impoverishes every nation where it is tried. Sooner or later money will be free again, just as most cybercurrencies are free.

CRYPTOCURRENCIES EXPAND IN SMALLER COUNTRIES

Many people involved in ICOs are finding places with low taxes that are welcoming to them. They have gone to places like Switzerland, parts of Europe and the Caribbean. Regulators are not reaching equally into all corners of the world.

In fact, regulators’ push to reduce coin purchases may end up increasing use in these alternative regions. The US has done a number of ICOs this year but it is not necessarily an easy sell. And many major jurisdictions consider ICOs as basically risky propositions

The entire European Union is basically operating with a strict stance.  The SEC has already stated that ICOs should be regulated like securities. Selling utility tokens is a good idea, but SEC rules may evolve in such a way that even tokens will receive a good deal more scrutiny.

US issuers ought to think about selling overseas.  The Seychelles is one place that people can consider. But there are others. Meanwhile digital coins have sold some 3.6 billion so far this year, up from $100 million last year.

And many millions can be raised fairly issue quickly which is something regulators are concerned about. Generally speaking government regulators from first world counties put securities ahead of cryptocurrencies. And in fact they would to some degree rather that cryptocurrencies were something they didn’t have to deal with at all.

If they can reduce cryptocurrency exposure they may do it. But cryptocurrencies will continue to grow faster and faster until regulation finally catches up to them. This is not going to happen any time soon. Cryptocurrencies will continue to be offered in out-of-the-way places and circulate worldwide.

Regulators in first-world counties may do less issuance but smaller countries will continue and expand volume. This continues to take place no matter what countries like America do.

Now Uruguay Builds a Cryptocurrency

Uruguay’s central bank is building a digital currency. Other central banks are doing the same thing. For many observers, the kind of digital currency that a central bank would build may have little to do with a bitcoin-style cryptocurrency.

For one thing, cryptocurrencies like bitcoin have caps so they cannot print unlimited money. And cryptocurrencies are not governed by central banks. That means the value of the money is market-based, not fixed by bankers.

Nonetheless, banks like The Banco Central del Uruguay (BDC) are trying to make their own digital currencies even if it may not bear much resemblance to something like bitcoin.

Bills will be created, nonetheless, that can be passed via cellular from one party to another. The project is not yet launched but could be shortly.

Bannon Predicts the End of Crypto

The CEO of JPMorgan Chase bank, Jamie Dimon, says “it will end badly” for cryptocurrencies. He thinks that currencies will eventually end up on the black market after having been made illegal.

He told CNBC:

“Right now these crypto things are kind of a novelty. People think they’re kind of neat. But the bigger they get, the more governments are going to close them down.”

He also said governments could issue digital currencies, though they wouldn’t exactly be cryptocurrencies.  A company called Blockswater in Switizerland has made a market complaint featuring Bannon for previous remarks.

Bart Chilton Wants Crypto Regulation

Former US CTFC markets regulator Bart Chilton said that regulation could even-out crypto prices.  Recently bitcoim slipped from $5,00 to around $3,600.

He wrote in an editorial, “There’s no questions – zero – that had digital currencies been regulated, I would have sought an investigation into the precipitous price changes we’ve witnessed.”

Chilton has long wanted some kind of framework to oversee cryptocurrencies. But in fact primary regulation is already in place. Primary regulation is after all market regulation. Secondary regulation is government regulation.

Primary regulation must take place before a security can trade. It makes a security tradeable. Secondary regulation is what people think as primary regulation, but it is not.

Chilton wants to impose secondary regulation, which is far more invasive that primary regulation. He believes that this will smooth out crypto prices. In fact, it must be a kind of price fix. And in the long-term price fixes never work.

 

 

Casey Is a Fan of Crypto and Climate Change

Michael J Casey, chairman of CoinDesk’s advisory board, thinks ICOs could remedy some of humanity’s big, troublesome issues. He’s especially vocal about ICOs, tokens and … climate change.

In and editorial, he wrote that rules  are embedded into the smart contracts working with crypto. This tells people what to do.

It is featured in plans for a “Climate Coin” where tokens become more valuable as the climate improves. The result, he says, is that tokens can rewrite the way the market works and help people grapple effectively with climate change.

The real problem of course is that there may not be any climate change, not the kind that people can do anything about. Before individuals get all worked up about climate change, they better decide if it is what people say it is, or something less.

There are plenty of scientists who don’t believe in climate change and they ought to be listened to alongside of those who foretell the worst.

 

 

Mexico to Let Central Bank Supervise Crypto

Mexico will give its central bank the ability to supervise cryptocurrencies. A translation of some of the bill:

“[Financial technology firms] can only operate with virtual assets that are determined by the Bank of Mexico through general provisions. To carry out operations with such virtual assets, they must have the prior authorization of the Bank of Mexico.”

President Enrique Pena Nieto says the fintech legislation will begin on September 20. There are no voices raised in opposition to the bill it seems, but there should be. Cryptocurrencies are a way to use currency that has nothing to do with a central bank.

To put a central bank in charge of a currency is to ensure sooner or later that the currency will come under attack from the central bank. That’s because central bank currencies and crypto currencies cannot exist together in the long term.

Either cryptocurrencies or central bank currencies will have to change. More likely neither will change and the upshot will be a significant fight.

SEC Blockchain Meeting to Take Place in October

The US Securities and Exchange Commission (SEC) will talk about blockchain in October. The discussion will take actually take place on October 12. No further details are available at the moment.

The SEC is not the only group to discuss blockchain. Other government entities have examined the topic as well including the US Treasury Department and the CFTC.

A discussion does not necessarily imply action, certainly not immediate action. But chances are at some point, the SEC will issue regs involving blockchain. The meeting will be available on the SEC website, live, for those can’t come.

China Continues Shutdown

China will close some bitcoin exchanges during September. China’s regulators have said  exchanges need to close because they don’t have formal licenses.

There is a document circulating as well that explains what exchanges need to do. One exchange, BTCC, said it will shutting down and users ought to get their funds back by Sept. 30.

Some exchanges may not shut down, including Huobi and OKCoin. It is possible that China wants to radically decrease the number of exchanges so as to better control them.

Alternatively, government may actually take control of whatever exchanges are left. There is speculation that government does not want to shut down the sector entirely. The plan is not yet clear and the government is in no hurry to explain itself.  Presumably it will do so in due time.