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Bitcoin - What Next?

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Posted by Martin Armstrong - Armstrong Economics

on Friday, 27 January 2017 07:19

bitcoin-600x400The rally in bitcoin has come out of China, which has accounted for 98% of bitcoin trading in the past six months. China is also home to about two-thirds of the world’s bitcoin mining power. The Phase Transition spike in bitcoin is very alarming, for it flies right in the face of government attempts to eliminate currency. The Chinese have been buying bitcoin onshore, selling it offshore for another currency, and then moving the money to a bank account. This is how the Chinese individuals can take cash out of the country, circumventing all regulation.

The Chinese government has been strengthening requirements for citizens by converting their yuan. With Trump coming into office, China fears that lower values for the yuan will become a trade war even if the government is not actively trying to depreciate the yuan for trade. Conversions of yuan are already subject to a quota or currency controls in an effort to curb capital outflows.

Bitcoin has been the escape method for capital fleeing China. With the looming trade war on the horizon, the Chinese government will have absolutely NO CHOICE but to come in and regulate bitcoin as its citizens now account for 98% of all trading. From a regulatory perspective, the days of passive treatment of bitcoin may come to an end. Bitcoin has soared only because it has been the mechanism to obtain foreign exchange and take capital out of China. This could easily be considered an illegal operation, such as money laundering, to justify closing that window.

Of course, you have the zealots who preach bitcoin as the alternative to the dollar that they cannot shut down. All they need to do is declare bitcoins illegal and the PRESUMPTION of being in bitcoin is a PRESUMPTION of being a criminal. They are already using terms like “CASH IS FOR CRIMINALS” and if you have a few thousand in cash, they just confiscate it presuming you are criminal under Civil Asset Forfeiture without having to prove you committed a crime or charging you.

Keep in mind we are dancing with the devil. There are no rules — just ruthless self-interest. They will do whatever it takes to survive. They will not relinquish power willingly.



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Currency

Inflation Moving Higher Thanks to Dollar

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Posted by Martin Armstrong - Armstrong Economics

on Monday, 23 January 2017 07:08

InflationPrices in the US are picking up strongly and support the Fed’s arguments for raising interest rates further. The rate of inflation rose by 2.1% in December, according to the Ministry of Labor. This is the highest increase since two and a half years. Some are suggesting this is due to higher gasoline prices and rents in particular caused the buoyancy. After all, the November rate was still 1.7%. The Fed has been targeting two percent. The Fed raised the key interest rate in December to 0.5 to 0.75%, and took three further steps upward for 2017.

With With consumer confidence at record highs, that means....continue reading HERE

...also from Martin:

Trump Brings Consumer Confidence to 13 Year High



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Currency

Welcome To The Third World, Part 21: This Pension Thing Is About To Get Real

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Posted by John Rubino - DollarCollapse.com

on Monday, 16 January 2017 10:27

“The problem with police officers and firefighters isn’t a public-sector problem; it isn’t a problem with government; it’s a problem with the entire society. It’s what happened on Wall Street in the run-up to the subprime crisis. It’s a problem of people taking what they can, just because they can, without regard to the larger social consequences. It’s not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They’d been conditioned to grab as much as they could, without thinking about the long-term consequences.”
― Michael Lewis, Boomerang: Travels in the New Third World

Though it may not be instantly clear, in the above quote Michael Lewis is talking about public sector pensions and how over the course of several decades, mayors and governors across the US have colluded with police, firefighter and teachers unions to promise outrageously-generous benefits and then failed to put aside enough money to pay for them.

As a consequence two things are happening. In dozens if not hundreds of cities and towns, services are being cut to the bone to pay for ballooning pension benefits, and – when even these cuts prove inadequate – pensions are being drastically reduced.

Which in turn means two other things. First, life isn’t nearly as easy or pleasant as it used to be in a lot of places, as library hours are cut, trash piles up and police response times lengthen. And second, hundreds of thousands of public sector workers who expected to retire comfortably are staring at major lifestyle shrinkage.

To which a reasonable person might yawn and say, sure the numbers look grim. But they’ve looked that way for a long time and outside of Chicago, American life is still pretty good by Greek, Venezuelan or Russian standards. So go away until something tangible actually happens.

Point taken. But this might be that time. Beginning with Dallas, where the city is actually taking money back from plan recipients…

Dallas Police and Fire pension members may have to pay back funds

The city has agreed to put in an additional billion dollars over 30 years, but they’re proposing a series of bitter pills to make up the rest of the nearly $4 billion shortfall.

The bitterest pill: A proposal to take back all of the interest police and firefighters earned on Deferred Option Retirement accounts, or DROP. That would amount to an additional billion dollars saved. The city is calling it an “equity adjustment.” Retirees call it an illegal “claw back.”

The city is also seeking to “equity adjustment” on cost of living increases. The city says that pension checks are about 20 percent higher than they would have been if increases had been tied to inflation.

The city’s proposing to freeze cost of living increases until it catches up to the inflation index.

…and moving on to Kentucky, where if a funding level of 16% for the state employees fund isn’t an imminent crisis, then nothing is:

KY-pensions-Jan-17

Things are if anything even bleaker in the private sector:



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Currency

Inflation Is Rearing Its Head Everywhere, And Now In Germany - The Implications For The U.S. Dollar And Euro Relationship

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Posted by Robert P. Balan - Seeking Alpha

on Friday, 13 January 2017 06:23

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Summary

  • Latest Eurozone data indicate a substantial jump in inflation in Germany in December , eliciting calls that ECB president Mario Draghi, end his ultra-loose policy and raise the policy rate.
  • The reality is that with energy costs rising quickly, the strong disinflationary pulse that the globe had seen in 2015-2016 has been neutralized. The deflation meme is dead.
  • The overwhelming impact of rate differentials still favor the USD, but there comes a time when significantly higher inflation rates in the US vs. Row starts to hurt the currency.
  • The universal outlook of higher crude oil prices in the medium term has the potential effect of limiting future USD gains, if not weakening it outright against the euro.
  • Our short-term outlook is for the US Dollar to strengthen until mid-February, after which the US currency should weaken significantly against the euro and other major currencies.

...read more HERE

 

...related from Jack Crooks:

The Fed’s Fake News: Inflation Risks. Buy bonds!



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Currency

The Fed’s Fake News: Inflation Risks. Buy bonds!

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Posted by Jack Crooks - Currency Currents

on Thursday, 05 January 2017 08:19

Quotable

“We know from chaos theory that even if you had a perfect model of the world, you'd need infinite precision in order to predict future events. With sociopolitical or economic phenomena, we don't have anything like that.”

--Nassim Nicholas Taleb

Commentary & Analysis

The Fed’s Fake News: Inflation Risks. Buy bonds! 

JC

It’s an interesting aspect of the human condition—clinging to our view despite the fact reality has already invalidated them. The Federal Open Market Committee seems to have this characteristic firmly embedded in its DNA.

To wit, today’s headline from Reuters:



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