Triffin Dilemma: Quick Part 2 - E227

Mais episódios de "Bitcoin & Markets"

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  Evergrande The Deteriorating Situation in China - E233

  23/09/2021

  34:51

  This is an early cut of the Evergrande podcast episode coming out next week on Fed Watch. I discuss the proper context in which to view Evergrande, and give details on what I see going on over there in China. Full notes: https://bitcoinandmarkets.com/e233
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  Present and Future of the Euro, ECB Annual Report Breakdown - E232

  20/06/2021

  54:37

  In this episode I read through some of the ECB's Annual Report and comment on the current state of the Euro, as well as their efforts to create a digital Euro. This is applicable to bitcoin because the ECB is a major incumbent in the current system, and is trying to launch a bitcoin competitor, which they call a Central Bank Digital Currency. In the first part of the podcast I detail some of the inconsistencies in their Main Findings. Namely, they claim the Euro's currency status has remained "broadly stable" through 2020. Yet, when we read their stats, nearly everything is declining and at a fairly rapid pace. This is very notable, especially since the Euro is already at "historic lows" of importance in the financial system. Next, I read through the entire CBDC section and comment thoroughly about what they are getting right and wrong. Unfortunately, they are getting most things wrongs, but they are doing better than, say, two years ago. The main issues I see are: 1) Means of payment is not a function of money. Paypal or Visa are not functions of the dollar. They are separate features. We can easily and plainly draw a line between Paypal and the dollar. We don't consider Paypal as part of the dollar. Therefore, means of payment is not a function of money, it is a function of financial infrastructure around money. 2) Features are not additive. Throughout their report, they claim adding feature X will result in Y, and adding feature A will result in B, as if these features are added in isolation without any second order effects or trade-offs. Indeed, they claim there is a positive feedback loop to adding more and more features. In fact, every feature has a trade-off and adds to the complexity of the whole. This dynamic is actually a negative feedback loop. 3) Interoperability and anonymity - central banks can only give lipservice to these two things. They cannot truly be interoperable, because that opens them up to monetary competition and gives sanction to speculative attacks. One thing legal tender laws do is to close down monetary competition. Anonymity as well is an obvious plus, so they consider it here, but it fact central planners cannot offer anonymity else they'd lose control. 4) Many of these things are already possible and don't need a special new solution by the central bank. In the real world, these solutions are squashed by regulation, not some technical limitation. There is a reason those regulations where put in place (whether you agree with it or not), and providing a new solution effectively routes around those inefficiencies that are part of the regulation process. The central banks would be undermining their very own regulations in other words if they solved for these things in a CBDC. 5) Interoperability, anonymity, censorship resistance, and being a bearer instrument are products of decentralization. A CBDC is by definition centralized around the central bank, so cannot provide these things. Links ECB 2021 Annual Report https://www.ecb.europa.eu/pub/ire/html/ecb.ire202106~a058f84c61.en.html Hypothesis link https://hyp.is/go?url=https%3A%2F%2Fwww.ecb.europa.eu%2Fpub%2Fire%2Fhtml%2Fecb.ire202106~a058f84c61.en.html&group=world Lagarde conviction https://www.nytimes.com/2016/12/19/business/lagarde-imf-verdict-france-questions.html A Get The Bitcoin Dictionary! Bitcoin jargon demystified. Over 180 Bitcoin terms, concepts, and idioms. http://bitcoindictionary.cc The Best Free Bitcoin Newsletter! Don't miss another issue. Subscribe to the Free tier! Subscribe to the Pod! iTunes  |   Stitcher   |  Google Pods  |  YouTube  |  Soundcloud  |  RSS The Show Needs Your Support Become a paid member! We’re a small operation and producing quality content people find valuable. Check out our big list of ways to help the show Affiliates Chart Like A Pro With TRADINGVIEW The Best WordPress Theme I’ve Ever Used! GeneratePress Sign Up For Audible And Get 2 FREE Audio Books Have Feedback? Send it our way. **DISCLAIMER: This is not investment advice, do your own research.**
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  Q&A on Deflation & Bitcoin: Part 2 - E231

  08/06/2021

  33:01

  Hopefully this episode helps you understand the monetary system and some of the arguments for a future outlook that is deflationary. Questions were sent in by long time supporter Rob. They are below. We cover the first three in this Part 1 and then tackle the last two here in Part 2, along with a general discussion on CPI and asset price inflation. I finish by explaining why bitcoin doesn't need hyperinflation or even inflation to get adopted. In fact, it is better to that it will be a deflationary grind, because that preserves as much capital as possible in a transition. Check out Part 1 first. Jeff Booth talks about how we should have massive DEflation due to technology and productivity advances, yet we don’t, why not? Is it possible to have both inflation and deflation in different types of goods and commodities, is that what is happening? With the fed expanding supply of reserves dramatically, why don’t we see consumer inflation. Where do we look to measure it? How come there is no consensus on what is or is not inflation, and what is or is not likely to come in the next 12-18 months? Gold has a reputation of being a hedge of inflation, has that proven true or false over time? Bitcoin? A Get The Bitcoin Dictionary! Bitcoin jargon demystified. Over 180 Bitcoin terms, concepts, and idioms. http://bitcoindictionary.cc The Best Free Bitcoin Newsletter! Don't miss another issue. Subscribe to the Free tier! Subscribe to the Pod! iTunes  |   Stitcher   |  Google Pods  |  YouTube  |  Soundcloud  |  RSS The Show Needs Your Support Become a paid member! We’re a small operation and producing quality content people find valuable. Check out our big list of ways to help the show Affiliates Chart Like A Pro With TRADINGVIEW The Best WordPress Theme I’ve Ever Used! GeneratePress Sign Up For Audible And Get 2 FREE Audio Books Have Feedback? Send it our way. **DISCLAIMER: This is not investment advice, do your own research.**
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  Q&A on Deflation: Part 1 - E230

  03/06/2021

  23:30

  Hopefully this episode helps you understand the monetary system and some of the arguments for a future outlook that is deflationary. Questions were sent in by long time supporter Rob. They are below. We cover the first three in this Part 1 and then tackle the last two in Part 2, along with a general discussion on CPI and asset price inflation. I have Part 2 recorded, but have to edit it and upload it. So, you can expect that in a few days. Jeff Booth talks about how we should have massive DEflation due to technology and productivity advances, yet we don’t, why not? Is it possible to have both inflation and deflation in different types of goods and commodities, is that what is happening? With the fed expanding supply of reserves dramatically, why don’t we see consumer inflation. Where do we look to measure it? How come there is no consensus on what is or is not inflation, and what is or is not likely to come in the next 12-18 months? Gold has a reputation of being a hedge of inflation, has that proven true or false over time? Bitcoin? A Get The Bitcoin Dictionary! Bitcoin jargon demystified. Over 180 Bitcoin terms, concepts, and idioms. http://bitcoindictionary.cc The Best Free Bitcoin Newsletter! Don't miss another issue. Subscribe to the Free tier! Subscribe to the Pod! iTunes  |   Stitcher   |  Google Pods  |  YouTube  |  Soundcloud  |  RSS The Show Needs Your Support Become a paid member! We’re a small operation and producing quality content people find valuable. Check out our big list of ways to help the show Affiliates Chart Like A Pro With TRADINGVIEW The Best WordPress Theme I’ve Ever Used! GeneratePress Sign Up For Audible And Get 2 FREE Audio Books Have Feedback? Send it our way. **DISCLAIMER: This is not investment advice, do your own research.**
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  Economic Fallacies of Ethereum as Ultra Sound Money - E229

  25/04/2021

  38:27

  Hopefully this episode helps you understand the criticisms of Ethereum's Ultra Sound Money (USM) thesis. In this episode I focus on answering the criticism present in the USM thesis from a bitcoin perspective. I start with introducing the listener to the idea of USM and economic engines. Then I dive into the ways to power the engine with issuance or fees, and some of the fallacies around that. Next, we look at Proof of Work (mining) versus Proof of Stake (what ethereum wants to go to). Lastly, is a quick discussion on EIP 1559, the proposal in Ethereum to burn transaction fees as a way to deflate supply. https://bitcoinandmarkets.com/e229
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  NFTs and Bitcoin Fungibility - E228

  19/03/2021

  44:28

  Full show notes: https://bitcoinandmarkets.com/e228 I listen to and react to an interview Pompliano did with "the most famous digital artist in the world," Beeple, who recent sold a JPG for $69 million. Then I go through what fungibility is and why it applies to bitcoin. Pomp and Beeple https://youtu.be/rT13eQOf6ho Fungibility of Bitcoin - BTCM Research blog  
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  Triffin Dilemma: Quick Part 2 - E227

  15/03/2021

  13:55

  Full show notes and links: https://bitcoinandmarkets.com/e227 In this episode, I attempt to clear up why I think Lyn Alden is using a Triffin-style premise and my problem with the Triffin dilemma in general. I've noticed people using Triffin-style arguments even more in the past couple of weeks, and it is very important that we have the tools to evaluate if this is the proper framework from which to build an understanding of the financial system. I quote heavily from Lyn and the BIS in this episode, drilling down the essense of the problem with the premise of deficits being the basis for foreign reserves of the dollar. Short answer, they aren't. There's very little evidence that deficits matter to foreign reserves at all, or that they play more than a very small role. The single most important source of foreign reserves is the eurodollar market. If we clear our minds of the role of deficits, then what is the argument for the unsustainability of the USD system? Well, it boils down to the end of a gigantic global credit bubble enabled by the Pax Americana. Hope this helps clarify. Stay tuned for the next episode on NFTs and fungibility. It will be a satisfying episode. A Links The Fraying of the US Global Currency Reserve System - Lyn Alden Fraying with my highlights Why Trade Deficits Matter - Lyn Alden BIS Report - Triffin: Dilemma or Myth? BIS Report with my highlights
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  Triffin Dilemma: Fact or Fiction? - E226

  28/02/2021

  17:18

  Website: https://bitcoinandmarkets.com/e226/ Hopefully this episode helps you understand the arguments people often make and if they hold water next time the invoke the Triffin Dilemma. My interest in the Triffin Dilemma started several months ago. Little did I know then that I was trying to debunk an ahistorical extension of the original Triffin argument. I initially came to this conclusion: The problem with using Triffin in an argument about a dollar collapse is 1) it's ahistorical and 2) there doesn't need to be a capital account deficit in the US and surpluses in other countries for them to acquire dollar reserves. In this episode, I try to provide you with a basic understanding of the original Triffin Dilemma from Robert Triffin in 1958, and of why the modern extensions of this famous prediction are poor facsimiles. I provide tons of useful links below as part of the show notes. Balance of Payments It all comes down to the Balance of Payments for a country which issues the global reserve currency. The two main parts of the BoP are the current account and the capital account (including the financial account which we don't talk about). These two halves of the BoP must balance. The current account consists main of a balance of trade. Is the country running a trade surplus or a trade deficit. Other factors are things like foreign aid which we don't have to consider because it's very small compared to the trade balance. The capital account consists of flow of assets and liabilities for the country as a whole. When a foreigner buys a US asset (or a dollar denominated asset) this is a positive input for the capital account. In the reverse, when a US person or entity buys an asset in a foreign country it is a negative input for the capital account. Remember, the current account must be offset by the capital account. Therefore, if the US has a trade deficit of say $500 billion, they must have a capital account surplus of $500 billion. Triffin and Trade Surpluses When Triffin was writing the original Triffin Dilemma, in the 50's and 60's, the US ran massive trade surpluses. This means the capital account was negative - the US was losing assets abroad, or more accurately gaining liabilities abroad. Triffin was concerned that when the dollar denominated value of foreign liabilities surpassed that of the US's gold stock which backed the dollar at the time, there would be a run on the gold stock by those foreigners. They would sell their dollar denominated assets and take delivery of the gold, portending the doom of the US dollar peg. Current Account and Fiscal Triffin The US dollar did end up going off the gold standard in 1971, but not for the reasons Triffin predicted. Despite being accidently right, this form of argument became very popular in economics. Today, we can see two main extensions to the Triffin Dilemma, "current account Triffin" which is exactly the opposite of the original theory, and "fiscal Triffin" which is about global demand for US debt to cause the US to run unsustainable fiscal deficits. The current account Triffin is the most used by inflationists to support their dollar bear views, and, well, it's totally false. It reverses cause and effect, and lacks a clear systemic risk. The fiscal Triffin is more sound, but it is also false. It fails to consider other forms of safe assets like Mortgage Backed Securities and other derivatives. These are inferior to US Treasuries, but they are still widely used in their place (with an associated premium surely). Fiscal Triffin also lacks a clear systemic risk to the financial system, so is unlike the original. Hope this helps. A Links Wikipedia entry for Triffin Dilemma BIS Report - Triffin: Dilemma or Myth? BIS Report with my highlights via Hypothesis Understanding Capital And Financial Accounts In The Balance Of Payments - Investopedia FRED - Financial Accounts of the United States Khan Academy - Balance of payments: Capital account
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  Thucydides Trap: China vs US, Real or Debunked? - E225

  15/02/2021

  37:34

  Full show notes with images and links at https://bitcoinandmarkets.com/e225 At first glance, the Chinese miracle has survived the virus recession and returned to growth. There is no lack of articles proclaiming the inevitable dominance of the communists, sitting atop the list of largest economies in the world. An idea that a rising CCP will want to stretch its new found legs and exercise influence over international trade and diplomacy, and that will bring them into direct conflict with the declining power, the US. This idea was titled the Thucydides Trap by Graham Allison in 2012. Since then it has been a widely used and debated point. While it makes sense that the West is stuck in a debt trap cycle making them destined to stagnation (unless bitcoin), it does not follow in the least that the CCP will continue to rise. The pattern we have seen in China over the last 20 years, is nearly identical to the pattern we saw in Japan from 1970-1990. In this episode I read the original work by Graham Allison and then a great article debunking this work of ahistorical fiction. Hopefully it helps you next time you hear someone using the Thucydides Trap idea to support a decline of the West.
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  Inflationist Dogma - E224

  16/12/2020

  29:02

  In this episode I listen and react to Doug French's recent Mises article Central Banks Put Wind at Bitcoin's Back. It's a short but wide ranging discussion touching on the current bitcoin rally, market manipulation, money, and central bank caused inflation. Suffice it to say, this article has a misplaced bias saying bitcoin's rally is "FOMO", "misallocation", and "human error". Austrians are missing a huge opportunity to champion bitcoin as free market money and become the most influence school of economics. They need to update their inflationist dogma. More show notes: bitcoinandmarkets.com/e224 Source: https://mises.org/library/central-banks-put-wind-bitcoins-back