Month: July 2014

This past Monday the US Marshals auctioned off the “Silk Road” Bitcoin wallets at a higher than expected price to a single bidder.  The Bitcoin market strengthened coming into the auction and has held on to most of the price gains.

In the alternative coin market, on the other hand, we saw panic selling of an alternative coin (but only on one site!) and aggressive selling across the spectrum of “scrypt” based coins.  “scrypt” is one of the cryptographic algos that is used to validate transactions in some of the alternative coins such as Litecoin and Dogecoin.  Bitcoin uses a different algo called SHA256.

Zerohedgers know that algos are subject to attack by other algos and that the name of the game in the HFT space has been faster-faster-faster.  This is also true in the coin space.  Coins are produced by looking for rare sets of numbers that work out to be valid using the coin’s algo.  This is called mining.  Initially people mined with their PC computer.  Then a faster level of mining was achieved using graphics cards.  A new level of speed arrived when special purpose ASIC integrated cicuit chips were designed to process the digital coin algos.  There are rumors of even higher speed mining using a different type of integrated circuit called an FPGA.

The faster miners are able to gain economic profits over the slower miners and dump coins on the market.  The depressed coin prices further damage the profitability of the smaller miners.

Of more concern is the pooling of this faster crypto algo power in the hands of a smaller group of high speed coin traders.  One of the vulnerabilities of a coin network is the so called “51% problem”.  The coin networks operate by consensus – a transaction is valid if most of the network calculates it to be valid.  If a small group of high speed coin operators reach the 51% level they can tamper with the consensus.  This could break a coin – ruining the slower players that are holding it.

Fortunately Bitcoin seems to be actively working to prevent this.  The alternative coins, particularly the ones that use the “scrypt” algo, are much more vulnerable to the “51% problem”.  I think this explains most of the price action of the past two weeks in the alternative coin market.  The market is making the transition from an abstract maybe-someone-could concern to a real maybe-someone-is concern.  Fortunately there have been nice bounces in the affected coins so perhaps the concerns are overblown.

In response new coins have been created which use a different cryptographic hashing algo that is much more difficult to implement in specialized hardware.  One of these is called x11 (an unfortunate name choice which has been in use for decades as the Unix windows software).  The hope is that x11 will inhibit the bigger faster guys from being able to kill the coin.  It is not an encouraging sign to see an x13 algo hit the streets before the x11 coins have had a chance to make it out of the nursery.

From the perspective of hindsight it seems that the choice to use the faster and simpler “scrypt” algo was a bad choice for the early alternative coins.  Bitcoin’s use of the slower and more complex SHA256 algo keeps it relatively safer for longer but as always technology marches forward.  The marching is faster when money is on the line.  Satoshi’s great invention was to protect the little guy from the too big to trust institutions but now we see a glimer that even Satoshi is/was only human.

Thanks Zerohedge!
Mark Hittinger
bugs_

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Euthanasia of the rentier appears to be increasingly the modus operandi of the central planning caste of the world.

As we noted previously, Bernanke’s (and now Yellen’s) plan to exterminate savers is wholly unsustainable, The Fed’s insistence that “our savers collectively have to hold all the assets of the economy and a strong economy produces much better returns in general” must be juxtaposed with comments from a money manager that “I don’t think that’s a fair-trade” for money intended to be invested safely.”

 

 

By removing the last shred of hope for a rise in savings rates anytime soon, the Fed is once again creating the potential for major unintended consequences as the collapse in interest income for US savers from the 2008 peak forces them to extend duration (TSYs), lower quality (corporate bonds), and/or increase leverage/risk (equities).

No matter how hard they herd the masses, the elderly (and still working) respond, “At our age, we can’t be a risk taker anymore.”

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Submitted by Ben Tanosborn

Affluence Economics: Low-Inflation and “Fool” Employment

Numbers don’t lie, the saying goes, but the have-liars are doing their numbers on the gullible have-nots.  And although mathematics is an exact science, it can be used as a practical tool by inexact social scientists working for those trying to influence people at the civic or individual level, call it politics or more accurately, persuasive deceit.

That’s where we have been finding ourselves in the United States for more than three decades, sporting a government of the powerful affluent, whether ran by the apostles of Tweedledee, or the disciples of Tweedledum, lying to the citizenship in all aspects that matter, be it their security, human rights or economic health. 

We might think that Washington is as pitchfork-worthy today as France was in 1787, or Tsarist Russia in 1917; however, we are still likely a few leagues away from the igniting point that sparks a true revolution, where reality sets in and replaces the mirage created by economic-political brainwashing.  Not quite there yet, the number of people struggling to put food on the table, although increasing at an accelerating pace, still only represents about 20 percent of those privileged in not having to receive SNAP (Supplemental Nutrition Assistance Program) benefits… those contemptible, dignity-stripped food stamps.

In the US we live in two interconnected economic worlds; however, we are brainwashed into believing we are a single, if diverse, society, with one economy, one flag, and one common destiny.  But we are not; we are a 2-tier society of haves and have-nots with two distinct economies operating side by side.  Two economies that must be measured separately if we dare face the economic and social realities that separate us from being one people, one nation… rancor and anger dividing us even when saluting the very same flag.  Still blaming that odious One Percent of capitalists, Knights of Our Economy, when we should be blaming the culprits in all of this, the Nineteen Percent of troglodyte lackeys serving in their roles of squires, helping to keep our downtrodden hoi polloi in check… and we all know who the squires are; what many of those squires don’t seem to understand is the precariousness of being a squire, and how prone they are to join the ranks of the have-nots… as the 80-20 rule becomes 85-15, then 90-10.  Perhaps then our revolution will get to ignite, bringing a more benign form of capitalism to this nation, and not the predatory, in your face capitalism which enslaves us today.     

Just in time to celebrate Independence Day, our illusionist government came out with “great ‘job numbers’” to keep the fireworks flying high, exploding in spectacular multi-colored brightness, lifting our spirits of eternal hope for a “recuperated” economy following course to a Dow Industrials that would surpass the 17,000 mark on the day 288,000 jobs were said to be added by employers to their payrolls, 73,000 more than economists had predicted.  Five straight months with job creation exceeding 200,000; the unemployment rate dropping all the way to 6.1 percent, the lowest level in almost six years, and a radiant and jubilatory Wall Street which has restored the pre-recession lost value to the Squires’ 401k’s. 

But all of this hoopla is an exercise in farce-economics, stats in Affluence Economics that have little to do with the economic condition of the have-nots, where unemployment rates, jobs created and rate of inflation need to be extracted from other data applicable to them, stats that reflect Have-nots Economics, not Washington’s generic bullshit.

Jobs created and rate of unemployment need to have realistic basis, not the joke that it is today where stats for underemployed or chronically unemployed are not part of the picture.  According to OECD (Organization for Economic Co-operation and Development) we are now at Full Employment here in the US since the measured unemployment level is within the 4 to 6.4% range.  “Fool” employment, I feel, since US true unemployment rate (if properly measured) is probably in the 15 to 20% range.

But where have-nots are brutally-penalized most is in the measurement of inflation, as much of their revenue comes from fixed sources (retirement, social benefits, etc.) that use those inflation figures, nowadays 50 to 200 percent off the mark, since the basket of goods consumed by the poor is totally different from that of the affluent 20 percent.  A 25 percent increase in food prices may not be that meaningful to that remaining middle class, but it is critical to those at the poverty level, or even 10-20 percent higher.  Where the government has told us we have averaged a 1.9 annual rate of inflation in the past four years, for the have-nots the figure is probably closer to 6 percent (over 200 percent more).  Great savings for our illusionist government now able to invest more money in weapons for the Pentagon!          

We needn’t worry about terrorism coming to America from outside our borders; we are seeding terrorism right here, in our “land of opportunity” garden, an extremely bitter plant of discontent that will make terrorists of our neighbors and poison us all.

Happy Independence Day to the Haves, and a

Happy Dependence Day to the Have-nots!

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Pro-Russian separatist forces have been forced to retreat from their stronghold in Slavyansk following “massive shelling” in the early morning from Ukraine’s ‘anti-terrorist’ forces. Armored vehicles entered the city and the rebels, according to RT, decided to move back to their headquarters in Kramatorsk to ‘prepare’ in advance for further offensives. Just days after the cease-fire was lifted, newly-appointed Defense Minister Valery Heletey commented the “order to free Slaviansk from the (separatist) fighters has been carried out,” but pro-Russian supporters are not done yet and exclaimed: “Pass on these words to Putin: the people of the Donbass believed him for some reason when he said he would help. But now they (government forces) are killing peaceful civilians and if that is not genocide I would like to know what is.”

 

 

As Reuters reports,

Government forces recaptured a flashpoint area of eastern Ukraine from pro-Russian rebels on Saturday, and Ukraine said its blue and yellow flag was flying again over what had been the separatist redoubt of Slaviansk.

 

A Reuters reporter saw a convoy of about 20 military transport vehicles and buses filled with armed rebels driving out of Kramatorsk where they had gone after apparently earlier fleeing Slaviansk 20 km (12 miles) to the north.

 

“Your order to free Slaviansk from the (separatist) fighters has been carried out,” newly-appointed Defense Minister Valery Heletey was quoted by the presidential website as telling Ukrainian President Petro Poroshenko.

 

 

IMAGE: #Ukraine flag raised in #Slavyansk after Donetsk militia left city for #Kramatorsk http://t.co/LjN3OMfqpm http://ift.tt/1vLftkB

— RT (@RT_com) July 5, 2014

 

 

“A significant number of militants have left Slaviansk … along the way, our battle groups are greeting them. They are suffering losses and surrendering,” he said in a statement on his Facebook page.

As RT reports, according to Channel One’s information “there was massive shelling” and then armored vehicles entered Slavyansk and street fighting began. That’s when the self-defense forces took the decision to leave the city, the channel said.

“Despite the massive shooting, the fighters stormed out of the city and headed for neighboring Kramatorsk. Part of their hardware was shot down in the process,” the channel said.

Prime Minister of the Donetsk People’s Republic, Aleksandr Boroday, explained…

“Our troops have consolidated at the reserve lines of defense, in an organized way and having kept their weaponry. We were prepared for this option, as we have to face tens of thousands of Kiev’s military men and hundreds of armored weaponry units – which means almost all the battle-ready Ukrainian army,” Boroday said.

 

 

“Taking into account the ‘scorched earth’ tactics employed by Kiev’s punitive forces, and the strategy of genocide toward the Donbass population, we declare that every hour of military action claims civilians’ lives,” Boroday said.

This followed impassioned pleas for help late last week…

Igor Strelkov, a Muscovite appointed as defense minister of the self-declared Donetsk People’s Republic, said without Moscow’s aid the region the rebels lay claim to, known as Novorossiya (New Russia), would fall to Kiev’s forces.

 

“Slaviansk will fall earlier than the rest,” he wrote on a rebel website.

 

…

 

“Pass on these words to (Russian President Vladimir) Putin: the people of the Donbass believed him for some reason when he said he would help. But now they (government forces) are killing peaceful civilians and if that is not genocide I would like to know what is.

 

“The (rebel) fighters are without shoes and don’t have anything to fight with.”

So far the only actions taken by Russia are to stop selling arms to Ukraine…

The Russian Foreign Ministry announced Saturday that Moscow is halting the process of delivering weapons, Ukrainian military forces’ equipment and funds from the territory of Crimea to Kiev authorities due to their military actions in the east, which have resulted in the “deaths of civilians, including children, and civilian infrastructure in Donetsk and Lugansk regions being destroyed.

 

“The decision will be valid until a full ceasefire in the east of Ukraine by the country’s military and until a peaceful solution is reached,” Russia’s Foreign Ministry said.

*  *  *

As the tensions shift from blood in the streets to energy-wars centred around Austria, Bulgaria, the South Stream, new ‘targeted’ sanctions, and a potential German-Russia alliance, one wonders just how long before Putin must act.

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Submitted by Marc Faber of The Gloom, Doom, and Boom report,

Science fiction author Frank Herbert opined that,

“All governments suffer a recurring problem: Power attracts pathological personalities.”

Friedrich Hayek thought that,

“the more the state ‘plans’ the more difficult planning becomes for the individual,”

and John Stuart Mill wrote already in Principles of Political Economy (1848) that,

“In all the more advanced communities the great majority of things are worse done by the intervention of government, than the individuals most interested in the matter would do them, or cause them to be done, if left to themselves.”

Economist Richard Rahn, the eponymous creator of the Rahn Curve, makes the connection between the rate of economic growth and the size of government.

The Rahn Curve suggests there is an optimal level of government spending (as a share of GDP) that maximizes the rate of economic growth. As government begins to rise from zero percent of GDP, initially it spends to protect life, liberty and property; as this happens the economy surges. When government makes people safe, enforces contracts, protects liberty and enforces property rights great things begin to happen. As government continues increasing, it next spends on infrastructure. Such spending further accelerates economic growth. It is clear that a little government does a lot of good. At this point government’s share of GDP is between 10% and 20%. From its founding to circa 1930, total US government spending was around 10% on the Rahn Curve.

In general, I have great sympathy for the Rahn Curve, which essentially states that the larger the government becomes beyond a certain point (about 20% of GDP) the slower economic growth will be.

Under the influence of the neo-Keynesian interventionists and the professors at the Fed, the public has been brainwashed into believing that governments can revive economic growth. But as Ronald Reagan pointed out,

“Government is not a solution to our problem, government is the problem.”

Barry Goldwater warned that,

“The government that is big enough to give you all you want is big enough to take it all away.”

via Zero Hedge http://ift.tt/1mjFjuw Tyler Durden

It’s common sense – everyone knows that interest rates are going to rise (how can they fall any lower?) Inflation will come back (because the Fed said so), economic growth will flourish (because the Fed said so), and longer-term bond yields will surge in a bond-bull-destroying renaissance proving stock market speculators right all along. Except that isn’t what history shows us… When a central bank dominates the domestic bond market, all bets are off (whether economically rational or not). When a sovereign simply cannot afford higher interest rates, all bets are off (no matter what your economic textbook says).

 

Source: JPMorgan

 

Simply put – this is not your father’s bond market anymore.

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