Tag: news

It is becoming increasingly obvious that we are seeing the disconnect between financial markets and the real economy grow. It is also increasingly obvious (to Citi's FX Technicals team) that not only is QE not helping this dynamic, it is making things worse. It encourages misallocation of capital out of the real economy, it encourages poor risk management, it increases the danger of financial asset inflation/bubbles, and it emboldens fiscal irresponsibility etc.etc. If the Fed was prepared to draw a line under this experiment now rather than continuing to "kick the can down the road" it would not be painless but it would likely be less painful than what we might see later. Failure to do so will likely see us at the "end of the road" at some time in the future and the 'can' being "kicked over the edge of a cliff." Enough is enough. It is time to recognize reality. It is time to take monetary and fiscal responsibility – "America is exhausted…..it is time."

Via Citi FX Technicals,

Small business (the “backbone of the US economy”) is struggling again

These numbers were released this week and give rise for concern. The outlook here does not look very promising as we see all of the charts above starting to look shaky

We are particularly focused on the overall small business optimism index and what it suggests.

Small business optimism index

This chart is very compelling and looks to be following exactly the same path as that seen in 2011 (when QE2 was due to end only to “morph into operation twist”) and again in 2012 (when operation twist was due to end only to “morph” into “QE infinity”)

Important points to note on this chart are:

94.7: This was the major low posted in March 2003 (The month that the major rally in the stock market (S&P) began which then peaked in October 2007.That gave us a low to high move of 105%.) Traditional Fed easing ended in June 2003 with the Fed funds rate at 1%.This indicator then rallied to a peak of 107.7 by November 2004. The next time this support was revisited was in November 2007 when it gave way with a “print” of 94.4

 

94.5: This was the high of the bounce off the March 2009 low and was posted in Feb. 2011. The index then fell away and this high of 94.5 was once again posted in April 2012

 

94.4: After another fall away, this index again bounced into a peak of 94.4 in May 2013 and has since moved lower again.

After the break of supports in 2007 the low posted was 81 (March 2009) while we saw levels of 88.1 and 87.5 respectively after the 2011 and 2012 peaks. (The 2011 move took 6 months (Aug. 2011) and the 2012 move took 7 months (Nov 2012)). Operation twist was instituted in Sept 2011 while QE “infinity” was put in place in Sept 2012. If we were to follow the same path then the Fed could well be talking easing bias rather than tapering by the New Year (we hope not)

Overlay of the small business optimism index and the S&P 500

As can be seen from the chart above the Small business optimism index and the S&P were very correlated from 2007-2012. If anything, the Small business optimism index has tended to slightly lead i.e. the business backdrop seemed to reflect the economic backdrop which was then reflected in the equity market.

However, since Sept. 2012 when the Fed went “all in” with QE “infinity” there has been a huge divergence between these two. After an initial “hiccup” of about 9% in the Equity market it has since rallied 32% in 11 months, with no corresponding support from the business index.

There is now a “huge divergence” between the “backbone of the US economy” (Small business) and the Equity market. This clearly shows that while sharp balance sheet expansion at the Fed continues to “elevate” the equity market, it is far from clear that it is providing incremental benefit to the real economy. If these small business indicators continue to deteriorate as we expect then there is likely an inevitable negative feedback loop to the real economy and ultimately employment creation (Which at this point remains “qualitatively poor”)

If the Fed is not concerned about the dangers of creating a potential “bubble” in financial assets that does not see fundamental support, then they should be. They might want to explain what their next policy measure would be IF they allow a financial bubble to emerge while they sit at “Zero bound” short-term rates and a balance sheet likely sitting above $4 trillion.

The Equity market move is fundamental: Yeah right!

S&P and the Fed balance sheet since early 2009. Not at all correlated… well maybe a little

 

S&P, Fed Balance sheet and US GDP: QE infinity is working really well…..DUH..

Year on year real GDP growth peaked in 2010 at 2.8%.(YOY growth in nominal GDP peaked at 5.2% in 2012 and is now back at 3.1%). These levels remain extremely low by “normal” recovery standards and have failed to re-accelerate despite the fact that the Fed has nearly doubled the size of its balance sheet since 2010.

The Fed balance sheet is now $3.85 trillion and still rising.

Consumer confidence chart further supports these concerns

Has rolled lower following the June 2013 peak and is now back below the 2011 and 2012 peaks.

Huge divergence between consumer confidence and the S&P

Starting with 2000 and followed by 2007 and 2013 consumer confidence has hit a high followed by a lower high and another lower high.

At the same time the S&P has seen a high followed by a higher high and another higher high.

Effectively consumer confidence is acting like a momentum indicator and exhibiting “triple divergence” vis a vis the equity market

In 2000 there was a 4 month lag from when consumer confidence turned and the S&P began to struggle. In 2007 it was 3 months. So far there has been a 4 month lag (Consumer confidence peaked in June and so far the S&P has peaked in October at 1775).

It is also worth noting that the 1998-2000 rally (Which we think is very similar to today) in the S&P was 68%. A similar rally off the 2011 low gives us 1,806. In 2000 the peak of the S&P was also set at 14% above the 55 week moving average. Today such a gap would equate to 1,810 on the S&P. So there may still be a little “juice” left in this move into year end.

ABC news weekly consumer comfort index is now accelerating to the downside

As it did in 2000 and again in 2007. A move below minus 40 to minus 41 again would be concerning and suggest a danger of a return to the lows seen in 2008/2011.

The velocty of money is extremely slow.

Subpar velocity of money leads to subpar economic growth leads to subpar job creation leads to downward pressure on inflation (disinflation)

We would argue that QE encourages excessive misallocation of capital into financial markets and thereby directly contributes a decrease/contraction in money velocity.

While velocity of money and core PCE are at levels identical to the mid 1960’s and similar to the early 1970’s nominal GDP (YOY) is much lower.

In fact nominal GDP is actually back to levels (troughs) similar to 1982, 1991 and 2001.

This is happening at the same time as financial assets are booming. This is just one of many charts that suggest that all QE is now doing is encouraging a misallocation of capital into financial assets thereby contributing to the lowest level in money velocity since the data series above began in 1959. This contributes to slow economic growth and poor “qualitative” employment creation as well as disinflation. (Transfers the inflation into asset markets like we did between 1980 and 2000) This argues that we should measure inflation as a combination of traditional economy inflation and financial asset inflation thereby “smoothing” the cycle instead of encouraging “booms and busts”

Will the above eventually encourage the Fed to adopt a nominal GDP target (i.e. to encourage more traditional inflation).If so, how do they hope to achieve that. We do not really know the answer but it seems increasingly obvious that QE is not it.

Meanwhile the employment backdrop remains “qualitatively” weak.

So given all of the above let us look at what we think should happen and also what we think will (unfortunately) happen

What should happen (In our view)

The Fed needs to hold their nerve and start tapering. This is less to do with the view of the underlying economic picture and more to the view that QE has become “destructive”. It encourages a misallocation of capital and poor risk management. As a consequence there is every chance that it contributes to a falling velocity of money as liquidity simply “round trips” in financial assets rather than multiplies out in the real economy. If the “trickle down effects” of the equity market were really happening then after a 166% rally in the S&P we should be “booming”. However, the “average Joe” in the US economy is more exposed to

• Credit- which is still tighter than in prior recoveries
• Housing- Which is recovering but at a much slower pace than previous recoveries
• Job creation- Which is recovering but remains “qualitatively poor”

It is quite possible (likely even) that this process will not be painless but that is not a reason not to do it. QE does not work and another way needs to be tried. The continued expansion of the Fed’s balance sheet simply encourages fiscal irresponsibility at a Governmental level in the misguided idea that the Fed will bail us out. If the Fed holds the line then Congress will be forced to address our issues head on, and that would be a good thing.

Throwing the “ball” into the fiscal arena would force Congress to look at ways to stimulate the economy in the near term but only if they address the “drag” on the economy of the long term fiscal promises that they cannot keep (i.e. reform entitlements, healthcare etc)

Fiscal stimulus and regulation reform (to make both more business friendly) would be a much more effective transfer mechanism in putting money in people’s pockets today. If combined with looking towards more business friendly policies it would potentially be a more effective “kick start” for the economy.

What about an HIA 2 (Homeland investment act) initiative to encourage repatriation of all those non-taxed corporate profits sitting overseas? A very low tax rate for these funds conditional on a robust framework for how that money needs to be used (Capex, infrastructure spending, job creation etc). This would be a fiscal stimulus that does not cost any money in the existing budgetary process (Surely that could attract a bipartisan approach). The tax received could also be used in similar areas.

A dynamic such as above (Less monetary easing/marginal tightening, combined with short term fiscal relief and long term fiscal reform would be unequivocally USD bullish in the medium to long term. Therefore a set of policies such as this would hugely strengthen our bullish USD view.

What likely will happen (In our view?)

The Fed will try to hold the line on tapering in the near term. Yellen will “do a Ben”. What we mean by that is that when Ben Bernanke was appointed he had a reputation of being “Helicopter Ben”. (A reputation that was obviously well deserved given the dynamics of recent years). However he spent his “early days” trying to establish his “dual mandate” credentials and “monetary responsibility” In fact he did this “to a fault” maintaining a “hawkish tone” in the first half of 2007 and suggesting the Fed might raise rates. They never did and the rest as they say is history. Yellen has a reputation for being a consensus builder and therefore in the “transition phase” it is likely that she will take a more balanced tone between the hawks and the doves. She may even concede some concern about the balance of positive/negative risks that QE brings (something we opined on above). In fact it is even possible that we get some tapering in the near term, possibly even in December.

What will matter as we see this tone and possibly action will be the reaction function of markets. IF yields push higher, IF Equity markets start to correct, IF housing numbers continue to moderate, IF emerging markets start showing stress again, will they hold the line and continue to steadily taper? We would like to think yes but a “Leopard does not change its spots”. Real GDP is very low by historic standards at this point in the cycle, official inflation (Core PCE) at the very low end of a 0.95% to 10.23% 43 year range (Stands at 1.2%) and the qualitative employment “recovery” is poor. We do not therefore believe that the Fed will “hold its nerve” if we get another negative reaction like we saw last summer to signals of imminent tapering.

In this instance it is far more likely (unfortunately) that they do not taper, or if they already have, that they reverse course and start to talk of other measures like inflation targeting/nominal GDP targeting etc. We hope not as we really think this would eventually be a strongly misguided and potentially disastrous course of action. History has shown that the longer an economy/market is subject to “interference” such that it becomes the norm rather than the exception then the worse the outcome eventually is. We cannot afford the danger of another 2000 or another 2007 in a zero bound interest rate environment and a Fed balance sheet potentially well North of $4 trillion.

Enough is enough. It is time to recognize reality. It is time to take monetary and fiscal responsibility. It is time to fix the excesses of the last quarter century+. It is time to take the pain today so that we can gain tomorrow. It is time to make this a better place for the next generation. Isn’t that what we are meant to do? That would be a much better legacy that that which are likely heading to if “Kick the can” remains the only “bankrupt” policy we have.

We honestly HOPE that this is the course we take. The US has a history of “finding a way”. As Winston Churchill famously said. “We can always count on the Americans to do the right thing, after they have exhausted all the other possibilities.”

America is exhausted…..it is time.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/y11vB6Essvw/story01.htm Tyler Durden

Submitted by AWD via The Burning Platform blog,

Maybe 2015 will be the year of the collapse.

Our entire economy runs on debt creations, vis-a-vis financialization, since we import $500 billion a year more than we export.

2015 is the year when increasing debt results in ZERO GDP growth. The end of the line. But that won’t stop the Federal Reserve and the criminals in Washington. Enjoy what time we have left before it all collapses.

Government Intervention in Economic Downturns…Makes Things Worse

Every time government intervenes in an economic downturn, the downturn (or recession) gets longer, and deeper. History has borne this out, yet politicians can’t resist the impulse to “do something” when recession comes. Left to its own devices, the economy will recover much more quickly than if we tinker with monetary policy or inject massive amounts of taxpayer dollars into the equation. Thomas Sowell makes this case one more time in a piece at Townhall:

The idea that the federal government has to step in whenever there is a downturn in the economy is an economic dogma that ignores much of the history of the United States.

During the first hundred years of the United States, there was no Federal Reserve. During the first one hundred and fifty years, the federal government did not engage in massive intervention when the economy turned down.

No economic downturn in all those years ever lasted as long as the Great Depression of the 1930s, when both the Federal Reserve and the administrations of Hoover and of FDR intervened.

The myth that has come down to us says that the government had to intervene when there was mass unemployment in the 1930s. But the hard data show that there was no mass unemployment until after the federal government intervened. Yet, once having intervened, it was politically impossible to stop and let the economy recover on its own. That was the fundamental problem then– and now.

The Keynesians that are busy trying to turn the magic levers in our economy right now still aren’t getting the message, more than two years later: government spending can’t make the economy grow. Until they stop trying (and racking up immense, almost unfathomable amounts of debt), things are likely to continue to get worse. What we need is some level of certainty about policies that the current administration is trying to enact. Businesses don’t invest in growth, and thus hire new employees, because they don’t know what’s going to happen.

The policies of this administration make it risky to lend money, with Washington politicians coming up with one reason after another why borrowers shouldn’t have to pay it back when it is due, or perhaps not pay it all back at all. That’s called “loan modification” or various other fancy names for welching on debts. Is it surprising that lenders have become reluctant to lend?

Private businesses have amassed record amounts of cash, which they could use to hire more people– if this administration were not generating vast amounts of uncertainty about what the costs are going to be for ObamaCare, among other unpredictable employer costs, from a government heedless or hostile toward business.

As a result, it is often cheaper or less risky for employers to work the existing employees overtime, or to hire temporary workers, who are not eligible for employee benefits. But lack of money is not the problem.

Uncertainty is killing opportunities for growth. We don’t need more government intervention in the form of stimulus, or easing, or regulation. We need to government to get out of the way.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0F_FDPqqTmw/story01.htm Tyler Durden

Authored by Guy Haselmann of Scotiabank,

FED – Encouraging the Melt-Up Trade, While Regulating Bubbles Away      

The Fed moved ‘all-in’ in 2008/09 when it pushed rates to zero and embarked on QE. Since the Fed basically used its final chips via this action, it became trapped playing ‘this hand’ until the bitter end. The stakes are enormous and grow over time. The only way the Fed can ‘win’ is – as Yellen said today – “to do everything possible to promote a very strong recovery”. Tapering too soon could be calamitous toward this objective. Yet, the longer it continues, the more the risks aggregate.  However, Yellen seemed to calmly indicate today that any unintended consequences or dangers to financial stability are worth the risk.

There is an inability, and lack of good options, for providing any additional monetary or fiscal accommodation, should the economy weaken or should a global crisis arise. This is what makes the Fed’s current policy experiment such a high-stakes experiment. Here is why policy-makers are in such a predicament:

Every economic or business cycle decline over the past three decades has been met with the same response: monetary or fiscal stimulus.  Policy makers have been quick to offer accommodation, but they have been slow to withdraw the stimulus which is always politically more difficult. 

 

Fiscal accommodation over the years has resulted in large deficits and debt which are now leading to contentious discussion about how to reel them in.  

 

Monetary authorities have stair-stepped the Fed Funds Rate down, but eventually hit zero and ran out of room.

 

Effectively, both stimulatory mechanisms are broken.

Yellen had to field several questions about potential market bubbles, but she deflected them aggressively saying that she did not believe that “bubble-like conditions” existed.  Whether she believes that or not, it would have been counter-productive for her to admit it.  She mentioned that should bubbles begin to form, the Fed has the regulatory tools to control them.  She can’t possibly believe this (or can she); but regardless, she must try to convince the market that the Fed is monitoring them and can contain them.

Basically, she has given the market the green light to “melt-up”.  The only question is how much higher will the Fed’s ‘gift’ drive prices? She indicated the Fed has no choice but to continue with this policy until it succeeds (or will it ultimately fail?).

 

As perverse as this seems, Yellen likely ensured that an equity market crash (someday) is inevitable.  Yellen’s failure to acknowledge any signs of bubble-like conditions encourages more risk-taking and speculation.  Therefore, this fact, combined with her hints of a continuation of policy, should lead to a bubble; if one hasn’t been created already.  And, all bubbles eventually pop.

 

Alternatively, it is possible that Fed policy fails and economic growth begins to slip. In this scenario, a significant re-pricing (lower) of financial assets would occur.

 

Since banks are in a much stronger position today than in 2008, the Fed probably has limited concern about a market crash – as long as the banking system remains healthy.  The Fed probably doubts a crash could be as bad as 2008, and it know it know possesses a slew of liquidity facilities (established in 2008) which could be implemented quickly if necessary.

“The question isn’t who is going to let me; it’s who is going to stop me.” – Ayn Rand

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/aDeRuispGGw/story01.htm Tyler Durden

Authored by Guy Haselmann of Scotiabank,

FED – Encouraging the Melt-Up Trade, While Regulating Bubbles Away      

The Fed moved ‘all-in’ in 2008/09 when it pushed rates to zero and embarked on QE. Since the Fed basically used its final chips via this action, it became trapped playing ‘this hand’ until the bitter end. The stakes are enormous and grow over time. The only way the Fed can ‘win’ is – as Yellen said today – “to do everything possible to promote a very strong recovery”. Tapering too soon could be calamitous toward this objective. Yet, the longer it continues, the more the risks aggregate.  However, Yellen seemed to calmly indicate today that any unintended consequences or dangers to financial stability are worth the risk.

There is an inability, and lack of good options, for providing any additional monetary or fiscal accommodation, should the economy weaken or should a global crisis arise. This is what makes the Fed’s current policy experiment such a high-stakes experiment. Here is why policy-makers are in such a predicament:

Every economic or business cycle decline over the past three decades has been met with the same response: monetary or fiscal stimulus.  Policy makers have been quick to offer accommodation, but they have been slow to withdraw the stimulus which is always politically more difficult. 

 

Fiscal accommodation over the years has resulted in large deficits and debt which are now leading to contentious discussion about how to reel them in.  

 

Monetary authorities have stair-stepped the Fed Funds Rate down, but eventually hit zero and ran out of room.

 

Effectively, both stimulatory mechanisms are broken.

Yellen had to field several questions about potential market bubbles, but she deflected them aggressively saying that she did not believe that “bubble-like conditions” existed.  Whether she believes that or not, it would have been counter-productive for her to admit it.  She mentioned that should bubbles begin to form, the Fed has the regulatory tools to control them.  She can’t possibly believe this (or can she); but regardless, she must try to convince the market that the Fed is monitoring them and can contain them.

Basically, she has given the market the green light to “melt-up”.  The only question is how much higher will the Fed’s ‘gift’ drive prices? She indicated the Fed has no choice but to continue with this policy until it succeeds (or will it ultimately fail?).

 

As perverse as this seems, Yellen likely ensured that an equity market crash (someday) is inevitable.  Yellen’s failure to acknowledge any signs of bubble-like conditions encourages more risk-taking and speculation.  Therefore, this fact, combined with her hints of a continuation of policy, should lead to a bubble; if one hasn’t been created already.  And, all bubbles eventually pop.

 

Alternatively, it is possible that Fed policy fails and economic growth begins to slip. In this scenario, a significant re-pricing (lower) of financial assets would occur.

 

Since banks are in a much stronger position today than in 2008, the Fed probably has limited concern about a market crash – as long as the banking system remains healthy.  The Fed probably doubts a crash could be as bad as 2008, and it know it know possesses a slew of liquidity facilities (established in 2008) which could be implemented quickly if necessary.

“The question isn’t who is going to let me; it’s who is going to stop me.” – Ayn Rand

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/aDeRuispGGw/story01.htm Tyler Durden

Over the weekend, we reported that as Bitcoin’s unprecedented, Caracas-like surge continues, legislators are finally starting to pay attention to the digital currency, a process that will culminate with a hearing on November 18 titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” in which witness would be invited to testify about “the challenges facing law enforcement and regulatory agencies, and include views from “non-governmental entities who can discuss the promises of virtual currency for the American and global economies.” Which as everyone knows is code word for creeping, smothering regulation, especially since as was reported earlier, the FEC is debating allowing the use of Bitcoin for political donations (trust America’s corrupt politicians to always pay attention to anything that appreciates a few thousand percent in one year).

However, one person is not waiting that long: Ben Lawsky, the New York financial services superintendent, is looking to regulate Bitcoin now by issuing BitLicenses for business that conduct transactions in Bitcoin, and to that end he will conduct a public hearing to discuss the “burgeoning world of digital money.” Participants will discuss the feasibility of a license that would make the virtual currency market more like those for other forms of money. In other words: it will make BitCoin just like the fiat currency it is trying to replace, at least in the eyes of the government. At which point the primary utility of Bitcoin – as an unregulated medium of exchange- itself disappears.

 

Ben Lawsky with a Bloomberg terminal featured prominently in the background, photo credit NYT

From the NYT:

If the plans go ahead, it would be an important step in bringing bitcoin and other virtual currencies closer to the financial mainstream. In another move in the same direction, the Federal Election Commission held a hearing on Thursday in which it considered whether to legalize campaign donations made in virtual currencies.

 

Since bitcoin was created in 2009 by anonymous programmers, it has frequently been treated with derision by many financial insiders and authorities, who have described it as a speculative mania. Many authorities still hold to that position, but the currency’s online network, which is not controlled by any centralized authority, has survived several crises.

But the truth behind the scenes is simpler:

Several regulators have been looking at ways to make sure virtual money cannot be used for laundering money or other criminal purposes. In October, the federal authorities arrested the operator of an online marketplace where they said bitcoin could be used to buy drugs and other illegal goods.

 

“The cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running and child pornography,” Mr. Lawsky said in a letter announcing the hearing, which has not yet been scheduled.

So please everyone think of the children and some such hypocrisy.

And speaking of Hypocrisy, the last sentence of this paragraph has no peers:

“Virtual currencies may have a number of legitimate commercial purposes, including the facilitation of financial transactions,” Benjamin Lawsky, superintendent of financial services, said in the notice. “That said, NYDFS also believes that it is in the long-term interest of the virtual currency industry to put in place appropriate guardrails that protect consumers, root out illegal activity, and safeguard our national security.”

So, shouldn’t he be looking at the dollar instead?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_y-5YmfJyJk/story01.htm Tyler Durden

Over the weekend, we reported that as Bitcoin’s unprecedented, Caracas-like surge continues, legislators are finally starting to pay attention to the digital currency, a process that will culminate with a hearing on November 18 titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” in which witness would be invited to testify about “the challenges facing law enforcement and regulatory agencies, and include views from “non-governmental entities who can discuss the promises of virtual currency for the American and global economies.” Which as everyone knows is code word for creeping, smothering regulation, especially since as was reported earlier, the FEC is debating allowing the use of Bitcoin for political donations (trust America’s corrupt politicians to always pay attention to anything that appreciates a few thousand percent in one year).

However, one person is not waiting that long: Ben Lawsky, the New York financial services superintendent, is looking to regulate Bitcoin now by issuing BitLicenses for business that conduct transactions in Bitcoin, and to that end he will conduct a public hearing to discuss the “burgeoning world of digital money.” Participants will discuss the feasibility of a license that would make the virtual currency market more like those for other forms of money. In other words: it will make BitCoin just like the fiat currency it is trying to replace, at least in the eyes of the government. At which point the primary utility of Bitcoin – as an unregulated medium of exchange- itself disappears.

 

Ben Lawsky with a Bloomberg terminal featured prominently in the background, photo credit NYT

From the NYT:

If the plans go ahead, it would be an important step in bringing bitcoin and other virtual currencies closer to the financial mainstream. In another move in the same direction, the Federal Election Commission held a hearing on Thursday in which it considered whether to legalize campaign donations made in virtual currencies.

 

Since bitcoin was created in 2009 by anonymous programmers, it has frequently been treated with derision by many financial insiders and authorities, who have described it as a speculative mania. Many authorities still hold to that position, but the currency’s online network, which is not controlled by any centralized authority, has survived several crises.

But the truth behind the scenes is simpler:

Several regulators have been looking at ways to make sure virtual money cannot be used for laundering money or other criminal purposes. In October, the federal authorities arrested the operator of an online marketplace where they said bitcoin could be used to buy drugs and other illegal goods.

 

“The cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running and child pornography,” Mr. Lawsky said in a letter announcing the hearing, which has not yet been scheduled.

So please everyone think of the children and some such hypocrisy.

And speaking of Hypocrisy, the last sentence of this paragraph has no peers:

“Virtual currencies may have a number of legitimate commercial purposes, including the facilitation of financial transactions,” Benjamin Lawsky, superintendent of financial services, said in the notice. “That said, NYDFS also believes that it is in the long-term interest of the virtual currency industry to put in place appropriate guardrails that protect consumers, root out illegal activity, and safeguard our national security.”

So, shouldn’t he be looking at the dollar instead?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_y-5YmfJyJk/story01.htm Tyler Durden