Stellar Lumens (XLM) Forum with for newcomers and contributor's rewarded Check here




Crypto Is Liquidity
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5

#1
[Image: https%3A%2F%2Fspecials-images.forbesimg....it%3Dscale]
There was a time before the credit crunch when money supply was significantly driven by the private sector. When Wall Street is turning illiquid assets into liquid ones via securitization, new money is brought to life. This money swills around, driving the value of assets up because once their illiquid value is released the money is free to chance more spicy areas to work in.

This was a great growth driver but then the wheels came off this money charabanc in the credit crisis of 2007 onward.

Governments of the world grasped the system and took it all back in house. Replacing the private sector’s market driven liquidity machine is the public sector’s central bank version QE, which crudely buys securities off the private sector as a way of injecting the ‘right’ level of cash to oil the machine of the economy. Gone are the days of banks using their financial instruments as a way of levering up their capital to magic cash down from the central bank. The system has gone from a push system to a pull.

This hasn’t worked out badly for asset holders, there is no doubt the stock markets and housing markets have had a good run because of it.

There is a doubt hanging over the process, however. Is there actually enough cash money out there to optimize growth? While private sector systems have a downside in that they break catastrophically now and again, public sector systems are notorious for being chronically inefficient and wrong for very long periods indeed. While as we might expect the private sector to blow itself up as it did on Wall Street in 2007, the public system of management can operate as a blunt and painful instrument for endless amounts of time.

This is the risk of the current setup and in Japan you can see it in an economy that is centrally controlled and has been unable to have the right level of inflation for more than a generation.

Small chronic problems may turn out and seem better than the short-term acute ones like 2007, but over the years they mount up to be major and can create their own acute situations.

We are seeing that clearly in the markets as the Federal Reserve tries to unwind its balance sheet against the background of extremely elevated stock prices.

My feeling is that now and for some time, there is not enough money in the system to fill full demand for liquidity.

If there is too much money chasing stuff then you get inflation, so the fact that inflation is low at least by most historical measures suggests there isn’t enough money chasing stuff. There is an argument that people don’t want to chase stuff with their money so that it is in effect lying dormant but real estate and stocks have been chased up so it’s not as if users of money are catatonic as many a Keynesian might have you imagine. Low growth, low inflation is the curse of developed economies, one that would seem to be a good use for old fashioned ‘more money.’

It is further ironic that on the one hand government is worried about the ‘low paid’ and that on the other it is worried about ‘wage inflation,’ yet again worried about reported ‘wealth inequality’ that higher basic wages from some ‘wage inflation’ would help close.

This to one side, if there is not enough cash money about, how can we make some profit from this?

First off you have to buy into the idea that there is not enough liquidity about, which is not hard to sign up for as the Federal Reserve drains billions of dollars, no doubt levered up in the economy, from the system every week.

As it doesn’t seem this trend will be halted let alone reversed any time soon, there is going to be a big pressure on the private 
sector to find proxies.

That at some point is going to be cryptocurrencies.

While that might seem far fetched it is easy to forget how far this sector has come in the last three years.

Here is a chart:

[Image: https%3A%2F%2Fblogs-images.forbes.com%2F...90205a.jpg]
Bitcoin has come a long way in three yearsCREDIT: ADVFN


While I wait for a lower bottom of around $2,500 for bitcoin, we are near the bottom in terms of 2017’s high of $20,000.

While many state bitcoin is not money, I can assure you it is and I have used it as such on many occasions. In certain circumstances it is a better money than dollars or pounds. Not only is it fast and cheap to transact internationally, especially if you have a hurricane sweeping through your neck of the woods, it is more secure than a reversible payment charge back of a credit card payment and often it is more easily spent by people rich in crypto but perhaps poor in cash.

As I write, bitcoin is in a narrow range it will break out of soon. This might signal the last move of its crash, which will consequentially kick off the next leg of the crypto story. This might be the bottom already, even though I don’t think so.

[Image: https%3A%2F%2Fblogs-images.forbes.com%2F...90205b.jpg]
Has bitcoin reached the bottom?CREDIT: ADVFN


Either way, crypto is likely to start on a new cycle of adaptation and unlike fiat there are few drags on issuance because new altcoins can always be minted to fill demand all the while the most famous coins act as a gold standard.

The key thought is, if bitcoin can’t go to zero, it must rise and if the governments of the world won’t create enough money to give the right amount of inflation and growth, crypto is a mechanism where the economy can once again, via the private sector, create a float of token money it needs to operate optimally.


by Clem Chambers
Reply


Possibly Related Threads...
Thread Author Replies Views Last Post
  Full House: Crypto Cards Show a Strong Hand in 2019 crytocure 0 4 1 hour ago
Last Post: crytocure
  Do We Really Need So Many Crypto Exchanges? Yes, and Here’s Why crytocure 0 27 Yesterday, 02:15 PM
Last Post: crytocure
  Bitcoin and Voluntaryism – Where Libertarian Philosophy Meets Crypto crytocure 0 33 Yesterday, 11:44 AM
Last Post: crytocure
  Why Brazilian farmers are using crypto coffee coins crytocure 0 41 18-07-2019, 11:01 AM
Last Post: crytocure
  Coping with crypto: The stages of Bitcoin acceptance crytocure 0 49 16-07-2019, 09:59 AM
Last Post: crytocure
  Binance's CEO Made A Serious Bitcoin And Crypto Warning crytocure 0 52 15-07-2019, 01:47 PM
Last Post: crytocure
  Panda Group's Crypto Terminals Offer Venezuelans a Bridge to Economic Prosperity crytocure 0 50 14-07-2019, 11:23 AM
Last Post: crytocure
  Study Exposes How Russia, Iran, & China Are Weaponizing Crypto crytocure 0 43 14-07-2019, 11:08 AM
Last Post: crytocure
  How to Avoid Ponzi Schemes in the Crypto Space: A Checklist crytocure 0 80 13-07-2019, 09:29 AM
Last Post: crytocure
  Crypto Capitulation: An Altcoin Obituary, Or the Biggest Buy Signal Ever? crytocure 0 95 11-07-2019, 01:58 PM
Last Post: crytocure



Users browsing this thread: 1 Guest(s)