The Western financial system is sitting on a quadrillion dollar financial derivatives bubble. There’s a new generation of MBS and other instruments waiting to collapse.
You don’t hear many people talking about solutions, like breaking up the banks (Glass-Steagall), shutting the Fed down and converting it into a National Bank for funding new generations of infrastructure and great projects, like the US used to do. We do hear about governments trying to introduce digital currencies and reduce food production by paying farmers to destroy their crops, or even going directly after people’s farm land, as we see in the Netherlands (under the insane lie of wanting to fight climate change).
I think people need to be thinking and debating in terms of the bigger picture, because this single issue stuff, whether digital currencies, banking, trade, none of it gets at the big picture.
Are we still allowed to talk about the big picture? It’s almost as if people are discouraged from doing so. And that fits perfectly well with our age of specialization where people can study trees and still know nothing about leaves. That’s what these discussions of the financial crisis sound like. We need a new global financial architecture.
Many issues certainly deserve coverage, but it’s not Matt’s job to thoroughly investigate every issue in the world before ever writing about even one of them. I suspect if stagflation continues, you’ll see a lot more economic articles by Matt.
But that’s my point Richard, it’s not about “issues.” Western civilization is looking at a systemic breakdown of all its institutions, its economic system, and its social fabric.
This “rules based order” only represents about 1 billion people. But a significant part of the world has already moved on, with things like BRICS+ (representing over 3 billion people), infrastructure programs like The New Silk Road (spanning more than 140 nations), and basically a new global operating system and financial architecture taking root throughout Eurasia.
Meanwhile, Western nations are being cannibalized for no other reason than to maintain the current Wall Street/City of London financial system. That’s really all it’s about. That’s what all the austerity is about, that’s what the 16 plus in bailouts of the US banking system was about. That’s why the Federal Reserve secretly received 7 trillion in liquidity injections by January 2020 (3 months before COVID even hit). The scale and scope of the problem is just not being addressed, though I feel Matt can do so.
I don’t see the point in trying to play it safe at this point.
Most of the left-right debates are fake. We all know that. Western nations are being destroyed because a decrepit feudal-minded oligarchy is trying to maintain its hold on its dying financial empire, which it can longer do without basically going for full-hog fascism. And it’s willing to sacrifice as many people as necessary to maintain power. Of course, this time fascism includes a technocratic caveat and all the latest Behavioural Science nudging techniques to make it feel and sound like it’s nowhere as bad as it is, just a “hard landing.”
The digitization of the economy and digital currencies can be best understood in that context, not simply as another ponzi scheme.
So that’s what I mean by bigger picture. There are a lot of moving parts. We know that. But that doesn’t mean just settle for one thing then and ignore the rest; it means zooming out and starting from the top in order to understand what the systemic problem/disease is. Then we can start looking at the myriad side effects and other problems it produces.
In a word: I support Matt because he does his own thing and writes well, but I feel he’s got the dial at like 5 when he could be turning it up to like 9.
It’s 2022; we’re looking a the unwinding of the largest financial bubble in human history.
It’s time to take the gloves off.
We need a Solon-style restructuring of our society at this point. The precedents are there. Again, we just need to zoom out a bit, before zooming into individual problems and issues.
I mostly agree with your description of the problem, but saying we need a complete reset sounds uncomfortably like pie-in-the-sky. Ain't gonna happen--and who would you trust to even attempt such a thing? The Democratic Party?
The unipolar West has reached peak corruption and clownish, brain-dead "leadership". There are many valuable sources of information on the present sad state of affairs for those interested, but they are not the legacy media, MSNBC, or any other "progressive" outlets, bought and paid for by the oligarchs.
As Pops says below, all you really can do is prepare. To give one tiny example, I've told my sons, both in their twenties, to not just assume they are always going to want to be American citizens, to remain flexible, and to seek out opportunities for fulfillment well outside of conventional narratives, if only to serve as alternate plans, or frameworks for thinking. There are literally unlimited ways to put the pieces together, but one thing is sure: Never, ever, think that a political figure has your best interests at heart.
True all. I'd add that while I want to remain an American citizen forever because this is OUR country, not that of the fascists and oligarchs posing as political and financial leaders, I wouldn't mind hedging my bets with dual citizenship somewhere. I wonder if a wee plot of land on a loch in Scotland is affordable?
Absolutely yes . Our government is already fascist, at least in the classic definition of government being the enforcement arm of Big Corporate. Now we're running partners with dictatorship, and that leads to . . .
Well, we need to stop this train before it hits the orphanage.
The problem is that Occam's Razer unfortunately takes all conversations to Tin Foil Hat-land. This is by design. You can't run around saying Uncle Klaus wants to remove money and cars and food and bring the peasants in line, because then you can't buy a gun in the state of New York, because your social media presence says you are "unfit" for such a responsibility.
The truth is, our governments are approaching the level of "co-opt" that the rest of the West is now under. America truly was the last stand. We The People generally resisted, but it's now over. They've finally sent us to crazy town and we too now are desperate for the mother's milk, that is going to start being soured VERY VERY soon.
Always follow the money, and you eventually always end up finding regularly scheduled annual or bi-annual meetings in secluded locations accessible only by private jet with Assault Rifle armed private security operating on some sovereign land they have no business taking control over. That's how you know when you've reached the true level of central planning.
When you see the WEF security operating on US soil, you'll know it's over.
Great and accurate assessment. And all the comments are valid as well. As far as dual citizenship or a bolt hole country goes (assuming one has financial means). Where the hell is it any better? The entire west is consumed in this elite feudalism paradigm. What’s left. A Caribbean outpost?
I looked into available dual citizenship countries and came to the conclusion (as of right now) that there is no place to run. I would agree that we need to stay flexible because things will change but our current strategy is to hunker down and buy local as much as possible.
The investor personality, Doug Casey, likes Uruguay, and has a permanent residence there (a farm). But he also says he has "digs" in several other countries. Lol.
I am not very good at linear thinking but I excel at metaphysics. I can't think of two economic philosophers who understand that economics is not science better than John Ralston Saul and Yanis Varoufakis. I can't think of three economic historians who understand Western Culture better than Yanis Veroufakis, John Ralston Saul and Richard Wolff.
It is obvious that in a world wide web a hierarchy of wealth and power is unsustainable.
Here in Quebec we played follow the leader to achieve an American standard of living and now we are sore afraid of America because we are so rich in what's important and you are Nihilists.
First Matt must understand that Trudeau has virtually no power. Canada is a liberal democracy and power is bottom up. Institutions in Canada have no rights. Power rests in the Houses of we commoners and the members of the house of commons serve at our disposal.
We don't put banks in charge of the federal reserve. Banks serve us, at our disposal.
I am curious if Trudeau has no power how was he able to seize people's money over the trucker protests? Is it your Parliament that actually did that? I don't know the intricacies of Canadian politics so may have gotten the wrong end of the stick.
He was able to seize the money because he maintains the support of the House of the Commoners. He can be replaced the same way Boris Johnson was replaced and Trudeau's party isn't even the majority. he is subject to the approval of our liberal democracy. Trudeau could have received a vote of no confidence and the next day he would be the member of parliament from Montreal Papineau. The Commons would decide on a new government or an election within the next few weeks. Canada is not an Empire . It will do fine for six weeks with or without Parliament. Our top civil servants are competent not the product of corruption and nepotism.
See my response to David Gosselin for the link. John Ralston Saul translates Canada to the world.
If you want to understand the difference between liberalism and neoliberalism watch Chrystia Freeland interview Georges Soros in 2015 when Zelensky was still a TV celebrity. Freeland who is now finance minister and Soros who is a liberal rather than a neoliberal and Freeland whose uncle is the Father of our Charter of human rights.
In terms of economic assessments, I would say that it comes down to the solutions. Many will describe the problem is rather reasonable terms, but then when you get to the solution, you find out whether people are psycho-spiritually beholden to some ideology or if they can think in real-world physical economic terms i.e. monetary values have no self-evident worth, they are determined by the physical economic activity of the real economy. You can have an economy without farming, industry, and whatnot for a while, with services and a FIRE economy keeping things looking nice while we depend on foreign cheap labor. However, there comes a point where the financial side of things becomes increasingly big, and needs to keep growing, or it starts to contract and creates recessions and depressions, and basically starts imploding, at which point the only thing elected officials know how to do is print money.
The opposite is the Hamiltonian approach. Alexander Hamilton made the point that there's no such thing as a legitimate debt for the state, unless it creates the means to extinguish it. The problem arises when we start creating debts out of pure speculation, unmoored to any activity in the real economy. This is called gambling. The problem arises when you start to treat the entire financial system as something that you can gamble with, rather than being subservient to the needs of the people and the operating of the real economy.
The entire Wall Street and City of London system is based on creating this kind of casino economy, and siphoning investment from the real economy into these financial black holes, which at a certain point become to big to sustain. At such points, civilizations have two options: either continue to try to feed the black hole, or stop playing the game, which requires imposing more austerity on the REAL economy and cutting back on REAL services and infrastructure in order to keep that game going.
The only thing that matters is not playing the game, and changing the rules of the game.
Solon and his debt jubilee remains a fine example of the kind of classical wisdom I think we're in need of.
My reality tells me this all began at the end of the Enlightenment when Russia's Czars realized Voltaire, Franklin and places like Vilnius in Lithuania had adopted Deism (secular Humanism ) as their social contract. The war in Ukraine began over 200 years ago. We read the Charge of the Light Brigade in High school. Funny word Ghetto. In Montreal it is the most diverse population on the planet. Paupers, Princes, philosophers and fundamentalists all homo sapien?
I was born at the Royal Vic in 1948. I grew up in Montreal. I remember when it was a Catholic and plutocratic hierarchy.
I left Montreal in 1970 and returned in 2006. We lived in the Ghetto for four years but the hills were too much and we moved 2 hours east. I lived in many cultures. Even families are made up of individuals
Can the tyranny of the masses be any worse than the tyranny of the few?
How does one explain to Americans that Trudeau can't be a neoliberal. The Prime Minister of Canada has no real power. He serves the Commons. He serves at the discretion of the people. In Canada Institutions have no human rights they don't even possess animal rights. They are pieces of paper.
Here is John Ralston Saul explaining it to a world audience PEN International this spring.
I am labelled autistic. Sixty ago I was label lazy. I was in the room as the authorities told my parents I wasn't trying hard enough in school. I had a PhD vocabulary and was a genius at logic but I was a twelve year old and was trying the best I could. I didn't belong in school. I was travelling the universe. I still travel the universe and try to make sense of Homo Sapiens.
We are the only designer in the Universe and we have not evolved with the technology.
Benjamin Franklin was a Communist. He lived in the commons. He was a Deist and he was a scientist. Scientist always believed in evolution from before Aristotle. Newton said we are standing on the shoulders of giants.
Why do Saul, Veroufakis, Chomsky and Wolff understand what is happening?
They know history. They remember the tulips. They remember Solon and they remember the whys of WW2.
It was top down from the time of the Magna Carta and the printing press changed everything.
Today the WEB is our reality and we can't deal with the metaphysics.
Everyone has their own printing press just like Benjamin Franklin.
Franklin kept a journal and lived in the Commons of Boston and London. Franklin knew that in 1688 the Monarchy had no power whatsoever in England or its colonies. The parliaments were in charge and the Upper House represented only property. The East Company ran most of the world even the colonies of other Empires. The East India Company in the British Empire was the House of Lords.
"The wonderful wizard of oz was written 122 years ago and was tongue in cheek about the same financial system we have today only now it's on steroids and crack. Will it change? Like fusion power it seems to always be ten years away. Most people still believe in the invisible man in sky so I'm not hopeful.
exactly. ssdd. invisible man in the sky, messiahs comin to save us (from ourselves) at this point, collapse is inevitable.. just the timing is suspicious. now? after im dead? Im 60, so, probably the latter
Hmm. I wonder if poor people short on food might demonstrate or riot? And wouldn’t these riots be terrorism? And would that justify a domestic increase of the security state and further suspension of civil rights? Would they not be justified in using force to keep us safe from domestic terrorism and right wing extremists? And wouldn’t many comply, so that they have did and security? And wouldn’t total fertility drop, as who wants to birth a child into such chaos?
You don't hear many people talking about solutions because there are none. You don't see politicians railing about this because it's how they get paid. So much of today is as it was in the Robber Baron days before TR got into office by pure dumb luck, and then was only taken out of office by his own self righteous stupidity. After TR tried to break up the corporate stranglehold on government, there was simply no way in hell they were ever going to let another TR back in.
This is proof by all of our establishments. Follow the money. A lot of it leads right back to BlackRock.
Yes, the "Big Picture", or the Forest, is missed for all of the Trees singularly, and out of focus, discussed. The "Great White Western Money System" is falling down, in Ukraine and elsewhere. There is also the obvious "non-discussion about Roots," but this is quite clear to any of us who've spent any Thinking Time on the Subject. The "root" of the problem, so to speak, involves the historical mis-application of the "Ratio," or "Reason" in an actual communitarian sense, but instead have been hi-jacked by certain "actuaries" of Oligarchies passed down to school children as "Natural Fact." The overarching Mythology breathes on, even as it Gasps! and Wheezes! Grasps at straws whilst drowning, 10 Downing Street, drowning street. The U$A, it seems to me, is not "far behind..."--Todd
You're correct, it's all of one piece. The divisiveness, the food shortages, Green Energy Scam, inflation, loss of our status as the sole international settlements agency, inflation, warfare, reduced standard of living and the list goes on.
Things seem to be accelerating, although it might just be my advanced age. Boris Johnson and Shinzo Abe; the NYT finally acknowledging what we've all known, that Joe Biden is a modern Mafia Don. and the awful realization that our best hope may be Kamala Harris, the word-salad chef.
Actually; yes I have and as you said, I learned a lot. I learned even more by reading Michael Hudson and Ellen Brown. Shiela Bair wrote the best book on the 2008 crash as she was running late FDIC at the time, very technical. Free lunch and Perfectly legal are excellent and very readable by David Cay Johnson. Yanis Varoufakis is excellent, I read three of his; he was the finance minister of Greece when the EC and the USA were screwing over Greece and the MSM in the west was lying their teeth out. There are people out there that will tell you the truth about the Ukraine too; in fact, if you read the MSM of a year ago or the paradise papers you can learn what a crook Zelensky and his oligarch Kolomenski is; All down the memory hole. There's truth about the COVID pandemic and other stuff out there but you won't get it on the MSM.
I've followed Matt mostly on Substack. But I know of his other work and know that he's competent. All the more why, given we're like at 2 minutes to midnight--historically speaking--when do the gloves come off?
The West does need a new financial architecture, and technically, it needs to be a global financial architecture. The idea of creating a parallel Western and Eastern financial architecture just isn't going to work. Hence, the problem. Because those running the Trans-Atlantic banking system really are willing to risk it all to maintain their power. What's at stake here is global dominance. Both sides won't be left standing. And the Western banking system is sitting on a gigantic derivatives timebomb, worse than 2007-2008, and the ''tools'' in the financial ''tool box'' have already been used. So this isn't going to be a repeat of 2007-2008. It's going to be a different kind of beast. It also means this time we do have the chance to do what wasn't done in 2007-2008, which is to put the speculative financial casino we call the Western banking system into a bankruptcy re-organization where we cancel all the funny money, we cancel all the worthless speculative debts (as opposed to more bailouts, or worse, ''bail-ins,'' and at the same time protect the viable commercial banking system and product parts of the financial system that are tied to the physical economy.
I don't see another way, or another option, that doesn't involve cancelling the gigantic derivatives financial cancer. However, the means nations and citizens are declaring all out war with the ruling financial oligarchy, which has ''captured'' our once noble institutions.
Thousands of financial people need to be in jail. Financial needs to be reduced by ~90%+ and the government need to be in control of the bank's, not our system where the banksters are in control of the government. That's how it works in China and don't believe that agitprop on China. The legal industrial complex also needs to be reduced by ~90% along with the educational industrial complex. None of it is productive and it needs to be minimized to what's needed to support the real economy. I'm not holding my breath; we're in a multi generational restructuring of the world if the empire doesn't blow it up.
Matt I admire this work above and beyond most everything else you do! Why? Because it’s so fucking HARD to read. And in this time of swatting at the nearest info-mosquito that’s got to be healthy. So I’ll knuckle down and do the work. You have. I salute you!
Yesterday before I read these articles, I was talking to a friend about a book she's trying to write called "Rhetoric is Fatal". In a past life I audited to-big-to-fail companies and then later practiced law, and I told her that accounting and legal writing is often about describing the world while refracting responsibility.
I told her to read Taibbi to get a great layman's view of this. Then I read these articles and decided to gift her a subscription here, but I was wondering how hard it would be to leap into this stuff cold.
I'm gonna tell her what you wrote here. I'm familiar with this stuff, and even i find it hard, but the subject can be maddeningly complicated, and Matt does as good of job as we can get of describing it in its lurid, greedy, bullshitting essence.
Hey Matt - I got an automagic email from you this week about my upcoming subscription renewal. I set it a aside thinking maybe I'd cancel: you haven't published much lately. But, I also reflected on your great work this past year. When I was in the biz (30 years before I got out) the main rule in investigative reporting was if you want to uncover the real story, FOLLOW THE MONEY. I'd forgotten how well you do this. Your shovel works overtime.
Too many people think following the political news will tell them what's going on in the world. That's one of the devil's great deceptions. FOLLOW THE MONEY. Economics reporting is where it's at.
I use Venmo to pay babysitters, etc. and it offered me the option to buy various crypto. So I bought $100 of bitcoin because I could afford that much and then would be easily able to see how it worked. It went to $150 and now is at $50. I should have bought scratch-offs.
Ha Ha. I started with Venmo crypto too . . . and then went to Coinbase, Blockfi, and Celsius--unfortunately. Still have low four-digits tied up Celsius. I tried to get onto Voyager, but they wouldn't accept my commercial address . . . lucky thing for me!
I couldn’t figure out how to buy groceries with it so I stayed away.. I never heard a decent explanation about how it could be used beyond speculation.
OMG!!! I am a simple woman and this article makes my head hurt… I don’t pretend to understand Crypto but wasn’t Crypto supposed to free us from government and Wall St? Sounds like more of the same Wall St and govt economic shenanigans that will eventually screw the hard-working taxpayer.
Ayn Rand explained that we are three actors: producers, looters and moochers. Our problems are the result of the rise of looter power. Blackrock and Joe Biden are examples.
I may be uniquely uninformed about this area, but just thought I'd leave some feedback in case it's helpful. For me, the article was/is somewhat confusing. I found myself on several occasions having to do reference searches on things like RRPs or even USDC to be able to follow along, the latter of which in particular seems like it should be unnecessary given its central nature to the story. In USDC's case, simply going one step further and explaining that USDC is redeemable for dollars held in reserve through mechanisms like the BlackRock fund would have made the early part of the article much more clear to me. You already said that it's a stable coin, but there are different strategies for how stable coins can achieve stability, so to me that bit of extra information helped solidify what we were talking about here.
I'm honestly still a little bit confused about the use of RRPs since from my understanding the purchaser of an RRP would be viewed as the lender and I would assume that the fund "investing in RRPs" would make them the purchaser. However, the article later says that the fund terms allow it to "burrow" up to a third of its reserves. Is this talking about a different provision, or do I have it backwards? Either way I can see that a reserve fund intended to back a stable financial asset being held in non-cash assets would be a concern, but the discrepancy makes me wonder what other parts of this I may not be understanding.
It's also not clear to me who's playing the role of exercising this clause of the agreement. Since BlackRock is managing the fund would that mean that they're the ones purchasing RRPs to back the fund? The article seems to say that it's Circle, but you also say that Circle is backing their USDC with lots of other things not in the fund agreement like corporate paper. Are these other holdings coming through separate agreements then, or is this a case where different parts of the chain are playing their own games (i.e. BlackRock is backing its part of the funding chain with a mix of RRPs and cash while Circle is backing USDC with a mix of the BlackRock fund, which it treats as "cash" in its statements regardless of what BlackRock actually backs the funds with, and other assets)?
In terms of general flow, the frequent dips into other subjects like prior examples of financial malpractice (e.g. Chase) or going through key players' prior crimes and settlements also made it kind of hard for me to track the story overall. This could be more just the fault of my general confusion. There were other confusing elements to the article, but I'm not trying to turn you into my own personal explainer-of-all-things-finance.
I could be off-base, and I'm not trying to say that you need to dumb your articles down to the lowest-common-reader level, which I may very well be. Finance is not my world, and I expect in an article like this to do some searching. But it does seem like at least some more background might have helped connect your statements and conclusions and helped folks like me to better follow along.
Probably more than I ever wanted to know about this industry but once again it looks like we have a financial industry that does not have anyone but their top leaders in mind as they do business. I don’t think my trust in these type of companies could go any lower but if it could it just did
Matt went easy on them! I'm no fan of the "financial industry" as you call it, but crypto is on another level of criminality. It's organized crime, pure and simple. Here's a couple of good resources: https://www.stephendiehl.com/blog.html. No one is more articulate about the problems than he.
I believe I have a good feel for the value of Bitcoin. I think it is real and tremendous. I also think I understand how scammy almost every other crypto currency is. But i can at least understand the appeal of their get rich quick, ponzi marketing. I don’t get stable coins. “It’s like holding dollars.” Just hold dollars?
Bitcoin optimizes on the 5 attributes of money better than any other substance in history:
1. Scarcity - Bitcoin is capped at a finite amount of 21 million coins. There is no other commodity where you can definitively identify the terminal amount. Over 90% of all bitcoin that will ever be produced are already in circulation. It is currently growing at less than 2% per year and beginning in 2024 it will grow at less than 1% per year.
2. Durability - Bitcoin is maintained by the most secure computer network in history. It does not degrade over time and cannot be destroyed (only lost through sloppy custody). If there is electricity and the internet 200 years from now, it is highly likely there will still be bitcoin being used as a store of value if not also as a medium of exchange and a unit of account. I put the likelihood of bitcoin surviving this timespan higher than any currency currently in circulation. Anyone owning bitcoin today and practicing prudent custody could hold it for free for the next 2 centuries.
3. Portability - For the first two attributes, you could squint and say gold isn’t too far behind in scarcity and durability. Portability is a big loser for gold. Try to move $1,000,000 worth of gold from North America to Australia. How great do you feel about that process? How much did it cost you. Now move it back in 6 months. Bitcoin can be moved anywhere on the planet in an hour at a very low cost. You can exit any jurisdiction with 12 memorized words in your head that secure any amount of money you want to bring with you. Best portable asset ever invented.
4. Divisibility - Try paying for a cup of coffee with gold. That’s about 1/360 of an ounce. Each bitcoin is made up of 100,000,000 Satoshis. So you could buy that same cup of coffee with 23,000 satoshis. (Today). Obviously Bitcoin’s volatility hasn’t lent itself to being a great daily currency yet, but the ladder of money is first store of value, then medium of exchange, then unit of account. Bitcoin has appreciated at >100% a year since inception. Best store of value during its existence.
5. Recognizability - Here is one spot where gold may have a global advantage currently at the headline level. More humans on earth may currently see a gold bar and recognize/value it than bitcoin. However - this gap is closing every year. And if someone tried to hand you 20 oz of gold in a trade for your car, would you trust that it was real gold? Or would you have to find some way to test the heavy yellow stuff? (Then where do you store it, how do you spend it, how do you move it?) Bitcoin may already have the lead here in a practical sense. You know when you got paid in real bitcoin.
I’m assuming your question was in good faith, so i spent some time on my answer. I could be wrong. I don’t think i will be. The only question for me is on what timeline will i be right. I wish i knew.
Either no one can get at at your money if it’s in stablecoin or you can prove that it’s really yours or something. I keep reading these articles and still feel clueless.
Mike, that’s a perfect illustration of the problems with (non-Bitcoin) crypto. A lot of bad actors have combined various and nefarious aspects of the financial system with digital currency. Crypto guys always hold your keys (your username and password for your money on the blockchain) and almost always reinvest investor money in arbitrage schemes like the one Matt details here. The simple answer for this is to give keys to the people and don’t allow for reinvesting - which is what BTC does and why it is different / not vulnerable to this particular scheme.
There are plenty of schemes it is vulnerable to, but this isn’t one of them. As long as you use a cold wallet and not an exchange, these bad actors can’t get their grubby mitts on your money.
In other words, crypto is status quo. Bitcoin is subversive. Hope this helps.
Nice article. Good work. If you’re looking for trouble , look for the leverage. Indeed, it’s hard to walk into the Vegas casino with other peoples money and not play a few hands. Pretty soon you’re rolling the dice and saying I’ll make it up on the next one!
Hi, gang. I'm here to announce my decision to transition . . .
. . . to my real name :-) I was "William Shayne" for quite a while, but found that writing under a pseudonym made me a little more rabid and a little less careful with language than I ever am when writing openly. So here I am, having undergone gender reassignment surgery---er, changing to my real name--in the hopes of less fallacies in my analyses. Glad to "meet" you.
My hormone of choice is single-malt Ardbeg from Scotland. I am a published crime novelist who writes under Shane Gericke, and spent the first half of my career as a newspaper editor, primarily at the Chicago Sun-Times when it was a national powerhouse. Fun times, but as the newspaper business began swirling the bowl, I switched to cops and robbers fiction.
I remain an old-fashioned, non-woke liberal. I still like guns and support 2A and all the other A's. I despise the bullies of the left and right, believe the oligarchy of corporate and politics is going to kill this nation if we don't wise up and stop them, and I admire Matt for his willingness to dive into cryptocurrencies so we don't have to.
It IS a risk these days, I agree. But the CancelNuts can't do a whole lot to me, since I work for myself, my wife is dead from cancer, and therefore I have few pressure points for them to attack. The upside is that real name keeps me on the straight and narrow when I post, which is good for reminding myself that unhinged rants are not good for society or me.
People have lost the ability to disagree but stay agreeable. "Assume positive intent" and try to find the good points they are making while disregarding the bad points.
Thanks Matt, The impending doom of our economy combined with our governments printing 10 trillion in pandemic spending like alcohol fueled sailor's on shore leave and now this revelation smells of total financial collapse in our near future. Looking like my move off the grid, working towards self sufficiency is going to pay off when the perverbial shit hits the fan.
As I was reading your analysis - and feelings stimulated similarly by your first reference to Vampire Squid - I inexplicably began mumbling the words Jon Corzine and MF Global. Those funds, too, did not belong to the segregated account holders (although required by law). Back then it was seen as a guideline and not a rule. Excellent analysis and commentary.
"next thing you knew, they had a $12 billion bomb crater and Elizabeth Warren was screaming at an eye-rolling Jamie Dimon on television."
The apex of Congressional action and Bankster accountability & suffering.
"“We know that a lot of customers get USDC on Coinbase, and we previously said that every USDC is ‘backed by a dollar in a bank account.’ Our language could have been clearer here.”"
Now that our fraud is impossible to hide let's walk back the claims and pretend customers are to blame for their own losses.. it's nice to be in the class of 1% untouchables!!
"“Any case involving alleged fraud will be a matter of great concern to the banking regulators,” said former FDIC General Counsel Mike Krimminger. "
Indeed the job of the regulators is to keep the frauds from public view & impose token fines with no admission of guilt by the thieves!!
Warren is a fraud. And I am not talking about her claims to First Nation membership. I read her first book which argued that most individual bankruptcies were caused by medical expenses. The book's authors received a $250,000 grant to write it. One of the three professors who approved the grant later accused the three authors (including Warren and Teresa Sullivan, who later went on to be President of the University of VA before resigning in disgrace after her mishandling of the Rolling Stone alleged fraternity gang rape story) of academic misconduct. There was an "investigation" that was really just a whitewash.
If Warren is a fraud, the CEOs she deals with are ten times worse. She was absolutely correct to have pinned Dimon to that hearing wall like a moth in a science-fair project.
Problem is, nothing ever changes. Crypto. Derivatives. Fraud up the ying-yang. Wells Fargo has ripped off customers and taxpayers so many times it should be shut down via RICO as a clear and present danger to society. Instead, nothing.
I will take Liz over the enemies of our democracy any time.
That only applies to investigations where the subject is a progressive. If the subject is a conservative, we have show trials.
Here is the operative quotes from the Schuchman review:
"I report my own interest as a part of this essay. I was deputy director of the Commission on the Bankruptcy Laws, and am the author of three of the empirical studies listed below. I was also one of the reviewers of Sullivan, Warren and Westbrook's grant proposal to the National Science Foundation and wrote in favor of awarding their grant. Most of their study replicates several earlier research publications. These are hardly mentioned. The writers make extravagant and false claims to originality and priority of research. There appear to be serious errors in their use of statistical bases which result in grossly mistaken functions and comparisons. Some of their conclusions cannot be obtained even from their flawed findings.
The authors have made their raw data unavailable so that its accuracy cannot be independently checked. In my opinion, the authors have engaged in repeated instances of scientific misconduct."
* * * *
"This book has been six years in the research and writing. The authors' data were eight years old at publication. Nineteen eighty-one was a recession year. Unemployment has decreased and remained low in the eight years since then. Interest rates were very high in 1981, but were sharply lower within two years and have remained quite low relative to 1981. There were substantial amendments to the Bankruptcy Code in 1984. These factors make it almost impossible to gauge the present value of the authors' data. Only a study over time and an impact analysis of the 1984 amendments could show whether their findings, if accurate for 1981, remain descriptive now."
Nothing wrong with flipping foreclosures. Travel the world and see countries with poor Title laws like Mexico and India with vacancies in great cities because people can't flip a foreclosure. If you want predatory, learn about tax liens.
Matt, this was a serious deep dive into a subject area largely devoid of such scrutiny. A few months ago, we had an extended family Zoom call on the subject of crypto. The older folks pretty much stayed clear of investing in crypto, using metaphors like tulip mania and Ponzi, terms with which the younger family members were generally not familiar. The millennials thought we “didn’t get it”, citing the large interest rates they were receiving on their crypto loans. Yet none of them really understood how the crypto ecosystem even purported to work. Suffice to say they are all getting a valuable (and somewhat costly) lesson on basic investing principles.
My own takeaway is that governments are likely to embrace crypto and do away with cash. That way they will know where every dollar you own is and how each dollar is spent. In a pinch they can even help themselves and replace your wealth with an IOU as Argentina did to investors’ retirement plans in that country. If we ever get to that point, Matt won’t be able to cover the story - he’ll be locked up somewhere writing one act plays for his fellow inmates.
Why just focus on this crypto scheme?
The Western financial system is sitting on a quadrillion dollar financial derivatives bubble. There’s a new generation of MBS and other instruments waiting to collapse.
You don’t hear many people talking about solutions, like breaking up the banks (Glass-Steagall), shutting the Fed down and converting it into a National Bank for funding new generations of infrastructure and great projects, like the US used to do. We do hear about governments trying to introduce digital currencies and reduce food production by paying farmers to destroy their crops, or even going directly after people’s farm land, as we see in the Netherlands (under the insane lie of wanting to fight climate change).
I think people need to be thinking and debating in terms of the bigger picture, because this single issue stuff, whether digital currencies, banking, trade, none of it gets at the big picture.
Are we still allowed to talk about the big picture? It’s almost as if people are discouraged from doing so. And that fits perfectly well with our age of specialization where people can study trees and still know nothing about leaves. That’s what these discussions of the financial crisis sound like. We need a new global financial architecture.
Many issues certainly deserve coverage, but it’s not Matt’s job to thoroughly investigate every issue in the world before ever writing about even one of them. I suspect if stagflation continues, you’ll see a lot more economic articles by Matt.
But that’s my point Richard, it’s not about “issues.” Western civilization is looking at a systemic breakdown of all its institutions, its economic system, and its social fabric.
This “rules based order” only represents about 1 billion people. But a significant part of the world has already moved on, with things like BRICS+ (representing over 3 billion people), infrastructure programs like The New Silk Road (spanning more than 140 nations), and basically a new global operating system and financial architecture taking root throughout Eurasia.
Meanwhile, Western nations are being cannibalized for no other reason than to maintain the current Wall Street/City of London financial system. That’s really all it’s about. That’s what all the austerity is about, that’s what the 16 plus in bailouts of the US banking system was about. That’s why the Federal Reserve secretly received 7 trillion in liquidity injections by January 2020 (3 months before COVID even hit). The scale and scope of the problem is just not being addressed, though I feel Matt can do so.
I don’t see the point in trying to play it safe at this point.
Most of the left-right debates are fake. We all know that. Western nations are being destroyed because a decrepit feudal-minded oligarchy is trying to maintain its hold on its dying financial empire, which it can longer do without basically going for full-hog fascism. And it’s willing to sacrifice as many people as necessary to maintain power. Of course, this time fascism includes a technocratic caveat and all the latest Behavioural Science nudging techniques to make it feel and sound like it’s nowhere as bad as it is, just a “hard landing.”
The digitization of the economy and digital currencies can be best understood in that context, not simply as another ponzi scheme.
So that’s what I mean by bigger picture. There are a lot of moving parts. We know that. But that doesn’t mean just settle for one thing then and ignore the rest; it means zooming out and starting from the top in order to understand what the systemic problem/disease is. Then we can start looking at the myriad side effects and other problems it produces.
In a word: I support Matt because he does his own thing and writes well, but I feel he’s got the dial at like 5 when he could be turning it up to like 9.
It’s 2022; we’re looking a the unwinding of the largest financial bubble in human history.
It’s time to take the gloves off.
We need a Solon-style restructuring of our society at this point. The precedents are there. Again, we just need to zoom out a bit, before zooming into individual problems and issues.
I mostly agree with your description of the problem, but saying we need a complete reset sounds uncomfortably like pie-in-the-sky. Ain't gonna happen--and who would you trust to even attempt such a thing? The Democratic Party?
The unipolar West has reached peak corruption and clownish, brain-dead "leadership". There are many valuable sources of information on the present sad state of affairs for those interested, but they are not the legacy media, MSNBC, or any other "progressive" outlets, bought and paid for by the oligarchs.
As Pops says below, all you really can do is prepare. To give one tiny example, I've told my sons, both in their twenties, to not just assume they are always going to want to be American citizens, to remain flexible, and to seek out opportunities for fulfillment well outside of conventional narratives, if only to serve as alternate plans, or frameworks for thinking. There are literally unlimited ways to put the pieces together, but one thing is sure: Never, ever, think that a political figure has your best interests at heart.
True all. I'd add that while I want to remain an American citizen forever because this is OUR country, not that of the fascists and oligarchs posing as political and financial leaders, I wouldn't mind hedging my bets with dual citizenship somewhere. I wonder if a wee plot of land on a loch in Scotland is affordable?
Absolutely yes . Our government is already fascist, at least in the classic definition of government being the enforcement arm of Big Corporate. Now we're running partners with dictatorship, and that leads to . . .
Well, we need to stop this train before it hits the orphanage.
The reset is already in progress. The special club that none of us are in, are already managing it.
The problem is that Occam's Razer unfortunately takes all conversations to Tin Foil Hat-land. This is by design. You can't run around saying Uncle Klaus wants to remove money and cars and food and bring the peasants in line, because then you can't buy a gun in the state of New York, because your social media presence says you are "unfit" for such a responsibility.
The truth is, our governments are approaching the level of "co-opt" that the rest of the West is now under. America truly was the last stand. We The People generally resisted, but it's now over. They've finally sent us to crazy town and we too now are desperate for the mother's milk, that is going to start being soured VERY VERY soon.
Always follow the money, and you eventually always end up finding regularly scheduled annual or bi-annual meetings in secluded locations accessible only by private jet with Assault Rifle armed private security operating on some sovereign land they have no business taking control over. That's how you know when you've reached the true level of central planning.
When you see the WEF security operating on US soil, you'll know it's over.
Thanks for that, David G. Lots of food for thought.
Great and accurate assessment. And all the comments are valid as well. As far as dual citizenship or a bolt hole country goes (assuming one has financial means). Where the hell is it any better? The entire west is consumed in this elite feudalism paradigm. What’s left. A Caribbean outpost?
I looked into available dual citizenship countries and came to the conclusion (as of right now) that there is no place to run. I would agree that we need to stay flexible because things will change but our current strategy is to hunker down and buy local as much as possible.
The investor personality, Doug Casey, likes Uruguay, and has a permanent residence there (a farm). But he also says he has "digs" in several other countries. Lol.
Good to know 🙂
I am not very good at linear thinking but I excel at metaphysics. I can't think of two economic philosophers who understand that economics is not science better than John Ralston Saul and Yanis Varoufakis. I can't think of three economic historians who understand Western Culture better than Yanis Veroufakis, John Ralston Saul and Richard Wolff.
It is obvious that in a world wide web a hierarchy of wealth and power is unsustainable.
Here in Quebec we played follow the leader to achieve an American standard of living and now we are sore afraid of America because we are so rich in what's important and you are Nihilists.
First Matt must understand that Trudeau has virtually no power. Canada is a liberal democracy and power is bottom up. Institutions in Canada have no rights. Power rests in the Houses of we commoners and the members of the house of commons serve at our disposal.
We don't put banks in charge of the federal reserve. Banks serve us, at our disposal.
I am curious if Trudeau has no power how was he able to seize people's money over the trucker protests? Is it your Parliament that actually did that? I don't know the intricacies of Canadian politics so may have gotten the wrong end of the stick.
He was able to seize the money because he maintains the support of the House of the Commoners. He can be replaced the same way Boris Johnson was replaced and Trudeau's party isn't even the majority. he is subject to the approval of our liberal democracy. Trudeau could have received a vote of no confidence and the next day he would be the member of parliament from Montreal Papineau. The Commons would decide on a new government or an election within the next few weeks. Canada is not an Empire . It will do fine for six weeks with or without Parliament. Our top civil servants are competent not the product of corruption and nepotism.
See my response to David Gosselin for the link. John Ralston Saul translates Canada to the world.
Thanks
If you want to understand the difference between liberalism and neoliberalism watch Chrystia Freeland interview Georges Soros in 2015 when Zelensky was still a TV celebrity. Freeland who is now finance minister and Soros who is a liberal rather than a neoliberal and Freeland whose uncle is the Father of our Charter of human rights.
https://www.youtube.com/watch?v=vdUaEE7mr2w&t=71s
Soros is like Freeland Canada's Finance minister an economic liberal.
In my dictionary both French and English liberal means adapting to change. The same word scientists call evolution.
Neoliberal is neither new nor liberal its been called hierarchies from time immemorial.
Freeland and Soros are personnae non grata in Davos, Beijing, Riyadh, Moscow, Dallas, New York and Washington.
justin Trudeau is a devout Catholic at home and a secular humanist when he is Prime Minister and has no more rights than those truckers.
Shout out from Montreal, Canada!
In terms of economic assessments, I would say that it comes down to the solutions. Many will describe the problem is rather reasonable terms, but then when you get to the solution, you find out whether people are psycho-spiritually beholden to some ideology or if they can think in real-world physical economic terms i.e. monetary values have no self-evident worth, they are determined by the physical economic activity of the real economy. You can have an economy without farming, industry, and whatnot for a while, with services and a FIRE economy keeping things looking nice while we depend on foreign cheap labor. However, there comes a point where the financial side of things becomes increasingly big, and needs to keep growing, or it starts to contract and creates recessions and depressions, and basically starts imploding, at which point the only thing elected officials know how to do is print money.
The opposite is the Hamiltonian approach. Alexander Hamilton made the point that there's no such thing as a legitimate debt for the state, unless it creates the means to extinguish it. The problem arises when we start creating debts out of pure speculation, unmoored to any activity in the real economy. This is called gambling. The problem arises when you start to treat the entire financial system as something that you can gamble with, rather than being subservient to the needs of the people and the operating of the real economy.
The entire Wall Street and City of London system is based on creating this kind of casino economy, and siphoning investment from the real economy into these financial black holes, which at a certain point become to big to sustain. At such points, civilizations have two options: either continue to try to feed the black hole, or stop playing the game, which requires imposing more austerity on the REAL economy and cutting back on REAL services and infrastructure in order to keep that game going.
The only thing that matters is not playing the game, and changing the rules of the game.
Solon and his debt jubilee remains a fine example of the kind of classical wisdom I think we're in need of.
It's been done before.
My reality tells me this all began at the end of the Enlightenment when Russia's Czars realized Voltaire, Franklin and places like Vilnius in Lithuania had adopted Deism (secular Humanism ) as their social contract. The war in Ukraine began over 200 years ago. We read the Charge of the Light Brigade in High school. Funny word Ghetto. In Montreal it is the most diverse population on the planet. Paupers, Princes, philosophers and fundamentalists all homo sapien?
I was born at the Royal Vic in 1948. I grew up in Montreal. I remember when it was a Catholic and plutocratic hierarchy.
I left Montreal in 1970 and returned in 2006. We lived in the Ghetto for four years but the hills were too much and we moved 2 hours east. I lived in many cultures. Even families are made up of individuals
Can the tyranny of the masses be any worse than the tyranny of the few?
How does one explain to Americans that Trudeau can't be a neoliberal. The Prime Minister of Canada has no real power. He serves the Commons. He serves at the discretion of the people. In Canada Institutions have no human rights they don't even possess animal rights. They are pieces of paper.
Here is John Ralston Saul explaining it to a world audience PEN International this spring.
https://mail.google.com/mail/u/0/#inbox/QgrcJHsTnPnHxgLgmmCMsbLSbCvTHFMCqXG?projector=1
Oh the irony of your comment.
I see you are still up to your childish tantrums.
I am labelled autistic. Sixty ago I was label lazy. I was in the room as the authorities told my parents I wasn't trying hard enough in school. I had a PhD vocabulary and was a genius at logic but I was a twelve year old and was trying the best I could. I didn't belong in school. I was travelling the universe. I still travel the universe and try to make sense of Homo Sapiens.
We are the only designer in the Universe and we have not evolved with the technology.
Benjamin Franklin was a Communist. He lived in the commons. He was a Deist and he was a scientist. Scientist always believed in evolution from before Aristotle. Newton said we are standing on the shoulders of giants.
Why do Saul, Veroufakis, Chomsky and Wolff understand what is happening?
They know history. They remember the tulips. They remember Solon and they remember the whys of WW2.
It was top down from the time of the Magna Carta and the printing press changed everything.
Today the WEB is our reality and we can't deal with the metaphysics.
Everyone has their own printing press just like Benjamin Franklin.
Franklin kept a journal and lived in the Commons of Boston and London. Franklin knew that in 1688 the Monarchy had no power whatsoever in England or its colonies. The parliaments were in charge and the Upper House represented only property. The East Company ran most of the world even the colonies of other Empires. The East India Company in the British Empire was the House of Lords.
"The wonderful wizard of oz was written 122 years ago and was tongue in cheek about the same financial system we have today only now it's on steroids and crack. Will it change? Like fusion power it seems to always be ten years away. Most people still believe in the invisible man in sky so I'm not hopeful.
exactly. ssdd. invisible man in the sky, messiahs comin to save us (from ourselves) at this point, collapse is inevitable.. just the timing is suspicious. now? after im dead? Im 60, so, probably the latter
Why are they trying to destroy the food supply. Hungry people are often irascible see Revolution, French
Of all things I've seen that is the most perplexing. Are they galactically stupid or do they assume we are?
Hmm. I wonder if poor people short on food might demonstrate or riot? And wouldn’t these riots be terrorism? And would that justify a domestic increase of the security state and further suspension of civil rights? Would they not be justified in using force to keep us safe from domestic terrorism and right wing extremists? And wouldn’t many comply, so that they have did and security? And wouldn’t total fertility drop, as who wants to birth a child into such chaos?
You don't hear many people talking about solutions because there are none. You don't see politicians railing about this because it's how they get paid. So much of today is as it was in the Robber Baron days before TR got into office by pure dumb luck, and then was only taken out of office by his own self righteous stupidity. After TR tried to break up the corporate stranglehold on government, there was simply no way in hell they were ever going to let another TR back in.
This is proof by all of our establishments. Follow the money. A lot of it leads right back to BlackRock.
Yes, the "Big Picture", or the Forest, is missed for all of the Trees singularly, and out of focus, discussed. The "Great White Western Money System" is falling down, in Ukraine and elsewhere. There is also the obvious "non-discussion about Roots," but this is quite clear to any of us who've spent any Thinking Time on the Subject. The "root" of the problem, so to speak, involves the historical mis-application of the "Ratio," or "Reason" in an actual communitarian sense, but instead have been hi-jacked by certain "actuaries" of Oligarchies passed down to school children as "Natural Fact." The overarching Mythology breathes on, even as it Gasps! and Wheezes! Grasps at straws whilst drowning, 10 Downing Street, drowning street. The U$A, it seems to me, is not "far behind..."--Todd
You're correct, it's all of one piece. The divisiveness, the food shortages, Green Energy Scam, inflation, loss of our status as the sole international settlements agency, inflation, warfare, reduced standard of living and the list goes on.
Things seem to be accelerating, although it might just be my advanced age. Boris Johnson and Shinzo Abe; the NYT finally acknowledging what we've all known, that Joe Biden is a modern Mafia Don. and the awful realization that our best hope may be Kamala Harris, the word-salad chef.
Actually; yes I have and as you said, I learned a lot. I learned even more by reading Michael Hudson and Ellen Brown. Shiela Bair wrote the best book on the 2008 crash as she was running late FDIC at the time, very technical. Free lunch and Perfectly legal are excellent and very readable by David Cay Johnson. Yanis Varoufakis is excellent, I read three of his; he was the finance minister of Greece when the EC and the USA were screwing over Greece and the MSM in the west was lying their teeth out. There are people out there that will tell you the truth about the Ukraine too; in fact, if you read the MSM of a year ago or the paradise papers you can learn what a crook Zelensky and his oligarch Kolomenski is; All down the memory hole. There's truth about the COVID pandemic and other stuff out there but you won't get it on the MSM.
I've followed Matt mostly on Substack. But I know of his other work and know that he's competent. All the more why, given we're like at 2 minutes to midnight--historically speaking--when do the gloves come off?
The West does need a new financial architecture, and technically, it needs to be a global financial architecture. The idea of creating a parallel Western and Eastern financial architecture just isn't going to work. Hence, the problem. Because those running the Trans-Atlantic banking system really are willing to risk it all to maintain their power. What's at stake here is global dominance. Both sides won't be left standing. And the Western banking system is sitting on a gigantic derivatives timebomb, worse than 2007-2008, and the ''tools'' in the financial ''tool box'' have already been used. So this isn't going to be a repeat of 2007-2008. It's going to be a different kind of beast. It also means this time we do have the chance to do what wasn't done in 2007-2008, which is to put the speculative financial casino we call the Western banking system into a bankruptcy re-organization where we cancel all the funny money, we cancel all the worthless speculative debts (as opposed to more bailouts, or worse, ''bail-ins,'' and at the same time protect the viable commercial banking system and product parts of the financial system that are tied to the physical economy.
I don't see another way, or another option, that doesn't involve cancelling the gigantic derivatives financial cancer. However, the means nations and citizens are declaring all out war with the ruling financial oligarchy, which has ''captured'' our once noble institutions.
Thousands of financial people need to be in jail. Financial needs to be reduced by ~90%+ and the government need to be in control of the bank's, not our system where the banksters are in control of the government. That's how it works in China and don't believe that agitprop on China. The legal industrial complex also needs to be reduced by ~90% along with the educational industrial complex. None of it is productive and it needs to be minimized to what's needed to support the real economy. I'm not holding my breath; we're in a multi generational restructuring of the world if the empire doesn't blow it up.
Matt I admire this work above and beyond most everything else you do! Why? Because it’s so fucking HARD to read. And in this time of swatting at the nearest info-mosquito that’s got to be healthy. So I’ll knuckle down and do the work. You have. I salute you!
Yesterday before I read these articles, I was talking to a friend about a book she's trying to write called "Rhetoric is Fatal". In a past life I audited to-big-to-fail companies and then later practiced law, and I told her that accounting and legal writing is often about describing the world while refracting responsibility.
I told her to read Taibbi to get a great layman's view of this. Then I read these articles and decided to gift her a subscription here, but I was wondering how hard it would be to leap into this stuff cold.
I'm gonna tell her what you wrote here. I'm familiar with this stuff, and even i find it hard, but the subject can be maddeningly complicated, and Matt does as good of job as we can get of describing it in its lurid, greedy, bullshitting essence.
Hey Matt - I got an automagic email from you this week about my upcoming subscription renewal. I set it a aside thinking maybe I'd cancel: you haven't published much lately. But, I also reflected on your great work this past year. When I was in the biz (30 years before I got out) the main rule in investigative reporting was if you want to uncover the real story, FOLLOW THE MONEY. I'd forgotten how well you do this. Your shovel works overtime.
Too many people think following the political news will tell them what's going on in the world. That's one of the devil's great deceptions. FOLLOW THE MONEY. Economics reporting is where it's at.
I look forward to more great reporting TK.
These Circle people sound like jerks.
Makes me glad that I am such a dinosaur and never got on the virtual currency rollercoaster.
I use Venmo to pay babysitters, etc. and it offered me the option to buy various crypto. So I bought $100 of bitcoin because I could afford that much and then would be easily able to see how it worked. It went to $150 and now is at $50. I should have bought scratch-offs.
Ha Ha. I started with Venmo crypto too . . . and then went to Coinbase, Blockfi, and Celsius--unfortunately. Still have low four-digits tied up Celsius. I tried to get onto Voyager, but they wouldn't accept my commercial address . . . lucky thing for me!
There's a cryptocurrency named Celsius?
I'm starting one named Fair and Height. It will be pegged to the Celsius at 1.8:1.
I couldn’t figure out how to buy groceries with it so I stayed away.. I never heard a decent explanation about how it could be used beyond speculation.
There is a vending machine that sells crypto right next to the Ohio Lottery machine at a local grocery. 'Nuff said.
OMG!!! I am a simple woman and this article makes my head hurt… I don’t pretend to understand Crypto but wasn’t Crypto supposed to free us from government and Wall St? Sounds like more of the same Wall St and govt economic shenanigans that will eventually screw the hard-working taxpayer.
Ayn Rand explained that we are three actors: producers, looters and moochers. Our problems are the result of the rise of looter power. Blackrock and Joe Biden are examples.
I think pirates are looters. Libertarians would like the pirates to stop taking their stuff.
I may be uniquely uninformed about this area, but just thought I'd leave some feedback in case it's helpful. For me, the article was/is somewhat confusing. I found myself on several occasions having to do reference searches on things like RRPs or even USDC to be able to follow along, the latter of which in particular seems like it should be unnecessary given its central nature to the story. In USDC's case, simply going one step further and explaining that USDC is redeemable for dollars held in reserve through mechanisms like the BlackRock fund would have made the early part of the article much more clear to me. You already said that it's a stable coin, but there are different strategies for how stable coins can achieve stability, so to me that bit of extra information helped solidify what we were talking about here.
I'm honestly still a little bit confused about the use of RRPs since from my understanding the purchaser of an RRP would be viewed as the lender and I would assume that the fund "investing in RRPs" would make them the purchaser. However, the article later says that the fund terms allow it to "burrow" up to a third of its reserves. Is this talking about a different provision, or do I have it backwards? Either way I can see that a reserve fund intended to back a stable financial asset being held in non-cash assets would be a concern, but the discrepancy makes me wonder what other parts of this I may not be understanding.
It's also not clear to me who's playing the role of exercising this clause of the agreement. Since BlackRock is managing the fund would that mean that they're the ones purchasing RRPs to back the fund? The article seems to say that it's Circle, but you also say that Circle is backing their USDC with lots of other things not in the fund agreement like corporate paper. Are these other holdings coming through separate agreements then, or is this a case where different parts of the chain are playing their own games (i.e. BlackRock is backing its part of the funding chain with a mix of RRPs and cash while Circle is backing USDC with a mix of the BlackRock fund, which it treats as "cash" in its statements regardless of what BlackRock actually backs the funds with, and other assets)?
In terms of general flow, the frequent dips into other subjects like prior examples of financial malpractice (e.g. Chase) or going through key players' prior crimes and settlements also made it kind of hard for me to track the story overall. This could be more just the fault of my general confusion. There were other confusing elements to the article, but I'm not trying to turn you into my own personal explainer-of-all-things-finance.
I could be off-base, and I'm not trying to say that you need to dumb your articles down to the lowest-common-reader level, which I may very well be. Finance is not my world, and I expect in an article like this to do some searching. But it does seem like at least some more background might have helped connect your statements and conclusions and helped folks like me to better follow along.
Probably more than I ever wanted to know about this industry but once again it looks like we have a financial industry that does not have anyone but their top leaders in mind as they do business. I don’t think my trust in these type of companies could go any lower but if it could it just did
Matt went easy on them! I'm no fan of the "financial industry" as you call it, but crypto is on another level of criminality. It's organized crime, pure and simple. Here's a couple of good resources: https://www.stephendiehl.com/blog.html. No one is more articulate about the problems than he.
https://youtu.be/YQ_xWvX1n9g. Award-winning video. Exhausting, but fun!
Started on second video. 2 hour commitment is a lot but I think I will go ahead and invest the time.
I believe I have a good feel for the value of Bitcoin. I think it is real and tremendous. I also think I understand how scammy almost every other crypto currency is. But i can at least understand the appeal of their get rich quick, ponzi marketing. I don’t get stable coins. “It’s like holding dollars.” Just hold dollars?
Yeah, it seems that keeping it pegged to the dollar defeats one of the main 'advantages' of crypto: to be a hedge against inflation.
The Null, Can you tell me why you think the value of Bitcoin is real and tremendous?
Bitcoin optimizes on the 5 attributes of money better than any other substance in history:
1. Scarcity - Bitcoin is capped at a finite amount of 21 million coins. There is no other commodity where you can definitively identify the terminal amount. Over 90% of all bitcoin that will ever be produced are already in circulation. It is currently growing at less than 2% per year and beginning in 2024 it will grow at less than 1% per year.
2. Durability - Bitcoin is maintained by the most secure computer network in history. It does not degrade over time and cannot be destroyed (only lost through sloppy custody). If there is electricity and the internet 200 years from now, it is highly likely there will still be bitcoin being used as a store of value if not also as a medium of exchange and a unit of account. I put the likelihood of bitcoin surviving this timespan higher than any currency currently in circulation. Anyone owning bitcoin today and practicing prudent custody could hold it for free for the next 2 centuries.
3. Portability - For the first two attributes, you could squint and say gold isn’t too far behind in scarcity and durability. Portability is a big loser for gold. Try to move $1,000,000 worth of gold from North America to Australia. How great do you feel about that process? How much did it cost you. Now move it back in 6 months. Bitcoin can be moved anywhere on the planet in an hour at a very low cost. You can exit any jurisdiction with 12 memorized words in your head that secure any amount of money you want to bring with you. Best portable asset ever invented.
4. Divisibility - Try paying for a cup of coffee with gold. That’s about 1/360 of an ounce. Each bitcoin is made up of 100,000,000 Satoshis. So you could buy that same cup of coffee with 23,000 satoshis. (Today). Obviously Bitcoin’s volatility hasn’t lent itself to being a great daily currency yet, but the ladder of money is first store of value, then medium of exchange, then unit of account. Bitcoin has appreciated at >100% a year since inception. Best store of value during its existence.
5. Recognizability - Here is one spot where gold may have a global advantage currently at the headline level. More humans on earth may currently see a gold bar and recognize/value it than bitcoin. However - this gap is closing every year. And if someone tried to hand you 20 oz of gold in a trade for your car, would you trust that it was real gold? Or would you have to find some way to test the heavy yellow stuff? (Then where do you store it, how do you spend it, how do you move it?) Bitcoin may already have the lead here in a practical sense. You know when you got paid in real bitcoin.
I’m assuming your question was in good faith, so i spent some time on my answer. I could be wrong. I don’t think i will be. The only question for me is on what timeline will i be right. I wish i knew.
Fantastic breakdown. Really really well said.
Either no one can get at at your money if it’s in stablecoin or you can prove that it’s really yours or something. I keep reading these articles and still feel clueless.
Mike, that’s a perfect illustration of the problems with (non-Bitcoin) crypto. A lot of bad actors have combined various and nefarious aspects of the financial system with digital currency. Crypto guys always hold your keys (your username and password for your money on the blockchain) and almost always reinvest investor money in arbitrage schemes like the one Matt details here. The simple answer for this is to give keys to the people and don’t allow for reinvesting - which is what BTC does and why it is different / not vulnerable to this particular scheme.
There are plenty of schemes it is vulnerable to, but this isn’t one of them. As long as you use a cold wallet and not an exchange, these bad actors can’t get their grubby mitts on your money.
In other words, crypto is status quo. Bitcoin is subversive. Hope this helps.
I think it helps ☺️
Nice article. Good work. If you’re looking for trouble , look for the leverage. Indeed, it’s hard to walk into the Vegas casino with other peoples money and not play a few hands. Pretty soon you’re rolling the dice and saying I’ll make it up on the next one!
Hi, gang. I'm here to announce my decision to transition . . .
. . . to my real name :-) I was "William Shayne" for quite a while, but found that writing under a pseudonym made me a little more rabid and a little less careful with language than I ever am when writing openly. So here I am, having undergone gender reassignment surgery---er, changing to my real name--in the hopes of less fallacies in my analyses. Glad to "meet" you.
My hormone of choice is single-malt Ardbeg from Scotland. I am a published crime novelist who writes under Shane Gericke, and spent the first half of my career as a newspaper editor, primarily at the Chicago Sun-Times when it was a national powerhouse. Fun times, but as the newspaper business began swirling the bowl, I switched to cops and robbers fiction.
I remain an old-fashioned, non-woke liberal. I still like guns and support 2A and all the other A's. I despise the bullies of the left and right, believe the oligarchy of corporate and politics is going to kill this nation if we don't wise up and stop them, and I admire Matt for his willingness to dive into cryptocurrencies so we don't have to.
I enjoy your company and hope to contribute.
I don't dare post under my full name. My full name is unique.
It IS a risk these days, I agree. But the CancelNuts can't do a whole lot to me, since I work for myself, my wife is dead from cancer, and therefore I have few pressure points for them to attack. The upside is that real name keeps me on the straight and narrow when I post, which is good for reminding myself that unhinged rants are not good for society or me.
People have lost the ability to disagree but stay agreeable. "Assume positive intent" and try to find the good points they are making while disregarding the bad points.
Very well said, Hugh, thanks. We will lose our society if we keep guzzling rageahol.
Thanks Matt, The impending doom of our economy combined with our governments printing 10 trillion in pandemic spending like alcohol fueled sailor's on shore leave and now this revelation smells of total financial collapse in our near future. Looking like my move off the grid, working towards self sufficiency is going to pay off when the perverbial shit hits the fan.
As I was reading your analysis - and feelings stimulated similarly by your first reference to Vampire Squid - I inexplicably began mumbling the words Jon Corzine and MF Global. Those funds, too, did not belong to the segregated account holders (although required by law). Back then it was seen as a guideline and not a rule. Excellent analysis and commentary.
"next thing you knew, they had a $12 billion bomb crater and Elizabeth Warren was screaming at an eye-rolling Jamie Dimon on television."
The apex of Congressional action and Bankster accountability & suffering.
"“We know that a lot of customers get USDC on Coinbase, and we previously said that every USDC is ‘backed by a dollar in a bank account.’ Our language could have been clearer here.”"
Now that our fraud is impossible to hide let's walk back the claims and pretend customers are to blame for their own losses.. it's nice to be in the class of 1% untouchables!!
"“Any case involving alleged fraud will be a matter of great concern to the banking regulators,” said former FDIC General Counsel Mike Krimminger. "
Indeed the job of the regulators is to keep the frauds from public view & impose token fines with no admission of guilt by the thieves!!
Warren is a fraud. And I am not talking about her claims to First Nation membership. I read her first book which argued that most individual bankruptcies were caused by medical expenses. The book's authors received a $250,000 grant to write it. One of the three professors who approved the grant later accused the three authors (including Warren and Teresa Sullivan, who later went on to be President of the University of VA before resigning in disgrace after her mishandling of the Rolling Stone alleged fraternity gang rape story) of academic misconduct. There was an "investigation" that was really just a whitewash.
Read about it here: https://www.thecollegefix.com/ousted-uva-prez-and-liz-warren-jointly-accused-of-scientific-misconduct/
If Warren is a fraud, the CEOs she deals with are ten times worse. She was absolutely correct to have pinned Dimon to that hearing wall like a moth in a science-fair project.
Problem is, nothing ever changes. Crypto. Derivatives. Fraud up the ying-yang. Wells Fargo has ripped off customers and taxpayers so many times it should be shut down via RICO as a clear and present danger to society. Instead, nothing.
I will take Liz over the enemies of our democracy any time.
It's hard to recall any high profile "official investigation" in my lifetime that wasn't a whitewash.
That only applies to investigations where the subject is a progressive. If the subject is a conservative, we have show trials.
Here is the operative quotes from the Schuchman review:
"I report my own interest as a part of this essay. I was deputy director of the Commission on the Bankruptcy Laws, and am the author of three of the empirical studies listed below. I was also one of the reviewers of Sullivan, Warren and Westbrook's grant proposal to the National Science Foundation and wrote in favor of awarding their grant. Most of their study replicates several earlier research publications. These are hardly mentioned. The writers make extravagant and false claims to originality and priority of research. There appear to be serious errors in their use of statistical bases which result in grossly mistaken functions and comparisons. Some of their conclusions cannot be obtained even from their flawed findings.
The authors have made their raw data unavailable so that its accuracy cannot be independently checked. In my opinion, the authors have engaged in repeated instances of scientific misconduct."
* * * *
"This book has been six years in the research and writing. The authors' data were eight years old at publication. Nineteen eighty-one was a recession year. Unemployment has decreased and remained low in the eight years since then. Interest rates were very high in 1981, but were sharply lower within two years and have remained quite low relative to 1981. There were substantial amendments to the Bankruptcy Code in 1984. These factors make it almost impossible to gauge the present value of the authors' data. Only a study over time and an impact analysis of the 1984 amendments could show whether their findings, if accurate for 1981, remain descriptive now."
I agree with you in part. I am not so certain about Hillary.
She’s a Wall Street insider.
Nothing wrong with flipping foreclosures. Travel the world and see countries with poor Title laws like Mexico and India with vacancies in great cities because people can't flip a foreclosure. If you want predatory, learn about tax liens.
Matt, this was a serious deep dive into a subject area largely devoid of such scrutiny. A few months ago, we had an extended family Zoom call on the subject of crypto. The older folks pretty much stayed clear of investing in crypto, using metaphors like tulip mania and Ponzi, terms with which the younger family members were generally not familiar. The millennials thought we “didn’t get it”, citing the large interest rates they were receiving on their crypto loans. Yet none of them really understood how the crypto ecosystem even purported to work. Suffice to say they are all getting a valuable (and somewhat costly) lesson on basic investing principles.
My own takeaway is that governments are likely to embrace crypto and do away with cash. That way they will know where every dollar you own is and how each dollar is spent. In a pinch they can even help themselves and replace your wealth with an IOU as Argentina did to investors’ retirement plans in that country. If we ever get to that point, Matt won’t be able to cover the story - he’ll be locked up somewhere writing one act plays for his fellow inmates.