Sunday, May 19, 2013

Royal Black Swan? A Question of Honours.


When the banks in Cyprus were poised to seize deposits from their customers to provide collateral for a bailout, in Greece, Ireland, Italy, Spain, likely Portugal, and disturbingly, Japan, the question of whether it would be the template for other national bailouts became the question on everyone's mind. 

It is one thing to seize deposits of hedge funds, oil and energy companies, agricultural and tourism firms - along with the funds held in the country by foreign investors - as they employ many citizens and there would no doubt be significant, if containable unrest in the event this occurred...

Tuesday, April 9, 2013

Laser Guided Policy and the 80th Anniversary of EO 6102


To gold bugs, and more recently, American libertarians U.S. President FDR's executive order 6102 looms in their imaginations as one of the key examples of their government turning on the citizenry and illegally seizing their property.

Back in 1933, citizens were compensated for their forfeited gold at a fixed price of about $20/oz. The fine for  not turning it over to the state was the equivalent to about $175,000 today, in addition to the threat of 10 years imprisonment. Of course many Americans did not turn over their gold, and there are few if any reported cases of anyone actually going to prison over it.

Anonymous comment contributors to skeptic financial blogs (or fringe blogs, depending on your view) seem to think that the U.S. and certain European countries are preparing for a similar move. It's not unreasonable to hypothesize that personal gold confiscation could happen again. While it is unlikely that we will return to a gold backed currency in the west anytime soon, if ever. But if the Euro, the GBP, CAD or USD were suddenly devalued to pay off liabilities - at face value a scenario of gold confiscation through forcible "repurchasing" is not as paranoid as it might seem...

Monday, April 1, 2013

Japanese Dominoes


Given the predictions about imminent Japanese economic collapse, (recent estimates from Kyle Bass including a %60 currency devaluation and %70 stock index devaluation), what countries have exposure to restructurings of Japanese international businesses?

The answer may not be which countries, but rather, which municipalities, states and provinces.

Monday, February 25, 2013

Bitcoin liquidity revisited - Save Bernankestan


Recently I wrote about how the viability of bitcoin was limited by the risk of total, sudden liquidity collapse . The argument can be summarized as saying that without institutions whose business is transacted in it, bitcoin suffers from a bootstrapping problem whereby a crack in the crypto scheme would create an instant wave of counterfeit and debasement. Since there is no entity to restore trust in the currency with a guarantee, e.g. no central bank or government to offer a sovereign guarantee, a crack would make bitcoin illiquid and worthless. 

I said that bitcoin would only ever be useful on the black market, since without legitimacy from legal institutions, the only commodity of last resort it may ever be readily exchanged for will be drugs or other contraband.  

Circumstances have changed since I argued that point, as a number of online gambling sites are beginning to take in and pay out bets in bitcoin. It is a game changer since, more than blackmarket commodities, now bitcoins may be traded for _risk_.

Monday, January 21, 2013

Trillion Dollar #DIV/0!


This whole thing about the "trillion dollar coin" brings up an interesting problem. To rehash it, it's that the U.S. Treasury may use an unintended consequence of an obscure earmark amendment to stamp a platinum coin denominated as $1-trillion dollars, and deposit it with the Federal Reserve as collateral for new loans, which the government can then use to pay its bills.  It is an accounting hack, (the programmers equivalent to the side effect of a function) and one that even an eminent NYTimes economist believes should technically work.

This of course begs the question in regard to what one means by "technically" and "work," but hey, he's got a Nobel Prize in Economics so I'm sure he knows what he's talking about. To a point, anyway...