Monday, February 26, 2018

Will the next credit crisis and financial failing begin in 2018?

Ten years have passed since the crisis of 2008.  Overall, things have been getting worse, not better.

Modern financial markets have become accustomed to boom and bust cycles.  These cycles happen as a result of central banks exercising tyrannical control over the global monetary system.  Each cycle begins with a boom, leads to a bust, and culminates in war.  Central banks openly admit their roles in helping finance wars.  The cycle has repeated itself twice in the last century and lies on the precipice of its third completion.

The boom-bust cycle

For the past 105 years, America has had its economy and financial future ensnared by the central banking system.  Ever since the creation of the Federal Reserve Bank in 1913, a cycle of economic booms and busts has become the norm.  This artificial cycle has become so accepted that few even question its origin, let alone envision a world without it. 

Throughout history, the cycles have three primary parts, each part being further divisible into smaller phases.  First, the credit cycle enjoys a brilliant expansion.  The economy is booming, there are jobs aplenty, people are making money, everyone is happy, and all is right with the world.  An example of this would be the so-called “roaring twenties”, referring to the decade preceding The Great Depression.  This is what’s referred to as the boom.

Second, a crisis, or “credit crunch” occurs.  At this point, banks stop lending, liquidity vanishes, businesses go bankrupt, stocks selloff, and chaos ensues.  Banks may even fail, as they did in 2008 prior to being bailed out by governments and the central banks who own them. 

The crisis of the 1930s has a reputation of being more severe due to its effects being more visible.  People waited in long bread lines to eat, unemployment was rampant and not hidden by people dropping out of the labor force, and banks were allowed to fail, resulting in millions of people losing their life savings overnight. 

By contrast, today we have the opposite: food stamps in the form of Electronic Benefits Cards masks the severity of people being unable to afford food, the official unemployment rate remains at a record low because those who give up looking for work are not counted in the official statistics, and banks were bailed out, leading to the illusion of business continuing as usual.

War and banks

The third phase of this central bank-induced cycle has no direct correlation to the cycle itself on the surface.  Yet it always follows.  The third and final action that happens after an economic bust is war.

World War I began in 1914, just a year after the creation of the Federal Reserve.  The Federal Reserve Act also enacted the income-tax in order to aid in financing the war effort.  President Woodrow Wilson gave a speech on October 13, 1917, proclaiming cooperation among the nation’s banks to be of paramount importance to the peaceful war effort.  In addition, European bankers had been working since at least 1887 to keep the nations of Europe under an insurmountable debt burden to pay for war armaments. 

Without financing from central banks, nations would not have the ability to war with one another like they have during the past century.  The Federal Reserve itself admits this to be part of its role in the economy.  In 1943, the Federal Reserve board of governors stated its intention to help with all efforts of funding World War II.  This war began following the bust of the 1930s.  The next world war will happen once the current credit cycle completes in a bust the likes of which the world has never seen.

The coming crisis

Many mainstream publications have been warning of an imminent economic catastrophe for years now.  But in the first few months of 2018, their collective voices have grown quite stronger.  Desmond Lachman, former macro-economist at the International Monetary Fund, recently wrote a piece for U.S. News entitled “A Crisis is Coming.”  In it, he describes the financial conditions today as being far worse than they were during 2008 by any metric. 

Debt levels have grown out of control, massive asset bubbles have appeared in sectors beyond the housing industry, and interest rates have been too low for too long.  Even a modest increase in interest rates will cause debt levels to be unsustainable.  

In addition, the Independent notes that wage growth in the UK is rising at its fastest pace since the 2008 financial crisis.  This corroborates what Lachman says in his U.S. News piece about economic conditions overheating.  Wage growth indicates inflation.  Inflation leads to rising interest rates.  Rising interest rates lead to higher debt payments.  Those payments will become so large that governments will have no way to pay them.  The only way out will be war.

A Third World War

As dire as the economic conditions look, they pale in comparison to the current geopolitical landscape.  Not since the Cold War have tensions between adversarial nations been quite so high.  How might such nations react in the midst of a historic financial collapse?  If history is any guide, the answer makes itself apparent.  As Marc Faber has said, “when everything collapses, then we go to war.”  It can’t be said any simpler. 

The coming crisis will be the biggest yet, and so will the war that follows.  Entire nations will go bankrupt.  It’s possible that entire nations could be destroyed in the conflict that ensues. 
World events have already begun to align with such an undesirable outcome.  The election of Donald Trump, for example, provides a convenient scapegoat for the whole ordeal.  Rather than focusing on central banks and their role in the crisis, all the world’s attention will have been turned to Trump as the ultimate harbinger of destruction.

Despite the fact that it matters not who holds political power, this will be the conclusion of most of the public.  Keep in mind, however, that politicians hold absolutely zero sway over monetary policy.  Central banks have total control when it comes to economic decisions.  And through this mechanism, they control economies, currencies, and ultimately, the course of world events.  Even in leading the human race to ruin, too many remain blind to the banks that have been guiding us there for generations.   

Tuesday, February 13, 2018

How the Chorus of Crypto Criticisms Discredits itself

The same rationale used to discredit cryptocurrency markets gets used to defend stock markets

 "Bitcoin gets crushed again" has been trending today. The comment threads mostly contain rants about a bubble that has burst and a technology that has died for the 249th time. The few rational voices pointing out multi-year patterns get drowned out by an army of internet trolls labeling them wishful thinkers, although often with much harsher language. At the current stage of this most recent "crash", BTC/USD is up 700% year-over-year and 13,900% over the past five years assuming a $50 price in Q1 2013 and a $7000 price today. By comparison, the Dow is up 200% since 2009, assuming a bottom of 9,000 points and a top of 27,000 points today.

 "Dow falls 1,500 points" has also been trending. The comment threads seem to mostly contain defenses of stocks and how this is only a blip on the radar. Those who proclaim it to be the start of a bigger selloff or a bubble bursting are written off as hysterical or ignorant. Long-term trends are cited in order to put things in the context of the big picture. Notice how this reflects a total inversion of the same arguments used against crypto.

 A Tale of Two Asset-Classes

 Yet when crypto enthusiasts point out long-term trends, they get labeled delusional zealots incapable of coping with reality. Despite the fact that no historical precedent exists for this new technology or its value relative to fiat currency outside of the past nine years, those who do not understand it feel justified in their predictions and analyses based on a few weeks. And their vitriolic assertions mimic the zealous tone they perceive in those who understand otherwise. Many such critics cannot even tell you what a blockchain is, what fiat currency is, or what a central bank does. This paradigm shift has gone so far over the heads of those who do not care to grasp it that they have formed a chorus of incoherent rambling.

Even the most well-respected financial experts and mainstream publications have joined this chorus, as I mentioned in a piece for in December 2017. Hit pieces on blockchain and crypto often have little to no factual underpinnings. shows this quite well. One of the best articles ever written on this subject was published by Business Insider in August 2017. In it, John McAfee compares the invention of blockchain technology to the invention of agriculture:

 It is like the first pueblo cultures being warned by their past sages that they will perish in their stone houses when it is time for the village to move. They understood that the concept of "moving" had no meaning in their new world. Likewise, what people see as a bitcoin "bubble," from the perspective of the new paradigm, is merely the predictable and systematic devaluation of fiat currencies that will continue, with obvious ups and downs, until all fiat currencies reach the zero point. 

The decline of fiat currencies is almost never mentioned as a factor affecting cryptocurrencies, even though it can be seen as the single most significant variable. Likewise, corporate buybacks are often overlooked with regard to the stock market.

An Irrelevant Reference Point

These criticisms operate based on the same fundamental misunderstanding. The value of an asset, whether it be a stock or cryptocurrency, is often perceived in only one dimension - the price as measured in fiat currency. Underlying fundamentals or potential manipulations are often never considered.

The stock market rise has been fueled in large part by corporate buybacks. An excellent piece on this subject was penned by Forbes contributor Bert Dohmen just weeks before the aforementioned Business Insider piece by McAfee:

 Only 20 stocks accounted for 42% of all buybacks last year. It’s easy to see that manipulation of the EPS of 20 stocks can produce bullish sentiment in the market. The media usually just tells you about the rise in EPS, without telling you what the total profits were. In fact, total profits can decline while the EPS rises. It’s all a game of “smoke and mirrors.” It’s “fool's gold.” I have been writing about this deceptive financial engineering since 2013. In my January 20, 2014 issue of the Wellington Letter I wrote: "In the U.S., the most significant factor for rising stock prices has been the very large corporate buybacks of their own stocks. Companies have been the biggest stock buyers over the past five years, while every other major, traditional buyer has been on the sell side." 

This is almost comical considering critics cite the lack of regulation in crypto markets as a worrisome issue that opens the door for price manipulation. As if regulated markets such as the Dow, S&P 500, and Nasdaq are somehow immune to such financial engineering. To be fair, a large number of people use cryptocurrencies as a speculative tool for fiat gains. This says nothing of the underlying technology. Nor does it make fiat currencies have more value. It's yet another indication of the broad lack of understanding of the significance of this invention.

A New Perspective

Bitcoin and currencies like it may be the biggest invention since that of the internet. And blockchain may be the most significant technological advancement for human society since agriculture. That's what inspires me to write about it. The vast sea of disinformation needs more contrarians.

 I'm thankful to have the opportunity to work for companies like Blue Chip Crypto Education and They allow for publication of factual material relating to blockchain and cryptocurrency. I believe in the stated mission of Blue Chip Crypto, and I know many others do as well: We want to give our readers clear, concise information, and an objective view that would help break through the confusion and misunderstanding surrounding digital currencies. In short, those who dismiss the significance of blockchain have begun to look like those who wrote off the internet as insignificant decades ago. "It's only for criminals, it will never work, it won't last, it's useless", were all real criticisms against the internet years ago. It's no coincidence that crypto faces similar scrutiny. Quantum leaps in technological advancement have a tendency to create paradigm shifts that only become widely accepted and understood sometime after their implementation. For crypto, that time is close at hand.

[Note: this article was originally published on LinkedIn at on 2/5/18.]

Saturday, February 3, 2018

Blockchain has already brought positive benefits

The blockchain revolution has already begun to take hold

Cryptocurrency and blockchain technology has the potential to radically transform our entire world.  They have already begun to do so.  US Senator Judd Gregg recently remarked that bitcoin could alter the world, according to

For the first time, human beings no longer need to rely upon centralized third-parties.  Large centralized organizations have a strong tendency toward becoming corrupt and controlling the actions of those whose business they intermediate.  The larger the centralized organization, the more power it has.  The more power it has, the greater the potential for corruption and overall detrimental impact upon society. 

Blockchain makes banks irrelevant

Banks are the quintessential example.  Given near total control over the personal finances of the population and broader financial markets, banks like Wells Fargo, JP Morgan Chase, Deutchebank, HSBC have ample opportunity and incentive to rig the system.  They have been caught doing so time and time again.  

The consequences of such corruption are virtually non-existent.  They receive a slap on the wrist in the form of a small fine and continue business as usual.  As I’ve written about previously, HSBC, for example, was caught laundering hundreds of millions for deadly Mexican drug cartels.  They still conduct business today as if nothing ever happened.

Cryptocurrency transactions do not require a bank.  They only require two users with private wallets.  Transactions happen much faster and at much lower rates.  The bitcoin blockchain is immutable and transactions cannot be reversed.  While semi-anonymous for users, all transactions are still transparent and bad actors can be seen and potentially routed out.  

The distributed nature of the network makes attacking it all but impossible.  The encryption inherent in such a cryptographic coin makes hacking it equally implausible absent a quantum computer. 

The true potential of blockchain tech

But banks are only one example of how blockchain will put power back into the hands of the people.  Countless other examples abound of technology entrepreneurs endeavoring to create a better world on the blockchain., for example, is the world’s first decentralized blogging and social media platform.  Steemit rewards users for their interaction and contributions with STEEM, a cryptocurrency native to the platform.

In addition, existing centralized platforms have begun to embrace the blockchain revolution.  They have no choice.  They must do so in order to stay relevant.  Otherwise, they risk becoming obsolete., for example, has announced its plans to introduce a cryptocurrency that will be native to the Minds platform.  Similar to Steemit, users will be eligible to receive this cryptocurrency.  While Steemit rewards users with STEEM directly, Minds offers “points”.  These points will soon be exchangeable for crypto. 

All things considered, the blockchain revolution has only just begun.  The new technologies, new jobs, and new freedoms that have already been created will continue to increase and multiply.  The world as we know it will never be the same.