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Category: Financial News

More investors looking to Bitcoin as markets reel

Last week I blogged about whether Bitcoin and other cryptocurrencies will experience a boom thanks to rising economic instability around the globe triggered in part by the continued trade war between Washington and Beijing. Said war is hurtling forth with no signs of abating; in fact it seems to be picking up steam, regardless of Trump’s decision to suspend additional tariffs, which he did to avoid being branded the President Who Stole Christmas.

In addition to roiling global markets, the Trump’s trade war has many people worrying that a recession in the offing. Predictably, investors are looking for alternatives. Bitcoin is one such alternative due to its independence of geopolitics and the resulting economic consequences. “Because it’s decentralized and not dictated by a single government, it’s not subject to the whims of a central bank or political leader,” Markets Insider reports.

Increasingly, Bitcoin is seeming to investors like a sort of lifeboat in a sea of economic turbulence. Evan Kuo, CEO of Ampleforth, a digital asset protocol, told Markets Insider explained to Market Insider:

“In a slowdown, since the global economy is so interconnected, there are only a limited number of assets that are isolated.”

And at the moment, Bitcoin is as isolated as it gets. Hence, more investors are taking a serious look at it, as well as other cryptocurrencies. The drawback, of course, is crypto’s inherent caprice—as we’ve seen, such currencies are susceptible to wild and unpredictable fluctuations in value. Bitcoin is currently trading at just over $10,500. That could change drastically at any time.

But Kuo says investors shouldn’t let such volatility scare them off.

“It’s helpful that it’s volatile in a way that’s not connected to other assets,” he said. “There’s been almost 10 years of data to suggest that the coin has almost no risk exposure to precious metals, commodities, equities, currencies, and so on.”

With greater risk comes the potential for greater reward, and many investors are increasingly willing to take that risk with regard to Bitcoin. Time will tell whether it pays off.

Michael Hudson: Debt cancellation is inevitable (and sensible)

In a recent article, economist Michael Hudson (author of many books including, recently, … and Forgive Them Their Debts, J is For Junk Economics, and Killing the Host) predicts widespread cancellation of what he terms “bad debts” as an inevitable solution to the (ignored but apparent) economic woes plaguing the United States.

“When debts can’t be paid and debtors default, what happens to these creditors?” Hudson asks. For an example he cites Washington’s bailout of Wall Street in 2008 following the Great Recession precipitated by the collapse of the housing bubble which was created by reckless and predatory loaning practices on the part of major US financial institutions and credit agencies. In order to finance this bailout, the Obama administration simply created more money while zeroing out interest rates.

“But this artificial life support to keep the debt overhead afloat is nearing the reality of the debt wall,” Hudson writes. “The European Central Bank has almost run out of available euro-bonds to buy. The new fallback position to keep the increasingly zombified U.S. and Eurozone financial markets afloat is to experiment with negative interest rates.”

The destructive consequences of mounting and unpayable debts were understood 5,000 years ago. And these civilizations also recognized the need to cancel said debts, lest their empires collapse as Rome’s eventually did:

“To prevent this rising indebtedness from tearing their realms apart, rulers started their first full year on the throne by clearing away the overhang of arrears that had been accruing on personal and agrarian debts. The aim was to restore an idealized ‘mother condition’ in which bondservants were liberated, able to start with a Clean Slate with their self-support land returned to them, in balance with regard to their income and outgo.”

Hudson draws a parallel to post-WWII America, a period of enormous prosperity when Americans were more or less debt free and able to start families and buy homes. Also to post-war Germany, where debts were wiped out (“easy because most debts were owed to Nazis”).

In contrast, the contemporary situation in America is one in which young people graduate from college weighed down by mountains of debt that prevents them from purchasing homes and contributing to the economy. The US’ solution thus far has been to lower interest rates which further increases debt and, by extension, default. The problem isn’t going away, Hudson writes, thanks largely to collective denial on the part of economic institutions and mainstream analysts.

What the US currently offers—quantitative easing and bailouts—is a stop-gap that will only compound the issues it seeks to address. “Debt cancellation is historically the solution,” according to Hudson, who wonders whether a “revamped economics curriculum will include the study of history to see how earlier societies have coped with the inherent tendency of debts to increase faster than the ability to be paid.” After all, “Western civilization has failed to solve the financial problem that Near Eastern societies were able to cope with by intervening from ‘outside’ the economy.”