Cryptocurrency May Wreak Havoc on Economy — Especially on People With No Assets

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    • #433928
      eridani
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      • Total Posts: 9,978

      https://truthout.org/articles/cryptocurrency-may-wreak-havoc-on-economy-especially-on-people-with-no-assets/

      If the cryptocurrency market takes another nosedive — like it did in May, shedding some $1 trillion, or 40 percent of its global market cap — investors will scramble to cover their losses on leveraged bets. This could generate a ripple effect, bringing down commercial ventures outside of the financial sector, which would harm those least likely to own any financial asset, digital or conventional. Economic downturns disproportionately harm the poor, and 45 percent of Americans own no stock, according to a Gallup poll conducted last year, while only 14 percent of Americans own cryptocurrencies.

      “What happens if a huge number of hedge funds who have prime broker relationships with too-big-to-fail banks all happen to be in similar crypto positions, whether it’s long or short, and there’s massive volatility in the market? They may have to sell some of their other assets,” said Goldstein, the director of financial policy for the Open Markets Institute and a former Wall Street banker who left the industry in 2010. She told the committee that losses on cryptocurrencies could lead to “forced liquidations” of non-crypto assets (stocks and bonds of other companies in hedge funds’ portfolios).

      In March, for example, the failure of a private family fund called Archegos Capital dealt a blow to banks and non-financial firms alike, sending shock waves across the economy. Archegos had bet on the stock prices of certain companies to rise, including media conglomerates ViacomCBS and Discovery, by borrowing four to five times the amount of capital that it owned. When those bets started to go sour, Archegos’ creditors — major banks such as Credit Suisse, Morgan Stanley and Goldman Sachs — sold off some $35 billion in stock, as it became clear that their client would struggle to pay them back. The banks themselves also took hits: Credit Suisse lost more than $5 billion, and Morgan Stanley and Goldman lost about $1 billion each, The stock prices of ViacomCBS and Discovery fell 35 percent as Archegos’ creditors liquidated the shares they bought on behalf of the company.

      As Goldstein warned, similar fire sales could happen because of hedge funds invested in wildly fluctuating cryptocurrency, especially considering rules on disclosure and leverage. Archegos didn’t have to reveal its stake in ViacomCBS and Discovery, like investors in cryptocurrency don’t have to do, because it had purchased derivatives based on the firms’ share prices, instead of directly investing in the companies’ stock. And while Archegos leveraged up to five times its capital, some cryptocurrency exchanges, like Binance, which has processed trillions in transactions this year alone, let clients purchase digital assets with $125 in borrowed money for every $1 of the client’s own money. Financial markets may be able to weather a few major failures in normal times, but a sudden uptick in the number of hedge fund failures and corporate bankruptcies could lead to a wider crisis of confidence, increasing the potential for more asset sales, the failure of financial markets, mass layoffs and a recession. The potential for the broader economy to suffer from financial sector wheeling and dealing in any market is particularly acute at the moment. Corporate debt reached record levels in 2020 driven by promises of pandemic bailouts of bondholders from the Federal Reserve, and it climbed to new heights this year with “higher-risk, speculative-grade bonds … now on pace to set their own record,” as the Wall Street Journal said on June 14.

      Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

    • #433951
      snot
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      • Total Posts: 1,285

      (using the example of Archegos), the risks involved in all kinds of other financial instruments including but not limited to credit derivatives are every bit as dangerous as crypto.  And speculative credit derivatives and naked shorts offer none of the advantages of BTC (not all crypto are alike).

      TPTB are terrified of losing control over our currency and thus losing one of their prime means of looting the rest of us.  This article looks to me like part of the engineered campaign to try to gin up support for regulating crypto to death.

      There are many much more helpful measures that could be taken to help wring out speculative excesses that threaten the larger economy, e.g., restoring Glass-Steagall properly (the Volcker Rule leaks like a sieve), taxing high-frequency trading, outlawing stock buybacks, etc., without depriving everyone of the benefits of crypto.

       

       

      Destruction is easy; creation is hard, but more interesting.

      • #433952
        Ohio Barbarian
        Moderator
        • Total Posts: 21,777

        The rich would still be able to gamble in their Wall Street casino, but they would be unable to recoup their losses from the commercial banks that provide services to most people, which was the whole point of Glass-Steagall in the first place.

        But that’s well outside the Overton Window of thinkable things in Washington. Is there a single Congresscritter calling for the restoration of Glass-Steagall? <crickets> No, instead we hear AOC crying over some athlete kicked off some team I don’t give a shit about because she tested positive for pot.

        It is better to vote for what you want and not get it than to vote for what you don't want and get it.--Eugene Debs

        You can jail a revolutionary, but you can't jail the revolution.--Fred Hampton

      • #434110
        eridani
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        • Total Posts: 9,978

        It sure the hell isn’t a medium of exchange.  If you think it is, tell me how I can get quarters in change from crypto coins to use in the laundromat.  The PTB have at least set up a medium of exchange.

        Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

    • #434129
      djean111
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      • Total Posts: 6,446

      “Wall Street needs a cryptocurrency bailout”, did it.

      America is not a country, it's just a business. (Brad Pitt, Killing Them Softly)

      Everything I post is just my opinion, and, honestly, I would love to be wrong.

    • #434133
      ArtfromArk
      Participant
      • Total Posts: 1,616

      and its connection to Bitcoin. Bitcoin was rising parabolically in part because Tesla announced that it was accepting Bitcoin in payment. Then, voila! afew days after reaching $60,000, Tesla announces in mid-May that it was not going to accept Bitcoin, and the market crashed, eventually falling to down to around $33,000.

      https://www.caranddriver.com/news/a36434628/tesla-bitcoin-wont-accept/

       

      Then, last month Tesla announced it would resume accepting Bitcoin at some point in the future, and the price rebounded to around $40,000.

       

      https://edition.cnn.com/2021/06/14/investing/elon-musk-bitcoin-intl-hnk/index.html

       

      But since then, it has lost all of that spike and is now just below $33,000

      “There’s a new spirit abroad in the land. The old days of ‘grab and greed’ are on their way out. We’re beginning to think of what we owe the other fellow, not just what we’re compelled to give him. The time’s coming… when we shan’t be able to fill our bellies in comfort while others go hungry, sleep in warm beds while others shiver in the cold.... And God willing, we’ll live to see that day…” Basil Rathbone,"Sherlock Holmes Faces Death" (Universal 1943)

      • #434308
        eridani
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        • Total Posts: 9,978

        If you think it is, tell me how I can use it to get quarters for the laundromat.

        Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

        • #434328
          djean111
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          • Total Posts: 6,446

          Whether you can get quarters at the laundromat is not really pertinent; anyway, the laundromat near me requires loading up a swipe card in order to use the machines.  Your quarters would be useless.  Right now, bitcoin is also speculative, but then so is gold and silver and the dollar.  Working overseas taught me about how the dollar is worth more – or – less- than other currencies, as a medium of exchange, on any given day.  Makes expense reports interesting, when one has paid for everything with yen or krone or, before the EU, guilders. Your quarters would be useless unless exchanged, and then they might not be worth enough, that day, to use the laundromat.

          A lot of online retailers accept BTC for goods and services -here is an article about that.

          https://cointelegraph.com/bitcoin-for-beginners/what-can-i-buy-with-bitcoins

          America is not a country, it's just a business. (Brad Pitt, Killing Them Softly)

          Everything I post is just my opinion, and, honestly, I would love to be wrong.

          • #434451
            eridani
            Participant
            • Total Posts: 9,978

            Safeway, Albertsons, Fred Meyer and QFC weren’t on the list.  Nor is my neighborhood taco stand.  Still pretty useless as far as I am concerned.

            Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

            • #434482
              djean111
              Participant
              • Total Posts: 6,446

              Wall Street and Subway and Home Depot et al.  will continue to use/accept it as a medium of currency, though, methinks.

              It is not like people are asking you to believe in, and participate in, a corrupt electoral system and, on top of that, call the US a democracy.  That is truly gag-worthy.  The rest of the world knows that.  And Bitcoin will not affect you personally, unless and until the folks who have “won” an “election” bail out the Bitcoin users, that is.

              https://www.usnews.com/news/best-countries/articles/2020-10-07/us-elections-compare-poorly-to-other-democracies-research-shows

              A 2019 report by Harvard University’s Electoral Integrity Project found that the United States had the second-lowest integrity score among liberal democracies for elections between 2012 and 2018. The country was ranked at No. 57 overall.

              Methinks that US elections are now just a money-making scam.  A money-laundering device used to gather even more money.  I bet the DNC and the GOP will eventually take Bitcoin, if it is offered.  Medium of exchange, used to buy products and services.

              America is not a country, it's just a business. (Brad Pitt, Killing Them Softly)

              Everything I post is just my opinion, and, honestly, I would love to be wrong.

              • #434599
                eridani
                Participant
                • Total Posts: 9,978

                -unless and until the folks who have “won” an “election” bail out the Bitcoin users.   Which is a 100% certainty if it is a Republican and a 90% certainty if it’s a Dem

                Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

                • #434621
                  djean111
                  Participant
                  • Total Posts: 6,446

                  Both parties will bail out bad investments in dollars, mortgages, bitcoin.  May be in different forms, but BOTH parties will bail out bad debts for Wall Street.  Obama looked pretty fetching whilst doing that, big cheesy grin.

                  Also, I believe those percentages should be 100% vs 100%. And, again, if anyone at all accepts bitcoin as payment, it is a medium of exchange.  Sotheby’s, Christie’s, Home Depot.  I personally think it stupid to accept something with such a volatile value, but then again, I know I will never be bailed out.

                  America is not a country, it's just a business. (Brad Pitt, Killing Them Softly)

                  Everything I post is just my opinion, and, honestly, I would love to be wrong.

        • #434487
          ArtfromArk
          Participant
          • Total Posts: 1,616

          only that its price may have something to do with what billionaires and billion-dollar corporations think of it.

           

          Personally, in my current quarter-million population city of residence, there is only one (that I know of) business that accepts Bitcoin– and that is a café that caters mostly to Japanese hipsters. So you can take that for what it’s worth.

          “There’s a new spirit abroad in the land. The old days of ‘grab and greed’ are on their way out. We’re beginning to think of what we owe the other fellow, not just what we’re compelled to give him. The time’s coming… when we shan’t be able to fill our bellies in comfort while others go hungry, sleep in warm beds while others shiver in the cold.... And God willing, we’ll live to see that day…” Basil Rathbone,"Sherlock Holmes Faces Death" (Universal 1943)

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