Ok, Cards on the table

[bpr]

Re: Ok, Cards on the table

i recommend avoiding both inverse and leveraged etf's except for very short term trades. they meet their target on a DAILY basis, not long term. if you do the math on a round trip to nowhere, i.e. have the market gain or lose x, then reverse that move, you'll see that inverse and leveraged etf's lose money unless there is a strong directional move maintained over your holding period.

Very true, especially so with the 2x leveraged funds. You need to be nimble and set a stop-loss. Take profits and never, ever hold over a weekend. But they're an effective hedge against long positions in a downward or sideways market.

[Woodsman]

Re: Ok, Cards on the table

"Ok, Cards on the table?" Could be all things to all people, and here I suggest that it is covered under the impact of the political economy on finance and investment. Hard to draw hard lines these days, i.e. Corona's impact, etc. But I hear you.

[Woodsman]

Re: Ok, Cards on the table

...So what to do? How to "fix" things in a way that preserves their authority? Well, Legarde and Draghi before her persist in the view that the only reason negative interest rates have failed is because we the people have failed our central banker betters by hoarding our cash. Lo and behold, Corona shows up. In the spirit of never letting a crisis go to waste, why not use this once in a lifetime opportunity to good effect? So what's the answer?

Crypto...

‘Digital Dollar’ Stripped From Latest US Coronavirus Relief Bill

Mentions of a "digital dollar" in a coronavirus-related relief bill before the U.S. House of Representatives have been scrubbed. House Democrats' latest version of the "Take Responsibility for Workers and Families Act," revealed late Monday, does not contain any language around a "digital dollar" in its section on direct stimulus payments.

https://www.coindesk.com/digital-dol...us-relief-bill

[shiny!]

Re: Ok, Cards on the table

‘Digital Dollar’ Stripped From Latest US Coronavirus Relief Bill

Mentions of a "digital dollar" in a coronavirus-related relief bill before the U.S. House of Representatives have been scrubbed. House Democrats' latest version of the "Take Responsibility for Workers and Families Act," revealed late Monday, does not contain any language around a "digital dollar" in its section on direct stimulus payments.

https://www.coindesk.com/digital-dol...us-relief-bill

Well that's a relief. But per your link, the draft bill is already 1404 pages long. You just KNOW that if it's that many pages, it's chock-full of mischief.

I'm waiting to see how Europe uses Covid-19 and the market crash as a pretext for forcing a digital currency on the people.

[GRG55]

Re: Ok, Cards on the table

Well that's a relief. But per your link, the draft bill is already 1404 pages long. You just KNOW that if it's that many pages, it's chock-full of mischief.

I'm waiting to see how Europe uses Covid-19 and the market crash as a pretext for forcing a digital currency on the people.

Not sure about anybody else, but it's been a damn long time since I got my pay in cash, or even a paper check. Isn't that a digital currency when it shows up (well, used to show up...) like magic in my bank account?

[thriftyandboringinohio]

Re: Ok, Cards on the table

Getting paid in cash, brings back memories.
1975, I was a clerk at a big chain department store after class in high school. They had, quite literally, sacks full of cash laying around at all times.
On Friday we were paid. A line of people at the pay office.

"Next!"
You walked in and they handed you one of these stuffed with currency and coins. The lady asked you to count it and sign her book that you were given the correct amount.
They had two ladies at two little tables to keep the line moving along.

[globaleconomicollaps]

Re: Ok, Cards on the table

Not sure about anybody else, but it's been a damn long time since I got my pay in cash, or even a paper check. Isn't that a digital currency when it shows up (well, used to show up...) like magic in my bank account?

The world is engaging in an experiment with bond markets. The yield on EU bonds has dropped below zero on AAA debt for maturities below 30 years.

The question is why would anybody buy a negative yielding bond? You give your money to the Government of France for 20 years and they give you back ... less than you gave them. You always have the option of taking your money out of the bank in the form of cash. Cash yields zero percent but at least you are not losing money. The thing is you have to be able to take your money out and put it somewhere. Some insurance companies in Switzerland have tried to put large sums of cash into bank vaults. The banks protest that they are not really safe places to put cash and the vaults are just for show. Cash represents a problem for the banking system. They don't want it and it prevents governments and central banks from enacting the aggressive policy of Financial Repression. As far as the central banks are concerned the main issue is that interest rates are not negative ENOUGH. As they see it the main problem is hoarding. The idea is that people are not liberating their funds into the casino of the markets. This for instance is Ken Rogoff:
https://www.hoover.org/sites/default...conference.pdf

I. Introduction
This paper explores the case for gradually instituting the changes necessary to implement unconstrained negative interest rate policy as a long-term solution to the zero bound on interest rates (or more precisely the near zero effective lower bound.) We shall argue that if negative interest rate policy can be implemented, it would be by far the most elegant and stable long-term solution to the severe limits on monetary tools that have emerged since the financial crisis.
Admittedly, the question of how to resuscitate monetary policy is of more immediate relevance in Europe and Japan, where interest rates are already at the effective zero lower bound (in many cases mildly negative) a decade after the global financial crisis, and more than two decades after Japan’s financial crisis. But even the United States is likely to face severe constraints in the
event of another financial crisis, possibly even in a deep recession. Implementing effective negative rate policy will require a host of legal, regulatory and tax changes. A considerable amount of time and study is warranted, and the obstacles in different countries may vary. It is notable, however, that most of the changes were navigated fairly smoothly in countries that have implemented mild negative rate policy, albeit no country has tackled the main challenge, which is how to prevent paper currency hoarding and, as a corollary, how to protect bank profitability if rates go deeply negative. In this sense, the kind of unconstrained negative rate policy analyzed here is a very different animal from the very mild and highly-constrained negative rate policy that has been implemented to date.


There is, in fact, a straightforward way to essentially eliminate the hoarding problem
without any change to the issuance of paper currency. It basically involves taking steps so that electronic currency becomes the unit of account, and creating a crawling peg between electronic currency and paper currency (analogous the proposal of Eisler, 1933). If central banks can foreclose the hoarding option, it will go a long ways toward enabling private banks to directly
pass on negative rates to large-scale depositors; it is straightforward to shield those who hold
only relatively small bank deposits, and who constitute the vast majority of retail customers.

So the plan is to crank up "taxes" on stagnant funds by lowering yields to about negative 6% and banning cash so that people can't take money off the table. All the funds in the captive pool of "savers" must go into the markets.

Just a reminder if you don't like this you are an anti-social hoarder and should be punished. I believe that the trump administration has introduced laws against hoarding recently. I think the ultimate form of hoarding has traditionally been gold hoarding. Gold hoarding was banned in the USA by executive order 6102 on April 5 1933. President Franklin Roosevelt signed this order "forbidding the hoarding of gold coin, gold bullion, and gold certificates within the continental United States". pretty cool hum? That's sticking it to the man!

This is the free dictionary definition of Gold hoarding:

Gold Hoarding

the accumulation of gold as treasure by private individuals in precapitalist formations and under capitalism. “Gold hoarding” does not refer to the accumulation of state gold reserves for, among other things, international payments, the formation of strategic reserves, and the strengthening of the system of money circulation.

For many centuries—until World War II—the hoarding of gold for everyday and ceremonial needs was widespread in the East, including India, China, and Egypt. In the developed capitalist countries, gold hoarding is especially common during wartime and postwar economic dislocation, economic crisis, and periods of inflation; its purpose is to safeguard monetary capital and to protect against the devaluation of paper money. According to the League of Nations and several foreign sources, more than 5,000 tons of gold were hoarded in the 20-year period between 1914 and 1933. During and immediately after World War II, hoarding was not widespread, since most of the belligerents had kept strict control over currency, since gold mining in the major producing countries (the USA and the countries in the British sphere of influence) decreased markedly, since all of the metal mined was handed over to the state, and since private trading in gold was for all practical purposes prohibited. After the resumption of unrestricted trading in gold in the 1950’s under the impact of monetary crisis, the hoarding of gold grew rapidly. Between 1956 and 1966, according to the International Monetary Fund (IMF), 4,800 tons of gold were hoarded—or, according to the Bank for International Settlements (BIS), 6,500 tons. (The IMF figure includes gold bullion and coins; the BIS figure also includes simple jewelry made of gold.)

The largest private accumulations of gold are concentrated in France and India. According to Pick Publishing, a US firm that publishes a world currency report, of the estimated total world gold production of approximately 77,000 tons (excluding production in the USSR after 1917 and in the other socialist countries after World War II) between the discovery of America in 1492 and 1975, 24,000 tons of gold have been hoarded. By late 1974, France accounted for 4,600 tons of hoarded gold; of the 5,000 tons of gold hoarded in the countries of Asia, most is in India.

So all the hoarders are in France and India. Good to know. Are you a hoarder?

[thriftyandboringinohio]

Re: Ok, Cards on the table

...So the plan is to crank up "taxes" on stagnant funds by lowering yields to about negative 6% and banning cash...

This functions exactly like the wealth tax the hard-shell liberals are pushing for.
The central bankers can avoid the embarrassment of admitting to their rich financier constituents they've instituted a socialist wealth tax. They don't have to speak the words "wealth tax".
But they have done it.

[shiny!]

Re: Ok, Cards on the table

Not sure about anybody else, but it's been a damn long time since I got my pay in cash, or even a paper check. Isn't that a digital currency when it shows up (well, used to show up...) like magic in my bank account?

Yes, but the money that is digitally transferred to your account is still in a currency that you can withdraw as cash. If you want folding money or even fear a banking collapse you can withdraw your cash if you want to. But if a government bans cash and cash transactions for whatever reason, e.g. to prevent money laundering by terrorists or to save us from germy money, then you can't withdraw your money anymore. Bail-ins suddenly get much easier, right?

[santafe2]

Re: Ok, Cards on the table

This functions exactly like the wealth tax the hard-shell liberals are pushing for.
The central bankers can avoid the embarrassment of admitting to their rich financier constituents they've instituted a socialist wealth tax. They don't have to speak the words "wealth tax".
But they have done it.

These must be entities with so much money they have no more ideas on how to invest. Here *government of choice*, I'll pay you to keep my billions while I read Yachting Monthly and hire a crew to make my money disappear more quickly. I've so much money I can't bear to think about it. I find my money so annoying. I'll be on the deck, bring my caviar, I want to feel the breeze as I taste the essence of the ocean.

Yeah, we might want to focus on getting funds to small business in the US. I've started a few and when you're successful, you never have enough capital and cash flow to support your growth and pay taxes. I would make this so painful these entities are willing to look around and find ways to invest that make sense.

[globaleconomicollaps]

Re: Ok, Cards on the table

This functions exactly like the wealth tax the hard-shell liberals are pushing for.
The central bankers can avoid the embarrassment of admitting to their rich financier constituents they've instituted a socialist wealth tax. They don't have to speak the words "wealth tax".
But they have done it.

You know what would be an even better wealth tax? Hyperinflation. Probably not a coincidence that the same policy of eliminating cash works even better to prevent people from escaping the net of hyperinflation. Financial Repression ( and hyperinflation) only works if people can't take money out of the system. That means no foreign currency, no gold, no items of value like fine art, collectables or objets d'art. It would also presume that the government has the right to come into your home and search for contraband items or currencies. In a world of Financial Repression all constitutional rights are suspended. I suppose that you could skip the draconian civil liberties violations if you instituted the new policy overnight. That would prevent people from running out and buying gold. On the other hand people are pretty stupid. The people of Cyprus had plenty of opportunity to buy gold before the government seized all the money in the bank accounts. They didn't take advantage of it.

[jk]

Re: Ok, Cards on the table

This functions exactly like the wealth tax the hard-shell liberals are pushing for.
The central bankers can avoid the embarrassment of admitting to their rich financier constituents they've instituted a socialist wealth tax. They don't have to speak the words "wealth tax".
But they have done it.

the wealthy don't hold a lot of their money in cash or cash deposits. financial assets will not be subject to the mandatory inflation built into FEDCOIN(tm). worse comes to worse, they'll set up a shell company in the caymans to hold their assets in some other way.

[jk]

Re: Ok, Cards on the table

You know what would be an even better wealth tax? Hyperinflation.

hyperinflation is not a wealth tax. certainly it devalues cash. also it is, among other things, a tax on lenders of fixed rate debt. people who own treasury bonds, mortgages, corporate bonds and so on with fixed rates will all take a hit. insurers and pension funds could also take big hits unless they hedge or get out early.

otoh, borrowers do great under inflation- it's why i wouldn't consider paying off my fixed rate mortgage. it's an inflation hedge.

hyperinflation is good for all real assets- e.g. real estate, factories as well as gold. that's why german equities didn't do badly during the hyperinflationary episode there- stock represented partial ownership of real businesses with real assets.

money has been running out of equities into bond funds for a while, from before the virus scare. the bond fund buyers: mom and pop - they have always been and always will be the bag holders. they're the folks who bought pets.com in 1999, and overpriced/overleveraged/exploding-mortgages houses in 2006.

when we reach the fruition of our current experiment in mmt [the policy that dare not speak its name], mom and pop will be left holding paper which maintains its value in name only.

the wealthy will find ways to obscure their wealth, set up undervalued shell corporations in tax havens, depreciate assets, and so on. i have great faith in the ingenuity of their lawyers and accountants.

Financial Repression ( and hyperinflation) only works if people can't take money out of the system. That means no foreign currency, no gold, no items of value like fine art, collectables or objets d'art.

i disagree. a wealth tax requires assessing the value of such things, not their confiscation. repression can be implemented by heavily taxing gains made on the sale of such assets. of course, that would be a real wealth tax, and i believe the democrats have proposed doing away with special tax treatment of capital gains as a starter towards a more progressive tax regime.

. On the other hand people are pretty stupid. The people of Cyprus had plenty of opportunity to buy gold before the government seized all the money in the bank accounts. They didn't take advantage of it.

that seizure of money from accounts did not exemplify either repression or inflation. the "bail in," as it was called, treated depositors as unsecured lenders to the bank, and so they were. i'm not sure how they were treated versus other layers of the capital structure. in the absence of deposit insurance, i would have wiped out shareholders first, then commercial lenders, then bondholders before looking towards depositors, but that's just me.

[globaleconomicollaps]

Re: Ok, Cards on the table

The wealthy don't hold a lot of their money in cash or cash deposits. financial assets will not be subject to the mandatory inflation built into FEDCOIN(tm). Worse comes to worse, they'll set up a shell company in the Caymans to hold their assets in some other way.

The reason that the bill included a proposal for a digital currency was to pave the way for deeply negative interest rates. You can read more about it here:
https://www.hoover.org/sites/default...conference.pdf

When Rogoff discusses the wealthy he is talking about retired people. People that don't have their wealth already invested in the stock market. This measure is specifically targeted at those holding government bonds. So yes, that means that the wealthy ( those that are in a position to create a shell company) will benefit from this plan. I'm going to assume that laws will be passed preventing you and me from forming such companies.