Topic: Bitcoin "reserve" currency (Read 2327 times)
yen and gold
Now that you have a question I can answer:
First Choice: USD
Everything I need to pay for to survive requires USD, and short term it should remain fairly strong.
Second Choice: Yen
The long term deflationary trend looks to be holding on strong. I don't see an end to it until government debt levels come down in Japan. Yen would have been a horrible choice 6 months ago, but it is looking good today.
First Choice: USD
Everything I need to pay for to survive requires USD, and short term it should remain fairly strong.
Second Choice: Yen
The long term deflationary trend looks to be holding on strong. I don't see an end to it until government debt levels come down in Japan. Yen would have been a horrible choice 6 months ago, but it is looking good today.
The USD is about on its last legs. In fact just gasping for air with the attempts on Bitcoin . The Yen will not do as well once the USD finishes its collapse unless China decides to give them a hand.
Next in line:
China or Europe with China currently having the upper hand. And its possible for the first time that we could see a multi global reserve. All this could be good as well as bad for Bitcoins and the alt. coins.
If it doesn't come in cash, it will come in blood.
couldn't agree more
Sorry, I made a typo and was talking about deflation in the Yen, not inflation in the dollar. And yes, you always have to pay the piper in the end. If it doesn't come in cash, it will come in blood.
It is added to the accounts of the primary dealers yes, but the government also has to pay it back to the fed.
The demand is created because the US government now owes the value of the treasury to the fed. Yes, before the maturity date it is inflationary, but the debt eventually comes due.
Do they though? The solution for most governments in the post WWII era when debt comes due is to issue more debt to repay it. If yields are too high than the fed will simply step in to monetize the new debt. If the treasury issues new debt to pay off the old (thats not an if its a when) the cycle will just continue. Until a new reserve currency steps in or a new asset is defined as the risk free rate, this will not change.
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I'll just leave this here:
Debt levels in Japan are still as high as they were when inflation began.
As I said you haven't seen price inflation you have only seen an inflation in the monetary base so I'm not sure what you mean by when inflation began. Also you cant say ipso facto that because exchange rates are down that their is inflation. Exchange rates are the result of a wide variety of supply and demand factors. The huge shifts in the JPY USD exchange rate have largely been the result of traders anticipating the effects of Abe's policy's. Throwing a chart up with the exchange rate over time doesn't necessarily say anything about inflation.
In any case I feel like we are talking at cross purposes here. I think we can both agree that Japan is in a deflationary spiral, which is good for savers (the majority of the Japanese population) but bad for companies focused on exports (most Japanese companies). This puts Japan in a tough spot because they desperately want to inflate their currency to help exports but if they inflate too much rates will rise and they will be screwed. This level of monetization on a global scale has never been seen before so the unwinding process is relatively unknown. I'm content to wait and see while I continue to acquire BTC
Actually, since money is only "printed" by issuing government debt and because interest rates are still above 0% in the long run they are creating more demand than they create supply. When assets fall cash is king. Markets are pushing up interest rates for both governments, which means they have to sell assets to keep rates in check. They can't afford to let them rise, Japan especially so. That said, I'm holding onto my Yen for at least the next few months. I only buy USD when I need to pay bills.
I'm not sure if you're misunderstanding QE or I am misunderstanding your argument.
When the treasury issues debt almost none of it is bought by traditional buyers (banks and other financial institutions) at this point in time. You have primary dealers who buy the debt when it is issued and then immediately sell it to the fed. The fed doesn't actually have the money to buy this debt so it instead adds credits to the accounts that these primary dealers keep with it. While this isn't actually printing money, most money today isn't printed anyway, it only exists electronically it has the same effect, the money supply increases. Money isn't printed by the issuing of government debt, it is only printed when the fed adds to the accounts of primary dealers, the two are not the same.
It is added to the accounts of the primary dealers yes, but the government also has to pay it back to the fed.
Quote
When the Fed buys these treasuries from the primary dealers (ie prints money) it has the double effect of reducing the amount of treasuries available for sale on the market. This lowering of supply increases the price which in turn lowers the yield. So not only is the fed monetizing the debt it is also forcing down the rate that the treasury has to pay, regardless of the risk/reward ratio perceived by the market. Currently the 30-year treasury is yielding about 3.3% a year nominally which means unadjusted for inflation. The real (inflation adjusted) yield on those bonds is much closer to 0%. I'm not sure how familiar you are with zero interest rate policy but that is the trap that Japan has been in for the last 20ish years. Once a government commits to a near 0% interest rate it is almost impossible for them to go back to anything else. debt service payments soon outstrip all tax revenues and even a 1% rise in rates would destroy the government's budget. Thus the central bank has to monetize more and more debt and a vicious cycle is born.
These primary dealers then take this money and have to do something with it, they are profit oriented they cant just sit on this cash. The hope at the federal reserve is that the primary dealers will take this money and invest it in the form of loans which will in turn spur economic growth and lower unemployment. Instead these primary dealers are investing in risk assets (stocks and corporate debt primarily) in order to get some yield off all of the new found cash. Thus we have the risk asset bubble, sponsored by the fed, that will, at some point int he future, come crashing down.
This is why their has not been much inflationary price pressure even though the fed is currently printing $85 billion a month. The money isn't going into circulation, instead it is being used to bid up the price of risk assets. This is exactly what happened during the dotcom and housing bubbles. Easy credit from the fed was invested in risk assets which eventually came tumbling down when the fed was forced to turn of the spigot.
I'm not sure what you mean by they are creating more demand then supply so I cant address that directly. Also what assets have you seen either government sell? their is no need to sell assets when the central bank is perfectly willing to monetize the debt. Interest rates have largely been rang bound since the financial crisis and in the grand scheme of things are significantly lower than they have ever been for this long of a time period. ZIRP is like crack for governments, once you get addicted your hooked for life. While Japan and the US both cant afford to let rates rise that is still compatible with devaluing the currency as I have outlined above. What matters is who is able to devalue faster Japan or the US.
These primary dealers then take this money and have to do something with it, they are profit oriented they cant just sit on this cash. The hope at the federal reserve is that the primary dealers will take this money and invest it in the form of loans which will in turn spur economic growth and lower unemployment. Instead these primary dealers are investing in risk assets (stocks and corporate debt primarily) in order to get some yield off all of the new found cash. Thus we have the risk asset bubble, sponsored by the fed, that will, at some point int he future, come crashing down.
This is why their has not been much inflationary price pressure even though the fed is currently printing $85 billion a month. The money isn't going into circulation, instead it is being used to bid up the price of risk assets. This is exactly what happened during the dotcom and housing bubbles. Easy credit from the fed was invested in risk assets which eventually came tumbling down when the fed was forced to turn of the spigot.
I'm not sure what you mean by they are creating more demand then supply so I cant address that directly. Also what assets have you seen either government sell? their is no need to sell assets when the central bank is perfectly willing to monetize the debt. Interest rates have largely been rang bound since the financial crisis and in the grand scheme of things are significantly lower than they have ever been for this long of a time period. ZIRP is like crack for governments, once you get addicted your hooked for life. While Japan and the US both cant afford to let rates rise that is still compatible with devaluing the currency as I have outlined above. What matters is who is able to devalue faster Japan or the US.
The demand is created because the US government now owes the value of the treasury to the fed. Yes, before the maturity date it is inflationary, but the debt eventually comes due.
I'll just leave this here:
Debt levels in Japan are still as high as they were when deflation began.
Actually, since money is only "printed" by issuing government debt and because interest rates are still above 0% in the long run they are creating more demand than they create supply. When assets fall cash is king. Markets are pushing up interest rates for both governments, which means they have to sell assets to keep rates in check. They can't afford to let them rise, Japan especially so. That said, I'm holding onto my Yen for at least the next few months. I only buy USD when I need to pay bills.
I'm not sure if you're misunderstanding QE or I am misunderstanding your argument.
When the treasury issues debt almost none of it is bought by traditional buyers (banks and other financial institutions) at this point in time. You have primary dealers who buy the debt when it is issued and then immediately sell it to the fed. The fed doesn't actually have the money to buy this debt so it instead adds credits to the accounts that these primary dealers keep with it. While this isn't actually printing money, most money today isn't printed anyway, it only exists electronically it has the same effect, the money supply increases. Money isn't printed by the issuing of government debt, it is only printed when the fed adds to the accounts of primary dealers, the two are not the same.
When the Fed buys these treasuries from the primary dealers (ie prints money) it has the double effect of reducing the amount of treasuries available for sale on the market. This lowering of supply increases the price which in turn lowers the yield. So not only is the fed monetizing the debt it is also forcing down the rate that the treasury has to pay, regardless of the risk/reward ratio perceived by the market. Currently the 30-year treasury is yielding about 3.3% a year nominally which means unadjusted for inflation. The real (inflation adjusted) yield on those bonds is much closer to 0%. I'm not sure how familiar you are with zero interest rate policy but that is the trap that Japan has been in for the last 20ish years. Once a government commits to a near 0% interest rate it is almost impossible for them to go back to anything else. debt service payments soon outstrip all tax revenues and even a 1% rise in rates would destroy the government's budget. Thus the central bank has to monetize more and more debt and a vicious cycle is born.
These primary dealers then take this money and have to do something with it, they are profit oriented they cant just sit on this cash. The hope at the federal reserve is that the primary dealers will take this money and invest it in the form of loans which will in turn spur economic growth and lower unemployment. Instead these primary dealers are investing in risk assets (stocks and corporate debt primarily) in order to get some yield off all of the new found cash. Thus we have the risk asset bubble, sponsored by the fed, that will, at some point int he future, come crashing down.
This is why their has not been much inflationary price pressure even though the fed is currently printing $85 billion a month. The money isn't going into circulation, instead it is being used to bid up the price of risk assets. This is exactly what happened during the dotcom and housing bubbles. Easy credit from the fed was invested in risk assets which eventually came tumbling down when the fed was forced to turn of the spigot.
I'm not sure what you mean by they are creating more demand then supply so I cant address that directly. Also what assets have you seen either government sell? their is no need to sell assets when the central bank is perfectly willing to monetize the debt. Interest rates have largely been rang bound since the financial crisis and in the grand scheme of things are significantly lower than they have ever been for this long of a time period. ZIRP is like crack for governments, once you get addicted your hooked for life. While Japan and the US both cant afford to let rates rise that is still compatible with devaluing the currency as I have outlined above. What matters is who is able to devalue faster Japan or the US.
Bitcoin is the future reserve currency for the world.
If you want a hedge I think in the future we are going to discover a lot more scientific uses for gold that will boost its value in the long term.
If you want a hedge I think in the future we are going to discover a lot more scientific uses for gold that will boost its value in the long term.
Now that you have a question I can answer:
First Choice: USD
Everything I need to pay for to survive requires USD, and short term it should remain fairly strong.
Second Choice: Yen
The long term deflationary trend looks to be holding on strong. I don't see an end to it until government debt levels come down in Japan. Yen would have been a horrible choice 6 months ago, but it is looking good today.
First Choice: USD
Everything I need to pay for to survive requires USD, and short term it should remain fairly strong.
Second Choice: Yen
The long term deflationary trend looks to be holding on strong. I don't see an end to it until government debt levels come down in Japan. Yen would have been a horrible choice 6 months ago, but it is looking good today.
My fear with both of these currencies is that their central banks are undertaking a policy of aggressive devaluation. While right now this might not be a problem their is a huge potential for inflationary pressure especially 12-24 months down the road. I'd rather take my fiat out in a stable currency, then convert to USD (since that's what I use every day as well).
Actually, since money is only "printed" by issuing government debt and because interest rates are still above 0% in the long run they are creating more demand than they create supply. When assets fall cash is king. Markets are pushing up interest rates for both governments, which means they have to sell assets to keep rates in check. They can't afford to let them rise, Japan especially so. That said, I'm holding onto my Yen for at least the next few months. I only buy USD when I need to pay bills.
Now that you have a question I can answer:
First Choice: USD
Everything I need to pay for to survive requires USD, and short term it should remain fairly strong.
Second Choice: Yen
The long term deflationary trend looks to be holding on strong. I don't see an end to it until government debt levels come down in Japan. Yen would have been a horrible choice 6 months ago, but it is looking good today.
First Choice: USD
Everything I need to pay for to survive requires USD, and short term it should remain fairly strong.
Second Choice: Yen
The long term deflationary trend looks to be holding on strong. I don't see an end to it until government debt levels come down in Japan. Yen would have been a horrible choice 6 months ago, but it is looking good today.
My fear with both of these currencies is that their central banks are undertaking a policy of aggressive devaluation. While right now this might not be a problem their is a huge potential for inflationary pressure especially 12-24 months down the road. I'd rather take my fiat out in a stable currency, then convert to USD (since that's what I use every day as well).
Now that you have a question I can answer:
First Choice: USD
Everything I need to pay for to survive requires USD, and short term it should remain fairly strong.
Second Choice: Yen
The long term deflationary trend looks to be holding on strong. I don't see an end to it until government debt levels come down in Japan. Yen would have been a horrible choice 6 months ago, but it is looking good today.
First Choice: USD
Everything I need to pay for to survive requires USD, and short term it should remain fairly strong.
Second Choice: Yen
The long term deflationary trend looks to be holding on strong. I don't see an end to it until government debt levels come down in Japan. Yen would have been a horrible choice 6 months ago, but it is looking good today.
To respond to OP's point, not withstanding his misuse of the reserve currency terminology, my top currencies would be the following:
Chinese Yuan
Swis Franc
New Zealand Dollar
The Yuan is backed by the highest % of gold of any major currency and their are many who suggest they may be moving towards a true gold standard, they have been acquiring gold at a pretty alarming rate.
The Swiss Franc is one of the most stable currencies in the world, partially because they peg, but so does the Yuan, and until 2000 it was legally required that their currency be 40% backed by gold, currently I believe it is around 20%
The NZD is probably a curve ball for anyone out there who studies currency, and is why they are third on my list. They have no deposit insurance which means that their banks are required to be relatively well capitalized as their is no authority to bail them out if fractional reserve lending fails them. Not as reliable as the first two but a decent third choice in my opinion.
Chinese Yuan
Swis Franc
New Zealand Dollar
The Yuan is backed by the highest % of gold of any major currency and their are many who suggest they may be moving towards a true gold standard, they have been acquiring gold at a pretty alarming rate.
The Swiss Franc is one of the most stable currencies in the world, partially because they peg, but so does the Yuan, and until 2000 it was legally required that their currency be 40% backed by gold, currently I believe it is around 20%
The NZD is probably a curve ball for anyone out there who studies currency, and is why they are third on my list. They have no deposit insurance which means that their banks are required to be relatively well capitalized as their is no authority to bail them out if fractional reserve lending fails them. Not as reliable as the first two but a decent third choice in my opinion.
Guilty as charged with misusing the term reserve currency. It was the best term I could think of for accurately describing the concept, while at the same time not being entirely accurate for what I was trying describe.
I like this idea a lot
To respond to OP's point, not withstanding his misuse of the reserve currency terminology, my top currencies would be the following:
Chinese Yuan
Swis Franc
New Zealand Dollar
The Yuan is backed by the highest % of gold of any major currency and their are many who suggest they may be moving towards a true gold standard, they have been acquiring gold at a pretty alarming rate.
The Swiss Franc is one of the most stable currencies in the world, partially because they peg, but so does the Yuan, and until 2000 it was legally required that their currency be 40% backed by gold, currently I believe it is around 20%
The NZD is probably a curve ball for anyone out there who studies currency, and is why they are third on my list. They have no deposit insurance which means that their banks are required to be relatively well capitalized as their is no authority to bail them out if fractional reserve lending fails them. Not as reliable as the first two but a decent third choice in my opinion.
Chinese Yuan
Swis Franc
New Zealand Dollar
The Yuan is backed by the highest % of gold of any major currency and their are many who suggest they may be moving towards a true gold standard, they have been acquiring gold at a pretty alarming rate.
The Swiss Franc is one of the most stable currencies in the world, partially because they peg, but so does the Yuan, and until 2000 it was legally required that their currency be 40% backed by gold, currently I believe it is around 20%
The NZD is probably a curve ball for anyone out there who studies currency, and is why they are third on my list. They have no deposit insurance which means that their banks are required to be relatively well capitalized as their is no authority to bail them out if fractional reserve lending fails them. Not as reliable as the first two but a decent third choice in my opinion.
You do recall how the Krona did during the crisis, right? Sure, Iceland prosecuted bankers. Big deal. The currency also lost half of its purchasing power versus the US Dollar. Imagine everything priced in dollars (essentially, all imports since those products could be sold for dollars instead) doubling. Almost overnight.
Seems a very strange choice for community that's so obsessed about inflation
ref: http://www.xe.com/currencycharts/?from=USD&to=ISK&view=10Y
Seems a very strange choice for community that's so obsessed about inflation
ref: http://www.xe.com/currencycharts/?from=USD&to=ISK&view=10Y
Bitcoin can never be strictly tied to any fiat currency, Icelandic Krona or otherwise, nor should it, and your point exemplifies one of many reasons why.
You do recall how the Krona did during the crisis, right? Sure, Iceland prosecuted bankers. Big deal. The currency also lost half of its purchasing power versus the US Dollar. Imagine everything priced in dollars (essentially, all imports since those products could be sold for dollars instead) doubling. Almost overnight.
Seems a very strange choice for community that's so obsessed about inflation
ref: http://www.xe.com/currencycharts/?from=USD&to=ISK&view=10Y
Seems a very strange choice for community that's so obsessed about inflation
ref: http://www.xe.com/currencycharts/?from=USD&to=ISK&view=10Y
Since you think Iceland is 'anti-bank', it's currency should be the reserve currency? 
Iceland is not anti-banking. If it were, it wouldn't be in that mess in 2008 in the first place. Also, you probably don't even need a Bill Gates to buy up all the Icelandic Kronas there are in the world! BTC though is a completely different animal and yes, it can certainly be the reserve currency of the world quite a bit into the future. Not sure we are ready for it now though.
Iceland is not anti-banking. If it were, it wouldn't be in that mess in 2008 in the first place. Also, you probably don't even need a Bill Gates to buy up all the Icelandic Kronas there are in the world! BTC though is a completely different animal and yes, it can certainly be the reserve currency of the world quite a bit into the future. Not sure we are ready for it now though.
As far as I know, Iceland is the only country that actually prosecuted the bankers that caused the financial crisis in Iceland. That's what I meant by anti-bank. Therefore, they might be inclined to be in favor of a concept such as bitcoin. Or they might not, but their actions have shown that they're probably more ready for bitcoins than most countries.
Since you think Iceland is 'anti-bank', it's currency should be the reserve currency?
Iceland is not anti-banking. If it were, it wouldn't be in that mess in 2008 in the first place. Also, you probably don't even need a Bill Gates to buy up all the Icelandic Kronas there are in the world! BTC though is a completely different animal and yes, it can certainly be the reserve currency of the world quite a bit into the future. Not sure we are ready for it now though.
Iceland is not anti-banking. If it were, it wouldn't be in that mess in 2008 in the first place. Also, you probably don't even need a Bill Gates to buy up all the Icelandic Kronas there are in the world! BTC though is a completely different animal and yes, it can certainly be the reserve currency of the world quite a bit into the future. Not sure we are ready for it now though.
In the world of fiat, the US Dollar is the world reserve currency. If you were to pick a reserve currency for the bitcoin, which would you pick? Obviously, the ideal would be to not need one, but if we get to that state of the economy, it will be many years from now.
My vote would go to the Icelandic krona since Iceland seems fairly anti-banking as a country.
My vote would go to the Icelandic krona since Iceland seems fairly anti-banking as a country.
I'm not sure your question makes sense.
From http://en.wikipedia.org/wiki/Reserve_currency
Quote
A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves.
It might make sense for bitcoin to BE a reserve currency, but it doesn't make sense for it to HAVE a reserve currency since it is neither a government nor an institution.
Right, I clearly need to explain myself better in these forums.
I meant it in a somewhat different term than the traditional use the term reserve currency since you're right, the term doesn't make sense for bitcoins. But in most places, you can't pay all your bills with bitcoins, so what I meant was if you had to pick a currency to choose as a preferred currency to exchange from bitcoins -> fiat, which would you prefer?
they pay with their local currency.
but think about it.
the bitcoin could become the PEOPLE'S reserve currency.
Spendulus is correct there is no currency currently people anywhere in the world can use to pay their bills. With the digital nature of Bitcoin, it is at least plausible that the infrastructure could be built to have one currency where you can pay all your bills from anywhere in the world.
Also to address your picking a reserve currency point, a reserve currency is as much curse as blessing
http://www.financialsense.com/contributors/john-butler/curse-reserve-currency-triffin-dilemma
It is the ability to print money seemingly endlessly that allows such terrible waste and mal-investment from the government of the country possessing the reserve currency.
In the world of fiat, the US Dollar is the world reserve currency. If you were to pick a reserve currency for the bitcoin, which would you pick? Obviously, the ideal would be to not need one, but if we get to that state of the economy, it will be many years from now.
My vote would go to the Icelandic krona since Iceland seems fairly anti-banking as a country.
My vote would go to the Icelandic krona since Iceland seems fairly anti-banking as a country.
I'm not sure your question makes sense.
From http://en.wikipedia.org/wiki/Reserve_currency
Quote
A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves.
It might make sense for bitcoin to BE a reserve currency, but it doesn't make sense for it to HAVE a reserve currency since it is neither a government nor an institution.
Right, I clearly need to explain myself better in these forums.
I meant it in a somewhat different term than the traditional use the term reserve currency since you're right, the term doesn't make sense for bitcoins. But in most places, you can't pay all your bills with bitcoins, so what I meant was if you had to pick a currency to choose as a preferred currency to exchange from bitcoins -> fiat, which would you prefer?
they pay with their local currency.
but think about it.
the bitcoin could become the PEOPLE'S reserve currency.
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