The price of Bitcoin leaped 128% in one month from mid-July to mid-August 17, 2017, on no news! Despite price fell to $3,200 from its all-time high of $5,000 after China banned initial coin offerings (ICOs) and exchanges, it’s back over $4,100 now. Two years ago, it was only $225. Another popular cryptocurrency, Ethereum, is even more amazing. It has outshined Bitcoin’s big gain with a year-to-date performance of over 37-fold at times. Many other cryptos have achieved at least 100% gain this year. We are undoubtedly witnessing a bubble.

Bitcoin enthusiasts claim that bitcoin is real money like gold and silver. But what is money?

Aristotle defined four characteristics for good money:

1. It must be durable, and its value should be reasonably stable over time. Bitcoin can hardly satisfy the requirement of durability because the coins would be nowhere to be found if there is a long-term power or Internet outage. Even if the power grid is not disturbed, its violent fluctuations in price make it unusable for savings and hence borrowing or lending.

2. It must be portable, which is a plus for Bitcoin.

3. It must be divisible. Again, bitcoin fully satisfies this requirement.

4. It must have intrinsic value, and cannot be created out of thin air like what Central Banks do nowadays. Like gold, bitcoin has a limited and finite supply.

Even if Bitcoin processes all the above essential features, I still don’t believe it can become legal tender. The reason is very simple: no government will voluntarily hand over the power of their monopoly on the issuance of money to another party. They need the power to print money out of think air to inflate away the mountain of debts they have accumulated over the years. Like it or not, regulation is coming, defeating the very purpose Bitcoin is created for.

Risk is most dangerous when it is least apparent, and least dangerous when it is most apparent.- JIM GRANT

 

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本文乃作者個人意見並不構成任何投資建議。

作者不承擔任何因使用本文章所提供的資訊內容或資料所產生的直接、間接、附帶的、特別的、衍生性或懲罰性賠償,包括收入、利潤、經營、商譽等損失或其他無形損失。作者不負責任何因下載本文章所引致的電腦病毒感染、通訊系統故障或其他故障、越權存取、資料刪改、遺漏或其他錯誤、資料被盜或毀滅所導致的損失。

如本協定的中、英文本出現分歧,以英文文本為准。

 

This newsletter represents only the opinions of the author. Any views expressed should not be construed in any way as an offer, an endorsement, or inducement to invest.

In no event shall the author be liable for any direct, indirect, incidental, special, consequential or exemplary damages including damages for loss of revenue, anticipated profits, loss of business, goodwill, or other tangible or intangible losses resulting from the use of any data or information provided in this article.

The author disclaims any liability and losses consequent upon the downloading of this article which results in computer virus infections, communication network failures and other failures, unauthorized access of all types, data alterations and omissions and other data errors, and data theft or destruction of records.

In case of discrepancies in the Chinese and English versions of this agreement, the English version shall prevail.

 

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聯儲局終於在上星期四會議後公佈量化緊縮時間表,今年十月開始縮減中央銀行 4.5 萬億美元的資產負債表,十二月將按早前計劃加息。聯儲局將停止再投資到期債券,直至資產負債表下調至目標水平。資產負債表將以每月約100億美元的速度縮減,下年將加至以每月約500億美元的速度縮減。

聯儲局緊縮政策將減少貨幣供應,提高利率。

我不認為聯儲局能貫徹執行計劃。美國經濟將碰壁,整個體系將在堆積如山的債務下倒塌。

當股市崩盤,到處出現破產時,我們將見第五輪、第六輪量化寬鬆。清算的日子早晚到來,市場歸零重啟將是無可避免。

The Fed finally gave a timetable for QT (Quantitative Tightening) after its meeting on Thursday last week. It sets October as the start of the unwinding of the central bank’s $4.5 trillion balance sheet and will stick to the planned rate hike in December this year. The Fed will stop rolling over debts until the balance sheet comes down to the targeted level. It will shrink its balance sheet at a rate of about $10 billion a month, then going up to $50 billion a month next year.

The Fed’s QT policy will reduce money supply and increase interest rates.

I don't think the Fed can follow through with its plans. The economy will hit a wall and the whole system will collapse under the mountain of debts.

When stocks crash and bankruptcies are everywhere, we will see QE5, QE6, … QE infinity. And when the day of reckoning arrives, a hard reset is inevitable.

 

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本文乃作者個人意見並不構成任何投資建議。

作者不承擔任何因使用本文章所提供的資訊內容或資料所產生的直接、間接、附帶的、特別的、衍生性或懲罰性賠償,包括收入、利潤、經營、商譽等損失或其他無形損失。作者不負責任何因下載本文章所引致的電腦病毒感染、通訊系統故障或其他故障、越權存取、資料刪改、遺漏或其他錯誤、資料被盜或毀滅所導致的損失。

如本協定的中、英文本出現分歧,以英文文本為准。

 

This newsletter represents only the opinions of the author. Any views expressed should not be construed in any way as an offer, an endorsement, or inducement to invest.

In no event shall the author be liable for any direct, indirect, incidental, special, consequential or exemplary damages including damages for loss of revenue, anticipated profits, loss of business, goodwill, or other tangible or intangible losses resulting from the use of any data or information provided in this article.

The author disclaims any liability and losses consequent upon the downloading of this article which results in computer virus infections, communication network failures and other failures, unauthorized access of all types, data alterations and omissions and other data errors, and data theft or destruction of records.

In case of discrepancies in the Chinese and English versions of this agreement, the English version shall prevail.

 

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Chief Executive Carrie Lam will unveil her new scheme for first-time homebuyers who do not qualify for subsidized housing but cannot afford private apartments during her first policy address next month. Questions to ponder: 

  1. How does the government prioritize the needs of the various segments of society? Are the woes of families below poverty line less urgent than those who cannot afford private apartments? How about those who need to wait long hours for treatment in public hospital emergency rooms, or those who need to wait years to get an operation? What about the needs of the long queue of senior citizens waiting for a place in a retirement home? …
  2. What priority scheme is being used by the goverment? How should the resources be best allocated to maximize the satisfaction of the whole society? How can the Chief Executive compare the costs to be expended and the gains to be earned for various projects?
  3. I don’t think the government has the information to do the economic calculation to ensure that public fund is well spent to maximize the overall well being of our society.
  4. Without economic calculation, what means does the government have in making a rational choice between the various alternatives? Inevitably, the government will have to resort to political calculation to prioritize the divergent interests of various stakeholders. Not surprisingly, the needs of the most vocal, the issue that gets the most media attention or the choice that will help the politician win the most votes will be the first addressed.
  5. Politics is dishonest. It is mostly claptrap and folderol.
  6. Government is the most inefficient organization in the world. Putting the government responsible for solving housing problems would inevitably lead to wastage and sub-optimal allocation of resources. You will remember the 1998 property market collapse followed by the then Chief Executive Tung Chee-hwa to scrap his plan to build 85,000 public housing units.
  7. The solution to skyrocketing price is skyrocketing price. When price is high and profit margin is attractive, property developers are encouraged to construct and sell more apartments, thereby increasing the supply and bringing down the price until it is no longer profitable to do so.
  8. Trees never grow to the sky. Property prices cannot defy gravity forever. Left to itself, free market forces will do the natural correction in due course. 

《史記.貨殖列傳序》:「故善者因之,其次利道之,其次教誨之,其次整齊之,最下者與之爭。」

 

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本文乃作者個人意見並不構成任何投資建議。

作者不承擔任何因使用本文章所提供的資訊內容或資料所產生的直接、間接、附帶的、特別的、衍生性或懲罰性賠償,包括收入、利潤、經營、商譽等損失或其他無形損失。作者不負責任何因下載本文章所引致的電腦病毒感染、通訊系統故障或其他故障、越權存取、資料刪改、遺漏或其他錯誤、資料被盜或毀滅所導致的損失。

如本協定的中、英文本出現分歧,以英文文本為准。

 

This newsletter represents only the opinions of the author. Any views expressed should not be construed in any way as an offer, an endorsement, or inducement to invest.

In no event shall the author be liable for any direct, indirect, incidental, special, consequential or exemplary damages including damages for loss of revenue, anticipated profits, loss of business, goodwill, or other tangible or intangible losses resulting from the use of any data or information provided in this article.

The author disclaims any liability and losses consequent upon the downloading of this article which results in computer virus infections, communication network failures and other failures, unauthorized access of all types, data alterations and omissions and other data errors, and data theft or destruction of records.

In case of discrepancies in the Chinese and English versions of this agreement, the English version shall prevail.

 

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 America’s debt exceeded $20 trillion (not counting unfunded liability) for the first time in its history, and Trump has just cracked a deal with Democrats to permanently abolish the US debt ceiling.  This year, total household debt rose to $12.7 trillion, surpassing its 2008 peak. Meanwhile, interest rates are at their lowest levels in recorded history.

 

Source: http://www.usdebtclock.org/ (assessed on 2pm, 19 September 2017)

Austrian economist Eugen von Böhm Bawerk once said that the higher a people’s intelligence and moral strength, the lower the rate of interest. Caveat emptor: the interest rate von Böhm Bawerk referred to was market interest rates, not government manipulated interest rates. With government distorted interest rates and a mountain of debt, nation falls when interest rates start to rise.

And it looks like interest rates are due for a rise.
 
If interest rates were to rise by 1%, the annual federal deficit rises by $200 billion. If rates were to return to the historical norm of 5.77%, just the annual interest payment would increase by $1.154 trillion per year.

Economists Ken Rogoff and Carmen Reinhart studied governments who have defaulted on their debts and found that a country enters the danger zone when its debt-to-GDP ratio exceeds 90%. At that point, a dollar of debt yields less than a dollar of output. Debt becomes an drag on GDP. America's GDP is about $19 trillion, which means a debt-to-GDP ratio of 105%.

The Fed is actually quite restrained in money printing when compared with the European Central Bank and the Japanese Central Bank. ECB owns 40% of all Eurozone government debt, and it's more than 60% in Japan. 60%!  Not a typo.  With so much debt everywhere, it will be SHTF when rates rise.
 
There are only three ways to pay off one's debt: work harder to earn more money to repay the debt, cut expenses or outright default. For a nation, there is one more alternative: create inflation by printing money out of thin air. Governments will print more money to inflate away their debts, because it is the easiest and the only politically feasible alternative.

 

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本文乃作者個人意見並不構成任何投資建議。

作者不承擔任何因使用本文章所提供的資訊內容或資料所產生的直接、間接、附帶的、特別的、衍生性或懲罰性賠償,包括收入、利潤、經營、商譽等損失或其他無形損失。作者不負責任何因下載本文章所引致的電腦病毒感染、通訊系統故障或其他故障、越權存取、資料刪改、遺漏或其他錯誤、資料被盜或毀滅所導致的損失。

如本協定的中、英文本出現分歧,以英文文本為准。

 

This newsletter represents only the opinions of the author. Any views expressed should not be construed in any way as an offer, an endorsement, or inducement to invest.

In no event shall the author be liable for any direct, indirect, incidental, special, consequential or exemplary damages including damages for loss of revenue, anticipated profits, loss of business, goodwill, or other tangible or intangible losses resulting from the use of any data or information provided in this article.

The author disclaims any liability and losses consequent upon the downloading of this article which results in computer virus infections, communication network failures and other failures, unauthorized access of all types, data alterations and omissions and other data errors, and data theft or destruction of records.

In case of discrepancies in the Chinese and English versions of this agreement, the English version shall prevail.

 

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The Telegraph reported at least 16 people died after a 117-year old derelict building in Mumbai collapsed three days ago, following two days of incessant monsoon rain. Building collapses are pretty common in India. Critics say construction projects often lack proper oversight and safety controls, but I think a more important reason is rent control. 

A rent control Act was passed in India in 1947 that froze rents at 1940 levels. It wasn’t until 1999, after a fifty two year freeze, that the Act was modified to allow a meager rent increases of 4% per year. Today thousands of tenants are paying rents of around only 500 rupees a month (that’s HK$60 a month!).

Rent controls initially benefit tenants at the expense of landlords, but over time everyone suffers. The natural consequence of disallowing the free market to come up with an optimal rent results in landlords having neither the incentive nor the money to maintain their buildings. Tenants, on the other hand,  are reluctant to pay for his/her fair share of the maintenance expense when the money are to be used for structural improvements to the entire residential structure that do not benefit their individual apartments directly, not to mention the free riders who are not willing to pay a dime for the common good.

 

Image source: http://www.afternoondc.in/city-news/aamdar-niwas-still-in-use-despite-being-declared-as-dangerous/article_139473

Government is never the solution. Government is the problem.

 

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本文乃作者個人意見並不構成任何投資建議。

作者不承擔任何因使用本文章所提供的資訊內容或資料所產生的直接、間接、附帶的、特別的、衍生性或懲罰性賠償,包括收入、利潤、經營、商譽等損失或其他無形損失。作者不負責任何因下載本文章所引致的電腦病毒感染、通訊系統故障或其他故障、越權存取、資料刪改、遺漏或其他錯誤、資料被盜或毀滅所導致的損失。

如本協定的中、英文本出現分歧,以英文文本為准。

 

This newsletter represents only the opinions of the author. Any views expressed should not be construed in any way as an offer, an endorsement, or inducement to invest.

In no event shall the author be liable for any direct, indirect, incidental, special, consequential or exemplary damages including damages for loss of revenue, anticipated profits, loss of business, goodwill, or other tangible or intangible losses resulting from the use of any data or information provided in this article.

The author disclaims any liability and losses consequent upon the downloading of this article which results in computer virus infections, communication network failures and other failures, unauthorized access of all types, data alterations and omissions and other data errors, and data theft or destruction of records.

In case of discrepancies in the Chinese and English versions of this agreement, the English version shall prevail.

 

版權所有,不得轉載。