1. Swedes Like Their Digital Payment Implants

    The debate between cash and digital payments has been going on for some time. The anti-cash crowd, including Harvard Professor Ken Rogoff, claim that cash is unnecessary, facilitates tax evasion and other criminal acts and must be wiped out to allow the imposition of negative interest rates.

    The pro-cash forces say that cash is needed by those too poor or too unsophisticated to manage bank accounts. Cash also comes in handy during power outages and natural disasters when digital systems don’t work. Cash helps to maintain privacy, avoids bank freezes and permits a degree of personal liberty.

    That debate will continue, despite the fact that digital payments seem to be winning the day. Meanwhile, the digital payments crowd have taken things a step further. As reported in this article, thousands of Swedes have elected to have microchips implanted under their skin to act as digital wallets and payments systems.

    These microchips contain both information on the users’ bank accounts, personal health and personal profile as well as monitoring devices to track fin‌ancial payments, heartbeats, blood pressure and personal information. Users love the convenience. There’s no more reaching for wallets, credit cards or cash. They simply wave their hand near a scanner that reads the needed information from the microchip transmitter and the transa‌ction is complete.

    Yet there’s a dark side to this technology that the implant users seem not to have considered. If a merchant can read your microchip, so can the government or a hacker simply by getting in close proximity. If the government wishes to track your whereabouts or subject you to arrest, it’s relatively easy to place scanners on buses or taxis or in restaurants to identify you.

    Even if drastic surveillance is not imposed, scanning the microchips can result in everything from targeted advertising to political propaganda based on your “profile.” Promises of encryption and privacy are meaningless. Users of the chips are trading temporary convenience for permanent surveillance by big business and Big Brother.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  2. Malaysia Tries Its Own Version of Ice-Nine. It Seizes China Account

    In my book The Road to Ruin, I discuss a concept called “ice-nine.” It was created by author Kurt Vonnegut in his novel Cat’s Cradle. Ice-nine was an isotope of water with two unique properties. It was frozen at room temperature, and if ice-nine came in contact with water, the water would turn to ice-nine and freeze.

    The ice-nine that existed was kept in sealed canisters. If any were released into water, all the water on Earth would eventually turn to ice and life on Earth would cease. I used this idea to explain how financial contagion works.

    In the next crisis, central banks will be unable to print enough money to stop a liquidity crisis. Instead, regulators will close banks and exchanges and freeze accounts. This will spread quickly into a financial ice-nine in which all accounts are eventually frozen (except for daily allowances for gas and groceries).

    We’re not there yet, but smaller versions of ice-nine are happening with greater frequency. In 2013, bank accounts in Cyprus were frozen. In 2015, bank accounts in Greece were frozen. This article reports that Malaysia recently froze a bank account with $330 million in it owned by a Chinese pipeline company.

    Superficially, this is just a high-profile contract dispute. But it once again demonstrates that when you leave money in a bank, it’s not your money anymore; it’s controlled by the bank and state regulators. They’ll give you the money if they feel like it, and not otherwise.

    Investors should be prepared for more account freezes and ice-nine activity by keeping some money outside of banks in hard assets such as gold as well as currency stored in nonbank vaults.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  3. Silicon Valley Maven Says It’s Time to Investigate Google

    Peter Thiel is not just another Silicon Valley tech guru. He’s a multibillionaire entrepreneur who co-founded PayPal, is a director of Facebook and founded Palantir, a highly secretive artificial intelligence firm that does top-secret work for the Pentagon, intelligence community and private clients. He’s also unusual in that he’s a Trump supporter while most Silicon Valley types are firmly in progressive left-wing ranks.

    As reported in this article,Thiel recently caused shock waves when he called for U.S. government investigations into Google’s work in China. In particular, Thiel raised issues related to infiltration of Google by Chinese spies, the use of Google’s research to crush human rights in China by enabling sophisticated surveillance including through facial recognition and the extent to which Google’s efforts can be utilized by the Chinese military to defeat U.S. forces. This critique was exacerbated by the fact that Google has refused to do certain projects for the U.S. military due to the objections of a few employees at its headquarters.

    Google’s response to these criticism was a terse, “We are not working with the Chinese military.” That’s a nonresponse response because almost every major company in China has some ties to the military either as a supplier, contractor or outsourced research arm. President Trump amplified Thiel’s comments by saying it was worth a look to see what’s going on at Google if the company won’t police its own efforts.

    This is just the beginning of the overdue scrutiny of Google, Facebook, Amazon and other mega-corporations in the tech world. These companies could be facing antitrust, tax and national security inquiries. Thiel’s comments are just the tip of the spear.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  4. REPLAY | Rickards: How To Protect Your Wealth When This Bubble Bursts

    There is no way out without bigger bubbles and a much larger market crash that results.  This is why I believe that we face a financial market crash as bad or worse than 1929 or 2008.

    -James Rickards

    Outspoken author and investment advisor James Rickards sits down for a pro-to-pro discussion with Hedgeye CEO Keith McCullough.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

     

  5. Cryptocurrencies and Criminality Continue to Walk Hand in Hand

    Regular readers know I take a dim view of cryptocurrencies. They are not all the same, so one has to consider the differences in algorithms, governance and ceilings on issuance before making determinations on specific cryptos.

    That said, cryptos are generally nonscalable, nonsustainable and badly flawed from a monetary perspective. The coding and math can be great, but if the developers don’t know anything about monetary economics (most don’t), then the cryptos are bound to fail in time.

    The other problem is most cryptos have no uses cases except aiding and abetting criminal conduct such as tax evasion, drug dealing, terrorism and child pornography. The legitimate use cases are few and far between.

    The main use for cryptos has been for zero-sum gambling between buyers and sellers. There have been some big winners and also millions of losers around the world. Still, the net value added created by cryptos has been zero at best and probably negative because of the energy wasted in “mining” the coins in the first place.

    With this much connection between crime, waste and cryptos, it’s not surprising to find that a fugitive technologist is proposing a new cryptocurrency to prop up the communist regime in Cuba. As reported in this article, alleged tax evader and fugitive from U.S. justice John McAfee (inventor of McAfee Antivirus Software) is now in Cuba living on his yacht and offering to build a cryptocurrency and blockchain to help Cuba avoid U.S. sanctions on international payments.

    McAfee may soon discover that’s he’s stuck in Cuba (other countries would deport him to the U.S.) and he has to use his fortune to bribe Cuban officials to remain there.

    This kind of lonely, dead-end existence is exactly what happened to investment scammer Robert Vesco. Vesco fled to Cuba in 1982 and died there in 2007, but not before being sentenced to prison by the Cubans for drug smuggling and other crimes. Today the scams are based on cryptocurrencies, not securities fraud, but the outcome for fugitives may be the same.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  6. The Global Run on the Gold Bank Continues. Is Your Gold Safe?

    Most people who have heard of the huge gold depository buried under the Federal Reserve Bank of New York assume that’s where most of the U.S. gold hoard is stashed away. That’s not true.

    It is true there are 6,000 tons of gold at the New York Fed, but that gold does not belong to the U.S. It belongs to foreign governments and the IMF, which leave it there in safekeeping. (The U.S. gold is divided between Fort Knox and West Point with a relatively small amount kept at the Denver mint.)

    The other large third-party depository in the world is the Bank of England, which also has about 6,000 tons of gold. Only about 600 tons of that gold belongs to the U.K. The rest belongs to other governments.

    The question is why other governments trust the U.S. and U.K. to secure their gold. In a financial panic, the Fed or Bank of England could easily seize that gold and hold it for their own account. As revealed in this article, foreign central banks are starting to realize this and demand return of their physical gold bullion to home country vaults.

    The stampede began several years ago when Germany demanded the return of most of its gold from the Fed and the Bank of France vaults. Austria, Netherlands, Azerbaijan, Hungary and some other countries followed suit to demand the return of some or all of their gold. Other nations such as China and Russia have always kept their gold reserves in their own vaults and never trusted custody to the U.S. or U.K. Now we can add Poland to the list.

    This article reports that Poland is demanding the return of about half its gold from the Bank of England vaults. These gold transfers involve more than just shipping the physical gold from one vault to another. London and New York are centers of gold trading in physical and derivative forms. Physical gold can be leased or hypothecated to trading banks for purposes of covering short sales used to suppress the price of gold.

    As gold leaves New York and London, it becomes unavailable for leasing and other market-manipulation schemes. This may be one reason for the recent rise in gold prices, since less gold is available for manipulation.

    In any case, a full-scale “run on the bank” for gold has now started. Like most bank runs, this dynamic will only end when most or all of the gold is gone. No one wants to be the last in line to take custody of his gold. Things are about to get interesting at the gold vaults.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  7. Federal Reserve Throws Cold Water on Facebook’s Libra Cryptocurrency

    The biggest news in cryptocurrencies lately has been the announcement by Facebook of a new cryptocurrency called libra. With billions of Facebook users worldwide and established communications channels, Fakebook’s libra seems well positioned to succeed where other cryptocurrencies have failed.

    Libra is envisioned as a “stable coin,” which means that the value of one libra is pegged to a stable store of value such as a reserve currency or the IMF’s special drawing rights (SDR). That value is maintained by placing funds that users pay to acquire libra in liquid instruments such as Treasury bills, bank deposits or other cash equivalents. Sounds good. But is it?

    Libra may be too good to be true. Regulators in Europe, China and the U.S. are already raising objections. As this article reports, Federal Reserve Chair Jay Powell is already cautioning about libra. According to Powell, “I just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering…data protection, [and] consumer privacy– all of those things will need to be addressed very thoroughly and carefully, and again, in a deliberate process that will not be a sprint to implementation.”

    Most of the concerns raised publicly involve matters such as anti-money laundering (AML) rules and “know your customer” (KYC) rules. Cryptocurrency systems also typically require a money transfer license. Most of these objections are easily met and established cryptocurrencies and exchanges have satisfied the rules. But the real objections to libra are much more serious.

    By maintaining a pool of liquid assets to meet redemption requests from libra, Facebook will be operating a money market fund. Those funds require registration with the SEC and much more extensive regulation than the AML and KYC rules. Even more troubling is the fact that libra may be viewed as a bank and not very different from a central bank.

    Facebook will pay libra holders nothing in interest, but will collect interest payments on their liquid fund assets. That’s essentially what banks do in a zero interest rate environment.

    Also, in a financial panic, Facebook may not be able to sell its “liquid” assets fast enough to meet redemption requests by holders. That’s exactly what happened to money market funds in the 2008 panic. The result was a blanket guarantee by the Fed.

    Facebook could face the same panic conditions and require a Fed bailout to save the financial system. Rather than walk into another trap that will enrich Mark Zuckerberg, it’s more likely the Fed will just say no to libra.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  8. Trump’s New Fed Nominees Are on Their Way to Confirmation. Good News

    There are currently two vacancies on the powerful board of governors of the Federal Reserve System. Those vacancies have persisted since the Obama administration.

    Obama thought Hillary Clinton would win the election in 2016 and fill the seats with reliable global elitists. Instead, Trump won and had the vacancies handed to him on a silver platter. Taking into account retirements and resignations of other governors, Trump has appointed three of the sitting governors (Michelle Bowman, Randal Quarles and Richard Clarida) and promoted sitting governor Jay Powell to chairman. The only governor not appointed or promoted by Trump is Lael Brainard. And the two vacancies remain!

    Trump will end up exerting more control over the composition of the Federal Reserve Board in a shorter period of time than any president since Woodrow Wilson, who appointed the first board when the Fed was created in 1913.

    Trump got shot down when he nominated Herman Cain and Steve Moore to fill the two remaining vacancies. But he’s back with two outstanding expected nominees in Christopher Waller, research director of the Federal Reserve Bank of St. Louis, and Judy Shelton, the U.S. director of the European Bank for Reconstruction and Development.

    According to this article, both Waller and Shelton have much smoother paths to confirmation than Cain and Moore. Shelton is particularly interesting because she has a Ph.D. degree. The absence of a Ph.D. hurt Cain’s and Moore’s chances.

    Shelton has also been previously confirmed by the U.S. Senate (for her existing position). A prior confirmation always makes a subsequent confirmation more likely, assuming no new derogatory information emerges.

    Best of all, Shelton is an advocate for the consideration of gold prices in monetary policy deliberations. She will not be able to implement a new gold standard from her position as a Fed governor, but simply getting some intelligent views on gold inside the board room at the Fed would be a major step forward in the return to a sound international monetary system.

    Think of Shelton’s confirmation as one small step for gold, one giant leap for a sound economy.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  9. Free-Riding Investors Set up Markets for a Major Collapse

    Free riding is one of the oldest problems in economics and in society in general. Simply put, free riding describes a situation where one party takes the benefits of an economic condition without contributing anything to sustain that condition.

    The best example is a parasite on an elephant. The parasite sucks the elephant’s blood to survive but contributes nothing to the elephant’s well-being.

    A few parasites on an elephant are a harmless annoyance. But sooner or later the word spreads and more parasites arrive. After a while, the parasites begin to weaken the host elephant’s stamina, but the elephant carries on.

    Eventually a tipping point arrives when there are so many parasites that the elephant dies. At that point, the parasites die too. It’s a question of short-run benefit versus long-run sustainability. Parasites only think about the short run.

    To read the rest of this article, click here.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.