Is the crypto boom & bust just part of 'every bubble being pricked' in wider market sell-off?

grubstake

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USD is being undermined slowly by a number of Middle Eastern and Asian countries who are conducting international trade in other currencies.
 

Dave79

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Not likely, mate. Why do you think the value of cryptos is expressed in fiat money?
You can only keep printing more for so long before it loses its value, crypto is crashing and the rest of the western financial system is not far behind... borrow fake money and invest in precious metals!
 

Hawkear

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Not backed by anything other than popularity within a group of believers. Bubbles are driven by people who do not understand intrinsic value, and the true worth of something is it usefulness when it is not ever sold.
Land, Goods and commodities like gold, ownership shares in profitable companies, even the aesthetics of works of art, fill that criteria.
Fiat money is backed by the economic strength of the government issuing it, but even that can be no guarantee as happened in Nazi Germany before the war and other dysfunctional governments around the world even today. Currency trading has that idea at its heart and is actually a measure of economic strength of the issuing government.
Still struggling to see how crypto currencies fit into that picture.
We can invent more and more crypto “things” and call them currency, coins, tokens or whatever, that people can buy and sell, just like gamers buy tokens to play online computer games. Is there any limit to how many different types can be invented and if not can they really have value?
We have already seen the collapse of some cryptos which flew high on a bubble enhanced by smoke and mirrors.
But then the world is full of believers.
Just some thoughts by someone who finds it hard to understand why he should buy in.
 
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Not backed by anything other than popularity within a group of believers. Bubbles are driven by people who do not understand intrinsic value, and the true worth of something is it usefulness when it is not ever sold.
Land, Goods and commodities like gold, ownership shares in profitable companies, even the aesthetics of works of art, fill that criteria.
Fiat money is backed by the economic strength of the government issuing it, but even that can be no guarantee as happened in Nazi Germany before the war and other dysfunctional governments around the world even today. Currency trading has that idea at its heart and is actually a measure of economic strength of the issuing government.
Still struggling to see how crypto currencies fit into that picture.
We can invent more and more crypto “things” and call them currency, coins, tokens or whatever, that people can buy and sell, just like gamers buy tokens to play online computer games. Is there any limit to how many different types can be invented and if not can they really have value?
We have already seen the collapse of some cryptos which flew high on a bubble enhanced by smoke and mirrors.
But then the world is full of believers.
Just some thoughts by someone who finds it hard to understand why he should buy in.
I agree in general but one has to have a good reason for the largest economic power in the world to suddenly lose its economic strength. There was good reason for that in the case of Germany.

"Germany had to pay war reparation after its defeat in the First World War. But Germany refused to pay the reparation and France occupied Ruhr to claim Germany's coal. In retaliation Germany printed paper currency recklessly. As a result, the value of German mark collapsed and prices of goods soared.............Germany was already suffering from high levels of inflation due to the effects of the war and the increasing government debt. ... In order to pay ....striking workers the government simply printed more money. This flood of money led to hyperinflation as the more money was printed, the more prices rose."

All my life and for long before people have been predicting the collapse of the US dollar. The US has operated with huge government debt for decades (public debt is much smaller, about a third more than annual GDP). The government debt is mostly also held by the public - the external debt proportion owed to the world is only about 25% of this, and a third of that debt is a liability on foreign investors. Other countries accept this because they consider the US is good for the money (it has a healthy economy and very low unemployment). Covid only increased this government debt by 16%, so its effect is far from overwhelming.

All the gold held in the world would not cover much more than a quarter of the US debt alone (government external and internal debt to the public) at the present gold price, and would only cover a minute fraction of world debt (all governments. The increase in gold price required to cover it would be gigantic and would skew all world economies (a disaster), so gold is very unlikely to become the new and sole source of wealth. However the annual demand for gold has already been 25% higher than annual world gold mine production for decades but it has not caused a proportionate increase in price.

The relationship between all these things is impossible to predict (for this uninformed financial ignoramus who refuses to be scared by people who are mostly trying to sell me gold or silver, or who are uninformed because of reliance on internet blogs). Possibly holding gold would be a bit of a hedge against high inflation, but the gold price is showing no real response so far to the present high US and UK inflation. So balanced investment is probably better than hanging everything on gold alone - when the Russian currency collapsed in the 1990s Russia simply continued to operate of a goods barter system until things improved (one haulpak is worth x sheep carcases etc). You can drive trucks and make money doing it - you can eat sheep - so other things can have lots of intrinsic value.
Keep in mind that during economic crises in the US and Australia in the 1930s and 1950s respectively, those governments made private ownership of gold illegal and those holding it were forced by both governments to sell it back to the governments at a price set by those governments. Everything in life is a gamble.....be happy, enjoy life when there is no crises actually causing you hunger etc.
 

grubstake

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You can only keep printing more for so long before it loses its value, crypto is crashing and the rest of the western financial system is not far behind... borrow fake money and invest in precious metals!
Ah yes, the ever-popular precious metals furphy. Below is a firm prediction posted on PA back in August 2013 by a gold and silver spruiker. 9+ years later and despite the claims of "13 fundamental and locked-in-stone reasons why gold will first hit, and then surpass $5,000/oz", it has manifestly failed to do so and may well not do so during the present decade:

 
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Reply to post 7 Goldierrocks ,

Wow what a top post !
Enjoyed it

Just 2 suggestions ~ post read before sending & having less drinks maybe :)

Regards
Jack
 
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Interesting thread, I’m buying ATM crypto is cheap and although it’s crashed since last years high Bitcoin was $0.09 cents 12 years ago and sitting at around $16 k US. Not a bad investment if you bought in then and can’t think of too many other investments that have similar returns. Good luck!
 

grubstake

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Interesting thread, I’m buying ATM crypto is cheap and although it’s crashed since last years high Bitcoin was $0.09 cents 12 years ago and sitting at around $16 k US. Not a bad investment if you bought in then and can’t think of too many other investments that have similar returns. Good luck!
Except that crypto is not an investment - as its history has shown, it's a speculation. It's only "cheap" if subsequently it trades at a higher price (in spendable fiat money!) and you don't get swindled along the way like so many others already have.
 
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Except that crypto is not an investment - as its history has shown, it's a speculation. It's only "cheap" if subsequently it trades at a higher price (in spendable fiat money!) and you don't get swindled along the way like so many others already have.
I think if you keep your crypto in a personal wallet offline and not on a platform as such, then the chances of being swindled are minimised. I’ve met quite a few young people who have made a killing from the crypto early days and no longer work, it’s Definately not for everyone but for myself I see it as a long term investment. Along with shares and real estate. Cheers
 

Dave79

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Ah yes, the ever-popular precious metals furphy. Below is a firm prediction posted on PA back in August 2013 by a gold and silver spruiker. 9+ years later and despite the claims of "13 fundamental and locked-in-stone reasons why gold will first hit, and then surpass $5,000/oz", it has manifestly failed to do so and may well not do so during the present decade:

Not sure where you got the idea that I was promoting precious metals as a high yield investment, my point is that both cryptos and fiat currency are completely dependant on confidence to be worth more than the paper (or digital equivalent) that they are printed on.
We've all seen the pictures of people using a wheelbarrow full of banknotes to do a couple of days worth of grocery shopping and burning money as firefighters, and there's nothing tangible stopping the USD and AUD following suit.
I for one have lost all confidence in our current monetary system, got a trillion reasons, and if everyone else catches on, at least you can still light a fire with plastic bank notes!
 
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Not sure where you got the idea that I was promoting precious metals as a high yield investment, my point is that both cryptos and fiat currency are completely dependant on confidence to be worth more than the paper (or digital equivalent) that they are printed on.
We've all seen the pictures of people using a wheelbarrow full of banknotes to do a couple of days worth of grocery shopping and burning money as firefighters, and there's nothing tangible stopping the USD and AUD following suit.
I for one have lost all confidence in our current monetary system, got a trillion reasons, and if everyone else catches on, at least you can still light a fire with plastic bank notes!
Except as i noted in #7, there was good reason for loss of confidence in the Deutschemark in the 1920s but no reason for a lack of confidence in the US economy at present. The reason was Germany printing money as you say (I have a 10 billion deutschemark note in my collection) and resulting hyperinflation, but there is nowhere near hyperinflation in the USA (in fact it is well below what it was in Australia in the 1980s and is starting to drop). Germany had its Ruhr coalfield invaded by France and lost much of its trade income, it owed a fortune in WW1 reparations to the allies (the reason Hitler started WW2) and had massive unemployment - USA has a healthy economy and very low unemployment (as do we). I agree completely that paper money is dependent on confidence, but the world is confident about the USA economy (there is more reason to worry about the Chinese economy). One has to look not just at what occurred but at the reasons why things occurred. I haven't seen anyone wheeling wheel barrows full of money down Wall Street so far!

A loaf of bread in Berlin that cost around 160 Marks at the end of 1922 cost 200,000,000,000 Marks by late 1923. By November 1923, one US dollar was worth 4,210,500,000,000 German marks. They just kept printing money and by 1924 there were 1.2 sextillion (1,200,000,000,000,000,000,000) deutschmarks in circulation. There is a misconception about the amount of paper currency the USA has in circulation. As of December 31, 2020, there was $2,040.7 billion ($2 trillion) in circulation, only a tiny fraction of what Germany was circulating 100 years ago, and half of that currency is held overseas, not in the USA. Confidence is the key. If you have a house worth $15 million but only $10,000 in cash in total, everyone will still happily lend you money. You have little paper money but have assets that are perceived as being worth $15 million. That is the way economies work - if you (or a country) is seen as in a position to pay back its debts (even if only over a long time), it is considered good for a loan. The amount of paper money is not the factor - total U.S. assets amount to about $225 trillion, more than a hundred times the face value of its paper currency in circulation. If China sells the US $5 billion in electronics (an imaginery number) and the USA sells China $4.8 billion is soy beans, China only has a balance of payments deficit of $200 million - billions of dollars in paper currency does not change hands, it is sums on paper. Or so it seems to my poor understanding of economics.
 
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Dave79

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More of a shift in confidence to the BRICS currencies than a loss of confidence in the traditional stable economies, nobody knows for sure, but low unemployment is not a sign of a healthy economy, if your wage can't support your family to your desired standard of living, you're still a slave. If inflation, living costs, taxation etc get so high that it's no longer advantageous to work, the entire system will crash rapidly and in my opinion, the only things of value will be consumables and precious metals. I hope it doesn't come to this, but it's certainly heading in that direction.
 
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More of a shift in confidence to the BRICS currencies than a loss of confidence in the traditional stable economies, nobody knows for sure, but low unemployment is not a sign of a healthy economy, if your wage can't support your family to your desired standard of living, you're still a slave. If inflation, living costs, taxation etc get so high that it's no longer advantageous to work, the entire system will crash rapidly and in my opinion, the only things of value will be consumables and precious metals. I hope it doesn't come to this, but it's certainly heading in that direction.
Having somewhere to live is still as important. Land (not a consumable) is the biggest asset here. People don't stop working because it is not advantageous to do so - if you have people not working you have high unemployment not low unemployment (exactly the opposite of what we have here and in the USA). "Desired standard of living" is a function of economic conditions - it can be eating or having a roof to sleep under. Poor governments don't pay unemployment benefits that people can live on (so large numbers of people don't choose to stop working). 40% of Australians don't pay ANY net taxation at all now (i.e. the benefits that they get back from government exceed the tax they pay) - so taxation has no real impact on those less well off.
 

Diginit

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The average Joe I know doesn't have to worry about crypto be it good or bad as their to busy worrying about paying the weekly bills to bother. :rolleyes: Perhaps if the % of those that don't pay any "net" taxation was less then the average Joe might have less to worry about? I'm sure an extra fifty a week in the pocket of a family man with a wife and a couple of small children at home would be most welcome 👍
Powers to be state average weekly earnings are $1700 to $1800 dollars a week 🤣 🤣 They are obviously far from the reality of the real world.
 

Dave79

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I agree that land is the most important asset, it's the key to self sufficiency in a number of the most important consumables and self sufficiency is a great method of tax evasion! The cost of every item you buy in the shop factors in the income tax of the growers, transporters, and sellers, the fuel and rego to get it to you and a miriad of other taxes on the land, water and resources it took to produce it. No wonder the government has enough money to prop up that 40 percent and only end up a mere trillion dollars in debt.
 

Diginit

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Also do not forget that every taxed item you purchase you have already been taxed on that same money you are using to purchase that said item :mad:
 
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The average Joe I know doesn't have to worry about crypto be it good or bad as their to busy worrying about paying the weekly bills to bother. :rolleyes: Perhaps if the % of those that don't pay any "net" taxation was less then the average Joe might have less to worry about? I'm sure an extra fifty a week in the pocket of a family man with a wife and a couple of small children at home would be most welcome 👍
Powers to be state average weekly earnings are $1700 to $1800 dollars a week 🤣 🤣 They are obviously far from the reality of the real world.
Median average weekly earnings are stated to be $1209 per week (median means what most Australians earn) - unless you are indigenous in which case it is $600/week. Average figures are a meaningless value because they include Gina Reinhardts income etc. in the average.

My figure was too low - 48% of Australians pay no net tax, not 40%. Any tax they do contribute is offset by the welfare — pensions, family tax benefits or childcare rebates — they receive. "As many as 85 per cent of single-parent families contribute no tax, once welfare benefits are deducted. Of single person households — mostly pensioners — 55 per cent pay no tax. About half of couples with no children pay no tax. For couples with children — with adults more likely to be working — one in four families pay no tax". For example, Australians who pay $12,935 in income tax receive $9515 in benefits, so only make a net yearly contribution to the public purse of $3424.

Nearly all net income tax payments to government comes from those on reasonable incomes (and the top 1% of income earners contribute 15% of all net tax contributions to government).
 

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