Bitcoin Mania: Not For Chinese Banks (Which Should Probably Mean Its Not For You)
“China’s central bank warned Thursday that Bitcoin carries substantial risks and issued new rules that prohibit financial institutions from dealing in the digital currency.” Chinese banks have mostly stayed away from the digital currency, but some internet companies like Baidu and Alibaba have either already started accepting Bitcoin or are considering it. Bank of America doesn’t seem to agree with the warning, saying recently that Bitcoin “can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers.” They even go on to give a fair value analysis of $1,300 (maximum value which, considering its extreme volatility, seems a bit bold) Also, the former president of the Dutch Central Bank says that hype around Bitcoin may be worse than Tulip mania in the 17th century. Consider this Canadian who sold their $1 million home for Bitcoin; their real estate agent had this to say: “Basically, Bitcoin is either going to go to zero or it’s going to go to a million dollars.” Awesome. Some key differences between Bitcoin and the $US: “What gives the dollar value is not so much the government, but the government’s ability to tax the community which bestows power [derived from] the productive capacity of the collective wealth assets of the US community, its land and its resources…Bitcoin, however, is backed by nothing but speculative interest.” Oh yeah, and the retailers interested in laundering – I mean, exchanging – their Bitcoins for real money, they gotta go through this guy (yes, that is the CEO of BitPay, Inc posing with Christopher Moltisanti of Sopranos fame). Finally, you know you’ve reached crazy status when you get an official Paul family endorsement: “it’ll go down in history as the destroyer of the dollar.”
US Growth Revised Up To 3.6% in Q3
The Commerce Department revised their previous estimates for GDP growth from 2.8% to 3.6% in Q3. It is believed to be a reflection of a build up in private inventories (i.e. clothing retailers). Investors aren’t rushing into the market on this data, however, as life under The Taper makes good news = bad, bad news = good and sometimes not and sometimes who knows what the Fed is going to do.
ECB Maintains Rate, Crosses Fingers and Says a Little Prayer
The European Central Bank left their borrowing rate at 25bps this morning. President Draghi said “there had been a ‘brief discussion’ about cutting the deposit rate into negative territory, in an attempt to get banks lending more.” Most economists polled by Reuters believe that the ECB will initiate another long-term refinancing option (LTRO) early next year. Draghi said that an “LTRO would only be conducted if the ECB felt confident the money would flow into the real economy and not subsidise the banks’ balance sheets.” Here are 5 takeaways from the ECB’s decision: 1) The Bank doesn’t really expect a whole lot of inflation or growth next year or in 2015 for that matter, 2) Don’t underestimate the Bank’s willingness to use their “toolbox” (read: negative rates), 3) Lack of lending to the private sector isn’t good, 4) The Bank is interested in becoming less tricky and 5) Draghi is just kind of like keeping his fingers crossed about the whole Eurozone recovery thing.
Financial Times has a great summary of the debate over raising the minimum wage. Unfortunately, their verdict is less than hoped for: “Honestly, we don’t know.”