Bitcoin prices surge over $15,000 (a 1500% rise in 2017) while real wages rise only 0.5% the past year. That sums up succinctly what the 21st century US Trump economy is fundamentally about!
Listen to my Friday, December 8, 2017 Alternative Visions radio show for an in depth analysis of what’s behind the bubble in Bitcoin, and where it’s going.
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SHOW ANNOUNCEMENT
Dr. Rasmus goes in depth on the bitcoin mania and the bubble, now at more than $15,000 a coin—a 1500% increase in speculative profits in 2017…and rising. What are the determinants and drivers of the Bitcoin mania, the ‘digital tulips’ bubble of today? Rasmus discusses the fundamental causes as blockchain technology and central bankers’ decades of massive liquidity injection into the global economy, incenting speculative investors to search ever more desperately for ‘yield’, with inflows to digital currencies absorbing more and more of the massive liquidity accumulated on the sidelines today by the professional investing class (aka new global finance capital elite). Additional ‘enabling’ factors have been driving prices as well, including proliferating ICOs, entry of traditional investor-speculators, diversion of financing from gold futures, and most important, increasing legitimation of Bitcoin and crypto currencies by established commodity clearing houses in the US (CME, CBOE), some countries’ direct endorsement and plans(Japan), hedge funds preparation to enter the market, and even commercial banks (Chase, Goldman) announcing partial participation. Bitcoin is a commodity, not yet a currency, and a speculative ‘play’ not unlike oil futures, gold futures (as were tulips in 17th century Holland). Rasmus concludes with a discussion of government regulation, taxation, and potential channels of contagion to other financial asset markets (also approaching bubble territory), when the Bitcoin and cryptos price busts occur. Capital gains from Bitcoin commodity speculation at 1500% contrasts sharply with today’s just announced real wage gains of only 0.5% in the US. (Next week: the House-Senate final Trump Tax Cuts and latest acceleration of income inequality)
The issue of contagion in linked financial institutions [Systemic Fragility] is related to a climate change concept of real importance. The climate change concept is the substantial delay between the cause and the collapse. This concept was first articulated by the then lead research scientist of Exxon who first raised the problem of the significant delay between the generation of CO2 and its visible manifestations; creating what is now known as “the CO2 pipeline”. The trillions and trillions of dollars that the central banks and others have pumped into the global economy are also “in the pipeline” and there is obviously a significant delay as to when it will be manifested in financial collapse. To push the analogy one step further, the critical research paper on climate change written by James Henson and others was published in 1981; it was only 30 years later that their predictions became visible to the general public but all of their predictions made in 1981 have in fact come to pass. We face a similar problem with the delays in the “credit/debt/cash/pipeline” because no one knows when the crash will really come. We just know that it is inevitable and the more that is pumped into the system the greater the eventual collapse.