Central banks "create money"


Join thousands of others who receive this daily analysis of crypto markets & news in their inbox every morning - subscribe now.


The European Central Bank held a question and answer session on Twitter yesterday. Obviously, it turned out exactly as you would expect.

At one point, Twitter user Gianluca Nervegna asked “Where did you get the money for QE?” — for those that don’t know, QE stands for Quantitative Easing and is when a central bank conducts a large-scale, coordinated purchase of assets in an attempt to stimulate the economy and increase liquidity. 

Traditionally, the central bank will purchase government bonds or other financial instruments during quantitative easing. Over the last four years for example, the European Central Bank has spent almost $3 trillion on bond purchases. [Side note: the US spent ~$3.7 trillion between 2008 and 2015 on QE, but because the ECB got started so much later they had to accelerate their purchases compared to the US]

This brings us back to the question on Twitter: Where did the ECB get this $3 trillion??


According to the ECB’s Chief Economist Peter Praet, they just printed the money out of thin air! We obviously all know this is what central banks are doing, but the fact that they are comfortable enough to brag about it so nonchalantly on Twitter shows how untouchable they feel.

As a reminder, when central banks and governments decide to simply print more money, they are stealing wealth from majority of the population and enriching the elites. According to the IMF, inflation is one of the leading causes of income inequality in the world. 

The citizens of a country who store their wealth in cash (living paycheck to paycheck) have their wealth devalued away over time. The citizens who don’t have inflation-adjusted wage contracts continue to get paid the same dollar amount year after year, even though their purchasing power is eroding annually. And lastly, inflation leads to rising prices for real assets (real estate, etc), which are owned by the elites generally.

So when the ECB is saying “we can create money to buy assets,” what they are really saying is “we create money out of thin air, the wealthy benefit greatly, and the common man or woman gets screwed!”

Central banks may be able to print more fiat dollars, but eventually the Ponzi scheme will end. When it does, Bitcoin will be there, as scarce as ever, with the inability for anyone to print more. As the IMF said in their 1998 paper on inflation and wealth inequality, “There are no medium- or long-term income inequality costs of disinflation, only benefits."


”Long Bitcoin, Short the Bankers!” becomes more applicable every day :)

-Pomp


The “Off The Chain” podcast has been downloaded 700,000+ times in 160 countries. You can listen to the latest episode with Hany Rashwan, CEO of Amun here: Click here for Off The Chain podcast


THE RUNDOWN:

Ripple and Forte Announce $100 Million Fund: The cryptocurrency company Ripple on Tuesday announced an ambitious project to integrate blockchain technology into video games. The plan, which features a $100 million fund for developers, could remake the gaming industry by creating a new way to create in-game marketplaces for digital goods. The fund will be overseen by Forte, a San Francisco company founded this year by prominent gaming executives, and which is backed and advised by a host of big Silicon Valley names, including Andreessen Horowitz, Coinbase Ventures and Battery Ventures. Read more.

Gold-Backed Cryptocurrency Is Almost Here: Investors will soon be able to buy gold and stocks in the form of cryptocurrency, the same way they might buy Bitcoin. Paxos, a New York-based firm that already offers a dollar-backed cryptocurrency (known as a stablecoin) as well as Bitcoin trading services, plans to introduce digital tokens backed by precious metals and publicly traded stocks sometime in 2019. The company launched its stablecoin, Paxos Standard, six months ago by tying cash reserves to a blockchain—a digital ledger of transactions that is the backbone of any cryptocurrency. Now, it wants to take “any type of asset and put it into a blockchain,” Paxos CEO Chad Cascarilla said. Read more.

IBM Quietly Enters Crypto Custody Market With Tech Designed for Banks: IBM is coming to the crypto custody space. Later this month, Shuttle Holdings, a New York investment firm, will launch the beta version of a custody solution for digital assets built on IBM’s private cloud and encryption technologies. The companies won’t be storing cryptocurrencies and tokens themselves, but offering tools for others to do so. Potential users include banks, brokers, custodians, funds, family offices and high net worth investors who want to do self-custody, as well as exchanges, Brad Chun, Shuttle’s chief investment officer, told CoinDesk. Read more.

US Sanctions Moscow-Based Bank Accused of Financing Venezuela’s Controversial Petro: The United States Treasury Department has added Moscow-based bank Evrofinance Mosnarbank to its sanctions list, alleging it was the “primary international financial institution willing to finance” Venezuela’s controversial national oil-backed cryptocurrency, Petro. In its statement, the Treasury accused Evrofinance — which is reportedly jointly owned by Russian and Venezuelan state-owned companies — of materially assisting efforts to launch the cryptocurrency, which it characterized as a “failed” project. Read more.


HSBC Seeks Banking Partners in South Korea to Launch Voltron Blockchain Platform: United Kingdom-based banking giant HSBC is seeking banking partners in South Korea to deploy the blockchain platform Voltron in the country. As reported, Voltron is a platform that enables companies to process and settle their trading invoices via blockchain. The solution was launched in October 2018 by blockchain consortium R3 and eight banks — including HSBC, ING and Standard Chartered — and is currently at the pilot stage. Read more.


Interested in crypto research? Look no further. The premier research firm in the space, Delphi Digital, has two subscription offerings for individuals and institutions alike. Take a look at their Bitcoin and Ethereum reports to get a taste of their analysis. [Click here]


If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.