Kooks, Cranks and Currencies

First they feared it, now they want to control it.

Or so says someone on Reddit.

Reddit, as you may know, is one giant internet chat room, where anything goes.

Some of what you’ll find on Reddit is much like trash TV — it’s good fun to read, but you’d never own up to it. Other parts of it can be informative. Perhaps one of the best things about Reddit is that it links people around the world into small digital communities.

Unsurprisingly, the Bitcoin Reddit page is very active.

In a post titled ‘Dear Bitcoin Warriors’, one user explains that they have a direct connection to someone employed at a central bank. In their post, the user claims their ‘friend’ says that central banks are buying up bitcoin. According to him, central banks are rushing into bitcoin and driving the price up. That way, investors looking to make a quick buck will jump out of bitcoin, leaving it to the central banks to hoard.

Sounds scary, right? The central banks chasing bitcoin — similarly to how governments demonised gold — to force the public further into the fiat money system.

Yet I’m not entirely convinced this is the case. Central banks aren’t being secretive about their recent interest in bitcoin.

Arguably, central banks aren’t known for being early adopters of tech. So the fact that they are investigating cryptocurrencies less than seven years after their creation is rather forward-thinking by their standards.

For the better part of a decade, central bankers were able to dismiss cryptocurrencies as something for the kooks and cranks. Much like they do with gold bugs.

Now, it seems to be case of ‘If you can’t beat them, join them.’

Representatives from the People’s Bank of China (PBoC) and a couple of their research departments recently visited San Francisco to find out more about blockchain technology. China has a growing interest in blockchain technology, cryptocurrencies, and all things FinTech.

Former Federal Reserve Bank chairman Ben Bernanke is a keynote speaker at a blockchain and banking conference in October hosted by Ripple, the world’s fourth largest cryptocurrency. Bernanke recently told an audience that digital currencies hold ‘long term promise.’

With cryptocurrencies a potential rapid technological advancement in how societies function, it’s clear that central banks can’t ignore this trend.

That said, I’m not entirely convinced that central banks will have the ability to take over the digital monetary system.

As of July this year, there were over 900 known cryptocurrencies. New coin issuing’s are occurring on a weekly basis. The cryptocurrency base is growing so quickly that it’s unlikely even the almighty money-meddlers will be able to dominate it.

More to the point, while random Reddit threads on cryptocurrencies can be fun to read, it’s not particularly useful information. This sort of stuff feels like it’s feeding the conspiracy theorists out there, rather than pointing them in the direction of how best to use cryptocurrencies to keep some of their money outside of the financial system.

But, as tempting as it might be to rush out buy the next cryptocurrency coin offering, there’s no point throwing your cash away in a desperate bid to get in on the crypto craze. This isn’t a fad. And digital money isn’t going away.

Which is why you should take your time and do your research. This is a high-risk emerging asset class. And you need to clue yourself, especially as you could lose all your money investing in this.  You can start here.

This week in Markets & Money

On Monday, Vern wrote about what can only be called the ‘demographic showdown’. Simply put, low economic growth equals fewer returns, and that in turn could hurt the largest-ever demographic bracket set to retire over the next 10 years. In his eyes, cash might be the only solid return on investment for baby boomers.

For more on this story, click here.

On Tuesday, Jason pointed out that the cobalt price is high for now, but there’s only thing keeping it that way. The way Jason sees it, the mainstream says cobalt is a ‘screaming’ buy. But they are missing a key piece of the reason why the cobalt price is elevated. If the conflict in this particular cobalt mining region eases, then the price of cobalt is likely to drop like a rock.

On Wednesday, Jason tackled what I’ve been calling the ‘true war metal’. Now, no one likes to think about the world escalating into another world war. But as Jason explains, the same economic factor in play before the First World War occurred — overleveraged nations with non-existing economic growth — is present again. Investors take note…the growing political tensions may actual benefit this metal.

For the full story, go here.

On Thursday, Matt revealed how you could potentially double your income in this current market. All the details in Thursday’s Markets & Money here.

On Friday, Vern republished an extract from his book — How Much Bull Can Investors Bear? — in which he looked at the risks investors face in chasing a few extra percent in returns. As Vern says, life would be much easier if excessive reward was risk-free, but that’s not how life works, as overbought, overhyped and overvalued markets represent a serious threat to your wealth.

For more on this story, click here.

Kind regards,

Shae Russell,
Editor, Markets & Money

Shae Russell started out in financial markets more than a decade ago. Working with a derivative brokering firm, she helped clients understand derivative markets, as well as teaching them the basics of technical analysis. Since joining Port Phillip Publishing eight years ago, Shae has worked across a number of publications. She holds the record for the highest-returning stock recommendation, in which a microcap stock returned over 1,200% in six months. Ask her about it, and she won’t stop yapping on. For the past two years, Shae has worked alongside Jim Rickards as his Australian analyst, translating global macro trends for Aussie investors, and how they can take advantage of these trends. Drawing on her extensive experience, Shae is the lead editor of Markets & Money. Each day, Shae looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

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