11th October 2023 > > Bonds & China.

tl;dr

Value destruction of government bond portfolios is beneficial to cryptos. The fragility of the banking system must not be ignored. China’s crypto pivot leaves me in a quandary.

Market Snap

Market Wrap

For the first time in a long time perpetual futures funding rates are close to neutral, without the pain of a short squeeze for the leveraged children. The drop to $27k has come as a surprise, to me at least, especially in the light of the 2.5% rally or so in long-end bond portfolios, partially retracing recent weakness., though this does not repair the damage wrought on banks’ balance sheets (see below).

Occasional Series – The IMF

This is extraordinary.

Kristalina Georgieva, managing director of the International Monetary Fund, has been quoted as saying:

“It is paramount to avoid a premature easing of policy, given the risk of re-surging inflation. High inflation undermines consumer and investor confidence, erodes the foundation for growth and, above all, hurts the poorest people in society the most.”

It is true that inflation does all those things.

But at what point did the IMF ever take a critical stance against quantitative easing? In which economic theory does she find justification for raising domestic interest rates to combat inflation caused by international oil and gas cartels? Did the IMF ever point out that destroying supply lines (aka lockdown, a vicious and spiteful policy that removed liberty and freedom at a stroke and which has damaged so many children’s lives) whilst paying people to stay at home and not work would cause inflation?

And given the IMF’s history of deliberately hurting the poor and needy, did Georgieva look in the mirror immediately after penning that comment, and simply smirk?

The IMF is one of the strongest supporters of CBDCs, natch.

Curious Cryptos’ Commentary – How’s that risk-free government bond portfolio doing?

A cornerstone of banking legislation is that investment grade government bonds are risk-free. Under Basel rules, banks can buy as many government bonds as they wish and allocate ZERO capital to the investment. The CCC has long been a frequent critic of this market-distorting rule that drives investors away from wealth-creating businesses into the arms of wealth-destroying governments.

The Financial Times – not normally known for challenging the probity of the technocratic elite – has inadvertently done us all a favour:

That is one insolvent banking system right there, notwithstanding the moves of the last day or so.

This doesn’t presage the imminent collapse of fiat, but as we saw at the backend of 2022, fears about the solidity of the banking system are good for cryptos.

Curious Cryptos’ Commentary – Fire extension!

I know I keep telling you about this extension, but sometimes I worry no-one ever listens.

This email looked suspicious to me:

But with the Fire extension for Chrome or Brave, one just doesn’t need to fret:

Get it here, and get it now:

https://www.joinfire.xyz/

Curious Cryptos’ Commentary – The Chinese pivot

President Xi and his murderous henchmen have completed a policy flip-flop to an extent that politicians here in the UK merely aspire to.

After initially “banning” cryptos and crypto-miners, tyrant Xi seemed to be taken by surprise when those miners simply went elsewhere. And mostly to America.

We have seen in the last year or so that the Hong Kong technocrats have been given Xi’s personal approval to encourage crypto business to the island. Now, China Daily – owned by the state – has announced its ambition to develop a metaverse and an NFT platform:

http://www.ccgp.gov.cn/cggg/zygg/gkzb/202309/t20230925_20768340.htm

China is leading the world in the development of a state CBDC, which comes as no surprise to anyone. But this increasing focus on developing a decentralised industry is intriguing given the glaring contradictions between the ethos of the ruling elite and the ethos of cryptos.

I am not yet sure how I feel about this.