7th October 2023 > > CBs, economics, & tokenisation.

tl;dr

The madness of central banks. Inappropriate use of economic statistics. Tokenisation gets a boost.

Market Snap

Market Wrap

Blowout jobs numbers in the US doesn’t help the outlook for rates or stocks, whose correlation (notwithstanding yesterday’s more normal performance) must now be at all-time highs, with little sign of relief in the future. Perhaps this explains some of the resilience being shown by BTC, as investors increasingly recognise its virtue as an asset of undoubted diversification.

Today’s rates are not out of the historic norm. What is different is the excessive level of government debt. Servicing that debt at these rates will simply crowd out government spending, and/or lead to such hikes in tax from which the economy can never recover.

This is the truth of quantitative easing, a policy sourced from socialist economic theories, but whose outcome was destined to fail the progressive test. There is no painless way for society to get out of this mess, though on a personal level, astute use of spare capital might perhaps make all the difference.

Curious Cryptos’ Commentary – And on that note, a gentle reminder

Curious Cryptos’ Commentary – That blowout jobs number

Perhaps the jobs report didn’t give the whole story.

ZeroHedge has a different take:

https://www.zerohedge.com/markets/inside-todays-jobs-report-885000-full-time-jobs-lost-offset-1127-million-part-time-jobs

Once again, the madness of having central banks determine short-term interest rates is laid bare.

We just do not know how inaccurate economic statistics are. What we do know is that they are constantly revised, and – with the notable exception of the performance of the UK economy since 2016 – they are usually revised downwards.

If left to market forces, interest rates across the curve would reflect the real-world. Instead we are left in a limbo of inappropriate rates determined by market participants’ second guessing of what the bureaucrats may or may not decide at some indeterminate point in the future.

What a load of hogwash.

Curious Cryptos’ Commentary – Tokenisation

Tokenisation will become an ever more frequent topic for the CCC.

Switzerland – a key bulwark in our defence against the dystopian future of CBDCs – was one of the first to regulate the tokenisation industry, way back in 2021. The very first use of this law was the tokenisation of “Grand Vin de Chateau Latour, Premier Grand Cru Classic 2012” by Signum Bank:

At only EUR 620 per bottle, this is one of the cheaper wines in this cohort. I have had the pleasure of some of the more rarified options, but I am yet to be convinced that my palate was deserving of them. Even so, despite my lack of cultural sophistication, every glass was quite extraordinary.

…

Base – the blockchain launched by Coinbase (who are these genius creatives paid millions of dollars to come up with these names?) – is now the launchpad for a tokenisation of BlackRock’s short-term US Treasury ETF by Backed Finance.

Why is this important?

Estimates of the potential size of the tokenisation market vary widely. Tens of trillions of dollars is one of the more common landing points. And never forget, tokenisation cannot be a thing without cryptos. But to get there, retail, and institutional access must be secure, simple, and with minimal costs.

Short-dated US Treasury ETFs on a blockchain created by a regulated, publicly quoted company in the country with the strictest securities laws in the world, ticks the first of those boxes. Base costs are designed to be low, as one of the many options of a L2 on Ethereum, ticks the third.

The simplicity – and solving custodial issues – is the difficult task. But it is certainly not insurmountable.

The tokenisation revolution, as just one strand of the crypto revolution, is firmly underway.