The fact that cryptocurrencies have managed to grow and hold their value for so long is in itself proof that the financial system is not working.
A huge chunk of the new money that the Fed is injecting into the system is going straight into the financial sector and some of it is going directly into cryptocurrencies.
People have started to figure out that hard work doesn't pay. To earn money, you just need to get close to the massive stream of money that the Fed is constantly dumping into the economy.
The whole financial system is an over-engineered mess; packed with technical debt and vulnerabilities. If it was a software system, it would have been rewritten decades ago.
> The fact that cryptocurrencies have managed to grow and hold their value for so long is in itself proof that the financial system is not working.
The market cap of all stock markets is on the order of $100T. Total bond market cap is of similar scale. The total market cap of cryptocurrencies is $200B (and shrinking).
Cryptocurrencies could be 10 bigger than what they are today and they'd still be a rounding error compared to the overall financial markets.
The only thing proven by cryptocurrencies is that, at a global scale, the long tail provides enough opportunities for niches to exist.
> If it was a software system, it would have been rewritten decades ago.
Like all of the software that runs power plants, defense systems, medical records? You make a good point, accidentally, that no, in fact most systems that become large and complex aren't re-written.
Dumping money in people's bank accounts would be a process called helicopter money, named after the suggestion that central banks could stimulate the economy by printing new money and scattering it out of helicopters. Sadly the Fed hasn't tried that yet.
What central banks are doing is buying bonds and other assets from the private sector, and paying for them by creating new money. In the past they might have created new money by ordering a truckload of new $100 bills to be printed, but now they can do it simply by changing the central bank balance of whoever they are buying the bonds from.
If all the money ever created in the US comes from Fed loans (using US dollars which the Fed created out of thin air), then logically, the only way to fully pay back those
loans plus interest is by borrowing more new money from the Fed - This is because no other entity except the Fed has the power to create the USD necessary to cover the interest on the loans it makes.
If the government can keep accumulating debt forever without limits, is it actually debt?
If someone kept loaning you more money every year and they let you use some of the money from your new loan to pay back all of your old loan... and they let you keep doing this forever; is it actually a loan?
Yes, the government cannot die in theory so the government debt can keep going up forever... Which is what seems to be happening. In order to pay back its old debts, the government takes out new, bigger debts (from the Fed mostly) and uses the new debt to pay off the old debts (again, to the Fed mostly; via open market operations).
This activity inflates the money supply. Because big government susidies, policies and overall spending tend to go to big corporations; much of that new government bond money ends up going into speculative investments like the stock markets, financial corporations and cryptocurrencies.
> government takes out new, bigger debts (from the Fed mostly)
> via open market operations
> This activity inflates the money supply
This sounds like conspiracy theory bullshit that confuses the quantitative easing that happened after the financial collapse with what's happening today.
Open market operations is one way that the Fed injects money into the economy; the government creates bonds/debt out of thin air and sells them to the Fed on the open market:
^ That's more than $10 trillion of new money 'borrowed' from the Fed by the government and then injected into the system in just 10 years. $1 trillion per year equates to 10% of the US GDP.
Quantitative easing is different because the Fed went beyond the regular open market operations of just buying government bonds; they also started buying other kinds of assets. After the 2008 crisis, the Fed purchased toxic assets from troubled banks; the same toxic assets which caused the financial crisis. See https://www.csmonitor.com/Business/The-Circle-Bastiat/2010/0...
When the Fed buys securities, they essentially create new money out of thin air. So that's $3.6T of new money.
But that program ended four years ago. Since then the Fed's balance sheet has been gradually shrinking.
Since the program ended, the Fed has sold $0.4T of those securities.
Just like the Fed creates new money when they buy securities, they destroy money when they sell securities.
So for the last four years, the Fed has been destroying money, not creating it.
This has nothing to do with the national debt, or the government selling bonds to finance the budget deficit.
With the exception of the Fed's crisis response (which ended four years ago), the bonds that fund the national debt are held by the general public and as foreign reserves by nations around the world -- not by the Fed creating money.
> What central banks are doing is buying bonds and other assets from the private sector, and paying for them by creating new money.
That’s called “quantitative easing” and was a temporary reaction to the global economic crisis. There were only a few rounds of that, the last of which was years ago.
That's the thing, I don't think it's fair to characterize it that way. Aside from QE, there's no real sign that "massive streams of money" were "dumped in" at all, outside of the three QE rounds. Here's a graph from the FED where the three rounds of QE are highly visible spikes: https://fred.stlouisfed.org/series/BASE
A weird, philosophical skepticism towards fiat currency and an irrational belief in high rates of inflation even without any evidence for it has been a common folk belief amongst goldbugs for decades. (Side note: what's the cryptocurrency equivalent of a goldbug? A bitbug?)
The general mechanism for the FED to influence the money supply is by borrowing and lending money with commercial banks. QE is only really used as a last resort.
I thought this was a great joke and hung out in the Reddit for a while. It got tedious, and some people seemed to be taking it alarmingly seriously, so I stopped.
I think the lesson is that jokes wear off quickly and anything money-like hooks people the same way.
I had a friend involved in the community a few years back. Some of the stuff they did was pretty funny (like sponsoring a NASCAR car). However, the inner circle was basically a group of people in a chat room running pump and dump schemes with the currency.
(Disclaimer: I'm not a shibe let alone a Dogecoin expert or insider, so all of this is just from casual observation. OTOH I do know one of the current devs http://coloringcrypto.com/index.php/2018/03/12/29-part-3-ori... personally—he's on here as rnicoll—so I'm not unbiased either. On the third hand, I'm speaking for myself here, and what I say isn't co-ordinated with or approved by him or anyone else. And it sure as heck is not investment advice or a substitute for your own due diligence.)
Are you thinking of Billy Markus? He's in the article. He's lower-profile than Jackson Palmer but his involvement is by no means a secret: https://motherboard.vice.com/en_us/article/jp5x3d/dogecoins-... . It seems that Markus did all the actual initial software, having begun work on it before Palmer independently came up with the (rather brilliant) Dogecoin name and marketing strategy.
I'm a little skeptical about Palmer's ongoing Dogecoin apology tour. Partly that's because it looks like another marketing operation to me. That's not to say that what he's saying is simply insincere. But I do get the impression that when he saw the marketing opportunity to be the founder of a far-out, headline-generating cryptocurrency he seized on that; and now that he sees the opportunity to be the remorseful crypto-skeptic, delivering what-have-I-wrought confessions to a media that's mostly soured on cryptocash and is now highly receptive to that message, he's pouncing on that opportunity too.
> When I asked about the recent Coinbase rumor, he answered, albeit hesitantly. “There’s no way of submitting all the legal documentation that Coinbase requires. It’s by no means likely that they’ll get it.”
What exactly about having made his money from cryptocurrency speculation makes him more at risk of kidnapping, robbery etc. than any other random rich person?
We've reverted it to the original from “The man behind Dogecoin regrets nothing”, but we'd be happy to change it to something more informative if someone can suggest such a phrase from the article.
A huge chunk of the new money that the Fed is injecting into the system is going straight into the financial sector and some of it is going directly into cryptocurrencies.
People have started to figure out that hard work doesn't pay. To earn money, you just need to get close to the massive stream of money that the Fed is constantly dumping into the economy.
The whole financial system is an over-engineered mess; packed with technical debt and vulnerabilities. If it was a software system, it would have been rewritten decades ago.