As I have mentioned in my previous post, I believe that Cryptocurrencies are here to stay, and that Litecoins are a good buy right now. Before I explain why so, lets go through a little introduction on cryptocurrencies. Since Bitcoin's rise to fame, a myriad of alternative cryptocurrencies (altcoins) have come into existence.

There are over 30 altcoins available on Coinmarketcap.com, but most have meagre market capitalization as compared to Bitcoin. Litecoin is currently leading the altcoin market and is the coin to watch, as I will explain.

One of Litecoin’s most significant claimed improvements over Bitcoin is that it allows transactions to be confirmed as legitimate much more quickly, says Charles Lee, who designed the currency, which is now maintained by him and a small group of other enthusiasts. It is also notable that Charles is currently working in Coinbase, which could mean that Coinbase may announce Litecoin integration anytime soon. In fact, Coblee (aka Charles Lee), posted on trollbox that Litecoin support will be available on several exchanges next week (see the post here).

Litecoin prices have been steadily declining since it boomed alongside Bitcoin earlier this year, and many people do think it will continue on this downtrend to its oblivion. However, it is interesting to note the similarity of Litecoin chart compared to Bitcoin chart right before it started climbing up to it's current level. See the comparison in this video below.

So what determines whether or not Litecoin prices will increase?

I believe that this is largely dependent on the availablility of services built ontop of Litecoin. As long as there remains no significant usage of Litecoins, it's price will continue to decline, possibly to the level of other altcoins. Hence, an example of good news for Litecoin would be trading platforms such as BTC China, or online wallets such as Coinbase integrating Litecoin into their systems.

In this recent Youtube video, the team at 'Let's Talk Bitcoin' discussed Litecoin and its potential which I highly recommend watching.

They mention two main problems faced by Litecoin, namely an infrastucture problem, and an adoption issue. In terms of infrastructure, the number of resources available to trade Litecoin as compared to Bitcoin is currently very minimal. Hence, Litecoin prices have been sliding (or stagnating) since its boom in April 2013. On top of that, adoption of Litecoin by major trading platforms has been non-existential. Even though trading platforms like MtGox have announced Litecoin integration back in May, it still has yet to do so. Until Litecoin sees an enhanced utilization and utility, we will unlikely see Litecoin prices grow. However, my guess is that once large trading platforms or wallets start to accept Litecoin, we may see a great boost in Litecoin prices.

Lastly, they also discuss how the future of cryptocurrency lies in the ability of the payment infrastructure to be cryptocurrency agnostic, that is, that one infrastructure will be allowed to accept different kinds of coins. Much like a packaged solution where vendors can integrate and accept every altcoin. This will allow markets to exist on its merits instead of its perceived value.

This is also in line with much of the discussion I have found on Bitcointalk, such as this one titled "Why the loss of confidence in Litecoin". Some of the comments by users are highlighted here:

Furthermore, this Quora discussion titled "Do other crypto-currencies have a chance or is Bitcoin too far ahead?" generated more than a few interesting comments, as shown below:

Ben Mordecai, Bitcoin Hopeful (See the full comment here: http://qr.ae/NmnvS)

Ben Solmar (See the full comment here: http://qr.ae/Nmnsv)

Lastly, I'd like to end off this post with a more controversial video, linking FIAT currency and a decreasing trust in Governments and Banking corporations, to the rise of Cryptocurrencies.

Cheers & have a great week trading. All the best, and stay tuned!

So you've heard about Bitcoins. Since its boom in April 2013, Bitcoins have garnered immense media attention and continued to show impressive strength, rising steadily and finally breaking the $200 psychological barrier today. Even the recent Silk Road closure couldn't dampen the demand for Bitcoins, as prices continued to rally after Baidu (the Google of China) announced its acceptance of Bitcoins as a payment mode.

The popularity of Bitcoins can be attributed to two characteristics of the currency; it is decentralized, and there is a finite amount of bitcoins that can be mined. As such, Bitcoins are very often said to be similar to be Gold. These two characteristics can be said to give Bitcoins their perceived value.

However, the question on everyone's mind is, what gives Bitcoins their intrinsic value (See a Reddit discussion on Bitcoin's intrinsic value here)? As a relatively new commodity that is still in its infancy stage, there have been attempts by a large number of parties to predict it's price, and to reason its market fluctuations with existing Economic theories. However, in attempting to analyse the Cryptocurrency market, we must keep in mind its infancy, and hence the significance of non-economic factors. The real problem is not what the price will be, but whether or not Bitcoin will even be here in five, ten years from now. The question we should be asking then, should be, what factors determine the viability of Bitcoins as an alternative currency?

In my opinion, the most important factor driving the demand of Bitcoins is its adoption by corporations. Basically, the more companies accept Bitcoins as payment for products and services, the better it will be for Bitcoin's future. However, this can turn into a chicken-and-egg issue, because corporations will never consider transacting in Bitcoins because of its instability. Until Bitcoins find a stable price, it is highly unlikely that this will happen. As MeldrumLaw pointed out in this Reddit discussion, "Bitcoin needs to stabilize (or all fiat alternatives need to simultaneously collapse) before widespread commercial adoption occurs."

It is true that Bitcoins have no intrinsic value, in the numismatic sense. Yes, Bitcoins solve some algorithmic problems through the mining process. However, these computations do not generate any kind of useful data, or solve any real life problems; there is a lack of "useful" input/output in solving alogorithms. Cryptocurrency needs to be more "useful" and solve a problem, in the same way that Duolingo translates the web while allowing users to learn a new language. With this in mind, I believe that a new cryptocurrency will emerge and overshadow Bitcoin, that actually solves a real world problem or generate useful data from all the computational data used. Imagine what could happen if Google is currently working on their own decentralized cryptocurrency?

Bitcoin prices skyrocketed during the financial crisis in Cyrpus as a result of people's distrust in FIAT currency and an increasing demand for an ungoverned and limited alternative.  Coupled with the large (and growing) number of services built around Bitcoins, I believe that Bitcoins, or at least Cryptocurrencies, will be here to stay for good.

In my next article, I'll be talking about alternative cryptocurrencies, and why Litecoins are a good buy right now. Stay tuned!

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Some time ago I wrote about the prospect of the U.S. economy going through a Canadian-style slump (see here). To summarize: The recession that hit Canada and the U.S. in the early 1990s was much more severe in Canada than in the U.S., and the recovery in Canada took almost a decade to complete. In 2008, the tables appear turned. In what follows, I plot the employment-to-population ratio for Canada from 1989:1 - 2003:1 and match it up against the same ratio for the U.S. beginning in 2007:1 - present. The parallels thus far are striking.

Let's start with the employment ratios (courtesy of my able research assistant, Li Li) for the whole population in both countries: (All starting points normalized to 100 -- the actual employment rates are close in any case.)

This shows that the slump, as measured by the drop in employment, was about the same magnitude for Canada in 1990-91 as for the United States in 2008-09. The recovery dynamic in both cases appears to be painfully slow.

Let's now decompose employment across various age groups.





In terms of young and prime-age workers, the U.S. looks a little more depressed relative to the Canadian experience. The experience of older U.S. workers seems less depressed (but the behavior of older workers since the mid 1990s is influenced by a change in secular dynamics, so perhaps should not be viewed as a recovery dynamic.)

Now let's decompose by age and sex. Here we have the data for adult men:


And here we have the age-sex decomposition for men:






The correspondence between those aged 20-55 (the bulk of the population) is very close. Here is the data for adult females:


And here is the age-sex decomposition for women:






The most recent U.S. recession is sometimes labeled a "mancession" in reference to the fact that men appear to have been particularly hard hit (my colleague Silvio Contessi and my RA Li Li talk a bit about this phenomenon here.) It is interesting to note that while this may have been the case, the data here suggest that U.S. females were nevertheless hit harder than their Canadian counterparts in the 1990s.

Just for fun, I asked Li Li to plot broad stock market indices: the TSX composite index for Canada and the S&P 500 for the U.S. (both series have been adjusted for inflation).


Anyone willing to bet against the EMH?

At this point, I'm not entirely sure how to interpret this data. My feeling is that something useful may come out of studying the Canadian episode in greater detail. Maybe a few Ph.D. students are willing to take up the challenge?

 

Is the level of employment in the U.S. currently too low? To many people, the answer to this question seems obvious: of course it's too low, you moron.

But "too low" relative to what? Relative to historic averages? Employment seems low relative to recent history, but high relative to more distant history; see here. Moreover, secular employment dynamics across demographic groups often move in different directions, making the question even more difficult to answer. (Marcela Williams and I talk at length about the "many moving parts" of the labor market here.)

Maybe we can learn something by comparing the U.S. experience with Canada. As far as different countries go, Canada is about as "close" to U.S. as one can get. Moreover, as I've pointed out before, the Canadian economy experienced a great slump in the 1990s, a phenomenon that appears to be playing out now in the U.S.

Let me start by looking at the employment-to-population ratios across these two countries. (In Canada, the population constitutes those aged 15+, in the U.S., those aged 16+). Here is what the picture looks like for prime-age males:


Employment is similar early in the sample, but a gap emerges in the 1980s, growing even larger during the "great Canadian slump" of the 1990s. But for most of the 2000s, up to 2008, the employment gap appears to have vanished. Since 2008, the employment gap has reversed itself: the employment rate among prime-age American males is now significantly lower (2 percentage points) than their counterparts in Canada for the first time in about 40 years.

Can we use these employment gaps to infer something about the slowness of the U.S. recovery? I'm not sure. Well, we have to be careful. But this picture might make one more sympathetic to the idea that there is an "output gap" in the U.S. that's at least as large as the value-added associated with increasing prime-age male employment by 2 percentage points. (Of course, this says nothing about what the source of the gap is.)

What does this data look like for other age groupings? Let's take a look. Here's the picture for "adult" teens:


A lot of this employment must be in the form of part time work. The employment ratios are low relative to other demographic groups, as one would expect, but the two countries are quite similar here until about 2000. What happened?

Here we have young adult men:


The picture here looks similar to the one for prime-age males. Together, the two pictures above show that the recent recession hit younger men in the U.S. harder than their counterparts in Canada, and also relative to older men in general.

As for older men:


Evidently, older men are immune from negative aggregate demand shocks. Interesting.

Let me now report what the same data looks like for females. For prime-age females, the picture is this:


For most of the sample, the employment ratios track each other fairly closely, with the Canadian ratio slightly below its American counterpart. Again, as with teenage men, something appears to have happened in 2000. The female employment rate appears to be in secular decline while, in Canada, it has remained elevated and stable. What are the implications of this recent divergence? And how should it be evaluated by policymakers? We need more data to answer these questions.

Here's the picture for teenage women. Again, a large cross-country gap emerges around 2000.


As with older men, older women seem largely impervious to the business cycle.

What is it that is leading older people to devote more time to market work -- seemingly at the expense of younger people? It is tempting to argue that the financial crisis, by wiping out retirement portfolios, compelled older people to work more to rebuild their lost wealth. But the trends here appear to have been in place since before 2000.
  

Have you ever stopped to question any of the 'norms' of this world? Have you ever though about how money was created, how the banks are creating money 'out of thin air'? Find out more about how the US dollar is the biggest scam in the history of mankind in the video below.

But beyond that, we need to ask, how will this ever affect me?

Learning this will change your life, because it will change the choices that you make. If enough people learn it, it will change the world... because it will change the system . For this is the biggest Hidden Secret Of Money. Never in human history have so many been plundered by so few, and it's all accomplished through this...The Biggest Scam In The History Of Mankind.

Ah, a fine Sunday morning. Made the mistake of reading Wren-Lewis and Krugman. Usually they have some interesting things to say. But not always. And recently, they have said some rather strange things. Time to weigh in.

First, Simon Wren-Lewis complains (again)  about something that may or may not have been true at one time:

My first complaint is that too many economists follow what I call the microfoundations purist position: if it cannot be microfounded, it should not be in your model. Perhaps a better way of putting it is that they only model what they can microfound, not what they see. This corresponds to a standard method of rejecting an innovative macro paper: the innovation is ‘ad hoc’.

"Too many" economists. Like who, Simon? Give us names! A long list of names.

I don't think he can do it. He can't because all economic models and theories embed ad hoc assumptions. (Btw, I've addressed this complaint before, here.) So why does he say things like this? I'm not entirely sure. 

 

He seems to want to tell us that nominal wages are sticky, something that standard economic theory is evidently incapable of explaining, and that a set of economists belonging to some sort of commission have made terrible policy mistakes by ... um, refusing to admit that wages are sticky ... because economic theory cannot be used to support the observation? I am confused. 

 

I am also confused about what the following statement has to do with his opening complaint:

 

Now, let's see if I understand. Some economists evidently believe that the "output gap" cannot be very big because, if it was, we should be seeing deflation. Let me point out that the very concept of an "output gap" relies on the presumption of sticky nominal prices -- an ad hoc assumption forming a center piece of NK theory. So what Wren-Lewis appears to be saying here is that his ad hoc assumption is better than their ad hoc assumption. This may very well be true--but again, what it has to do with his original complaint, I have no idea. 

 

No big deal. Wren-Lewis, who I think usually makes for a good read, was maybe a bit sloppy on this occasion. I can certainly relate. Let's just move on. 

Oh, but no. Nope. My favorite curmudgeon has to take an unsolicited hand-off and proceed to let loose his canon (ha ha) here: Sticky Wages and the Macro Wars. 

 

O.K, we get it. Nominal wages are sticky. But it is important to understand precisely what he means by this. In particular, he does not just mean that nominal wages appear not to move very much in the data. We can all see that. What he means is that the reason they do not move is beyond the comprehension of standard economic theory. He makes this explicit here, where he says:

I’ve written quite a lot about sticky wages, aka downward nominal wage rigidity, which is one of those things that we can’t derive from first principles but is a glaringly obvious feature of the real world.

Well, it is my humble opinion that he is just plain wrong. We've known since at least Barro (1977) that spot wages are not "allocative" in job-worker relationships, where bargaining (and not any auctioneer) determines the terms of trade and how these terms evolve over time (I discuss this at length here).  In short, wages can "look sticky" empirically, even if they are not theoretically. Let me also refer you to this interesting paper by Eichenbaum, Christiano and Trabandt (2013). This latter paper belongs to a class of papers (see Hall and Shimer, in particular) who "microfound" price rigidities via bargaining theory. In a nutshell, the details of the bargaining process matter and this is something that is (deservedly) receiving a lot of attention by theorists. (I may be wrong, but I never see Krugman citing such work. Either he finds it uninteresting, or wrong, or ... ). 

 

But enough of Krugtron. As for Wren-Lewis, I think his main message is for young economists: do not to be led into thinking that every macroeconomic theory needs to be "microfounded." That's fair enough advice. But by the same token, young economists should also not feel threatened or bullied into thinking a priori that social phenomena are beyond the reach of economic theory--especially when such sermons are delivered by bitter Nobel-prize economists still suffering from the intellectual wedgies applied to them in their youth. 

Jeff Berwick is a Canadian entrepreneur, economics, finance, and investment writer, and libertarian and anarcho-capitalist activist. He believes that we are going through a significant market shift. He goes on to say that the excessive printing of money will lead to hyperinflation, and adds, this is exactly what the Federal Reserve is doing now. They have been printing 10% of the money every year, for the last 5 years. He believes that the economic (US dollar and Stock markets) collpase is imminent, and that we should look towards alternate forms of wealth such as Gold or Bitcoins.

Bitcoin, the first free-market non-localized private money, is seen as a great threat to the Government's monopoly of money. However, the recent economic collapses in smaller regions (think Cyprus), have spurred the rise of Bitcoin and its non-centrality as an alternative to the FIAT currency.

Or watch it on YouTube: US Dollar Collapse, Soon Won't Be Able to Buy Gold at Any Price -- Bitcoin - Galt's Gulch

Dan Popescu, a global markets strategist and gold expert, shares his thoughts about Gold and China. He talks about a 'black swan event' that is at our doorstep and how that can make the price of gold 'explode' in a day. Gold is important because it is a "hard currency" that has value, as opposed to the FIAT currency which is not backed by anything.

China is a major buyer of gold, and their strategy is to gather a large deposit of gold to be able to properly back up their currency, unlike any other currency now. If the Chinese can successfully back up their currency with gold, they will be able to give credibility to their currency.

The world is becoming increasingly dissatisfied with the current system. He believes, within the next 3 to 5 years, that "we'll have a currency crisis with a new international monetary system, and gold will defnitely be part of it." Gold will shoot up in a shock, surprise move, and he "won't be surprised" if gold goes above US$2000/oz within a year.

Or watch it on YouTube: Maybe the most important video you'll ever see on gold - Interview with Dan Popescu

Another video also highlights that 90% of market movement will come in the last 10% of time. Click here to watch the full video: Silver - 90% of the move comes in the last 10% of the time

Last video I want to share with you is from Ned Goodman. Ned is a Canadian billionaire with a unique perspective on the world economy. He starts off in the video by saying that "the dollar is about to be dethroned as the world's de facto currency".

He justifies his claim by explaining how the US dollar is backed by nothing, but still has a strong power in the world, because all oil in the middle east is traded with US dollars. That is how the dollar got to where it is today. However, China has recently made deals with Russia to buy oil in Chinese Yuan (RMB), opening the path to international partnership between these two big players. It was also obvious from the tension in Syria, that China and Russia are on the same side. We are heading into a period of "stag-flation" as the Federal Reserve loses its power to print money at will.

We buy things to protect our future purchase power. To continue doing so today, he emphasizes the need to start buying hard assets.

Or watch it on YouTube: Canadian billionaire predicts end of US Dollar as world's reserve currency - Ned Goodman lecture

For those of you who are still unsure about what FIAT currency means, or how the US dollar is not backed by anything, I'll end of with one of my favourite videos that very aptly answers these questions.

Or watch it on YouTube: When Will The Economy Collapse?

Thank you for reading, and I hope you gained some value from this post. Be safe and all the best!

Jim Rogers, touted as a legendary commodities investor, is an investor and author based in Singapore. In his recent interview on FOX Business, Rogers outlined several investment opportunities:

Source: Jim Rogers: If Gold Dips Below 1K, I'll Buy

In another video, Rogers talks about the artificial stimulus package introduced in the United States, and believes that America will "default (on its debts) one way or the other". When that happens, he believes that the Dollar will lose its place as the World currency.

Source: Jim Rogers Discusses Gold, Housing and China

In light of the recent US Government Shutdown on 1st October 2013, and upcoming Debt Ceiling talks, I have decided to stop my Forex Trading with the Leo EA. If you are currently trading in the Forex or Equity markets, please be safe! Nothing is for certain in this economy.

With that said, I will be looking to move my investments towards 3 main products:

Read more in my previous post: Danger looming for Equity & Forex Markets - GBPUSD at 8-month high

Will share my own thoughts and reasons for this decision over the next few posts. So stay tuned!

In the meantime, diversify your portfolio and do your research into what's going on in the world today.