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G and I in Europe and Japan

Posted by Grow Your Bitcoin, Get Free BTC on 5.18.2014 Label:
May 2014 - Hello friend Grow Your Bitcoin, Get Free BTC, In the article you read this time with the title May 2014, we have prepared well for this article you read and take of information therein. hopefully fill posts we write this you can understand. Well, happy reading.

Title : G and I in Europe and Japan
link : G and I in Europe and Japan

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May 2014

Izabella Kaminska reports here on a Credit Suisse comparison of Japan and the Euro area (h/t Scott Sumner). Here is an interesting diagram from that report:


According to Kaminska:
As the analysts note, a powerful fiscal stimulus in Japan helped to counter the demand shortfall. That caused personal consumption to continue to grow until 1997 and investment to rebound almost to its previous peak in just six years — something which isn’t slated for Europe any time soon.

Well, the increase in G counteracting an unexplained decline in I is one interpretation. This is the "deficient demand" interpretation that so many like to portray as obvious. But in fact, it's difficult to ascertain the direction of causality from just a picture.

The Japanese data above corresponds to what I posted some time ago here: What's Up with Japan? In response to that post, Mark Sadowski alerted me to the fact that the Japanese investment series plotted above includes both private and government spending. Here's what things look like when we decompose this aggregate (I discuss in more detail here: Another look at the Koizumi boom):


So it seems that there was a boom in private investment during the Koizumi years (something that Krugman gets wrong here, and something I'm not sure he's acknowledged). Moreover, this boom coincided with a slowing or outright contraction in government purchases. And in a liquidity trap era, I might add! What do our conventional "deficient demand" theories have to say about this? Maybe there is something more complicated than a simple IS-LM+liquidity trap story going on? I'm just asking. Humbly yours, DA.

Izabella Kaminska reports here on a Credit Suisse comparison of Japan and the Euro area (h/t Scott Sumner). Here is an interesting diagram from that report:


According to Kaminska:
As the analysts note, a powerful fiscal stimulus in Japan helped to counter the demand shortfall. That caused personal consumption to continue to grow until 1997 and investment to rebound almost to its previous peak in just six years — something which isn’t slated for Europe any time soon.

Well, the increase in G counteracting an unexplained decline in I is one interpretation. This is the "deficient demand" interpretation that so many like to portray as obvious. But in fact, it's difficult to ascertain the direction of causality from just a picture.

The Japanese data above corresponds to what I posted some time ago here: What's Up with Japan? In response to that post, Mark Sadowski alerted me to the fact that the Japanese investment series plotted above includes both private and government spending. Here's what things look like when we decompose this aggregate (I discuss in more detail here: Another look at the Koizumi boom):


So it seems that there was a boom in private investment during the Koizumi years (something that Krugman gets wrong here, and something I'm not sure he's acknowledged). Moreover, this boom coincided with a slowing or outright contraction in government purchases. And in a liquidity trap era, I might add! What do our conventional "deficient demand" theories have to say about this? Maybe there is something more complicated than a simple IS-LM+liquidity trap story going on? I'm just asking. Humbly yours, DA.

Desperately Seeking Humility

Posted by Grow Your Bitcoin, Get Free BTC on 5.12.2014 Label:
May 2014 - Hello friend Grow Your Bitcoin, Get Free BTC, In the article you read this time with the title May 2014, we have prepared well for this article you read and take of information therein. hopefully fill posts we write this you can understand. Well, happy reading.

Title : Desperately Seeking Humility
link : Desperately Seeking Humility

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May 2014

For what it's worth, I think that Paul Krugman and Simon Wren-Lewis come down way too hard on Tony Yates. 

In a nutshell, Krugman and Wren-Lewis claim that the economics profession knows how to diagnose and treat post-Lehman-like recessions. The diagnosis is self-evident: "deficient demand" (not the same thing as a decline in demand.) The treatment is written down in the most basic Econ 101 IS-LM model: increase G (or, at least, do not decrease it). 

Evidently, we are to have great confidence in the IS-LM prescription because the model correctly predicted that a massive increase in government debt would not lead to soaring interest rates and that a massive increase in the (base) money supply would not be inflationary. 

Well, that's nice. But I don't read Yates as claiming otherwise. I read him as suggesting that there is still a lot we don't know about many things leading up to the financial crisis and the economic forces governing the (slow) recovery dynamic. And because of this state of affairs, politicians were largely free to pursue policies that fit more in line with their political instincts (when do they not do that, I wonder?). Well, I don't know. Sounds plausible. Certainly, I would not have called Yates out for his "self-destructive" attitude. For a similar "self-destructive" attitude, have a look here at what the physicist Freeman Dyson has to say about what people generally don't get about science: 
Q: "How can you tell if someone is a visionary or a crank?"
A: "You can't tell. The whole point of science is that most of it is uncertain. That's why science is exciting--because we don't know. Science is all about things we don't understand. The public, of course, imagines science is just a set of facts. But it's not. Science is a process of exploring, which is always partial. We explore, and we find out things that we understand. We find out things we thought we understood were wrong. That's how it makes progress."
Well, you might say, Wren-Lewis says we know (we know, damn it) that we had a demand deficit because nominal interest rates went to zero just about everywhere (well, except out along the yield curve).  And what about the fact that IS-LM made some correct "counterintuitive" predictions? 
  
Look, I do not think Yates is saying that this interpretation is wrong. He is saying (correctly, in my view) that it is not necessarily correct. That's a big difference, and it's an important one. 

First off, there are many off-the-shelf models that permit zero nominal interest rates without "deficient" demand. So just because we see zero nominal interest rates is not proof of "deficient" demand. Please be more careful! 

Second, yes, the basic IS-LM model correctly predicted no soaring interest rates and no soaring inflation in the face of fiscal and monetary stimulus. But you know what? There are plenty of models out there outside the IS-LM tradition that made the same prediction. The "new monetarist" models that Steve Williamson works with have this property. Even the simple overlapping generations model I used to interpret Japanese economic developments over a decade ago make the same prediction. Moreover, as I remarked in that paper back then, increasing G is not necessarily the right thing to do in a liquidity trap. Again, I'm not saying the contrary opinion is wrong. I'm saying that it's not obvious. 

And it is even less obvious when we stop to consider that all of these models (my own included) basically begin by assuming that everything in the economy is just peachy when suddenly, a bad shock happens. Goodness, even conditional on this obviously wrong approximation, shouldn't we at least be taking some time to figure out the true nature of the shock? Just because demand falls does not mean it is "deficient" in the way "deficient" is usually defined in this class of models. Demand could be falling for all sorts of reasons, and probably many reasons. Maybe demand should be falling, conditional on these other factors changing?

Maybe it's not a good idea to cut G during a severe recession (certainly, I have argued elsewhere that economists might at least agree to increase infrastructure spending with debt finance). But then, maybe it is (who can really know for sure?). Maybe you view my attitude as "destructive." I view it more in line with Freeman Dyson's answer above. 

For what it's worth, I think that Paul Krugman and Simon Wren-Lewis come down way too hard on Tony Yates. 

In a nutshell, Krugman and Wren-Lewis claim that the economics profession knows how to diagnose and treat post-Lehman-like recessions. The diagnosis is self-evident: "deficient demand" (not the same thing as a decline in demand.) The treatment is written down in the most basic Econ 101 IS-LM model: increase G (or, at least, do not decrease it). 

Evidently, we are to have great confidence in the IS-LM prescription because the model correctly predicted that a massive increase in government debt would not lead to soaring interest rates and that a massive increase in the (base) money supply would not be inflationary. 

Well, that's nice. But I don't read Yates as claiming otherwise. I read him as suggesting that there is still a lot we don't know about many things leading up to the financial crisis and the economic forces governing the (slow) recovery dynamic. And because of this state of affairs, politicians were largely free to pursue policies that fit more in line with their political instincts (when do they not do that, I wonder?). Well, I don't know. Sounds plausible. Certainly, I would not have called Yates out for his "self-destructive" attitude. For a similar "self-destructive" attitude, have a look here at what the physicist Freeman Dyson has to say about what people generally don't get about science: 
Q: "How can you tell if someone is a visionary or a crank?"
A: "You can't tell. The whole point of science is that most of it is uncertain. That's why science is exciting--because we don't know. Science is all about things we don't understand. The public, of course, imagines science is just a set of facts. But it's not. Science is a process of exploring, which is always partial. We explore, and we find out things that we understand. We find out things we thought we understood were wrong. That's how it makes progress."
Well, you might say, Wren-Lewis says we know (we know, damn it) that we had a demand deficit because nominal interest rates went to zero just about everywhere (well, except out along the yield curve).  And what about the fact that IS-LM made some correct "counterintuitive" predictions? 
  
Look, I do not think Yates is saying that this interpretation is wrong. He is saying (correctly, in my view) that it is not necessarily correct. That's a big difference, and it's an important one. 

First off, there are many off-the-shelf models that permit zero nominal interest rates without "deficient" demand. So just because we see zero nominal interest rates is not proof of "deficient" demand. Please be more careful! 

Second, yes, the basic IS-LM model correctly predicted no soaring interest rates and no soaring inflation in the face of fiscal and monetary stimulus. But you know what? There are plenty of models out there outside the IS-LM tradition that made the same prediction. The "new monetarist" models that Steve Williamson works with have this property. Even the simple overlapping generations model I used to interpret Japanese economic developments over a decade ago make the same prediction. Moreover, as I remarked in that paper back then, increasing G is not necessarily the right thing to do in a liquidity trap. Again, I'm not saying the contrary opinion is wrong. I'm saying that it's not obvious. 

And it is even less obvious when we stop to consider that all of these models (my own included) basically begin by assuming that everything in the economy is just peachy when suddenly, a bad shock happens. Goodness, even conditional on this obviously wrong approximation, shouldn't we at least be taking some time to figure out the true nature of the shock? Just because demand falls does not mean it is "deficient" in the way "deficient" is usually defined in this class of models. Demand could be falling for all sorts of reasons, and probably many reasons. Maybe demand should be falling, conditional on these other factors changing?

Maybe it's not a good idea to cut G during a severe recession (certainly, I have argued elsewhere that economists might at least agree to increase infrastructure spending with debt finance). But then, maybe it is (who can really know for sure?). Maybe you view my attitude as "destructive." I view it more in line with Freeman Dyson's answer above. 

Paradigm Shift: Technical Analysis in the Altcoins & Bitcoin Market, & Introduction to Market Cycle, Structure & Manipulation

Posted by Grow Your Bitcoin, Get Free BTC on 5.02.2014 Label: , , , , , , , , , , , , ,
May 2014 - Hello friend Grow Your Bitcoin, Get Free BTC, In the article you read this time with the title May 2014, we have prepared well for this article you read and take of information therein. hopefully fill posts Artikel accumulation, Artikel altcoins, Artikel Bitcoin, Artikel daytrading, Artikel elliott wave theory, Artikel market maker, Artikel market manipulation, Artikel market mover, Artikel pump and dump, Artikel qtm, Artikel quantum holdings, Artikel TA, Artikel technical analysis, Artikel wall street, we write this you can understand. Well, happy reading.

Title : Paradigm Shift: Technical Analysis in the Altcoins & Bitcoin Market, & Introduction to Market Cycle, Structure & Manipulation
link : Paradigm Shift: Technical Analysis in the Altcoins & Bitcoin Market, & Introduction to Market Cycle, Structure & Manipulation

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May 2014

Remember this? I bet the first time you saw it in December you laughed this picture off, but it's okay so did I. And if this is the first time you're seeing this, don't dismiss it just yet!


Because, well, the harsh truth is that its all real. And this market cycle, believe it or not, is present in every market out there, including these Bitcoin & Altcoin markets.


If you haven't already, check out my previous posts earlier this year about trading Bitcoins and Altcoins, which highlight technical analysis basics, fundamental analysis frameworks, margin trading, and tips on developing a cryptocurrency trading strategy and TA. Here, I just want to point out the importance of understanding market structure, introduce you to market manipulation, and show you how technical analysis can be applied to your cryptocurrency trading.

As you read on, keep these following points in mind as these rules apply even more closely:
  • What goes up must come down
  • Buy on rumors, sell on news
  • All markets are linked to everything else


To take this one step further and understand the markets from an even wider perspective, the next thing to do is to put on your market manipulator hat. Check out these 2 really good resources covering this topic for a deeper understanding of what I'm trying to get at:


The whole point of learning about how market manipulators operate is not to actually manipulate the markets yourself or conduct pump and dumps, but to actually spot when others are trying to do so. This can help your trading strategy in various ways such as to:
  • Have a better understanding of the ebbs and flows of the market
  • Avoid getting caught in their squeezes
  • Identify a suspicious (potentially profitable) market
  • Know what the "smartest man in the room" is doing, and follow the "smart money"

From Wolong's ebook, he broke down the market cycle into 7 stages, namely:
  1. Position Building 
  2. Suppressing prices
  3. Test Pump
  4. Actual Pump
  5. Shakeouts
  6. Re-allocation and distribution
  7. Exiting - The Dump

If you compare the psychology chart above and the Pump & Dump cycle pointed out by Wolong, to the market structure chart below, you can see how they have very similar structures even though they use different terms to explain the phases.


    And from this market structure chart, you can see that the stages can be further simplified to 4 phases:
    1. Accumulation
    2. Markup (Pump)
    3. Distribution
    4. Decline (Dump)

    So why is this important, or how does it apply to the cryptocurrency markets? By understanding the market cycle chart, you will be able to better pick altcoins by spotting accumulation zones to join the breakout and profit, and to make your exit when you reach distribution zones. For example:


    Although many people disregard the profitability (or possibility) of using technical analysis to trade the Bitcoin and especially Altcoins markets, it is most definitely possible. I think the problem lies predominantly in the limitation that some of you have put on the term 'technical analysis'.

    Every piece of information on that chart you use is part of technical analysis; but the bigger question is how to make sense of it all. To better understand TA, we should think of the price charts as simply a graph of human behaviour.

    Although the tools to do so efficiently are sorely lacking at this point in time, here's just a few examples of TA used on Altcoins and Bitcoin.

    The first ever Technical Analysis chart applied to altcoins on Dogecoin, from way back in January 2014:

    Example of a markup on Blackcoin BC last month:

    How a Dump looks like and when you should exit:

    Bitcoin on a Logarithmic scale:


    Once you can wrap you head around the following facts, and combine them with what I have covered in the previous posts, you should be well on your way to developing a profitable cryptocurrency trading strategy. So here's a recap of the key takeaways:

    1) Markets are fundamentally fractal in nature; for every one up or down trend, you can zoom in/out too see the same wave cycles. Read more about Elliott Wave Theory here.



    2) Price charts are merely a graph of human behaviour. It doesn't matter if you're looking at a 3h chart or a 30m chart, they all tell the same story. Make sure to always compare two different time frames to better understand the macro and micro trend.


    3) All markets are linked to each other, and affect each other in a dynamic fashion to create one over-arching ecosystem. Don't forget those crash cycle charts I showed you at the beginning; they're everywhere.

    4) All markets are manipulated. Ride the waves and profit with the whales; don't fight the macro trend.




    With that, I'll just end off with a few words of wisdom.





    Remember this? I bet the first time you saw it in December you laughed this picture off, but it's okay so did I. And if this is the first time you're seeing this, don't dismiss it just yet!


    Because, well, the harsh truth is that its all real. And this market cycle, believe it or not, is present in every market out there, including these Bitcoin & Altcoin markets.


    If you haven't already, check out my previous posts earlier this year about trading Bitcoins and Altcoins, which highlight technical analysis basics, fundamental analysis frameworks, margin trading, and tips on developing a cryptocurrency trading strategy and TA. Here, I just want to point out the importance of understanding market structure, introduce you to market manipulation, and show you how technical analysis can be applied to your cryptocurrency trading.

    As you read on, keep these following points in mind as these rules apply even more closely:
    • What goes up must come down
    • Buy on rumors, sell on news
    • All markets are linked to everything else


    To take this one step further and understand the markets from an even wider perspective, the next thing to do is to put on your market manipulator hat. Check out these 2 really good resources covering this topic for a deeper understanding of what I'm trying to get at:


    The whole point of learning about how market manipulators operate is not to actually manipulate the markets yourself or conduct pump and dumps, but to actually spot when others are trying to do so. This can help your trading strategy in various ways such as to:
    • Have a better understanding of the ebbs and flows of the market
    • Avoid getting caught in their squeezes
    • Identify a suspicious (potentially profitable) market
    • Know what the "smartest man in the room" is doing, and follow the "smart money"

    From Wolong's ebook, he broke down the market cycle into 7 stages, namely:
    1. Position Building 
    2. Suppressing prices
    3. Test Pump
    4. Actual Pump
    5. Shakeouts
    6. Re-allocation and distribution
    7. Exiting - The Dump

    If you compare the psychology chart above and the Pump & Dump cycle pointed out by Wolong, to the market structure chart below, you can see how they have very similar structures even though they use different terms to explain the phases.


      And from this market structure chart, you can see that the stages can be further simplified to 4 phases:
      1. Accumulation
      2. Markup (Pump)
      3. Distribution
      4. Decline (Dump)

      So why is this important, or how does it apply to the cryptocurrency markets? By understanding the market cycle chart, you will be able to better pick altcoins by spotting accumulation zones to join the breakout and profit, and to make your exit when you reach distribution zones. For example:


      Although many people disregard the profitability (or possibility) of using technical analysis to trade the Bitcoin and especially Altcoins markets, it is most definitely possible. I think the problem lies predominantly in the limitation that some of you have put on the term 'technical analysis'.

      Every piece of information on that chart you use is part of technical analysis; but the bigger question is how to make sense of it all. To better understand TA, we should think of the price charts as simply a graph of human behaviour.

      Although the tools to do so efficiently are sorely lacking at this point in time, here's just a few examples of TA used on Altcoins and Bitcoin.

      The first ever Technical Analysis chart applied to altcoins on Dogecoin, from way back in January 2014:

      Example of a markup on Blackcoin BC last month:

      How a Dump looks like and when you should exit:

      Bitcoin on a Logarithmic scale:


      Once you can wrap you head around the following facts, and combine them with what I have covered in the previous posts, you should be well on your way to developing a profitable cryptocurrency trading strategy. So here's a recap of the key takeaways:

      1) Markets are fundamentally fractal in nature; for every one up or down trend, you can zoom in/out too see the same wave cycles. Read more about Elliott Wave Theory here.



      2) Price charts are merely a graph of human behaviour. It doesn't matter if you're looking at a 3h chart or a 30m chart, they all tell the same story. Make sure to always compare two different time frames to better understand the macro and micro trend.


      3) All markets are linked to each other, and affect each other in a dynamic fashion to create one over-arching ecosystem. Don't forget those crash cycle charts I showed you at the beginning; they're everywhere.

      4) All markets are manipulated. Ride the waves and profit with the whales; don't fight the macro trend.




      With that, I'll just end off with a few words of wisdom.





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