BOOM as at 3rd March 2019

STABLECOIN REVOLUTION?
CONNECT THE DOTS

This week, we have seen a very significant event in the Crypto world. The 24 hour Volumes traded in Bitcoin have been exceeded by a Stablecoin, Tether.  And the total volume traded for all the Stablecoins combined has, at times, exceeded the volume traded in Bitcoin.

The Bitcoin Volume over the last 24 hours (at time of writing on Tuesday 26th Feb) was US$ 10.875 Billion.  The Tether Volume was US$ 11.303 Billion. This could be a significant day in the history of Crypto. Time will tell.

Another Stablecoin that is growing in Daily volumes traded is the USDC  by Circle & Coinbase. It was released in October last year so it has been trading for just 5 months. Volumes have risen from around US $ 100,000 per day to $ 55 Million per day. Another one, the True USD Stablecoin Daily Volume has risen from US$ 1 Million per day to US$ 125 Million in just under 12 months. The PAXOS Stablecoin Daily Volume has risen from US$ 2.5 Million per day to US$ 120 Million over the last 5 months. And the DAI Stablecoin daily volume has risen from US$  100,000 per day to US$ 37 Million in just 12 months. The Gemini Dollar volume has risen from about US$ 75,000 to US$ 248 Million.

JP Morgan, the giant US bank just announced its own Stablecoin for in-house use only to be used as an accounting tool to facilitate low cost data storage on a blockchain or DAG (a Directed Acylic Graph).   JP Morgan settles $6 trillion of transactions on average every day between clients of its wholesale payments business. It is highly likely that all banks and all large entities will eventually have similar (private) stablecoins and private blockchains to serve the same purpose.  The JPM Coin will initially run on top of Quorum, the private version of ethereum developed by the bank and EthLab. In future, they could use any blockchain technology. They are not tied to ethereum.

Get the drift?  The Stablecoin revolution is coming. And these could (theoretically) replace the older gateways such as Bitcoin, Ethereum etc.  Of course, there is theory and then there is reality.  But if that happens, the question must be raised — what will happen to the price/value of the old gateways?

Stablecoins may become the preferred bridges, the gateways into the New World of Crypto which will probably look very different to the Old World of Crypto. Prepare to be shocked at the speed of this possible transition.

SAUDI – CHINA INVESTMENT $ 28 BILLION

Last week, BOOM mentioned a $ 10 Billion deal between Saudi Arabia and China for a joint oil refinery and a petrochemical project. Since then, it has been revealed that there were other projects agreed and that the total investment deal between the two nations actually amounted to US$ 28 Billion.

It has been reported that 35 agreements were signed and four licenses granted to Chinese companies. The details were not revealed. The source was the Saudi State news agency, SPA as reported by Reuters.  This is very significant to note from a Geo-political aspect.

RUSSIA IS A GAS

Staying on the Geo-political theme, last week Gazprom, Russia’s state-run energy company, said its share of sales of natural gas in the European Union has increased to 36.7 percent, rising over two percent since 2017.

Some reports indicate that Russia’s gas supplies to Europe are three times larger than the total LNG imports into Europe from all international sources.  LNG shipments to Europe are growing but they are still only 13% of the entire gas market. Trump doesn’t seem to understand these realities as he urges Germany and other nations to abandon Russian gas.

On the other side of the Russian landmass, Gazprom is also due to move large amounts of gas into China soon through the so-called “Power of Siberia” pipeline which is now 99% complete.

UNUSUAL US ENERGY CRISIS

The fracking companies in the USA have certainly been producing more oil and gas over the last 10 years with their new technologies to extract energy from “tight” places.  It is now fashionable to call America the new energy “powerhouse”.  But their companies have had to raise enormous amounts of debt and equity capital to fund that expansion. Now there is a problem and it is old one in business — insufficient profit (or lack of profit altogether).

The price of West Texas Oil was US$ 105 per barrel 5 years ago. In 2016, it fell to just US$ 30 and it is now $ 55. These are the harsh realities of the energy world. During that 5 year time-frame, the Natural Gas prices have halved.

The amounts of capital raised last year by the US fracking companies was just $ 22 Billion — about half of what they raised in 2016.  The problem is that unfortunately it appears that shale drilling is actually unprofitable for many companies. The energy comes out of the ground but the money pumped in to do so simply overwhelms it. In other words, costs overwhelm the potential for profit. This is a perfect illustration of the concept called EROEI — Energy Returned on Energy Invested but in a financial sense.

Cheap finance (low interest rates) which has been the norm since 2008 sounds good but only if it is combined with high oil and gas prices to produce the miracle of energy profits. With global economic growth slowing especially in Europe, the prospects for higher energy prices in the near future look grim.

For a closer look at this, read the lead article in BOOM this week — Wall Street Loses Faith In Shale.

HEALTH STATISTICS

BOOM has had a long term interest in life expectancy as being the critical measuring device for determining overall health outcomes. After all, anyone who is alive is clearly healthier than someone who has just died at the same age. Being alive is the ultimate health measure.  “It is better than the alternative” say some wise people. BOOM just read a very interesting report on health outcomes in various nations. The Top 10 nations were — Spain, Italy, Iceland, Japan, Switzerland, Sweden, Australia, Singapore, Norway and Israel.  The United States came 35th, well down the list surrounded by nations such as Costa Rica and Lebanon. Cuba came in at 30th.

This result should have been a huge embarrassment to the US leadership who always thinks that  they are “exceptional”. BOOM supposes that exceptionally bad is still “exceptional” in their eyes. Trump would probably find a way to spin it that way.

The article makes interesting reading —

“Bloomberg 2019 Healthiest Country Index —  the index grades nations based on variables including life expectancy while imposing penalties on risks such as tobacco use and obesity. It also takes into consideration environmental factors including access to clean water and sanitation.”

Reference:  https://www.bloomberg.com/news/articles/2019-02-24/spain-tops-italy-as-world-s-healthiest-nation-while-u-s-slips

In economics, things work until they don’t. Until next week …………  Make your own conclusions, do your own research.  BOOM does not offer investment advice.

 

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Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/

EMAIL: gerry [@] boomfinanceandeconomics.com

==================================================================

HOW MOST MONEY IS CREATED

BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR
(but they always need a Borrower to do so)
THERE IS NO SUCH THING AS A DEPOSIT
BANKS PURCHASE SECURITIES, THEY DON’T MAKE LOANS
BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY

Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how the banking system and financial sector really work.

https://www.youtube.com/watch?v=EC0G7pY4wREhttp://

How is Most New Money Created ?

LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).

From the Bank of England Quarterly Bulletin Q1 2014    —

“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves”.

Youtube Video —  https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-in-the-modern-economy-an-introduction

and

https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy

Paper:  Money in the Modern Economy  PDF —  CLICK HERE

Quarterly Bulletins Index

http://www.bankofengland.co.uk/publications/Pages/quarterlybulletin/2014/qb14q1.aspx

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.

On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —

“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).”

Reference: https://www.bundesbank.de/Redaktion/EN/Topics/2017/2017_04_25_how_money_is_created.html

The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018.

“…… the vast bulk of broad money consists of bank deposits”

“Money can be created …….. when financial intermediaries make loans

“In the first instance, the process of money creation requires a willing borrower.”

“It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”

======================================================================

PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 3rd March 2019:

1. US LONG BOND PRICE (TLT) — Changed to NO Arrow Dominant
2. SHANGHAI STOCKS — Changed to UP Arrow Dominant

TLT
SHANGHAI STOCKS

NOTE — RED ARROWS INDICATE BOOM PRICE PULSE DOMINANCE in the present moment (as indicated by the date of the chart and taking into account the 3 year time frame shown).  The charts are now arranged in PRICE PULSE RED ARROW DOMINANCE.    NOTE: All Charts are WEEKLY Charts over the last 3 YEARS time frame.  Arrows indicate PAST price action (not future).  No predictions are implied from past action.

Comments refer to past PRICE PULSE (Red Arrow DOMINANCE) over the last 3 years, the week ended 3rd March 2019.  You can RIGHT CLICK a chart and OPEN in a New Tab.  Make your own conclusions, do your own research. BOOM does not offer investment advice. 

PLEASE NOTE — Many charts are ETF’s from NY Market  (not the base commodity or currency etc). The NY Stock Code is in the Top Left Hand Corner of each chart.
Charts are produced from http://www.stockcharts.com

Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/

PRICE PULSE RISING — (RED ARROW UP DOMINANCE)

# SHANGHAI STOCKS — UP Arrow Dominant
# COPPER PRICE — UP Arrow Dominant
# SWISS STOCKS — UP Arrow Dominant
# SOIL (POTASH ETF) — UP Arrow Dominant
# SINGAPORE STOCKS — UP Arrow Dominant
# US JUNK BOND PRICES — UP Arrow Dominant
# HANG SENG — UP Arrow Dominant
# RWR (US Real Estate REIT Fund) — UP Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — UP Arrow Dominant
# US HIGH GRADE CORP BONDS (LQD) — UP Arrow Dominant
# EMERGING MARKETS ETF (EEM) — UP Arrow Dominant
# YUAN (AGAINST USD) ETF (CYB) — UP Arrow Dominant
# AGGREGATE US BOND PRICES (BND) — UP Arrow Dominant
# GOLD PRICE in USD — UP Arrow Dominant
# GOLD PRICE (in Aus Dollars) — UP Arrow Dominant
# INDIAN STOCKS — UP Arrow Dominant
# BRAZIL STOCK INDEX — UP Arrow Dominant
# PALLADIUM PRICE — UP Arrow Dominant
# ARGENTINA STOCKS — UP Arrow Dominant
# US INFLATION PROTECTED BOND PRICES — UP Arrow Dominant
# US UTILITIES STOCKS — UP Arrow Dominant
# RIO STOCK (Iron Ore) — UP Arrow Dominant
# US 3 MTH T BILL YIELD — UP Arrow Dominant
# LIBOR — UP Arrow Dominant

PRICE PULSE FALLING — (RED ARROW DOWN DOMINANCE)

# TED SPREAD — DOWN Arrow Dominant
# NATURAL GAS (SPOT PRICE) — DOWN Arrow Dominant
# US DOW STOCK INDEX — DOWN Arrow Dominant
# US BIOTECHNOLOGY INDEX — DOWN Arrow Dominant
# JAPAN STOCKS — DOWN Arrow Dominant
# WEST TEXAS OIL PRICE — DOWN Arrow Dominant
# US TRANSPORT INDEX — DOWN Arrow Dominant
# US INSIDER SENTIMENT (KNOW) — DOWN Arrow Dominant
# QUAL (Quality ETF) — DOWN Arrow Dominant
# MTUM (Momentum ETF) — DOWN Arrow Dominant
# RUSSELL 2000 INDEX — DOWN Arrow Dominant
# TRIM TABS US FLOAT (TTAC) — DOWN Arrow Dominant
# FINANCIAL SECTOR ETF (XLF) — DOWN Arrow Dominant
# US KBW BANK INDEX — DOWN Arrow Dominant
# NASDAQ COMP INDEX — DOWN Arrow Dominant
# COMMODITIES INDEX (USCI) — DOWN Arrow Dominant
# SWISS FRANC (AGAINST $US) — DOWN Arrow Dominant
# FRANCE STOCKS — DOWN Arrow Dominant
# AUSSIE ALL ORDS INDEX — DOWN Arrow Dominant
# THAI SETI INDEX — DOWN Arrow Dominant
# GERMAN DAX — DOWN Arrow Dominant
# TAIWAN STOCKS — DOWN Arrow Dominant
# FVL — VALUE LINE — DOWN Arrow Dominant
# YEN (AGAINST $US) — DOWN Arrow Dominant
# COAL ETF (KOL) — DOWN Arrow Dominant
# INDUSTRIAL METALS ETF (DBB) — DOWN Arrow Dominant
# SOUTH KOREA STOCKS — DOWN Arrow Dominant
# AUSSIE DOLLAR AGAINST US DOLLAR — DOWN Arrow Dominant
# CANADIAN DOLLAR AGAINST USD — DOWN Arrow Dominant
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# NOMURA HOLDINGS — DOWN Arrow Dominant
# PLATINUM PRICE — DOWN Arrow Dominant
# BITCOIN INDEX $NYXBT — DOWN Arrow Dominant
# DEUTSCHE BANK SHARES — DOWN Arrow Dominant
# FOOD INPUT PRICES (DBA) — DOWN Arrow Dominant
# EURODOLLAR INDEX ($XED) — DOWN Arrow Dominant

PRICE PULSE UNCERTAIN NON-DOMINANCE OF RED ARROW –

# US LONG BOND PRICE (TLT) — NO Arrow Dominant
# DENMARK STOCKS — NO Arrow Dominant

Disclaimer: All content is presented for educational and/or entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice, nor is it at all intended to be taken as such. The commentary and other contents simply reflect the opinion of the authors alone on the current and future status of the markets and various economies. It is subject to error and change without notice.The presence of a link to a website does not indicate approval or endorsement of that web site or any services, products, or opinions that may be offered by them.

Neither the information nor any opinion expressed constitutes a solicitation to buy or sell any securities nor investments. Do NOT ever purchase any security or investment without doing your own and sufficient research.  Neither BOOM Finance and Economics.com nor any of its principals or contributors are under any obligation to update or keep current the information contained herein. The principals and related parties may at times have positions in the securities or investments referred to and may make purchases or sales of these securities and investments while this site is live. The analysis contained is based on both technical and fundamental research.

Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

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MOLS   Denmark

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