Currency

On a monthly basis, Canadian GDP grew 0.3% in September, to an annual pace 2.7% in the third quarter. This outpaced the 1.6 per cent of the previous three months, and was just shy of U.S. economic growth of 2.8 per cent at its latest reading.

The Canadian Dollar futures are currently up $0.15 to $94.50 this moring.

 

Drew Zimmerman

Investment & Commodities/Futures Advisor

604-664-2842 – Direct

604 664 2900 – Main

604 664 2666 – Fax

800 810 7022 – Toll Free

dzimmerman@pifinancial.com

It seems only yesterday — it was only yesterday — that bitcoin went soaring past $1,000, popping eyeballs everywhere. But as most of America gears up to tuck into some turkey on Thursday, profit-takers seemed nowhere to be seen, as the virtual currency sailed past that big level to tap a new high of $1,170 over at Mt. Gox, last changing hands at $1,143.90 (albeit in low volumes).

Investing in the Future of Money

 

  • The best performing investment, ever?
  • A brief history of the phenomenon known as Bitcoin
  • The cure for the broken monetary system… the future of money… and more!

Never has a tech investment risen so high, so fast… 

Scratch that — never has any investment risen so high so fast. 

If you had bought five Bitcoin for a grand total of one dollar back in October 2009, you’d now be sitting on upwards of $4,500 worth of Bitcoin. 

We’ll let you ponder that for a moment…

But not too long. Because although you could have made huge gains when we covered Bitcoin as it hovered around $30… a bigger picture now comes into view…

Could other crypto-currencies compete with Bitcoin? And would they get off the ground, run alongside Bitcoin, as the dollar runs alongside the euro or the renminbi?

If the answer is yes, dear reader, there could still be hope for outlandish gains in this area of the market. Let us know if you’d invest in those currencies if you could. If so, we’ll write about it next week. 

If such a trend holds, could we be entering a time when crypto-currencies replace fiat currency?

Below, Jeffrey Tucker shows you how that very thing could be underway as you read these words. According to him, crypto-currencies such as Bitcoin could be the cure to our broken monetary system, and your financial worries.

Please read on as Jeff gives you a crash course on this important chapter in financial history. 

Best,

Josh Grasmick
Managing Editor, Tomorrow in Review

The Cure for the Broken Monetary System

Screen Shot 2013-11-26 at 6.08.55 PMBefore the housing market collapsed and the government pumped billions into the economy to save it, there was a programmer named Satoshi Nakamoto. And without much fanfare, he created an idea that’s in the process of changing the world. His idea was Bitcoin.

Some background information is in order before I go any further.

Think back to 2008. Real estate was in a free fall, and the devastation was most intensely felt by the largest banks and investment firms holding mostly worthless assets in the form of mortgage-backed securities. The lame-duck Bush administration was frantically lobbying to spend $800 billion to bail out the banks.

To achieve this implausible goal, the Bush administration, along with its counterpart in the U.K., had to whip up a kind of hysteria. Administration officials warned of a melting financial world. Banks would die, ATMs would run out of money, goods would not ship, the monetary system would break down, and the U.S. was going the way of Iceland, which, at the time, ran out of purchasable groceries.

Was it true? I for one never believed it. I had seen this kind of government-induced frenzy before, which the establishment was pushing through things like Homeland Security, or NAFTA, or other huge and decisive bills that met with massive public opposition. The establishment has to create an environment of fear in order to get the bill through Congress.

Looking back at those days, it seems obvious now that this was a turning point in history, a time in which it became very clear to some very smart people in the world that the government’s system of financial and monetary management was broken. If an entire system could be brought down by declining house prices, is it really robust enough to support global economic growth into the future.

Back to the faceless programmer, Satoshi Nakamoto. Around the same time, he was putting the finishing touches on his newly proposed currency, Bitcoin.

It would be created entirely out of code. It would have all the main features that we know good money has. It would be divisible, portable, durable, uniform in quality, and scarce. He chose the model of open source code: everyone could see exactly how it is made. It would live on a ledger in the Internet cloud, and the ledger would keep strict controls on creation of new units and the ownership of existing units.

There was just one problem: His newly created Bitcoin had no value whatsoever.

Nakamoto knew that if it were ever to have value, it couldn’t be imparted by the programmers. It had to come from the market itself. The proposed product appeared that January, as the new administration was taking office. You could think of this as an act of secession, a final declaration of no confidence in the existing system.

For the next eight months, it was nothing but a curiosity. A techy dream that never reached beyond the dark part of the Internet and the tiny group of genius-geeks who follow things like it. But in October 2009, something amazing happened. Bitcoin obtained a price on the market. It began to trade at about 2/10 of a penny. In other words, one U.S. cent would get you 5 Bitcoins.

How could this happen? Two crucial points help explain what happened.

First, it had proven itself to be very useful and functional. It was portable. The system was stable. The ledger in the sky called the “blockchain” worked exactly as Satoshi expected that it would.

Second, Bitcoin was scarce. Only a certain number could be created in any period of time, and the way they were created was through the hard work of computers themselves. This feature of scarcity and resource use led the market to value them.

But of course, that was all 4½ years ago. Today, Bitcoin is roaring. In the last several weeks, it has moved exponentially from $250 to peak at $900, before a huge selloff hit it again and it settled in the $700 range. But one thing many people have noticed about the latest rally. It is not following the same pattern as in the past. Each time, there seems to be a settling back to reality (whatever that is!), something stops it, and buyers step in to dominate the market.

There are a number of salient factors driving this. The myth that Bitcoin is valuable only for purchases of drugs online has been shattered. The “Amazon for narcotics” was shut down by the feds just a few weeks ago and the exchange rate of Bitcoin to the dollar did not collapse. In fact, after about 48 hours, the price had actually risen in value.

Also, China has entered the market in a huge way. Some people believe that one-third of current trading activity is coming from China, where the government has shown itself to have a very laissez faire attitude when it comes to the currency.

The congressional hearings held on Capitol Hill featured a line of administration officials warning that they are on the job to make sure that Bitcoin is not ever used for nefarious purposes.

But can these government regulators really fulfill their promises?

Bitcoin lives on a distributed network that cannot be taken down. The transactions are pseudonymous. That means you can track ownership numbers, but you can’t necessarily connect those numbers to particular people. It is not a perfect system for preserving anonymity, but it comes closer than anything that exists.

Government cannot control Bitcoin any more than they can control algebra. It exists and it is not going away. It will live forever outside the control of any state.

Satoshi proposed his system as a possible new standard for money in the Internet age. It was a wild dream and speculation. But these are times in which dreams come true. The current monetary system has been nationalized for 100 years, and it is broken down.

By their own words, the world’s central bankers and presidents have said the system is unstable and needs constant bailing out. That’s not what you want to hear from the people in charge.

Satoshi saw that it was time for something new. The market apparently agrees. Now, no matter what government does, it can’t help but inadvertently promote the use of this new medium of exchange. It has a life of its own.

Bureaucrats can complain, threaten, pronounce, and warn. But in the end, Bitcoin just doesn’t care.

Sincerely,

Jeffrey Tucker
For Tomorrow in Review 

P.S. When we first started covering Bitcoin, you could buy one for around $30. Now, that price seems like a steal. We will never see it again. 

A handful of events have changed people’s opinion about the hot alternative currency. As more and more people understand the history of the currency, they see it as a safe way to protect and grow their wealth. 

To find out how you can get your hands on this exciting currency, click here for more information.

Thank you for reading Tomorrow in Review. We greatly value your questions and comments. Click here to send us feedback.

 
 

 

Inflation Is Raging – If You Know Where to Look

Inflation-300-0017770EMost people — certainly most governments and economists — define inflation as a general rise in prices. But this is wrong. Inflation is an increase in the money supply, of which a rising general price level is just one possible result — and not the most common one.

More often, excessive money creation shows up as asset bubbles, where the new money, instead of flowing equally to all the products that are for sale at a given time, flow disproportionately into the ‘hottest’ asset classes. Readers who were paying attention in the 1990s might recall that the consumer price index was well-behaved while huge amounts of money flowed into financial assets, producing the dot-com bubble.

The same thing happened in the 2000s, when excess currency flowed into housing and equities. In each case, mainstream economists and government officials pointed to modest consumer price inflation as a sign that things were fine. And in each case they were simply looking in the wrong place and completely missing the destabilizing effects of an inflating money supply.

Now we’re at it again, with economists, legislators and central bankers using low consumer price inflation as a rationale for even easier money, while ignoring epic bubbles in sovereign bonds, equities, high-end real estate and collectibles around the world. These bubbles are the true evidence of inflation, and since they’re growing progressively larger, it’s accurate to say that inflation is high and accelerating. Let’s take some exotic examples, first from the art world:

Art prices painting a disturbing picture of inflation

The Francis Bacon painting “Three Studies of Lucian Freud” was sold for a whopping $142.4 million as part of a $691.6 million Christie’s sale on Tuesday night, making it the most expensive work of art ever sold at auction.

Some argue that the sale is giving us a message about inflation that investors aren’t getting from the action in gold, the Dollar Index, or the government’s official consumer price index data.

“Asset inflation took another leg higher last night,” wrote Peter Boockvar in a Wednesday morning note. “Thank you Federal Reserve, and thank you Bureau of Labor Statistics for not including art in the consumer price index.”

And this from—would you call it the jewelry world?:

Most expensive diamond ever sold goes for $83.2M

Sotheby’s just dropped the hammer on the most expensive diamond ever sold. The stone, a 59.6-carat flawless pink diamond called the “Pink Star,” was auctioned for $83.2 million, according to Sotheby’s. That made it the most expensive jewel or diamond ever sold at auction.

The previous record for a diamond sold at auction was $46 million, for a 24.68-carat pink diamond bought by Laurence Graff in 2010. The auction follows yesterday’s Christie’s sale of the largest fancy-vivid orange diamond known to exist, a 14.82-carat stone that sold for $36 million—the highest price-per-carat ever paid at auction.

Now, if the super-rich are going to covert their paper currency into tangible things — at a time when governments around the world are contemplating wealth taxes — they need safe, confidential storage. And the market is responding:

Über-warehouses for the ultra-rich

PASSENGERS at Findel airport in Luxembourg may have noticed a cluster of cranes a few hundred yards from the runway. The structure being erected looks fairly unremarkable (though it will eventually be topped with striking hexagonal skylights). Along its side is a line of loading bays, suggesting it could be intended as a spillover site for the brimming cargo terminal nearby. This new addition to one of Europe’s busiest air-freight hubs will not hold any old goods, however. It will soon be home to billions of dollars’ worth of fine art and other treasures, much of which will have been whisked straight from collectors’ private jets along a dedicated road linking the runway to the warehouse.

The world’s rich are increasingly investing in expensive stuff, and “freeports” such as Luxembourg’s are becoming their repositories of choice. Their attractions are similar to those offered by offshore financial centres: security and confidentiality, not much scrutiny, the ability for owners to hide behind nominees, and an array of tax advantages. This special treatment is possible because goods in freeports are technically in transit, even if in reality the ports are used more and more as permanent homes for accumulated wealth. If anyone knows how to game the rules, it is the super-rich and their advisers.

Because of the confidentiality, the value of goods stashed in freeports is unknowable. It is thought to be in the hundreds of billions of dollars, and rising. Though much of what lies within is perfectly legitimate, the protection offered from prying eyes ensures that they appeal to kleptocrats and tax-dodgers as well as plutocrats. Freeports have been among the beneficiaries as undeclared money has fled offshore bank accounts as a result of tax-evasion crackdowns in America and Europe.

Parallel fiscal universe

Freeports are something of a fiscal no-man’s-land. The “free” refers to the suspension of customs duties and taxes. This benefit may have been originally intended as temporary, while goods were in transit, but for much of the stored wealth it is, in effect, permanent, as there is no time limit: a painting can be flown in from another country and stored for decades without attracting a levy. Better still, sales of goods in freeports generally incur no value-added or capital-gains taxes. These are (technically) payable in the destination country when an item leaves this parallel fiscal universe, but by then it may have changed hands several times.

Some thoughts

Clearly, inflation is raging. But because so much of society’s wealth is flowing to the top 1% — who after all can only drive one car at a time and tend to eat no more than the rest of us — inflation isn’t showing up in food, suburban houses or other mass-market products. Instead, trillions of disposable dollars are pouring into real assets that are then hoarded in mansions and high-end storage facilities. This is a truly startling asset grab when you think about it.

The one unique thing about this episode is that past migrations of capital from financial to tangible assets have included precious metals, which tend to be in demand when paper currencies are being mismanaged. That gold and silver aren’t participating is the strongest proof yet that they’re being manipulated to hide the impact of rising debt and excessive currency creation. After all, if you’re going to spend $100 million on art, your financial adviser will almost certainly tell you to diversify into farmland, oil wells and gold bars.

[Hear MoreRonald Stoeferle: The Fundamental Argument in Favor of Gold Remains Intact]

That this hasn’t happened doesn’t mean it won’t. Picture a chart tracking the tangible asset classes of the super-rich: art, jewelry, high-end London and Manhattan apartments, beachfront property, gold bullion, etc., things that exist in limited supply and will be prized no matter what the S&P 500 or 10-year Treasuries are doing. Virtually all the lines on that chart would would be looking parabolic right about now — except precious metals. A billionaire, trying to figure out where to move his next hundred mil would look at this chart and see one outlier, one thing that hasn’t yet gone through the roof, and make the obvious choice. That day is coming.

But looked at another way — in terms of the amount of paper currency being used to buy them — you could say that gold and silver are by far the most popular tangible assets in the world. China, India, and Russia between them have snapped up about 4,000 tons of gold this year, worth about $153 billion at the current price. That’s a lot more than was spent on art. It’s just that these purchases, massive though they are, aren’t moving the price.

But they are moving something: the gold reserves of the western central banks that are sending their gold eastward. Those reserves are falling, at an unsustainable rate. So Western central banks face a tough choice: keep sending their gold to Asia until it’s gone, or let the super-rich bid it into the stratosphere in line with art and diamonds. Sooner or later, the central banks will have to choose door number two.

 

(Reuters) – Google Inc (GOOG.O) will offer a prepaid debit card that will allow consumers to purchase goods at stores and to withdraw cash from ATM machines, the Internet company said on Wednesday.

The card, which is only available in the United States, lets consumers access the funds stored in their Google Wallet accounts. Google Wallet is a smartphone app and online payment service that lets consumers buy goods and transfer money to each other.

The new Wallet card will be accepted at “millions of locations” that accept MasterCard and at ATM machines, Google said in a post on its official blog on Wednesday. Google said the card is free and that the company will not charge cardholders any monthly or annual fees.

The card could help advance Google’s efforts to play a bigger role in commerce and provide the company with valuable information about consumer shopping habits, though it appears to be less ambitious than the full-fledged credit card once rumored to be in the works.

…more, the business look HERE & the Tech look HERE