Bitcoin: A Solution to Excess Wealth? | Kanebridge News
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    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,480,538 (+0.01%)       Melbourne $960,899 (-0.26%)       Brisbane $805,943 (+0.49%)       Adelaide $760,890 (+0.51%)       Perth $651,708 (+0.03%)       Hobart $728,895 (+0.57%)       Darwin $613,579 (0%)       Canberra $946,216 (+2.14%)       National $956,035 (+0.37%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $696,616 (-0.38%)       Melbourne $470,588 (+0.14%)       Brisbane $450,511 (+0.19%)       Adelaide $370,041 (+0.13%)       Perth $363,377 (-0.48%)       Hobart $568,887 (+1.25%)       Darwin $342,547 (-0.28%)       Canberra $488,335 (+0.42%)       National $491,956 (+0.17%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 7,426 (+91)       Melbourne 10,303 (-71)       Brisbane 8,928 (-39)       Adelaide 2,407 (+20)       Perth 7,995 (-258)       Hobart 874 (-2)       Darwin 238 (-2)       Canberra 758 (-3)       National 38,557 (-264)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 6,833 (-17)       Melbourne 6,618 (-36)       Brisbane 1,828 (-2)       Adelaide 460 (-11)       Perth 2,177 (-9)       Hobart 126 (-3)       Darwin 336 (+5)       Canberra 425 (+7)       National 18,641 (-66)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $680 (+$15)       Melbourne $500 ($0)       Brisbane $560 (-$10)       Adelaide $520 (-$10)       Perth $550 ($0)       Hobart $560 (-$5)       Darwin $700 (+$5)       Canberra $700 (-$20)       National $606 (-$3)                    UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $600 ($0)       Melbourne $450 ($0)       Brisbane $498 ($0)       Adelaide $420 (-$8)       Perth $480 ($0)       Hobart $485 (+$13)       Darwin $550 ($0)       Canberra $550 (-$10)       National $514 (-$1)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 6,843 (+487)       Melbourne 6,880 (+741)       Brisbane 4,325 (+498)       Adelaide 1,251 (+157)       Perth 1,748 (+277)       Hobart 262 (+34)       Darwin 133 (+14)       Canberra 709 (+61)       National 21,516 (+2,269)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 8,300 (+770)       Melbourne 5,973 (+745)       Brisbane 1,753 (+273)       Adelaide 410 (+74)       Perth 731 (+171)       Hobart 119 (+13)       Darwin 249 (+21)       Canberra 641 (+63)       National 17,293 (+2,130)                HOUSE ANNUAL GROSS YIELDS AND TREND       Sydney 2.34% (↑)      Melbourne 2.69% (↑)        Brisbane 3.58% (↓)       Adelaide 3.60% (↓)     Perth 4.40% (↑)        Hobart 4.04% (↓)     Darwin 5.81% (↑)        Canberra 3.76% (↓)       National 3.30% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND       Sydney 4.47% (↑)        Melbourne 5.00% (↓)       Brisbane 5.88% (↓)       Adelaide 6.19% (↓)     Perth 7.21% (↑)      Hobart 4.59% (↑)      Darwin 8.41% (↑)        Canberra 5.89% (↓)       National 5.43% (↓)            HOUSE RENTAL VACANCY RATES AND TREND       Sydney 1.6% (↑)      Melbourne 1.8% (↑)      Brisbane 0.5% (↑)      Adelaide 0.5% (↑)      Perth 1.0% (↑)      Hobart 0.9% (↑)      Darwin 1.1% (↑)      Canberra 0.5% (↑)      National 1.2% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 2.3% (↑)      Melbourne 2.8% (↑)      Brisbane 1.2% (↑)      Adelaide 0.7% (↑)      Perth 1.3% (↑)      Hobart 1.4% (↑)      Darwin 1.3% (↑)      Canberra 1.3% (↑)      National 2.1% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND       Sydney 35.4 (↑)      Melbourne 35.9 (↑)      Brisbane 42.8 (↑)      Adelaide 34.8 (↑)      Perth 43.1 (↑)      Hobart 37.2 (↑)      Darwin 49.3 (↑)      Canberra 38.3 (↑)      National 39.6 (↑)             AVERAGE DAYS TO SELL UNITS AND TREND       Sydney 39.7 (↑)      Melbourne 36.4 (↑)      Brisbane 43.7 (↑)      Adelaide 33.8 (↑)      Perth 46.2 (↑)      Hobart 48.9 (↑)        Darwin 45.9 (↓)     Canberra 33.7 (↑)      National 41.0 (↑)            
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Bitcoin: A Solution to Excess Wealth?

Canada is planting 30 million trees this season. The purpose is to build a powerful carbon sink.

By Marc Chandler
Tue, Jun 29, 2021 2:16pmGrey Clock 3 min

Carbon is not the only thing that modernity produces in excess. There is a surfeit of capital. Absorbing it has become a major challenge and threatens financial stability. There are more than $13 trillion of negative-yielding bonds in the world. Despite claims of exorbitant privilege, the U.S. government pays about 1.5% interest to borrow for a decade, historically low and below the Federal Reserve’s inflation target. Japan and Germany, the next largest market economies, can borrow at considerably lower rates. Germany charges investors nearly 20 basis points, or 0.2%, annually for the privilege of lending to it. It is not coincidental that cryptocurrencies were born in an age in which savings are abundant.

Capital is subject to the same law of supply and demand as other sectors of society. Capital is cheap because it is abundant. Large companies have more money than they know what to do with, so they return it to shareholders in stock buybacks and dividends. The drive to improve returns fuels mergers and acquisitions.

Equity valuations are stretched. House prices in many countries are rising quickly. Credit spreads, which measure how much one is paid for a unit of risk, are historically tight.

Excess capacity is another expression of surplus savings, that is, overinvestment. The U.S. economy is roughly the size it was on the eve of the pandemic. Yet around 7.5 million fewer people are working. Despite a booming economy, the U.S. is using a little more than three-quarters of its industrial capacity. Even at the end of 2019, it was just above 76%.

Capital is abundant because market-based economies are huge wealth creators. By applying science to production and finance, capitalism has been incredibly successful. And it turns out that to succeed, capitalism does not need to permit slavery, employ children, or deny women the right to vote. It can provide unemployment insurance, social security, and head-start services without being dictated to or sacrificing personal liberty. Its plasticity confounds critics. It can be reformed.

However, capitalism’s biggest weakness grows out of its most powerful strength, one that cannot be reformed away. It produces wealth on levels heretofore inconceivable. We live in an epoch that King Midas would recognize. We are choking on our wealth. Even if one does not recognize the disease (the idea of surplus capital is still controversial in some circles), the symptoms are undeniable. The return to capital is low, whether it is interest rates or profit margins. Redundant investment (excess capacity) is another symptom. Efforts to rationalize industries are part of the M&A wave. Corporations have become net providers of capital, no longer net borrowers. Speculation is extensive, and the gamification of “investing” began long before Robinhood and the legalization of sports betting in the U.S.

If we will not address the underlying distributional issues and the disparity of income, wealth, and power, then we need to channel the surplus savings away from those expressions that help fuel economic and political instability. What is needed is a vehicle that does to savings what trees do to carbon. Voilà! Enter crypto.

Some diehards continue to insist that crypto is money. El Salvador’s President Nayib Bukele recently pushed through plans to recognize Bitcoin as legal tender. More than two-thirds of the nation’s population lacks bank accounts or credit cards. Bitcoin rose about 270% from mid-December to mid-April and has since been halved. Volatility makes this a dangerous experiment. Let’s see if it lasts longer than Tesla’s offer to sell cars for Bitcoin.

Perhaps the function of crypto is to redirect savings from lifting equities to even more stretched values, or pushing nominal and real rates lower, or creatively destroying goodwill in acquisitions. Some have said that blockchain was a solution looking for a problem. The problem that crypto may attempt to address is the need for a new asset to absorb the wealth in a nonthreatening, ideologically safe way.

Crypto was born during a period of great concentrations of wealth, and it cannot help but reflect that origin. Despite the talk of decentralized finance, ownership of crypto, let alone trading, appears highly concentrated. One recent study found that more than 72% of Bitcoins (now about $33,000 each) are owned by those with 100 or more Bitcoins, along with miners and brokers. Nearly 32% are owned by those with 1,000 or more Bitcoins. A recent survey by Gemini, a crypto exchange, found that the “average” crypto trader was a 38-year-old male whose household made about $111,000, roughly 60% more than the median family income in the US.

The volatility and environmental issues of some models (proof-of-work) suggest that even as a centralized store of value, crypto’s role as a savings trap may be limited. It will not solve the challenge of capitalism’s unparalleled ability to produce wealth. The current steep decline in the face of strong price pressures weakens arguments of a hedge against inflation and as store of value. Ultimately, crypto is another expression of the surfeit of capital.

Marc Chandler is chief market strategist, Bannockburn Global Forex.

Reprinted by permission of Barron’s. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: June 28, 2021.

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Mortgage holders should brace themselves for more pain as the Reserve Bank of Australia board prepares to meet tomorrow for the first time this year.

Most economists and the major banks are predicting a rise of 25 basis points will be announced, although the Commonwealth Bank suggests that the RBA may take the unusual step of a 40 basis point rise to bring the interest rate up to a more conventional 3.5 percent. This would allow the RBA to step back from further rate rises for the next few months as it assesses the impact of tightening monetary policy on the economy.

The decision by the RBA board to make consecutive rate rises since April last year is an attempt to wrestle inflation down to a more manageable 3 or 4 percent. The Australian Bureau of Statistics reports that the inflation rate rose to 7.8 percent over the December quarter, the highest it has been since 1990, reflected in higher prices for food, fuel and construction.

Higher interest rates have coincided with falling home values, which Ray White chief economist Nerida Conisbee says are down 6.1 percent in capital cities since peaking in March 2022. The pain has been greatest in Sydney, where prices have dropped 10.8 percent since February last year. Melbourne and Canberra recorded similar, albeit smaller falls, while capitals like Adelaide, which saw property prices fall 1.8 percent, are less affected.

Although prices may continue to decline, Ms Conisbee (below) said there are signs the pace is slowing and that inflation has peaked.

“December inflation came in at 7.8 per cent with construction, travel and electricity costs being the biggest drivers. It is likely that we are now at peak,” Ms Conisbee said. 

“Many of the drivers of high prices are starting to be resolved. Shipping costs are now down almost 90 per cent from their October 2021 peak (as measured by the Baltic Dry Index), while crude oil prices have almost halved from March 2022. China is back open and international migration has started up again. 

“Even construction costs look like they are close to plateau. Importantly, US inflation has pulled back from its peak of 9.1 per cent in June to 6.5 per cent in December, with many of the drivers of inflation in this country similar to Australia.”

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