Gold collapsing. Bitcoin UP.

[cypherdoc]

6min

 

[cypherdoc]

haha. i knew it:

FOMC Statement: No Rate Hike

 

[cypherdoc]

Dow whipping all over like a stuck pig.

gold shooting up. dollar dumping. stocks to follow.

Bitcoin to the Moon, please.

what fun!

 

[Melbustus]

Most meaningful part of the Fed statement, I think:

"The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
http://www.federalreserve.gov/newsevents/press/monetary/20150917a.htm

Originally they were going to raise once unemployment dropped below 6.5% (we're around 5% right now). Remember how big a deal it (supposedly) was that they made a quantified statement regarding liftoff conditions?

So that's all out the window now. The door is open for them to do whatever the heck they want.

My sig from BCT seems appropo today:
"Bitcoin is the first monetary system to credibly offer perfect information to all economic participants."

 

[Melbustus]

Just for clarity, I don't believe anyone has shown conclusively what happens in the limit as R/T --> 0. It is possible that there actually is no problem even with Bitcoin exactly as it already is.

Indeed. My intuition would be that these narrow problems chained on nuances would probably not work out to be catastrophic issues in practice (just as how one can construct death-spiral args surrounding the 4yr emission halving cliffs, yet they're fine in practice). But it'd still be nice to more thoroughly understand it.

 

[cypherdoc]

haha, the joke's on you. one Fed member projects negative interest rates coming to the US of A:

http://www.zerohedge.com/news/2015-09-17/fomc-stunner-one-fomc-member-forecasts-negative-025-bps-interest-rate-2015-and-2016

 

[cypherdoc]

what are the financials telling you? nothing good, i can assure you:

 

[cypherdoc]

i'm feeling better now:

 

[molecular]

haha, the joke's on you. one Fed member projects negative interest rates coming to the US of A:

http://www.zerohedge.com/news/2015-09-17/fomc-stunner-one-fomc-member-forecasts-negative-025-bps-interest-rate-2015-and-2016

lol. looks like space invaders to me.

Do these people really think this will happen?!?

EDIT: I don't mean the negative rates, I mean the crazy hike. 3% in 2017/2018? heh, I think not.

 

[Justus Ranvier]

This is extraordinary:

http://www.zerohedge.com/news/2015-09-17/maxine-waters-congratulates-janet-yellen-not-hiking-rates-says-zirp-precisely-what-m

If low rates are "good for minorities", then raising them would be "bad for minorities".

Put in the context of recent events, in particular the news media's apparent interest in fueling racial tensions at any opportunity, this almost looks like an open threat in the form, "keep printing the money, or else we'll burn down the cities."

 

[solex]

Most meaningful part of the Fed statement, I think:

"The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
http://www.federalreserve.gov/newsevents/press/monetary/20150917a.htm

Originally they were going to raise once unemployment dropped below 6.5% (we're around 5% right now). Remember how big a deal it (supposedly) was that they made a quantified statement regarding liftoff conditions?

The Federal Reserve has policies which are anathema to hard-money enthusiasts and followers of Austrian economics. However, it does not mean that people who work at the Fed are dumb. So they must know the 5% unemployment figure is window-dressing, and take more seriously unbiased numbers like those of ShadowStats:

http://www.shadowstats.com/alternate_data/unemployment-charts

The Fed can't raise rates because the US is still in Peak Debt. It needs 5% or even 10% wage inflation for a few years to severely erode the household debt pile in real terms. This is a remote hope if real unemployment is still close to 1930s depression-era levels.

 

[cypherdoc]

Go Peter, go Peter!

 

[Melbustus]

...
The Fed can't raise rates because the US is still in Peak Debt. It needs 5% or even 10% wage inflation for a few years to severely erode the household debt pile in real terms. This is a remote hope if real unemployment is still close to 1930s depression-era levels.

Maybe I've been listening to Marc Andreessen too much, but perhaps the deflationary pressures are not simply due to accumulated debt and the current deleveraging cycle. Maybe it's far more structural...and not a bad thing. The oft-repeated thesis being that as "software eats the world", industry after industry becomes an order of magnitude (or more) more efficient, and therefore prices for corresponding goods or services drastically drop. That shows up as very strong deflationary pressure in traditional CPI/PPI measures.

But it's increasingly obvious that we're measuring the wrong stuff. Dramatic increases in efficiency are of course a great thing for the world economy, yet by a narrow measure of price-inflation of a fixed basket of goods, these advances move the numbers exactly the same way as increased unemployment or decreased general economic activity would.

Anyways, it's perhaps interesting to think about how that affects interest rates and a world of finance that's been built up over decades on different assumptions.

[Also note that if we had a massively divisible and fixed money supply (ahem) over the long haul, we would be conditioned to see overall prices falling over the longrun as a *good* thing. It would be an obvious quantification of humanity's success (producing more for less). It's strange that that's kinda the case in the tech industry - we all think it's wonderful that a 1GB of memory went from $1000 20yrs ago to $1 today - yet "deflation" is generally a horrible word in economic circles. I understand why, but as tech eats everything else, does this change?]

 

[Mengerian]

[1] @Mengerian also made some plots that illustrate the mining gap in the previous Gold thread on BCT and possibly has insight into what happens as R/T --> 0.

Hi Peter! I'll try my best...

I think the issue with R --> 0 stems from the concept of "neutral profit" in your formulation. Because "neutral profit" is based on the miner's profit with on empty block, this becomes nonsensical when the block reward is zero, and thus the analysis breaks down.

I think the solution to this is to base the formulation on "zero profit" instead of "neutral profit". Take your equation (5) and set profit to 0. solve for M, yielding:

M=ηHTe^(τ/T) - R

This is the zero profit curve. When R = ηHT (cost = block reward revenue), it resolves into the same equation as your "neutral profit". Currently when block reward is the majority of revenue, we can expect R > ηHT. in this case, the curve will start below 0, so the profit will be positive for empty blocks, up until the lines cross at some large Q.


But when fees predominate in future (ie R << M), we should expect R < ηHT. In this case this "cost" curve will start above 0, so the "demand" curve (which starts at 0) will be below it, meaning that empty blocks are unprofitable. This is the "mining gap" situation.


Now in this formulation, equation (8) will become:

p_supply = ηH dτ/dQ e^(τ(Q)/T)

(ie, replace R/T with ηH)

Similarly equation (10) can be modified by replacing R/T with ηH. This makes sense intuitively, since the value ηH is simply the hash cost rate, the cost of maintaining the network hash rate per unit of time.

Anyway, I hope that all makes sense. I'll try to go through the paper more thoroughly when I have time.

By the way, this approach removes the assumption that block reward is non-zero, but assumes some sort of equilibrium is achieved where the miners have incentive to include transactions in successive blocks so that fees will pay for hash rate H. I haven't really thought through the dynamics on Justus Ranvier's point about the lack of incentive to extend the blockchain with successive blocks when there is no block reward.

 

[cypherdoc]

i don't think it really matters if it's spam. as long as it pays:

 

[cypherdoc]

I don’t expect that we’re going to be in a path of providing additional accommodation. But if the outlook were to change in a way that most of my colleagues and I do not expect, and we found ourselves with a weak economy that needed additional stimulus, we would look at all of our available tools. And that would be something that we would evaluate in that kind of context.​

http://www.zerohedge.com/news/2015-09-17/what-yellen-said-about-negative-rates-coming-us

 

[Zarathustra]

Ethereum collapsing - Bitcoin not

Halving the market cap since August peak.

http://coinmarketcap.com/currencies/ethereum/#charts

 

[theZerg]

can you spot the clue?:

i don't think it really matters if it's spam. as long as it pays:

We need to stop using the term "spam" because it is completely subjective. In one sense every transaction that I am not involved in is spam to me, isn't it?

By definition a txn with a fee bit enough that a miner includes in a block is not spam. The transaction was worth more to the poster then the cost to the miner. Of course this argument ignores the total network cost, but we simply can't quantify that... small blockers somehow think that limiting the block size will somehow correlate txn prices with network cost and therefore filter out spam but not useful txns. But that's like pricing your apples based on oranges.

And just to put one more nail in the spam coffin, the whole concept of spam is predicated on wasting people's time because a person's time is extremely valuable. Its hard to quantify the minuscule resources consumed when computers talk to each other. In other words, its best to err on the side of allowing txns, especially right now when Bitcoin needs adoption and addtl use cases.

 

[cypherdoc]

Stocks whipping around like a stuck pig. Looks like time for the roll. Need confirmation. Dollar down too.

What's that deflationary sucking sound?

 

[cypherdoc]

we would have to get a massive reversal to invalidate the swing high it looks like we're going to get by the end of the day which will trigger another short term sell signal. hold on: