Tuesday, June 5, 2018

Jim Chanos on Bitcoin


INET - Chanos says bitcoin is a security speculation game. Great quotes from him. The introductory quote says it all:

I’ve found in my research and my teaching that what I would call the “fraud cycle” — instances of large-scale financial fraud over multiple platforms and companies in the financial markets in the modern era (the last 500 years) — follows the financial cycle with a lag. That means that as business and particularly financial markets improve, peoples’ sense of disbelief and caution that they’ve often earned from the previous downturn begins to erode. Schemes that before might have seemed too good to be true begin to be embraced.

And as for the utility of bitcoin:


Bitcoin is still the area for people who are trying to avoid taxation or other examinations of their transactions. That’s one thing where I think it probably still has utility, but the governments have figured that out.

Last year, just as the mania was really going, an early convert who had gotten in early and had made a lot of money wrote this humorous blog about trying to cash in his winnings, if you will. He chronicled telling the exchange that he wanted to convert his bitcoins into U.S. dollars and have them wired into his U.S. bank. It took something like eight or ten days and numerous follow-ups and phone calls. The funniest part was his having to fax his passport to Lithuania. [...]

Using a fax machine to Eastern Europe struck me as kind of the antithesis of what you’re trying to do here. So this is simply a security speculation game masquerading as a technological breakthrough in monetary policy. Someone at Grant’s interest rate conference recently said that it was as if we had intentionally created a “monetary Somalia.”

And an interesting aside comparing the Bushes to the Clintons, which the Democrats should fucking pay attention to when discussing why the working class has abandoned them:

I always joke that the two presidents who have put more executives in jail than all the rest combined were both named Bush. W’s father was instrumental in prosecuting the S&L [Saving and Loan] crooks back in the early ‘90s and put about 3,000 of them in jail. I think they realized that the public was losing money in the stock markets, not just because of the frauds, but because the long dot-com bull market had ended. People were upset. Then when you had the revelations of WorldCom and Enron on top of it, there was a sense that every corporation was crooked and this was going to have exogenous impacts on the economy and the market as a whole. I think they correctly realized that we’ve got to basically show that we’re the cops on the beat. And they did.

Whereas after 2008 under the Democrats:

People in New York and San Francisco and Boston might be fine with everything, but in the South and Midwest, where you’re from and where I’m from, there’s still this general sense that “the bastards got away with it and I’m still suffering.” So there is an exogenous cost to this where people don’t feel that there was justice. They feel that they were taken advantage of by those sharpies on the coasts.

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