Creating Money out of Thin Air

HashTalk with Sankalp Issue #4

Sankalp Shangari

Last week, Federal reserve used what some call its master weapon, and that is to print money at will. The last time it used this so called weapon, it was during the “The Great Recession”. This also comes as a realization that banks basically have the power to artificially print and expand money supply ultimately devaluing YOUR money. And that is why Bitcoin, with its capped supply and strict predictable output, matters.


WHAT HAPPENED?

America’s Central Reserve Bank financed $278 billion worth of repurchasing agreements from September 17 to 19, 2019. This move resulted in completely polar opinions from experts. With some, such as nobel laureate Paul Krugman tweeting as follows:

While Gregori Volokhine of Meeshaert Financial Services provided his 2 cents and stated as follows:

"It looks like a lot of cash left the system in recent days and that demand for dollars was greater than the number of dollars in circulation.”

It is to be kept in mind that repo-operation is a very short-term strategy. With the banks getting liquidity for a 24 hour window.

In simple terms, these emergency loans are taken out if the bank doesn’t have enough assets on its balance sheet at the end of the day to meet the reserve requirements mandated by the Federal Reserve. To amend this, the bank takes out a repo loan from another bank and puts up bonds and other securities as collateral. Once the borrowing bank has more cash in reserve the next day from payments and other operations, they pay back the repo loan with interest.

But, this time it was a different story. At the beginning of the week, the lending rate for the repo market leapt from Federal Reserve’s fund rate set at 2% to a staggering 10% in a day. Which forced Federal Reserve to pump $53.2 billion into the market on September 17 and $75 billion on September 18, 19 and 20 for a humongous $278 billion. To bring down the rising interest rates by injecting emergency funds.


THE REASON?

Banks were facing a cash crunch and are unwilling to lend their peers money at the Fed’s target rate, so they began charging higher rates.Heidi M. Moore, a business maven who made her career as a finance journalist at the Wall Street Journal and the Guardian states:

Repo-Operation by Federal Reserve is a problem even if it’s for a 24 hour window. But, It becomes a huge problem when the repo-operation continues day after day. Which happened last week, with more than a quarter of a trillion dollars’ worth of capital being introduced into the system. Why the banks went short on cash, that’s a story for other newsletter or podcast. One thing is clear though, “Feds are an early bird to the recession crash party. Liquidity has dried up in the overnight money markets.”


BITCOIN = BETTER MONEY = YES

Bitcoin is easy, it’s different, built on a tamper proof architecture and cannot be manipulated. Comes with fixed circulation count of 21 million, and no one can set artificial lending rates along with predictable supply with a known monetary policy. Deflationary in nature and designed to increase in value so long as demand increases.

While the archaic financial systems are failing with banks fighting to lower the value of their currencies by printing money and destroying the long-term value of your money.


Selected Headlines: So that you don’t have to

  • Bakkt/BTC Futures Trading. Bakkt’s much-anticipated BTC futures trading has launched. The platform is the first of its kind to receive approval from United States regulators and is a product of ICE, the operator of the New York Stock Exchange.  Read More

  • Germany / Libra. Germany passed a blockchain strategy preventing any parallel currencies to be issued in the country, including Facebook’s stablecoin Libra 

  • SEC / Jay Clayton. In a recent speech, SEC Chairman Clayton argued to "increase the attractiveness of our public capital markets as places for companies to raise capital, and increase the type and quality of opportunities for our Main Street investors in our private markets”

  • ConsenSys / Codefi. ConsenSys, the Ethereum venture studio led by Ethereum co-founder Joseph Lubin, is creating a new suite of products ("Codefi") tailored for decentralized finance (DeFi) applications

  • SEC / ICOBox. The SEC alleges that ICOBox and founder Nikolay Evdokimov violated securities laws with its 2017 token sale ($14.6M)

  • Binance/OTC will be launching a new over-the-counter fiat onramp in China next month. While the Chinese government banned trading two years ago, OTC markets have continued to exist allowing investors to purchase stablecoins and convert them to crypto. Since leaving China in 2017, Binance has also recently made its first Chinese investment participating in a $200 million round for Mars Finance, a local blockchain publication.


Thought Starters

Try telling about Fiat. #blockchainbaby

Fiat clouds judgement**

Have a virtual conference over at Dark Web using some open source Skype alternative allowing 5K participants at once.

Oracle of Ethara (The land of Ethereum)

Amen to that

BEST TWEETSTORM OF THE WEEK


IT ALWAYS WAS AND WILL BE


MY Week Summed Up

This week I had a chance to interview Alex Mashinsky, the pioneer of VoIP technology and now the Founder CEO of Celcius Network. We discussed how he got into blockchain, what was his motivation for doing so, and his future plans. Believe me, they are BIG. Listen on Google Podcasts > Click Here

Also, I had a very friendly and full of philosophy talk with man of many hats, Michael Nye, Co-Founder of Titan Ventures. We talked how he is able to do so many things in his mid 20s, how he loved travelling to India, his future plans, his music career (P.S. He has been playing piano since 4 yrs of age), and his positive outlook on the future. Listen on Google Podcasts > Click Here

P.S. HashTalk with Sankalp is now available on all the major podcast channels including Apple Podcasts, Spotify, Google Podcasts, iHeartRadio, PocketCasts and many more.


Curated Articles of Past Week: Best of the Best


Top Listen: Best of the Best Podcast

113. Why do regulators hate libra? - Blockchain Insider by 11:FS

Click Here to Listen


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Disclaimer: None of the content in this newsletter is meant to be financial advice. Please do your own due diligence before taking any action related to content within this article.