Their reasoning here is pretty sound if you ask me.
I wonder if the 'free world' follows suit or lets it all play out.
I can see a few people getting very wealthy and most people making just a little bit or losing money. That's not much different from 'business-as-usual'.
Cryptocurrencies seem like the least of the problems with Chinese financial institutions selling unsuitable investments to retail customers though. Sure, they might lose everything they put in, but at least it stops there. The Bank of China managed to sell aggressively (and deceptively) branded and marketed oil-futures-based investments to ordinary retail customers who ended up losing more than their total investments. (Though they may have eventually given up on trying to claim back the extra from investors.)
Are you too young to have been here during the 2008 crisis?
Almost the entire financial system was illiquid and insolvent, and would have collapsed without massive and unprecedented government intervention.
And in all cases, management knew, or should have known they were lending money that would never be returned.
For example, the reason "liar loans" were called that, was because the financial institution issuing the loans refused to check reported income even if the information was available. The name "liar loans" was common in the financial industry BEFORE the crash.
Banks mean nothing. They shiftet their assets to other banks and nationalized mainly the debt.
As a consequences they cut pensions, cut benefits and raised taxes on the middle class.
The top 1% was spared and saved and got even richer in the crisis.
We have seen historically what happens in that kind of situation. That didn't happen in 2008. Also in 2008, we had an unprecedented government intervention. Now, you can claim that "this time would have been different", but the burden of proof is on you for that claim. Without that proof, the observations are "it didn't crash when it usually did, and the government intervention is what was different". Not quite proof, but very suggestive.
You observe that some countries did not bail out their banks. But which countries? The US and big European banks are systemically important worldwide in a way that the banks of, say, Croatia or Egypt are not. (Not saying those are the countries you have in mind - I don't know which ones you're talking about.) If country X didn't have a real estate boom, and let some banks go under without bailout, it shouldn't have caused much damage.
To disprove a hypothesis only a single counter-example needed.
The example is Iceland. It let its banks fail, wrote down nearly 15% of household debt, let its currency collapse, put capital controls in place. Completely opposite of the west did, everything exactly opposite of what global banking cartel insisted on.
Guess what? They recovered way quicker. If you contrast it to another smaller country that was also hit pretty bad, Ireland, who followed the more common bailouts+austerity, Iceland recovered years ahead of Ireland.
Yes, Iceland is a small country. The bank debt however was quite ridiculous: 20x larger than the GDP of the entire country (lol), and threatened failures of European banks, as most borrowers were foreign. The UK and Dutch governments had to compensate their residents. It was an issue systemic enough to create a diplomatic row and even attempts to kick out Iceland out of the free trade block.
There are plenty of historical examples that contradict the "zomg bailout or else the world ends" FUD.
In the Asian Tiger crisis of 1997, economies with capital controls and managed exchanged rates (Singapore, Taiwan, China, Vietnam) fared much better than relatively more open economies that implemented IMF demands(South Korea, Phillipines, Malaysia, Indonesia), despite of the incessant FUD and pressure from the West at the time.
Even in the case of Great Depression in 1930s, a rather mainstream opinion of the monetarist school of thought today is that the intervention by the Fed was either the cause, or made things much worse. No, it's not some fringe crackpot theorists, but an orthodox mainstream opinion. Nearly 100 years later it is not firmly settled still.
Bankers have perverse moral incentives to convince you that handing over your hard earned tax dollars to them is somehow good for you. Of course they'd say that.
Evicted taxpayers' money going to bailout rich fund managers that made bad bets is the hypocrisy of systemic proportions indeed.
It did happen 2008, but not to the US and the rich european countries. They successfully outsourced their banking faults and saved their banks.
Just look what they did to Greece. The rating of the US is a joke but they control the rating agencies.
That's my point. The system was saved but the people down below had to pay. They lost their houses and jobs, most managers didn't even lose their bonuses.
The crisis made the rich richer and the poor and middle class poorer.
And now they still behave the same and the next bubble is sure.
The lesson China took from 2008, when they successfully avoided a financial recession and ensuing political chaos that was widely visible across the West was to start a campaign to clean up the financial sector. China is acutely aware of the risk that unregulated private finance poses to the security of the state but also the economy, and this is why they're hyper-vigilant when it comes to financial products, and I don't blame them to be honest.
There is virtually no social upside to people YOLOing their live-savings into crypto. "Well people should be allowed to do stupid stuff" has never had much pull in China. It's not the US.
I kind of like the way it was done in several instances in 2008. The shareholders are wiped out, the management is gone, but the institution was protected (and therefore the depositors were).
Chinese Yuan is not a freely convertible currency, each Chinese individual can convert their CNY to a foreign currency up to 50k USD value, the conversion process is tightly reviewed.
If banks start offering crypto, they are essentially offering CNY -> Crypto -> USD, the regulation is being circumvented hence they are not happy.
"the conversion process is tightly reviewed" In my country the government is very, very interested in where your money comes from. Please show me your receipts going back 5 years...
I do find it amusing crypto is so very often associated with tax evasion and criminal activity.
The effect of these non-news on the price has become a self-fullfiling prophecy.
People sell not because of the effect the change is going to have, but because they think people are gonna think the change is going to have an impact. Everyone thinks everyone else is gonna think that. Boom, dump.
Smart people get a golden opportunity to buy cheap while dumb people panic sell.
> Smart people get a golden opportunity to buy cheap while dumb people panic sell.
Except it's so volatile that you don't know when it's cheap. It's not cheap now; it's some 40-50% above cheap, so let's see how many 'smart' people there really are. I'll wait a bit for actual cheap ETH.
> Except it's so volatile that you don't know when it's cheap.
You do know.
You just have to look at the logarithmic regression bands and fair value models.
Granted, these are useless if you intend to day trade, because prices are absolutely unpredictable on the short term, but they're useful if you want to hold for more than 5 months, because prices in the mid and long term are more predictable than you'd think.
The current price is not really 'cheap' from a technical perspective, but its cheap if you consider that the market cycle isn't over yet, so in the next 7 months the probability that bitcoin is going above 70k is so big that it's more or less a safe bet at this point. The only thing that could stop Bitcoin from getting over 70k between today and January 1st 2022 is a global economic crisis of the magnitude of the 2008 crisis.
IMO, buying today and holding for 7 months is the best think you could do right now.
(I'm talking about Bitcoin, because yes, ETH isn't cheap right now. No one knows if the ETH/BTC valuation is going to hold as it is right now, I wouldn't buy ETH today)
28 comments
[ 2.9 ms ] story [ 66.5 ms ] threadI wonder if the 'free world' follows suit or lets it all play out.
I can see a few people getting very wealthy and most people making just a little bit or losing money. That's not much different from 'business-as-usual'.
They still can under this new law. They were just forbidden from providing cryptocurrency services to retail customers.
Are you too young to have been here during the 2008 crisis?
Almost the entire financial system was illiquid and insolvent, and would have collapsed without massive and unprecedented government intervention.
And in all cases, management knew, or should have known they were lending money that would never be returned.
For example, the reason "liar loans" were called that, was because the financial institution issuing the loans refused to check reported income even if the information was available. The name "liar loans" was common in the financial industry BEFORE the crash.
would have, could have, but didn’t, that goes only to prove op’s point that institutions don’t lose money, especially the big ones.
History will be the judge of that, far too early to tell.
Several countries did not bail out their banks, and simply took them into recievership. Outcomes weren't much different.
We have seen historically what happens in that kind of situation. That didn't happen in 2008. Also in 2008, we had an unprecedented government intervention. Now, you can claim that "this time would have been different", but the burden of proof is on you for that claim. Without that proof, the observations are "it didn't crash when it usually did, and the government intervention is what was different". Not quite proof, but very suggestive.
You observe that some countries did not bail out their banks. But which countries? The US and big European banks are systemically important worldwide in a way that the banks of, say, Croatia or Egypt are not. (Not saying those are the countries you have in mind - I don't know which ones you're talking about.) If country X didn't have a real estate boom, and let some banks go under without bailout, it shouldn't have caused much damage.
The example is Iceland. It let its banks fail, wrote down nearly 15% of household debt, let its currency collapse, put capital controls in place. Completely opposite of the west did, everything exactly opposite of what global banking cartel insisted on.
Guess what? They recovered way quicker. If you contrast it to another smaller country that was also hit pretty bad, Ireland, who followed the more common bailouts+austerity, Iceland recovered years ahead of Ireland.
Yes, Iceland is a small country. The bank debt however was quite ridiculous: 20x larger than the GDP of the entire country (lol), and threatened failures of European banks, as most borrowers were foreign. The UK and Dutch governments had to compensate their residents. It was an issue systemic enough to create a diplomatic row and even attempts to kick out Iceland out of the free trade block.
There are plenty of historical examples that contradict the "zomg bailout or else the world ends" FUD.
In the Asian Tiger crisis of 1997, economies with capital controls and managed exchanged rates (Singapore, Taiwan, China, Vietnam) fared much better than relatively more open economies that implemented IMF demands(South Korea, Phillipines, Malaysia, Indonesia), despite of the incessant FUD and pressure from the West at the time.
Even in the case of Great Depression in 1930s, a rather mainstream opinion of the monetarist school of thought today is that the intervention by the Fed was either the cause, or made things much worse. No, it's not some fringe crackpot theorists, but an orthodox mainstream opinion. Nearly 100 years later it is not firmly settled still.
Bankers have perverse moral incentives to convince you that handing over your hard earned tax dollars to them is somehow good for you. Of course they'd say that.
Evicted taxpayers' money going to bailout rich fund managers that made bad bets is the hypocrisy of systemic proportions indeed.
There is virtually no social upside to people YOLOing their live-savings into crypto. "Well people should be allowed to do stupid stuff" has never had much pull in China. It's not the US.
I do find it amusing crypto is so very often associated with tax evasion and criminal activity.
People sell not because of the effect the change is going to have, but because they think people are gonna think the change is going to have an impact. Everyone thinks everyone else is gonna think that. Boom, dump.
Smart people get a golden opportunity to buy cheap while dumb people panic sell.
Except it's so volatile that you don't know when it's cheap. It's not cheap now; it's some 40-50% above cheap, so let's see how many 'smart' people there really are. I'll wait a bit for actual cheap ETH.
You do know.
You just have to look at the logarithmic regression bands and fair value models.
Granted, these are useless if you intend to day trade, because prices are absolutely unpredictable on the short term, but they're useful if you want to hold for more than 5 months, because prices in the mid and long term are more predictable than you'd think.
The current price is not really 'cheap' from a technical perspective, but its cheap if you consider that the market cycle isn't over yet, so in the next 7 months the probability that bitcoin is going above 70k is so big that it's more or less a safe bet at this point. The only thing that could stop Bitcoin from getting over 70k between today and January 1st 2022 is a global economic crisis of the magnitude of the 2008 crisis.
IMO, buying today and holding for 7 months is the best think you could do right now.
(I'm talking about Bitcoin, because yes, ETH isn't cheap right now. No one knows if the ETH/BTC valuation is going to hold as it is right now, I wouldn't buy ETH today)
But it's banning cryptocurrency to save its economy? Doesn't seem like their economy is robust enough now.