By tying blockchain technology to fiat currencies, stablecoins are trying to be the solution to cryptocurrency volatility. Hannah Murphy reports for the Financial Times: While stablecoins are less enticing investments for risk-hungry speculators than other cryptocurrencies, proponents argue users get the best of both worlds: the low volatility of fiat currencies together with the advantages of digital currencies, such as fast international payments, availability to anyone with an internet connection and no need to go through the banking system. And many believe their potential goes beyond … [Read more...]

The IMF is urging central banks to seriously consider digitizing their currencies. There are a number of stated reasons why governments would consider digitizing their money, but the real reason is less obvious. When money is digitized, citizens have no option to cash out their currency. If it all sits on a bank's balance sheet in digital form, governments can easily implement negative interest rates, forcing consumers to spend their money, or risk losing it. Today, depositors have a check on bank and government power over their assets because they can always withdraw their money in hard … [Read more...]

Speaking to the Financial Times, Treasury Secretary Steve Mnuchin mentioned that he would like to discuss currency devaluations by China as part of trade talks between the United States and the communist nation. Sam Fleming reports: The US Treasury secretary has warned China not to engage in competitive devaluations of the renminbi as the two countries spar over their economic relations and engage in an escalating trade war. Steven Mnuchin said in an interview with the Financial Times that the Treasury monitored currency issues “very carefully” and noted that the Chinese renminbi had … [Read more...]

I wrote this back on August 7, but it's worth posting again in light of recent crypto-volatility.  Writing in The Wall Street Journal, Andy Kessler explains the mistake Isaac Newton made with his investments in the South Sea Co. After investing well and earning 100%, Newton initially sold his shares profitably. But when the South Sea Co.'s shares began to take off into bubble territory, Newton was afraid of missing out and invested once again, ultimately losing what would be millions in today's dollars. Kessler writes of today's bitcoin investors: Why relive this painful history? Because … [Read more...]

Once confidence in a currency is lost, it's hard to get it back. Turkish central bankers are trying hard to hold the public's confidence in the lira by hiking interest rates to 24%. At The Wall Street Journal, David Gauthier-Villars explains the central bankers' efforts to maintain control. He writes: The monetary-policy decision could help ease investor concerns over the central bank’s independence from Turkey’s President Recep Tayyip Erdogan, whose call for lower rates earlier Thursday had weighed heavily on the lira. “This was much bigger than expected. It sends a signal to the market … [Read more...]

It has been a hard year for crypto-currencies, especially once you look beyond bitcoin. Since June 30, bitcoin is down 1.7%, but as Paul Vigna writes in The Wall Street Journal, "Ether, the second most-valuable cryptocurrency behind bitcoin, is down 53% since June 30, while XRP, also called ripple, is down 43%. Bitcoin Cash is down 37%, and EOS is down 38%." Over the years I've spent time talking to you on this site about the dangers and drawbacks of crypto-currencies. Here's a brief sample of what I have written in the past: Can Crypto-Currencies Ever be Safe? Steve Forbes: Here’s … [Read more...]

In Sweden this weekend, the anti-immigrant, euro-skeptic Sweden Democrats made major gains. Neither of the larger center-left or center-right coalitions were able to break the 50% threshold in parliament, and the Sweden Democrats could have influence in the days ahead. Bloomberg reports: Europe’s political outsiders chalked up another milestone in the Swedish election as a rise in support for nationalists showed the battle lines being drawn right across the continent. While the anti-immigration Sweden Democrats fell short of some pollsters’ projection, they still posted the biggest gains … [Read more...]

Emerging market currencies are in the tank. The Turkish lira is plummeting, as is the Argentine peso. Stronger emerging markets are even feeling the pain. Many U.S. investors assume a currency debacle couldn’t happen in the U.S. But make no mistake, just because something hasn’t happened, doesn’t mean it can’t. Investors who continue to eschew gold may want to brush up on their monetary history.     … [Read more...]

The Leaders at The Economist explore what it means to be a currency, and whether or not bitcoin and other crypto-currencies meet that definition. The question is, if bitcoin doesn't meet the definition of a currency, can it ever truly be useful as one? The Leaders write: AN OLD saying holds that markets are ruled by either greed or fear. Greed once governed cryptocurrencies. The price of Bitcoin, the best-known, rose from about $900 in December 2016 to $19,000 a year later. Recently, fear has been in charge. Bitcoin’s price has fallen back to around $7,000; the prices of other … [Read more...]

After hackers stole digital currency assets from South Korean currency exchange Coinrail recently, the question must be asked, can bitcoin and other crypto-currencies be safe? The problems don't seem to lie in the blockchain technology, but instead in the exchanges that provide servicing to crypto-currency users. This isn't the first time an exchange has been hacked, or even the second or third time. So users must take into account the idea that the place housing their crypto-currencies may not be altogether safe. Can you imagine a rash of bank robberies in your town, but without any FDIC … [Read more...]