A huge storm is coming

[johnyj]

QE3 has been terminated for more than 2 months, and we are already seeing crash in almost every commodity and other currency in the world. In 2007, FED stopped stimulant, then after a little over a year, a liquidity crisis finally hit housing market and brought financial crisis. It seems this time FED has much less time and room to maneuver

The Rational Expectations theory can explain this: If everyone knows that when FED print then economy get some support and when FED stopped printing the economy will go bad, then it is better sell after QE stopped. After several run, everyone has learned the trick, then the stimulant will not work any more

But, when there is a shortage of USD now, will bitcoin become a liquidity provider?

For example, companies want to sell products, but buyers do not have USD any more, but they have bitcoin, so that is also some kind of transaction medium for the company, then this income can be used to improve the liquidity situation of the company. They can sell the coin in exchange for those already very limited USD, but that will just lower the bitcoin value, thus make the liquidity situation worse. So they might just spend bitcoin so that it does not affect the exchange rate, and the overall liquidity situation will improve

An extreme situation will be that FED start to sell assets and further reduce the money supply, then very quickly there will be no money in the banking system, if everyone has no money, then many thing's price will crash to zero. But now people have another option to use bitcoin to do transactions, so they will not need to sell assets for USD, thus there will be no crash of the housing market, oil, etc...

[OROBTC]

...

Mmm, it seems to me like we are still too early in BTC's life that it would do much to provide liquidity in our huge economy.  It is still hard to use (for almost everyone not members of bitcointalk).  And BTC's total market cap is pretty tiny vs. US GDP.

My guess is that in the end (when I do not know) they will just print the money.  My banker said that.

Ctrl-P
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[Possum577]

We need more widespread use for BTC to serve in a "liquidity Savior" role, but it's a cool idea.

Don't worry so much about the Fed ending quantitative easing, it's just like someone going on a diet after an eating binge...the rocky times are good, we need to recover honestly.

[solex]

QE3 has been terminated for more than 2 months, and we are already seeing crash in almost every commodity and other currency in the world. In 2007, FED stopped stimulant, then after a little over a year, a liquidity crisis finally hit housing market and brought financial crisis. It seems this time FED has much less time and room to maneuver.

What the Fed stops overtly it continues covertly:



$1.6 trillion of mortgage backed securities (yes sub-prime ninja loans) purchased in recent years by the Fed from TBTF banks and hedgies eager to unload their toxic garbage. All of it paid for via QE and finger down on Ctrl-P.

The commodities (and EM currencies crash) is more to do with the world economy being jammed into first gear.

[johnyj]

FED won't be able to unload those assets, they don't even have enough money to deal with the current liquidity shortage, the only option is to print more

And if bitcoin is going to provide some liquidity for the real economy, a single bitcoin will need to exchange 100 or 1000 times more goods than it did today, how is that achievable without enough fiat money supply to first push its exchange rate several magnitudes up?

Imagine such a scenario: Since all the banks operate on fractional reserve, when there are large waves of liquidity problem, some of them will have no money to deal with withdraw. In such a situation,  they either go bankrupt or turn to FED to borrow USD. If FED do not give them money like they treated Lehman Brothers, then they might consider persuade their customer to withdraw bitcoin instead, so that they can borrow some bitcoin from large bitcoin holders

Since most of the large bitcoin holders have 100% reserve ratio, they would be able to provide bitcoin loan to these banks, but they will ask for a mortgage for the loan. And since these banks do not have money to buy bitcoin, they might put a very high value asset as mortgage. Actually if a coin could worth billions, then they will only need to borrow a couple of coins to turn the tide. At first this practice might be very small scale, but when it gets popular, the liquidity of bitcoin will also have problem, then the value of bitcoin will shot up quickly

[solex]

Indeed, lots of plates spinning which are banks trying to keep going.
Fed bailout money for banks is funneled through the FDIC, which has now been put on the hook for up to $100 trillion of derivatives (depending  upon how many net off), thanks to Citi and a clause on page 1599 in the recent 1604 page Cronybus congressional spending bill.
I don't think Bitcoin will have significance in the coming banking crisis, but it will be a shining refuge in the wreckage.

[manselr]

Indeed, lots of plates spinning which are banks trying to keep going.
Fed bailout money for banks is funneled through the FDIC, which has now been put on the hook for up to $100 trillion of derivatives (depending  upon how many net off), thanks to Citi and a clause on page 1599 in the recent 1604 page Cronybus congressional spending bill.
I don't think Bitcoin will have significance in the coming banking crisis, but it will be a shining refuge in the wreckage.

A shining refuge would mean the price goes up, or at least maintains its price. Do you think during a legit wreckage scenareo the price will be solid to store your value on BTC??

[World]

source
http://etfdailynews.com/2015/01/13/the-crashing-price-of-oil-is-going-to-rip-the-global-economy-to-shreds/

[BitCoinNutJob]

thus there will be no crash of the housing market, oil, etc...

Mega housing market crash would be the best thing to happen to society, cut the average joe stupid baby boomer wealth right off.

[solex]

Indeed, lots of plates spinning which are banks trying to keep going.
Fed bailout money for banks is funneled through the FDIC, which has now been put on the hook for up to $100 trillion of derivatives (depending  upon how many net off), thanks to Citi and a clause on page 1599 in the recent 1604 page Cronybus congressional spending bill.
I don't think Bitcoin will have significance in the coming banking crisis, but it will be a shining refuge in the wreckage.

A shining refuge would mean the price goes up, or at least maintains its price. Do you think during a legit wreckage scenareo the price will be solid to store your value on BTC??

Yes. I think it will be a safe storage of value in that scenario. It has suffered recently because it went up too fast in 2013, and the US$ is stronger because it is itself a safe haven from many other weak fiat currencies.

[painlord2k]

thus there will be no crash of the housing market, oil, etc...

Mega housing market crash would be the best thing to happen to society, cut the average joe stupid baby boomer wealth right off.

It would make housing affordable to normal working people again without the need to become a bank tenants for 30 years or more.

[painlord2k]

Indeed, lots of plates spinning which are banks trying to keep going.
Fed bailout money for banks is funneled through the FDIC, which has now been put on the hook for up to $100 trillion of derivatives (depending  upon how many net off), thanks to Citi and a clause on page 1599 in the recent 1604 page Cronybus congressional spending bill.
I don't think Bitcoin will have significance in the coming banking crisis, but it will be a shining refuge in the wreckage.

A shining refuge would mean the price goes up, or at least maintains its price. Do you think during a legit wreckage scenareo the price will be solid to store your value on BTC??

Yes. I think it will be a safe storage of value in that scenario. It has suffered recently because it went up too fast in 2013, and the US$ is stronger because it is itself a safe haven from many other weak fiat currencies.

I'm compiling and upkeeping a chart with the data about inflation of BTC, M1 and MB (money Base) of the USD:
The 24/12/2014 the Fed increased the MB just USD 256 billions (+8.8% compared to the previous year) and then, two weeks later, the data was confirmed with a +7.1% compared to the previous year).
Now, one point could happen, two points could be a coincidence so I want a third point to confirm my suspects the Fed have started a covert QE program without announcing it.
If the MB go up more than 9% or, better grow more than bitcoins, this would be very very bullish medium term.

[username18333]

. . .

Imagine such a scenario: Since all the banks operate on fractional reserve, when there are large waves of liquidity problem, some of them will have no money to deal with withdraw. In such a situation,  they either go bankrupt or turn to FED to borrow USD. If FED do not give them money like they treated Lehman Brothers, then they might consider persuade their customer to withdraw bitcoin instead, so that they can borrow some bitcoin from large bitcoin holders

. . .

A bank could also attempt to “persuade [its] customer[𝗌] to withdraw [𝑋-]coin,” its own currency, in a postmodern rebirth of the U.S.’ ante-“FED” banking system.

[Dilemma]

and that storm came
now prize under 200 dolar
that storm can be gone now.. 

[Dontlitter]

I'll keep buying on the way down.

[CanadaBits]

Im going to wait one more week then buy

[skinnyboy]

Indeed, lots of plates spinning which are banks trying to keep going.
Fed bailout money for banks is funneled through the FDIC, which has now been put on the hook for up to $100 trillion of derivatives (depending  upon how many net off), thanks to Citi and a clause on page 1599 in the recent 1604 page Cronybus congressional spending bill.
I don't think Bitcoin will have significance in the coming banking crisis, but it will be a shining refuge in the wreckage.

A shining refuge would mean the price goes up, or at least maintains its price. Do you think during a legit wreckage scenareo the price will be solid to store your value on BTC??

I would never trust an easily manipulated currency as a store of value, personally.  If, of course, you simply use it as a currency by recieving it with one hand and instantly spending it with the other...then it becomes useful.  It doesn' need a sudden price rise, or stability, for that matter, to become useful.  Just an increased velocity of transactions.

[fullzero]

The Dollar is actually not very stable; the FED adjusts constantly to make it appear to change as little as possible.  GDP batteries work best when fully invested in a stable dollar.

[devandtech]

USD is the most stable currency in the world. Don't think that will change soon.

[johnyj]

thus there will be no crash of the housing market, oil, etc...

Mega housing market crash would be the best thing to happen to society, cut the average joe stupid baby boomer wealth right off.

It would make housing affordable to normal working people again without the need to become a bank tenants for 30 years or more.

If the house price crash, normal working people will lose their job, because the total consumption of the whole society will shrink dramatically when many people are underwater and have to pay much more to bank to have their house. Then many companies' sale will plummet and a mass scale of firing workers will follow