Archive for month: March, 2020

NOW YOU REALLY NEED SOME CRYPTO

The Fed has been told to “just keep printing money” according to an interview with CBS’s 60 Minute. President of the Federal Reserve Bank of Minneapolis Neel Kashkari referred to there being “an infinite amount of cash at the Federal Reserve.”

He went on to say “That’s literally what Congress has told us to do. That’s the authority that they’ve given us: to print money and provide liquidity into the financial system.”

Remember that this very thing is why Bitcoin was created in the first place

If you have been following our blog you will know that the present literal swamping of the world with newly printed money will lead to the most horrific inflation, with too few goods being chased by too much money. The present panic buying in the UK is merely a harbinger of what is to come. Presciently, I said a short while ago that we would soon lose the rule of law and substitute the law of the machine gun.

Now is the time to hold crypto. Your fiat money – GBP, USD, Euro etc etc will soon be worthless as the Mark was in 1922/3 Weimar Germany.

There, the  cost-of-living index was 41 in June 1922 and 685 in December, a nearly 17-fold increase – and it continued to rise.

It was only solved in November 1923 when a new currency was established WITH EVERYONE ONLY RECEIVING 5 RENTENMARK.

So be prepared for the future – buy some crypto!

To help with this, any SCOT bought through https://exchange.scotcoinproject.com/

Will receive double the number of SCOT actually bought.

Cryptos ain’t too big to fail

This is the second article written for us by Robert McDowell.

He is a long time supporter both personally and through Summerhall of Scotcoin. He is currently chairman of that renowned venue in Edinburgh, and a long time top level financier and economist. He has written a couple of pieces for us. The first one was on the macro position we find ourselves in and the true scale of the credit crunch that is here now. This second piece is specifically on cryptos and where they might be headed.

Cryptos ain’t too big to fail.in fact in the bigger scheme of things they are not even ‘big’. The question is twofold. Are prominent cryptos a financial ‘safe haven’ compared to others (like Gold just now) or cash (either one or several currencies). We are in a low (probably negative) inflation situation. We have falling central bank interest rates even although we have higher risk premia. The question is are cryptos volatile or have they now found ‘fair value’. That may be the case today but they fell dramatically further than other assets over the last week. In fact by more than half as much again as the USD. (See  https://uk.investing.com/crypto/). Daily trade volume is 1/4000th of regular currencies.

Cryptos like other new alternative assets such as securitised bonds in the 2008/9 crash had not until then been tested by major recessions (global scale economic cycle downturns) or even by secondary market conditions. What had been largely a one-way primary market faced major exogenous shocks, shifting into dramatic sell-offs & volatilie gyrations of two-way secondary markets.  Central banks won’t be expanding their balance sheets to shore up crypto currency markets. There are no guarantors of last resort, no market brakes i.e. ‘trade halts’, no regulatory inquiries into quality of market conditions or very much else in the crypto world.

You can think but not say , quite truthfully and realistically, that the next two years are a test for the long term survival of cryptos. Of course, mentioning words like ‘survival‘ is anxiety-inducing & negative signalling, so perhaps it is best not to opine in those words exactly!

As a safe haven asset class is it truly liquid? In other words, do sellers always find buyers? Obviously this hasn’t happened in the last week or so.  Are there other advantages such as that they are unregulated, anonymous, unauditable & untaxable, without or beyond all borders that outweigh that fact? Are these what cash-surplus or cash-rich people need just now or those who cannot buy foreign currency or cross physical borders to travel to London or NYC with cash-packed suitcases stuffed with USD for fear of inter-bank audit trails?

There is $1trillion net flow from ‘south’ to ‘north’ every year below the radar, characterised as cross-border money-laundering & tax dodging. How much of this will deploy into cryptos because that’s better & surer than less unconventional assets & currencies? 10% of this processes itself via the world’s art markets – maybe 1-2% might transfer via cryptos?

I suspect that for the next 2 years the outlook for cryptos is neither better nor exceptionally different from other assets. I suspect that not until there is economic recovery & governments are looking hard again at tax-raising will there be positive movements.

However, I’m not confident about making predictions in an asset class that has relatively so little volume or history. Hence, I’m not sure what is best to say publicly. It may be that, for a long while yet, least said soonest mended. We should not be thinking speculatively, and markets will move better the less focusing there is of a caustic-minded attention on cryptos. Few media commentators can be relied upon to look kindly at anything relatively eccentric at the moment even though there are billions of people out there feeling extremely nervous & open to suggestion more than they realise. As has been said elsewhere, with all the massive “printing” of money, there WILL come a day of reckoning in terms of inflation. That will be the time to be glad you tucked away some crypto.

Buy here direct from The Scotcoin Project CIC > https://exchange.scotcoinproject.com/shop/

IS THE TRUTH THAT OUR ECONOMY IS SIMPLY TOO BIG TO FAIL?

Robert McDowell is a long time supporter both personally and through Summerhall of Scotcoin. He is currently chairman of that renowned venue in Edinburgh, and a long time top level financier and economist. He has written a couple of pieces for us, this first one on the macro position we find ourselves in and the true scale of the credit crunch that is here now. The second piece is specifically on cryptos and will appear in a few days time.

Georgiova (IMF managing director) was recently quoted as saying “what we want is to guarantee that people are not going to die just because of lack of money“. How absurd can it get? Obviously not a Keynesian but a Monetarist supply sider.

It reminds me of the long since passed Airey Neave (who was Thatcher’s puppet-master until the IRA car-bombed his Jaguar in the House of Commons). He was an admirable person in many ways except he ordered HMT never to report to Cabinet the difference between public spending before & after tax rake-backs, a foolish neo-con rule insanely followed ever since. He was, decades earlier in WW2, nearly caught having escaped from  Colditz (an officer class PoW castle) in Germany, heading for Switzerland. He was spotted in a railway station eating a chocolate bar (a Swiss Red Cross supplied one) when chocolate was something ordinary Germans could only dream of enjoying in 1941.

Chocolate then, money now. Lack of money? Lack of air or water? Maybe the IMF think money should be a natural resource (‘public good’) whenever there’s plenty of it? But what the crisis teaches us is that it is not quantity but velocity or circulation of money that gives it value. I shouldn’t wonder too if countless people die prematurely  sometimes because they actually have too much money. But, today, asset values like cash are in free-fall and we cannot see any reasons yet for recovery!

Countries can largely shut down to ensure social isolation & social distancing, but it will become harder over time to guarantee basic necessities & essential services.  The problem is that while clampdowns, prohibitions and the like, can be announced & enforced,  the conditions for lifting restrictions & announcing a return to normal are deceptive & uncertain without a firm date (or time limit). Getting Brexit done clung fiercely to dates by when a make or break deal must be struck. No such iconoclasm is in evidence r.e. Covid-19 & the present anxiety/panic is deeply entrenched. It is so deep that there could be permanent changes in the patterns that have pertained of modern human social behaviour. There will be hard-to-calculate economic (& well-being) consequences.

It is funny how prepared everyone appears to be to be seen to tackle this pandemic with a cavalier disregard for the costs of unintended or unwanted consequences. The economic dislocation that currently appears unbounded appears unending, with arbitrary dates being bandied about. Suddenly, for example, the whole private sector is bleating for government support. These pleas come from those who normally condemn state interference or “tax & spend” almost unreservedly.

All places where crowds might congregate including pubs & cafes plus all live arts & sport are shutting or mothballing or reducing to a skeleton operation. Supermarkets or big shopping stores are not yet shutting, but they are subject to stockpiling, and panic-buying. Many are involuntarily closing. All non-essential travel for months will stop in an effort to try to postpone the spiking of the covid-19 virus. 

It’s like thinking that prolonging a recession gets everyone cut back to essentially good & necessary fundamentals and behaviour – a puritanism in fact. It can backfire just like austerity. Those who railed against government austerity policy ain’t seen nothing like the austerity now coming fast down every one of our main streets.

A pandemic – like any defined thing of business – is assumed to be like a game where we are game-players. But games have agreed rules. Players all start with an equality – two factors almost totally missing in real world or real life events yet are demanded in a general crisis. Government must defend all equally, all businesses & all people. Fairness & equality ought to rule, though of course everything has unintended consequences. No good deed goes unpunished.

The pandemic is often likened to a lottery (even if only one of many such lotteries, many of which are much bigger) i.e. everyone has a remotely even chance of getting caught by it. My father often seriously joked there is good luck, bad luck, & luck out! (to be spoken in an Ulster brogue).

Funny how all presume equality of rights (first principle of citizenry) & everything connected thereto. Many of these same people extol inequality & dramatic change as creative destruction or simply good entrepreneurial spirit. But not any longer because they feel it is all someone else’s fault anyway or like the weather, if not the climate, inevitable. Human hypocrisy is now philosophical rationalism. It is limitless in its self-justifying sense of personal & or group entitlement.

The pandemic may be a lottery, but it has classes insofar as inequalities about who gets the worst & highest percentage risk of dying. I’m in the high risk category (retirement age & vulnerable upper respiratory tract). You too probably -no more pub visits!

Summerhall is closing down in events (e.g. 6 weddings in April-June) performances & catering (our main revenue). We will therefore have to reduce staffing to a skeleton crew at immense cost & may even find August festivals cancelled . That is a third of annual revenue! Various government compensations are mooted & insurance claims, but the fact is probably we will probably be unable to access any of these.

Jobs are being temporarily or permanently lost across all sectors given there are so many knock-on effects – a negative vortex. Leading bleaters craving government financial aid (didn’t work for FLYBE) are airlines, airports, and hotel groups.  Credit demand on banks is increasing with depleting security for loans, probably with many new margin calls & higher risk rates. Cash & Gold are suddenly King as they frequently are!

Transport & tourism in particular, but general retail too, have all been massively hit. Worldwide, 50 million jobs in tourism/travel industry alone are expected to go i.e. 23%.  Global unemployment was 205 millions (c.3 billions with jobs). We now foresee, even if  temporarily in the short term (6 months- or more?), at least tripling of joblessness to over 15% of the global aggregate, & possibly another 10-20% may follow if the crisis persists for a year or more. No one knows.

The virus is triggering a major recession globally. Some felt a recession was imminent anyway, waiting only for the excuse to start, but this? Well, we know a normal recession squeezes everyone’s finances & wipes out (nominally in theory) at least 75% of banks’ reserves!  Consumer culture is debt-fuelled, so the slowing of the velocity of money makes assets fall in value as well.

While good manufacturers can stockpile & hope to catch up in the eventual recovery rebound, trade lost to services tends to stay lost!   A lot of financial firms are bound to go under for their inability to handle withdrawals & foreclosures.

There is a palpable Keynesian response (or at least a strong whiff of it) among governments in their budgetary jet streams. Whatever is blowing in & across central bankers’ rate-setting counters & balance sheet re-jigging has the same smell to it. Hence, the naff IMF statement we started with – much like politicians saying ‘we’ll do whatever it takes’ is necessary implying also “whatever the consequences” while having no idea what these might be.

UK budget deficit borrowing is mooted to hit 25% ofGDP i.e. a war-economy footing. Half of the government budget will be debt financed. That’s probably only sensible. But, off balance sheet or off-budget financial relief may, as in the 2007-9 GFC, prove even more effective.

An amusing aspect is the conspiracy theory that banks & the non bank finncial sector are capriciously unfettered in how they create new money out of loans. Now these same conspiracists must face the opposite – in other words asset value crashes. Generally markets have fallen in price by about a third so far but not yet touched bottom.

Worldwide stock market value was about $70 trillions in total. That’s now had a c.30% fall.   Property ownership is reputedly about 60% of world assets or about $217 trillions (Savills Research 2016, of which $162tn is residential). In all likelihood, there is a 20% or higher fall there as well. The $217tn figure includes $145tn not available to be traded or not secured for debt. Hence, the active market amount is c.$70tn.

Commercial property – c. $53tn including land (according to Savills 50% of the world total is in USA, 28% Europe, 5% Latin America, ME & Africa, leaving only 17% in E, S, & SE Asia, which seems a bit implausible despite what we know of market pricing) What can such figures mean? If all ‘assets’ are c. 4 x world GDP & have fallen in price by 1 x world GDP so far this year, that is by about $1,000 per person in the world – man woman and child. Of course the loss of wealth is mostly concentrated in the world’s richest 25%.

That means about $60 trillions of wealth seems to have disappeared.  Another $6 trillions of households’ & personal incomes may follow & at least half as much again in lower company profits & actual losses.   The UK appears now exposed. Sterling fell this week sharply against both the USD & Euro (considered a safe haven for capital flight alongside CHF (Swiss Franc)). In March up to today, CHF/GBP went from 0.78 to 0.86  i.e. CHF up 10%. GBP/Euro went from 1.206 to 1.097 i.e. GBP down 9.9%. Those are big movements! They will have profound long term effects, not least fewer assets to support future development. Indeed, banks may need to ignore all the existing rules and conventions about loans

Officially the UK continues to enjoy a positive inflow of private foreign capital sufficient to finance the trade deficit without resource to extra government Gilts issues. But, underlying this since 2016 has been somewhere between £1 & £2 trillions of foreign disinvestment & UK capital flight. This is officially recorded in the UK’s net external balance (over £500 billion negative) i.e. about 20 years’ worth of net inflows recorded elsewhere by ONS in the balance of payments accounts.

There is something irreconcilable in these two data sets as there is also in the UK’s self-belief that financial services generate sizeable annual trade surpluses, when the UK’s top ten trading partners in financial services record surpluses against the UK.  In truth it may not really matter. Why? Because in the UK, especially London & The City & their surrounding regions are simply far “too big to fail”! It remains to be seen whether we can take comfort in that statement.

Robert will be sharing his views on blockchain and crypto in the next article. We very much hope he will become a regular contributor to our project.

Working from home for the first time?

Caroline Wylie

Amid the Covid-19 Crisis, Scotcoin is operating as normal. In part, this is because we established a virtual team as our preferred way of working years ago. It means we can recruit the best talent, regardless of where they are in the world, and that our team can work from the place that lets them be the most productive, whether at home, a coworking space or an office.

We asked our virtual admin, Caroline Wylie, to put together a few tips for those of you working from home for the first time:

Top Tips For Home Working

  1. Make sure IT have set you up – You may need external passwords, or security settings to access files or email from an outside network. We saw the Microsoft network melt on Monday because it simply wasn’t used to so many people logging in from home. Make sure there are backups in place.
  2. Put the radio on – Talk radio is good, this is your new office banter. (The good news: as the sole occupant of your office, you choose the station!).
  3. Set up a Skype Chat or Slack message board – To keep in contact with colleagues and quickly check stuff.
  4. Get outside – Seems counterproductive, but being stuck indoors all day will drive you crazy. Plus staying healthy involves some exercise and fresh air, which you don’t naturally do if you are working from home, so put it in your schedule!
  5. Proper chair – Sofa slumping may seem decadent -it won’t after a whole day.  Set up a proper office chair and table, making sure your seat height and monitor height is properly adjusted. Your back will thank me!
  6. Don’t cancel meetings – Have them on Zoom / Skype or simply do a phone meeting using conference call dial-ins.
  7. The house will be messier – It’s getting more use.  Try and limit discarded coffee cups and make a habit of doing a quick tidy up @ 5pm.
  8. Working elsewhere – If you are working from coffee shops or near family/friends, make sure your security is still good. Don’t have confidential phonecalls in public. Ensure you have a VPN on any devices accessing external connections. Be aware of who can see your screen. Consider locking your laptop away when not in use (or at least moving it out of the way of likely spills!).
  9. Set up regular check-ins – I suggest at least a weekly status meeting and an online workspace to collaborate on different projects.
  10. New rule: Working 9-5 – If other members of your household are also working from home, have a rule not to interrupt each other.

If you’d like more help to set up working from home protocols and tools, click here to book a session: BOOK SESSION

Two actors

Two actors

Two actors, a boxer, a cyber-security technician, a business administrator, a mechanical engineer and a builder all go into a gym hall.

Now you may think this is the start of a joke, but believe me this is not only no joke but one of the best things that has happened to me in quite a while.

Some weeks ago, my friend Frank of Bad Pony Media phoned me the other day and said could I take his place at an event. As it happened I could, and waited until the day before to find out what it was.

I was to turn up at St.Roch’s Secondary School in Royston at 9am in order to help some of their school leavers understand and improve their abilities to undertake interviews.

Now for those of you who don’t know, Royston in Glasgow is described as follows at understandingglasgow.com:

“ Male and female life expectancy is considerably lower than the Glasgow average. The percentage of children living in the neighbourhood is considerably higher than the Glasgow average, while there is a lower than average proportion of older people – defined as aged 65 years and over. A high percentage of the population are living in income and employment deprivation and the proportion of children living in poverty is particularly high. Nearly a third of the population are claiming out-of-work benefits.”

So it’s pretty much right up there with the “worst” areas of Glasgow. My immediate reaction was that this would be a group of underachievers with little or no ambition, and definitely no plans.

The young people we were “interviewing” were mostly sixteen to 17, with a few late 15, early 16. The first young man walked up to the table, and I rose to greet him, hand outstretched. ( This was before the Coronavirus) He looked me straight in the eye, shook my hand firmly, smiled and said “Good morning,” If I had been awarding points out of 100 for his interview, I’d have given him 50 immediately and pretty much employed him on the spot. As it happens, all the young people we were helping all behaved in exactly the same way. I’m sure they had already been told that this was the correct way to start an interview, but all 72 of them apparently acted in the same way, so at the very least they were prepared to listen and act on advice. I won’t bore you with what happened over the course of the morning, but myself and the other people roped in to help were all mightily impressed with the confidence, thought out plans and general passion for the interviewees chosen paths.

The two actors in particular were mind blowing in their confidence and poise, and one was so good that already from a standing start two years ago he was in the final casting for a minor part in a full length film about to be shot in Glasgow. The boxer just oozed certainty and had that confident walk that people who have pride in themselves and their ability can carry off to perfection without being arrogant or haughty. The mechanical engineer described his love of taking things apart, understanding them, then putting them back together. The builder didn’t just want to be a brickie – he wanted to understand all aspects from reading architectural drawings to putting the last slate in place. With me were an accountant and a business administrator and I couldn’t help but think we might all be working for this particular young man one day. The business administrator on the panel waxed lyrical about the 16 year old who wanted to be a business administrator – he already knew nearly as much as she did and clearly had a tidy mind and thought processes.

These young people gave me hope for Scotland. We oldies are always moaning about the “youth of today” and wondering what’s to become not only of us but of the country we are all proud of, yet fearful for.

Let me tell you we have nothing to worry about. If Royston can produce young people such as I met on that day then our future is truly in good hands.

Using Crypto in disaster areas

Using Crypto in disaster areas

CoinTelegraph had a very interesting article on this very thing – see here:

https://cointelegraph.com/news/unicef-fund-manager-cryptocurrency-could-revolutionize-humanitarian-aid

You probably won’t remember but this is something I spoke about and highlighted some considerable time ago as being a perfect use for crypto in disaster situations. UNICEF has now embraced the idea. In the interview their Program Funding Manager Sunita Grote has given, other unique and extremely important facts are mentioned, notably – and I quote:

  • It lets us tap into a new resource base for UNICEF and expand our network to receive contributions 
  • Blockchain can improve efficiency and transparency by tracking the flow of resources and transactions in a more transparent way. Blockchain makes us more accountable and has the potential to reduce the amount of resources we need to do our work. We’re a $7 billion global organization that conducts a lot of transactions between various parts of our organization, so we are looking to see how blockchain can help us manage and track these in a more efficient way. 
  • We are exploring how blockchain can disrupt and improve systems that deliver programs for children. Blockchain may allow us to make payments in a new way and improve how cash transfers are made. 

The other point she made was that they were not going to just take in crypto and resell it. She specifically rules this out, and also simply handing the crypto to governments in affected areas. The digital currencies, she says, are specifically going to be used as currency within affected areas.

That is an enormous step forward and a real life use of crypto that transcends anything it has been used for before.

Scotcoin - Coronavirus Redux

Coronavirus Redux

There is no doubt the Coronavirus is having a severe effect both on world trade but also in travel patterns across the globe.

It is clear that China is actually suffering a severe drop in output (check the electricity figures if you don’t believe me) and it may well be that this drop will translate into drops in manufacturing in the rest of the world. JLR is very nearly out of parts. The Baltic Dry Index (remember – 90% of world trade travels by ship) has fallen over 80% since September 2019, which means that the re-supply cannot just be switched back on. It will take time to build up again.

If you remember 2008 and its aftermath (and who doesn’t) you will know that Central Banks and Governments essentially increased massively the world’s money supply. That prevented a severe recession (with all that would have implied for social cohesion) but it is also part of why assets have increased so much in value in the last 10 years or so. Arguably, that is not a good thing.

I cannot see that the authorities response, financially, is going to be any different this time round. The drops that have been experienced mirror quite closely what happened in 2008.

In short, the real economic danger of Coronavirus is not temporary supply chain disruption, which in itself is likely to substantially slow global economic growth in the first half of 2020. The concern should be that this crisis triggers a panic in consumer and business confidence and in doing so sets off a wider reassessment of asset valuations. The thought of people’s house valuations plunging as they did in 2008 because the earnings of their occupiers have been decimated by layoffs doesn’t even bear thinking about – nor do the potential food riots. You can forget governing by consensus – it would be governing by machine gun. Already jittery investors are scarpering from the riskiest corners of debt markets amid worries the coronavirus could trigger an avalanche of downgrades and defaults.

And that’s why Crypto currencies are becoming more and more important, despite what the market prices are telling us. The inflation that should have been unleashed by the floods of money created 2008 onwards simply hasn’t happened because the classic demand push/pull of economics hasn’t been able to take hold. The credit that drained out of the system simply could not be replaced fast enough. If the governmental printing presses become red hot again, then inflation simply won’t be curtailed (And yes, I know that isn’t how money is created but it’s the usual image people relate to). But think on. Central Banks around the world are already dropping interest rates and increasing liquidity. Don’t think for one minute the Fed will stand aside just because it’s an election year, their traditional stance. There is already talk of WORLD economic activity dropping from 2.9% growth last year to a contraction of a similar amount in 2020. That would be disruptive in the extreme.

So think seriously about having some Crypto tucked away. For a start it won’t inflate away to nothing, so that pint of milk which was 50p and becomes £2.50 will still be 25 Scotcoin or .00006 Bitcoin.

BREAKING NEWS: The Fed just cut interest rates (You read it here first)