Monday, 24 February 2020

A Analysis

The Wall Street Journal has a well done analysis of Greek debt coming due in about a week. It's a lot considering the size of the country's shrinking economy! Here's a snapshot:

Greek Debt Due from WSJ

I have explained the Greek situation in full detail for my blog subscribers back in 2010, 2011 and 2012.

For background and perspective, read Lies, Damn Lies and the EU Confiscation Of Greek Sovereignty Masked As The Bailout That Never Happened. Pay close attention to these parts...


image021 copy


 So, as I was saying...

 It just won't work because it doesn't solve the problem. Instead, it attempts to conceal the problem in fashion that pretends it never existed. Let's walk through this so a 5 year old can understand it.

Interestingly enough, Reinhart and Rogoff, of This Time Is Different: Eight Centuries of Financial Follyfame contend "that historically, significant waves of increased capital mobility are often followed by a string of domestic banking crises". If that is actually the case, then the very goal of the Euro project was bound to bring about a sting of banking crises and all of this was actually inevitable. As excerpted:


The forgotten history of domestic debt has important lessons for the present. As we have already noted, most investment banks, not to mention official bodies such as the International Monetary Fund and the World Bank, have argued that even though total public debt remains quite high today (early 2008) in many emerging markets, the risk of
default on external debt has dropped dramatically, especially as the share of external debt has fallen. This conclusion seems to be built on the faulty premise that countries will treat domestic debt as junior, bullying domestics into accepting lower repayments or simply 12 defaulting via inflation. The historical record, however, suggests that a high ratio of domestic to external debt in overall public debt is cold comfort to external debt holders.

Default probabilities probably depend much more on the overall level of debt. Reinhart and Rogoff (2008b) discuss the interesting example of India, who in 1958 rescheduled its
foreign debts when it stood at only1/4 percent of revenues. The sums were so minor that the event did not draw great attention in the Western press. The explanation, as it turns out, is that India at this time had a significant claim on revenue from the service of domestic debt (in effect the total debt-to revenue ratio was 4.4. To summarize, many investors appear to be justifying still relatively low external debt credit spreads because “This time is different” and emerging market governments are now relying more on domestic public debt. If so, they are deeply mistaken.


... and this part from Saturday, 23 July 2011 The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!: I detail how I see modern bank runs unfolding


Now, with a full background on how we got to where we are now we move over to Goldman's recommended defensive plays to a Grexit, as reported by ZeroHedge. Before we go on, remember my admonitions about blindly following Goldman's retail and institutional analyst recommenations:

    • If tensions turn systemic, EM assets likely to see pressure

Even as Greek concerns have escalated, risk markets have so far traded in a resilient fashion, treating those concerns as effectively isolated to Greek assets. But in previous episodes of acute Euro area stress in 2010 and 2012, a wide range of EM assets came under pressure, especially CEE FX and CDS. Hungary was the hardest hit across all asset classes.

    • To hedge Greek risk, long $/CEE

Among EM, $/CEE has seen the largest moves in times of Euro area stress. This has reflected a weakening EUR and EUR/CEE moving higher. Specifically, the HUF and PLN are likely to depreciate against the USD in the medium term as policymakers welcome weaker currencies in the fight against ‘lowflation’, and would move even more rapidly if Greek risks do become systemic. Locally, the entry levels are also attractive given the rally in EUR/CEE in recent weeks.

*  *  *

Hedging Greek risks in EM assets

Euro area sovereign and financial risks rising again
The nearly constant barrage of headlines reporting comments from Greek and Euro area policymakers is indicative of the renewed deterioration in sovereign risk. Greece and its Euro area counterparties continue to work within a tight schedule to avert a disorderly outcome. Our base case remains that some new accommodation will eventually be found between Greece and the European authorities. But risks of an accident remain as commercial bank deposit outflow and a shortfall in tax collections can precipitate a critical situation in the interim. Even if an agreement to extend the programme is reached this week, the gap between the demands of the Greek side and the actual programme requirements is very large.

The situation is fluid, and if an agreement is reached quickly to extend the Greek bailout, then broader asset markets (including in EM) should stay largely unaffected. But we continue to receive questions on how EM investors can consider hedging the risks of a more messy outcome – that either leads to a ‘no man’s land’ where Greece is without the funding that comes along with a programme or, in the worst case, an outright exit from the common currency. In these latter outcomes, with systemic risk likely to increase, EM assets would come under pressure.

Three weeks ago, we described how in previous episodes of Euro area turmoil, on average EM bond yields tracked the move lower in G3 yields as demand for safe assets spiked, whereas EM credit spreads widened, EM FX weakened versus the USD and EM equities came under broad pressure (see ‘Taking one step back’, EM Weekly: 15/03, January 29, 2015). That said, both EM and G3 bond yields are now at much lower levels – which makes the argument for being long EM fixed income more debatable in the current context. In this EM Weekly, we drill further down within EM FX, CDS and equities to evaluate the relative performance across countries over those previous episodes to help identify how best to protect portfolios against an escalation in Greek risks.

The EM asset experience in the 2010 and 2012 episodes of Euro area stress
Even as concerns around the extension of the Greek programme have escalated, risk markets have so far traded in a resilient fashion, treating those concerns as effectively isolated to Greek assets. But in previous episodes of acute Euro area stress, a wide range of EM assets came under pressure as risk traded poorly. Below we study the two previous episodes of Euro area stress in 2010 and 2012 to assess how different EM assets were affected on average. Euro area stresses were also elevated in 2011, but in that episode it is harder to distinguish between the impact of the Euro area worries and the US debt-ceiling crisis, which played a major role in roiling markets.

Starting with EM FX, Exhibits 3 and 4 show the average moves versus the USD and the EUR over the two periods when Euro area stresses were at their most acute: mid-April to early June 2010 and mid-March to early June 2012. Exhibit 3 shows that in these ‘risk-off’ periods, almost all EM currencies depreciated versus the USD. In relative terms, the largest average depreciations were recorded in the Central and Eastern European region (PLN, HUF, CZK), followed by a couple of the high-yielders (RUB, ZAR) in the European time-zone. The MXN and BRL were most affected in the LatAm region, whereas NJA currencies outperformed.

Most EM currencies appreciated versus the EUR (Exhibit 4), which is unsurprising given that the Euro area was the epicentre of the shocks at these times. But, notably, the CEE-4 currencies saw meaningful depreciations versus the EUR, even as the EUR itself was depreciating. The geographical proximity and the strong trade and financial linkages of the CEE region to the Euro area meant that currencies there have tended to bear the brunt of Euro area crisis episodes.


Goldman believes Hungary is the most susceptible to Grexit risks. Since I've only excerpted the analysis, you can get the full story from the ZeroHedge article direcly... 

$/HUF and $/PLN weakening our preferred ways to hedge Greek risks
At the current juncture the market appears to be making a couple of assumptions: first, that the ongoing disagreements between the Greek government and the Eurogroup represents the typical political posturing that has tended to take place in advance of eventual eleventh hour agreements; and, second, that in the event that agreement cannot be reached by the end of February, the upgraded EU toolkit, including the OMT and the soon-to-be-initiated sovereign QE, will keep market pressures from spilling over into the rest of the EU periphery, and by extension into the broader market.

Our read of the situation is less sanguine on both counts. An eventual agreement between the Greek government and the Eurogroup is still our base case, but we worry that the gap between the current programme on offer and what would be acceptable to a majority of the Greek parliament is very large. In addition, market pressure has often been the forcing variable in the past in helping to close this gap, so paradoxically the absence of broader market pressure is likely to make an eventual agreement that much less likely. In the event that an agreement cannot be found, and ‘Grexit’ becomes a serious possibility, we would expect systemic concerns to affect markets more broadly than currently. As Francesco Garzarelli discussed (in Global Markets Views: ‘Systemic risks posed by Greece set to peak at month-end’, February 17, 2015), even if peripheral bonds are shielded from the fallout by the ECB’s purchases, we would expect the EUR and stocks to come under downward pressure, and credit spreads to widen, reflecting the downside risks to a fragile economic recovery in the Euro area.

Given the results documented in the previous section, our preferred way to hedge these risks would be through long $/CEE positions. In previous episodes of Euro area stress, the combination of the EUR moving lower versus the USD and EUR/CEE moving higher has meant that $/CEE has tended to see the largest moves across the EM FX complex. Even setting aside Greece-related risks, our forecasts call for EUR/USD to move to 1.11, EUR/PLN to weaken to 4.22 and EUR/HUF to weaken to 320 in 6 months, as policymakers in these economies welcome or actively seek weaker currencies in their fight against ‘lowflation’. This implies that the HUF and PLN are likely to weaken against the USD in the medium term based on macro and policy considerations, and if Greece-related risks turn systemic, the weakening is likely to be even more rapid. Finally, given the rally in EUR/HUF and EUR/PLN over the past three weeks, locally the entry levels are also much more attractive.

I've excluded the portions relating to CDS, but the EM FX is more than what's needed. I'm fully aware that CDS trades and exotic forext pairs may be beyond the ken of most retail investors and likely many institutional investors as well (which is why banks get them into such precarious situations, that cost them so much to get out of, ie. How Veritaseum's UltraCoin Could Have Saved Harvard Over $1 Billion!). Alas, I digress. Those who follow me know that I clearly aim to disintermediate rent seeking in the financial space and to return said rents back to the community at large in order to let true talent, intellect, and most importantly drive (the prime determinent of success absent institutional barriers to entry, participation and geo/socioeconomic discrimination). These tweets make a good segway into how and why consumers - big and small (like Harvard who was taken advantage of by the Bank Morgans and stay at home day traders) - can now compete with Wall Street and stand toe to toe. 

Now, I will work the magic of technology and show everyone who can make it to the bottom of this article (unfortunately, that is truly only a select few) how to encapsulae the Goldman researh (which I haven't personally vetted, but does make sense on its face) in one single trade. This trade, a digital swap, is something that Goldman itself, nor any of its competitors (save Veritasuem, which is a software concern and not a financial institution) can offer you. Goldman suggests "$/HUF and $/PLN weakening our preferred ways to hedge Greek risks". A cursory look at these two pairs through both the 2012 scare and now lends credence to the Goldman assumption.

Grexit Hedge using Dual CEE Forex pairs

 So, let's take a position on both pairs with a single UltraCoin swap. This can be be modeled with Veritaseum's UltraCoin Trade Modelling Spreadsheet before actually being entered through the actual ultracoin client. Keep in mind that, as a digital derivative transaction:

  1. You can take as small or as large a position as you please. This example uses a $4000 at risk amount, you can use as little as 12 cents or as much as $300 million.
  2. The use of leverage can give you extreme buying power (up to 10,000x), but along with it is extreme risk and larger fees. At the end of the day, its still beats ANYTHING Goldman can, or would offer you. Here we have the equivalent of two forex pair swaps for $100,000 for $121. Read  How Veritaseum's UltraCoin Could Have Saved Harvard Over $1 Billion! to see how much JP Morgan and Morgan Stanley charged Harvard. Here's a spoiler, it was more than the 10 basis points they would have been charged with UltraCoin!
  3. This is a very custom swap. I'm not saying Goldman can't do it, but it's not just sitting around in their inventory, and they will charge you accordingly - with no more liquidity than is offered here, but with a LOT less transparency and safety. As a matter of fact, you always either no where your money is (in the blockchain) or have it in your possession (via your wallet), that is unless you lose it. Here's a graphic of the order placed, and to find the location of your funds at any time, just hit that "Track Transactions" button at the bottom.

Grexit Hedge using Dual CEE Forex pair UltraCoin Swap order placed

    Rest assured, Goldman, et. al. can never tell you where your funds are at any specific time. The ex-president of Goldman, Mssr. Corzine can attest that Man Financial probably couldn't either, as per Wikipedia:
    1. In 2011, MF Global faced major pressures to its liquidity over several months. Some analysts and financial commentators indicate that MF Global probably experienced a number of trading days in 2011 during which the firm's bets on sovereign debt would have required the use of customer funds to meet capital requirements, thereby maintaining operating funds and possibly overall solvency. A large part of these pressures on MF Global were a result of the firm's involvement in a significant number ofrepurchase agreements. Many of these repo agreements were conducted off their balance sheet. Also, MF Global made a $6.3 billion investment on its own behalf in bonds of some of Europe’s most indebted nations. Failure of those, and other, repo positions contributed to the massive liquidity crisis at the firm.
  1. UltraCoin is P2P software, not a brokerage firm or a bank hence there is absolutely no exposure to our balance sheet or the risks of such that my ensue. It never, at any time, even takes possession nor has control of any of your funds, thus it can never abscond with them or use them in an inappropriate manner.
  2. The only other possible (okay, credible) sales objection the Goldman team could raise to prevent their clients from defecting to a software solution as compared to their 45% of gross revenues paid as their compensation solution is that the Veritaseum solution rides on the Bitcoin blockchain, exposing users to BTC volatility. Outside of the fact Goldman would likely charge you more for the swap than the volatiity may cost you, I have modeled in a 10% drop in BTC prices, along with all the fees charged to show you what happens when the swap is constructed properly. Just follow the series of graphics below carefully and read everything.

 Grexit Hedge using Dual CEE Forex pair UltraCoin Swap

I love to talk! I'm willing to discuss anything in this article, from Grexit to Wall Street banks to the technology that challenges their hegemony, with anyone. Just reach out to me here.

I've worked hard to establish a strong reputation - not only in terms of competence but in terms of integrity. For those who don't know of me, you can view my media apearances and calls as well as my Wikipedia page. You see, my mommy and daddy raised me to appreciate both aspects of success - not only one. With that in mind I'd like to address the recent report from JP Morgan slamming Bitcoin. Just so most know my viewpoint, the typical Bitcoin enthusiast and entrepeneur is primarily technologist leaning, thus may or may not see all of the aspects of the financial side of this new... "thing". In addition, and because of that, the financial guys often get away with some outrageous bullshit that they'd never even try under different circumstances. Let's apply this perspective to JPM's latest FX strategic outlook report, "The Audacity of Bitcoin". I will refute this report, point by point, and in the process make the managing director whose name is on the report look downright ignorant and uneducated. This is not a personal attack or an attempt at sleight (hey, he may be a downright stand-up guy), I am simply calling it as I see it.

Before we get to the report though, I want to address the foolishness of following these "reports" from the big name brand money center banks. Since JP Morgan is the name du jour, let's focus on that one shall we? On Wednesday, 27 April 2011 I penned a piece called There's Something Fishy at the House of Morgan wherein I pointed out quite a few inconsistencies and made an educated extrapolation (my way of saying prediction without having to sound like a guruConfused). One of them was a marked spike in JPM's legal costs, despite a marked drop in the rate of reserving said legal expenses, to wit:


I have warned of this event. JP Morgan (as well as Bank of America) is literally a litigation sinkhole. See JP Morgan Purposely Downplayed Litigation Risk That Spiked 5,000% Last Year & Is Still Severely Under Reserved By Over $4 Billion!!! Shareholder Lawyers Should Be Scrambling Now Wednesday, March 2nd, 2011.

Traditional banking revenues: manifest destiny as forwarned - Weakening Revenue Streams in US Banks Will Make Them More Susceptible To Contingent Risks

 Was I right? Well, here's a list of JP Morgan's fines PAID (yes, paid) over just the last 6 months (this would be $31 billion on an annualized run rate, but whose counting?). Actually, I may be counting - after all you (the taxpayer) paid $30B to bailout Bear Stearns (bought by JP Morgan with US guarantees and financing, remember I warned about Bear Stearns in explicit detail months before the fact- Is this the Breaking of the Bear?) as well as JP Morgan to the tune of at least $12B more. Oh well, back to that list...

  1. January 8th Scandals cost JPMorgan $1 billion in fines (various intergovernmental agencies)
  2. January 7th: OCC Assesses a $350 Million Civil Money Penalty Against JPM 
  4. October 16th JPMorgan to Pay $100 Million Fine on CFTC London Whale Claim
  5. September 19th | JPMorgan Chase Agrees to Pay $200 Million and Admits ...
  6. September 18 $221 million - UK FCA
  7. Septembe 17 $300 million - OCC
  8. September 18CFPB Orders Chase and JPMorgan Chase to Pay $309 Million
  9. September 18 $60 million - OCC
  10. July 30 JP Morgan penalized $285 million for manipulating California electricity prices
  11. July 30 JPMorgan to Pay $410 Million in U.S. FERC Settlement - Bloomberg
  12. Plus that $13 billion dollar WHOPPER!

This is just the last 6 months!

Go to 12:28 in the video and realize why JP Morgan is a bit more desperate than many believe...

 Better Markets summarizes the past ten years of JP Morgan credibility better than I ever could, as follows: Highlights From A Decade of Illegal Conduct by JP Morgan Chase

  1. United States v. JPMorgan Case Bank, NA, No-1:14-cr-7 (S.D.N.Y. Jan 8, 2014) ($1.7 billion criminal penalty); In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-13-109 (Jan. 7, 2014) ($350 million civil penalty); In re JPMorgan Chase Bank, N.A., Dept. of the Treasury Financial Crimes Enforcement Network Admin. Proceeding No. 2014-1 (Jan. 7, 2014) ($461 million civil penalty) (all for violations of law arising from the bank’s role in connection with Bernie Madoff’s Ponzi scheme, the largest in the history of the U.S.);
  2. In re JPMorgan Chase Bank, N.A., CFTC Admin. Proceeding No. 14-01 (Oct. 16, 2013) ($100 million civil penalty); In re JPMorgan Chase & Co., SEC Admin. Proceeding No. 3-15507 (Sept. 19, 2013) ($200 million civil penalty); In re JPMorgan Chase & Co., Federal Reserve Board Admin. Proceeding No. 13-031-CMP-HC (Sept. 18, 2013) ($200 million civil penalty); UK Financial Conduct Authority, Final Notice to JP Morgan Chase Bank, N.A. (Sept. 18, 2013) (£137.6 million ($221 million) penalty); In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-2013-75, #2013-140 (Sept. 17, 2013) ($300 million civil penalty) (all for violations of federal law in connection with the proprietary trading losses sustained by JP Morgan Chase in connection with the high risk derivatives bet referred to as the “London Whale”);
  3. In re JPMorgan Chase Bank, N.A., CFPB Admin. Proceeding No. 2013-CFPB-0007 (Sept. 19, 2013) ($20 million civil penalty and $309 million refund to customers); In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-2013-46 (Sept. 18, 2013) ($60 million civil penalty) (both for violations in connection with JP Morgan Chase’s billing practices and fraudulent sale of so-called Identity Protection Products to customers);
  4. In Re Make-Whole Payments and Related Bidding Strategies, FERC Admin. Proceeding Nos. IN11-8-000, IN13-5-000 (July 30, 2013) (civil penalty of $285 million and disgorgement of $125 million for energy market manipulation);
  5. SEC v. J.P. Morgan Sec. LLC, No. 12-cv-1862 (D.D.C. Jan. 7, 2013) ($301 million in civil penalties and disgorgement for improper conduct related to offerings of mortgage-backed securities);
  6. In re JPMorgan Chase Bank, N.A., CFTC Admin. Proceeding No. 12-37 (Sept. 27, 2012) ($600,000 civil penalty for violations of the Commodities Exchange Act relating to trading in excess of position limits);
  7. In re JPMorgan Chase Bank, N.A., CFTC Admin. Proceeding No. 12-17 (Apr. 4, 2012) ($20 million civil penalty for the unlawful handling of customer segregated funds relating to the bankruptcy of Lehman Brothers Holdings, Inc.);
  8. United States v. Bank of America, No. 12-cv-00361 (D.D.C. 2012) (for foreclosure and mortgage-loan servicing abuses during the Financial Crisis, with JP Morgan Chase paying $5.3 billion in monetary and consumer relief);
  9. In re JPMorgan Chase & Co., Federal Reserve Board Admin. Proceeding No. 12-009-CMP-HC (Feb. 9, 2012) ($275 million in monetary relief for unsafe and unsound practices in residential mortgage loan servicing and foreclosure processing);
  10. SEC v. J.P. Morgan Sec. LLC, No. 11-cv-03877 (D.N.J. July 7, 2011) ($51.2 million in civil penalties and disgorgement); In re JPMorgan Chase & Co., Federal Reserve Board Admin. Proceeding No. 11-081-WA/RB-HC (July 6, 2011) (compliance plan and corrective action requirements); In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-11-63 (July 6, 2011)($22 million civil penalty) (all for anticompetitive practices in connection with municipal securities transactions);
  11. SEC v. J.P. Morgan Sec., LLC, No. 11-cv-4206 (S.D.N.Y. June 21, 2011) ($153.6 million in civil penalties and disgorgement for violations of the securities laws relating to misleading investors in connection with synthetic collateralized debt obligations);
  12. In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-11-15, #2011-050 (Apr. 13, 2011) (consent order mandating compliance plan and other corrective action resulting from unsafe and unsound mortgage servicing practices);
  13. In re J.P. Morgan Sec. Inc., SEC Admin. Proceeding No. 3-13673 (Nov. 4, 2009) ($25 million civil penalty for violations of the securities laws relating to the Jefferson County derivatives trading and bribery scandal);
  14. In re JP Morgan Chase & Co, Attorney General of the State of NY Investor Protection Bureau, Assurance of Discontinuance Pursuant to Exec. Law §63(15) (June 2, 2009) ($25 million civil penalty for misrepresenting risks associated with auction rate securities);
  15. In re JPMorgan Chase & Co., SEC Admin. Proceeding No. 3-13000 (Mar. 27, 2008) ($1.3 million civil disgorgement for violations of the securities laws relating to JPM’s role as asset-backed indenture trustee to certain special purpose vehicles);
  16. In re J.P. Morgan Sec. Inc., SEC Admin. Proceeding No. 3-11828 (Feb. 14, 2005) ($2.1 million in civil fines and penalties for violations of Securities Act record-keeping requirements); and
  17. SEC v. J.P. Morgan Securities Inc., 03-cv-2939 (WHP) (S.D.N.Y. Apr. 28, 2003) ($50 million in civil penalties and disgorgements as part of a global settlement for research analyst conflict of interests).

Now, how many bankers went to jail during this entier ten year period?

Then there's the actual financial fidelity of the bank itself, which so few call into question... JP Morgan's Derivatives Portfolio Was (and STILL MAY BE) VASTLY Inferior To That of Bear Stearns AND Lehman Brothers Just Before They Collapsed!!!

JPM Lower Grade Derivatives

The oft used chart below was created in the 4th quarter of 2009. I'm sure it's worse now!

JP Morgan's Chart

So, have I demonstrated the nature of the entity that has issued said report "The Audacity of Bitcoin" and clearly contrasted it to thine humble author (media apearances/calls & Wikipedia page)? This is not a credible institution. The same institution that penned and distributed "The Audacity of Bitcoin" also files patent for Bitcoin-style payment system but JPMorgan's "Bitcoin-Alternative" Patent Was Rejected (175 Times)

The Sheer Audacity!

JPM Audacity of Bitcoin pg 1

JP Morgan's John Normand says:

"Unlike other asset markets, FX rarely welcomes newcomers for the simple reason that launching a widely-used currency traditionally required creating a sovereign or supra-sovereign entity with a central bank to issue the unit and manage its supply over time.

Hence the audacity of bitcoin: it is a stateless, virtual and peer-to-peer currency, so exists only digitally and is associated with no sovereign, central bank or bank payments system. It is also incredibly illiquid extremely volatile and often caricatured."

Ignorant statement correction #1: Bitcoin is not a currency. It is a bifurcated system consisting of:

  1. Bitcoin - an open source peer to peer protocol that enables a fully distributed ledger of data (and not just financial data) that is agreed upon by networked consensus, thus eliminating the need for trust. No fiat currency can come remotely close to doing what it can do;
  2. and bitcoin - a stream of data traveling along the fully distributed ledger mentioned above, manifested as a virtual currency that has an inherently native scripting language that fully qualifies it as a smart, programmable currency in stark contrast and direct contravention to "dumb" fiat currencies which have no programmable features whatsoever.

Mr. Normand/JP Morgan also state: "virtual and peer-to-peer currency, so exists only digitally". This patent nonsense. Here is a physical bitcoin right here, compared to two other very popular physical manifestations of digital money:

digital currencies

Mr. Normand and JP Morgan then go on to state: "For corporates, bitcoin’s appeal is two-fold: no or low transaction costs from a peer-to-peer payments system, and the potential brand recognition from trialing a new technology. These advantages must be weighed against extreme illiquidity and volatility, both of which impede risk management. All-in transaction costs may also be higher once the fees from transferring bitcoins to fiat currencies are included."

Well, that's exactly what we're working on at UltraCoin. If you simply do the math you can find out exactly how much using Bitcoin will cost. What JP Morgan forgot to mention was the inherently safe risk management attributes that can come with using UltraCoin over bitcoin. UltraCoin effectively hedges and isolates the user from both credit risk and market risk, if the user is willing to pay the hedging costs. This makes the UltraCoin enabled bitcoin deal multiples safer than doing a similar deal with JP Morgan itself as the counter party. As a reminder, see the two charts above which illustrate JP Morgan's holdings then glance down to the flowchart below.

BTC swap  conversion cost flowchart1

Tell me, would Greece have been better off dealing with me through UltraCoin and Bitcoin or JP Morgan and Goldman Sachs through their opaque swaps. As a reminder I bring you the BoomBustBlog article I penned a couple of years ago - Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!

The Greeks (again)...

    1. According to people familiar with the matter interviewed by China Securities Journal, Goldman Sachs Group Inc. did as many as 12 swaps for Greece from 1998 to 2001, while Credit Suisse was also involved with Athens, crafting a currency swap for Greece in the same time frame.

        Under its "off-market" swap in 2001, Goldman agreed to convert yen and dollars into euros at an artificially favorable rate in the future. This helped Greece to use that "low favorable rate" when it recorded its debt in the European accounts-pushing down the country's reported debt load.

      Moreover, in exchange for the good deal on rates, Greece had to pay Goldman (the amount wasn't revealed). And since the payment would count against Greece's deficit, Goldman and Greece came up with another twist: Goldman effectively loaned Greece the money for the payment, and Greece repaid that loan over time. And the two sides structured the loan as another kind of swap. So, the deal didn't add to Greece's debt under EU rules. Consequently, Greece's total debt as a percentage of GDP fell from 105.3% to 103.7%, and its 2001 deficit was reduced by a tenth of a percentage point in GDP terms, according to people close to Goldman.

      Another action that smacks of Hellenic manipulation, at least to the staff of BoomBustBlog: for years it apparently and simply omitted large portions of its military-equipment spending from its deficit calculations. Though, European regulators eventually prevailed on Greece to count everything and as a result, in 2004, there was a massive revision of Greek deficit figures from 2000 (a budget deficit of 2.0% of GDP in 2000 to beyond the 3% deficit limit in 2004), by then Greece had already gained entrance to the euro. As in my trying to prepare for the coming sovereign debt crisis, timing is everything, isn't it???

You see, these shenanigans are not possible when the swap is implemented with UltraCoin (the derivative layer that we overlay on top of Bitcoin). Remember "Ignorant statement correction #1": Bitcoin is not a currency. It is a bifurcated system consisting of Bitcoin - an open source peer to peer protocol that enables a fully distributed ledger of data (and not just financial data) that is agreed upon by networked consensus, thus eliminating the need for trust. No fiat currency can come remotely close to doing what it can do;...

Because everything is accounted for in the Blockchain, you cannot double count, double deal, lie, cheat, steal or deceivingly overleverage - in other words the typical Wall Street bank business model is fractured!


This means my potential inability to write artciles such as these: Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse! or Once You Catch a Few EU Countries “Stretching the Truth”, Why Should You Trust the Rest?

To think, all of this wording... and I'm just getting to the bottom of the first page of this report! If you want me to address the rest, simply give me the heads up in the comment section below - and...

If you want to contribute to the further education of Mr. Normand and JP Morgan, contibute to the UtlraCoin crowdfunding effort here. As you can see from this article, Reggie Middleton's UltraCoin is no mere alternative cryptocurrency. I fully intend to disintermediate the typical Wall Street bank through this technology by elimintating them as the unnecessary, full friction, inefficient and costly (where do you think those $20 million bonuses come from?) middlemen that they are. Remember, THEIR profit margin is MY business model! Click here to crowdfund the disintermediation of Wall Street!

Oh yeah, Mr. Normand, if you ever want to debate Bitcoin in public, I'm game. Let's dance! 


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