Crypto Terminator Cyborgs!

  • Where there’s a will there’s a way: Workarounds for China’s crypto crackdown
  • Just in: Regulation, shmegulation — bitcoin touches another all-time high
  • D.C. takes a step toward tax reform… but does a government shutdown come first?
  • ATM withdrawals as a form of protest. Bank run next?
  • An announcement you might not expect from the Trump IRS
  • Is it “racist,” “classist” or “sexist” to think of yourself as a taxpayer?
  • Imagine a cashless society amid a natural disaster

“It’s official, blockchain technology has beat one of the biggest authorities on Earth,” writes Kenneth Rapoza at Forbes.

We try not to regurgitate old news here in The 5. But we’re still blown away by the resilience of cryptocurrencies in the face of a Chinese crackdown last month.

We detailed the crackdown — a ban on initial coin offerings and cryptocurrency exchanges — as it was happening. We also cited Agora Financial’s sui generis contributor James Altucher, who assured us it was no big deal — even as crypto prices took some wild swings.

As September wore on and transitioned to October, we noticed Chinese crypto trading didn’t grind to a halt — it simply moved off the exchanges. Transactions took place legally over the counter, or, to use the proper geek-speak, “peer to peer.”

But it’s Mr. Rapoza’s insights — he’s Forbes’ emerging-markets specialist, so he has a little extra insight into China — that bring us back to the topic this morning.

“Bitcoin prices fell. Ether prices fell. And then cryptocurrency startups shook it all off,” Rapoza writes.

“It was as if they were punched in the face, shook the cobwebs out of their head and remembered that this whole blockchain thing is decentralized and autonomous. That’s the point. Banned in one country, move to another. Now they’re back on their feet in most cases, like a terminator cyborg hard to knock down.”

Crypto startups hoping to get financing from Chinese are getting it from other places.

One outfit simply left China and set up shop in Estonia.

A fellow in San Francisco named Ken Sangha had to put his plans for an initial coin offering on hold, but he’s unfazed. “The ethos behind blockchain has been tested,” he tells Forbes. “A central, organized and powerful authority — China — said ‘no’ and we all have been tested worldwide because of it. But the system flexed its muscles. It’s doing what it was supposed to do.”

Meanwhile, bitcoin has shrugged off the latest regulatory rumblings coming from Washington.

As we mentioned on Wednesday, the Commodity Futures Trading Commission said it might assert oversight of initial coin offerings — which we thought was funny because the Securities and Exchange Commission said the same thing a while back.

Bitcoin tanked 8% on the news… but it’s regained nearly all of those losses in the last 48 hours. As we write this morning it’s $5,661 — even higher than it was before the China scare of early September…

Bitcoin chart

[Update: As we go to virtual press, bitcoin just crossed $6,000 for the first time.]

Here’s what bitcoin sellers overlooked this week as they freaked out over the CFTC’s regulatory moves.

Back in July, we told you how the CFTC signed off on the first bitcoin options exchange — an outfit called LedgerX.

As LedgerX moves closer to launch, the aforementioned James Altucher tells us it will mark “a big step forward for the acceptance of digital currencies by banks. By offering tools for banks to reduce their risk on cryptocurrency investments, an exchange like LedgerX could create a lot of demand for digital currencies.”

Understand crypto doesn’t need the banks to succeed — again, it’s that decentralized and autonomous thing. “However,” says James, “approval by regulators like CFTC and the launch of an exchange like LedgerX could create enough momentum to push the price of cryptocurrencies much higher.

“Announcements like the one made by the CFTC on Wednesday along with the approval of LedgerX should be seen as an indication that digital currency markets could soon attract investment from banks. I remain bullish on the long-term potential of bitcoin and ethereum and continue to advise readers to buy dips.”

[Ed. note: For the first time, James is throwing open his ultimate crypto playbook — showing you how to turn every $1 invested into $1,000.

Until today, only a select few people have had access to this presentation. Now you can see it too by following this link — but only for a limited time. It comes offline at midnight Sunday night, so be sure to check it out right away.]

The major U.S. stock indexes are pushing higher into record territory as the week winds down.

At last check the Dow has crossed the 23,200 mark. Gold has weakened to $1,282 as the dollar index has strengthened to 93.5.

It’s possible all these asset classes are moving in response to the Senate passing a “budget resolution” last night. It’s not an actual budget — more about that shortly — but under Senate rules it does clear the way for passage of tax reform with only 51 votes instead of 60.

The only economic number of note is existing home sales — which registered their first increase in four months, up 0.7% in September. But year over year, turnover of existing homes is now down 1.5%.

It’s now 50 days until another “partial government shutdown” like we had in 2013.

As we noted above, the Senate passed a “budget resolution” last night, not an actual budget for fiscal 2018, which began this month.

“Dec. 8 is the day congressional authorization to keep the government open expires,” Jim Rickards writes us from Washington, D.C. You need 60 Senate votes to keep the government running. That means Democrats have to go along.

“The issues on which Democrats and Republicans disagree include funding for Trump’s border wall, Planned Parenthood, Obamacare insurance bailouts, sanctuary cities and ‘Dreamer’ immigration status. You get the point. There’s no middle ground.”

Is it the end of the world? No. It wasn’t the last time in 2013. “But it does not inspire confidence in U.S. governance at a time when China is taking center stage and war drums are beating in North Korea,” Jim says. “There’s nothing the stock market likes less than uncertainty. This could be a catalyst for the overdue stock market correction.”

And now a fascinating development in the War on Cash…


As you might recall, there’s a secession movement in Spain’s northeast province of Catalonia — one that’s only gathered strength after the central government in Madrid sent jackbooted thugs to break up an independence referendum on Oct. 1.

Today brings an act of protest — Catalans trudging to ATMs for withdrawals of $188 each, or 155 euros. That’s a reference to Article 155 of the Spanish constitution — which Madrid is threatening to impose tomorrow, stripping Catalonia of all its self-governing powers.

Two banks in particular are being targeted, because they announced this month they’re moving their headquarters out of the Catalan capital of Barcelona. “These banks are traitors,” a store owner tells The Associated Press. “They need to see that it’s a lot of us who are angry.”

Near as we can tell, the protest has not morphed into a full-blown bank run. But because no one knows exactly how Madrid’s crackdown will play out, it wouldn’t surprise us if Catalans start loading up on cash tonight, just in case.

Go figure: The IRS under Trump is getting hard-ass with Obamacare enforcement.

“The IRS,” according to CNBC, “is warning tax professionals that it will block or suspend processing of 2017 income tax returns that do not comply with Obamacare rules requiring filers to disclose their health insurance status.” Electronic returns lacking the disclosure won’t be accepted. If you file by paper and don’t include the disclosure, the agency will just sit on your return.

Hmmm… If the Trump administration really wants to use executive authority to undercut Obamacare, this seems like a funny way to do it.

On the other hand, Trump still hasn’t replaced Obama’s IRS commissioner John Koskinen — the guy who dragged his feet getting to the bottom of the “targeting” scandal in which IRS bureaucrat Lois Lerner went after the tax-exempt status of conservative groups.

As we mentioned last May, it was Koskinen who greased the way for Trump to pull off one of his first big real estate deals in 1975.

As long as we’re on the subject of taxes, let’s talk about an — umm, interesting notion that we’re seeing surface from some of the far-left corners of political discourse in this country.

The background: You might recall a few weeks ago when Vice President Pence flew to Indianapolis for the express purpose of walking out of an NFL game in protest because he knew some of the players would kneel during the national anthem.

Some of the headlines that followed went like so…

  • “Mike Pence’s Flagrant Waste of Taxpayer Money” (The Atlantic)
  • “How Much Did Mike Pence’s Trip to Indianapolis Cost Taxpayers?” (Sports Illustrated)
  • “Democrats Calling on VP Pence to Reimburse Taxpayers for Trip to Colts Game” (WISH-TV Indianapolis).

Estimates of that cost run north of $200,000, by the way.

But the dollar amount isn’t why we bring up the topic today. We bring it up because a couple of writers at Splinter News — one of those look-alike Gawker websites that live on despite Gawker’s demise — are having none of this “taxpayer money” talk.

The writers assert that framing the topic in terms of taxpayer money helps to spread “a racist, sexist, classist myth.”

For real.

“Although most of us pay taxes of some kind,” write Raul Carrillo and Jesse Myerson, “every time we say ‘taxpayer money’ we prolong the illusion that society depends on certain kinds of people so we can have nice things.

“One quick exercise shows why. Picture a ‘taxpayer.’ What does one look like? A homeless black trans teen? An immigrant day laborer waiting on the corner? A young mom trying to cobble together enough income to feed her family, while languishing on the disability backlog? Unlikely. Let’s be honest: We know what sort of people ‘taxpayers’ are supposed to be, and they’re not the ones we should be casting as the aggrieved parties.

“Calling public money ‘taxpayer money’ implicitly affirms that taxation is theft: If the money is taxpayers’ by right, what business does the government have using it for health care, jobs or clean water?”

The writers prefer the term “public money,” by the way.

We’re not going to spill a lot of digital ink rebutting the authors’ assertions. Chances are if you’re reading this e-letter you’re able to come up with a few choice counterarguments on your own. We only bring it up today because it’s typical of some of the chatter we’ve seen online in the weeks since Pence’s pointless act of petulance.

And we figure you should be on notice that in some circles, you don’t have the right to express an opinion about how government spends its money if you think the money originally belonged to you. Otherwise, you’re helping promote racism, sexism and classism. Oy…

“Dave, this is another cold, hard lesson in capitalism, no?” writes one of our regulars after an item yesterday about hurricane-ravaged Puerto Rico reverting to a cash-only economy and the Federal Reserve flying a planeload of cash.

“But my spider sense is tingling…

“I accept the theory that global elites are studying such events as test cases in their war on cash. The problem — as Jim Rickards has explained so well — is the elites mean business. They may lose an occasional battle, but they’re quite determined to win the campaign. And if history teaches us anything, it’s that big banksters are very sharp!

“As Jim points out, forcing citizens to go cashless is their way of herding us into digital accounts, where our currency can be frozen, seized, taxed or confiscated at the government’s pleasure.

“So despite any short-term comebacks cash might be making in isolated situations, I fear we’re headed for the ‘Ice Nine’ scenario one way or another!

“I pulled the trigger on another bullion purchase this morning. Now I’ll put on my tinfoil hat again.”

The 5: Yeah. As we said in the aftermath of Hurricane Harvey, can you think of a better way to make people utterly dependent on government than to deprive them of physical cash amid a widespread natural disaster?

It’s a central planner’s dream. “Yes, sir, your family can have three extra rations of MREs this week. However, you will have to surrender all firearms in the household.”

Have a good weekend,

Dave Gonigam
The 5 Min. Forecast

P.S. Last chance: If you want a peek at James Altucher’s ultimate cryptocurrency blueprint — with the possibility of turning every $1 invested into $1,000 — here’s the place to look.

The presentation comes offline after midnight Sunday night… and we won’t be sending you any reminders about it this weekend. If you want in, it’s now or never.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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