Cullen Roche: Pragmatic Capitalism

I am seeing a good deal of misunderstanding arise with the popularity of Bitcoin. Much of this seems to stem from a gold standard style of thinking. It can basically be boiled down to this: Government debt is bad. Banks are evil.¹ A fixed supply of money eliminates the ability of banks to be evil by expanding credit and doesn’t allow governments to issue debt as easily. Returning to the gold standard would fix these problems.² Since we’re not returning to the gold standard we’ll create...

This is Part 2 in my series on cryptocurrencies and how I think they’ll change the economy. In this post I will discuss why I think crypto will lead to a peer-to-peer economy.  In my last Bitcoin post I made a few big points: Bitcoin is the current reserve currency coin in the cryptocurrency space. Bitcoin’s lack of par settlement is a tremendous problem and potentially a fatal flaw. Blockchain tech and decentralized apps are bigly important and will transform many industries by cutting...

Over the course of my career I’ve endured endless Federal Reserve conspiracy theories. I’ve known people who stayed away from the stock market for the entirety of the last 20 years because they think the Fed caused the Nasdaq bubble, then inflated the housing bubble and then inflated the stock market with QE. But here’s the problem with that – this is mostly politics masquerading as pseudoscience. I’ve done a tremendous amount of work describing how the Federal Reserve works. The main goal...

We all have to make forecasts when it comes to investing. But how we develop those forecasts can be the difference between high probability outcomes and low probability outcomes. For instance, take a 30 year bond yielding 2.75%. No one really knows where that bond will be in 1 year. But we know that it will yield 2.75% per year for the next 30 years. So this instrument is really unpredictable in the short-term and becomes more predictable in the long-term. Now, the same basic thing is true...

Is it just me or has there been a resurgence in the number of people who worry about hyperinflation? I don’t engage in these conversations too often anymore because they’re almost always the same. That conversation usually goes something like this: Inflationista: The government has destroyed our purchasing power by printing too much money! CR: You know, the US government doesn’t really print money in any meaningful sense (see myth #1). Inflationista: Yeah, but how do you explain why our...

While we’re all digesting the passage of a tax bill that the Senate couldn’t possibly have had time to fully read and understand, I will recommend some stuff to get your mind off the charade that has become American politics:

At the risk of discrediting this article before it even begins I am going to pretend that I am an Independent Senator in the USA considering the current GOP tax plan. If you’re still reading – in my perfect world a sweeping tax plan includes many of the no-brainer policies that I’ve discussed in the past. This would include a full payroll tax cut and an increase in certain types of secondary market “investments” like capital gains and dividends. This would give every working American a tax...

“Bitcoin is capitalism, distilled. You should love it!” – Adam Ludwin I’ve tried to remain pretty balanced in my view on Bitcoin and cryptocurrencies in general. Back in 2013 I said Bitcoin was definitely money and that the ideological hatred of it was irrational. This monetary view is consistent with the general view I have on cryptos as a part of someone’s portfolio – as I said yesterday, no one really knows how this will play out so you need to be extremely cautious and avoid taking...

Bitcoin has gone stratospheric in recent weeks and it seems to be one of the only things anyone is talking about anymore. If you’re like most people you probably don’t know what Bitcoin is or if you do you don’t own any (or very much) in the first place. But you’ve probably read reports about how it’s the next world changing technology or you’re hearing from friends about how they made money investing in Bitcoin and now you’re jealous and the fear of missing out is creeping in. According...

Back in 2007 Edward Leamer published a paper titled “Housing IS the Business Cycle“. This one turned out to be pretty timely as the paper was published as the housing market was already falling apart and slowly pulling the US economy into the dumpster with it. It’s an appealing perspective especially within the context of today’s weak economic growth. With a weak recovery in housing the national recovery looks weak. So goes housing, so goes the US economy. Today’s release of the surge in...