#rehypothecate

[mostlysignssomeportents]

How finfluencers destroyed the housing and lives of thousands of people

For the rest of May, my bestselling solarpunk utopian novel THE LOST CAUSE (2023) is available as a $2.99, DRM-free ebook!

The crash of 2008 imparted many lessons to those of us who were only dimly aware of finance, especially the problems of complexity as a way of disguising fraud and recklessness. That was really the first lesson of 2008: "financial engineering" is mostly a way of obscuring crime behind a screen of technical jargon.

This is a vital principle to keep in mind, because obscenely well-resourced "financial engineers" are on a tireless, perennial search for opportunities to disguise fraud as innovation. As Riley Quinn says, "Any time you hear 'fintech,' substitute 'unlicensed bank'":

https://pluralistic.net/2023/05/01/usury/#tech-exceptionalism

But there's another important lesson to learn from the 2008 disaster, a lesson that's as old as the South Seas Bubble: "leverage" (that is, debt) is a force multiplier for fraud. Easy credit for financial speculation turns local scams into regional crime waves; it turns regional crime into national crises; it turns national crises into destabilizing global meltdowns.

When financial speculators have easy access to credit, they "lever up" their wagers. A speculator buys your house and uses it for collateral for a loan to buy another house, then they make a bet using that house as collateral and buy a third house, and so on. This is an obviously terrible practice and lenders who extend credit on this basis end up riddling the real economy with rot – a single default in the chain can ripple up and down it and take down a whole neighborhood, town or city. Any time you see this behavior in debt markets, you should batten your hatches for the coming collapse. Unsurprisingly, this is very common in crypto speculation, where it's obscured behind the bland, unpronounceable euphemism of "re-hypothecation":

https://www.coindesk.com/consensus-magazine/2023/05/10/rehypothecation-may-be-common-in-traditional-finance-but-it-will-never-work-with-bitcoin/

Loose credit markets often originate with central banks. The dogma that holds that the only role the government has to play in tuning the economy is in setting interest rates at the Fed means the answer to a cooling economy is cranking down the prime rate, meaning that everyone earns less money on their savings and are therefore incentivized to go and risk their retirement playing at Wall Street's casino.

The "zero interest rate policy" shows what happens when this tactic is carried out for long enough. When the economy is built upon mountains of low-interest debt, when every business, every stick of physical plant, every car and every home is leveraged to the brim and cross-collateralized with one another, central bankers have to keep interest rates low. Raising them, even a little, could trigger waves of defaults and blow up the whole economy.

Holding interest rates at zero – or even flipping them to negative, so that your savings lose value every day you refuse to flush them into the finance casino – results in still more reckless betting, and that results in even more risk, which makes it even harder to put interest rates back up again.

This is a morally and economically complicated phenomenon. On the one hand, when the government provides risk-free bonds to investors (that is, when the Fed rate is over 0%), they're providing "universal basic income for people with money." If you have money, you can park it in T-Bills (Treasury bonds) and the US government will give you more money:

https://realprogressives.org/mmp-blog-34-responses/

On the other hand, while T-Bills exist and are foundational to the borrowing picture for speculators, ZIRP creates free debt for people with money – it allows for ever-greater, ever-deadlier forms of leverage, with ever-worsening consequences for turning off the tap. As 2008 forcibly reminded us, the vast mountains of complex derivatives and other forms of exotic debt only seems like an abstraction. In reality, these exotic financial instruments are directly tethered to real things in the real economy, and when the faery gold disappears, it takes down your home, your job, your community center, your schools, and your whole country's access to cancer medication:

https://www.theguardian.com/world/2012/jun/08/greek-drug-shortage-worsens

Being a billionaire automatically lowers your IQ by 30 points, as you are insulated from the consequences of your follies, lapses, prejudices and superstitions. As @pixelpusher220@dmv.community says, Elon Musk is what Howard Hughes would have turned into if he hadn't been a recluse:

https://mamot.fr/@pixelpusher220@dmv.community/112457199729198644

The same goes for financiers during periods of loose credit. Loose Fed money created an "everything bubble" that saw the prices of every asset explode, from housing to stocks, from wine to baseball cards. When every bet pays off, you win the game by betting on everything:

https://en.wikipedia.org/wiki/Everything_bubble

That meant that the ZIRPocene was an era in which ever-stupider people were given ever-larger sums of money to gamble with. This was the golden age of the "finfluencer" – a Tiktok dolt with a surefire way for you to get rich by making reckless bets that endanger the livelihoods, homes and wellbeing of your neighbors.

Finfluencers are dolts, but they're also dangerous. Writing for The American Prospect, the always-amazing Maureen Tkacik describes how a small clutch of passive-income-brainworm gurus created a financial weapon of mass destruction, buying swathes of apartment buildings and then destroying them, ruining the lives of their tenants, and their investors:

https://prospect.org/infrastructure/housing/2024-05-22-hell-underwater-landlord/

Tcacik's main characters are Matt Picheny, Brent Ritchie and Koteswar “Jay” Gajavelli, who ran a scheme to flip apartment buildings, primarily in Houston, America's fastest growing metro, which also boasts some of America's weakest protections for tenants. These finance bros worked through Gajavelli's company Applesway Investment Group, which levered up his investors' money with massive loans from Arbor Realty Trust, who also originated loans to many other speculators and flippers.

For investors, the scheme was a classic heads-I-win/tails-you-lose: Gajavelli paid himself a percentage of the price of every building he bought, a percentage of monthly rental income, and a percentage of the resale price. This is typical of the "syndicating" sector, which raised $111 billion on this basis:

https://www.wsj.com/articles/a-housing-bust-comes-for-thousands-of-small-time-investors-3934beb3

Gajavelli and co bought up whole swathes of Houston and other cities, apartment blocks both modest and luxurious, including buildings that had already been looted by previous speculators. As interest rates crept up and the payments for the adjustable-rate loans supporting these investments exploded, Gajavell's Applesway and its subsidiary LLCs started to stiff their suppliers. Garbage collection dwindled, then ceased. Water outages became common – first weekly, then daily. Community rooms and pools shuttered. Lawns grew to waist-high gardens of weeds, fouled with mounds of fossil dogshit. Crime ran rampant, including murders. Buildings filled with rats and bedbugs. Ceilings caved in. Toilets backed up. Hallways filled with raw sewage:

https://pluralistic.net/timberridge

Meanwhile, the value of these buildings was plummeting, and not just because of their terrible condition – the whole market was cooling off, in part thanks to those same interest-rate hikes. Because the loans were daisy-chained, problems with a single building threatened every building in the portfolio – and there were problems with a lot more than one building.

This ruination wasn't limited to Gajavelli's holdings. Arbor lent to multiple finfluencer grifters, providing the leverage for every Tiktok dolt to ruin a neighborhood of their choosing. Arbor's founder, the "flamboyant" Ivan Kaufman, is associated with a long list of bizarre pop-culture and financial freak incidents. These have somehow eclipsed his scandals, involving – you guessed it – buying up apartment buildings and turning them into dangerous slums. Two of his buildings in Hyattsville, MD accumulated 2,162 violations in less than three years.

Arbor graduated from owning slums to creating them, lending out money to grifters via a "crowdfunding" platform that rooked retail investors into the scam, taking advantage of Obama-era deregulation of "qualified investor" restrictions to sucker unsophisticated savers into handing over money that was funneled to dolts like Gajavelli. Arbor ran the loosest book in town, originating mortgages that wouldn't pass the (relatively lax) criteria of Fannie Mae and Freddie Mac. This created an ever-enlarging pool of apartments run by dolts, without the benefit of federal insurance. As one short-seller's report on Arbor put it, they were the origin of an epidemic of "Slumlord Millionaires":

https://viceroyresearch.org/wp-content/uploads/2023/11/Arbor-Slumlord-Millionaires-Jan-8-2023.pdf

The private equity grift is hard to understand from the outside, because it appears that a bunch of sober-sided, responsible institutions lose out big when PE firms default on their loans. But the story of the Slumlord Millionaires shows how such a scam could be durable over such long timescales: remember that the "syndicating" sector pays itself giant amounts of money whether it wins or loses. The consider that they finance this with investor capital from "crowdfunding" platforms that rope in naive investors. The owners of these crowdfunding platforms are conduits for the money to make the loans to make the bets – but it's not their money. Quite the contrary: they get a fee on every loan they originate, and a share of the interest payments, but they're not on the hook for loans that default. Heads they win, tails we lose.

In other words, these crooks are intermediaries – they're platforms. When you're on the customer side of the platform, it's easy to think that your misery benefits the sellers on the platform's other side. For example, it's easy to believe that as your Facebook feed becomes enshittified with ads, that advertisers are the beneficiaries of this enshittification.

But the reason you're seeing so many ads in your feed is that Facebook is also ripping off advertisers: charging them more, spending less to police ad-fraud, being sloppier with ad-targeting. If you're not paying for the product, you're the product. But if you are paying for the product? You're still the product:

https://pluralistic.net/2021/01/04/how-to-truth/#adfraud

In the same way: the private equity slumlord who raises your rent, loads up on junk fees, and lets your building disintegrate into a crime-riddled, sewage-tainted, rat-infested literal pile of garbage is absolutely fucking you over. But they're also fucking over their investors. They didn't buy the building with their own money, so they're not on the hook when it's condemned or when there's a forced sale. They got a share of the initial sale price, they get a percentage of your rental payments, so any upside they miss out on from a successful sale is just a little extra they're not getting. If they squeeze you hard enough, they can probably make up the difference.

The fact that this criminal playbook has wormed its way into every corner of the housing market makes it especially urgent and visible. Housing – shelter – is a human right, and no person can thrive without a stable home. The conversion of housing, from human right to speculative asset, has been a catastrophe:

https://pluralistic.net/2021/06/06/the-rents-too-damned-high/

Of course, that's not the only "asset class" that has been enshittified by private equity looters. They love any kind of business that you must patronize. Capitalists hate capitalism, so they love a captive audience, which is why PE took over your local nursing home and murdered your gran:

https://pluralistic.net/2021/02/23/acceptable-losses/#disposable-olds

Homes are the last asset of the middle class, and the grifter class know it, so they're coming for your house. Willie Sutton robbed banks because "that's where the money is" and We Buy Ugly Houses defrauds your parents out of their family home because that's where their money is:

https://pluralistic.net/2023/05/11/ugly-houses-ugly-truth/#homevestor

The plague of housing speculation isn't a US-only phenomenon. We have allies in Spain who are fighting our Wall Street landlords:

https://pluralistic.net/2021/11/24/no-puedo-pagar-no-pagara/#fuckin-aardvarks

Also in Berlin:

https://pluralistic.net/2021/08/16/die-miete-ist-zu-hoch/#assets-v-human-rights

The fight for decent housing is the fight for a decent world. That's why unions have joined the fight for better, de-financialized housing. When a union member spends two hours commuting every day from a black-mold-filled apartment that costs 50% of their paycheck, they suffer just as surely as if their boss cut their wage:

https://pluralistic.net/2023/12/13/i-want-a-roof-over-my-head/#and-bread-on-the-table

The solutions to our housing crises aren't all that complicated – they just run counter to the interests of speculators and the ruling class. Rent control, which neoliberal economists have long dismissed as an impossible, inevitable disaster, actually works very well:

https://pluralistic.net/2023/05/16/mortgages-are-rent-control/#housing-is-a-human-right-not-an-asset

As does public housing:

https://jacobin.com/2023/10/red-vienna-public-affordable-housing-homelessness-matthew-yglesias

There are ways to have a decent home and a decent life without being burdened with debt, and without being a pawn in someone else's highly leveraged casino bet.

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2024/05/22/koteswar-jay-gajavelli/#if-you-ever-go-to-houston

Image: Boy G/Google Maps (modified) https://pluralistic.net/timberridge

[mariacallous]

The US crypto business is having an identity crisis, which could become an existential one. Are cryptocurrencies commodities, like gold and pork bellies? Or securities, like stocks and futures? The Securities and Exchange Commission, America’s top financial regulator, is so convinced that cryptocurrencies are the latter that it’s suing one of the world’s largest crypto exchanges, Coinbase, for breaking securities laws. The SEC has instigated an aggressive campaign of “regulation by enforcement,” going after companies for all kinds of alleged violations and insisting that they register with the agency—something crypto businesses say is all but impossible.

But another regulator, the Commodity Futures Trading Commission, has also sued one of the industry’s biggest players, Binance, alleging it has broken commodity trading laws.

The confusion over what crypto is and who sets its rules has left the industry on edge. On Wednesday, senators Cynthia Lummis and Kirsten Gillibrand—a Wyoming Republican and New York Democrat, respectively—will unveil a new version of their proposed regulatory regime for the fintech industry, which hopes to settle the question.

While there’s plenty new in the revamped Lummis-Gillibrand Responsible Financial Innovation Act, its centerpiece is a measure that would classify most cryptocurrencies as commodities, putting them under the purview of the CFTC. It’s a clear rebuke to the SEC, which, Lummis and others say, is stifling innovation in financial technologies.

“The domestic industries really are trying to comply, for the most part, and they’re just getting the cold shoulder,” Lummis says. “That’s not how we regulate in this country.”

The content of the legislation seeks to prevent a repeat of the apparent failings in the crypto industry, which led to a series of high-profile collapses in the industry over the past two years that have left many investors with losses.

According to a person with knowledge of the act, the legislation, if passed, would compel crypto exchanges to keep their customers’ assets in third-party trusts and stop them from so-called “proprietary trading”—essentially, trading with their own funds on their own exchange. It would also give the CFTC the power to supervise “material affiliates” of exchanges—such as Alameda Research, the sister company of the collapsed FTX exchange, whose founder, Sam Bankman-Fried, is awaiting trial on fraud charges. FTX allegedly lent large amounts of customer funds to Alameda to cover its investment losses, ahead of a liquidity crisis on the exchange that led to its downfall.

The act also bans “rehypothecation,” which essentially outlaws lenders’ ability to finance digital assets with collateral already pledged for different loans, the person says.

The SEC and other agencies were consulted on the content of the legislation, according to Lummis, who still worries they’ll try to kill the measure. “They have seen it. We asked them to tweak it, and we’ve incorporated some of their changes,” she says. “After all of our efforts to reach out to them and work with them, I do not want them to come in at the last minute to put their kibosh on this.”

The proposal comes at a point where there is significant animosity toward SEC chair Gary Gensler within the Republican-controlled House. Republicans have even introduced a bill meant to dilute Gensler’s power by adding a sixth SEC commissioner and killing the chair position altogether. But lawmakers admit that they’ve created the space for the regulator to act—often unilaterally—on crypto because of inaction on the subject in Congress.

“The reason [Gensler] is having this opportunity is because Congress hasn’t acted,” says Senator John Boozman of Arkansas, the top Republican on the Agriculture Committee.

After the senators drop their bill Wednesday, the hard legislative work begins. Digital assets fall under the jurisdictions of numerous committees—Banking (which Lummis serves on), Agriculture (one of Gillibrand’s committees), and Finance. Even the Environment Committee wants a say on crypto mining. That’s just in the Senate.

Each of these committees comes at crypto from a different angle. Take the Senate Banking Committee. Its Democratic chair, Sherrod Brown of Ohio, has focused on risks to consumers, while Senator Elizabeth Warren, a Massachussettes Democrat, has found the issue a bridge to the other side. Last year she teamed up with first-term senator Roger Marshall, a Republican from Kansas, on the Digital Asset Anti-Money Laundering Act of 2022, which would place crypto firms under the Bank Secrecy Act—a 1970 law that requires financial institutions to monitor and report money laundering, among other regulations critics say would crush the crypto industry.

That measure hasn’t been introduced in this 118th Congress, possibly because Gensler and the Department of Justice are all but implementing the bipartisan legislation in real time. Even as industry leaders, investors and their congressional allies accuse the SEC of crippling crypto, what’s become clear in recent months is, if Congress fails to act, again, securities regulators will aggressively go it alone.

[bitcoincables]

The Rise of Bitcoin ETFs and Their Impact on Wall Street

Bitcoin exchange-traded funds (ETFs) have arrived with a bang, as BlackRock's IBIT becomes one of the top five ETFs by inflows this year. The popularity of these funds is expected to continue growing, although it remains to be seen if they can match the optimistic end-of-year valuations predicted by firms like Standard Chartered Bank and Fidelity. Despite this excitement, most wealth managers advise their clients to allocate only 1% to 3% of their portfolio to crypto, as the high volatility poses risks that traditional investors are not accustomed to.

The SEC has approved several bitcoin ETFs, with one ETF, known as ZZZ, set to allocate 75% of its capital to the S&P and the remaining 25% to bitcoin futures. This diversified approach aims to reduce the potential downside risk and volatility associated with bitcoin. Additionally, future hybrid funds may utilize strategies that involve investing in U.S. Treasuries or other less risky assets to protect against bitcoin's volatility, thereby offering investors a unique selling point.

In the competitive world of ETFs, firms are expected to compete by lowering management fees and providing promotional offers. Some companies may choose to hold investors' bitcoin in cold storage, while others may rehypothecate the assets to earn returns. Grayscale, however, has opted to maintain its high fees for its popular GBTC product due to its strong brand equity and loyal following among bitcoin enthusiasts. With the growing demand for bitcoin ETFs, Onefund aims to tap into the bitcoin community's camaraderie by offering a non-institutional approach with its Cyber Hornet branding.

Read the original article

[coinatory]

Decentralization Concerns and Market Dynamics: A Deep Dive into Ethereum's Ecosystem and Price Trends

Many individuals within the cryptocurrency community prefer liquid staking platforms like Lido over centralized ones. Lidos approach has been to involve a number of node operators to prevent any single group from having excessive control over staked ETH, which helps address concerns about centralization. However the risk of centralization still remains. If a dominant group of liquidity providers or node operators were to emerge it could create a vulnerability. Even establish a monopoly that goes against the broader interests of the Ethereum community. Following the Merge and Shanghai updates Ethereum, the worlds most prominent cryptocurrency has experienced an increase in centralization. JPMorgan has expressed concerns about declining staking returns. Another important aspect mentioned in their report is rehypothecation. This

Read more on Decentralization Concerns and Market Dynamics: A Deep Dive into Ethereum's Ecosystem and Price Trends

[ailtrahq]

JPMorgan Chase &. Co. has shed light on how the Ethereum network decentralization has decreased significantly since the Merge event and Shanghai upgrade went live. The rise of staking and centralization Since implementing the Merge and Shanghai upgrades, Ethereum has seen a substantial uptick in staking activities. Staking, a process where users lock up their crypto assets to support network operations, has its merits. According to a CoinDesk report citing JPMorgan research, this surge in staking activity comes at a cost: centralization. Traditionally, many in the crypto community prefer decentralized liquid staking platforms like Lido over their centralized counterparts.  Lido’s approach included adding more node operators to ensure no single entity controlled a significant portion of staked Ether (ETH). The aim was to address centralization concerns. However, centralization remains a risk. A concentration of liquidity providers or node operators could act as a single point of failure or even collude to create an oligopoly, potentially undermining the interests of the broader Ethereum community. Ethereum, the world’s second-largest crypto, has become more centralized since the Merge and Shanghai upgrades. And JPMorgan is highlighting concerns over a decline in staking yields.  The menace of rehypothecation Another highlight from the report is rehypothecation. This complex term refers to the practice of reusing liquidity tokens as collateral across multiple decentralized finance (DeFi) protocols simultaneously.  DeFi encompasses lending, trading, and other financial activities carried out on the blockchain. The problem arises when a staked asset’s value sharply declines or faces a security breach or protocol error.  In such scenarios, rehypothecation could trigger a cascade of liquidations, jeopardizing the stability of the DeFi ecosystem. Furthermore, the report points out that the increase in staking has diminished the appeal of Ethereum from a yield perspective. This shift is especially noticeable amid rising yields in traditional financial assets. The total staking yield has fallen from 7.3% before the Shanghai upgrade to approximately 5.5%. From a different perspective, the research data presented in December following Ethereum’s Merge upgrade in September 2022 reveals a significant reduction in the network’s energy consumption, akin to the energy usage of entire countries such as Ireland and Austria.  This decrease in power consumption positively contributes to environmental sustainability, aligning with broader global efforts to reduce the carbon footprint associated with blockchain technologies. Ethereum’s core developers have introduced an Ethereum Improvement Proposal (EIP-7514) as part of the upcoming Dencun upgrade, scheduled for activation in October 2023.  This proposal aims to slow down the rate of Ether staking. The intention is to provide the Ethereum community with more time to devise a practical reward scheme for stakers on the network. ETH price analysis As of the time of writing, the price of Ethereum (ETH) stands at $1,629, representing a 3.4%  decline on the weekly timeframe. Ethereum’s Relative Strength Index (RSI) is currently sitting at 40.4.  The price of ETH is struggling to maintain the $1600 level after facing rejection at the $1700 resistance level. A failure to hold the $1600 level could potentially lead to a further decline to the $1500 level.

[thesecrettimes]

House Financial Services Committee Advances Clarity for Payment Stablecoins Act

The bill would grant the Federal Reserve the power to write requirements for issuing stablecoins but would not infringe on the authority of state regulators. The following editorial was written by guest authors Wyatt Noble and Michael Handelsman for Kelman.Law Under this bill, stablecoins are generally understood as digital assets which an issuer must redeem for a fixed monetary value, a definition that all those involved in blockchain technology and cryptocurrency are likely familiar with. However, this bill’s controversy largely stems from what or who can become a permitted issuer. Permitted issuers would be the only entities allowed to issue a payment stablecoin for use by people in the United States. Permitted Issuers The bill would require that permitted issuers be “a subsidiary of an insure depository institution that has been approved to issue payment stablecoins,” “ a Federal qualified nonbank payment stablecoin issuer that has been approved to issue payment stablecoins,” or “ a State qualified payment stablecoin issuer.” The third category of permitted issuers opens the door for appropriate state legislators and represents a carve-out for states looking to develop their own approach with respect to stablecoins. Some Democratic politicians, including Representative Maxine Waters, opposed the bill on the grounds that issuers could simply opt to be regulated under relaxed state regimes. Another concern is that the language and definitions concerning issuers would allow commercial companies to effectively issue their own money. Additionally, permitted issuers would be required to maintain reserves that back their stablecoins on a one-to-one basis in assets such as U.S. coins and currency, funds held as insured demand deposits or insured shares at insured depository institutions, treasury bills with a maturity of 90 days or less, repurchase agreements with a maturity of seven days or less backed by the aforementioned treasury bills, central bank reserves deposits, and other assets that the “primary Federal or State payment stablecoin regulator determines appropriate.” Other digital assets such as cryptocurrencies are notably absent from the list of assets that can be used as reserves for payment stablecoins, and that is probably because of the volatile nature of most cryptocurrencies, along with the recent slew of bankruptcies in the industry fueled by that price volatility. In light of this exclusion, the bill would place a two-year moratorium on payment stablecoins that rely on the value of another digital asset created or maintained by the same originator to maintain the fixed value. The bill would also create requirements for the rehypothecation or reuse of reserves, custodial or safekeeping services for stablecoins or private keys, and supervisory, examination, and enforcement authority over non-state qualified issuers. Clarifying That Stablecoins Are Not Securities Importantly, the bill’s final section clarifies that stablecoins are not securities or commodities as those terms are defined under the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Securities Act of 1933, the Securities Act of 1934, or the Securities Investor Protection Act of 1970. This final section of the bill would definitively remove stablecoin issuers from the Securities Exchange Commission’s jurisdiction, so long as they operate within the confines of the bill. What Should You Do in the Meantime? In light of ongoing regulatory uncertainty and the increasing frequency of enforcement actions by the SEC, it’s more important than ever to consult with legal experts well-versed in digital assets. Consulting with the lawyers here at Kelman PLLC early on is the most efficient way to ensure compliance with potentially applicable laws and regulations, and avoid legal pitfalls and expenses that could otherwise handicap your business. Fill out our contact form here to set up a free 30-minute consultation. What do you think about the House Financial Services Committee’s Stablecoins Act? Share your thoughts and opinions about this subject in the comments section below. Read the full article

[iampjr]

@spencernoon @euler_mab Please avoid the terms "backwardation," "contango," and "rehypothecation."

@spencernoon @euler_mab Please avoid the terms “backwardation,” “contango,” and “rehypothecation.”

@spencernoon @euler_mab Please avoid the terms “backwardation,” “contango,” and “rehypothecation.” — Patrick Rooney (@patrickrooney) Dec 30, 2022 https://platform.twitter.com/widgets.js from Twitter https://twitter.com/patrickrooney

[confidant]

This CEO has a narrow, biased opinion of cryptocurrency. Comparing; It to an old 1940's movie with Humphrey Bogart.

[thepause]

BITCOIN 2049 - The Fimpire Strikes Back! - SBS & AngryDentist - Caitlin Long

BITCOIN 2049 – The Fimpire Strikes Back! – SBS & AngryDentist – Caitlin Long

Tonight for One Night Only…… RocknRoller Crypto Og's Shem Booth-Spain & "Angry Dentist" will be discussing paper bitcoins, Rehypothecation with Fmr chair/president & 22-yr Wall St veteran Caitlin Long, What it is, how it works and price suppression, Bitcoins a proto global currency and a small ecosystem, What dynamics are effecting it, This is the future. Welcome to BITCOIN 2049….

Help us save…

[govtcorpwatch]

The U.S. Economy In Two Words: Asymmetric Gains

The U.S. Economy In Two Words: Asymmetric Gains

via Of Two Minds – The Status Quo is in trouble if the bottom 95% wake up to the asymmetric gains that are the only possible output of our hyper-financialized economy.

The core dynamic of the U.S. economy in this era is asymmetric gains: the gains in income, wealth and power are increasingly concentrated in the top slice of the economy and society, while the income, wealth and power of the…

[dwagom]

"growth recession" or "we got a little ahead of ourselves and now we're in a mire of leveraged debt (also did some rehypothecations while the regulators weren't looking), so we're slashing wages so we can pay this quarter's coupons and completely fuck ourselves up in the next because nobody can buy shit because we slashed wages but to solve that we're going to get into even more debt in order to GROW! GROW! GROW! GROW! and make even people work (whether we will be able to pay them is beside the point) anyways because QE is never going to end and interest rates will never rise and we will definitely make payments on everything instead of setting off a cataclysm of cascading defaults across a tangled mess of interlocking debt"

[btc-current-blog]

Rehypothecation in Cardano

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Rehypothecation in Cardano

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[immortal-elements]

Long post about market shit, yet more shady shit is going on!

This will be a long post, and I can’t fully take credit for what is written here. I’m posting it here to raise awareness, credit goes to u/WhatCanIMakeToday for making me aware of this.

So the SEC (securities and exchange commission) just gave the OCC (Options Clearing Corp.) the green light to “expand non-bank liquidity facility program”, as of 09-02-2022, (or 02-09-2022 for you brits).

The proposal  SR-OCC-2022-803 34-95327  can be read at that link.

 “As the sole clearing agency for standardized U.S. Securities options listed on National securities exchanges registered with the Commission (”listed options”), OCC is obligated to make certain payments. In the event of a Clearing Member default, OCC would be obligated to make payments, on time, related to that member’s clear transactions.”

That is the basic function of the OCC. Think of it like going to a casino, and the casino let’s you gamble with house money as long as they are sure you are good for it. If you make too many bad bets, then you end up owing the house whatever you lose. But, if you cannot afford to pay off your bad bets (default), then the house pays out the winner and just eats the loss. Banks and funds that are members of the OCC and use it as a clearing house are at risk of default, and this proposal is seeking to expand how the OCC can pay off those bad bets. “For example, OCC would only enter into confirmations with an institutional investor that is not a Clearing Member or affiliated bank, such as pension funds or insurance companies, in order to allow OCC to access stable and reliable sources of funding without increasing the concentration of it’s exposure to counterparties that are affiliated banks, broker/dealers, or futures commissions merchants. In addition, any such institutional investor is obligated to enter repurchase transactions even if OCC experiences a material adverse change, funds must be made avaailable to OCC within 1 hour of OCC’s delivering eligible securities, and the institutional investor is not permitted to rehypothecate purchased securities.” This proposal is specifically for the OCC to enter into repurchase agreements with institutional investors, SUCH AS PENSION FUNDS or insurance companies, that are not Clearing Members!

Earlier this year, CEO of the hedge fund Citadel Securities did an interview about the “meme stock phenomena” [x]. For those who may not know, the meme stock phenomenon happened because retail investors (your average everyman) called these banks on a bad bet, (some might even say illegal and aggressive naked short selling), and bought up a lot of shares in Gamestop. Now, buying and holding shares is literally the oldest trick in the book, notice how he tries to reframe it as retail investors “wiping out teacher’s pension funds?” Why would buying and holding a stock wipe out teacher’s pension funds unless the firms managing those funds were gambling them away?

So let’s recap. In the event of an OCC member default, the obligations of that member are transferred to the OCC, and the OCC foots the bill. The OCC, however, is anticipating having to deal with such massive obligations that it feels the need to seek additional funding. In order to acquire that funding, the OCC is looking to enter repurchase agreements with non-OCC institutional investors, such as pension funds. Additionally these funds are “obligated to enter repurchase transactions even if the OCC experiences a material change���, i.e, even if the OCC is screwed, these repurchase transactions MUST be made. “Funds must be made available to OCC within 60 minutes of OCC’s delivering eligible securities”.

Remember what happened in 2008? How Mortgage Backed Securities were incorrectly rated, and these securities (which were dog shit wrapped in cat shit) were rated as being very steady and good investments? And that caused the whole huge market crash? “ Liquidity Facility program would continue to promote the reduction of risks to OCC, its Clearing Members and the options market in general because it would allow OCC to obtain short-term funds from the Non-Bank Liquidity Facility to address liquidity demands arising out of the default or suspension of a Clearing Member, in anticipation of a potential default or suspension of Clearing Members, the insolvency of a bank, another securities or commodities clearing organization, or a counterparty with which OCC has invested Clearing Member funds, or the failure of such a bank clearing organization, or investment counterparty to meet an obligation to OCC when due. 

The Non-Bank Liquidity Facility helps OCC minimize losses in the event of a default, suspension, insolvency, or failure to achieve daily settlement, by allowing it to obtain funds from sources not connected to OCC’s Clearing Members on extremely short notice to ensure clearance and settlement of transactions in options and other contracts without interruption.”

That looks like some fancy words for “Shifting bags of shit from the OCC to their non-bank liquidity facility in the event that shit hits the fan”, and the goal of this proposal is to shift losses AWAY from OCC clearing members!

So, how much money does the OCC need? In 2020, the OCC was allowed to get up to $1bil from their non-bank liquidity facility, (which is again, secured from multiple pension funds). Things haven’t gone well since then, as evidenced by the fact that we are now in a recession (2 consecutive quarters of negative GDP is the definition of a recession, we’ve had that, yet the FED refuses to acknowledge that we are in a recession). The OCC upped their cash clearing fund to $5bil, and they are asking for permission to increase the amount they can pull from their Non-bank liquidity facility. Their analysis underlying their recommendation was delivered to the SEC in a confidential exhibit, SR-OCC-2022-803. Despite not being able to view the analysis, we do see the OCC requesting an additional $2.5bil through the Non-Bank Liquidity Facility despite having $15.8bil (current total Clearing Fund requirement of which $5.5 billion are govmt securities deposited by clearing members) and $8bil in Base Liquidity Reserves. The OCC is saying their $23.8 BILLION may not be enough for when shit hits the fan, so the OCC is asking for an additional $2.5 billion to come from pension funds FIRST, before they put the other clearing member’s money at risk. 

But Wait! Providing advance notice is a pain because people might find out, and it’s so much easier to do business when you don’t need to ask for permission, so OCC proposing to remove the $1bil cap on the Non-Bank Liquidity Facility would also mean removing one of the cases where the OCC needs to file for advance notice. In other words, the OCC is asking “can we please get access to more pension fund money without needing to ask for it? We swear this proposed change is just like how we were doing business before because the amount we’re using from pension funds won’t be less than $1bil. We got risk under control, trust me bro!”

Again, to clarify, the OCC is requesting permission to do an additional $2.5bil AND also remove the cap so that the OCC can tap the pension funds for as much as they want without asking again. The second part is probably the most dangerous one, as it could theoretically give them access to the $35 Trillion in pension funds (as of 2020). A good sized chunk of that $35 trillion in pension funds is government backed by state and local government, meaning that taxpayers ultimately foot that bill.

The whole shit icing on the cake is that the SEC said  "The Commission has received comments regarding the changes proposed in the Advance Notice. The Commission is hereby providing notice of no objection to the Advance Notice." Which is fancy government speak for “Thank you for your comments and concerns, we don’t care”.

So what this means is that banks know they are fucked, they know that they made a bad bet and are too overleveraged to get out, so the most they can do is try and shift the liabilities around. They are trying to destroy pension funds so they can break even, because I am sure that a rallying cry of “Save the Teacher’s Pension funds!” would go over a lot better than “bail the banks out again!” Hell, as far as I know, that money is already gone, and this is just to cover their asses when the curtain drops. In addition, let’s look at some of the other bullshit rules that are implemented, (I can dig up sources for these in a bit if needed). Inverse Single Stock ETFs. Let’s break that down bit by bit, an ETF is a bundle of stocks and securities designed to provide steady and reliable growth over a long period of time. The value of the ETF is determined by weighted averages of all the securities that make up the ETF. Most investment funds will use ETFs, most pension plans are comprised of ETFs. A Single Stock ETF is exactly what it sounds like. A “bundle” of stocks containing a single stock. Realistically the only reason these exist is as a loophole in insider trading. An inverse single stock ETF, however, is betting against that single stock. If the underlying stock value goes down, the ETF value goes up, and vice versa. Problem is, lowest a stock value can go down is to $0. There is no limit on how high a stock price can climb, especially in the event of a short squeeze, (look at V&W short squeeze, which coincided with the 2008 market crash. Hmmm... wonder why), ergo this Inverse single stock ETF could theoretically pose infinite losses. Within a month of Inverse Single Stock ETFs being allowed, there were already a slew of inverse meme stock ETFs, some of which were single stock. Now, if I had to bet, I would say that in addition to the OCC’s plan to gobble up non-OCC pension funds, that this is the other vehicle through which they will spread out that obligation. They will package those ETFs in with other securities, rate them as Super Totally Safe Investments (trust me bro), and pass them off to a bunch of unwitting pension fund managers. Hell, these may even be the “eligible securities” the OCC would deliver as part of the repurchase agreement.

[bitcofun]

Celsius Network CEO Alex Mashinsky took control of the company's trading technique in January, Financial Times has actually reported. Celsius experienced extensively advertised insolvency problems as crypto costs crashed then declared Chapter 11 personal bankruptcy in July. Mashinsky Allegedly Traded Celsius Funds Alex Mashinsky stepped in on Celsius Network's trading choices in the months leading up to the company's collapse, a Tuesday Financial Times report has actually declared. According to the report, the Celsius CEO took reign over the company's trading method in January ahead of a Federal Reserve conference. According to unnamed sources knowledgeable about the matter, Mashinsky feared that crypto rates would suffer if the Fed treked rate of interest and chose to overthrow senior traders with years of experience. In one circumstances, the sources declared, he bought the crypto loan provider's trading group to offer numerous countless dollars worth of Bitcoin, and the company redeemed the funds the list below day at a loss. The report declares that Celsius lost $50 million through trading in January alone. The sources likewise stated that Mashinsky had several clashes with the company's previous primary financial investment officer Frank van Etten over trading choices and his intervention in the company's trading technique. Van Etten left Celsius in February. The Financial Times report follows months of turbulence at Celsius. In June, it emerged that the crypto loan provider was dealing with an insolvency crisis when it stopped client withdrawals. The company applied for Chapter 11 insolvency a month later on, exposing a $1.2 billion hole in its balance sheet originating from lost bets on Terra, Lido's staked-Ethereum token, Grayscale's GBTC fund, and loans to the now-defunct hedge fund Three Arrows Capital. In the fallout from Celsius' implosion, the company has actually dealt with a variety of debates with Mashinsky at the center of the drama. One previous executive declared that the company controlled the rate of its CEL token prior to its collapse, and the company was slammed when its healing strategy exposed that it was expecting a booming market to honor its financial obligations. According to Celsius' regards to usage, customers offered the company the right "to utilize, offer, promise, and rehypothecate" their properties when they transferred their funds. This indicates that those consumers might never ever see their funds once again. Disclosure: At the time of composing, the author of this piece owned ETH and a number of other cryptocurrencies. The info on or accessed through this site is gotten from independent sources our company believe to be precise and dependable, however Decentral Media, Inc. makes no representation or guarantee regarding the timeliness, efficiency, or precision of any info on or accessed through this site. Decentral Media, Inc. is not a financial investment consultant. We do not offer individualized financial investment guidance or other monetary suggestions. The details on this site undergoes alter without notification. Some or all of the details on this site might end up being out-of-date, or it might be or end up being insufficient or incorrect. We may, however are not bound to, upgrade any out-of-date, insufficient, or unreliable details. You need to never ever make a financial investment choice on an ICO, IEO, or other financial investment based upon the details on this site, and you need to never ever analyze or otherwise depend on any of the info on this site as financial investment suggestions. We highly advise that you seek advice from a certified financial investment consultant or other competent monetary expert if you are looking for financial investment guidance on an ICO, IEO, or other financial investment. We do decline payment in any kind for evaluating or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or products. See

complete conditions Celsius Was "Absolutely Trading CEL to Manipulate the Price": Form ... Celsius' previous monetary criminal offenses compliance director informed CNBC that the beleaguered lending institution was handling a series of internal failures years prior to it declared Chapter 11 personal bankruptcy. Celsius Faces ... Celsius Is Hoping for a Bull Market to Repay Customers News Jul. 19, 2022 During a late Monday insolvency hearing, Celsius' legal representative Patrick Nash informed the judge that "all is not lost," as the company is go for a reorganization instead of a liquidation ... News Jul. 14, 2022 Celsius revealed it had actually declared Chapter 11 personal bankruptcy early Wednesday. Numerous Celsius consumers have actually required to social networks to share their problems following the update. Celsius Files for Chapter ... Read More

[cryptonews94]

Speaking to Fortune following news Bakkt had hired former Coinbase vice president Adam White as COO, Kelly Loeffler forecast a repeat performance of ICE’s market-making moves last decade. Bakkt,  set for launch next month, has generated considerable interest since its announcement in late July. “The digital market is fragmented like the energy market in the early 2000s. ICE was the pioneer attracting more and more institutions to trade energy, which is what created today’s liquid market,” she told the publication. “We’re about to see a revolution on the same scale in cryptocurrencies.” Bakkt intends to avoid unpopular leveraged and non-custodial trading products for its increasingly broad institutional investor base, alleviating some concerns from cryptocurrency industry figures that a lack of physical interaction with Bitcoin $6581.28 -0.05%itself would ultimately damage its profile and success. Highlighting a suite of features unveiled in a blog post on Monday, Loeffler, added, provided additional reassurance. “These points should also eliminate misconceptions regarding commingling, leverage and rehypothecation, which are not features of our offering,” she wrote. WHITE EYES TECHNICAL FUNDAMENTALS Coinbase itself is also actively seeking ways to attract the institutional market, launching its Coinbase Pro platform earlier this year and confirming it would build out its functions with new crypto-assets going forward. ICE will now compete with offerings from Wall Street stalwarts Morgan Stanley, Citigroup and Goldman Sachs, all of which have said they intend to become active in the trading sector. White meanwhile repeated the commonly-heard narrative about the space in its current form: that institutional investor interest is real, but many are biding their time waiting for suitable support. • [Follow: @cryptonews94 ] • #coin #coinmarketcap #cryptocurrency #crypto #cryptonews94 #news #post #follow #altcoins #altcoin #cash #money #bitcoin #btc #bakkt #ceo #blockchain #blockchaintechnology #technology https://www.instagram.com/p/BpBmXOQAgkp/?utm_source=ig_tumblr_share&igshid=vpsuvhyum51p

[mood-report]

Current Narratives Have This In Common

“World domination. Same old dream.” ~Ian Fleming

VACCINE MANDATES -- population control

CLIMATE CHANGE -- global control

CARBON OFFSETS -- commercial control

EV/AUTONOMOUS DRIVING -- crowd control

ESG -- social control

AI/METAVERSE -- mind control

CRYPTOCURRENCY -- financial control

EXPONENTIAL AGE -- speculation control

INTERNET/CLOUD COMPUTING -- information control

SOCIAL MEDIA -- communication control

ELECTRONIC VOTING MACHINES -- political control

DIGITAL TRANSFORMATION -- total control

I am increasingly viewing these narratives as part of a broader agenda.

Just like in commodity markets where the best cure for high prices is high prices, if you want to know someone’s true intentions, the counter-intuitive thing is to “give ‘em enough rope” so that their overconfidence causes them to step too far. 

Using the global pandemic as cover, the overlords have stepped wayy too far.

It’s therefore encouraging to see ordinary people in every corner of the globe soundly rejecting authoritarian overreach.

So, how do we trade this mess?

I’ve long thought the best answer, dripping with the wisdom of history, comes from famed investor Jim Rogers:

In all my years in investing, there’s one rule I’ve prized beyond every other. Always bet against central banks and with the real world. Central banks and governments always try to maintain artificial levels, high or low, whether of a currency, a metal, wool, whatever. Usually these prices are absurd, and the market knows they’re absurd. When a central bank is defending something, the smart investor always goes the other way. It may take a while, but I promise you you’ll come out ahead. It’s a golden rule of investing. Violent movement happens whenever a price has been kept high or low.

~Jim Rogers, Investment Biker

Central banks have kept asset prices high for decades.  I believe their luck is running out. 

I therefore do not agree that we are entering the Exponential Age made popular by Cathy Wood and Raoul Pal. I believe we’ve already experienced most of it.

I believe the real world, as Rogers calls it, is getting ready to return, and that the credit cycle will triumph over Metcalf’s Law. 

Fractional-reserve banking, Zero Interest Rate Policy, collateral rehypothecation, collateral transformation, margin, leverage, liquidity, prime brokerage, all this has enabled decades of exponential gains in global asset prices.

One might even argue that it has also encouraged unbridled expansion of power and control by governments and elites. 

The social mood aspects here are fascinating. If someone would have predicted years ago that people would voluntarily participate in the surveillance society, I would have said No Way. Yet here they are embracing every aspect of it. So perhaps exponential gains have produced (or have been produced by) exponentially high social mood.

Gum up the works with an interest rate shock, and these wonderfully benevolent network effects and social mood extremes can swing in reverse, causing what rock ‘n’ roll poet Jim Carroll called wicked gravity.

Should the real world return via the credit cycle, violent movement will happen.

How would I trade it? Long puts sprinkled across the entire financial asset spectrum. Long gold and silver. Long VIX calls and call ladders. Long cash in a variety of currencies with leveraged FX pairs as trading positions. And I would keep as low a profile as possible.

I would also treat Bitcoin, Ethereum, and the 10,000 other crypto currencies as Dot-Com rejects for at least a year or two, as I don’t think computer code would be considered kindly as real world intrinsic value.

As with wampum, only time will tell.