ALERT: Euro impending collapse, but don’t worry – FX is simple

Forex is the most simple market in the world.  As we explain in our book Splitting Pennies – Forex is the underpinning of the world’s financial system.  Although it is also the least understood market, there’s nothing ‘sophisticated’ about FX.  Take a dollar, exchange it for a euro.  The rate changes – exchange it back.  Simple!  Trading money.
There is no ‘2 day settlement’ in Forex, a custodian, there’s no Reg D, no Reg NMS – there’s no HFT front running your orders, there’s no ‘order types’ – there’s no exchange rules (because there’s no exchange).  Actually, when you strip away the complexities of most markets like securities, bonds, real estate, commodities, FX is many times over the most simple market.
Understandably, the securities market is the most widely promoted to investors because of the potential for making high returns from participating in corporate ownership (and thus ownership of profits).  But securities are a derivative.  Investors don’t really own the companies – they own the shares.  And actually to be technical, they don’t own the shares too – they are controlled by a huge custodian DTCC.  The securities, bond, and futures markets are the core of modern capitalism.  But they aren’t a necessity, they are an abstration and thus – have complex rules.  Or to say differently – the banking system needs the real economy – the real economy doesn’t need the banking system.
How do these abstract markets drive inflation?  Here’s how.  QE doesn’t directly go into the economy.  However, by keeping interest rates low, both in real terms and buy the Fed’s various asset purchase programs – it means money has never been cheaper.  With cheap money, it’s easy for i-banks to borrow at zero or near zero rates, invest in any index at 2x or 4x leverage and get their 20% – 40% per year with virtually no risk (that is, no seen risk – there is huge tail risk that one day the market will collapse, which it will for sure, like the big bubble that it is.)
The ‘stock markets’ have become so intertwined with the real economy, they have made themselves a necessity.  Like a virus that has taken over a host, now it would be practically impossible to kill the market without affecting the overall economy.  All of this has become so complicated, with so many involved parties – it has become a giant spider web.
On the topic of the Fed and their direct stock market alleged manipulation, consider the following.  The Fed is owned by the member banks.  The Fed gives it’s QE to the member banks, almost all of which are now publicly traded companies.  Here’s where the paper trail begins for the ‘conspiracy crowd’ about the Fed being owned by nefarious 13 families:  Public disclosure rules mean that anyone can lookup what’s going on at Bank of America (BAC).  Hiding significant information at public companies is very difficult, and becoming more and more difficult with the digitization of records, communications, and basically all aspects of business, which by the way is all ‘doubled’ and recorded on a network level by ATT (T) another public company – and stored in an NSA database.  America Inc. is technically a corporation and the states such as South Carolina are more like countries (hence the name ‘states’) – although you can’t buy and sell shares of America Inc. you sort of can, it’s called immigration – citizens of USA are sort of like shareholders.  And there’s a short side too, record numbers of US Citizens are giving up their citizenship.  So, does the Fed manipulate the stock market?  It’s not a fair question, because Fed ownership and operations are completely intertwined with the stock market.  During the time when the Fed was created, America was just passing the wildcat banking era, where there were thousands of private banks.  Do not confuse ‘private banking’ with a ‘privately owned bank’ – private banking is discreet services for rich people who may want to hide their assets or not let others know how rich they are.  Privately owned banks are nearly non-existent in the USA today, for a number of reasons – mostly caused by generational wealth transfer and generally a trend towards the institutionalization of assets.  What does that mean?  It means that 100 years ago, things were in YOUR name, if you were JP Morgan or Andrew Carnegie.  Today, it’s all in tax havens, the Carnegie foundation, trust funds, and almost nothing is in YOUR name.  That includes banks, which are mostly publicly traded and thus, publicly owned.  The individual has become obsolete.
So all these tendencies, make the market so complicated it’s even confusing to describe.
All this drama created by Nixon is really in the eye of the beholder – this idea of ‘economic collapse’ is a fantasy promulgated by religious types in Armageddon style packaging, as if the Earth will explode and burn in a big singularity event.  The reality is that ‘economic collapse’ is happening every day, simply that only some of us notice it.
Forex simply gauges the tides as they ebb and flow, EUR/USD rate changes, but not really that much.  Brexit gave us a 9% move which is huge for FX but not really statistically significant in the grand scheme of things.
Take a look at EUR/GBP for last 10 years:
forex
This is a monthly chart.  You can see why FX is not interesting for the general public.  But it takes a lot less time to understand FX than the stock markets.  FX is simple.
As we head into a potential complete meltdown of the Euro, and tomorrow’s NFP, we’re heading into an event that may change the face of FX forever.
Dear Trader,
With the upcoming second round of the French Presidential Election this weekend, we require that your account balance plus any open profit or loss covers at least 3% of the total notional exposure across all EUR crosses and EUR Equity Index CFDs by 4pm (UK time) Friday, 5th May 2017. Where the cover is lower than 3%, we may reduce your positions to increase the cover on your account before the market close.
Exit polls will be released prior to the market open on Sunday, 7th May 2017 and there is increased risk of wide spreads and large price gaps on the market open and through the night. Please ensure you are comfortable with the exposure on your open positions leading into the market close on Friday, 5th May 2017.
If you have any queries, please do not hesitate to contact Client Services by calling +44 20 3192 XXXX or emailing XXXXXX.
FX and CFDs are leveraged products that can result in losses exceeding your deposit. They are not suitable for everyone so please ensure you fully understand the risks involved.
Kind regards
LMAX Exchange
Client Services Team

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We've been closely watching the Crypto Currency Market if you can call it that, with all the fake data, fraud, and related problems.  One thing stands out - it's not so different than FX, commodities, futures, or stocks.  Market dyn...

Bitcoin and other cryptocurrencies flash-crashed Saturday night, one day after the US Commodity Future Trading Commission (CFTC) sent subpoenas four cryptocurrency exchanges in an ongoing probe into bitcoin manipulation that began in late July - following the launch of bitcoin futures on the CME, according to the Wall Street Journal
CME’s bitcoin futures derive their final value from prices at four bitcoin exchangesBitstamp, Coinbase, itBit and KrakenManipulative trading in those markets could skew the price of bitcoin futures that the government directly regulates.
In delay reaction, Bitcoin fell as much as $433 or 5.6% in Saturday night trading, with some noting that the flash crash happened shortly after a 90th ranked crypto exchange, Coinrail, had suffered a "cyber intrusion", and was likely the more relevant catalyst for the crypto price drop.
While major Cryptocurrencies were down from 4.5 - 5.5%, Bitcoin Cash dropped over 8.4%. 
The CTFC subpoenas were issued after several of the exchanges refused to voluntarily share trading data with the CME after being asked last December. Of note, the CFTC regulates the CTC. 
According to the WSJ, the CME, which launched bitcoin futures in December, asked the four exchanges to share reams of trading data after its first contract settled in January, people familiar with the matter said. But several of the exchanges declined to comply, arguing the request was intrusive. The exchanges ultimately provided some data, but only after CME limited its request to a few hours of activity, instead of a full day, and restricted to a few market participants, the people added.
What is curious, is that if there was indeed manipulation since the launch of bitcoin futures, it was to the downside, as the price of cryptos peaked around the time the crypto futures were launched, and are down well over 50% in the 6 months since.
Coinbase in particular has been under the watch government regulators. On February 23, Coinbase sent an official notice to around 13,000 customers to notify them they were legally required to turn over their information to the IRS
The IRS had initially asked Coinbase in July 2017 to hand over even more detailed information on every one of its then over 500,000 users in an attempt catch those cheating on their taxes. However, another court order in Nov. 2017 reduced this number to around 14,000 “high-transacting” users, which the platform now reports as 13,000, in what Coinbase calls a “partial, but still significant, victory for Coinbase and its customers.”
Coinbase told the around 13,000 affected customers that the company would be providing their taxpayer ID, name, birth date, address, and historical transaction records from 2013-2015 to the IRS within 21 days. Coinbase’s letter to these customers encourages them “to seek legal advice from an attorney promptly” if they have any questions. Their website also states that concerns may also be addressed on Coinbase’s Taxes FAQ. The ongoing legal battle between Coinbase and the US government dates back to November, 2016, when the IRS filed a “John Doe summons” in the United States District Court for the Northern District of California.
On Feb. 13, personal finance service Credit Karma released data showing that only 0.04 percent of their customers had reported cryptocurrencies on their federal tax returns. 
And in April, former New York Attorney General, Eric "we could rarely have sex without him beating me" Schneiderman, launched a probe of 13 major cryptocurrency exchanges according to the Wall Street Journal - claiming that investors dealing in the fast-growing markets often don’t have the basic facts needed to protect themselves.
Former AG Schneiderman’s office said the program, called Virtual Markets Integrity Initiative,  is part of its responsibility to protect consumers and ensure the integrity of financial markets, and its goal is to ensure that investors can have a better understanding of the risks and protections afforded them on these sites.
CFTC Commissioner: Crypto is a "modern miracle"
While the CFTC, IRS and New York Attorney General's office are all cracking down on cryptocurrency exchanges, it seems to all be part of the government's embrace of virtual currencies.  Last week CFTC Commissioner Rostin Benham called cryptocurrencies a "modern miracleat the Blockchain For Impact Summit held at the UN in New York last week. 
But virtual currencies may – will – become part of the economic practices of any country, anywhere.  Let me repeat that:  these currencies are not going away and they will proliferate to every economy and every part of the planet.  Some places, small economies, may become dependent on virtual assets for survival.  And, these currencies will be outside traditional monetary intermediaries, like government, banks, investors, ministries, or international organizations.
We are witnessing a technological revolution.  Perhaps we are witnessing a modern miracle. -Rostin Benham
Rostin hinted at the upcoming legal action against the exchanges during his speech:
Under the CEA and Commission regulations and related guidance, exchanges have the responsibility to ensure that their Bitcoin futures products and their cash-settlement process are not readily susceptible to manipulation and the entity has sufficient capital to protect itself.  The CFTC has the authority to ensure compliance. In addition, the CFTC has legal authority over virtual currency derivatives in support of anti-fraud and manipulation including enforcement authority in the underlying markets.

Meanwhile, the official Bitcoin website removed references to Coinbase, Blockchain.com and Bitpay, according to Crypto News - only one of which, Coinbase, was subpoenaed. 
http://Bitcoin.org  just removed/censored the 2 largest US Bitcoin companies (@BitPay Payment processing and @coinbase Bitcoin Exchange). It’s a good move: Bitcoin Core is obviously no longer Bitcoin, and should ideally be removed from both @BitPay and @coinbase too.

The CFTC officially recognized bitcoin as a commodity in September of 2015 when it went after Coinflip for operating a platform for trading bitcoin options without the proper authorization. Since the agency effectively asserted its dominance over the bitcoin market with that decision, this is the first time it has given its blessing to an bitcoin options trading platform. Expect a burst of institutional trading activity to follow - especially since they approved institutional options trading in July
This post sponsored by Total Cryptos @ www.totalcryptos.com  

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