Death to Forex

The Forex market is dead and dying, in parallel with the US economy; which is fitting, considering the US is still the world reserve currency.

Significant harbingers that have changed the Forex market forever:

For those readers who believe this is all part of a ‘conspiracy’ to issue in a one world currency, read the following Kissinger transcript post Nixon shock (in part):

 Secretary Kissinger: But if they ask what they’re doing—let me just say economics is not my forte. But my understanding of this proposal would be that they—by opening it up to other countries, they’re in effect putting gold back into the system at a higher price.
Mr. Enders: Correct.
Secretary Kissinger: Now, that’s what we have consistently opposed.
Mr. Enders: Yes, we have. You have convertibility if they—
Secretary Kissinger: Yes.
Mr. Enders: Both parties have to agree to this. But it slides towards and would result, within two or three years, in putting gold back into the centerpiece of the system—one. Two—at a much higher price. Three—at a price that could be determined by a few central bankers in deals among themselves.
So, in effect, I think what you’ve got here is you’ve got a small group of bankers getting together to obtain a money printing machine for themselves. They would determine the value of their reserves in a very small group.
There are two things wrong with this.
Secretary Kissinger: And we would be on the outside.
Mr. Enders: We could join this too, but there are only very few countries in the world that hold large amounts of gold—United States and Continentals being most of them. The LDC’s and most of the other countries—to include Japan—have relatively small amounts of gold. So it would be highly inflationary, on the one hand—and, on the other hand, a very inequitable means of increasing reserves.
Secretary Kissinger: Why did the Germans agree to it?
Mr. Enders: The Germans agreed to it, we’ve been told, on the basis that it would be discussed with the United States—conditional on United States approval.

 

Secretary Kissinger: They would be penalized for having held dollars.

These are not very sophistocated guys, according to the transcript (Conspiracy Theorists are encouraged to read the FULL transcript), but it does give credibility to the rumor that Arthur Laffer explained economic policy to Dick Cheney and Donald Rumsfeld in a bar by drawing a half circle on a napkin.

So, how does the Death of Forex have an impact on my portoflio?  How is this information valuable to me, and not just for Fortune Cookies?

1. If you are considering participating in Forex, or are already doing so, and you are a US Citizen or live in the US, consider setting up something outside of US, legally.

2. If you are a portfolio manager, hedge yourself from a potential collapse of your domestic currency.  There are plenty of high quality articles on Zero Hedge that outline this, just remember that if the US Dollar collapses it may be orchestrated with the ECB, now being run by an American trained MIT alumni, so if the USD goes down it doesn’t mean exactly that the EUR will go up.

3. If you are investing internationally, be sure to hedge your Forex position with forwards, options, and avoid huge bank spreads that can be as high as 14% of your total transaction (up to 700 pips per side).

4. Unless you are forced by circumstance, or are extremely intelligent, experienced, and sophistocated, DO NOT INVEST IN FOREX, especially with 3rd party ‘managers’ that boast consistent usually unrealistic returns.

5. Stay out of cash as much as possible, a big Forex market event can create hyperinflation, or even black market rates as we’ve seen in Argentina and India, or make the use of currencies in certain venues difficult or prohibited.

A final thought, about the biggest players in the world’s largest market by volume.  Germany is the economic backbone of the Eurozone and thus the Euro.  Euro is currently the only alternative to the US Dollar, and US Bond market.  Here’s a passage about the banking culture in Germany, with their most important FX banks:

 The Commerzbank Tower is 53 stories high and unusually shaped: it looks like a giant throne. The top of the building, the arms of the throne, looks more decorative than useful. The interesting thing, said a friend, who visited often, was a room at the top, peering down over Frankfurt. It was a men’s bathroom. Commerzbank executives had taken him up to the top to show him how, in full view of the world below, he could urinate on Deutsche Bank. And if he sat in the stall with the door open …

Urinals pissing on DB

 

Just a thought, considering the current cases against the FX trading banks, maybe it would have been better, in hindsight, to instead invest in some dynamic model for FX.  But every organization reaches it’s ultimate level of optimization, in the case of this Forex environment, it involves the excretion of one of the few products we can all agree that Germany does well (beer), and is combined with the alleged manipulation (cheating) of FX dealers.   It paints a sad and surreal death to the modern Forex market.

http://www.zerohedge.com/contributed/2014-01-19/death-forex

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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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