[7 min read]  James
Woodburn |
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Bit of a break in proceedings today, publisher James Woodburn here. I just wanted to give Rum Rebellion readers some advance notice of something big happening for you later this week. You may well have noticed in recent weeks a friendly quarrel between Greg and Vern about cryptos. Vern thinks they’re a ‘cult’ reminiscent of the dotcom era. Greg used to think that…but now he’s not so sure… I encourage all our editors at Port Phillip Publishing to have their own views and to argue for them passionately. I’m just not quite used to such open warfare inside a single e-letter. It’s great! They say there’s no one more passionate than a recent convert. And if you fall into Greg’s camp, you’re going to love what we have in store later this week. This is Sam Kim of the Umbrella Network: ‘There is something good growing among us. In the coming years, it will remove a layer of intermediaries that controls our most precious assets, governs our access to our own data and charges us for the privilege in a variety of ways. This group of technologies will change the way we bank, transact, borrow and save. They will let us interact with each other directly and trustlessly. Collectively, these applications are known as decentralized finance, or DeFi. And if you haven’t heard of them yet, you will. ‘When most people think of blockchain technology, they equate it with Bitcoin. But a few years ago, with the advent of Ethereum and smart contracts came the ability to program the blockchain to perform actions far more complex and potentially far more beneficial than just sending and receiving crypto funds. DeFi projects are visceral examples of this transformation.’
Sometimes a new trend bursts forth so quickly, and so powerfully, you’re insane to ignore it. Like Vern…and, until recently, like Greg, you may well have been wary of cryptocurrencies. You perhaps equate all these insane price rises and frothy mainstream media coverage with a bubble. And it’s partly true. There probably is some irrational, speculative thinking driving crypto prices to record after record. But as the quote above says, focusing only the digital currency aspect misses all the wider ramifications of the current transformation taking place in finance. Take the exponentially exploding
world of ‘crypto income’… If you’re sick of the lack of options there are right now when it comes to generating income from your savings, DeFi is now putting some rather interesting options on the table for you. The roots of decentralised finance (DeFi) have spent the last few years bedding in. What you’re seeing right now is them breaking the surface into the mainstream. And new ways for income-strapped savers to get yield — away from the banks and the stock market — is a huge and growing part of this. These strategies make it possible to get income from a cryptocurrency as an alternative to getting interest on your cash, or dividends from your shares. Things are moving here at a crazy pace, even compared to a year ago. NOT JUST FOR CRYPTO-MAXIMALISTS If you think earning an income this way is just for 22-year-olds who trade Cardano on their phone in between Pilates session which they’ve paid for in bitcoin…you’re wrong. Anyone can do this now. And many people of all ages and levels of experience are. As Entrepreneur put it recently: ‘The onset of DeFi has been beneficial to both the crypto maximalists as well as the traditional investors looking for yield.’
As Alex Wearn, CEO of decentralised exchange IDEX, says: ‘There are a lot of ways to earn interest in cryptocurrency including “bitcoin rewards” credit cards, crypto lending services, and DeFi (decentralised finance) yield farming. ‘Some of these require little to no crypto knowledge (bitcoin credit card rewards), while others require deep technical knowledge (yield farming).’
If you’ve never considered earning an income from cryptocurrencies, now is the time to get a good understanding of it. Through this week and next, we’re going to start giving you some tips on the best methods…as well as the risks involved at these exciting but early stages of the crypto-income boom… A new way to get income in a low interest rate world Hang on, though. Aren’t bank interest rates going to go up soon anyway? If you’ve got a few hundred grand saved, isn’t there a chance you’ll be able to find much better term deposit rates on it later this year or next year? Recently there has been a bit of talk in the news about rising bond yields and inflation. And the possibility of interest rates rising. Don’t believe it. If you’ve been reading The Rum Rebellion this year, you’ll know that Greg did a very popular presentation called ‘Life at Zero’. In it he outlined a solid case for interest rates staying incredibly low for years to come. ‘The point is that zero, or near zero, cash rates are here to stay,’ says Greg. ‘And when inflation does eventually pick up in the years ahead, the job of the central banker will be to keep nominal rates below the rate of inflation, meaning REAL rates stay negative. ‘That’s because the only way to overcome such massive debt levels is to hold real interest rates in negative territory for as long as possible. So you’re going to be stuck with “life at zero” for a long time to come.’
The old guard are trying everything to keep the old, centralised financial game alive. That means low interest on your savings and investments, if you keep playing by the old game rules. And that’s where these new vehicles for income are stepping in… Due to a high volume of interest we’ve decided to devote a significant amount of resources to getting you up to speed with these vehicles. And a whole lot of other opportunities springing up in this brave new world of DeFi. Stay tuned… Cheers, James Woodburn,
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Goodbye to a Good Old-Fashioned Con man
Bill Bonner A moment of silence, please. Poor Bernie Madoff died in prison this week. He had tried to be a good husband and father, and a good provider — to a wife who spent US$57,000 per month on the company credit card. He was a prominent philanthropist in New York…and an important donor to Democratic party candidates. He was convicted of defrauding investors in a ‘ponzi’ scheme. At the time of his trial, he had taken in some US$36 billion from investors, of which about half was ‘missing’. Half of his investors had made money from the scheme. The other half had lost it. But after 11 years of lawsuits, the losers had managed to scrape back a further US$14 billion, reducing the total loss to only US$4 billion. If those numbers are right, investors got back 78% of their money. And here we offer a prediction: After the next blow up, many investors will wish they had left their money with Madoff. Simple scam There are scams and there are scams. Bernie Madoff’s flimflam was simple. He took money from investors. He gave them a good return — between 10% and 12% annually. Not too much and not too little. But paltry compared to today’s hot-shot gambles. (After all, since Madoff went to prison, the S&P 500 is up more than 400%. Tesla (TSLA) is up 184 times. Bitcoin has gone from 8 cents to over US$60,000. If he’d only been able to hold on…and buy cryptos!) But investors were happy. Madoff was happy. His wife was happy. And it worked, as long as the money coming in was greater than the money going out. Alas, in the downturn of 2008, the money stopped coming in. The scam was exposed. Madoff was not ‘investing’ at all; he was just taking money in and paying it out, skimming off a bit for himself in passing. Compared to cryptos, SPACs, the FAANGs, NFTs, and federal monetary policies, Madoff’s flimflam seems reasonably harmless. Some investors would do well from it; others, not so well.
And Madoff’s ‘take’ (shared with employees and the luckier investors) was probably no more than the returns of a common hedge fund or SPAC. Bigger scam Nor was the Madoff method particularly heinous. In fact, it differed from US financial policy only in detail…and scale. The scale of the crime, of course, is much, much greater for the feds — with the sums counted in the trillions, not billions. And the losses — from manipulated interest rates, deficits, money printing, political payoffs, and giveaways — will be thousands of times greater than those suffered by Madoff’s investors. Like Madoff, the feds claim to be ‘investing’. But there is no real hope of any economic return from their boondoggle programs. And unlike Madoff, who kept investors’ money carefully in major banks, the government spends…consumes…and wastes the money in its custody. Were taxpayers to ask for their money back today, they wouldn’t get 78%; they’d get nothing. And, like Madoff, the scam will continue as long as the cash keeps flowing. Real scam But the details are important, too; they put the feds’ crimes on a whole different level, and leave Madoff almost with a halo. Bernie Madoff was no saint. But he never forced anyone to give him money…never counterfeited money to pay his creditors, never tried to debase his clients’ money, and never falsified the whole financial world in order to keep his scam going. And he never caused a horrible inflation that will plague the whole nation, even innocent bystanders who never heard of him. As you recall from yesterday, the team led by Treasury Secretary Janet Yellen ran a number of ‘models’ and came to the conclusion that more money-printing would be no problem. They could add US$1.9 trillion of new spending to combat the COVID-19 malaise, and another US$2.3 trillion in infrastructure spending to give the patient a shot in the arm, and still have ‘manageable’ levels of inflation. If this infrastructure boondoggle is approved, it will bring the total stimmy spending — 2020 + 2021 — to more than US$7 trillion, almost twice the total spending by the entire federal government in 2016. These numbers would be alarming to any sane person. An honest man would be appalled. But imagine the envy and admiration in the heart of a conman! The feds force their marks to hand over as much money as they think they can get away with…and then, they print up more money — as much as they want — and give it out all over town. The press hails them as heroes. And their ‘models’ show them they can keep it up almost indefinitely. Regrets At least Madoff had regrets: ‘I have left a legacy of shame, as some of my victims have pointed out, to my family and my grandchildren. This is something I will live in for the rest of my life. I’m sorry.’
Yes, dear reader…there are some things it’s hard to back away from — shame, for example. Or inflation. The models notwithstanding. You may realise, at age 80, that you should have married that redhead from Indiana 50 years ago. But it is too late. You can’t back up. When you mix cement, you put the sand and the cement into a wheelbarrow. Then, when you add the water…the chemical process begins, whether you like it or not. There’s no point in having second thoughts. And when you pull the pin and release the grip on a hand grenade, you can’t change your mind. You better toss the thing or it will blow your foolish head off. Once the grift was underway, it was almost impossible for Madoff to stop it — even if he wanted to. He needed to bring in new money to keep paying off the old money. And he needed it to afford the style of life to which his family had become accustomed. Likewise, as the feds feed the system with newly printed fake money, more and more of the economy depends on it. More and more people want it. Politicians who oppose money printing and stimmy cheques are quickly escorted from the building. Those remaining cannot cut spending. They cannot stop printing. They can’t put the pin back in the grenade…they can’t stop the bomb from blowing up. RIP Bernie But that may be months…or even years…in the future. And by then, the noise and swirling debris will bury almost everyone in a cloud of forgetting…fingers of blame will point in every direction — the rich…the Republicans…the white supremacists. But the culprits will probably get away. In that sense, too, Bernie should be considered a paragon. He did his crime; he served his time. Bernie. We hardly knew ye. But yours was a good old-fashioned scam. RIP. Regards, Bill Bonner,
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