Crypto concerns are likely driving a lot of Trump “policy”

By Paul Krugman. I very much share his entirely well-grounded suspicions.

By now it’s obvious that Donald Trump suffers from CBS — Cowardly Bully Syndrome.

On Friday, Trump blasted China’s new export controls on rare earths, declaring them a “moral disgrace” which were “obviously a plan devised by them years ago.” And he threatened to impose 100 percent tariffs on China, on top of the already high existing tariffs.

Less than a day later he was groveling…

This was the largest one-day crash crypto has experienced so far. My question, however, is why the prospect of an intensified trade war caused a crypto crash…

The answer, I believe, has little to do with economics and everything to do with politics. These days crypto derives its value largely from the support of politicians and government officials — in particular, officials who can be bribed. As a result, at this point crypto is largely a Trump trade. And crypto fell because the backlash against the potential trade war threatened to weaken Trump politically. - The National Memo

The SEC has given crypto a bright green light, and that's bad

A facile, fraught, and above all just plain stupid decision.

Over the past several decades, there have been rapid and fundamental changes in the finance and banking sectors. The banking reforms of the New Deal, which endured up until about 1980 and provided a relative degree of banking and financial stability, were reversed by the neoliberal counterrevolution with an eye toward increasing profits and shredding social responsibility. A new book by world-renowned progressive economist Gerald Epstein, Busting the Bankers’ Club: Finance for the Rest of Us, shows us the result: a financial system dominated by megabanks and shadow financial institutions prone to instability and crises that at the same time rely on government bailouts.

The neoliberal financial system, controlled by what Epstein calls “The Bankers’ Club,” benefits exclusively powerful people and institutions, is linked to the growing inequality of wealth and income, and is a net drain to the U.S. economy. Nonetheless, bankers not only see themselves as “essential workers,” a view that Epstein shreds into pieces, but as former Goldman Sachs Chief Executive Lloyd Blankfein claimed, many think they do “God’s work.”

The latest development in the evolution of the modern financial system is the Securities and Exchange Commission’s approval of bitcoin exchange-traded funds last month, concluding a decade-long fight and marking a turning point for cryptocurrency. This may be a game changer for the global money system but could also very well lead us to another financial crisis. - Truthout

Regulators are preventing a crypto-fueled economic meltdown

I'd prefer to see the stuff just banned, already. But what's going on is righteous, especially if you think about what would be happening with right-wingers in charge.

The implosion of what’s been unmasked as a criminal enterprise at FTX has created a chain reaction, where lost faith, pullbacks on trading volume, and potentially similar schemes at FTX competitors are devastating the nascent asset class. It should reinforce the fact that the government’s success in keeping crypto out of the broader financial system was the most important regulatory action of the past decade. We rarely give enough credit to agencies that prevent something from happening; it’s hard to prove a negative, as they say. But if we manage to get out of this cycle without a recession, we will have the banking regulators, primarily Gary Gensler at the Securities and Exchange Commission, to thank...

Hedge funds that have done business with Binance are receiving subpoenas related to federal investigations around compliance with anti–money laundering laws. Meanwhile, the SEC, along with securities regulators in Texas, has filed objections to Binance’s acquisition of assets from a bankrupt lender named Voyager Digital.

Perhaps the most important move by the banking regulators did not involve a specific crypto firm or token. The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (in early January) issued a joint statement that essentially told large banks to rethink any inkling of holding crypto assets in their portfolios. After detailing the numerous risks from crypto—including fraud and scams, misrepresentations and poor risk management from crypto companies, high volatility, legal uncertainties, and the potential for digital versions of old-time bank runs—the regulators stated: “It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system.”

While the joint statement went on to say that banks aren’t legally prohibited or discouraged from providing any permitted services to customers, you didn’t have to read between the lines to get the regulators’ point. They don’t want to see major banks investing in a bunch of crypto at this point, and they will be watching closely any transactions of that type. “Issuing or holding as principal crypto-assets … is highly likely to be inconsistent with safe and sound banking practices,” the regulators wrote. - The American Prospect

Cryptocurrency needs to be throttled

Tightly regulated, at the very least. I've been waiting for a while to run across a really righteous rant about the stuff. Here it is.

But the story of cryptocurrency is about more than just a bunch of gullible people losing their shirts gambling with Monopoly money. Cryptocurrency mania is part of a the same social forces that created libertarianism, rising fascism, and Donald Trump.

It's all rooted in the overblown sense of entitlement held by a lot of Americans — especially white Americans, and especially male Americans. It leads them to believe they are above having to live with the same social contract that binds the rest of us. Millions of Americans have decided that they not only can, but should, cheat the system — even to the extent of having separate currency systems. The result is that social structures we all rely on are starting to get shaky and, in some cases, are already on the verge of collapse. - Salon