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US activity moderates, but Fed's balance sheet to grow sharply; China struggles with debt risk; China tells iron ore buyers to be restrained; G7 close to tax deal; UST 10yr at 1.61%; gold and oil firmer; NZ$1 = 72.2 USc; TWI-5 = 73.6

US activity moderates, but Fed's balance sheet to grow sharply; China struggles with debt risk; China tells iron ore buyers to be restrained; G7 close to tax deal; UST 10yr at 1.61%; gold and oil firmer; NZ$1 = 72.2 USc; TWI-5 = 73.6

Here's our summary of key economic events overnight that affect New Zealand with news of China's struggles to contain the impacts of excessive debt and high commodity prices.

But first in the US, the Chicago Fed's National Activity Index suggests that economic activity moderated in April from March. This is actually consistent with other April data like employment. But subsequent data suggests this Chicago Fed monitor will rise again when the May assessments are completed.

We regularly report on the size and growth of the US Fed's balance sheet. It has been rising slowly to about US$7.9 tln or just under 36% of US annual GDP. But new projections released by the New York Fed suggest it could rise to US$9 tln (or 41% of US GDP) by the end of next year, unless they change course and start tapering soon.

In China, corporate debt risks are rising forcing firms to enter into much shorter tenors to get their refinancing deals done. It is the world's second largest debt market, but is by far the largest as far as corporate debt maturing before the end of 2021. In fact, so much is maturing in the next seven months it matches all the maturities for both the US and EU combined for that period. Investors are getting nervous, and that is making the stress levels higher. Making matters worse are two trends; Chinese corporations are defaulting on local bonds at the fastest pace on record, and Beijing is trying to enforce commercial discipline on these debt markets by trying not to bail out investors when debt goes bad. But those Beijing mandarins will need steely nerves to thread their way past investors who can see what is unfolding. In addition, its SOE bad bank Haurong (set up to deal with the fallout from an earlier crisis) is deep in these problems too. It has a good chance of getting ugly.

But make no mistake; Beijing has no qualms about interfering in markets. It has stepped up efforts to curb skyrocketing raw material costs that pose a threat to their economic recovery, summoning representatives of its metal industry at the weekend to warn them against any moves that would bid up prices. It is frustrated that it can't discipline Australia, and it is frustrated at the risks of fast-rising producer prices. But with the rest of the world expanding fast now, it doesn't have the leverage it had when it was running the only expanding economy. Yesterday, Chinese iron ore prices slipped slightly but not as much as you might have expected given the policy directives.

And China's flush of new development projects is past its peak. And that means that sales levels of excavators are now falling, an unusual situation for them.

Taiwan industrial production rose +13.6% in April from the same month a year ago. Looking back a year earlier to avoid the pandemic effect, it is up +18.5%. So this is maintaining a heady growth track. Taiwanese retail sales are up +18.3% year-on-year but that involves pandemic distortions. Compared with April 2019 they are only up a modest +6.2%. Drought and the re-emergence of restrictions from a new pandemic wave is starting to take a bite out of them.

On the global scene, there are reports that the G7 is close to a deal on taxation of world’s largest companies, the objective being to end the ability of global companies to shift profits to low tax jurisdictions. This deal has a better chance of working now that the US is part of the resolution.

On Wall Street, the S&P500 is up +1.2% in a strong start to the week with risk appetites returning. Overnight, European markets rose about +0.5% in their Monday sessions. Yesterday the very large Tokyo market ended up +0.2%, Hong Kong ended down -0.2%, while Shanghai ended its session up +0.3%. The ASX200 rose +0.2% while the NZX50 fell -0.1%.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 166,985,000 people have been infected at some point, up a much less +160,000 per day and a slowing increase as new case numbers ease in India. But they remain very high in Brazil. Global deaths reported now exceed 3,467,000 and up +10,000 per day. Vaccinations in the world are still rising but at a slower pace, now up to 1.67 bln. In the US almost half of their population (49.8%) have had at least one dose. Approaching 40% of Americans have been fully vaccinated (131.7 mln people). The number of active cases there has fallen to 5,791,000 with fewer new infections than recoveries recently and steady progress.

The UST 10yr yield starts today softish at 1.61% from this time yesterday. The US 2-10 rate curve is at +145 bps and marginally flatter. Their 1-5 curve is also a little flatter at +76 bps, while their 3m-10 year curve is flatter at +160 bps. The Australian Govt ten year benchmark rate is down -4 bps at 1.63%. The China Govt ten year bond is unchanged at its new lower level of 3.09%. And the New Zealand Govt ten year is down -1 bp at 1.83%.

The price of gold starts today up at US$1883/oz, a rise of +US$2 today.

Oil prices start today +US$2 firmer at just under US$66/bbl in the US, while the international Brent price is just under US$68.50/bbl.

The Kiwi dollar opens today at 72.2 USc and a rise of +½c since this time yesterday. Against the Australian dollar we are up at 93.1 AUc. Against the euro we are firm at 59.1 euro cents. That means our TWI-5 starts today at 73.6.

The bitcoin price is now at US$37,790 and today it is a giant +14.4% rise from this time yesterday. Volatility in the past 24 hours has still been very high at +/- 4.9%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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72 Comments

https://www.stuff.co.nz/life-style/homed/real-estate/125230594/biggest-…

If this is not a wakeup call for Mr Orr to act, What will be ???

It is this news / article that fuel FOMO which acts as fodder to housing ponzi and suits to fullfill Mr Orr's agenda.

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Should be a wakeup call for everyone - RBNZ, council, govt

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NOTHING will change until / unless house prices crash.
Until then, at best there will be a moderation in price increases.

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They'll just see this as a sign of success.

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So where is the financial stability in allowing the majority of a country's banks credit growth to be poured into a single sub section of an extremely overinflated asset class?

Orr may be on the podium tomorrow but will he have the guts to recognise the elephant standing beside him?

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Orr, Jacinda and Robertson. Please go.

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who you gonna replace them with?

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Don't replace them. It couldn't be any worse.

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Sadly most of this profit will be simply sunk back into the unproductive housing sector. Their remains very little else (bar BTC) that has any return. There will be some very residual uplift in spending I assume (new cars etc, why not?) but nothing systemic.

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Thanks for link the Richard, it's great owning property in NZ, isn't it?

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“Billionaire investor Ray Dalio says he'd rather own bitcoin than bonds as inflation surges - and reveals he's bought some of the cryptocurrency“

https://www.businessinsider.in/stock-market/news/billionaire-investor-r…

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Dalio added that bitcoin's greatest risk is its success - if it becomes a larger asset class and poses a real threat to others, like bonds, that could prompt a regulatory crackdown that could hinder the cryptocurrency

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...Which is exactly what is already happening.

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BTC market cap up 100B in the last 24 hours to 740B. That's 8% of the way to a BTC price of 100k which will happen in the very near future. Smart countries realise they'll never stop Bitcoin. All they can do is create FUD and buy low like China has just done, then regulate like Warren G. Business will flow to the countries with the best terms for crypto hodlers.

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You get a thumbs up just for the Warren G quip.

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Underrated comment lol

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BTC must be getting close to being recognised as an official religion?
The Supreme Court has interpreted religion to mean a sincere and meaningful belief that occupies in the life of its possessor a place parallel to the place held by God in the lives of other persons

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BTC must be getting close to being recognised as an official religion?

Ezy is vying to be the Ashley Church of NZ crypto. Unfortunately, the laser eyes will be all over the internet because of the surge in fiat value of BTC in the past 24 hours.

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The chosen ones are all getting much louder before the coming apocalypse.

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Really should declare it a religion. Then we could get tax breaks on our "donations" to the network?

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..you wont be able to write off your losses if you do that. So be careful.

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Except it isn’t considered a cryptocurrency, as Powell and Lagarde recently stated. But yes, regulation will be very important for mass adoption going forward. I suspect the US would rather be at the leading edge of this technology where possible though. Regulation is also coming to those crypto’s that act more as currency’s, and this is sorely needed to protect people that assume they are all one and the same.

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BTC is more regulated than NZ property. You actually pay tax on gains.

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This is true. Unless your affairs are not wrapped in a tax haven.

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This is just the start of what I was talking about yesterday where Bitcoin drives clean energy production - https://cryptopotato.com/bitcoin-eyes-40k-as-musk-saylor-work-on-green-…

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Not all the winds are behind you Ezy

"A State Council committee led by Vice Premier Liu He announced the crackdown late on Friday as part of efforts to fend off financial risks. It was the first time China's cabinet has targeted virtual currency mining, a sizable business in the world's second-biggest economy that some estimates say accounts for as much as 70% of the global crypto supply."

https://www.reuters.com/world/china/crypto-miners-halt-china-business-a…

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Banning mining in China would be a net positive for Bitcoin. It would help decentralise it more, while subsidising other miners around the world who would njow make more money off of greener power sources. Also it is not a universal ban, mining with hydro power would still be permitted, it is mainly targeting coal sourced electricity use. Mining in Xinjiang/ inner Mongolia is already supposed to be banned but that doesnt stop them, so dont hold too high hopes.

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Bitcoin (and more importantly anonymous crypto like Monero) is Kryptonite for China JAO. For any communist or oligarchic regime who are used to holding power alongside the countries purse strings their whole system of control is about to be democratised by stealth. Trying to ban Bitcoin is like trying to ban water. Regulation is going to be a hard enough task in itself - the internet is still largely unregulated after almost 25 years of mainstream adoption.

Be formless, shapeless, like water.
You put water into a cup, it becomes the cup.
You put water into a bottle, it becomes the bottle.
You put it into a teapot, it becomes the teapot.
Now water can flow or it can crash.
Be water, my friend
- Bruce Lee

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Bitcoin spam is the least of their worries ... seriously

Fresh water and food and jobs are what keep a population compliant .... not pixel spam

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If Bitcoin is like water, then I'm like Chuck Norris.

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Water runs down the drain.

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Bruce Lee reference noted

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"Banning mining in China would be a net positive for Bitcoin"

You Bit spammers are priceless
You really have no idea where stuff comes from do you?

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Can you offer a counter argument with your statement? Or are you just trolling for likes?

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just trolling for likes

which i spose beats trolling for a Ponzi

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https://www.swanbitcoin.com/why-bitcoin-is-not-a-ponzi-scheme-point-by-…
Have you actually read this any of the countless times I have posted it?

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money has no intrinsic value, it is a construct of energy exchange. If there is no exchange/conversion of energy then money itself cannot exist

https://end-of-more.medium.com/the-money-illusion-f5acb5b69dd6

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I would argue that money is a means of exchanging time. The time I spent for my work, is exchanged for the time you spend working, or to preserve my time energy to be exchanged at a later date for something I need or want. Therefore, for money to be sound, among other things, it needs to be saleable over time. CB money printing is essentially theft of our time, by devaluing our time/energy via money expansion. Am I looking at this wrong?

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I'd propose this whole BTC vs FIAT conversation on interest actually boils down to people who side with Keynesian vs Austrian schools of economic theory. It's all wrapped up with inflation, debt, savings, govt spending and what you believe to be true about business cycles. The Bitcoiners are basically anti-Keynesian which is the current status-quo. Whist the Nocoiners (like the RBNZ and property investors) are Keynesian lock-stock-and-barrel to the point it's too late to turn back - as a result, if consumer spending stops our whole economy will be stuffed and they'll be personally ruined. Have a look at this infographic for a very basic Vs description https://www.reddit.com/r/Bitcoin/comments/eo53ge/infographic_keynesian_…

It is difficult to get a man to understand something when his salary depends on not understanding it.

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"if consumer spending stops our whole economy will be stuffed and they'll be personally ruined...."

If consumer spending stops, EVERYONE is "personally ruined"
There is no magic backup supply chain for the Bitcoin gated community

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Money is really a means of exchanging our (surplus) ENERGY (the vast vast vast majority of which isnt human power) - a lawyer may think hes worth suiqdillion dollars an hour because of his/her amazing brain power ... when actually its that energy surplus derived from fossil fuel / oil that delivers the surplus into the system...

Try being a lawyer in a basic hunter gatherer society and see how the charge out rate goes....

"CB money printing is essentially theft of our time, by devaluing our time/energy via money expansion"

CB's are really trying to hold demand/buying power up ... and hold commodity prices up so producers keep producing
QE may be expanding balance sheets (and making money cheaper) but its not really feeding through to massive demand growth ... the easy resources / surplus simply arent there and costs are rising.

Which is why we will see Transitory inflation leading to a crash, not transitory inflation leading to either (a) stabilized growth, or (b) hyperinflation.

https://usawatchdog.com/inflation-implosion-hyperinflation-in-2022-john…

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Which is why you cant have a money that takes zero energy to create (ie adding some 000s to a ledger on a bank balance) because then you can create infinite amounts of it for no cost. This is exactly why Bitcoin runs on a proof of work (PoW) system. You have to prove you have spent the energy aka time to do the work to be rewarded the tokens. Bitcoin is Energy money, the purest form of money there is. It can be transmitted at the speed of light, self custodied, and the most important part, never debased or created for no cost. This is why PoW is key.
The banks printing money, distorting the real cost of money and bailing out failed firms results in massive misallocation of resources to projects that are not the most beneficial to human advancement, and yes use too much energy for an insufficient reward/advancement.

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As mentioned above
The masses want food, water and a job
Not "the best stable money out there"

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Bitcoin can never be debased? It is valued mostly in popularity, which is fleeting. Lets imagine Bitcoin2 is coming out next week, it is technically superior to Bitcoin in every way. Now what is your regular old Bitcoin worth? Who want's it? Technology moves on.
The inefficiency of creating crypto compared with standard money I would suggest is a bigger misallocation of resources. There is zero productivity payback from mining crypto. Just electronic casino tickets.

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Maybe there is an internet 2.0 coming. Could be better in every possible way? Just have to get the whole world to plug into it.
Or maybe there is electricity 2.0 coming? All people have to do is plug it into their houses? Rewire the whole electricity grid? Sounds pretty straightforward. Recreating digital scarcity is like reinventing the wheel. Convince me otherwise.

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There is internet 2.0 coming Pacman - it's called Ethereum! :)

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As Pacman has pointed out, this is called the network effect or Metcalfe's law: https://en.wikipedia.org/wiki/Metcalfe%27s_law
Also Bitcoin had the fairest launch possible, and it has grown naturally through several stages over its 12+ year life as the market has used and priced it as it values it.
Any Bitcoin 2.0 that is invented will have a leader, ie a centralised point of control. Just like BCash has Rodger Ver and B SV has Craig Write (lol) as its leader this destroys the entire point of being decentalised and out of human control. Why would anyone who has an economic and time investment in Bitcoin want to shift to some other, guaranteed worse Bitcoin?
Trace Mayer penned the idea of the 7 network effects briefly highlighted here : https://steemit.com/cryptocurrency/@cowa/trace-mayer-s-7-network-effect…
And you may be able to steal Bitcoins code, but you cant steal the other aspects.

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The Bitcoin lightning network is just getting started. Check out this cool graphic showing the network growth over the past 3 years.
https://twitter.com/documentingbtc/status/1396791399958388736?s=21

And then what the Facebook network has become.
https://twitter.com/stedavies/status/1396903226264391685?s=21

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Wow that is a shit article to be honest. They do not even understand the base definition of money.
It is several things, but mainly it is the most saleable good in an economy. The idea is that instead of having to barter with each other, you both have a common unit in the middle with an agreed upon price for both goods.
https://vijayboyapati.medium.com/the-bullish-case-for-bitcoin-6ecc8bdec…
Have a read of the history of money part (or preferably the whole thing)

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And Whoosh
Thats the sounds of logic going over the Bitconners heads

"Bitcoins fall into an entirely different category of goods, known as monetary goods, whose value is set game-theoretically. I.e., each market participant values the good based on their appraisal of whether and how much other participants will value it"

A greater fool scheme ... all welcome

I repeat
We do not have a money problem ... we have a resource / energy problem.
One that the Bitconners want to fix with money

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Everything in life takes energy, we dont have an energy problem, we have a pollution problem. There are multiple sources of energy available that we havent even started to tap into yet.
Access to more concentrated/dense energy sources is what drives humanity forward, and that isnt going to stop.
Bitcoin is Energy money.
https://assets.ctfassets.net/2d5q1td6cyxq/5mRjc9X5LTXFFihIlTt7QK/e7bcba…

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"You really have no idea where stuff comes from do you?"
Take a orange pill ham and all will be revealed

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We regularly report on the size and growth of the US Fed's balance sheet. It has been rising slowly to about US$7.9 tln or just under 36% of US annual GDP. But new projections released by the New York Fed suggest it could rise to US$9 tln (or 41% of US GDP) by the end of next year, unless they change course and start tapering soon.

Mind the gap! In case the #ECB declares its inflation target to be a symmetrical 2% YoY one, this would mean even more cheap money. (Chart via Morgan Stanley) Link

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'Fed's balance sheet to grow sharply'

There's your economic growth: print & spend...."Hey, look at our great GDP figures!!"

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Graphic evidence of Fed balance sheet growth failing to spur US bank balance sheet growth.

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USA and China have huge debt problems.
China as described here is going to have a v large problem revolving all debt maturing this year and in controlling defaulting debtors.
Things are not under such good control as people think. they think that until the manure hits the fan, then no one knows where it came from. But really we know: too much borrowing and not enough earning.
Inflation is now out of the bag and trying to get it back in is not going to be quick, nor painless.
The price of cv19 anaesthetic is about to fall due and all Mr Robertsons and mr Orr's optimistic noises re GDP and growth are going to be looking embarrassing

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Just get the kids to pay for it. "It seems like pretty irresponsible opportunistic fiscal policy to me. It is certainly inconsistent with those mostly-admirable Budget Responsibility Rules Labour campaigned on – since not only are they running large deficits with no macroeconomic crisis, but debt is above their own targets."
https://croakingcassandra.com/2021/05/24/a-questionable-budget/

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I think Grant Robertson's major 'fiscal experience' in his non-private-sector life was to deconstruct the Otago University Students Association. It seems his whole life has been one of grooming for politics. Much like Helen Clark. To me, that is weird. But most people seem to accept it as normal.

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Did he bugger that as well?

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JA did the same: from the local chippy to running a country, via the Helen Clark Political School for Willing Disciples.

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Looks like the death of the crypto bubble was greatly exaggerated.

A missed buying opportunity by most.

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Bit of an understatement. Glassnode data suggests that many nocoiners bought BTC in the past week. Also, important to remember that at least 850,000 leveraged traders were wiped out on Weds and that could be even larger by now. Collateral damage you see. Somewhere in the suburbs, there is misery.

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I meant most of the negative nellies on this site.

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They are all just like Peter Schiff, will scream bubble all the way up, then when it drops back to prices not seen for a few months will pat them selves on the back.
I wonder how many of them have actually spent the 50+ hours required to even start getting an idea of how the Bitcoin network works...
https://chrisgimmer.com/bitcoin-reserve-asset/
https://www.lynalden.com/misconceptions-about-bitcoin/
https://medium.com/original-crypto-guy/as-bitcoins-price-hits-a-new-all…
https://danhedl.medium.com/planting-bitcoin-56bd1459cb23
https://insights.glassnode.com/bitcoin-supply-distribution/
https://medium.com/@nic__carter/noahbjectivity-on-bitcoin-mining-205222…

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I hear you G. But you can argue the same about Scientology. Those who go deeper into that world tend to become fanatical and only see what they think they can see. When you're surrounded by others with similar conviction (Twitter for ex), your beliefs become reinforced.

It's not just Schiff. People like Nassim Taleb can also identify the ultra orthodox.

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Does a 50% fall not qualify as a bubble bursting?

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Depends. If the price goes up 1000% in a financial year, but there's regular 30-50% drops on the way up is it a bull or a bear market?

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I thought 1 Bitcoin = 1 Bitcoin?
how can the price have gone up?

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Was $57k USD back in early May.

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In China, corporate debt risks are rising forcing firms to enter into much shorter tenors
made me wonder what was happening to those poor little singers.
This though I found very scary, we are so dependent upon China trade: https://www.theguardian.com/world/2021/may/25/a-matter-of-time-new-zeal…

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More for the facts don't matter file and why reporters, journalists & editors need certification - like a JP.

https://mobile.twitter.com/dbseymour/status/1396624332181278723

First:
PM pushes back at ACT over education initiative, says 'white privilege' isn't mentioned

Then:
Jacinda Ardern is wrong. “White privilege” is referenced several times, including in the key materials being given to teachers [shows documents].

A couple of things:
1. Newshub repeated words, but does a journalist need repeat the words as spoken, or report as to if the words spoken were of truth?
2. Basis documented verification that the words spoken were not of truth, does the journalist need comment on the spoken falsehood?
3. What does the journalist feel the public know "pushes back" to mean?. Is it an euphemism?
4. How do the words "pushes back" influence the meaning of the phrase "'white privilege' isn't mentioned"

All stinky stuff mindyou.

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