Coin Catastrophe

LSP’s Blog on Crypto Carnage reminded me of so many other schemes that I’ve seen fail in the past. I know people including shirttail relatives who are on suicide watch because they went big into various token-based investment vehicles, none of which were backed by tangible assets.  Whether it was FTX or Bitcoin, or some other “investment” vehicle,  there was the question of how it would spend as an alternative currency, how would the value be marked to market, and what backed the value other than new investment money being poured in because “there was a fixed amount of investment.” Could blockchain (the underlying crypto) be manipulated? The day it was cracked, the house of cards would fold. As it is now, people are fleeing and dumping their positions.

Do you recall when unscrupulous people were peddling Iraqi Dinars, promising they’d skyrocket? A guy who lived near me dumped $800K into Dinars and told me that he’d buy me a Corvette when his ship came in…yeah.

I suggested to LSP that in this environment, chinchilla ranching in Hillsboro might be a better investment than crypto.

A Personal Experience

Three years ago the Communist Chinese were striking about, looking for an Uber Crypto solution. A contact of mine, close to the Chinese National People’s Congress Standing Committee approached me and asked for help creating Uber Crypto. I spoke in turn with Nick Spanos, who flew out from NYNY and we had dinner in San Diego. I’m sure that Nick will recall the conversation. My position was that the Chinese could create an anonymous coin, using blockchain if it was backed by physical gold (which the Standing Committee had a pile of) and if it was redeemable at different locations around the world with the central vault being located in Switzerland.

I had a place that would store that much physical gold securely. The Swiss would audit the physical gold and insure its integrity, etc. Sounds good? The Chinese interest quickly faded when there was no scam angle to exploit and we all went our own ways.

I hear you asking, “Why would you help the Communists, LL?” If they did it as specified, it would be a valuable thing for everyone. It would be a way to carry gold in blockchain and redeem it essentially anywhere on Earth out of the view of ANY government. When the Commies figured that out, they didn’t want to do it. They do it with underground banking routes now and the coin would cause them to commit billions in gold that they had very minimal control over because of blockchain.

I would have bought gold-backed crypto but valueless Ponzie crypto never had much appeal.

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44 COMMENTS

  1. “valueless Ponzie crypto”

    It looks like there were plenty of ways to skim off a percentage, so I wouldn’t say it was valueless.

    • There is value to crypto, but there is value in a Ponzi scheme too. I shouldn’t have used the term ‘valueless’.

      • There’s always a value to Ponzi, if you’re running the scam or are quick on the buy-sell trigger.

        That doesn’t mean it isn’t a scam. Nobody would run scams, if they weren’t profitable.

        The thing that amazes me is that the various governments just let Crypto ride, since it’s illegal in about a hundred ways. Treasury used to send thugs to barter conventions and haul people away to Mystery Jail, and then they let this shit go down for a decade?

        -Kle.

    • Exactly, the elite are involved and we know that they’re above the law. If they have enough on enough people (Epstein) they’ll hang themselves in a jail cell before they can testify.

  3. A government asks for a solution, and you offer one that governments can’t control and/or manipulate. Did they break out in hives when they heard it?
    Chinchilla ranching – haven’t heard that one in quite some time 🙂

    • It was more like 6 years ago now, on reflection because I’ve been living at the WWM for 4 years.

      They wanted to rule the world of crypto, and that would have done it. It would have exposed every currency on the planet. A fungible blockchain-protected cryptocurrency, backed 100% by redeemable gold. It would have thrown the planet onto the gold standard almost overnight. And it was doable. I brought Nick Spanos (Bitcoin Center on Wall St.) in because Nick had forgotten more than I knew about cryptocurrencies (my master’s study was math/crypto).

      At first, the Chinese were ecstatic and then they ran it by one of their people who explained how it would free the Chinese people (as well as people everywhere) and they shut that right down.

      • It’s still a great idea, and it will still create liberty. Just start out with pounds of gold rather than tons, and make it so the number of tokens will fluctuate matching the ounces. Add a mint mark, so lots of other gold warehouses can participate in the same electronic transfer system, but with competing currencies with different backing.

        • The catch is, you need a government to do it.

          Governments frown (usually) on people minting their own money (yes, I know, see above) and governments also have armies.

          Since this scheme badly harms governments, getting government support is problematic.

          -Kle.

        • EL – that was essentially the plan put forth. There was an exceptionally modest transfer fee/haircut that would be significant in the aggregate. Something like .025%. We went back and forth on the number – what would make the program self-sustaining? The idea was to make the ‘coin’ completely fungible down to a number that people could use everywhere. It would be manageable through the use of modern computing and networking, and invisible to all government oversight. The use of gold of specific purity, etc. to back the program meant that people could exchange their tokens for hard gold on demand through a number of outlets – participating banks being the logical outlet.

          • I find some 1880’s Stageline strongbox on my property (heck, anywhere for that matter) NO ONE WILL KNOW except the fence (that’d be crossbuck fence, wink wink).

  4. In these days of the Magic Kingdom telling FJB to go pound sand, what backs $USD? Serious question. How is the Debtbuck different from these scams, other than by inertia (coasting on priors)?

    Ah yes, the Chinese. And financial shitbaggery. My understanding is that in SE Asia the “overseas” Chinese have wildly disproportionate financial (and therefore political) power despite being minorities wherever they are (other than S’pore). The Chinese are viewed as nepotistic, hugely ethno-chauvinist, and disdainful of the locals, even if they have changed their surnames to better fit in. (A biologist would call this “crypsis”. The overseas Chinese would say it’s to keep them safe from the predations of the locals, all of whom are beastly and hate Chinese For No Reason at all. The locals would say the Chinese are the predators. Acknowledging openly that I have far less knowledge of SE Asia than our host and several readers, at least, and as an “overseas Chinese” myself, nonetheless I’m inclined to believe the locals are more correct than the Chinese.) It’s also been said that if you’re a local who marries into a Chinese family, you’re most likely going to remain “an animal that speaks” in the eyes of the Chinese, even the family you married into. Your children will be raised to think of themselves as Chinese. (Even though 100% Han will sneer at the obvious Filipino or Thai, or whatever, features of your offspring.)

    Given the above, I’m not surprised in the slightest by the propensity of the Chinese (a people with millennia of continuous ethnic identity, generally high IQ relative to the mean of their host populations, massive ethnocentrism, and the belief that they are always persecuted) to blithely plan to scam and loot anyone not Chinese. How this might relate to FTX and Sam Bankman-Fried I’m not sure. Gotta think on that one — it’s a head scratcher for sure.

    • In many countries, on Earth kidnapping, overseas Chinese is a cottage industry. It is high art in the Philippines. In Thailand not so much because of the Chiu Chow mafia. We can chat about the clan from Swantow on the blog if you’d like. They have owned Thailand since 1957.

      When we barbarians understand that the Han view us as “animals who speak”, we have a distinct advantage that the Chinese often fail to appreciate. Again, because it’s China, I can always elaborate, but Mike_C understands this so it’s not to him that I would put my comments. I actually enjoyed being a barbarian in China (a distinguished foreign visitor).

      • I would be fascinated to learn about the clan from Swantow, since I know nothing.

        Wait! So overseas Chinese face *actual, criminal* anti-Sinotism?!! Get outta town! Is there an ADR (Anti Defamation Reague) to look out for their interests? Snark and criminal activity aside, persons would be advised to read up on Malaysia’s bumiputra laws, for example. (I’m not saying I condemn those laws, incidentally. I have no official opinion, though I am aware of the horridly detrimental effects of a small, predatory minority that has contempt for its host population.)

        The topic of half-breeds (sorry if anyone is offended, that’s what most Han would think, so it’s contextually correct; also, harden up) reminded me of the film Crazy Rich Asians. I was amused that the “Chinese” romantic lead was played by Henry Golding, son of Brit Clive Golding and Iban (Dayak) Margaret Golding. Not a drop of Chinese! White (probably) father and Borneo-native mother. But Henry is tall (in the Asian context), squared jawed, and charming. The Pretty Korean Girl picked up on this immediately. She was amused also. (Against my better judgement I went to the movie with her and her girlfriends. I did not like most of the characters. Frankly what little sympathy I had was for Michelle Yeoh’s character.)

        • We like CRA…it’s a fun entertainment with an age-old theme.

          Heard a first hand story from years ago, Philip Anschutz (Denver), son of The Anschutz Corp. founder, ran into a hospital problem once, getting a lot of lip…apparently THEY did not know who HE was. Inside of an hour he bought the place. Money talks.

          As much as the Singapore scenes were sparkly, and I WANTED to eat at the street market…that hotel rooftop pool and party area may be “cool” but it’s what architects like Geary do when money is no object. No thanks.

          • What backs the $USD ?

            Simple. We are on the Plutonium Standard.

            Nobody on Earth dares call in their markers in case we say “come and get them”, so they have to pretend that the $USD isn’t toilet paper, or their economy evaporates, and none of them are nearly as self-sufficient as the US is, to weather the resulting worldwide economic collapse that would make the Great Depression seem like a Disney Vacation.

            I wonder what people are going to wear when it rolls around? Barrels are expensive nowadays, and so are decent shoulder-straps.

            -Kle.

          • During the depression, women wore flour sacks. The mills started printing patterns on them. How many of today’s women and girls know how to sew? I guess they could learn.

          • John Silber (former Boston University president) wrote a scathing critique of celebrity “genius” architects called Architecture of the Absurd. It was a good read. Silber in particular called out Daniel Libeskind and Frank Gehry, as I recall. The architectural genius of Libeskind and of Gehry is a scam, IMNSHO. However, I fully admit that they are indeed geniuses at self-promotion and fleecing insecure idiots who want to buy their way into “good taste” with money. (Other people’s money — the history of MIT’s Stata Building, a Gehry abomination, is instructive. Idiots in charge at MIT approved hideous cost overruns and paid for it by cutting salaries of innocent people who probably didn’t even want the monument to Gehry’s ego.) To make it even better, apart from being a freakish eyesore, the damned thing leaks.

            [Rant about rich SE Asians, Chinese or not, redacted 🙂 ]

            “During the depression, women wore flour sacks”
            Well now, that’s sexist right there. Any human being can wear a flour sack if xe wants to, regardless of the sex assigned at birth. (“assigned” /eyeroll)

          • “During the depression, women wore flour sacks.”
            Arrgh. I forgot to say: During the Russian revolution, the people were penniless. But the czar was Nicholas.

            Kle: I’m stealing “plutonium standard”. Thank you.

          • When “greats” like Gehry use a crumbled up piece of paper as design inspiration – a total disregard to feel and aesthetic – I have a problem with calling them great. Despite his lousy persona (often associated with genius types), I am very much an aficionado of FLW (and his former boss Sullivan) and the Greene’s…classic designs that elevated the inhabitants while pleasing the eye, not some monument to the ego driven. The Lake House is a good watch for this sort of mentality.

            The hubris of socially elevated by people with way too much money.

          • LL – I wonder how many modern women (or men) know where to get a sack of flour , or what flour is for?

            Mike_C – Feel free, anytime.

            -Kle.

    • It’s precisely why there will be no investigation. The democrat elite in America is involved in the scheme. 10% for the big guy.

  6. Crypto- the new gov’t money laundering vehicle. Ponzi doesn’t quite describe this one…always sounded like some weird vapor scam to me. Some guy forgets his password and “loses” his crypto “holdings”. Uh, yeah. No thanks. Tangible assets are necessary.

    So why did our Betters eliminate the gold-backed dollar? Yeah, nothing to see there.

    “A house built on sand cannot stand” isn’t about a building.

    • The US dollar is not backed by anything and USGOV has been buying the treasury bonds it issues with those dollars for a long time to prop up the world’s reserve currency. That’s just how it works.

      • PS – When I was young, the US was on the silver standard and each dollar was a silver certificate. Then we transitioned to Federal Reserve Notes.

        • Rules and moves designed to game the system for their off-shore accounts. Can the Takings Clause be used on the Clinton’s, O’s, McConnell’s, and pile of other Stye-Dwellers?

          You do know that P. Pelosi didn’t answer the front door in his underwear when the cops showed up, nor did he then move back towards his supposed attacker. Nah. And the AZ/NV/PA/GA votes a clean and tidy…five days after the fact and still counting, for a 1-Day election.

          We are being fed a pile of Stye Slop. Defiance is the operative mode.

        • And I still have a few of those “Silver Certificates” somewhere. I think if you go to “redeem” them, all they do is exchange them for current issue notes….Why not Silver Eagles?

      • I wouldn’t say the US dollar isn’t backed by anything. To some extent it’s backed by the promise that value can be extracted from future US taxpayers. That’s less and less true as the debt balloons, of course, and sooner or later, the .gov will default.

        • It’s backed by the full faith and credit of a corrupt regime that prints it with reckless abandon. That’s what it’s worth.

  7. Chinchilla ranching, ha. Tulip bulbs, anyone? 20 or 25 years ago it was ratites, i.e., ostrich and emu. Much money traded hands in birds and eggs and incubators and oil and etc. I knew some people in East Texas got way far into this, too far as it turned out. Then one day the bottom fell out and they were essentially worthless, unless you wanted to eat them. Which some did. Others just turned them loose Free Willy style because they couldn’t afford to feed them. Bit of a road hazard for a while, but that all sorted itself out. Good times.

  8. All this high finance is over the head of an old car salesman. April 5, 1933, all citizens were required to turn over their gold for $20.67 to the government.
    “There is gold in them thar hills” is still true. Thanks to all the regulations, mining it is too high a risk for any sane investor. The conspiracy theorist in me wonders who benefits from choking off gold production?
    Will these actions bite us in the ass? Look at cobalt for one answer.

    • ‘cept for dentists and dental labs and jewelers.
      as I understand it (I wasn’t a gleam for another 7+ years), quite a black market developed; ‘sides which, it wasn’t terribly enforceable

  9. Once again a GOOD reason not to ‘invest’ in vaporware… If it had ‘real’ backing, that’s a different kettle of fish. And I’m not surprised the Chinese backed out, especially after you found a place that would hold AND audit the gold deposits.

    • I have shirttail relatives in Switzerland that I keep in contact with so that was a phone call. They have massive vault space carved out from inside the alps. A Secret to be sure, but if we did that, they could store it reliably.

      The problem with the Chinese plan for them was that it would have completely undermined the RMB. Their war on the Euro, Dollar, Pound, etc. would have been victorious but a pyrrhic victory. The winner would have been the people of Earth.

  10. Gold backed Crypto? Secured by blockchain? Or would that be the other way around… hmmmm. And all decentralized…

    Whoa, now you’re talking. No wonder the CCP weren’t interested and no wonder central banks are prepping up to steal the space. Digital Dollar, anyone?

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