Economic Crisis News 2015-08-21
Greece Kicks the Can
Greek members of parliament voted early last Friday morning to approve a new multi-billion euro bailout deal aimed at keeping the nation afloat. 75% of Parliament voted YES. The deal has already been approved by Greece's euro partners. The deal requires tax hikes and more tough spending cuts, of course all in return for 85 billion euro in funding. This is Greece’s third bailout program in five years and gave them enough funds for their 3.2 Billion Euro payment to the ECB Thursday, August 20th. Surprisingly Prime Minister Tsipras resigned on the same day calling for an election to take place in September.
Thursday the Dow Jones crashed over 350 points or 2% to a new 2015 low; in fact a near 10-month low at under 17 thousand now. The S&P 500 nearly followed suite with a new low not seen for almost 7 months. The dollar index fell 1% in 2 days. In contrast silver and gold both shot up this week. Concerns of a physical silver shortage are brewing.
Commodities: Physical Silver Shortage Showing Signs
Gold rose over 3%for the week and Silver rose back over $15.50. According to Silver Doctors, the physical silver shortage is already present from evidence they are stating from wholesalers. They said the US Mint decreased coins available to Authorized Purchasers by 29% in one week and then 20% the following, and a 100oz bar distributor received only 30% of their scheduled bullion delivery. Also Sunshine Mint 1oz rounds were on a 9 week delay. It may be just a matter of days and weeks before premiums shoot up.
Flashback to late 2008 where premiums for 100z bars, usually the cheapest new retail bullion, were 25% to 50%. Today the premiums are around a mere 7%. To put this into perspective, silver spot price was $10 in mid-October 2008 and 100oz bars sold for about $14.65 per ounce on eBay; that's a 47% premium!
A substantial portion of silver is mined as a by-product of copper mining which is a metal that has seen a severe decrease as well; 29% in 1 year and also at the lowest level since 2008 at $2.27 per pound.
Oil fell significantly week over week for 9 weeks in a row, with analysts like Marin Katusa and Harry Dent calling for sub 40 dollar oil. Thursday it reached near $40 for WTI, 6-year lows. The 2008 low was $30.28 in December. This is a repeat of the 2008 depression that wasn't fixed but just delayed until a lucky 7 years later. The Federal Reserves lending rates have remained near zero since; now there's no ammunition left to stimulate and the death of the dollar could be upon us. No certainty was garnered from the Fed minutes release, so we will have to wait until it's next meeting September 16th.
In digital currencies, bitcoin price is still trying to recover almost $30 it is short from a flash crash that happened late Tuesday. It was supposedly spurred from margin calls on bitfinex, the largest volume online trading platform.
We were surprised, yet not surprised to see this important message when logging into our Local Bitcoins account about locking out New York residents.
As we mentioned last week, California is trying to pass their own BitLicense regulation. California is the largest US state by population, if New York and California are restricted from bitcoin use, Texas could be the new center of financial innovation; and it's the 2nd largest state. Texas' fourth largest city, Austin, is already a big tech capital and the state as a whole has been receiving disgruntled Californian businesses and residents in recent years.
Bitcoin development is reaching a new headway as a split between the community is leading to a fork in the software system which will be won by the majority power. The squabble is over a simple needed change; to increase block size to increase the number of transactions the system can handle. This type of change is needed for scalability and the future of bitcoin as a world currency.
Sorry to the non-technical viewers, but it is going to work like this: The new software is supported by two lead developers Gavin Andresen and Mike Hearn, it's called Bitcoin XT and if it succeeds in getting 75% of the miners using it, after 2 weeks notice it will begin generating blocks bigger than 1 megabyte. Under this scenario there should be little disruption; at most users running the old software would simply need to upgrade their software in what is called a hard fork which has happened before, in May 2013 after the huge rise in bitcoin price happened. At the current rate of bitcoin adoption, without this key change the system would reach maximum saturation of transactions by next year.
On Tuesday the first block was mined on a machine running the Bitcoin XT version of the software. A new reddit page called bitcoinXT was created on June 2nd to discuss the new software update and it already has over 7 thousand subscribers and is the 62nd fastest growing subreddit in the last week.
The core vs XT bitcoin camps could be warring until January next year when the bitcoin XT software allows larger than 1MB blocks. From now until months after that, we can expect increased volatility in bitcoin price. This should make some great trading opportunities. The most popular wallet service, blockchain.info now has over 4 million users. Get our free bitcoin report at CrushTheStreet.com/Bitcoin