December 22, 2017

Perspective

WEF – In 2020 Bitcoin will consume more power than the world does today – Adam Jezard 12/15

  • “Can the world afford Bitcoin? The cryptocurrency is enjoying something of a resurgence as investment and central banks weighed its benefits and caused its value to balloon.”
  • “But generating Bitcoin requires a truly staggering amount of energy. The electricity used in a single Bitcoin transaction, for instance, could power a house for a month.”
  • “And bitcoin mining (the process of generating a bitcoin) now consumes the same amount of electricity every year as Denmark – 33TWh, according to one recent report.”
  • Bitcoin mining’s energy use is reportedly growing at a rate of 25% per month. At that rate of growth, it will consume as much electricity as the US in 2019.”
  • And by 2020, bitcoin mining could be consuming the same amount of electricity every year as is currently used by the entire world.
  • “A new chain is created every 10 minutes or so and, according to a Business Insider article, the use of complicated and energy-intensive algorithms are part of a deliberate ploy to guarantee a degree of exclusivity.”
  • “The article quotes ING economist Teunis Brosens as saying a single Bitcoin transaction uses 200 kilowatt hours. ‘This number needs some context,’ he says, ‘200 kWh is enough to run over 200 washing cycles. In fact, it’s enough to run my entire home over four weeks, which consumes about 45 kWh per week costing €39 of electricity (at current Dutch consumer prices)’.”
  • “Bitcoin also uses a lot more power when compared with other transaction systems. A typical Visa card payment, for example, requires 0.01 kWh while another cryptocurrency, Ethereum, uses 37 kWh.”
  • “However, although Bitcoin is one of the worst examples of our profligate use of fossil fuels to create wealth, it is not alone. The whole digital world relies on power generation to run the data centers at the heart of the modern economy.”
  • “According to 2013 statistics, Google’s data centers used enough electricity to consistently power 200,000 homes, while the amount of power needed to run a large data center would run a small US town. And as we move to driverless cars and other data-intensive ‘internet of things’ technologies, the demand for energy will only increase.”
  • “It seems that businesses around the world are looking to a digital future while governments are talking of a more sustainable one: how to achieve both goals at the same time needs to be the subject of urgent discussion.”

US Census Bureau – Idaho is Nation’s Fastest-Growing State 12/20

WSJ – Daily Shot: CRFB.org – Largest US Tax cuts as percentage of GDP 12/21

Worthy Insights / Opinion Pieces / Advice

Economist – Free Exchange: A decade after it hit, what was learnt from the Great Recession? 12/16

Economist – Leaders: Bitcoin is a speculative asset but not yet a systemic risk 12/16

Economist – Leaders: America’s long-running economic expansion 12/16

NYT – Congress Refuses to Do Right by Children’s Health Care – Editorial Board 12/20

Markets / Economy

Bloomberg – U.S. Treasury Sales Are About to Double 2018. Who’s Buying? – Liz McCormick and Katherine Greifeld 12/19

  • “With the U.S. about to sell the most debt in eight years, Treasury Secretary Steven Mnuchin may find himself relying on a buyer base that needs to see higher yields before loading up.”
  • “Government debt sales are set to more than double in 2018, lifting net issuance to $1.3 trillion, the most since 2010, according to JPMorgan Chase & Co. estimates. With the Federal Reserve shrinking its bond holdings and deficits poised to swell even before taking into account the tax overhaul, all signs point to higher financing costs.”
  • “The challenge for Mnuchin is that some analysts predict buying by central banks — a pillar of support this year — may fade, in part as international-reserve growth stabilizes. In the view of Credit Suisse Group AG, that will put the onus on more price-sensitive buyers, particularly a group that the Fed classifies as including households, hedge funds, private-equity firms and trusts for wealthy individuals.”
  • “By Credit Suisse’s calculation, with the Fed pulling back and issuance surging, the slice of debt sales available for price-elastic buyers to absorb will rise to about 60% by the end of 2019, from 54% now. It would be their biggest share since the early 2000s.”
  • “The Treasury said last month that it expects to unveil bigger coupon auctions in February for the first time since 2009, and dealers see issuance rising for years to come. With entitlement costs heading higher, the U.S. debt burden was already projected to increase by $10 trillion in the next decade. Now the tax overhaul could boost the deficit by $1 trillion in the period.”
  • “JPMorgan’s 2018 net issuance tally of $1.3 trillion includes $847 billion of coupon debt, ballooning from an estimated $409 billion this year amid a darkening fiscal backdrop. The federal deficit may exceed $1 trillion by fiscal 2020, from about $666 billion in 2017, according to the most dire estimates by primary dealers. Meanwhile, the Fed could roll off about $250 billion of Treasuries in 2018.”
  • “The catch is that demand from China, which with almost $1.2 trillion of U.S. government debt is America’s biggest foreign creditor, may be about to ebb. The bulk of China’s buildup came as it boosted foreign-exchange reserves to help offset a strengthening yuan. But some forecasters see yuan stability in 2018, meaning limited need for currency intervention.”
  • “The wave of supply and the questions about demand come amid expectations for higher yields with the prospect of quicker U.S. growth and inflation. The Fed projects three more rate hikes in 2018, and firms including Goldman Sachs Group Inc. predict 10-year yields will rise to 3% in a year, from 2.46% now.”
  • “’There should be some overall repricing of yields higher, albeit modestly, on the back of the rising supply picture,’ said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. ‘The amount of the supply increase will be quite large, and it’s not clear how much support is going to come from overseas’.’’

Finance

WSJ – Daily Shot: Bitcoin 12/20

  • “The Bitcoin rally has stalled for now, with prices falling to pre-futures launch levels.”

WSJ – Daily Shot: Fintech Startups Seek to Shake Up Money-Transfer Industry – Corinne Abrams 12/19

Construction

The Atlantic – The Weird, Wooden Future of Skyscrapers – Amanda Kolson Hurley – Dec. 2017

Asia – excluding China and Japan

NYT – Jakarta Is Sinking So Fast, It Could End Up Underwater – Michael Kimmelman 12/21

  • “Experts say Jakarta has only a decade to halt its sinking.”

India

Bloomberg Quint – Deepest India Bond Rout in 17 Years Shows No Sign of Abating – Kartik Goyal 12/21

South America

WSJ – Venezuela’s Brutal Crime Crackdown: Executions, Machetes and 8,292 Dead – Juan Forero and Maolis Castro 12/21

  • I imagine it will take two generations to recoup what they’ve lost from bad politics – if ever.

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