Talking gold, bitcoin and the state of the economy

Transcript

hello everybody welcome to a new episode of the reinvent money hang out my name is Paul bad ink and with me today economists and Bitcoin expert to domestic and also we have a renowned golf expert cogency AKA yung new Eisen we're going to talk about gold bitcoin and the state of the economy and feel free to ask questions if you're watching this episode it would be nice to get some cool question from the audience ghost let's start with you and start a little bit about gold first of all do we have to call you coach answer or yani was and we're a bit lost there yeah I have to say I'm a problem well my real name is yuen yuen out so just call me young but I started to Twitter a few

years ago with the name Khalsa and then I started the block and then I got a job in this in this work field and I'm stuck with this cause Young's name but my real name is young you know it's no secret so I don't know what to do either but my real name is young okay let's stick with you on Don I'm and I will try to memorize because I'm so used to coast yeah I love time I saw you I also dressed US Coast because it's just aren't wired a lot of Chinese people ask me please take two calls young so because that's we can pronounce that better than me win hash yeah okay so what's what's keeping and gold investors awake at night these days not much because we have lost so many so much

sleep last couple of years that and know what I find interesting still is still Asian golden man that is the man from India is back on track Edward some severe import duties raised in in India in 2013 when gold price made famous nosedive they raised the import duty from four to six to eight to ten percent and implemented the 8020 rule and then this year they removed the 8020 rule and so there's a lot more official gold not coming in into India in according to official customs reports I should say and not fight the smuggling route what is the 8020 rule

the 8020 rule was a rule that all banks that imported gold had to export twenty percent of their imported goals that was the 8020 rule just meant to obfuscate gold imports and to just make it more difficult into because the gold import into India had a effect on the current accounts of India and they wanted to dampen the import that removed the 8020 rule so gold import in any is quite strong again this year in August was 138 tonnes in September child back to 50 tons I its provisional data so the Indians are on track to import 950 tons this year and the Chinese are on track

to import more than 1,300 tons this year so an add to that chinese mining supply that is 450 makes 1754 the chinese and 954 for india so that's almost all of yearly mining supplies how the rest of the world and another demand has to come from scrap supply and dis investments from from ets and the lag because you're talking about net imports there yeah i'm talking about net imports yeah yeah all the numbers i mentioned was net imports so and and a funny thing of course still is that the world gold council states that on average chinese gold demand is

1,000 tonnes and while they are importing much more than that and add to that that they have a domestic mining supply of about 450 tons each year so a chinese physical supply is clearly so much larger than what the world gold council stating that there is something completely wrong in their analysis and that is really fascinating why are you were they making that mistake then is there is there hidden agenda or is it just i mean if you're able to calculate that these guys have all research departments why is there this discrepancy between your data and their data that is i I don't know that that is really speculation

you know if I could speculate there is some hidden agenda Envy to let China accumulate more gold in the world gold council sort of yeah denies it although they have written some reports about there is more gold gone into China and but we don't really know blahdy blahdy blah and but yeah further north at its not being mentioned anymore bye bye big consultancy firms and so that is really it's so significant that this is about one hundreds and hundreds of tons every year and yeah it's very often forgotten to to mention this in the media it's at least it gives you this this niche where

you can become a specialist and the go-to guy for when it comes to calculating proper figures in China India and all of that so in a way I guess it's good you didn't right give you this this is market to work on yea indeed yeah yeah yeah that is quite far indeed do you speak do you speak Mandarin by the way or how are you able to interpret some of these these documents that are hidden somewhere in on the internet or with with these institutions do you have local people in China helping you yeah correct yeah so I'm very lucky to have a few sources in china mainland it helped me a lot with with the market there and with the language barrier because only when you

find a way to work with this language barrier you can really research the chinese gold markets and so i owe a lot of those sources and and i don't speak any Mandarin no only me how yeah and I wonder still what's the end goal here for for China how much gold do they want to kill night before they make next move or what's what's the game here I don't really know the thing is that according to my analysis and I wrote a piece about this recently also focusing on international goal trade and in international goal trade in merchandise trade statistics we can only see the

flow of non-monetary gold and all monetary goals there will be PBOC purchases it's not visible in these trade statistics this so everything we can see going into China is all according to my analysis of course it can be wrong but it's all going to the private sector so there is a lot of gold going into China it's more than the world gold council says and but that is all for the private sector and so we have to add to that demands from the PBOC now Roland manly and nick laird's did some research on the london gold market and they figured out that in 2011 there was nine thousand tons of gold in london and in 2015 it

was only 6200 but according to official trade statistics only about a thousand tons was a net imported so there is roughly 1,500 tons missing from London and so these are again more clues and it's all we can collect because it's kind of hard to guess what the BBC has again these schools are that this kind of gold can be connected bought by there by the PBOC can ask a question news yeah so I'm curious about him how you see the relationship of gold and the Chinese currency the RMB got devalued recently

and for a long time in the gold community and I guess a part of the gold community was convinced that the yuan would be very strong because China was accumulating all this gold and the gold is gonna be backing it and and now we're seeing that you want weakening for I mean for various reasons maybe maybe you can give your thoughts and yeah I'm wondering about I never really bought into this story but it really does seems to be breaking down the story of like the more gold is in China the stronger the you one could be or is this a long term playa i'm curious about your thoughts about this well i think they that the remaini strengthens at first in

the last couple of years because they are such a large exporter boots and services offer good only that good should say and but now because China is shrinking or the growth is coming down the stock market had problems of course less and less people have confidence in in China so that pressure the renminbi and then they let go of the peg I think I think it was not really clever but I think it's a move to also eventually let go perhaps off the peg f for good and to become included in the SDR or realm a me but i think the

downside of letting go of the bag or short while and then keeping it is that the whole world thinks is going to go further and lots of debts are piling up on you know the real memory is going to do tell you even further and capital outflows so it's costing that the people going to China a lot of money now to defend a peg so I don't really think it was really clever how to know maybe some master you know plan they have but I don't think that the the the strength of the renminbi has ever been determined by how much gold was inside of China maybe you know at a later stage that can

relate to the amount of gold but that then it would be more PBOC official numbers and now the people's bank of china says they have 1700 tons which is still a very small compared to their gdp for an exchange reserves etc yeah i mean it really remains to be seen the how hard the peg is really going to be i mean i'm reminded of what happened in France a couple hundred years ago were after the French Revolution the lands of the church were confiscated and there was this new currency and they said it has value because it is backed by all the lands of the church but of course nobody could like take french francs and

exchange them i think it was a different name i think it was the aussie yes you couldn't exchange him for any land so that that that was just rhetoric and I think it really means to be seen how much of that gold is going to be interchangeable for remnant be and back or if it's just gonna if it's gonna stay a story I don't expect it to have staying power and gold will be strong and then these currencies will do what they do um well i think i think you know only when you have a gold standard then these official gold reserves can be redeemed for huan and back so that is never going to happen I mean the Chinese are not going for gold

standard nor are the Europeans or the US or whatever but what is if you want to internationalize renminbi you have to give it a certain credibility and you have to I think need a lot of official gold reserves too poor to your currency so this is the the thing we're talking about backing your currency with gold and supporting your currency would go and what I just mentioned was supporting the renminbi with gold so if they you know come out one day and they said have 4,000 tons or whatever if they do it would give the Remi a lot more or to internationalize right since it's almost like an IMF requirement or in a bis

requirements for China to have X amount of gold no not really but no you notice be far as I don't party as the r22 have a need to have a threshold or something that for that reason they're accumulating it could just be two guys not that I know of no no it's not an SDR requirements i think if i recall correctly SDR requirement is freely usable it was the other thing no I can't remember this that serve a bit blurred but no no the gold is a it's not a requirement okay let's all sit openness is also on open it's about their data and foreign exchange reserves and they have to comply to the special

dissemination etc from from the IMF let's talk about openness transparency and the save the favor to subjective banker central banks especially there was his conference in Holland in September's reinvent money that organized where you also were closed and we had a central banker from Holland giving a presentation on macro prudence II and transparent you know of these things and you were afterwards you had a small chat with him his name is yaakov tahan and could she tell was a bit more about this interesting changing it with a central banker yeah so first of all I want to thank you for organizing the conference because it was kind of cool but there were a lot of good speakers at

the conference and it was I think it's the the best conference we have in the Netherlands own money on you know on the alternative ways to view money so he i was i was actually a bit surprised that you managed to to get a central banker to speak there but it was really nice but his center points of his speech was transparency transparency is for central bankers very important and you went on talking about it so you know of course I thought about well if you want to be so transparent why don't you give us the bar list of the official girl vultures of the Dutch central bank and unfortunately I raised my hands when I

could ask her questions but I didn't get a microphone so after the after his speech I went went to ya cope and I asked him well if the Dutch central bank wants to be very transparent can we can we talk about this because I did and what this is the Dutch equivalent of a Freedom of Information Act it's called a vote for sugar so you know yeah people are familiar with this I did that in 2013 and a house a lot of questions where is it can you come see the bar lists etc and then I got required from the Dutch central bank saying we are exempt from Freedom of Information X but is Yakoub and I think every European

Central Bank is but the Giacobbe seem to be working with me he said well give me drop me an email and we go figure it out maybe we can you know get youtube our list you'll see so I email them the next day and also do that last week but he has never replied my emails so I think I will call him this week and give it another go yeah I would definitely push with it so it's because we now now set a german bar list what do you make of that it to me I read Peter Berliners basically runs the gold X preparation or actual expatriation campaign for Germany and he didn't seem to be too happy about the bar list what are your thoughts on this ball is that

German Bundesbank mmm has published yeah well I agree with with Peter and of course it's if you publish a barley why not publish everything you know so also the refiner brains the year of manufacturing melt numbers bar numbers finance gross weight fine weights just everything that is pretty standard in the wholesale market you know if you only have an inventory number next to the bars that is completely meaningless because you can't compare this booms bunk list with with other lists room Fort Knox warfare reserve bank of new york Fort Knox has sort of similar bar list published only with milk numbers or no refinery brands so it's it's really

weird why why yeah don't they publish all the data I mean what's the secret isn't it just a way to be to pretend to be transparent and not actually be well that's what it seems yes yeah well it's it's not really of course I know you guys are not going to back down right so it's they buying time because they but they know that the gold books they want full disclosure so doesn't really make much sense like an inner from a game theoretical perspective to for them to to published it or maybe like there's a lot of people then we'll say okay I accept this and now for me the case is closed but for the real gold box of course is it only makes them more easier to to get to the bottom of it yeah

exactly i mean the mainstream media was was all over it in terms of well this bar list is very extensive and comprehensive and it's now all rumors have left you know and and we are like well this is not a real bar list I will work I wonder some of the you know stung what's going on is that if one central bank were to be very transparent then all the sudden the challenge is out for the other central banks but also it makes me wonder like what if there are certain bars in the Bundesbank that are ought to be in another country so like they would then become like inadvertent whistle blowers and cause very like a

very uncomfortable situation towards these other central banks so all the sudden have to answer all these I want to know if that's what's going on too yeah I think it can be I I also thought it was a bit of a push you know just first steps from the Bundesbank also to mega have a little push towards the federal reserve bank of new york like hey we really want our gold back and we are pushing transparency a little bit just step by step just as they are repatriating their goals in in seven years before 2020 day i forgot the exact number they ship home so many tons but not everything you know so there's a little struggle we know between the

boonies bank and federal reserve bank of new york and maybe this is just a little push again for for more transparency interesting well let's move to digital bolt and steer a lot a lot of as i see at least the price going up again over the past few weeks and it always makes me happy but what's going on in bitcoin lad well I have a few a few screens prepared so maybe I can just go ahead and do a screen share let's see I'm going to screen share I think this is the one I want to start with you should be able to see the Bitcoin obituaries so you see ya yeah so this is a screenshot or this is a how the situation was in

early februari 2015 there's a website Bitcoin obituaries and they measure how many are they they try to harvest all the times that bit Khan has been declared dead and so early 2015 after just one month the record of 2014 was almost broken and this to kind of indicate how far we are at from from that kind of sentiment back in 2015 really things were incredibly bearish the price had had dropped all the way down briefly two hundred fifty dollars so that's where we were about nine nine ten months ago um and then what we saw in May early May was that people like Alex gurevich who

was former JPMorgan head of macro trading so I not just a nobody started getting excited about Bitcoin and there was a number of other small signals that that was happening and then by August we we were clearly treated trading in a range Bitcoin had recovered I had gone up to 300 for two times and we saw this range between two hundred and ten dollars and three hundred dollars being established and it was from then on that I started thinking that 200 really seems like a solid a potential solid bottom so I still think there's about an eighty

percent chance that that will be the bottom and there's a small chance that will like have another drop to 100 but I think that's maybe like twenty percent a chance so going back looking more recently what we saw in about a week ago is that the 200-day moving average got broken again on the on the upside so we went above two hundred fifty dollars and I think that's a bullish sign because a lot of traders look at that look at that level see if the long term trend is is changing and I think this could be a sign of change and indeed Bitcoin has a gun absence we pull back a little bit

and I think for me the big story what's happening is Bitcoin has become a credible story there's a all these very established institution city bank Barclays New York Mellon UBS they're all experimenting with blockchain and Bitcoin and so it is a very legitimate topic of conversation on Wall Street these days and that's very different from a year ago I mean this is from October the Bloomberg Markets cover where we see Blythe masters on the front page with a big article about blockchain and that's the bus now that block chain really is you know the next thing the Bitcoin was just kind of a signal for

this block chain revolution and I don't really buy into that I think Bitcoin really will be the tcp/ip and one one one reason why i think that is that the sidechain technology is really being launched now and that people are able to experiment with it there's the elements side chain you can experiment with and block stream recently launched an actual working side chain several exchanges are working with that that I think really is going to show that bitcoin is scalable and that Bitcoin also can have genuine privacy because that's important for institutions who want to work with client money but don't necessarily want

to show to everybody or want to protect the privacy of the customers in other words and so looking at the interest from investors this is the google trends or how to buy bitcoin that's the term yeah how to buy bitcoin so we see that it bottomed out in May 2015 but really started picking up again and I think that yeah this could really be the bottom the bottom at 200 and then retesting 300 maybe go back again so the channel could be in place for a while but eventually I think by before summer 2016 I think we're going to see a big rally summer 2016 by the way is when the

block reward gets cut in half again so the Bitcoin the inflation of Bitcoin basically gets cut in half again so as this is our recent increase over the past few months you do you ascribe that then two fundamental demand or is there also something else is playing I read yesterday that a lot of it comes from China most of the volume also so do you believe this is investors are in there for the long run or you think it's a lot of short-term technical speculation and trading well I don't know if I have to link here but there is a cool website out there that shows the volumes on local bitcoins local bitcoins is a completely decentralized exchange

that facilitates people on the ground in in a starbucks in wanna site is to exchange bitcoins easily with somebody who has cash and vice versa so that really gives an idea of the UM on the floor on the ground demand and what you see there is that countries that have higher inflation really see a significant uptick in Bitcoin demand or Bitcoin volume trading volumes so I think right now it's the wild speculators are burned out they're horribly burned out after you know a year and a half we're almost two years of a bear market or I mean a short term mem archit a a big correction actually is what it is I don't think right now

we're seeing a lot of speculators I think we see value buyers people who see the value who knows some of the risks in the financial system and then also people who are starting to use it for remittance people are using Bitcoin ATMs for these purposes to send money to Venezuela for example and and also people seeking to diversify their portfolio maybe just by half a percent in Bitcoin and funds are also starting to buy Bitcoin they're more and more possibilities for funds to do so in a way that's that's legal and I mean keep in mind that the Bitcoin ETF is still and still being created I expect that to launch somewhere in 2016 I think they're

two or even three such initiatives so I think that could be very I mean remember back in two thousand six what kind of impact that had on the gold market you know interesting so it kind of asked to your question yeah sure but or do you think Bitcoin has the best technology from all the cryptocurrencies because that is essential for the value of forbid phones right right yeah and then then the quest like what what is the actual technological revolution that we're looking at what's the disruption that's happening and my view is that we're seeing the advent of the internet of money and the internet of money is has to be based on something that's

ultra-secure because that's the hardest thing and the digital universe is to make sure that something is not duplicatable it's almost like a violation of digital physics like and that's really hard and therefore i think the currency that has the highest security and that's not only because it has you know the protocol is designed and this or that way but also has to do with adoption but bit court very clearly is focused on very very high security and that's why this block sighs debate for example is so difficult because increasing the block size is as an effect on the decentralization has potentially in effect on the on the

security of bitcoins but even so even if the block size is increased it is by far by far the most secure currency out there and with side chains technology you can you can basically create altcoins that are pegged to Bitcoin that are backed by bit coin by the bitcoin security that our mind and validated by Bitcoin miners and i think that is that is massive and i think that's really underestimated that they know that the the power of up side chains i think is widely underestimated and and that's why people see bitcoiners like this this inflexible hard-nosed currency and i

think that's wrong that's that's a wrong assumption there's lots of innovation i think the old coins were fantastic playgrounds or trying new things and some of them will survive and i think some of them will try thrive but still i think you know about ninety percent of the mark that the value that the economic value of all the cryptocurrencies is it's probably going to be Bitcoin for the years ahead and I don't see a more secure currency on the horizon there is currencies that say they have more applications they have more utility but there is no currency who claims to have higher security on bitcoins at the moment okay yeah and then you SEC have any question yeah it does yeah thank you the two is it earlier in during your

discussion about the price that you're not buying into banks embracing blockchain instead of Bitcoin and so today that's rable bank and Holland is working with reported going to use the ripple network to do some transactions across Europe what do you think of that and I'll does that align with with with you saying that's you're not buying into that strength well so I think to say that to say that oh it's all about the blockchain bitcoin is is a is not what it's about I think it's it's missing the point and the point is that we need secure money and of course you can

improve the way banks work by implementing some blockchain technology have by having secure Ledger's and you can make private Ledger's and and all that but that's not going to take away from what bitcoin is going to do bitcoin is challenging the notion that that money has to be infinite or money has to be centralized and of course I mean banks operate in this this old paradigm of them you know we should be able to create securities out of thin air we should be able to have creative accounting all those kind of things and so of course they're struggling with this this block chain motion and ripple is kind of hybrid it tries to like you know give banks the best of both worlds or the customers well I'm banks actually

it tries to give them a little bit of the blockchain flavor but from the the savers perspective from the customers perspectives I think you're and there's several reasons for this but I think your funds are less secure in ripple than they are in in Bitcoin and that's why maybe in the short run ripple will do fantastic and it'll be a great way because they call themselves this this adhesive tissue between all the currencies so yeah it has its role to play but I don't feel excited about investing it it could be you know it could be a transition it could be a transition technology or transition company and that's fine it could have this place but I think I mean

if you look at Blythe masters what they're doing is yes on the one hand they are building their own private private network private cryptocurrency but on the other hand they're also building technology on top of Bitcoin so they're clearly not so sure about betting on their own their own altcoin yeah I just got a message from your part of the regular co-host is usually spanks me on skype saying that ripples on the block chain and which is Swift to point out so it is also the thing everyone's using the term blockchain but a lot of people have of course different interpretations and if we just focus on the Bitcoin blockchain then and then it makes much more sense um okay that's that's great thanks yo how are we up for

me I'm not confused it goes any any remaining questions for tier or maybe teria another question for you where it goes young doing an answer yeah well do you think it's a coincidence Blythe masters first worked for the commodity sector at JP Morgan right and now she just watch chain I mean first was by gold and now it's bitcoin is there is it a coincidence how is black masters connected with gold is it only mean I thought as I thought she worked for the commodities departments at JP Morgan before she did this oh yeah I didn't know that I I think in general a lot of people in the banking world really got

burned in 2008 and maybe not personally or are but but still they had a lot of heat and and I think especially the people that were in the eye of the storm are now look at I wouldn't know if I use the word redeem themselves but they you know they kind of became very aware of some of the risks of what they were dealing with and I think that's maybe why some of this interest in block chain and bitcoin is happening I'll be curious I have never read about her connection with gold or maybe some of the ideas came from there like maybe she was first interests in gold and then and then

looked at Bitcoin like as in hot in Herr general sabbatical taking a break from the more the more Wall Street asked investments um yeah I don't really know I want to read some more about that boom dear maybe I'm one final question for young um well I know you you don't um you don't do gold predictions and those kind of things but so I'm curious if you have any thoughts about what do you see more interest from the general

investment community like our like I said you have any numbers from funds maybe that are that are diversifying more into gold or about sentiment around gold those kind of things well I think sentiments for gold in the West correlates to to the price of gold we see US dollars so really when when the price of gold came down in 2013 I noticed that in Western countries people are just you know looking at it as it's in a beer market and you don't buy anything in a bear market so it's not interesting and it doesn't yield so why would you buy goals in of course in Asia

it's the other way around maybe it if the price comes down to buy more goals I know my company building star in Singapore is selling a lot more goals last couple of years also they started only a couple of years ago so in Asia it's still really normal to just put some of your savings in gold and but i think that the global price of gold let's say US dollar price of goals really correlates to the trust the the world in on average has in central banking and central banks appeared to have solved the crisis effort for Joe Average and so

a lot of people just go with with what the central bank's do don't fight the fed you know if they if they can print money in bailout every bank and whatever and if my held rocky says we will do whatever it takes to save the euro and people believe in then there are not going to bens to get it against it and they will sell their gold until of course what what I a maybe you also think that and central bankers do not have unlimited power and eventually you know the tool of printing money will will die and what happens then is it may be a little bit scary and that's why I like to have a few percent of my savings

in in physical gold right yeah i agree i think the story of central bank omnipotence has not broken yet but it's definitely more and more being challenged I mean the crash of the oil price the incredible volatility in the Swiss franc all these emerging market currencies that are really like you had to say crashing they're really crashing against the dollar and also the the policy of central banks was incredibly harmonized for a long time and I feel like now there's more and more of this tension where the US central bank is not raising rates but or it is is kind of thinking about raising rates but then

other central banks are not doing that at all so like these policies seem to be drifting apart and I think things like that could really break the credibility and break the story that yeah like central banks have all the power and they can just it's interesting to me that the expression pushing on a string if you look it up on the internet when the first definitions is Oh pushing on a string refers to being able to mitigate a problem in one way but when things turn you can't undo it it's like you can put the genie back in the bottle and it refers to central banks it's like yes it can control they can increase inflation by printing money but they

can't put a stop on it they can do the inverse so I think once we see central banks that are trying to to to lower inflation and failing at it I think those kind of things could really break the trust in there and central banks I mean of course slowly because they're there is such they have such a long track record of credibility well yeah what I also find fascinating is that sometimes it's not even about printing money for Santa brings strength central banks it just about their speeches you know did they say something in the whole market reacts on it or about forward guidance or and it's that is even

thinner than then printing money you know this is just worried right so it's almost eight yes like a like a church like you're listening to the priest and then you have to like decipher what he's really saying and what he's implying how how should I act because I know everybody's listening to the priests I'm actually not so much thinking about the priests I'm thinking about how other people interpret what if you of course yeah and it's all good yeah if you invest in in whatever in gold or starch I mean if you want to make a profit it doesn't matter what you think is going to happen to a stock or gold right and you should consider what the market thinks is going to happen with gold or Starks who and so everybody keeps keeps

having faith so to say at this point in time in central banks and how the show goes on and until it doesn't right now wanna see when the fat lady will sing and at least you're prepared cuz and with with gold wheels have some Bitcoin I also have some Bitcoin yeah I started mining actually in i guess it was early 2013 yeah when it made its famous run up i really enjoyed buying a computer with a few friends and at that time what was with video cards right and yeah we mind if you bitcoin and share so i own a couple it's cool right well thanks amor for being on the show again young I'm

going to train myself to say young and tier of course lost I was a year ago and so let's do it again in a little bit of a little bit less than a year keep it like an annual update on all things golden bitcoin thanks guys thank you very much Paul ok bye