Bitcoin.

This comes as no surprise to readers here...its developmental ontology recapitulating the phrenology of other actors who dare to challenge the authority of currency backed by "taxes and men with guns" (to paraphrase a popular economist) and instead offer something that can circumvent Government.

Bitcoin prices took a big hit on Wednesday after China’s regulators ordered the country’s payment processors to stop doing business with the country’s Bitcoin exchanges.

BTC-China, the world’s biggest Bitcoin exchange, said it would no longer take deposits in Yuan, effectively putting an end to the exchange’s pipeline of new Bitcoin buyers.

Bitcoin, the world’s most popular digital currency, which had been trading at about $700 on worldwide exchanges, dropped 35 percent to around $450 on the news. But then it did gain back some of that ground. At press time, bitcoins were trading at $575. That’s about half what a bitcoin was trading at two weeks ago.

China’s central bank met with payment processors on Monday, ordering them to “stop giving clearing services to bitcoin, litecoin, and other cryptocurrency exchanges,” the South China Morning Post reported on Wednesday, citing the financial news site Yicai. The payment processors were told to sever their relationships with Bitcoin exchanges by the end of January, the Post said.

Roach...

Gets many things right in this article.  Like this observation:

China’s seemingly open-ended purchases of US government debt are at the heart of a web of codependency that binds the two economies. China does not buy Treasuries out of benevolence, or because it looks to America as a shining example of wealth and prosperity. It certainly is not attracted by the return and seemingly riskless security of US government paper – both of which are much in play in an era of zero interest rates and mounting concerns about default. Nor is sympathy at work; China does not buy Treasuries because it wants to temper the pain of America’s fiscal brinkmanship.

China buys Treasuries because they suit its currency policy and the export-led growth that it has relied on over the past 33 years. As a surplus saver, China has run large current-account surpluses since 1994, accumulating a massive portfolio of foreign-exchange reserves that now stands at almost $3.7 trillion.

But then borks up the conclusion:

With rebalancing will come a decline in China’s surplus saving, much slower accumulation of foreign-exchange reserves, and a concomitant reduction in its seemingly voracious demand for dollar-denominated assets. Curtailing purchases of US Treasuries is a perfectly logical outgrowth of this process. Long dependent on China to finesse its fiscal problems, America may now have to pay a much steeper price to secure external capital.

The U.S. does not need to "secure external capital" from anyone, and it certainly does not need China to "finesse" its fiscal problems.  Its all about the pricing, gentlemen, and given the U.S.'s strategy of market control via military dominance (like being the prime mover in Africa,  etc.), the U.S. has the initiative once again.

Creating Order...

One of the themes of this blog has been the inevitability of strong U.S. presence in Africa.  Since I have been writing about this subject, Arfricom, military bases, and vastly increased attention to the continent have followed.  While most of this has been accomplished in a clandestine fashion, it appears that the Pentagon nees a new budget for this project and is now letting all of us know its intent.

This is wonderful for Africa, and terrible for the U.S. in the long run.

Full article here.

FORT RILEY, Kan. — Here on the Kansas plains, thousands of soldiers once bound for Iraq or Afghanistan are now gearing up for missions in Africa as part of a new Pentagon strategy to train and advise indigenous forces to tackle emerging terrorist threats and other security risks so that American forces do not have to.

The first-of-its-kind program is drawing on troops from a 3,500-member brigade in the Army’s storied First Infantry Division, known as the Big Red One, to conduct more than 100 missions in Africa over the next year. The missions range from a two-man sniper team in Burundi to 350 soldiers conducting airborne and humanitarian exercises in South Africa.

The brigade has also sent a 150-member rapid-response force to Djibouti in the Horn of Africa to protect embassies in emergencies, a direct reply to the attack on the United States Mission in Benghazi, Libya, last year, which killed four Americans.

“Our goal is to help Africans solve African problems, without having a big American presence,” said Lt. Col. Robert E. Lee Magee, a West Point graduate and third-generation Army officer whose battalion has sent troops to Burundi, Niger and South Africa in the past several months, and whose unit will deploy to Djibouti in December.

Optical backstops...

...making the rounds across the world...the EU edition below.  I am sure this will take care of all of the structural problems in the EU...

"The effectiveness of this exercise will depend on the availability of
necessary arrangements for recapitalizing banks ... including through
the provision of a public backstop," Mario Draghi said on Friday.
"These arrangements must be in place before we conclude our
assessment," he said.

But the ministers' talks face an additional hindrance because
Germany's finance minister, Wolfgang Schaeuble, is not expected to
attend the two-day Luxembourg meeting. Germany, Europe's biggest
economy, in talks to form a new government.

Starting to unravel...

Of course they are angry about the current Congressional imbroglio.  Its a partial turning off of the only spigot that is holding the Peoples Republic of China together.

The keys to the Middle Kingdom are held in Washington D.C.

BEIJING—China's exports unexpectedly shrank in September, in a sign of
weakening global demand for its products and a potential headwind for
the world's No. 2 economy.

Exports fell 0.3% in September compared with the year-ago period, data
from the General Administration of Customs showed o  This
was sharply down from August's 7.2% growth and far below economists'
median forecast of a 5.5% expansion.

Imports rose 7.4% on year, slightly up from the 7% rise in August and
beating economists' median forecast of a 6.75% increase. China's trade
surplus narrowed in September to $15.2 billion from $28.52 billion in
August.

Interesting bubble note...

The causes of property and financial bubbles are fairly well known...but it does appear to be an interesting confluence among places like London and NYC...

Full article here.

The trouble with nonresident property owners is that they’re fair-weather friends. There are three main groups in London at the moment: the super-rich buying holiday homes, investors looking for a quick buck, and overseas nationals looking for a safe haven. Normally you don’t get those groups all at once. When there’s massive overseas investment, you don’t expect many financial refugees, and vice versa. In the past the global super-rich were few in number—relying broadly on having an oil field in the sandpit or a fleet of tankers on the pond—and they spread their charms more evenly around the world. 

The Fed

Its always entertaining to read Fed minutes for their obfuscation and observations on recursivity.  The latest decision to hold off on "tapering" is a good case in point.  So much ado about simple asset swaps that provide no net benefit or detriment to the Economy.  The more insidious effects of QE for financial markets will be felt soon enough.  Removing quality collateral from dealer desks will have some effects with respect to short-term paper, and I fully expect the first convulsions for the next financial seizure to occur within money markets, commercial paper, or other short-term obligations.

Taking into account the extent of federal fiscal retrenchment, the Committee
sees the improvement in economic activity and labor market conditions since it
began its asset purchase program a year ago as consistent with growing
underlying strength in the broader economy. However, the Committee decided to
await more evidence that progress will be sustained before adjusting the pace
of its purchases.

Accordingly, the Committee decided to continue purchasing
additional agency mortgage-backed securities at a pace of $40 billion per month
and longer-term Treasury securities at a pace of $45 billion per month. The
Committee is maintaining its existing policy of reinvesting principal payments
from its holdings of agency debt and agency mortgage-backed securities in
agency mortgage-backed securities and of rolling over maturing Treasury
securities at auction.