Authored by Andrew Thornebrooke via The Epoch Times (emphasis ours),

The state of Indiana is suing social media giant TikTok, accusing it of falsely claiming the company’s product was safe for children and illicitly sending U.S.-based users’ data to communist China.

Indiana Attorney General Todd Rokita announced two separate lawsuits against the Chinese-owned TikTok on Dec. 7, both related to what he described as “false claims” made by the company about its app, also called TikTok.

“The TikTok app is a malicious and menacing threat unleashed on unsuspecting Indiana consumers by a Chinese company that knows full well the harms it inflicts on users,” Rokita said in a statement.

“With this pair of lawsuits, we hope to force TikTok to stop its false, deceptive, and misleading practices, which violate Indiana law.”

The first lawsuit alleges that TikTok lured children onto the platform by misrepresenting the amount of sexual content, profanity, and drug references made as “infrequent” when in fact the app is rife with what he described as “extreme examples of such material.”

The lawsuit further alleges that an essential part of TikTok’s business model is presenting the application as safe and appropriate for children ages 13 to 17.

The second lawsuit asserts that TikTok controls massive amounts of highly-sensitive data and personal information about Indiana consumers and deceived those consumers to believe that this information was protected from the Chinee Communist Party (CCP), which rules China as a single-party state.

National Security Threat

TikTok has long been subject to accusations that it feeds vital personal information on Americans to the CCP.

The main reason for this is that the company is owned by Beijing-based internet giant ByteDance, which is subject to laws in China requiring the company to share any and all data in its possession with the CCP. TikTok executives have admitted in the past that some Americans’ data was sent to China and also that the company previously censored materials at the request of the CCP.

Such issues have led FBI Director Christopher Wray to claim that TikTok is a national security threat.

“I would say that we do have national security concerns, at least from the FBI’s [perspective], about TikTok,” Wray said at a House Homeland Security hearing in November.

“They include the possibility that the Chinese government could use it to control data collection on millions of users or control the recommendation algorithm, which could be used for influence operations if they so chose, or to control software on millions of devices which gives it opportunity to potentially technically compromise personal devices.”

Likewise, security experts have raised the alarm that the app contains code that could be used for keylogging, meaning that it can track and save all information typed into its browser by a user, including bank account information and passwords.

“When you’re actually doing keystrokes, typing each letter, each number, those are being recorded back in China, and under supervision of the Chinese Communist Party,” said Casey Fleming, CEO of advisory firm BlackOps Partners, said during an August interview with “China in Focus” on NTD, a sister media outlet of The Epoch Times.

“What you’re texting, who you’re texting, passwords, email accounts, everything on your phone, anything that you’re typing in emails or texting, that keylogging is recording each word, each password, and so on.”

Rokita, who is seeking emergency injunctive relief and civil penalties against TikTok, said that the lawsuits were necessary to find out at long last just what the company was doing with Americans’ personal data.

“In multiple ways, TikTok represents a clear and present danger to Hoosiers that is hiding in plain sight in their own pockets,” Rokita said. “At the very least, the company owes consumers the truth about the age-appropriateness of its content and the insecurity of the data it collects on users. We hope these lawsuits force TikTok to come clean and change its ways.”

Read more here…

Authored by Charles Hugh Smith via OfTwoMinds blog,

The clueless technocrats are about to discover that unfairness and exploitation can’t be measured like revenues and profits, but that doesn’t mean they’re not real.

Economists and financial pundits tend to make a catastrophically flawed assumption. They tend to believe the technocratic myth that all human behavior boils down to financial incentives, data and metrics, as if all people make decisions based on interest rates, tax breaks and greed, the desire to maximize gains by any means available. (Cough, FTX, cough…)

The only other source of decision-making that’s recognized by the punditry is political / ideological squabbling: people make decisions based on their self-interest as expressed through political / ideological positions.

But this doesn’t exhaust the sources of human decisions and behaviors. People make life decisions for many other reasons which cannot be quantified or linked to financial incentives, interest rates or ideological beliefs.

For example, people can become fed up and quit caring: as in we pretend to work and you pretend to pay us, quiet quitting, opting out, laying flat and let it rot.

People get fed up with bogus propaganda designed to exploit them and with unfairness and corruption. For example, consider the endless spew of employers’ syrupy propaganda aimed at convincing their employees that the corporation / institution / employer really, really cares–I mean really cares–about its (ruthlessly exploited) employees.

If the employers actually cared about their employees and demonstrated it with loyalty and real-world behaviors, they wouldn’t need to slather on the phony propaganda. The employees would know the employers cared about them and their work because it was being demonstrated day to day.

The ugly truth is corporate / institutional employers stopped caring about their employees decades ago. This is the bitter fruit of hyper-financialization and hyper-globalization, which both reduce labor to a globally arbitraged commodity and an input cost that had to be cut to the bone to maximize shareholder value, i.e. profits and stock options that flow to the top management and top 5%.

This exploitation of labor resulted in the transfer of $50 trillion from labor to shareholders and management, the owners and managers of concentrations of capital which capture and distort governance mechanisms to serve the interests of capital to the exclusion of the common good and the workforce.

When employers stop caring about employees, employees stop caring about their work. No loyalty from employers is repaid in kind: employees have no loyalty to employers.

Everybody now understands they’re slaving away not for a piece of the ever-receding American Dream but to make the already-rich even richer and to keep the workforce cowed, compliant and exploitable.

So people are fed up and choosing to exploit their employers if possible and if that’s not possible, then stop caring and do the minimum to get by. This might mean cutting work hours, switching to gig-economy informal labor, retiring early, or switching jobs to get more for the same work.

In effect, people are choosing to reduce their dependence on exploitative structures by becoming more self-reliant: need less, invest in yourself, your family and community, shorten your personal supply chains, become productive on your own behalf rather than to the benefit of distant shareholders.

It’s called blowback, or karma if you prefer. What goes around comes around. The workforce has been strip-mined by the few at the top for 45 years, and now they’re responding in kind: take this job and shove it, I ain’t working here no more. (Per Johnny Paycheck’s timeless classic, Take This Job And Shove It 2:31).

This blowback is just beginning and it’s going to run farther and hotter than any of the clueless economists and financial pundits can even imagine. The clueless technocrats are about to discover that unfairness and exploitation can’t be measured like revenues and profits, but that doesn’t mean they’re not real.

While Everyone Cheers Soaring “Wealth,” America’s Social Order Is Unraveling (October 1, 2021)

*  *  *

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.  Read the first chapter for free (PDF)

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Update (1115 ET):

NASA’s uncrewed Orion capsule is set to splash down in the Pacific Ocean around 12:40 pm est, off the coast of Mexico’s Baja California. 

Live coverage begins at 11 am est. 

As of 10:24 am est, Orion was 20,000 miles from Earth — traveling at 9,600 mph, NASA said in a tweet. 

Flight Day 26. Orion is returning to Earth. 20,000 miles / 32,000 km from Earth. Traveling at 9,600 mph / 15,500 kmh and accelerating. pic.twitter.com/EWCKXkChjg

— Orion Spacecraft (@NASA_Orion) December 11, 2022

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NASA’s historic uncrewed Artemis 1 mission to the moon and back will conclude on Sunday with the Orion spacecraft returning to Earth. 

On Sunday afternoon, the Orion spacecraft will slam through Earth’s atmosphere at 25,000 mph, or about 32 times the speed of sound. It will heat up to 5,000 degrees Fahrenheit before splashing into the Pacific Ocean off the western coast of Baja California at 12:40 pm EST. 

Orion’s descent operations begin around 12 pm EST. Forty minutes later, the spacecraft should be in the ocean if everything runs on schedule. Here’s the splashdown schedule for tomorrow (courtesy of Space.com): 

“At present, we are on track to have a fully successful mission with some bonus objectives that we’ve achieved along the way,” Mike Sarafin, Artemis I mission manager, told reporters Thursday evening.

One of the most crucial parts of the mission will be testing the heat shield as Orion enters Earth’s atmosphere. If all goes well, this could indicate NASA is ready to fly astronauts around the moon in 2024 and then put them on the lunar surface by 2025. 

Meanwhile, Elon Musk’s SpaceX just announced a privately-funded moon mission with DJ Steve Aoki and a Japanese billionaire that could occur soon. 

Over 1.5 million people in the southern Ukrainian city of Odesa are without power following Saturday nighttime “kamikaze drones” pummeling electricity infrastructure in the region, also as blackouts continue surrounding the capital of Kiev and other cities. 

“As of now, the city is without electricity,” the Ukrainian presidency’s office said of Odessa. “The situation remains difficult, but is under control,” spokesman Kyrylo Tymoshenko said, but while acknowledging that hospitals and maternity wards do have access to electricity at this point.

“As a result of the strike, there is no electricity in almost all districts and communities of our region,” Maksym Marchenko, governor of the Odesa region said while pointing to suicide drones as the chief Russian weapon in the fresh attacks.

Starting Friday, the Ukrainian government said Odesa and southern regions were in the midst of suffering the worst and most sustained power outages due to the latest wave of major Russian aerial attacks. The biggest of these attacks started Monday and particularly targeted much of the south and its power grid.

National grid operator Ukrenergo said “Because of damage caused by missile strikes to power plants and the high-voltage network, the system has a significant shortage of electricity.”

According to the latest on Sunday:

The situation has been made worse by severe frost, rain, snow and strong winds, which are causing wires to ice over in western regions.

But the east, where fighting has been fiercest, is suffering most. Zaporizhzhia governor Oleksandr Starukh said: “There is a lack of energy – up to a third of what is needed.”

Russia launched 15 Iranian suicide drones against power infrastructure in Ukraine’s port city of Odesa on Saturday. Ukraine shot down 10. But 5 got through. Now 1.5 million people are without electricity. Streets were in darkness – apart from a carousel at the local fair ⬇️ pic.twitter.com/v50h2W2kfr

— Deborah Haynes (@haynesdeborah) December 11, 2022

Russian President Vladimir Putin has meanwhile accused the Ukrainians of waging their own cross-border attacks on Russia’s own energy and resources, alleging in a speech days ago its forces sabotaged power lines rom the Kursk nuclear power plant, as well as cutting off water supplies to Russian-controlled Donetsk, which he called an attempt at “genocide”.

Also last week, Ukrainian authorities said that Russian forces have continued to play a game of nuclear chicken due their installing multiple rocket launchers at the shut-down Zaporizhzhia nuclear power plant.

Authored by Scott Hill via BombThrower.com,

The Contagion: Fallout and Lessons from FTX and SBF

This is the third and final part in our recap of the collapse of FTX. In the first two issues we covered what happened in the weeks leading up to the failure of the exchange and how Alameda Research and FTX became so entangled and fraudulent in the first place.

Today we’ll cover the contagion and fallout throughout the Crypto industry and some lessons learned by Crypto investors and industry insiders.

Leveraged Unwind

The Contagion that we are seeing from the failure of FTX is mainly an unwind of built up debt between Crypto companies. This is acting with a lag as a majority of companies with financial problems were already on the ropes from earlier in the year as a result of the collapse of Luna/Terraform labs and Three Arrows Capital.

The list of Crypto lenders that have so far filed for bankruptcy as a result of these earlier problems include Voyager, Celsius and BlockFi. Gemini’s yield program has halted withdrawals. Nexo has announced that they will exit US markets but have not yet announced financial problems.

If you haven’t already, you should strongly consider whether any of the yield generating accounts at Crypto companies are worth the risk.

 These failures are all a result of counterparties defaulting on loans. Essentially, Crypto hedge funds and other entities took on loans from these lenders during the bull market and have failed to repay this year. To compound this issue towards the end of 2021 and in early 2022 the Crypto lending space was so competitive that loan terms were extremely favorable.

Lenders were growing rapidly and courting new investors. To be successful they needed to grow their loan book at any cost.

Kyle Davies, a co-founder at Three Arrows Capital explained in this interview that his Fund was offered billions of dollars in loaned funds on an uncollateralized basis. Other lenders were making loans on low quality collateral. Some were slow to liquidate loans as collateral value dropped.

This mechanism was a large part of the story of the FTX collapse. It appears that loans from other companies were being taken using FTT tokens and FTX stock as collateral with no plausible way to liquidate those assets anywhere near book value.

This is widely speculated to be the reason why FTX CEO Sam Bankman Fried attempted to bail out insolvent lenders like Voyager and BlockFi earlier this year, to ensure that they did not liquidate his FTT collateral.

This means that the contagion is very different to previous eras of Crypto collapse. It’s not hacks that are causing issues as happened in 2014. It’s not voluntary selling of assets as we saw in 2017 with ICO treasuries. It’s insolvent companies with giant holes in their balance sheets from defaulted loans.

DCG and Genesis

This brings us to the Genesis of all of the leverage in the Crypto industry, Digital Currency Group (DCG) and their subsidiary lending and prime broking service, Genesis. So far Genesis appears to have at least $1.8B owed to creditors. Its parent company DCG is on the hook for $575M that comes due in May next year and another $1.1B owed to Genesis in 2032.

Details are limited and DCG has gone quiet, but it appears that DCG has already committed to backstopping part of the faltering Genesis loan book.

We have no real idea how deep the hole is at Genesis. In early 2021 we learned that their total loans outstanding stood at $3.8B. This had increased by more than 5x since June 2020. It’s not inconceivable that Genesis had $10B in loans owed to it when it halted withdrawals in November. With so much carnage rippling through the industry it’s impossible to know how many of those loans are still performing and how many have defaulted leaving bad debt on the books.

For the first time since its 2013 founding, the DCG empire could be crumbling.

 While you aren’t all that familiar with Genesis as their dealings are mainly with other large Crypto firms, you are definitely familiar with the family of DCG companies. DCG owns Coindesk and Grayscale, which operates the Grayscale Bitcoin Trust. They also hold one of the largest venture portfolios in the industry, with fingers in almost every pie.

Among other things, Genesis loans are used as the counterparty to many yield products throughout the industry. The first shoe to drop was Gemini’s yield program, which simply passes through Genesis loans onto consumers, which is why they were forced to gate withdrawals shortly after Genesis.

Problems at DCG are problems throughout the Crypto asset class.

As the major Crypto prime broker and lending provider, the halting of withdrawals at Genesis is a major problem. Even if the lender can tidy up its books and continue to operate, their pause in normal operations likely means that Credit and business operating loans throughout the industry are much more constricted than normal.

How will Genesis Shake Out

Problems at DCG are not the same as problems at smaller Crypto Firms. The company has a wide range of assets that they can sell off to recapitalize the business and can seek outside investment if push comes to shove. There have been rumors about fundraising attempts while an offer to purchase Coindesk for $300M was apparently rejected as too low a bid. The main point is that DCG appears to need additional funding to maintain operations, but it might not be at a crisis point where the whole company is about to go under.

For example, early rumors that the Grayscale Bitcoin Trust could be liquidated seem to be unfounded.

That’s not to say that there aren’t deep problems. It would not be at all surprising if Genesis were sold off or allowed to enter bankruptcy. A sale of Coindesk would not be surprising. The total collapse of DCG and the sale of Grayscale, one of the major revenue sources for the corporate group, would be surprising to say the least.

With all that said, we just don’t know. DCG has been uncharacteristically quiet for weeks and nothing they have said inspires any confidence.

Silvergate

Another institutional Crypto company having problems is Silvergate bank. Silvergate is a US registered and publicly listed bank whose place in the industry was providing banking services to Crypto companies. In 2017 Crypto companies had awful trouble finding reliable banking services who would not close accounts. Silvergate fixed that and gained most of the banking business in the industry.

They claim not to have any exposure to FTX, but they were the banking partner

This opens up two big problems. Firstly, a major part of the FTX story was the dubious banking arrangement, where customers were asked to wire funds to the affiliated hedge fund, Alameda Research, rather than to FTX bank accounts. CEO Sam Bankman-Fried claims that FTX did not have access to banking at the time, but it appears that this practise carried on far longer than could be considered reasonable.

If Silvergate were aware of this arrangement and allowed it to continue, regulators will have some serious questions to ask.

The second and more minor issue is that banking naturally carries significant settlement risk as funds are debited and credited across accounts, sometimes opening up short term loans as settlement finalizes. It doesn’t appear that FTX has left a big gap in Silvergate balances through settlement failures, but it’s a possibility.

The other angle here is that if Silvergate had a major part to play in improper banking for FTX, they could find themselves liable for fines and even clawbacks of funds into the FTX bankruptcy. Members of Congress have already asked for information and it seems likely that a regulatory investigation is coming.

Solana Ecosystem and Wrapped Tokens

It’s no secret that FTX and Alameda had a big role in investing in and guiding the Solana ecosystem. Sam Bankman-Fried and associates had an outsized position in several ecosystem tokens like Serum and Maps. Solana token price has already been cut in half since FTX failed and ecosystem tokens are even more badly down.

The less obvious problem in Solana was that the major wrapped assets were custodied by FTX. Sollet, the wrapped Bitcoin token is currently trading at a 95% discount to Bitcoin. Most traders missed this small but important point as the FTX collapse was happening, but it’s a useful piece of information to keep in mind.

Not all wrapped assets are created equal.

 If you participate in DeFi you no doubt use wrapped assets. They allow you to trade and use assets from one blockchain on a different one or sometimes just provide a different token standard as a wrapper.

The major wrapped assets to be aware of are wBTC and wETH. The differences are important and useful to understand.

In the week after the FTX collapse there was a Twitter joke about wETH having problems. This led the asset to depeg from normal ETH tokens, despite being exchangeable 1 for 1. Articles were written in an attempt to calm panicked sellers of the wrapped token after the joke was reported seriously by Bloomberg.

Types of Wrapped Tokens

Wrapped ETH is a token which places an ERC-20 wrapper around ETH token, allowing it to take advantage of more advanced features of the Ethereum Blockchain. This process is handled entirely by a smart contract. The stash of ETH tokens can be viewed on the blockchain. The total supply of wrapped ETH can be audited in real time to monitor for problems. Nothing can go wrong with this system and funds can’t be stolen unless there is a smart contract exploit.

A big part of what makes wETH extremely safe is that it is self contained in the Ethereum ecosystem.

These sorts of smart contract wrapped tokens are similar to bridged assets. These wrapped tokens also operate by smart contract, but across different blockchains. They feature smart contracts on both blockchains which will custody native tokens and mint wrapped tokens on a different blockchain as requested by users on a 1 for 1 basis. At least that’s what they do when they’re operating properly.

Bridged tokens often break and have security exploits, the technology is extremely complicated and open to hacks.

Bridge exploits are by far the most common DeFi hack, with more than $2.5B stolen from bridges in the last two years.

The final type of wrapped asset is a custodial wrapped asset, which includes the Solana wrapped assets which were custodied by FTX and other more commonly used wrapped assets like wBTC and stETH on Ethereum. wBTC is custodied by BitGo and operated by a DAO, they have fairly good transparency and seem unlikely to suffer problems, but it’s important to be aware that if BitGo goes into bankruptcy, wBTC could have issues. stETH is issued primarily by Lido and is set up in a similar way with similar risks.

The main point is that if you are using wrapped assets, you should understand who holds the custody of the underlying token and whether they are at risk of financial problems.

Solana Wrapped assets are trading at a giant discount and unlikely to be fully convertible. I don’t think there’s a high likelihood that wBTC or stETH have similar issues, but it’s worthwhile being aware that they could have problems. If you’re holding wrapped tokens, know who the counterparty that can unwrap them is and whether or not they are trustworthy and solvent.

Lessons

Here are the big take-aways from all this…

Self Custody

The first and most important lesson out of this giant mess is that every investor in Crypto needs to know how to self-custody their assets. It’s the same lesson that was learned out of the 2014 Mt Gox collapse. It’ll likely be the lesson from the next Crypto crisis.

There is no excuse. Learn how to take custody of your Crypto. Easy self-custody is the major innovation.

There’s a range of options, if you’re only dabbling then use a software wallet like Metamask or Exodus. If you’re a little more serious you’ll want a hardware wallet like a Ledger or a Trezor which are available for less than $100. At the high end it might be worth considering a shared recovery service like Casa.

Whichever way you go, know how to Self Custody. Know how to move your Crypto off an exchange and onto your wallet. Practice doing it so that you can remove your funds when things go poorly.

During the FTX collapse, the people that could remove their Crypto the day that things started looking bad kept their coins. Others lost theirs.

Know Your Counterparty

The firms in the Crypto industry are not like banks or stock exchanges. They don’t have anywhere near the same regulatory scrutiny. They don’t have the same insurance. They don’t do the same audits.

This isn’t the wild west, but it’s still close.

If you’re giving your money or your Crypto over to an exchange or custodian know your counterparty. Know their counterparty. Read the terms of service and see what the risks are. The most surprising failure out of the FTX collapse was Gemini Earn closing down. They weren’t exposed to FTX but they used Genesis who suffered losses in the FTX collapse.

As a general rule, if you’re earning yield then your Crypto is being lent out. At the moment most of the yield products are closed down or bankrupt, but keep this in mind for next time. It doesn’t even have to be your chosen custodian that has problems, this industry is small and most firms have exposure to a wide range of counter-parties.

Always gauge whether the risk associated with the yield you’re getting is worth it. During this cycle plenty of investors lost their entire investment because they were chasing 10% yields. When the next bear market starts, your first thought should be whether you still want exposure to lending firms.

Know what you own

Not all Crypto assets are created equal. If you’re dabbling in altcoins and DeFi, know how the tokens you own are connected to the larger ecosystem.

As we already covered, wrapped assets have unique risks and that needs to be recognized. Ecosystem tokens, that is altcoins within a broader protocol should be viewed as having a strong correlation to the ecosystem they live in.

Problems in one place can easily spread.

Understanding how these tokens move together and how problems in one part can affect other parts is vital as the Crypto token ecosystems get more and more interlinked.

Proof of Solvency

While my advice would be to not have any tokens on any exchange or with any custodian at the moment, that’s not practical for everyone and people do need to trade sometimes. Ryan Sean Adams at Bankless has coined a phrase that I think explains how to think of exchanges at the moment:

Think of an exchange like a public restroom. Go in, do your business, and get out.

This isn’t the period where you want to hold assets on an exchange without a good reason. We’re heading into Christmas which is historically a low liquidity period. While a lot of insolvent firms have been flushed out, it feels decidedly like there are more shoes to drop.

While Binance has performed a proof of reserves there are numerous problems with their approach and some weird activity on their order books has left traders nervous. It’s unthinkable that Binance could be insolvent, but I wouldn’t want to have any funds there at the moment.

Kraken is the exchange that has the longest history of doing proof of reserves. Their CEO has recently been pointing out problems with other firms auditing, including Binance. He has also been advocating self custody.

If you need to keep assets on an exchange, Kraken appears to be safer than most, but their CEO is telling you not to keep your assets on any exchange.

Coinbase is the other big exchange. They’re publicly listed. They’re rigorously audited. Does that mean they’re safe? No. Do I trust them not to have problems? No. But they’re also safer than most.

There should be no real reason to keep a lot of Crypto assets on an exchange at the moment. If you plan on doing so, make sure you know how to get them off the exchange in a hurry.

Watch out for the next blowups

This all could be over. It also might not be. The blow ups in the first half of this year were fast and destructive. Luna and Three Arrows Capital blew up and took out huge chunks of the industry overnight.

This time around the blow ups are slow and large.

Genesis looks like it’s going to take December off and then come back and talk to creditors next year. Their parent company DCG is a multi-billion dollar behemoth. If they are going to blow up they are going to do it slowly. It takes forever to unwind an entity as large as Genesis.

The good news if you don’t have exposure to any of the already bankrupt firms is that most of them have already gone through the period where they sold off all of their assets in a fire sale. FTX was the poster boy for this phenomenon, ending their life with zero Bitcoin on their balance sheet, despite billions in Bitcoin owed to customers.

If more things explode, there likely won’t be a fire sale of coins rushing to market.

I fully expect there to be at least two additional offshore exchanges blow up in the next 6 months. I don’t expect them to have a large amount of assets to sell off, but things could get weird and an exchange blowing up will impact the price of tokens.

The Tail Risk is still out there

The Stablecoins are the biggest question mark still left on the board. After years of assurances, we still haven’t seen Tether’s books with any real certainty. Circle recently canceled its public market debut and will no longer be providing public financial reports. The less said about Binance USD the better and the other more minor stablecoins are plagued with questions.

Stablecoins are not dollars in a bank. If you want US dollars, own US dollars.

US short term government treasuries are currently yielding almost 4%. Bank accounts have insurance. There’s really no reason to be holding a large amount of stablecoins in this environment unless you’re using them in DeFi.

I don’t want to bet against Tether. Shorting Tether is the widowmaker trade in Crypto. Even if you’re right, your counterparty will likely be insolvent and won’t pay out.

I don’t even really think that Tether will fail in this cycle, but it’s a tail risk to be wary of.

Stick around for the next cycle

The biggest takeaway from all of this is that Crypto isn’t going anywhere. Bitcoin isn’t dead.

If you’re here already, stick around. Fortunes are made in bear markets and collected in bull markets. Learn about the space. Hone your strategies. Figure out what you want to own and why. Get ready to deploy funds when the Crypto winter is waning.

The Federal Reserve can’t stop printing money forever.

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Today’s post is from contributing analyst Scott Hill. To receive further updates of this series and our overall investment thesis for digital assets (even in this climate), subscribe to the Bombthrower mailing list. 

Inflation is surging nearly everywhere in 2022.

Geopolitical tensions are triggering high energy costs, while supply-side disruptions are also distorting consumer prices. The end result is that almost half of countries worldwide are seeing double-digit inflation rates or higher.

With new macroeconomic forces shaping the global economy, Visual Capitalist’s Dorothy Nuefeld shows, in the infographic below, countries with the highest inflation rates, using data from Trading Economics.

Double-Digit Inflation in 2022

As the table below shows, countless countries are navigating record-high levels of inflation. Some are even facing triple-digit inflation rates. Globally, Zimbabwe, Lebanon, and Venezuela have the highest rates in the world.

*Inflation rates based on the latest available data.

As price pressures mount, 33 central banks tracked by the Bank of International Settlements (out of a total of 38) have raised interest rates this year. These coordinated rate hikes are the largest in two decades, representing an end to an era of rock-bottom interest rates.

Going into 2023, central banks could continue this shift towards hawkish policies as inflation remains aggressively high.

The Role of Energy Prices

Driven by the war in Ukraine, energy inflation is pushing up the cost of living around the world.

Since October 2020, an index of global energy prices—made up of crude oil, natural gas, coal, and propane—has increased drastically.

Compared to the 2021 average, natural gas prices in Europe are up sixfold. Real European household electricity prices are up 78% and gas prices have climbed even more, at 144% compared to 20-year averages.

Amid global competition for liquefied natural gas supplies, price pressures are likely to stay high, even though they have fallen recently. Other harmful consequences of the energy shock include price volatility, economic strain, and energy shortages.

“The world is in the midst of the first truly global energy crisis, with impacts that will be felt for years to come”.

-Fatih Birol, executive director of the IEA

Double-Digit Inflation: Will it Last?

If history is an example, taming rising prices could take at least a few years yet.

Take the sky-high inflation of the 1980s. Italy, which managed to combat inflation faster than most countries, brought down inflation from 22% in 1980 to 4% in 1986.

If global inflation rates, which hover around 9.8% in 2022, were to follow this course, it would take at least until 2025 for levels to reach the 2% target.

It’s worth noting that inflation was also highly volatile over this decade. Consider how inflation fell across much of the rich world by 1981 but shot up again in 1987 amid higher energy prices. Federal Reserve chair Jerome Powell spoke to the volatility of inflation at their November meeting, indicating that high inflation has a chance of following a period of low inflation.

While the Federal Reserve projects U.S. inflation to fall closer to its 2% target by 2024, the road ahead could still get a lot bumpier between now and then.

Authored by BTCCasey via BitcoinMagazine.com,

The European Union indicated Thursday that it will make cryptocurrency companies report their European users’ holdings to tax authorities.

The proposed eighth Directive on Administrative Cooperation was previously reported on by CoinDesk, and could have wide-reaching implications including forcing non-EU based companies to have to register with tax entities there.

In a statement, the EU Commissioner for tax, Paolo Gentiloni said, “Anonymity means that many crypto-asset users making significant profits fall under the radar of national tax authorities. This is not acceptable.”

The enforcement of the measures was not made entirely clear, as the cryptocurrency industry has various entities and actors residing in various jurisdictions, including some who claim no base of operations. Beyond that, there should be concern for the honeypot of user data that registering user holdings creates. Often, holdings on centralized exchanges (which are dangerous in their own right) are paired with sensitive identifying information which could potentially be used by criminals to attach people to their holdings.

There have been various cases of documented data leaks in and outside of the cryptocurrency industry: and these are simply the ones that surface. Forcing companies to provide European tax authorities — including companies based outside of the EU — once again forces firms to collect copious amounts of data exposing user holdings, and then transmit them to tax authorities in Europe whom they must trust to keep them safe.

Concerns have also been voiced that this could have ramifications for the EU’s Markets in Crypto Assets Regulation (MiCA) which is the “first all-encompassing effort to tackle cryptoassets and brings rules contained in Mifid, Market Abuse and the Prospectus Regulation to the cryptoasset industry,” according to the International Financial Law Review (IFLR).

The European Crypto Initiative made a statement indicating it was “concerned that it would apply to a far wider range of obliged entities and individuals” than MiCA.

The EU has said it believes the move could generate as much as $2.5 billion (2.4 billion euros) through the introduction of the directive.

The West continues ratcheting up its sanctions regimen against Iran, as the now effectively collapsed efforts to restore the JCPOA nuclear deal are ever more distant in the rearview mirror, with the EU on Friday announcing fresh sanctions related to the ongoing protest crackdown in the wake of Mahsa Amini’s death in police custody months ago.

Europe is also taking aim at Iranian military supplies to Russia amid the ongoing conflict in Ukraine. Iran has supplied suicide drones to the Russian military, which have seen increasing use against Ukrainian cities and national energy infrastructure. 

“The new measures will target around eight individuals and organizations involved in the manufacture and delivery of drones Moscow has used in the war on Ukraine,” according to European diplomats cited in AFP.

“Another 20 individuals and one organization will be added to the asset freeze and visa ban blacklist over the repression of demonstrations that have rocked the regime, officials said.”

This follows prior EU sanctions placed on two known drone manufacturers, as well the head of Iran’s Revolutionary Guard Corps (IRGC). 

Further Tehran’s “morality” police and the interior minister are under sanctions – though it should be noted that days ago Tehran claimed to have disbanded the feared morality police as a good faith compromise with the activists. However, protesters have expressed skepticism, saying the government did no such thing.

On Thursday, Tehran authorities were met with international outrage as the judiciary conducted the first ever execution of a man based on charges related to the protests.

23-year old Mohsen Shekari was hanged after being convicted of wounding a government paramilitary officer. Specifically he stood accused of stabbing a Basij paramilitary officer in Tehran on September 23, amid a raging street protest.

France and Germany were among European governments to strongly condemn the execution, with German Foreign Minister Annalena Baerbock saying that Shekari “was tried and executed in a perfidious rushed trial for disagreeing with the regime.”

“The Iranian regime’s inhumanity knows no bounds,” she tweeted. “But the threat of execution will not suffocate people’s desire for freedom.”

Authored by Dave DeCamp via AntiWar.com,

NATO is considering using a $3.4 billion fund that was meant to support the now-defunct US-backed Afghan government to provide more aid for Ukraine, Politico reported this week.

Known as the Afghan National Army Trust Fund, the money was donated by individual NATO countries. The report said that Kyiv has asked NATO to consider using the money to support Ukraine in its war against Russia.

The US is not a contributor to the Afghan fund but has previously provided Ukraine with military equipment that was meant for the old Afghan government. Earlier this year, the US sent Kyiv 16 Russian-made Mi-17 helicopters that it originally procured for Afghanistan.

Western officials told Politico that NATO allies have discussed using the Afghan funds for Ukraine and are leaning toward doing so, although the decision is up to each individual country.

The funds are currently frozen, and NATO is either going to transfer the funds back to the donor countries or into a new fund for Ukraine.

If the money is used for Kyiv, it will likely go to the Ukraine Comprehensive Assistance Package, a fund NATO established in 2016 to give aid to Ukraine.

Ukraine is entirely reliant on aid from the West to fund its war effort and keep the government afloat. Besides the military support, Ukraine wants its Western backers to cover its massive $38 billion budget deficit for 2023.

Authored by Thomas DiLorenzo via LewRockwell.com,

In Hayek’s famous 1944 book, The Road to Serfdom, he warned that the intellectual and political classes of the democracies of that time were embracing some of the same ideas that inspired Hitler’s Germany, Mussolini’s Italy, and Stalin’s Russia:  comprehensive government planning, hyper regulation of industry,  nationalization, welfare statism, and collectivism in general.  He did not predict that these societies would end up “in serfdom,” however, as some have mistakenly claimed.  Quite the contrary.  In his first chapter he clearly stated that he hoped the ideas in the book would help these countries to avoid that disastrous fate.  He hoped the ideas of the book would be a roadblock on the road to serfdom.

The eleventh chapter of The Road to Serfdom is entitled “The End of Truth,” about the historical imperative in all totalitarian states throughout history to destroy freedom of speech so that the only true belief is “the social plan” imposed by the state, whatever that may be.  This is achieved by relentless institutionalized lying and propaganda, coupled with harsh censorship of all contrary ideas or even questions about the propriety of forcefully imposing one single “social plan.” This is American society today, in other words, in case you haven’t noticed.  (Socialism, Hayek said, has always been about substituting the plans of politicians for the plans that all of the citizens make for themselves.  It’s not a matter of planning versus no planning, but who is to do the planning).

The significance of propaganda in totalitarian countries, Hayek wrote, is that “If all the sources of current information are effectively under one single control, it is no longer a question of merely persuading people of this or that.  The skillful propagandist then has power to mold . . . minds in any direction he chooses . . .”  Jeff Deist, among others, has commented that America today has become a “post-persuasion society” and he is right, almost eighty years after Hayek issued this warning.  The Left is no longer willing to seriously debate anything – at least for the time being while they control the universities, all three branches of government, the media, (laughingly-named) “entertainment” industries, and more.  Even dopey Prince Harry publicly denounced the First Amendment in a pathetic attempt to ingratiate himself with Hollywood Leftists like his wife shortly after divorcing himself from his family and moving to Hollywood.  If you disagree with their latest version of socialist totalitarianism (“woke-ism” coupled with green hysteria and calls for worldwide central planning), then you can be canceled, smeared as a racist, a white supremacist, or even fired from your job and prevented from getting a new one.

The moral consequences of totalitarian propaganda are even more profound.  It is “destructive of all morals” because it “undermines one of the foundations of all morals:  the sense and respect for the truth.”  An avalanche of Official Lies has always been the tool of “various theoreticians of the totalitarian system,” wrote Hayek, citing Plato’s “noble lies” and “social myths” championed by the French philosopher Georges Sorel.  The ends justify the lying means to totalitarians everywhere.  When was the last time a “White House spokesperson” did not lie in public?  (See my 1992 book, Official Lies: How Washington Misleads Us, with James T. Bennett).

Of course minority opinions “must also be silenced” and “every act of the government must become sacrosanct and exempt from criticism.”  This was never more on display than in government responses to the “pandemic” of 2020, followed by the Biden campaign and its collusion with “Big Tech” to censor even the president of the United States along with massive evidence of the colossal criminality and corruption of the Biden family crime syndicate.  This was arguably the biggest governmental assault on the First Amendment, apparently organized by the FBI and CIA, since it was essentially done away with by the John Adams administration’s “Sedition Act.”

Academe must also be thoroughly corrupted, said Hayek, for “the disinterested search for truth cannot be allowed in a totalitarian system.”  American universities have gone almost all the way down to the end of the road to serfdom in this regard.  Many have fallen off the cliff completely.  This is especially true, said Hayek, of the disciplines of history, law, and economics.  They must be compromised in a way that supports the state rather than criticizes it, however mildly.  The American history profession is almost completely dominated by Marxists, for example, and economics has been plagued by Keynesian central planners and “market failure theorists” for decades.  As Doug Casey once remarked, most economists today “are political apologists masquerading as economists.”  They “prescribe the way they would like the world to work and tailor theories to help politicians demonstrate the virtue and necessity of their quest for more power.”  The field of economics, said Casey, “has been turned into the handmaiden of government in order to give a scientific justification for things the government . . . wants to do.”

In totalitarian societies, wrote Hayek, truth is not something that is discovered by learning, education, self-study, research, and debate and discussion.  Instead, it is “something to be laid down by authority . . .”  In today’s world, for example, global warming hysteria is “settled science,” the most un-scientific phrase ever uttered.  A true scientist always questions the status quo, not necessarily rejecting it but keeping an open mind that new research can alter his thinking.  Nothing is ever “settled.”  How a slippery politician like Al Gore is considered to be an expert on the philosophy of science – and atmospheric science to boot — is one of the wonders of the world.   (Don’t forget that the notion that the earth was flat was once declared to be “settled science” by the Al Gores of that day).

Medical science is not science, we have been told; Anthony Fauci is medical science. 

Or rather, the “authority” of Anthony Fauci, a grotesquely overpaid government bureaucrat is science.  Again, nothing is more un-scientific than these ridiculous, arrogant, and tyrannical pronouncements by Anthony Fauci and his political sidekicks.

“[I]ntolerance, too, is openly extolled,” in totalitarian societies said Hayek, anticipating by decades the 1960s-era “New Left” hero, the totalitarian intellectual Herbert Marcuse, who authored a widely-celebrated paper on “repressive tolerance,” the idea that only “the oppressed classes” deserve free speech.  In the world of the 60s “New Left,” whose students and political descendants now control almost all of academe, television, the media in general, much of government, “woke” corporations, and other institutions, the “oppressor class” is comprised essentially of all white heterosexual males, especially ones of European descent.  Everyone else is oppressed by them, the theory goes.  The poorest, lowliest, white redneck is said to “oppress” black millionaires and billionaires.  Question this theory in our post-persuasion society and you will be labeled a racist, a white supremacist, and probably even a Nazi.

Hayek based these ideas on his years of study of world history and of the totalitarian regimes of the early twentieth century.  “Wokeness” did not just suddenly appear and proceed to take over almost the entire Western world.  It is just the latest manifestation of totalitarianism that has been marching through the institutions for several generations.  There are always totalitarians in our midst, the title of Chapter 13 of The Road to Serfdom, and today’s totalitarians consider themselves to be standing on the shoulders of all those who preceded them, however unsavory they might have been.  That is why many on the Left celebrated after the worldwide collapse of socialism in the late 1980s and early 1990s.  “We no longer have to be associated with monsters like Stalin, Mao, Nicolae Ceaucescu, and other mass-murdering communists of the twentieth century,” they said.  And like all other totalitarians who came before them, they fully understand that freedom of speech is to them what sunlight or a Christian cross is to Dracula.  That is why they are all now hellbent on destroying Elon Musk, a man who is attempting to add a tiny smidgen of free speech to the stifling, statist political correctness of American society.  Their treatment of Musk will eventually make their treatment of Donald Trump seem like a love fest in comparison.

Their hatred for Trump, by the way, is derived from the same source as their hatred for Elon Musk:  Like Musk, Trump called out and publicized many of the official lies and official liars of the Washington establishment, especially those in the “fake news” business.  The Left considers the fight over free speech to be a political death struggle, and they are right about that.  If anything deserves to be strangled in its crib it is the Left’s current assault on the First Amendment.