The Lawrence Chan Blog

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Bartering Destroys Multiplying Effects

Banks facilitate a efficient means for money to freely floating among its users. Banks are supposed to help the multiplying effects in economy by making loans and short term borrowing for the other 99%. It is no longer true as many people already pointed out that the major banks are hoarding cash for their own speculations in various financial markets. Hence the economy at large has not benefit from the helicopter free money from the central banks at all.

In this sense, bartering comes into prominence is a direct result of the banks not doing their job.

The advantage of bartering is the elimination of money in the transaction. Do not underestimate this subtle difference because it changes the nature of the transaction completely. When fiat money is not involved, the transaction cannot be tracked because no one can tell if the transaction has happened.

Governments Hate Bartering

For classic second hand market where you exchange the belongings does not really concern the governments. The value of these transactions are small in comparison to the economy as a whole. For most countries it is perfectly fine to do that with no tax consequence. Even for countries with tax code trying to milk money off these exchanges cannot really enforce these laws efficiently.

Now, imagine that you make a deal with your barber – he will style your hair in exchange for your time to diagnose the computer problem he has. In this situation, since fiat money is not involved, there is no money exchange from one hand to another. There is no banking involved. It stops the multiplying effect right there. Notice the exchange of services in this case cannot be taxed. The aggregated effect is a smaller footprint of fiat money in the economy and the government is about to lose tax dollars in every front – sales tax, income tax, etc.

Currently governments do not really care about this development. As long as the banking system is as broken as it is, politicians and central bankers will have an excuse to keep printing money there as if they are doing their jobs. What they fail to realize is that their actions and the way banks are behaving is feeding the whole world to ditch fiat money. The people in power are forcing the rest of the world to drop the use of fiat money.

Even if the governments understand their mistakes and stop pumping money into the big banks, it is too late to reverse the damage to the fiat money based economy. Once people have tried the modern bartering system, there is no going back. The benefits totally outweigh the minor inconvenience. A major part of the global economy will go hidden (or underground if you prefer the term) from the governments forever.

Suppression Of Bartering

At this point it should be clear why governments always prefer big businesses over small businesses because big businesses seldom barter. That’s why in countries where bartering becomes very powerful the governments will find ways to shutdown these bartering organizations. The usual excuse is that these bartering organization were making illegal tenders. Illegal because these alternative money compete against the fiat money printed by the governments themselves.

The creation of some kind of standardized representation of credit is a normal extension of old style bartering. It makes it easier to exchange goods and services among the members in the bartering group. Hence creating a legal angle for the governments to punish or shutdown the bartering groups based on the use of non-government money.

The modernized version of bartering can now eliminate the need of the credit system in two ways.

First, physical form of such credit is no longer necessary as the transfer of credit can be done through the Internet. Thus eliminating the legal issue of printing a form of money tender.

Second, it is now possible to dynamically evaluate the goods and services in terms of time. In this situation all transactions will be transacted in the floating rate of time value based on a specific type of labour work. In this case even the virtual concept itself cannot be challenged legally because it is not a form of money. The balance you have in the bartering system is simply the amount of manual labour measured in time which you have committed to the system.

Without the need of a pseudo credit system, governments can no longer accuse bartering groups of creating and using illegal tenders. The legality issue of mass scale bartering will always be a muddy issue going forward. For now, the bartering proponents have the upper hand.

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The other talk from Mr. Gourley that illustrate the importance of utilizing computer technology in better ways to improve your odds.

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The interesting development of significant increase in moneyless transactions is something we should pay more attention to. Should this trend continues, it will become a disruptive event in the future on the current global financial system. Besides virtual currency, this is another important development that will affect economy worldwide.

The Cause

The 3 financial bubbles created by the central bankers around the world in year 1998 to 2000, 2006-2008 and since 2009 have completely destroyed the normal economic equilibrium in the micro level across the world. These bubbles destroy the middle class as they were told to participate in the great invention of capitalism through all these financial instruments. As these scams collapse one after another, the misinformed population are hurt so bad economically they can never recover financially within their lifetime.

The global decline in middle class population has created a gap between the lower class and upper class population. This gap disrupts normal economic activities within a society as wealth effect can no longer trickle down efficiently without the middle class. In another words, the rich gets richer but their extra spending do not reach down the class ladder at all.

The Effect

Income obtained from labour and profits generated by small local businesses become insignificant and not sustainable due to inflationary pressure of ever increasing prices on necessities. Bigger governments destroy the rest of the disposable income these middle and lower class population could generate. Politicians always play the blame game on other countries or finger pointing at the existing system. The truth is that they do absolutely nothing to stop the situation from getting worse.

Net effect from this macro problem causes the middle and lower class populations around the world to have less money to sustain their living. More and more people are suffering as the stupidity continues.

The Strike Back

Some people who are badly hurt in this environment choose to cut back on their spending, getting multiple jobs and try their best to live on bare essentials only. These people are normal nice people who will be crushed. The reason is that no matter how hard they try the difficulties to survive will continue to increase. The route they take may be reasonable but it can only work for a short period of time.

Some others who can see beyond the immediate problems choose to strike back, big time. No, I am not talking about starting a revolution. It is next to impossible to do that in the current environment unless your country is one of those at the bottom of the GDP ranking around the world.

For revolution to work, you need majority of the people in your country to not value much of their own lives and the lives of others. You need people willing to die for a cause. When the living condition is marginally acceptable, you will never find enough volunteers to risk their lives in exchange for a regime change.

In my opinion, the strike back I have seen so far is actually better than starting a revolution at this point. The solution these resourceful people have discovered is simple – stop using government issued money. It is happening globally and it is growing strong.

Age Of Virtual Bartering

When people do not have enough money, there are other ways to obtain necessities. They can offer services or whatever existing goods they already have in exchange for the services or goods they want. This is called bartering. In case you do not know, bartering exists before money was created. It is the oldest form of making a trade among people.

In old days bartering has many constraints because you can only do that with people you know. You are also limited by your geographical location where one can deliver the goods or services efficiently. This limitation is now shattered by the Internet.

The modern form of bartering started back in early days of the Internet. Back then, the mechanism was still pretty close to the ancient practice. But things evolve very fast on the Internet. At this point, bartering groups have popped up all around the world with readily available open source software to make it happen in your local community. If you have a skill that worth something or goods with potential suitors, you can list that in these modern barter system in exchange for the things you need.

One good example is the practice of growing your own vegetables at your backyard. Even the Obamas talked about that. What they probably fail to realize, is the unintended consequence. People within close proximity start to cooperate and share their farming produce. In old days it used to be a very complex task to manage the production and co-operation. Now, it is just a matter of signing up online with the co-op movement websites and learn the skills quickly online.

As a result of this co-op, the families involved spend way less in those food items. They no longer shop at the nearby supermarket for these produce. They have less time to spend money on entertainment.

To sum it up – this small part of the fiat money economy just collapsed.

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A good presentation on algos and their impacts on the markets we trade.

This presentation reminds me of a pattern I called VWAP Run that I take advantage of often. Many people who join me at my real-time chat room have heard me calling that out well ahead of time. Many are amazed how I do that. Well, it is not magic.

Consider the scenario where the bots all loaded up on the same side of the boat yet no stops are discovered which is necessary for these bots to exit their positions at a profit. By the time the market is about to close and that one bot chooses to just give up by dumping its position at market, the rest of the bots will follow and dump their positions all at the same time. They will go as far as dumping all the shares / contracts they acquired until the Volume Weighted Average Price of the trading day is reached.

This move is predictable if you know what to look for. For non-trained eyes, you would guess that someone was trying to shake you out of your positions, gunning for your stops, or controlling the price. The truth is much simpler than that. The bots collectively made the same mistake and choose to cut their losses at the same time.

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A small set of regular market breadth data is now available in the Historical Data Bank.

We’ve revised the upload method and it is now much easier for us to maintain the data bank. If things go smoothly, we can add more data quickly.

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