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The author Jp Koning
Jp Koning
Working in the bowels of the finance industry. Blogging about monetary phenomena is my side gig.

JP Koning: Moneyness

Moneyness is an economics blog by JP Koning about economics, money and finance. He adds an unique perspective to money-related issues, and explains everything very clearly, this combination sets him apart.

A fifty-year history of Facebook’s Libra

Last week, we finally got some information about what Libra's currency basket would look like. A Libra currency basket will reportedly include... -no Chinese yuan -50% dollar -18% euro -14% yen -11% pound -7% Singapore dollarhttps://t.co/YNbRY9Q02xLibra could have automated the decision by adopting an established unit of account, say the IMF's SDR... — John Paul Koning (@jp_koning) September 20, 2019 If you haven't heard, Libra is a proposed global blockchain-based payments network. It...

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The life and death of an internet monetary meme

Over the last few years I've increasingly crossed paths with the following claim on the internet: "The average life expectancy for a fiat currency is 27 years." Is this claim true? What definitions are being used? I mean, are we talking about inconvertible paper money here, or currency that was convertible into gold, too? I finally got curious enough that I decided to chase down the source of this meme. After all, without knowing what data it is based on, it's hard to evaluate the claim's...

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Why the discrepancy?

Vitalik Buterin had a thought-provoking tweet a few days back about interest rates. Lending DAI to Compound offers 11.5% annual interest. US 10 year treasuries offer 1.5%. Why the discrepancy? — Vitalik Non-giver of Ether (@VitalikButerin) August 23, 2019 Today's post explores what goes into determining interest rates, not blockchain stuff. So for those who don't follow the blockchain world, let me get you up to speed by decoding some of the technical-ese in Buterin's tweet.DAI is a version...

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Starbucks, monetary superpower

I recently spent some time on Twitter musing about the monetary wonders of Starbucks: Wow Starbucks, what a great gig. Starbucks has ~$1.6 billion in 'stored value card liabilities' i.e. the Starbucks Card. So ~6% of the firm's liabilities are comprised of coffee addicts paying 0% for the privilege of lending to their supplier. Source: https://t.co/nGH2arujYz pic.twitter.com/cGcSW3L4MM — JP Koning (@jp_koning) August 11, 2019 Starbucks has around $1.6 billion in stored value card...

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Stigmatized money

Some payments systems are so awkward they scare away the average user. The only people with the patience to stick around must have a motivation for doing so. These include ideologues with an ax to grind, hobbyists who happily embrace complicated features, and criminals/weirdos who are shut out of everything else. Here are a few examples of awkward payments systems:-Local Exchange Trading Systems, or LETS -Bitcoin/Dogecoin -Labor notes -Stamp scrip When usage of a payments system is...

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Classifying cryptocurrencies

Whenever biologists stumble on a strange specimen, they first try to see if it fits into the existing taxonomy. If it doesn't fall within any of the pre-existing categories, they sketch out a new one for it.For people like myself who are interested in monetary phenomena and finance, Bitcoin and other cryptocurrencies like Dogecoin and Litecoin have presented us with the same challenge. How can we classify these strange new instruments?Because they have the word 'currency' in them, the...

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Esperanto, money’s interval of certainty, and how this applies to Facebook’s Libra

Facebook recently announced a new cryptocurrency, Libra. I had earlier speculated about what a Facebook cryptocurrency might look like here for Breakermag. I think this is great news. MasterCard, Visa, and the various national banking systems (many of which are oligopolies) need more competition. With a big player like Facebook entering the market, prices should fall and service improve, making consumers better off. The most interesting thing to me about Facebook's move into payments is...

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Is bitcoin getting less volatile?

I'm going to make the following claim. The price of bitcoin is inherently volatile. Even if bitcoin gets bigger, its core level of volatility is never going to fall. Bitcoin's hyperactive price movements prevent it from becoming a popular medium of exchange. Merchants are too afraid to accept bitcoins. If they do, they could experience large losses. Consumers who hold bitcoins are loath to spend them. Many of these hodlers are trying to change their financial lives by getting exposure to...

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Revisiting stablecoins

Source: Gravity Glue (2014) Cryptocurrencies were supposed to destroy the traditional monetary system. Ten years on, where are we?Bitcoin has been wildly successful, but as a financial game--not as a medium of exchange. It's a fun (and potentially profitable) way to gamble on what Keynes once described as what "average opinion expects the average opinion to be." But no one really uses it to pay for stuff. It's nature as a gambling token makes it too awkward to serve as a true substitute for...

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Kyle Bass’s big nickel bet

In 2011, hedge fund manager Kyle Bass reportedly bought $1 million worth of nickels. Why on earth would anyone want to own 20 million nickels? Let's work out the underlying logic of this trade. A nickel weighs five grams, 75% of which is copper and the rest is nickel. At the time that Bass bought his nickels, the actual metal content of each coin was worth around 6.8 cents. So Bass was buying 6.8 cents for 5 cents, or $1.36 million worth of base metals for just $1 million. To realize this...

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