Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18
Gold Price Seasonal Trend Analysis - 14th Sep 18
Growing Number of Small Businesses Opening – and Closing – In the UK - 14th Sep 18
Gold Price Trend Analysis - Video - 14th Sep 18
Esports Is Exploding—Here’s 3 Best Stocks to Profit From - 13th Sep 18
The Four Steel Men Behind Trump’s Trade War - 13th Sep 18
How Trump Tariffs Could Double America’s Trade Losses - 13th Sep 18
Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - 13th Sep 18
Trading Cryptocurrencies: To Win, You Must Know Where You're Wrong - 13th Sep 18
Gold, Silver, and USD Index - Three Important “Nothings” - 13th Sep 18
Precious Metals Sector On a Long-term SELL Signal - 13th Sep 18
Does Gambling Regulation Work - A Case Study - 13th Sep 18
The Ritual Burial of the US Constitution - 12th Sep 18
Stock Market Final Probe Higher ... Then the PANIC! - 12th Sep 18
Gold Nuggets And Silver Bullets - 12th Sep 18
Bitcoin Trading - SEC Strikes Again - 12th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

The Correlation Between Cryptocurrenices & GDP

Currencies / BlockChain Feb 22, 2018 - 03:45 AM GMT

By: Rodney_Johnson

Currencies It was the best of times, it was the best of times. OK, that’s not exactly the Dickens quote from A Tale of Two Cities, but even with the recent volatility and inflation jitters, the sentiment seems to fit the mood of the marketstoday. And what’s not to like?

Tax reform will put more coin in most people’s pockets in the weeks ahead, not to mention fill corporate coffers to the point of overflowing. Based on estimates of future spending and earnings, investors are driving stocks higher from what were already record levels.


But just like a late-night infomercial… that’s not all!

The Bureau of Economic Analysis recently reported its first estimate of fourth-quarter GDP. Personal consumer expenditures (PCE), the primary measure of consumer spending, jumped 3.8%, which gave the overall economy a huge boost, driving GDP growth to 2.6%.

That’s awesome news… until you consider how consumers were able to goose their spending.

To fund their shopping, consumers used a couple of well-known and concerning sources: raiding savings and adding credit card debt.

2017 possibly marked the point at which wages begin moving higher. Private workers enjoyed a 5.2% gain in wages in December, while government workers received a 3.1% boost.

Whether driven by need or want, consumers chose to spend all of those higher earnings and more, dropping the savings rate to 2.6%.

That’s not just the lowest savings rate since the financial crisis, it’s the lowest rate since September 2005, another time when most people thought everything was sunshine and roses…

Economist David Rosenburg calculated that if consumers had maintained their savings rate of 3.3% from the previous quarter, PCE would have clocked in at a modest 0.8%, which would have dropped GDP growth to an almost flat 0.6%.

Adding to the tale of caution, consumers also opened their wallets and pulled out the plastic at the end of 2017. Over the last 13 weeks of the year, consumer credit expanded so quickly that at one point it grew at a 22.5% annualized rate.

Without the dip in savings rate and increased credit card spending, it’s possible GDP might have touched zero at the end of last year, which is a far different story than the one we hear on the evening news, read on the internet, or see in the papers.

As to what people are buying with all the debt, one of our readers, Ray Q., brought up a possibility that has since been echoed elsewhere: cryptocurrencies.

Buying bitcoin or one of the other digital dollars can be a hassle. Purchasers must first establish an account at an exchange, or go through the hassle of setting up their electronic wallet and finding a willing seller.

Then comes the pesky part… paying for it.

Buyers can transfer cold, hard cash into their online accounts, or in many cases, simply make a purchase with a credit card, much like they do on Amazon or any other website. Using a credit card makes the transaction simpler and easy to track, but it comes with issues.

Roughly 18% of bitcoin purchases in December were made with credit cards, and one-fifth of those buyers didn’t pay off their balance at the end of the month. But they aren’t worried.

90% of those who carried their balance forward expect to pay off their debt with their cryptocurrency gains.

Because of that speculative point of view, along with the volatility of cryptocurrencies, Capital One no longer allows customers to buy cryptocurrencies using its credit cards. Discover made the same move in 2015, and Toronto-Dominion Bank limits some transactions.

If consumers choose to save a little more this quarter, or take on less debt, then GDP growth will take a hit and it will reverberate through the financial markets. That brings to mind a different literary reference.

The recent convergence of economic, paycheck, and stock market growth might be “as good as it gets.”

Rodney

Follow me on Twitter ;@RJHSDent

By Rodney Johnson, Senior Editor of Economy & Markets

http://economyandmarkets.com

Copyright © 2017 Rodney Johnson - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Rodney Johnson Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules