Bitcoins: New Gold or Fool’s Gold?

"How does it work? As with any foreign exchange transaction, a person holding local currency must first buy a foreign currency to transact in that currency. Bitcoin is foreign to everyone, so everyone must trade their local currency for Bitcoins through several Bitcoin exchanges that have cropped up around the world. These exchanges purchase Bitcoins, hold them in inventory, and sell them in exchange for the currencies of the world. In order to proliferate the system, new users download software onto their computers, enabling them to act as a node on the Bitcoin platform. In a process known as “hashing,” users’ computers compete to solve the mathematics of each transaction and thereby earn new Bitcoins..

The digital currency was created by an anonymous programmer, code name Satoshi Nakamoto. Bitcoins are remarkably sophisticated, both technically and financially. However, in order to assess Nakamoto’s creation, we must first consider what gives a currency its value. Currencies must be: a medium of exchange; durable and evenly divisible such that the quality of one unit is just as good as another; scarce such that they cannot be created at will; widely acceptable as payment to all participants for their goods or services; and used as a standard of market value, thereby enabling users of the currency to save money for later use."

http://blogs.cfainstitute.org/investor/2013/04/08/bitcoins-new-gold-or-fools-gold/

The Tailwinds Pushing the U.S. Dollar Higher

"I know this is as welcome in many circles as a flashbang tossed on the table in a swank dinner party, but the U.S. dollar is going a lot higher over the next few years. For a variety of reasons, many observers expect the dollar to decline against other currencies and gold, the one apples-to-apples measure of a currency's international purchasing power.

The tailwinds pushing the dollar higher are less intuitively appealing than the reasons given for its coming decline:

1. The Federal Reserve printing another trillion dollars (expanding its balance sheet) will devalue the dollar because money supply is expanding faster than the real economy.

2. The Fed is printing money with the intent of devaluing the dollar to make U.S. exports more competitive globally and thereby boost the domestic economy.

Let's examine each point.(...)

As for point 2:

2A. Exports are 13% of the economy. A stronger dollar would reduce the cost of oil, helping 100% of the economy, including exporters. Why would the Fed damage the entire economy to boost exports from 13% to 14% of the domestic economy? It makes no sense.

2B. Most U.S. exports are either must-have's (soybeans, grain, etc.) that buyers will buy at any price because they need to feed their people (and recall that agricultural commodities often fluctuate in a wide price band due to supply-demand issues, so if they rise 50% due to a rising dollar, it's no different than price increases due to droughts) or they are products that are counted as exports but largely made with non-U.S. parts.

How much of the iPad is actually made in the U.S.? Basically zero. Is it counted as an export? Yes. How much of a Boeing 787 airliner is actually manufactured in the U.S.? Perhaps a third. Sorting out what is actually made in the U.S. within complex corporate supply chains is not easy, and the results are often misleading."

http://charleshughsmith.blogspot.co.uk/2013/03/the-tailwinds-pushing-us-dollar-higher.html