It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Given how poorly states like California and Illinois have funded the pension funds for their own employees, one would think that this would stop dead in its tracks any plan to have the government assist in managing private sector funds too. The spate of recent activity, however, suggests otherwise.
The financial world is plodding along like a drunken sailor avoiding debt collectors by keeping no cash in his wallet. It’s not the kind of calm that’s going to last or end well. But the storm will have to wait until after the Olympics.What a game! We’ve never watched ice hockey closely before. But watching […]
“When they come for my gun, they will have to pry it out of my cold, dead hands,” is a common refrain I often hear from the Neo-Cons when there is a threat, credible or otherwise, that the U.S. government is going to take their firearms.And, when I hear this crazy talk, I agree with […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Amidst all the revelations about how the American people, many of whom are absolutely convinced they live in a free society, have their telephone calls, emails, website visits, and who knows what else under surveillance by their own government, let’s not forget the massive infringements on financial privacy that have gone on for decades.Consider, for […]
Image: ShutterstockBitInstant CEO Charlie Shrem, along with alleged co-conspirator Robert Faiella, was arrested by federal authorities last week for allegedly laundering more than $1 million worth of Bitcoins. This is a tiny amount compared to the largest drug-and-terrorism money laundering case ever. Yet when British bank HSBC was found guilty in 2012 of laundering billions, […]
The exercise had an awesome name, inspired by the movies: “Quantum Dawn 2.”On July 18, scads of U.S. banks, stock exchanges and government agencies took part in a digital fire drill — a practice run in the event all of Wall Street came under massive cyberattack.This isn’t the first time banks have come under an […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
So you’ve maneuvered the Obamacare website, plugged in your top-secret information and found out how much you are forced to pay to avoid a fine.And for some of you, it turns out you qualify for a government subsidy — making the premium sound like a bargain. But signing on that line to accept the government’s […]
The Largest Company in History:“The United States Corporation of Government (USCOG)”I follow global social and commercial networks, looking for entrepreneurial opportunities.Innovation surges when industry and government models change. Buggy whips. Landline phones. Railroads. The Soviet Union. Apartheid South Africa. All marked social and commercial innovation, both bad and good.We are witnessing a new form of […]
We’d like to give the banks in Australia some credit. They’ve finally gone and done it. They have caught up with 1960s technology. They’ve figured out how to use PIN numbers.How to only use PIN numbers, that is. They’re considering scrapping signatures on credit cards to cut down on fraud. Apparently, having to verify your […]
We put in a good-citizen call to the SEC the other day.“There’s a massive scheme to manipulate stock prices,” we told the friendly agent.“I have to tell you that your call is being monitored so that we can better serve the public,” he replied.“Oh, don’t worry about that. The NSA is tapping our call anyway.”“Are […]
Bitcoins are largely considered digital currency (or “crypto currency”) so you’d expect it to be treated like currency on a retail web site. But the Internal Revenue Service might not think so.
Politicians — elected officials — are street smart rather than book smart.If you care about influencing government policy it helps to know how they think.Forbes contributor Nathan Lewis argues that:“Too much is done today on the oral tradition. That is, literally, what it is. In this post-Gutenberg age, we have some better alternatives.“Thus, we need […]
Bitcoin has been making headlines for months now. Extreme price fluctuations have sparked a vigorous debate: Is it a currency or a scam? Is Bitcoin viable in the long-term, or are we witnessing a bubble waiting to burst?The answers to these questions are simple: Yes, Bitcoin is a currency, but we cannot know if it […]
The Silk Road was an undercover website where you could buy or sell illegal goods — drugs mainly. I believe passports were changing hands for about $6,000, and I understand weapons were also sold, but that was ceased in response to the spate of shootings in the U.S. over the summer. The essence of the […]
The market has selected different things as money throughout history. Some of these items have served as money in isolated places for specific periods of time — for instance, cigarettes in prisoner-of-war camps. Cigarettes continue to be a currency in prisons if allowed, but if not, according to Wikipedia, “postage stamps have become a more […]
[Ed. Note: This article originally published on Jan. 24, 2013]Stocks up. Gold down. Bitcoin… waaay up.The S&P 500 busted through the 1,500 mark this morning. Stocks haven’t been this expensive since 2007… right before they got a whole lot cheaper… for a whole lot longer. Gold, meanwhile, dipped a tad. This, despite central bankers of […]
Now, this is sheer entertainment. The Chicago branch of the Federal Reserve has addressed the great monetary question of our day. A researcher has taken a detailed look at the prospects for market-based crypto-currency, with a special focus on Bitcoin. It concludes that Bitcoin is not a viable replacement for the dollar. The report includes […]
The standard version of how money came to be goes like this: First, there was barter. (A handful of nails for a pint of ale!) Then, along came various forms of money. An evolutionary derby eventually crowned gold and silver as the supreme money. And finally, credit (or debt) was born. This is the apex […]
2013 represents another turning point in the demise of the American Empire. If you view it in economic (rather than ethical or moral) terms, the high water mark of Empire was probably in the late 1990s.But the Internet bubble and bust marked an important turning point. It coincided with the birth of the euro, a […]
It was a wild ride last week in the world of the Deep Web, that section of the Internet that requires special tools to access. The feds took down the site called Silk Road and claim to have arrested its founder and administrator. The news streams were filled with lurid tales of derring-do in this […]
My community in the Deep South prides itself on friendship, community feeling, and an overall happy spirit. So it was a bit strange for all of this to be utterly smashed and obliterated in the course of a few calamitous weeks in which friend turned against friend, colleagues became antagonists and enemies, and families were […]
A new assessment of state pension obligations suggests the problem is even worse than it already appears.How much worse?EMPTY COOKIE JAR: Pension liabilities are worse than many states’ official figures indicate.Using a more conservative method of accounting for financial gains in the marketplace, there is a $4.1 trillion gap between assets and liabilities — known […]
I dreamed I saw Bernard von NotHaus, alive as you or me.Said I, “But Bernard, you’ve been jailed two years.”“I never was,” said he.Bernard has been the called the Rosa Parks of the alternative money movement. More than 10 years ago, he had this idea that he would make his own money — not the […]
In March, I was at a conference in New Hampshire when a few Bitcoin businessmen sat me down to lunch. It seems like the last thing one wants, a long lunch at which one is hammered by unrelenting geek-speak about the glories of some crazy software thing.
It turned out very differently. A developer suggested that I download a smartphone application called Blockchain. I did this. He then took at an image of my QR code — that funny square design that looks like a 3-D bar code. It looks like this:
Within a few seconds, I was the proud owner of my first Bitcoin. I felt the rush. Ownership changes everything.
My wallet lived on my smartphone. Only three years ago, some wonderful applications had already developed around the currency unit. Although I’m a bit of a “techy”, I’m not a rocket scientist, and I’m quite certain that I would have been out of my league.
But this is how digital institutions develop to become ever more user-friendly. At the same event at which I became a Bitcoin owner, I also used a Bitcoin ATM. I put in the green stuff, held my digital wallet up to the scanner, and then felt the buzz on my smartphone. Physical became digital. Beautiful.
But still I wondered what exactly I could do with these things. That’s when the consumer world of Bitcoin products appeared before me. We aren’t just talking about Silk Road — a website that became notorious for enabling the easy, anonymous buying and selling of drugs. There are Bitcoin stores everywhere. And there are services through which you can buy from any website with a Bitcoin interface. There was even talk of Bitcoin futures markets. Some companies were rumored to be going public with Bitcoins, thereby bypassing the whole of the Securities and Exchange Commission. The implications are mind-blowing.
Still, I’m a tactile kind of guy. I need to experience things. So I went to one of these sites. I brought the first product I saw (why, I do not know). It was a pair of pliers for crimping electric cables. I put in my shipping address and up came a note that said it was time to pay. This is the moment I had been waiting for. A QR code popped up on-screen. I held up my “wallet” and scanned. In less than two seconds, the deed was done. It was easier than Amazon’s one-click ordering system.
My heart raced. I jumped out of my chair and did a quick song and dance around the room. Somehow, I had seen it thoroughly for the first time: This is the future.
The pliers arrived two days later, and even though I have no use for them, I still treasure them.
Bitcoin had already taken off when the surprising Cyprus crisis hit. The government was talking about seizing bank deposits as a way of bailing out the whole system. During this period, Bitcoin essentially doubled in value. Press reports said that people were pulling out government currency and converting it, not only in Cyprus, but also in Spain, Italy, and elsewhere. The price of Bitcoin in terms of dollars soared.
Another way to put this: The prices of goods and services in terms of Bitcoin were going down. Yes, this is the much-dreaded system that mainstream economists decry as “deflation.” The famed Keynesian Paul Krugman has even gone so far as to say that the worst thing about Bitcoin is that people hoard them, instead of spending them, thereby replicating the feature of the gold standard that he hates the most! He might as well have given a ringing endorsement as far as I’m concerned.
Obsession and Resentment
My own experience with Bitcoin during this time intensified. I began to call friends on Skype and scan their QR codes and trade currencies. I began to rope other people into the obsession based on my experience: You have to own to believe. After one full day of buying, selling, and using Bitcoins, I had the strange experience of resenting that I had to pay a cab fare in plain old U.S. dollars.
How can you obtain Bitcoins? This can be a bit tricky, but you have choices. You can go to localbitcoins.com and find a local person to meet you to trade cash for Bitcoins. Usually, this takes place at high premiums, anywhere from 10-50%, depending on how competitive the local market is. It is understandable why people are reluctant to do this, no matter how safe it is. There is just something that seems sketchy about meeting a stranger in an all-night cafe to do some strange digital currency exchange.
A more conventional route is to go to one of many online sellers, link up your bank account, and buy.
This process can take a few days. And then when you set out to transfer the funds, you might be surprised at the limits in the market that exist these days. Sites are rationing Bitcoin selling based on availability. It could take 10 days or more to go from nonowner to real owner. But once you have them, you are off to the races. Sending and receiving money has never been easier.
As of this writing, a Bitcoin is trading for $139. Just three years ago, it hovered at 0.14 cents. Many people look at the current market and think that surely this is a speculative bubble. That could be true, but it might not be. People are exchanging an unstable, fiat paper for something with a real title that cannot be duplicated. Everyone knows precisely how many Bitcoins exist at any time. Anyone can observe the transactions taking place in real-time. Its price can go up and down, and that’s fine, but there is no real speculation going on here endogenous to the Bitcoin market itself.
Is it a pyramid scheme? The defining mark of a pyramid scheme is that more than one person has an equal claim on the same money or good. This is physically impossible with Bitcoin. The program is set up as a strict property rights regime with no exceptions. In fact, in early March, there was a brief hiccup in the system when some new coins were approved by one group of developers but not by another. A “fork” appeared in the system. The price began to fall. Developers worked fast to resolve the dispute, and eventually the system — and the price — returned to normal. This is the advantage of the “open source system.”
But what about the vague sense some people have that a handful of coders cannot on their own cause a new currency to come into existence? Well, if you look back at what Austrian monetary theorist Carl Menger says, this is precisely how gold became money. It was not at first used by everyone. Every new currency is at first used only “by the most discerning and most capable economizing individuals.” Their successful behaviors are then emulated by others. In other words, the emergence of money involves entrepreneurship — that is, being alert to opportunities to discover and provide something new.
The single biggest problem with Bitcoins right now is getting them. The exchanges are overloaded. They can’t sell them fast enough. The virtual Bitcoin trading floors of these exchanges are full and it’s becoming increasingly difficult to make a deal.
This is all part of the pangs of growing, but it can be extremely frustrating for users. What we need are more ATMs that are hooked directly into exchanges. When those come online, crazy things could start happening. We could be looking at the global unraveling of all government paper.
But what about a government crackdown? No doubt that attempt will be made. Already, government agencies are expressing some degree of annoyance at what could be. But governments haven’t been able to control the cash economy. It would be infinitely more difficult to do this with a virtual currency with no central bank, with encryption, with millions of users per day. Controlling that would be unthinkable.
There was a time when the idea that e-books would replace physical books was absurd. When I first took a look at the early generation of e-readers, I laughed and scoffed. It will never happen. Now I find myself looking for a home for my physical books and loading up on e-books by the hundreds. Such is the way markets surprise us. Technology without central planners makes dreams come true.
It’s possible that Bitcoin will flop. Maybe it is just the first generation. Maybe thousands of people will lose their shirts in this first go-round. But is the digitization of money coming? Absolutely. Will there always be skeptics out there? Absolutely. But in this case, they are not in charge. Markets will do what they do, building the future whether we approve or understand it fully or not. The future will not be stopped.