A great technology solves a problem that we didn’t know we had. It makes us aware of deprivations we didn’t know existed until we discover the new thing. Once discovered, we can’t go back.People in the 1950s, for example, never missed the smart phone. They were pleased to have a phone at all. But today, […]
In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.The U.S. was already the world’s commercial powerhouse, having eclipsed the British […]
When you type a website address into a browser, you might have noticed that the letters “http” appear at the front. “HTTP” stands for Hypertext Transfer Protocol. In typing a Web address, you are actually sending an HTTP command to transmit that website to you. Hypertext Transfer Protocol is the means by which information is […]
In 2012, money mandarins running the European Union chose stagnation over restructuring. Here’s a consequence of that choice: expectations for a self-sustaining economic recovery keep getting crushed.Two years ago, European Central Bank (ECB) chief Mario Draghi promised to do “whatever it takes” to hold the eurozone together. He bluffed nervous investors into believing in a […]
Here’s a fun fact: Although we all hate the U.S. dollar, as it continues to hemorrhage wealth, its foothold as the world’s reserve currency isn’t going to disappear overnight.A Russian gas deal with China won’t change that — as we’ll highlight below.But before we get to the nitty-gritty, let’s dive into a story that’s right […]
Franklin Delano Roosevelt famously used the term “forgotten man” in a 1932 speech to describe those at the bottom of the economic pyramid who, he felt, government should aid.But the originator of the phrase “forgotten man” had a whole different meaning in mind. He aimed to expose the seeming good intentions of government to reveal […]
“As the nation’s central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding […]
The Keynesian disaster recovery plan has been to lower rates, force people to take more risk in search of yield, and entice others to borrow and spend and, magically, more jobs will be created. If people won’t buy stocks, central banks will.Back in 2011, Ben Bernanke, when asked if QE2 was driving up stock prices, […]
According to the Bureau of Labor Statistics, consumer prices are rising at a 2.1% annual rate. This suggests to us that the current stock market boom will die with a bang, rather than a whimper.Fed economists say they don’t think inflation rates are rising. They think the most recent reading is a fluke. But why […]
Real progress happens through real people, ideas, and innovations. Not by legislation argued and debated in Congress. Right now, one of the most influential technologies is changing the way people do business. And reinventing the future in the process.
As the world gets more digital, people forget about the benefits of transacting in cash. And government officials know that.
The experts will tell you the recession is over, but they’re only torturing the data to hide the truth. The economy never recovered from the downturn it experienced. But the downturn happened in 2000, not 2008. The country’s been in the middle of a 14 year recession and hardly anyone knows the truth.
Every time Bitcoin crashes, it winds up at a price greater than it’s previous high. Yet the experts still call it a currency fad that will fade away. But a little over a year since it really took up, the digital currency is still going strong, and is once again seeing its price rise. But is there another reason why people are buying Bitcoins.
All paper currency has a shelf life. It could be 5 years or 500 years, but at some point, the value of any paper currency eventually reaches zero. That's why, for centuries, people have turned to one shiny metal to safeguard their personal store of wealth. And, as Jim Rickards explains, you still have that option. Read on...
Edward Snowden’s one year visa in Russia expires at the end of next month. With only a few weeks left before he finds himself without a safe country to live in, he sat down to give an exclusive interview. Here are the most important things he wants you to remember from his recent sacrifice.
It’s a destructive cycle that comes around everytime your politicians ask you to take to the polls. The government’s meddling creates unexpected problems that eventually overshadow the planners’ original intentions. But that only leads the way for even more interventions.
Politicians love inflation. It’s a way to pay for the government’s debts without upsetting the public by raising taxes, or their special interests by cutting government. So they’ll flood the economy with easy money and eat away at your savings. But that’s only part of the story...
Obama recently claimed this was the “Decade of the Brain”. But it not the first time the government made that promise. The last time they did it, they wasted millions of your tax dollars. Now they’re back for round two. But this time, their failure could mean more than squandered money. It could mean making Alzheimer’s even worse for those who suffer from it.
“So we have, indeed, had a disappointingly slow recovery, and our consistent expectations for a pickup in growth have been dashed over a number of years… And the labor market is behaving in some perplexing ways and showing patterns that are novel.”–Federal Reserve Chairperson Janet Yellen in a speech to the Economic Club of New […]
Politicians who love Big Government love talking about the minimum wage. It’s one of the few policy where they don’t have to ask their constituents to pony up the extra tax dollars to pay the higher costs. Instead, they pass the buck to business owners. They can’t print money, nor can they can force you to pay more. So they cut back hours and fire the very workers politicians tried to help. But that’s how things go when you mess with the economy.
Economists aren’t physicists. But they sure do like to act like they are sometimes. When scientists reach a consensus about something, it usually means they’re breaking new ground on a theory based on hard facts and proven evidence. When economists agree on something, it shows the limitations of a field that tries to model how humans are supposed to behave. And that’s where the danger lies. Especially when it comes to things like U.S. Treasurys.
Ask a D.C. insider what’s the best way to solve the debt crisis. Nine times out of ten, they’ll recommend taking on more debt. That’s how things operate in the Potomac swamp. Up is down, right is left, digging yourself into more debt is the best way to get out of it. But it wasn’t always like this. In fact, there used to be common sense when it came to the economy. So where did it all go wrong?
Just because you’re retired doesn’t mean you have to stop working. Especially now that you have all the time in the world to do what you really want. Entrepreneurs don’t only come out of Silicon Valley. They come from all walks of life, from all different ages. If you’re retired and want to stay active while you relax, then find out the steps you need to take in order to start, manage, and grow your next small business.
Austrian economics does more than tell you what happens when the government disturbs market forces. In the hands of knowledgeable investors and entrepreneurs, it can tell you exactly what to expect from the market. Market behavior depends on how people behave. And how people behave is central to the Austrian perspective.
The U.S. dollar has been the world's reserve currency for almost a century, and already there are signs it may be in decline. But that doesn't mean it's not still valuable. On the contrary... As Chris Mayer explains, there are many reasons the U.S. dollar will remain relevant on the world stage for years to come. Read on...
The government will do whatever it takes to make sure it has enough of your money to fund itself. On the surface you might think that means enduring a grueling audit. But the IRS and the government is more than willing to ignore your privacy in the cold relentless pursuit of the money they think they deserve. As they get bigger and bigger every year, the smaller and smaller your paycheck becomes as they leach off it.
World War II might have dragged the country out of the Great Depression, but it did so at a great price. Central planning took center stage, and politicans and bureaucrats suddenly knew what was best for America, the economy, and your life. On top of that, they replaced the free market with a new economic system… Creditism.
Understanding Bitcoin requires that we understand the limits of our ability to imagine the future that the market can create for us. That is exactly what is happening with Bitcoin right now. As I type, the price is exploding, the main exchanges are overloaded, and people around the world can’t convert from government currency into this digital gold fast enough.
Absolutely no one imagined such a thing five years ago. Why are we surprised? We should get used to surprises in this digital age. Thirty years ago, for example, if someone had said that electronic text — digits flying through the air and landing in personalized inboxes owned by us all that we check at will, any time of the day or night — would eventually displace first-class mail, you might have said this is impossible.
After all, not even The Jetsons cartoon imagined email. Elroy brought notes home from his teacher on pieces of paper. Still, email has largely displaced first-class mail, just as texting and social network private messages and even Voice over Internet Protocol are replacing the traditional telephone.
It turns out that the future is really hard to imagine, especially when entrepreneurs specialize in surprising us with innovations. The markets are always outsmarting even the most wild-eyed dreamers, and it is certainly smarter than the intellectual who keeps saying such and such cannot happen.
It’s the same today. What if I suggested that digital money could eventually come to replace government paper money? Heaven knows we need a replacement.
Solving Problems a Byte at a Time
Money started in modern times as gold and silver, and it was controlled by its owners and users. Then the politicians got hold of it — a controlling interest in half of every transaction — and look what they did. Today, money is rooted in nothing at all, and its value is subject to the whims of central planners, politicians, and monetary bureaucrats. This is not a very modern system when we consider a world in which the market is driving innovations in other aspects of our daily lives.
Maybe it was just a matter of time. The practicality is impossible to deny: Gamers needed tokens they could trade. Digital real estate needed to be bought and sold. Money was also becoming more and more notional too, with wire transfers, bank computer systems, and card networks serving to move “money” around. The whole world was gradually migrating to the digital sphere, but conventional money was attached to the ground, to vaults owned or controlled by governments.
The geeks went to work on it in the 1990s and developed a number of prototypes — Ecash, bit gold, RPOW, b-money — but they all faltered for the same reason: Their supply could not be limited, and no one could figure out how to make them impossible to double- and triple-spend. Normally, reproducibility is a wonderful thing. You can send me an image and still keep it. You can send me a song and not lose control of yours. The Internet made possible infinite copying, which is great for media and texts and — with 3-D printing — even objects. But this is not a feature that benefits a medium of exchange.
After all, a currency is useless unless it is scarce and its replication carefully controlled. Think of the gold standard. There is a fixed amount of gold in the world, and it enters into economic life only through hard work and real expenditure. Gold has to be mined. All gold is interchangeable with all other gold, but when I own an ounce, you can’t own it at the same time. How can such a system be replicated in the digital sphere? How can you assign titles to a fungible digital good and makes sure that these titles are absolutely sticky to the property in question?
Follow the Money
Finally, it happened. In 2008, a person called “Satoshi Nakamoto” created Bitcoin. He wasn’t the first to solve the problem of double-spending. A currency called e-gold did that, but the flaw was that there was a central entity in charge that users had to trust. Bitcoin removed this failure, enabling miners themselves to constantly validate the transaction record. Nakamoto had each user download the full ledger of all existing Bitcoins so that each could be checked for its title and not used more than once at the same time. With his system, every coin had an owner, and the system could not be gamed.
Further, Nakamoto built in a system of mining that attempts to replicate the experience of the gold standard. The math equations you have to solve get harder over time to adjust to expansions of computing power involved in the mining. The early creators had it easy, just as the early miners of gold could pan it out of the river, though later they had to dig into the mountain. Nakamoto put a limit on the number of coins that can be mined (21 million by 2140). (A new coin currently is mined every 20 seconds or so, and a transaction occurs every second.)
He made his code completely open source and available to all so that it could be trusted. And the payment system uses the most advanced form of encryption, with public keys visible to all and a scrambling system that makes its connection to the private key impossible to discover.
No one would be in charge of the system; everyone would be in charge of the system: This is what it means to be open source, and it’s the same dynamic that has made WordPress a powerhouse in the software community. There would be no need for an “Audit Bitcoin” movement. Trust, anonymity, speed, strict property rights, and the possibility that applications could be built on top of the infrastructure: This was perfect.
It went live on Nov. 1, 2008. To really appreciate why this matters, consider the times. The entire political and financial establishment was in full-scale panic meltdown. The real estate markets had collapsed, pulling down the balance sheets of the major banks. The investment banks were unloading mortgage-backed securities at an unprecedented pace. Boats delivering goods couldn’t leave shore because they couldn’t find backers for their insurance bonds. For a moment, it seemed the world was ending. The Republicans held the White House, but the unthinkable still happened: Government and the central banks decided to attempt a full-scale rescue of the whole system, spending and creating trillions in new paper tickets to fill bank vaults.
Clearly, government paper was failing. A digital alternative had to exist. But what gave Bitcoin its value? There were several factors. It was not fixed to any existing currency, so it could float according to human valuation. It was made from real stuff: the very 1s and 0s that were driving forward the global market economy. And while 1s and 0s can be reproduced unto infinity, the new coins could not, thanks to a strict system in which the coin and its public key were strictly controlled and the ledger updated for every transaction. Its soundness could be checked constantly through instant conversion to other currencies as well as goods and services.
The model seemed impenetrable, the first digital currency that really addressed all the problems that had doomed previous attempts.
Stay tuned for tomorrow’s conclusion, in which you’ll learn about my own personal experience with the currency, including my very first Bitcoin purchase. Hopefully, you’ll see, just like I did, how simple, revolutionary and exciting this idea can be.