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 […]
I was daydreaming over the weekend. The subject: notable intellectual epiphanies I’ve experienced in the course of my life.
These are moments when someone reveals something to you that shakes you up. It runs contrary to everything you ever thought possible. You resist it at first, but can’t come up with a proof to the contrary. Finally, you embrace it, even with some discomfort. As the insight settles in, the world seems like a different place. You never shake off an epiphany, and you don’t really want to. It haunts you forever.
Bitcoin is one of those. Well, not directly. But had it not been for another epiphany, I would have paid no attention to the gaggle of geeks and their squawking about some new Internet money.
I was 20 years old and studying economics, with a focus on monetary policy and how it should be conducted. Somehow, I came across a monograph by Murray Rothbard called “What Has Government Done to Our Money?” Most of the content was familiar. It told how central banks and inflationary policies reduce money’s purchasing power, and why a hard money system would be better than a paper money system.
All fine. Agree. But there was this small section in this book, only a few paragraphs long, in which Rothbard made the claim that shook me up. He said that government doesn’t need to be involved with money at all. Money came from the market and it can remain part of the market. Producers can mint money the same as other producers make food, shoes, and calculators. Money is just a good like any other. It should be fully restored to the market, and government should keep its mitts off it completely.
This blew my mind. Why? Because it seems outlandish. Everything we know about money as a thing involves government. Every bill has a politician’s picture on it. It is printed by the U.S. Treasury. Banking and monetary policies always involve big shots with power. It’s been true in my lifetime, my parents’ lifetime, and their parents’ before them. It’s true in the 19th century too, and all the way back to the Revolutionary War.
Hasn’t money always been this way? Look at the Bible, for example. Jesus was confronted with a Roman coin with a picture of Caesar. He asked to whom it belongs, and he gave a puzzling and even evasive answer. In this case, and in every other I had known, government and money just go together.
Well, there is another history that we aren’t taught in school. Money originated and was produced privately. It was only later taken over by government, and for obvious reasons. A government that controls the money controls the economy. It is in a position to devalue the people’s money and have a source of revenue without taxing people. It can pass out favors to powerful members of society.
But government money is never stable. Private alternatives keep re-emerging. It was true in the middle ages. Private mints thrived — until they were shut down. It was true in the Industrial Revolution — until the private mints were shut down. Even in the United States in the 19th century, private currencies were a feature of every frontier territory — until they were later shut down.
In the 20th century, money was nationalized in all countries by governments. This happened in 1913 in the U.S. with the creation of the Federal Reserve. Government took ownership and gave control to a private cartel. The private cartel agreed to support the government. And in return the government would provide legal cover to the cartel to guarantee its stability and longevity. The rest of the history of depreciation and business cycles was already in the bag. It was just a matter of time.
But what about today? Is there really a way that money could be privatized again? Can we somehow restore sound money by making it privately produced and owned? Of course. Government only needs to get out of the way. Free enterprise would take over from there. How can we be sure? Well, money is rather useful. The private sector specializes in making and managing useful things.
Will it happen? Anything is possible, I suppose. But actually, there is no earthly reason to believe it will happen. The case for fundamental reform has been on the table for decades. The evidence that we need it is everywhere around us. But politics and scientific evidence don’t mix well. The political class and its financial backers do not want reform.
Without them, reform is not possible. It’s great to talk about the gold standard, but such talk is a pure abstraction in today’s climate.
Is there a ray of hope? Sure. James Cox in his excellent book Bitcoin and Digital Currencies: The New World of Money and Freedom (Laissez Faire Books, 2013) shows that there is a pattern at work here. Money first emerges as hard money. It is then taken over to become soft money, which the government then destroys. At this point, money gets reinvented by markets, and the cycle begins anew. He demonstrates the existence of this cycle from the ancient world to the present.
What form does sound money take in the digital age? Cox says it is digital. Bitcoin, then, represents the embodiment of a new private money — the Internet equivalent of the gold standard. It has all the properties of great money, but even improves on gold, because it operates as both a money and a payment system.
No money in history has managed to be both at once. This is because Bitcoin doesn’t have the storage and transport costs that other sound monies have had. With gold and silver, you need institutions to move the stuff around. You need institutions to process payments. You can exchange “peer to peer,” but it is cumbersome — and somewhat ridiculous in a global economy in which digital and universal trade is the norm.
This is why Bitcoin is so significant, and even epoch-changing. It deals with many problems at once. It solves the problem of having to trust third-party payment systems. It gets government out of the picture. It provides security for users by using the highest possible encryption standard for exchanges. It enables peer-to-peer exchange even in the absence of geographic proximity. And its surety as a money is even more uncompromisable than gold and silver, which have to be physically stored and can always be confiscated.
In Cox’s view, then, Bitcoin is the beginning of a new stage of monetary economics, one characterized by hard money. But it stands a greater chance of success than that which came before because it is protected against nationalization by government. Government can’t abolish math. It can ban math, but it won’t likely succeed. Similarly, it can ban Bitcoin, but Bitcoin won’t care. It is going to continue to grow and do what it wants to do.
So far, this is the best book to appear on the subject of Bitcoin, because it puts the innovation in the context of the whole of monetary history. This is a perspective we’ve so far missed. Cox argues that it is the new safe haven and, even more than that, it is advent of a new form of monetary freedom.
To be sure, Cox sees potential problems. The government can attack the exchanges — and indeed, government has already done this. There is a potential technical problem that we will encounter many years down the road when the mining stops (2140), and there is no incentive for transaction verification. Finally, Cox says that the real threat to Bitcoin’s future is not technological, but economic. Other currencies could come along that will make Bitcoin obsolete.
Had it not been for my epiphany when I was 20, when Rothbard proved to my satisfaction that money can be fully private, I would not have believed a word of this. I understand why some people are incredulous about digital currency. These same people have real doubts that markets can reinvent and manage money. Yes, in an age of nationalized money, such an idea seems crazy. But look at Bitcoin today and you see it happening already. A new world of money and freedom is already emerging.
Remember, too, that Bitcoin is only four years old. When the enterprise-driving portion of the Internet was four years old, Amazon.com looked like nothing impressive, and all the pundits were putting it down as an inevitable flop. So too for Bitcoin. Take a longer view. You might have an epiphany.