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 […]
As someone who only recently dived into the rocky Bitcoin waters — and discovered a world I had never imagined — I enjoy talking to others who have been there longer. There are some amazing stories out there. We are sitting here today with Bitcoin comfortably trading at 1 BTC to $134, and we take it all for granted. But it was not always so.
Bitcoin came into the world worth absolutely nothing in January 2009, only four years ago. In late 2010, it started to move up in ways that blew the minds of innumerable skeptics. In February 2011, there was a milestone that stunned people who were paying attention. It seemed like the impossible was happening, or maybe it was just a crazy bubble.
It was in that month that Bitcoin achieved parity with the dollar. You could trade 1 Bitcoin for $1. It had officially arrived, or so it seemed. Some hyper-geeks who had been owners of thousands of Bitcoins figured that the moment had arrived. They sold their Bitcoins for dollars and made several thousands of dollars. That was the end. They congratulated themselves for being savvy speculators.
Whoops. If they had held on, what might have happened? Well, they would be millionaires today. But once they sold, they had to spend even more to acquire the same amount. Welcome to the real world of speculation. You win some and you lose some. Sometimes both happen with the same trade.
The “early adopters” know this sector very well. They are not shaken at all by the run-ups and sell-offs. They know not to panic in either direction.
One of the fascinating things about this market is how it has drawn in a younger generation to do boots-on-the-ground investing. It has taught people a number of important life lessons, such as to avoid doing the obvious. If you do what is obvious, you buy high and sell low. To do the opposite requires you to break from the pack and trust that your knowledge is better than that of the screaming mob out there.
If you talk to savvy Bitcoin people, they will be the first to tell you that the intense focus on the exchange rate — which afflicts virtually every “newbie” out there — is absolutely wrong. If anything, they say the exchange rate is a distraction.
The purpose of this virtual currency is not to be a speculative vehicle, but rather a means of exchange — a real money. Of course, it has to have value in terms of goods and services in order to achieve that, and that value can also be assessed in terms of existing government monies. But the real aim of this combination payment system and means of exchange is to go its own way as an authentic money.
If this happens, a new world opens up. Just imagine that a Cyprian-style haircut is scheduled in the United States. Ben Bernanke is plotting a press conference to announce an across-the-board tax on all bank deposits in order to refund the Federal Deposit Insurance Corp. This is not bad for you, he will point out, but actually good, because it saves the banking system, and therefore, 99% of your money. If you object, he reasons, you are being shortsighted.
But before he gives his press conference, he remembers that it is a new world. Vast numbers of people have already set up a direct link between their bank accounts and some Bitcoin exchange. As soon as the rumor leaks, people can easily log in and exchange dollars for Bitcoins. Billions could disappear from the money supply in a matter of hours — government money escaping to the private-sector cloud, where it cannot be traced or accessed.
What then? In this case, Bernanke’s plans all come to naught. He will fear his own policies could backfire simply by causing people to lose confidence in the system. By then, people will be aware that they can buy all the tools, groceries, and pharmaceuticals they need with Bitcoin. By that time too, Bitcoin debit cards will make it possible to get gasoline. Under those conditions, what is the point to keeping anything but the bare essentials in dollars?
Might Bernanke rethink his little press conference? Probably. In other words, Bitcoin has suddenly done more than the U.S. Constitution to restrain the state and its banking cartel. The people are no longer monetary prisoners; they have a means of escaping into a realm of monetary freedom. This escape hatch turns out to be a core guardian of freedom and prosperity.
Two years ago, this vision would have seemed outlandish, but today? It is an approaching reality. And unlike gold, which has the problem that it must be kept physically, Bitcoin can live in the cloud, out of the reach of all the bad guys, essentially forever. This is probably the most difficult aspect of Bitcoin for people to grasp.
Now, to be sure, I’m writing as someone only recently converted to the cause of digital currency, so I love nothing more than to talk with people with longer experience. They also have tales of losing money, not just in terms of its exchange rate, but actually losing real coins in the course of buying and selling. It can happen, and most every case I’ve heard of is traceable to user errors. You send money when you don’t mean to. You get your wallets tangled and find that you have mislaid them. This is a particular problem for people who keep their wallets physically on their hard drives and then suddenly find that their computer won’t boot up.
What’s the solution? Aaron Lasher of Real Virtual Currency talked to me at length about the merit of “cold storage.” By way of explanation, hot storage is what you have on hand to use in daily transactions. But cold storage is a way of keeping your coins offline and safe so that no one can access the stuff. You can bring the coins from cold to hot, but it requires a transaction. Many exchanges and client services now offer this feature.
There is an even deeper method of doing the same thing using what is called a “brain wallet.” Under this system, you come up with a 40-character phrase. It could be a poem or a series of random words. You put that into a converter union that changes it to a long private key. Then you move on with your life.
Should the time come when a solar flare hits, or you get in a shipwreck, or you find yourself exiled to Guantanamo Bay, your money is absolutely safe. When real life returns and you get back to normal — this could be years later — you only need to type in your brain wallet phrase, and your access is unlocked. All your money is there, all without having to hide it physically or launder money or any such thing. A brain wallet, then, is the most secure way that anyone can possibly imagine to keep coins.
And it addresses a fundamental fear that many people rightly have.
I’m most fascinated by seeing how the development in the Bitcoin world is proceeding in a beautiful way. We are seeing more retailers jumping onboard. We are see exchanges open up. Venture capital is pouring in. The Keynesian punditry class is furious and denouncing it. The theoreticians are taking up the cause.
On the latter point, I’m thrilled to see the author of one of my favorite books, George Selgin, weigh in on the Bitcoin issue. His book from Laissez Faire is called Good Money and covers the history of private coinage. His new paper on Bitcoin examines the viability of what he calls “synthetic money.” It’s the most coherent scholarly paper I’ve seen yet. You can access it here.
It was also my pleasure to interview Aaron Lasher on issues of security. There are some pretty geeky topics discussed here, but it is extremely informative.