Apr 112013
 

(NaturalNews) There’s a bigger agenda happening with bitcoin that needs to be publicly stated, and this goes far beyond the issue of the financial harm that will be caused when the bitcoin bubble finally implodes.

Central banks hate bitcoin. They hate it because it doesn’t allow them to loot bank accounts (Cyprus) and control the movement of capital around the globe. Bitcoin, in fact, threatens the very foundation of monetary control that underlies all the corrupt governments of the world. As such, bitcoin is a huge threat to the status quo, making it an obvious target for the globalists to attempt to destroy.

Discrediting bitcoin isn’t enough, however. To really be effective, they need to make bitcoin illegal.

The plot to criminalize bitcoin

How do you criminalize bitcoin? The same way you get guns banned: Plan an attack, make sure lots of people get hurt, roll out all the victims in front of the cameras, then use the sob stories as moral justification to crack down with oppressive new laws.

This is the agenda being planned right now with bitcoin. The recipe works like this:

Step 1) Central banks buy up massive quantities of bitcoin currency, driving the prices into the stratosphere and encouraging millions of people around the world to jump on board the “get rich” bandwagon.

Step 2) Once bitcoin valuations reach a sufficient level of insanity, start a massive selloff by dumping the bitcoins you already bought onto the market, offering them for sale at any price (i.e. sell into falling prices, accelerating the loss in valuations).

Step 3) Watch panic take hold as the bitcoin crash accelerates, ending in a catastrophic wipeout of “valuation” of all bitcoins.

Step 4) Find “victims” of the bitcoin crash who can tell a good sob story for the mainstream media about how they invested little Johnny’s college money in bitcoin and lost it all. Roll them out on CNN and MSNBC where they cry on camera and talk about how they were ripped off by bitcoin and now they only trust the government from now on.

Step 5) Demonize bitcoin by characterizing it as a “libertarian pyramid scheme.” Lash out against both decentralized currencies and libertarians.

Step 6) Once the demonization gains traction, have traitors in the U.S. Congress announce a “Consumer Currency Protection Act” that outlaws non-central bank currencies such as bitcoin. It’s all “for your safety,” of course. Shut down all online bitcoin wallets and exchanges, calling them “criminal pyramid schemes” and arrest a few people using bitcoin to send a warning message to the rest.

Mission accomplished! You’ve now made bitcoin look like a “pyramid scheme,” you’ve scared the public into being wary of “anti-government currencies,” and you’ve criminalized their use by consumers.

That’s the goal the central banks are trying to achieve right now. It’s all be set in motion by the bitcoin bubble which will inevitably lead to a bitcoin crash.

Bitcoin is being manipulated as a pawn in the globalist scheme to destroy freedom

The bitcoin bubble is to currency freedom as the Sandy Hook shooting was to firearms freedom. In both cases, governments will use a crisis to destroy freedom while claiming to be “saving” the people.

The government WANTS bitcoin to be a disaster, and the mainstream media, which has so far refused to give bitcoin much attention, will leap all over the story like vultures once it crashes.

For the record, I’m a proponent of bitcoin and I want it to succeed in the long run, but the mania speculation happening with bitcoin right now is going to be disastrous for its reputation. It is the worst thing that could happen to bitcoin.

What we would prefer to see is a slow, steady rise that reflects stability with low volatility. Instead, we see extremely high volatility, wild price ranges, desperate purchasing patterns and even purchase queues at some exchanges where the demand for bitcoins is so high that it exceeds the limits of the services (such as Coinbase, where you now have to stand in line to buy bitcoins two days later at whatever “market” prices are offered that day).

Why the bitcoin craze is the modern-day equivalent of tulip bulb mania

Bitcoin has become a casino. It is almost a perfect reflection of the tulip bulb mania of 1637 in these two ways: 1) Most people buying bitcoins have no use for bitcoins (just like tulip bulbs), and 2) The rapid increase in bitcoin valuations cannot be substantiated in any way that reflects reality.

In other words, there is no fundamental reason why bitcoins should be 2000% more valuable today than four months ago. Nothing has changed other than the craze / mania of people buying in.

Mark my words: A bitcoin crash will occur, and a lot of people are going to be financially hurt by it. More and more, this bitcoin craze is looking like a “pump and dump” operation, where the only winners are those who are the first to sell.

When bitcoins were in the sub-$20 range, I was not concerned about any of this. I actually encouraged people to buy bitcoins and support the bitcoin movement. But alarm bells went off in my mind when it skyrocketed past $150 and headed to $200+ virtually overnight. These are not the signs of rational markets. These are warning signs of bad things yet to occur.

By the way, the simple way to prove to yourself that everything I’m saying here is true is to ask yourself this simple question: What do the people who are buying bitcoins plan to spend them on?

The answer is NOTHING! They don’t plan to spend bitcoins on anything. They have no use for bitcoins. Their only play (for 90+% of those buying them) is to buy low and sell high. That’s it! For them, bitcoin is nothing more than a speculative vehicle for gambling with some of their money.

Every speculative bubble market that goes up must come down. And it will usually come down at a multiple of the speed at which it went up.

The velocity of bitcoins is a huge red alert

Now, if most bitcoin buyers were actually using the currency on a day-to-day basis, purchasing things online, sending bitcoins to pay off debts, exchanging bitcoins for services, etc., then that would be different. The circulation of a currency is classically known as its velocity. The higher the velocity, the more frequently the currency is being routinely used for transactions.

But the velocity of bitcoins after the initial purchase is shockingly low. What this indicates is that people are buying lots of bitcoins but then sitting on them. Once bitcoins are purchased, in other words, they basically just sit around and aren’t used for any practical purpose.

Amazon.com, for example, doesn’t accept bitcoins. You can’t buy gas for your truck with bitcoins. You can’t shop with bitcoins at the local grocery store. Until bitcoins are more widely accepted and the velocity rises, there is no fundamental reason why their value should suddenly skyrocket.

Of course, those who are deep into bitcoins right now will call me a doom and gloomer. Sure, it’s okay for them to talk about how the dollar is going to crash, or how the Fed is a criminal operation, but the minute I start invoking mathematical reality with bitcoins, suddenly I become the bad guy.

Well, my answer to the critics is that I have more faith in the laws of mathematics than the self-deluded logic of people who own millions of dollars worth of bitcoins and who therefore have a strong self-interest in promoting the bitcoin mania.

They are blinded by their own positions in bitcoins and cannot see through the fog of self delusion. In contrast to that, I own only two bitcoins worth approximately $400 or so, meaning that I have no substantial position in bitcoins to speak of. Whether bitcoins go up or down does not impact me in any meaningful way. My sole motivation in writing this is to warn others away from the extreme risks that are now clearly associated with buying bitcoins at present-day prices.

There is nothing new under the sun

As always, there will be people (we call them “noobs” or “suckers”) who think they have stumbled upon the one exception in the universe to the laws of mathematics and that bitcoin somehow represents a galactic shortcut to universal wealth where everyone can become billionaires by trading each other electronic chunks of data with higher and higher numbers encoded in them. These people are fools, and history will prove them so.

After the bitcoin crash takes place, people will ask me, “Mike, how did you know bitcoin was going to crash when everybody else thought it was going to keep going up forever?” And my answer will be, “Because I believe that 2 + 2 = 4.”

If you understand mathematics, you know that the bitcoin bubble is doomed. Sell while you still can and be happy with the profits you’ve made so far. Importantly, remember that the only reason you can sell is because there’s a “greater fool” on the other side of that transaction who is buying your bitcoins.

The problem with all bubbles is that sooner or later the world runs out of greater fools.

Final notes: Why 95% have no clue what I’m writing about

Frustratingly, perhaps 95% of the people who will comment on this article in social media websites have no understanding of high-level mathematics, no understanding of economics, no understanding of free markets, no understanding of greed vs. fear psychology and no historical context through which they might understand what’s happening with bitcoin. Almost no one buying bitcoins has any clue what they are. They don’t even understand the meaning of the phrase “decentralized peer-to-peer crypto currency” and they have absolutely no working knowledge of public / private key cryptography. They have no idea what they are buying and they have no qualifications whatsoever to even discuss the topic.

This is a case where 95% of the people talking about bitcoin need to be told, simply, “Shut the hell up!” because they literally have no clue what they are talking about.

If you are going to talk about bitcoin, make sure you understand the fundamentals of mathematics, cryptography, free markets, economics and human psychology before opening your mouth. Otherwise, you are only announcing to the world that you’re a complete fool who will soon be parted from his money.

And to all those who think they are going to “get rich” by buying bitcoin today and selling it off when bitcoin goes higher, let me offer you a piece of practical advice: After the bitcoin crash, when you are screaming bloody murder and selling your bitcoins at perhaps 1% of what you paid for them, it will be people like me who will buy them and thus receive a 99% discount on the bitcoins you once bought at a hundred times the price. That discount is called the “IQ discount.”

You know how lotteries are called a “tax on people who can’t do math?” The bitcoin crash will be a massive global wealth transfer from people who can’t understand the dynamics of decentralized crypto-currencies to those who do understand.

If you don’t follow what I’m saying here, then don’t buy bitcoins. You will only be led to the mathematical slaughter.

 

Apr 092013
 

Bitcoin valuation surpasses 20 national currencies

By

Published March 29, 2013 FoxNews.com

More than $1 billion dollars worth of a digital currency known as “bitcoins” now circulate on the web – an amount that exceeds the value of the entire currency stock of small countries like Liberia (which uses “Liberian dollars”), Bhutan (which uses the “Ngultrum”), and 18 other countries.So what is a “bitcoin,” and why would anyone use it?Unlike traditional currency, bitcoins are not issued by a government or even a private company. Instead, the currency is run by computer code that distributes new bitcoins at a set rate to people who devote web servers to keep the code running. The bitcoins are then bought and sold for regular U.S. dollars online.

‘They buy gold, they put it under the mattress, or they buy bitcoin.’

– Tony Gallippi, the CEO “BitPay.com,

Bitcoin is in high demand right now — each bitcoin currently sells for more than $90 U.S. dollars — which bitcoin insiders say is because of world events that have shaken confidence in government-issued currencies.

“Because of what’s going on in Cyprus and Europe, people are trying to pull their money out of banks there,” Tony Gallippi, the CEO “BitPay.com,” which enables businesses to easily accept bitcoins as payment, told FoxNews.com.

In Cyprus, the government is considering taking a percentage of all citizens’ bank accounts to solve its fiscal woes. That has led Cypriots — and other Europeans worried about the same thing happening to them — to take their money out of banks.

“So they buy gold, they put it under the mattress, or they buy bitcoin,” Gallippi said.

Bitcoin demand has also increased, Gallippi says, because last week U.S. regulators issued the first official guidelines for private digital currencies. Prior to the regulations, the legal status of the currencies was in doubt.

“Now people can see that it’s not illegal, that it’s not banned,” Gallippi said.

Bitcoin is controversial because the currency can be exchanged anonymously online — it is in a sense the digital equivalent of using hard cash — and so some have criticized it for facilitating online drug markets. On the site known as “the Silk Road,” for instance, users pay bitcoins for illegal drugs and other forbidden items.

Bitcoin Targeted by Cyberattack

Just as Bitcoin explodes beyond the $1 billion mark thanks to Europe’s debt crisis, the emerging virtual currency was dealt a setback this week after a key exchange was hit by a powerful cyber attack that caused delays.

Read more at Fox Business.

In a 2011 letter to the Attorney General, Senators Charles Schumer (D-NY) and Joe Manchin (D-W.Va.) argued for strict enforcement.

“After purchasing bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days,” the Senators wrote. “We urge you to take immediate action and shut down the Silk Road network.”

But the Silk Road is still running, and a recent study estimates that $23 million dollars of illicit items are sold for bitcoins on the site every year.

The regulatory guidelines issued last week by the government agency known as the Financial Crimes Enforcement Network (FinCEN), however, will not stop that.

The regulations say that digital currencies like bitcoin are to be treated essentially as foreign currencies. Companies that exchange digital bitcoins for real money will have to comply with the same regulations as traditional currency exchangers — namely, they must verify the identity of anyone exchanging money for bitcoins and report large transactions to the government.

Using bitcoins to purchase goods, however, is specifically exempted.

“A user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not… under FinCEN’s regulations,” the guidance reads.

Some bitcoin defenders say the use of bitcoins to buy illegal items shouldn’t obscure the legal uses.

“With any technology… Criminals are going to use it for something, and regular people are going to use it for something,” Gallippi said. “You can’t ban cell phones just because criminals are using them to do drug deals. You can’t ban e-mail just because people are using them to do phishing scams in Nigeria. You have to start just prosecuting people who are committing crimes — you can’t just completely wipe out the new technology.”

Gallippi says one reason to use bitcoins for legal transactions is a lower risk of identity theft.

“If you are buying something online and you have the choice of paying with a credit card or bitcoins – think about what you have to do to use a credit card. You have to fill out this whole long form, name, address, account number, sometimes more… coincidentally, that’s all the info a thief would need to steal to pretend to be you.”

Between that, bitcoin’s anonymity, and worries about conventional currency, bitcoin demand is as high as ever, according to Alan Safahi, who runs “Zip Zap” – a company that facilitates cash deposits at stores like CVS and Wal-Mart for transfer to a site that can convert the money to bitcoins.

“We’re processing millions of dollars a month. We’ve seen tremendous surge in activity,” he said.

Contact the author at maxim.lott@foxnews.com.

Read more: http://www.foxnews.com/tech/2013/03/29/digital-currency-bitcoin-surpasses-20-national-currencies-in-value/#ixzz2PzyM5Cmc

 

 

Apr 072013
 

Bitcoin Really Is an Existential Threat to the Modern Liberal State

By Evan Soltas Apr 5, 2013 1:43 PM MT

So far, Bitcoin is not a big deal. Its total value in circulation was $1.4 billion as of this week. That’s equivalent to the currency stock of a small nation — somewhere between Iceland and Uruguay — and just one-thousandth of the total value of U.S. dollars in circulation. The volume of transactions in Bitcoin is growing only slowly, relative to the massive increase in demand for the currency: This discrepancy is strong evidence that Bitcoin’s rise is a speculative bubble.

Nonetheless, Bitcoin raises some interesting questions. One is whether it might undermine the modern state — which, for many of its libertarian-anarchist advocates, is the whole idea.

Technology enabled governments to grow more powerful and more centralized in the 19th and 20th centuries, as Tyler Cowen, an economist at George Mason University, has argued. The intriguing possibility is that technologies of the 21st century — such as Bitcoin — might push the other way.

Physical cash is used in a rapidly shrinking share of transactions: 27 percent in 2011, 23 percent by 2017, and so on, according to Javelin Strategy & Research, a financial-services research firm. The central banks of Sweden and Nigeria have both declared goals of a cashless economy. In Europe, the volume of non-cash transactions is forecasted to rise by 7 percent per year, despite economic stagnation.

What’s going on? First, a global shift to mobile payments and credit and debit cards. Second, a rise in online retail — one that could put 15 to 20 percent of all retail sales online in the U.S., U.K., China, and Europe, according to Bain & Company.

Electronic payments aren’t new. Bitcoin’s only innovations are its status as an independent currency and its decentralized network design. But those differences might make Bitcoin — or rather, crypto-currency in general — an existential threat to the modern liberal state. If widely adopted, crypto-currencies would cripple government in three central functions: taxation, police and macroeconomic stabilization. That is exactly what Bitcoin’s biggest fans are hoping.

  1. Taxation: How do governments collect taxes on transactions in Bitcoin? The answer is they don’t, and they can’t. Crypto-currency’s strong protections on anonymity make it impossible for any state to know who is buying what, who is paying whom, who earns what, and who has what in savings. That poses a direct challenge to the power of states to levy taxes.

    The problem is that Bitcoin makes tax evasion easier. States could enforce reporting of Bitcoin income for individuals and businesses, as they try to do for cash, which is also hard to track. But encryption and the peer-to-peer network structure make Bitcoin even harder to follow than physical cash, and digital cash is much better than the physical kind for storage and transactions, so the scale of the challenge could end up being much bigger.

  2. Police:It would be almost impossible for states to detect certain crimes. One of the major alleged uses of Bitcoin — though, of course, one can never truly know — is buying illicit drugs. Bitcoin’s cryptography makes it uniquely able to facilitate money laundering, insider trading, fraud, and bribery. The transactions would be untraceable, and the money doesn’t ever have to return to the bank, where the financial crime might have been detected.
  3. Macroeconomic policy:A Bitcoin economy would undermine the power of real-world central banks to make monetary policy. Yes, governments can influence the demand for national currencies by requiring taxes to be paid in them. But the monetary lever on private transactions and lending would be gone if such commerce was denominated in Bitcoin. And by displacing governments as currency issuers, Bitcoin also threatens their ability to finance public debt. In a world where many transactions are anonymous, it’s unclear how governments could even compile accurate economic data, without which macroeconomic policy is impossible. Economic depression in a Bitcoin regime could be an insoluble problem.

If Bitcoin remains on the fringes, then the state is safe. The question is, if it shows signs of becoming a widely used currency, what could governments do to crush it?

The Financial Crimes Enforcement Network, the wing of the U.S. Treasury Department that investigates money laundering, said last month that it has the authority to regulate transactions involving both Bitcoin and U.S. dollars under the Bank Secrecy Act. These inter-currency exchanges appear to be the best foothold for regulation. Governments could require records of all purchases and sales of Bitcoin, for instance.

But this approach has severe limits. There are, by design, no direct avenues for government to interpose itself in Bitcoin-only transactions. Government does have some enforcement leverage over the individuals and businesses. Bitcoin transactions have a real-world side. The problem, though, is that the usual mechanisms for detection and enforcement are very weak against Bitcoin. Ask the Federal Bureau of Investigation. Bitcoin presents “distinct challenges for deterring illicit activity,” according to a leaked intelligence assessment that was prepared in April 2012. “Bitcoin is unique because it is the only decentralized, P2P network-based virtual currency,” the FBI’s Cyber Intelligence and Criminal Intelligence Sections wrote. “The way it creates, operates, and distributes bitcoins makes it distinctively susceptible to illicit money transfers.”

Bitcoin may be a bubble that will burst. If it does, other forms of digital cash will come along. The state was intimately involved in the development of money — but that was before networked computers. In the next chapter of the history of currency, money might very well turn on its creator, and roll back government.

(Evan Soltas is a contributor to the Ticker. Follow him on Twitter.)

Apr 042013
 

BitCoin Poised to Change Society

Bitcoin Morpheus Titania

Bitcoin

There is a bitcoin craze at the moment, with prices of bitcoin skyrocketing. Bitcoin is still far from ready for prime time, but as it matures, it will change society’s fundamental operations much more than the Internet did. The net, after all, only allowed people to talk and shop more efficiently. By comparison, bitcoin eradicates the government’s ability to operate.

Let’s begin by looking at what a bitcoin is. It is money. It is a new form of money that isn’t issued by a government. Governments don’t have a monopoly on coming up with things you can trade and barter with, and bitcoin is one such non-governmental barter instrument. The difference between bitcoin and all other such tokens of value that have been invented over the years is that nobody is in control of the money supply, and nobody is in control of the money flow. This means that nobody can start the printing presses to eradicate your savings, and nobody can seize or see your wealth or income. You can think of it as an open-source currency compared to proprietary, state-issued currencies.

There is no central bank. This is a revolutionary concept. People can trade cash at a distance without going through an intermediary. The first time you send the value of a cup of coffee to a friend in India on a Sunday, without any transaction fees, and they have the money instantly, without anybody but you knowing of the transaction, your jaw drops.

This would have been but a curiosity, if it weren’t for the ridiculously strong business case to cut banks and credit card processors out of the sales loop for corporations, which could roughly double the profits in retail sales. This means that there’s a very strong force for universal uptake of this new currency.

As nobody is in control of the money supply (it is set to grow predictably at a slowing rate until 2140), and demand increases with a limited supply, the price for each bitcoin increases. This is what we’re seeing now, as more and more people realize bitcoin’s business potential. Also, there is value in the concept that you don’t have to trust any single person to store or to transfer bitcoin – not your government, not your bank, not Western Union – is something completely new.

Erik Voorhees writes, “Bitcoin is thus the only currency and money system in the world which has no counter-party risk to hold and to transfer. This is absolutely revolutionary and you should read the preceding sentence again. […] Never in the history of the world has an individual had this ability. It is unprecedented.”

So why does bitcoin have value? How is it, strictly speaking, money? People who ask this tend to be stuck in the idea that only states and governments can issue money, but that’s not the case. What we see as money has changed many times, and when Marco Polo came back to Europe from China in the 13th century, people were mocking him for bringing home banknotes. “This is not money”, they would say, and burn the Chinese banknotes. Money was coins. If you dismiss bitcoin just because you’re not used to seeing sequences of rare prime numbers as money, make sure you’re not scoffing at banknotes as people were in the 13th century. If people use it as money to trade, it’s money.

Jon Matonis has an excellent piece over at Forbes where he challenges the notion that money must be state-issued, and explains that a transactional currency can compete on its own merits and its own market.

It is important to realize that while the Internet has changed life in the IT industry tremendously, from a government standpoint, the net hasn’t changed much at all. If anything, it has reinforced existing structures: consumers spend their state-issued money more efficiently, credit is borrowed more and better from state-regulated banks which expands the money supply and keeps people happy, and it has created new industries that can fuel the economy. Oh, and it also lets citizens submit governmental forms more efficiently.

The only flip side to the net, from a government angle, would be that some people use the Internet to violate state-issued monopolies on entertainment distribution, which has been seen as a problem that needs to be dealt with swiftly and harshly, but other than that, the internet really isn’t much new from a government standpoint. Think about that the next time you see a politician who doesn’t appear to get the net: for them, if they’ve been in government too long, there is nothing much to get.

So we essentially have four different types of players that keep the economy going, and by extension, the government funded and operational. One, there is the government itself, which issues money and regulates banks. (For this exercise, I include the central bank in “government”.) Two, there are commercial banks which are in complete control of the money flow, in exchange for sharing that insight with the government and letting it siphon off as much as it likes to operate itself. Also, commercial banks expand the money supply when people ask for credit, so credit is good as the economy is measured today (“growth”). At the bottom of the food chain are, three, corporations which are tasked with using this system, running all its operations through these banks, and four, the ordinary citizen, who is supposed to be doing actual work and actually produce something that fuels the entire ecosystem.

What bitcoin does is cut the banks out of the loop, and by extension, the government’s ability to operate.

Those wars you have seen on TV? They are all fueled by this mechanism – the ability for banks to keep people happy in letting them spend imaginary money, while simultaneously giving the nation-state the ability to control as much of the money flow as it likes (and siphon as much as it likes off for itself).

Now, bitcoin isn’t going to drive its adoption just because it is impervious to state control and insight. Rather, its adoption is going to be driven by the strong business case for corporations to cut banks out of the loop – more specifically, cut bank profits out of their own profits.

The normal reaction for a government would be to use its entire arsenal of force against any phenomenon that threatens the government’s ability to function to this degree. But bitcoin is resilient to that. There is no central point to shut down. You can’t point a gun at a prime number and expect things to change. And we all know how effective governmental attempts to shut down peer-to-peer networks have been (even if it has been a low-priority issue so far that they haven’t really cared about).

A while back, I wrote that bitcoin is “The Napster of banking”. Perhaps there is a better analogy – perhaps it is the Skynet of banking. There is no central mainframe to shut down, and the intelligence in bitcoin is completely distributed with the single goal of obsoleting central banking.

In this regard, people at Business Insider who compare the bitcoin trade and its current price spike with the bubble around Beanie Babies in the early century come across as dangerously shortsighted and ignorant. Bitcoin is not a plush toy, it is not a commodity. It is an economic agreement, and as such, has value like any other contract that improves your business. This particular contract improves every business except banks.

So is bitcoin ready to take over the world? Far from it.

There are many problems with bitcoin today, but they are becoming less severe than the problems that plagued it one, two, and three years ago. In short, we’re seeing kinks being worked out, scratches being polished, and dents being straightened. But there are many reasons why bitcoin couldn’t take the place of state-issued money today, even if it is on a strong trajectory to do so in the next decade or decades.

The liquidity to state-issued money is one thing that strikes me immediately. In any economy, you need bridges between payment systems that are in use. Today, the vast majority of such bridging is handled by a Japanese bitcoin exchange known as MtGox. This is an unacceptable single point of failure in an ecosystem (proven by two hours of outage today). Further, lags of 10 minutes are common with MtGox’s trading engine (I’m seeing 400 seconds of lag right as I type this), which is just ridiculous when the financial world at large is dealing with micro- and nanosecond trading.

Bitcoin is getting there. But it’s not there yet. When it gets there, expect governments to panic and society to be reshaped into something where governments cannot rely on taxing income nor wealth for running their operations.

That is a bigger change to society’s fundamental structure than the ability to seek and share culture and knowledge we got with the net.

by: Rick Falkvinge

http://falkvinge.net/2013/04/03/why-bitcoin-is-poised-to-change-society-much-more-than-the-internet-did/

Mar 242013
 

The U.S. Treasury Announces Money-Laundering Rules Apply to “Virtual Currencies”

You didn’t think the Treasury was going to just let the bitcoin business develop outside the system, did you?

WSJ reports:
The U.S. is applying money-laundering rules to “virtual currencies,” amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities.

The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. WU 0.00% They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000.[…]

The arm of the Treasury Department that fights money laundering said Monday that the standard federal banking rules aimed at suspicious dollar transfers also apply to firms that issue or exchange money that isn’t linked to any government and exists only online.

One of the fastest-growing alternative cash products is Bitcoin, an online currency launched in 2009 that isn’t backed by a central bank or controlled by a central administrator. Currency units, known as “bitcoins” and consisting of a series of numbers, are created automatically on a set schedule and traded anonymously between digital addresses or “wallets.” Certain exchange firms buy or sell bitcoins for legal tender at a rate that fluctuates with the market[…]law enforcement, regulators and financial institution have expressed worries about the hard-to-trace attributes of virtual currencies, helping trigger this week’s move from the Treasury’s Financial Crimes Enforcement Network, or FinCen.

Creating clear-cut rules for virtual currencies is difficult. A FinCen official said that anti-money-laundering rules would apply depending on the “factors and circumstances” of each business. The rules don’t apply to individuals who simply use virtual currencies to purchase real or virtual goods.

The new guidance “clarifies definitions and expectations to ensure that businesses…are aware of their regulatory responsibilities,” said Jennifer Shasky Calvery, FinCen director.

Mar 222013
 

The Pros & Cons of Bitcoins

May 18, 2012

bitcoin pros and cons freemarketBitcoin, a privately controlled independent currency, is nothing short of revolutionary. Bitcoin, however, has a major drawback: it does not address the key issue of interest.


by Anthony Migchels

(henrymakow.com)

Bitcoin was developed by Satoshi Nakamoto and launched in January 2009.

There are currently more than 8 million Bitcoins in circulation and after predictable initial price swings after its launch, they have traded at a fairly stable rate of about $5 for more than six months now.

Bitcoin is a debt free unit: it comes into circulation through ‘mining’: the solving of complex algorithms by clients yields new Bitcoins.

However, no more than 21 million can be mined so there will never be more than that in circulation.

Bitcoin is important and actually nothing short of revolutionary. It is the first notable independent internet currency.

WHY BITCOIN MATTERS

Its key strength is its peer to peer design. The issuing organization’s sole function is to provide the client software and on-line market place where Bitcoins can be traded for other currencies. It plays no role in the creation of the money supply.

In this respect, it is a real assault on the Money Power’s stranglehold on our money supply.

It allows businesses and consumers to diversify their methods of payment, making them a little less dependent on the Government/Banking monopoly.

It also shows that a free market for currencies already exists. Of course regulators are inimical to them, but current legislation does allow for all sorts of units.

In fact, there is very little to stop free market currencies, provided those looking for opportunities are dedicated enough.

CONVERTIBILITY

Furthermore, Bitcoin is the first free market unit in the world that creates convertibility to other units through a currency exchange. This is an innovation that is underrated by most commentators.

Mutual Credit-based barters can use Bitcoin technology to create convertibility without dollar/euro backing.

Unsurprisingly, legislators bribed by banks have already voiced ‘concern’ about Bitcoin’s independence.

Apparently some naughty drug dealers are using Bitcoin to finance their operation. Its peer-to-peer character makes it suitable for this kind of transaction. Just like cash.

And cash too, as we know, is under attack from Big Brother who would like to know everything we buy and sell, and make us completely dependent on his monopoly infrastructure.

So Bitcoin’s existence is very useful for all monetary reformers as it will allow us to gather information about the strategies that the adversary will use to disable it.

DRAWBACKS

Notwithstanding these revolutionary breakthroughs, Bitcoin does suffer from a basic flaw.

It’s designed to behave like Gold. Nakamoto clearly believes Austrian Economics is the last word, including the idea that hyperinflation is the main threat to the system.

As a result Bitcoin suffers from the same problems as Gold: it is deflationary and expensive.

There is never enough of it. True, Bitcoins can be divided in ever smaller denominations, so ‘physically’ there will never be a shortage, but it means Bitcoin is designed to appreciate for ever and this is the definition of deflation. 

BITCOINS DRAWBACK CAN BECOME GREATEST STRENGTH

INTEREST

Worse still, Bitcoin does not address the interest issue. There is no possibility for cheap credit and if the unit matures, a banking system will be necessary to provide credit based on deposits.

Not only will this exacerbate the scarcity of money, it will also lead to very high cost for capital.

Yet another problem is that with a full reserve banking system as required by Bitcoin (and Gold too, by the way) would allow the Money Power to mop up the money supply through compound interest within one or two decades, as you can find out here..

The basic conceptual flaw is, that Austrian Economics believes a currency should be a good store of value first and foremost. This is the fatal mistake: money is a means of exchange, and it is the agreement to use it as such that gives it value, not the other way around. This is even true of Gold today: the reason Gold is now expensive, is because many investors are speculating it will be currency again.

Because of this design flaw, Bitcoin is being hoarded by its users. They prefer to have it sit in their ‘account’, instead of spending it, hoping it will appreciate. As a result turnover is lower than it could be. The unit is already an object of speculation, hindering its primary function: to finance normal trade.

CONCLUSION

Bitcoin is a revolution and a badly needed bit of fresh air. Peer to peer and independent of banks and Government it is an example for all of us. Yes, we should press for reform at the Government level, but no, we should not await it. There is a free market for currencies and it is ours for the taking.

However, it is not credit based and it does not allow for interest free credit. Its deflationary by nature, which is very problematic.

Its decentralized peer-to-peer nature and its convertibility mechanism are its main strength. If these can be harnessed in interest free credit based units, they would be unstoppable. The Money Power would be really hard pressed.

Bitcoin is a shot heard far and wide, but it is only the proverbial first shot across the bow.

Related:
Why Gold is so strongly deflationary

Mutual Credit, the Astonishingly Simple Truth about Money Creation
Mutual Credit for the 21st century: Convertibility
The Swiss WIR, or: How to Defeat the Money Power
Regional Currencies in Germany: the Chiemgauer

The Problem with Gold

Anthony Migchels is an Interest-Free Currency activist and founder of the Gelre, the first Regional Currency in the Netherlands. You can read all of his articles on his blog Real Currencies – See more at: http://henrymakow.com/bitcoins.html#sthash.0IOo9xH7.dpuf

Mar 222013
 

BITCOIN DRAWBACK CAN BE GREATEST STRENGTH

Some have said “There is never enough of BitCoins. True, BitCoins can be divided in ever smaller denominations, so ‘physically’ there will never be a shortage, but it means BitCoin is designed to appreciate for ever and this is the definition of deflation.”  That would be correct and having a deflationary money is GREAT.  The only ones who like Inflationary money are the BORG, Banks Organized Religion and Government

Cyprus Increase

With the recent hullabaloo the country of  Cyprus consideration to steal the deposits of the people to fund the central banks, the price of Bitcoins has jumped from $46.82 on March 16th 2013 to $71.96 March 22, 2013.  That is a swing of $25.14 in 6 days!  I’m  not sure what the annualized rate is however it’s a lot!  Imagine what the price would have done had the Cypress Parliament actually allowed this theft to occur?

Power to the People

As central Banks and Governments continue to print more and more money out of nothing, this will have the effect of driving the bitcoin price up.  This is great for those that have bitcoins and bad for those who do not have bitcoins.  What organizations are likely to be the last adopters? The BORG, Banks Organized Religion and Government.  My point is: as the government controlled interest backed fiat currency continues to devolve and at the same time the non-government controlled non-interest backed bitcoin fiat currency continue to evolve, those having “dollars” will have less and less money.  So lets dream for a moment…each Bitcoin is worth $100,000 and $100,000 buys a loaf of bread.  Now you are a member of the BORG and you have a trillion dollars, your illicit power is been greatly reduced and those with the 10,000 bitcoins are going to be in great shape.

Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.  Mark Twain,

Hoarding

In the fine article written by Anthony Migchels, he states that people are likely to hoard the bitcoins.  Some may or at least in my opinion they would be silly not to trade with them as much as possible.  Most people at least right now have never even HEARD of them.  Anyone who knows me, would say I talk to alot of people in the real world.  That translates very simply, THE SKY IS THE LIMIT on BitCoins.  Let’s put it this way, they can only go down to zero, AND they can go up to ANYTHING.  There are only 6 BILLION people in the world and my guess is that most of  them would like to be more prosperous.  Let’s say each person wants just one BitCoin, instead of their government manipulated debt based currency, do you know what that will do to the price?  I don’t know either,  my first guess is it would make the value of a BitCoin, like a MILLION DOLLARS!

Bitcoins are not food, you can not eat them.  They don’t even exist, except in cyberspace!  The reason why BitCoins will continue to increase is because people are using them.  The more people that use them, the more the price increases.  If you don’t use them for anything, what good are they? The more they get used, the more they will be accepted.  As I see it you got to get your hands on BitCoins as soon as possible.  Dump the Dollar for something the government can’t steal, can’t regulate and can’t control.  That will really make ’em mad.  And there is NOTHING they can do about it except turn off the internet / start World War 3 and play chicken with humanity. Give me a break, I got news for them, humanity will survive!  The BORG won’t.  They are valueless, irrelevant parasites.  (ask me how I really feel, lol)  Then we pump the value of a BitCoin up to a million dollars each.  You don’t want to be the one holding the big bag of money when the “dollars” are worthless and or the government has decided to steal them for their Banker masters.

Morpheus: Zion, hear me! It is true, what many of you have heard. The machines have gathered an army and as I speak, that army is drawing nearer to our home.  Believe me when I say, we have a difficult time ahead of us. But if we are to be prepared for it, we must first shed our fear of it. I stand here, before you now, truthfully unafraid. Why? Because I believe something you do not? No, I stand here without fear because I remember. I remember that I am here not because of the path that lies before me, but because of the path that lies behind me. I remember that for 8000 years, we have fought the BORG. I remember that for 8000 years, they have sent their armies to tax, and control us, and after a centuries of war, I remember that which matters most… We are still here! Today, let us send a message to that army. Tonight, let us shake this cave. Tonight, let us tremble these halls of earth, steel, and stone, let us be heard from red core to black sky. Tonight, let us make them remember, THIS IS ZION AND WE ARE NOT AFRAID!

Turning off the Internet

The world is moving into the future.  Lets see, we had the mail, printing press, light blub, telegraph, telephone, fax, internet, cell phone, and now BitCoins.  The government didn’t turn those things off, why they couldn’t.  The government didn’t create them, the people did.  Furthermore we now live in a global economy, EVERYTHING runs on the internet.  Want to go back to the dark ages?  Turn off the internet.  I say bring it on.  Society is  going to continue to move into the future no matter what they do.  I do not care what they do because they do not do anything for me. So I ignore them.  Now that we have BitCoins we now have a free market free market for the first time in 8000 years.   The government is now officially out of business.  They have lost their control.  The Government is rendered irrelevant.   It is the job of  the activists so simply spread the word, that the war is finally over and we can all go home now.  The best part is those who spread the word the most will be the ones who will be most rewarded.

What I am doing

This is how I am spreading the word.  You need BitCoins, I have them.  Send me a email and I will be more than happy to send you your first ones FREE,  so you can in turn do the same thing.  Send some to your friends, first you need a BitCoin wallet send me an email m-o-r-p-h-e-u-s2150@gmail.com (remove hyphens) and I will send you them for FREE.  What is the catch?  First off, I am not rich, however Bitcoins are divisible by 100,000,000, so I don’t have to send a bunch.  Then you would simply do what I am doing. Tell your friends you want to send them some BitCoins.  They need a wallet and you will send them a portion of what you have.  It’s like a multi-level marketing, without the need for the top down, hierarchical, multi-level marketing.  It’s organic,  pay it forward kinda deal.  The increase will be made on how many people use the system.  So let’s do it.  Get out there and rock and roll the bones…Get Busy!

These are the cards I am passing out to people as I knock on doors for my regular job.

Bitcoin Cards

Bitcoin cards

Community Building

I have set up a meetup group utilizing idea of a non-hierarchical organization called Titania.  Titania is based on the works of John David Garcia and Bob Podolsky to create a non-hierarchical, ethical, creative, thriving society of the future where everyone has an equal voice.  Imagine a money system that mirrors the society you want to create.  One that is voluntary, yet organized!    Bob and I are planning to use BitCoins as the engine to drive it forward FASTER.  I would love to meet you in person or over the internet.  The way this happens is one person at a time, are you in?

Mar 222013
 

It’s nearly impossible to buy BitCoins in the US

True story. I’ve been trying for about a week to buy modest (U$10000-20000) amount. It’s been hell. First, mt.gox requires scary amount of ID to receive wires. What has this world come to – to put your money somewhere you have to prove who you are! I get it about withdrawing, but depositing? WTF?

Then to sending wires. Scary. A branch manager of a local e-trade branch, without asking me for any ID pulls up my account, says there is plenty of money there, and proceeds for an hour to browser through the e-trade website looking for the right form, not finding it, making me hand write a ‘to whom it may concern’, finding the form, filling out a wrong one twice anyway, waiting for ‘his guy in Seattle’ to get off the other line, finally announcing that they can’t do it without additional signatures and notarizing more documents, which they can’t do as they have no notary on staff…

Wells Fargo bank. At least they checked my ID. Worked through filling out the forms. After 30 minutes of doing that, the banker announces that federal regulations require me to declare my address in Japan. What? No address in Japan, no wire. Very surprised that anyone can have a bank account in another country without living there. And ‘ by the way, we couldn’t send it anyway without the Wells Fargo debit card. Also your incoming wire hasn’t cleared’. Thanks for wasting my time.

Entire day shot. I have no reason to think my wire would clear at mtgox either, since I am #3277 on the verification queue, whatever that means (not promising).

Is this the famous banking system that needed to be bailed out, or the world collapses immediately? I can’t imagine Chinese banks being less competent, or monkey banks for that matter.

No wonder people are running to get bitcoin which allows you to move your money wherever the f*** you want, whenever you want, without anyone’s permission. Not to mention handling your own security, for god’s sake!

 

Read the original: http://www.reddit.com/r/Bitcoin/comments/1ar4cq/its_nearly_impossible_to_buy_bc_in_us/

Mar 152013
 

Simon Black More on Bitcoins and Capital Controls

March 15, 2013
Santiago, Chile

Earlier in the week, I wrote to you about an Argentine car rental agency that had started accepting Bitcoins as a means to bypass local capital controls.

We received a lot of questions about the article, the most common of which was “What in the world is a BITCOIN?”

Let’s start by looking at our current monetary system.

In most countries, a small tiny banking elite exercises total control over that nation’s money supply. And we’re just supposed to trust them to be good guys.

Yet central bankers around the world have conjured trillions of dollars out of thin air, debasing the money’s value. It’s a concept any six-year old can understand. If money grew on trees, it wouldn’t be worth very much.

This is one of the key reasons why people buy gold. You can’t just conjure gold out of thin air. It takes years of exploration and investment to pull it out of the ground.

In the information age, though, we have an alternative.

Bitcoin is digital currency. It doesn’t actually exist in our physical world… only in computers.

If this sounds esoteric and far-fetched, it’s not. The vast majority of our monetary system today is already digital.

A very small percentage of all the currency circulating in the world exists in physical notes and bills. The rest of it is merely accounting entries in bank  databases. Most financial transactions are just a reshuffling of these database entries. Physical currency seldom changes hands.

Bitcoin is similar in this respect… nothing physical exists. But there are some key advantages.

For one, Bitcoin is not controlled by any government or central bank. And two, it’s private.

In the world of conventional finance, governments can see every time you use your credit card, withdraw cash at an ATM, or make a wire transfer.

Yet with Bitcoin, they don’t have this ability. And this is a key reason why Bitcoin has become so popular, especially in places like Argentina where people are getting squashed by their government.

A few days ago I wrote about an Argentine car rental agency that had begun accepting Bitcoins. My friend Sir Charles of PricedinGold.com was at their office; he snapped a photo and sent me some really great information.

The 1-day rental rate for a basic car was 380 Argentine pesos. At the government’s official rate, that works out to be $74 USD. In Bitcoins, the same car rents for 1.13 BTC… which is approximately $54 USD. This is nearly 30% cheaper!

The benefit for the rental agency is the privacy; they can avoid all the costly fees, bureaucracy, and debilitating capital controls associated with a normal transaction. Plus, they can hold Bitcoins instead of the rapidly depreciating Argentine peso.

If you think that these sorts of tactics– mind-numbing financial bureaucracy, confiscatory taxes, and capital controls– can’t happen where you live, think again.

I was just having a conversation this morning on the topic with Jim Rickards, author of the best-selling Currency Wars and one of the speakers at our upcoming Offshore Tactics Workshop.

Jim reminded me that, aside from Roosevelt confiscating gold back in the 1930s, the US government also imposed a confiscatory windfall profits tax on oil gains back in the 1970s. In addition, for most of the 20th century, capital controls were the rule around the world, not the exception.

To be fair, Bitcoin is not without its challenges. But the prospect of digital currencies presents an elegant alternative to fiat destruction.

If you want to find out more about Bitcoin, this website provides a lot of great introductory information:

Until tomorrow,
Signature
Simon Black
Senior Editor, SovereignMan.com