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Fed Official Decries Bitcoin as “Not Backed”

December 2, 2017

Fed Official Decries Bitcoin as “Not Backed”

Bitcoin is backed by the use value of the distributed ledger in the underlying technology of the Blockchain.

Randal K. Quarles, a Trump administration appointee to the Federal Reserve Board of Governors and Vice Chair for bank supervision, has given a lengthy speech (“Thoughts on Prudent Innovation in the Payment System”) that directly targets Bitcoin as a danger to the monetary and financial system.

To reiterate, an official speaking for the nation’s central bank that manages the global reserve currency – the institution that has long bragged about its power to bail out the entire world with the magic powers of the alchemist – has put down Bitcoin for being untrustworthy, unbacked, and unsound.

Discrediting Crypto

The timing here seems about right. Nine years ago, Bitcoin was born, but only a small group of developers were really paying attention. Today, there are lines forming at Bitcoin ATMs around the country as people scramble to convert cash to digital money even at absurdly high premiums.

With one unit of Bitcoin now worth 10,000 times the US dollar, it makes sense that the Fed would begin to feel a bit defensive. Indeed, the speech comes to the defense of the central bank, the existing money, and payment system networks, and calls for the pace of innovation to be controlled by regulators in the interest of “prudence.”

His summary criticism of Bitcoin is that:

The “currency” or asset at the center of some of these systems is not backed by other secure assets, has no intrinsic value, is not the liability of a regulated banking institution, and in leading cases, is not the liability of any institution at all. Indeed, how to treat and define this new asset is complicated.

…click on the above link to read the rest of the article…

Bitcoin, Terence McKenna and the Future of the Internet

November 30, 2017

Bitcoin, Terence McKenna and the Future of the Internet

We have millions of people who are warehoused in almost a larval state in their apartments, watching tv, paying for their medical plans, and glued to this mindless opera of cultural decay that’s recited day after day in front of them. I mean, it’s horrible to imagine — and this is a creation to some degree of the world corporate state, that probably has to be addressed.

– Terence McKenna, The Internet is the Cure for TV (1994)

I know the title of this post seems strange in light of several factors. First, it’s been nearly twenty years since the dot-com bubble burst and it’s estimated that 3-4 billion people globally, or roughly 50% of the world’s population, already surf the web. Second, it’s become increasingly trendy in 2017 to highlight all the bad things about the internet, with social media typically singled out for the most intense and visceral criticism. Although I acknowledge some very real downsides of social media such as unhealthy obsession and addiction, most of the outrage we’ve seen this year has been focused on “fake news” and “Russia meddling.” In other words, most of the hysteria’s been political in nature, and would barely be registering anywhere near its current decibel level had Hillary Clinton won the election.

All of a sudden, there’s this insistence that social media is especially dangerous because it fosters the creation of echo chambers rife with tribal confirmation bias. Spaces where people with the same views simply talk to one another, and whoever’s willing to be the loudest and most aggressive at signaling to their tribe becomes the most popular. I don’t deny that this phenomenon exists, but like with anything else, you have to accept the bad with the good, and in the long-run the good far outweighs the bad.

…click on the above link to read the rest of the article…

The Asymmetry of Bubbles: the Status Quo and Bitcoin

November 30, 2017

The Asymmetry of Bubbles: the Status Quo and Bitcoin

Shall we compare the damage that will be done when all these bubbles pop?

Regardless of one’s own views about bitcoin/cryptocurrency, what is truly remarkable is the asymmetry that is applied to questioning the status quo and bitcoin. As I noted yesterday, everyone seems just fine with throwing away $20 billion in electricity annually in the U.S. alone to keep hundreds of millions of gadgets in stand-by mode, but the electrical consumption of bitcoin is “shocking,” “ridiculous,” etc.

Since the U.S. consumes about 20% of the world’s energy, we can guesstimate the total amount of electricity wasted on stand-by and similar sources of waste is more on the order of $100 billion annually.

What’s shocking and ridiculous is that upwards of $100 billion in electricity is squandered globally annually on stand-by devices and other painfully obvious sources of waste. But this attracts essentially zero concern or commentary. Do you notice any asymmetry in the scrutiny being applied to the status quo and to bitcoin et al.? The status quo– wasteful beyond measure–is just fine: nobody questions the staggering waste built into the status quo, from hundreds of millions of devices consuming electricity but doing no work to hundreds of millions of vehicles idling in traffic for hours each and every day across the globe–nope, the really big issue is bitcoin / blockchain consumption.

Does anyone question how much electricity the vast server farms of Google and Facebook consume in order to serve up adverts and store photos of puppies and kittens? And how about the energy consumed by the NSA and the dozens of National Security agencies that have proliferated over the past 16 years? How much coal gets burned to serve adverts, archive photos of puppies and kittens, and store billions of emails, phone calls to Aunt Sadie, etc. for future analysis?

…click on the above link to read the rest of the article…

Did Anyone Do Even a Minimal Check on the Sensationalist Bitcoin Electrical Consumption Story?

November 29, 2017

Did Anyone Do Even a Minimal Check on the Sensationalist Bitcoin Electrical Consumption Story?

Check the context before uncritically accepting sensationalist conclusions.

Let’s start with a primer on how to write a sensationalist story that can be passed off as “journalism:”

1. Locate credible-sounding data that can be de-contextualized, i.e. sensationalized.

2. Present the data as “fact” rather than data that requires verification by disinterested researchers.

3. Exaggerate the data as much as possible and set the tone and context with emotionally laden words: “shocking,” etc.

4. Select a context that sensationalizes the conclusion.

Now let’s take a look at a story that has been swallowed whole, with little to no fact-checking or disinterested inquiry: bitcoin’s electrical consumption, i.e. the electricity consumed by mining/maintaining bitcoin’s blockchain.

One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week

Let’s start by stipulating that energy consumption is a consequential matter worthy of serious inquiry. It’s important to measure the energy consumption of all the systems that operate within the current status quo, and compare the consumption levels of these systems.

With that in mind, let’s take a look at the story.

Right off the bat, the context we’re offered to grasp the enormity of bitcoin’s mining consumption is the electrical consumption of Nigeria, a nation, we’re breathlessly informed, with 186 million residents. Wow! That’s a crazy amount of electrical consumption, right?

Let’s do some very basic fact-checking before we accept sensationalist conclusions, shall we?

Nigeria consumes about 24 billion kWh annually, while the U.S. consumes 3,913 billion kWh annually.

So Nigeria uses 3/5th of 1% (0.6%) of the electricity the U.S. consumes.

…click on the above link to read the rest of the article…

Bitcoin Mining Now Consuming More Electricity Than 159 Countries Including Ireland & Most Countries In Africa

November 24, 2017

Bitcoin Mining Now Consuming More Electricity Than 159 Countries Including Ireland & Most Countries In Africa

Bitcoin Mining Now Consuming More Electricity Than 159 Countries Including Ireland

The map above shows which countries consume less electricity than the amount consumed by global bitcoin miningBitcoin’s ongoing meteoric price rise has received the bulk of recent press attention with a lot of discussion around whether or not it’s a bubble waiting to burst.

However, most the coverage has missed out one of the more interesting and unintended consequences of this price increase. That is the surge in global electricity consumption used to “mine” more Bitcoins.

According to Digiconomist’s Bitcoin Energy Consumption Index, as of Monday November 20th, 2017 Bitcoin’s current estimated annual electricity consumption stands at 29.05TWh.

That’s the equivalent of 0.13% of total global electricity consumption. While that may not sound like a lot, it means Bitcoin mining is now using more electricity than 159 individual countries (as you can see from the map above). More than Ireland or Nigeria.

If Bitcoin miners were a country they’d rank 61st in the world in terms of electricity consumption.

Here are a few other interesting facts about Bitcoin mining and electricity consumption:

In the past month alone, Bitcoin mining electricity consumption is estimated to have increased by 29.98%
If it keeps increasing at this rate, Bitcoin mining will consume all the world’s electricity by February 2020.
Estimated annualised global mining revenues: $7.2 billion USD (£5.4 billion)
Estimated global mining costs: $1.5 billion USD (£1.1 billion)
Number of Americans who could be powered by bitcoin mining: 2.4 million (more than the population of Houston)
Number of Britons who could be powered by bitcoin mining: 6.1 million (more than the population of Birmingham, Leeds, Sheffield, Manchester, Bradford, Liverpool, Bristol, Croydon, Coventry, Leicester & Nottingham combined) Or Scotland, Wales or Northern Ireland.
Bitcoin Mining consumes more electricity than 12 US states (Alaska, Hawaii, Idaho, Maine, Montana, New Hampshire, New Mexico, North Dakota, Rhode Island, South Dakota, Vermont and Wyoming)

…click on the above link to read the rest of the article…

SELLING OUT OF PRECIOUS METALS & BUYING BITCOIN…. Very Bad Idea

November 22, 2017

SELLING OUT OF PRECIOUS METALS & BUYING BITCOIN…. Very Bad Idea

There is a new trend by individuals in the alternative media community who are now selling out of precious metals and buying into Bitcoin and cryptocurrencies. While this may seem like a good idea, especially when Bitcoin and the cryptocurrencies reach new all-time highs, it is likely a big mistake. Now, I am not saying that individuals shouldn’t invest in cryptocurrencies. Rather, it’s a lousy idea to sell all of one’s precious metals holdings and put it all into Bitcoin and cryptocurrencies.

Recently, Sean at SGTReport published a short video in which part of the headlined was titled as “SILVER BULL CAPITULATES.” In the video, Sean explains how past frequent guest and precious metal analyst, Andy Hoffman, has sold out of all his silver and is now only in Bitcoin and gold. Andy explains in his interview on Crush The Street that he sold all of his silver this summer as he really has no interest in it. He goes on to say, “Because, in a digital age, I just don’t believe people are going to store thousands of pounds of silver hoping that the gold-silver ratio is going to come down.”

I have to tell you, not only do I find this sort of thinking, utterly preposterous, I also find it quite troubling that analysts who have been promoting precious metals for the past decade are now implying that gold and silver are no longer high-quality stores of value. I disagree entirely with this faulty and superficial analysis.

There are several reasons why I believe it is essential to hold most of one’s wealth in precious metals than in Bitcoin and cryptocurrencies. However, the most important factor has to do with the fragile nature of a highly technical complex system that allows Bitcoin and cryptocurrencies to function.

…click on the above link to read the rest of the article…

The Generational Wheels Are Turning

November 22, 2017

The Generational Wheels Are Turning

“The electric light did not come from the continuous improvement of candles.”

— Oren Harari

If you only read my stuff sporadically, you might be surprised to hear that I’m actually quite optimistic about the future. The main reason I compose articles highlighting all the frauds, corruption and absence of ethics within our current paradigm isn’t to fill you with fear and dread, but to create awareness. Ignorance is not bliss, and I believe a deep appreciation about how completely broken and opaque the current way of doing things is can provide the spark of inspiration and determination necessary to create a new and much better world

As I’ve stated many times previously, it wasn’t until Bitcoin emerged and I started to understand the implications of it, that I became very encouraged about the future. Prior to that, I saw humanity living under a terminal, predatory system that would eventually consume itself, but I couldn’t see a plausible roadmap toward a better tomorrow. Bitcoin proved to me that not only did such a path exist, but the infrastructure for this better future was being built right in front of our eyes.

I first started writing about the revolutionary implications of Bitcoin in the summer of 2012, and looking back five years later I’m filled with an overwhelming sense of awe and appreciation for all that’s been achieved. While the optimist in me always thought we might get to where we are today, to see it actually happen is nothing short of extraordinary. The incredible energy and global talent that’s entered this space over the past several years brings a gigantic smile to my face. It truly is an idea whose time has come, and the more the concepts of decentralization and trustless systems infect the global consciousness, the more unstoppable they become. I think we’re already there.

…click on the above link to read the rest of the article…

How to Protect Yourself Online, No Matter Your Security Needs

November 13, 2017

How to Protect Yourself Online, No Matter Your Security Needs

Find a balance between security and convenience that is appropriate for your life.

Almost every week, it seems that there is some kind of major security breach. Whether celebrity nudes, the social security numbers of the majority of Americans, or a Bitcoin heist, it seems that our private data is under constant attack.

The Internet and your co-workers are full of advice: put a sticker over your webcam, disable Flash/Java in your browser, encrypt your drives, delete your Facebook account, cover your hand while using the ATM, get a burner phone, pay for everything with cash, start wearing a tinfoil hat to protect against the NSA’s spy rays, etc.

The reality is that as more and more of our lives become digital, information security becomes increasingly important. Many bad things can happen when your privacy is breached: from finding out that you have a boat loan that you didn’t know about to having your naked photos all over the web to being thrown in jail because the government doesn’t approve what you have to say. It’s important to take appropriate measures to protect yourself, but what is appropriate for you really depends on the kind of secrets you have to keep and the kinds of threats you need to protect against.

Let’s consider three people who care about their privacy, and steps they should take to keep their stuff private:

Lisa Monroe

Lisa Monroe lives in Madison, Wisconsin. She is a college student with a part-time job. She just got her first credit card, and just started going steady with a boyfriend.

To keep her private photos private, Lisa only sends them using Snapchat.

Lisa doesn’t have many secrets to keep, but she is worried about fraud to her credit and debit cards and the naughty pics she trades with her boyfriend Brad.

…click on the above link to read the rest of the article…

BITCOIN vs. GOLD: Which One’s A Bubble & How Much Energy Do They Really Consume

November 2, 2017

BITCOIN vs. GOLD: Which One’s A Bubble & How Much Energy Do They Really Consume

If you are investing in either Bitcoin or Gold, it’s important to understand which asset is behaving more like a bubble than the other. While it’s impossible to understand how the market will value these two very different assets in the future, we can provide some logical analysis that might remove some of the mystery associated with the market price of Bitcoin versus Gold.

I’ve read some analysis on Bitcoin profitability and energy consumption that seemed unreliable, so I thought I would put my two cents in on the subject.

For example, many sites are using the Digiconomist’s work on Bitcoin energy consumption. However, I believe this analysis has overstated Bitcoin’s energy consumption by a large degree. According to the Digiconomist, Bitcoin’s annual electric use is approximately 24 TerraWatts per year (TWh/yr):

In a recent article that was forwarded to me by one of my readers, How Many Barrels Of Oil Are Needed To Mine One Bitcoin, the author used the information in the chart above to calculate the energy cost to produce each Bitcoin. He stated that the average energy cost for each Bitcoin equals 20 barrels of oil equivalent. Unfortunately, that data is grossly overstated.

If we look at another website, the author explains in great detail the actual energy cost to produce each Bitcoin. According to Marc Bevand, he calculated on July 28th, that the average electric consumption of Bitcoin was 7.7 TWh/yr, one-third of the Digiconomist’s figure. Here is a chart and table from Marc Bevand’s site showing how he arrived at the figures:

This graph shows the increase in Bitcoin’s hash rate and the efficiency of the Bitcoin Miners at the bottom.

…click on the above link to read the rest of the article…

Stagnation Nation: Middle Class Wealth Is Locked Up in Housing and Retirement Funds

October 25, 2017

Stagnation Nation: Middle Class Wealth Is Locked Up in Housing and Retirement Funds

The majority of middle class wealth is locked up in unproductive assets or assets that only become available upon retirement or death.

One of my points in Why Governments Will Not Ban Bitcoin was to highlight how few families had the financial wherewithal to invest in bitcoinor an alternative hedge such as precious metals.

The limitation on middle class wealth isn’t just the total net worth of each family; it’s also how their wealth is allocated: the vast majority of most middle class family wealth is locked up in the family home or retirement funds.

This chart provides key insights into the differences between middle class and upper-class wealth. The majority of the wealth held by the bottom 90% of households is in the family home, i.e. the principal residence. Other major assets held include life insurance policies, pension accounts and deposits (savings).

What characterizes the family home, insurance policies and pension/retirement accounts? The wealth is largely locked up in these asset classes.

Yes, the family can borrow against these assets, but then interest accrues and the wealth is siphoned off by the loans. Early withdrawals from retirement funds trigger punishing penalties.

In effect, this wealth is in a lockbox and unavailable for deployment in other assets.

IRAs and 401K retirement accounts can be invested, but company plans come with limitations on where and how the funds can be invested, and the gains (if any) can’t be accessed until retirement.

Compare these lockboxes and limitations with the top 1%, which owns the bulk of business equity assets. Business equity means ownership of businesses; ownership of shares in corporations (stocks) is classified as ownership of financial securities.

…click on the above link to read the rest of the article…

Bitcoin: A Tower of Monetary Babel

October 17, 2017

Bitcoin: A Tower of Monetary Babel

Bitcoin Fiat Currency

The promoters of crypto currencies have gushingly touted them as the mechanism by which the present central banking cabal and the system of nation states which derive much of their power from will be brought down and replaced by digital money. Despite their meteoric rise as speculative “assets,” there are fundamental economic reasons why they will never act as a general medium of exchange despite the wild enthusiasm for them by the crypto-currency cultists.

Money – a general medium of exchange – is the most marketable (exchangeable) commodity in an economy. As a good, money is not sought after for its direct use – to satisfy individual wants – but to satisfy wants indirectly through exchange for other goods. Over time, one good becomes money since it possesses qualities superior to all other goods as a money. When gold became demanded not for its “use value,” but for its “exchange value,” it became a general medium of exchange – money.

As a consumer good, gold possessed a value or a “price” prior to it becoming a money, as the eminent monetary theorist Murray Rothbard explains:

. . . embedded in the demand for money is knowledge

of the money-prices of the immediate past; in contrast

to directly-used consumers’ or producers’ goods, money

must have pre-existing prices on which to ground a demand.

But the only way this can happen is by beginning with a useful

commodity under barter, and then adding demand for a

medium to the previous demand for direct use (e.g., for

ornaments in the case of gold.)*

Thus, Bitcoin’s “price” is not in terms of its original commodity price, but its price is in terms of dollars, Euros, yuan, etc. In the dollar’s case, it was at one time linked to gold, but has since been severed from it while Bitcoin has had no such relationship.

…click on the above link to read the rest of the article…

The Coming One-World Currency

October 16, 2017

The Coming One-World Currency

QUESTION:

Bitcoin + Cryptocurrencies

Firstly, thank you – I’ve learned more from your blog and models that high-school would ever have hoped to teach me. And even after a year I am a still at the start-line of knowledge.

I am also been a follower and investor/gambler on crypto for over a year.

I concur with your findings that Govt’ will ultimately try to ban or regulate to tax crypto currencies. It really is all about tax. nothing else. I really don’t see how it can have anything to do with terrorist funding and the need to track all transactions, considering that as far back as 1996 the Federal Reserve that “ about $200 billion to $250 billion of U.S. currency was abroad at the end of 1995, or more than half the roughly $375 billion then in circulation outside of banks.” So how do the track this cash? or do they really care?

But what happens if the people just ignore the gov’t(s) attempt to ban crypto? What then?

Is it likely, or even remotely possible that most gov’ts would work jointly and simultaneously to ban crypto currencies?

Will there always be several countries that will ignore / not join this movement to benefit from the flow of currency – even if this inflow is crypto currency or not hard currency?

What will happy if the people just revolt and ignore the gov’’s efforts to tax crypto or ban it?

Some insight on how and what happened with previous alternative currencies who help shed some light on this. Could you also recommend some reading in this area.

Thanks again for your patience and skill in translating your work into digestible English so people like myself can benefit from your knowledge

…click on the above link to read the rest of the article…

Yahoo Hacking Highlights Cyber Risk and Increasing Importance of Physical Gold

October 8, 2017

Yahoo Hacking Highlights Cyber Risk and Increasing Importance of Physical Gold

– Yahoo admits every single one of 3 billion accounts hacked in 2013 data theft
– Equifax hacking and security breach exposes half of the U.S. population
– Some 143 million people vulnerable to identity theft
– Deloitte hack compromised sensitive emails and client data
– JP Morgan hacked and New York Fed hacked and robbed
– International hacking group steals $300 million
– Global digital banking and financial system not secure

Imagine there was a chemical disaster at a factory. The surrounding water and air supply are affected over hundreds of miles. Thousands of people, if not more, are affected.

There would be a national response. Governments would step in to ask why this had happened, how it was going to be dealt with and how it would be prevented.

More importantly, those affected would be notified with immediate effect. The responsible company would not set up a website inviting potential victims to log on with personal details in order to find out if and how badly they have been affected.

And if the company did do this then people and the government wouldn’t stand for it.

Imagine that another disaster happens a few months later, at another company. But it turns out the dangerous chemicals have been leaking into the environment for possibly the previous three months.

No-one knows the extent of the damage.

There would be uproar.

Yet there seems to be little reaction when the equivalent happens in the cyber world. Just this week, less than a month after the Equifax announcement, Yahoo have admitted all 3 billion accounts were compromised four years ago … four years ago …

This is just another example of repeated data breaches that have compromised the personal data and lives of billions of people.

…click on the above link to read the rest of the article…

IMF Head Foresees the End of Banking and the Triumph of Cryptocurrency

October 2, 2017

IMF Head Foresees the End of Banking and the Triumph of Cryptocurrency

In a remarkably frank talk at a Bank of England conference, the Managing Director of the International Monetary Fund has speculated that Bitcoin and cryptocurrency have as much of a future as the Internet itself. It could displace central banks, conventional banking, and challenge the monopoly of national monies.

Christine Lagarde–a Paris native who has held her position at the IMF since 2011–says the only substantial problems with existing cryptocurrency are fixable over time.

In the long run, the technology itself can replace national monies, conventional financial intermediation, and even “puts a question mark on the fractional banking model we know today.”

In a lecture that chastised her colleagues for failing to embrace the future, she warned that “Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies.”

Here are the relevant parts of her paper:

Let us start with virtual currencies. To be clear, this is not about digital payments in existing currencies—through Paypal and other “e-money” providers such as Alipay in China, or M-Pesa in Kenya.

Virtual currencies are in a different category, because they provide their own unit of account and payment systems. These systems allow for peer-to-peer transactions without central clearinghouses, without central banks.

For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked.

…click on the above link to read the rest of the article…

Just Because the Hedge Fund Wise Guys Have Forgotten

September 29, 2017

JUST BECAUSE THE HEDGE FUND WISE GUYS HAVE FORGOTTEN

Today’s post will be about Japanese yen vol, but I am sure to bore some readers with that topic, so I am starting with something a little more interesting. As many of you know, I am a little bit of a bitcoin skeptic. At the end of the day, I have trouble investing in the ledger in the sky.

Call me old-fashioned, call me a troglodyte, call me a bitter gold bug, call me whatever you want, I just can’t bring myself to get long bits in the cloud. And before you send me messages how I don’t understand it, don’t forget I was mining bitcoin before most of Wall Street had ever heard of it. So I am much more than just some trade-a-saurus that refuses to get with the times, I am the knob who passed on bitcoin at $5.

Yet I have the privilege of counting Tony Greer from TG Macro as one of my pals, and his enthusiasm about using crypto currencies for micro-payments has piqued my interest. From Tony’s great letter the other day:

For selfish reasons, this is the article that gets me most excited about bitcoin and the blockchain. The streamlining of media distribution is going to kick the door open for individuals to compete with publishing powerhouses and main stream periodicals.

Publishing content on Amazon, iTunes, even YouTube is extremely costly for the author/artist. Youtubers can’t earn money until they get 10,000 views. Apple and Amazon take between 30% and 75% for the right to their distribution networks. Since media consumption has gone digital, it’s been difficult to charge on a PER ARTICLE basis because of high transaction costs making it prohibitively expensive. All that’s about to change.

…click on the above link to read the rest of the article…

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