Bitcoin Price Hits $500, a 50x Increase in Just 12 Months

Those bitcoins that made you gasp at $300 just a couple of weeks ago? They were a bargain — the value of 1 BTC has now passed $500.

Prices hit this record and landmark figure at 11.50am GMT on 17 November, and at the time of writing were trading at $503.10 on Mt. Gox.

That means: if you bought a stash of bitcoins at their absolute highest peak price of $266* in April 2013 and then felt nauseous as the price plunged to $65 the same week, you have now almost doubled your investment. Provided you didn’t cut your losses and sell prematurely, that is.

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The bitcoin value began rising again almost immediately after that, breaking through the $100 mark again before May and hovering around that region throughout the northern hemisphere summer. It broke through $200 in late October and since then the price charts have been close to vertical, hitting $300 on 6 November and $400 on all exchanges by 15 November.

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There are currently 12,003,175 bitcoins in existence. The total market cap is $5,581,140,286 according to the Bitcoin Price Index, with 1,212,833 bitcoins changing hands in the past 24 hours. An average of 50,535 bitcoins are transacted every hour.

bitcoin price hits $500
The bitcoin price has reached $500 on Mt. Gox. Source: Bitcoincharts

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Why is this happening?

Bitcoin has survived some bumps in that time, most significantly the shutdown of the Silk Road online black marketplace and a number of chilly statements from government representatives. That it has continued to rise despite these setbacks could well be pushing values even higher, as investors sense a more resilient asset than previously thought.

The FBI seized a total of 171,955 BTC from Silk Road in October 2013, an amount so significant there were rumors it could influence bitcoin’s value. It is still unclear what the Bureau intends to do with its haul, if anything.

Nearly every piece of bad news about individual cases heralded more expectations that bitcoin would pay the price.

An asset with more significant value has also meant higher-profile hacks, scams and thefts. Companies like Australia’s Inputs.io found themselves out of their depth as its now considerable deposits came under attack.

What had been worth a few thousand in 2012 was suddenly worth millions, and people with plenty of experience finding naive security holes wanted it.

Rather than face their customers’ wrath, the proprietors of such businesses simply took fright and ran away. As recently as last week, the (supposedly) Hong Kong-based GBL also disappeared, along with its customers’ funds.

Yet the value never fell. Nearly every piece of bad news about individual cases heralded more expectations that bitcoin would pay the price. That it has continued to rise despite these setbacks could well be feeding back and pushing values even higher, as investors sense bitcoin is a more resilient asset than previously thought.

The government has been paying as much attention as the hackers and scammers. The US Senate Committee on Homeland Security and Governmental Affairs (HSGAC) will begin hearings on Monday 18 November with representatives from five wary federal agencies and representatives from the bitcoin advocacy community. Another Senate Committee on Banking, Housing and Urban Affairs will also hold a bitcoin hearing on Tuesday 19 November.

Again, the news of these hearings have had no negative impact on bitcoin’s value.

Silk Road shutdown effect on bitcoin
Silk Road’s shutdown on 2 October 2013 caused only a small dip in the bitcoin price.

Around the globe

BTC China Bitcoin Exchange
ate 2013 also saw an axial shift towards Asia, as BTC China became the highest-volume bitcoin exchange with its own record-setting prices. Reports of media attention and rampant mining activity have made some wonder if China is driving the rise. Even in April, when most gave credit for the bitcoin rise to government bank account confiscations, the factories of Shenzhen were busy cranking out mining hardware and selling it to locals.

The two week shutdown of the US Federal Government in October 2013 over a debt ceiling dispute did little to boost faith in government-backed money, especially the one acting as the world’s reserve currency. Every time the word ‘default’ is even mentioned in this context, no matter what the expected outcome, eyes begin to search for alternative assets.

There have been other alternate theories, including the one that bitcoin value is being driven up by the unfortunate millions desperately acquiring the currency to rid themselves of CryptoLocker malware.

Bubbles

The air in April was thick with the gloating of digital currency cynics and attempts even by technology media to analyze the factors behind bitcoin’s ‘fate’ and look for alternatives. But bitcoin has proved to be more Amazon.com than Pets.com and if it’s a bubble, it is one with a tendency to respawn.

Now, as $1,000 will get you only two bitcoins, the cries of ‘bubble!’ have not gone away.

Garrick Hileman, economics historian at the London School of Economics, said it’s too early to tell whether we’re seeing a bubble in bitcoin. He believes lots of factors are driving the price increase, including pure speculation, increased media coverage and attention from regulators.

“The growing regulatory attention which bitcoin is receiving is likely having a positive effect. This may seem counterintuitive, but to go mainstream, bitcoin needs more regulation, not less.”

Hileman said the US Senate hearings next week will not only bring more publicity to bitcoin, they may also lead to additional regulatory guidance.

“The lack of legal clarity is arguably the single most important issue facing bitcoin right now. For example, banks are scared of bitcoin, and reluctance by banks to work with the growing bitcoin ecosystem is a significant barrier to wider adoption,” he added.

Suggestions of a bubble will probably continue to increase and it’s wise to not get to carried away simply by a rising price. It might be equally prudent to stay ready to pounce on another price drop to $65.

Or we may be laughing at this story a year from now — not because the price has crashed, but because it has soared to even more unimaginable levels. Someone from November 2012 would probably find the idea of $500 quite hilarious too.

* Prices on BTC China were actually over the equivalent of $300 in April 2013, but the exchange trades only in Chinese RMB.

Everything You Know About Money Is Wrong

https://i1.wp.com/upload.wikimedia.org/wikipedia/commons/0/05/Barter-Chickens_for_Subscription.jpg

 We Can’t Fix What We Don’t Understand

Bloomberg notes this week that the conventional theory of why money was created is wrong:

There are, broadly speaking, two accounts of the origin and history of money. One is elegant, intuitive and taught in many introductory economics textbooks. The other is true.

The financial economist Charles Goodhart, a former member of the Bank of England’s Monetary Policy Committee, laid out the two views in a 1998 paper, “The Two Concepts of Money: Implications for the Analysis of Optimal Currency Areas.”

The first view, the “M View,” is named after the Austrian 19th century economist and historian Karl Menger, whose 1882 essay “On the Origins of Money” is the canonical statement of an argument that goes back to Aristotle:

As subsistence farming gives way to more complex economies, individuals want to trade. Simple barter (eight bushels of wheat for one barrel of wine) quickly becomes inefficient, because a buyer’s desires won’t always match up with a seller’s inventory. If a merchant comes through the village with wine and all a farmer has to offer is wheat, but the merchant wants nuts, there’s no trade and both parties walk away unfulfilled. Or the farmer has to incur the costs of finding another merchant who will exchange wheat for nuts and then hope that the first merchant hasn’t moved on to the next village.

But if the merchant and the farmer can exchange some other medium, then the trade can happen. This medium of exchange has to be what Menger calls “saleable,” meaning that it’s easily portable, doesn’t spoil over time and can be divided. Denominated coins work, shells and beads also fit the bill. So do cigarettes in POW camps and jails and Tide laundry detergent for drug dealers. This process, Menger argues, happens without the intervention of the state: “Money has not been generated by law. In its origin it is a social, and not a state institution.” [Menger’s view is the commonly-accepted theory of  money.]

Goodhart points out, however, that Menger is just wrong about the actual history of physical money, especially metal coins. Goodhart writes that coins don’t follow Menger’s account at all. Normal people, after all, can’t judge the quality of hunks of metal the same way they can count cigarettes or shells. They can, however, count coins. Coins need to be minted, and governments are the ideal body to do so. Precious metals that become coins are, well, precious, and stores of them need to be protected from theft. Also, a private mint will always have the incentive to say its coins contain more high-value stuff than they actually do. Governments can last a long time and make multi-generational commitments to their currencies that your local blacksmith can’t.

But why oversee money creation in the first place? This brings us to the second theory of money, which Goodhart calls the “C View,” standing for “cartalist” (chartalist is a more common spelling). To simplify radically, it starts with the idea that states minted money to pay soldiers, and then made that money the only acceptable currency for paying taxes. With a standard currency, tax assessment and collection became easier, and the state could make a small profit from seiginorage.

The state-coin connection has far more historical support than Menger’s organic account. As Goodheart points out, strong, state-building rulers (Charlemagne, Edward I of England) tend to be currency innovators, and he could have easily added Franklin D. Roosevelt’s taking the U.S. off the gold standard in 1933 or Abraham Lincoln financing the Civil War with newly issued greenbacks. The inverse is true too: When states collapse, they usually take their currencies with them. When Japan stopped minting coins in 958, the economy reverted to barter within 50 years.  When the Roman Empire collapsed in Western Europe, money creation splintered along new political borders.

If money came about independent of states, as according to the M View, one would think it would outlast transient political structures. Historically, however, this tends not to be the case, a strong argument in favor of the C View.

Anthropologist David Graeber – who has extensively studied the history of money and debt – agrees:

There’s a standard story we’re all taught, a ‘once upon a time’ — it’s a fairy tale.

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Rather than the standard story – first there’s barter, then money, then finally credit comes out of that – if anything its precisely the other way around. Credit and debt comes first, then coinage emerges thousands of years later and then, when you do find “I’ll give you twenty chickens for that cow” type of barter systems, it’s usually when there used to be cash markets, but for some reason – as in Russia, for example, in 1998 – the currency collapses or disappears.

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Taxes are also key to creating the first markets that operate on cash, since coinage seems to be invented or at least widely popularized to pay soldiers – more or less simultaneously in China, India, and the Mediterranean, where governments find the easiest way to provision the troops is to issue them standard-issue bits of gold or silver and then demand everyone else in the kingdom give them one of those coins back again. Thus we find that the language of debt and the language of morality start to merge.

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How did this happen? Well, remember I said that the big question in the origins of money is how a sense of obligation – an ‘I owe you one’ – turns into something that can be precisely quantified? Well, the answer seems to be: when there is a potential for violence. If you give someone a pig and they give you a few chickens back you might think they’re a cheapskate, and mock them, but you’re unlikely to come up with a mathematical formula for exactly how cheap you think they are. If someone pokes out your eye in a fight, or kills your brother, that’s when you start saying, “traditional compensation is exactly twenty-seven heifers of the finest quality and if they’re not of the finest quality, this means war!”

Money, in the sense of exact equivalents, seems to emerge from situations like that, but also, war and plunder, the disposal of loot, slavery. In early Medieval Ireland, for example, slave-girls were the highest denomination of currency. And you could specify the exact value of everything in a typical house even though very few of those items were available for sale anywhere because they were used to pay fines or damages if someone broke them. But once you understand that taxes and money largely begin with war it becomes easier to see what really happened.

Graeber provides an example:

We tend to forget that in, say, the Middle Ages, from France to China, … money was … whatever the king was willing to accept in taxes.

Graeber also notes that the first word for “freedom” in any language is the word for “debt-freedom”, and that much of the language of the great religious movements revolved around forgiveness of debts.  And the founders of the Christian and Jewish religions focused on the importance of debt jubilees.

In addition, most Americans don’t realize that our current money system does not serve the public good, but instead continuously sucks the prosperity and vitality out of our economy.  As Henry Ford noted:

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

Some claim that public banking is the answer. Others look to gold or Bitcoin as a saner alternative to fiat currencies.

As we noted in 2011, maybe we should get beyond all systems which keep track of exactly to the penny who owes what to whom … in the manner required for warfare and slavery:

Graeber hints at one possibility [for a way out of the money-debt trap]:

[French anthropologist Marcel Mauss] was one of the first anthropologists to ask: well, all right, if not barter, then what? What do people who don’t use money actually do when things change hands? Anthropologists had documented an endless variety of such economic systems, but hadn’t really worked out common principles. What Mauss noticed was that in almost all of them, everyone pretended as if they were just giving one another gifts and then they fervently denied they expected anything back. But in actual fact everyone understood there were implicit rules and recipients would feel compelled to make some sort of return.

What fascinated Mauss was that this seemed to be universally true, even today. If I take a free-market economist out to dinner he’ll feel like he should return the favor and take me out to dinner later. He might even think that he is something of chump if he doesn’t and this even if his theory tells him he just got something for nothing and should be happy about it. Why is that? What is this force that compels me to want to return a gift?

This is an important argument, and it shows there is always a certain morality underlying what we call economic life.

In other words, in communities or webs of human interaction which are small enough that people can remember who gave what, we might be able to set up alternative systems of money and credit so we can largely “opt out” of the status quo systems of money and debt measurement.

I’m not arguing for becoming Luddites and living in mud huts (but that is fine, if you wish to do so). Nor am I suggesting that we all have to become selfless saints who give away all of their possessions without any reasonable expectation of something in return.

I am arguing that it might be possible to empower ourselves – and create our own systems for keeping track on a local or people-centered basis, and create our own vibrant economies using the resources we have – by moving away from the national and global systems dominated by the biggest banks and oligarchs, and towards a system where we “spend” resources and goodwill into our local communities in a way in which trust is built from the ground-up, and the energy of trade and commerce can be re-started. [Trust is – after all – the basis for all prosperous economies.]

Postscript: Mainstream economists will argue that we need a universal, fungible type of money in order to trade on a global basis. But because currencies are now unpegged from anything in the real world and are traded on the currency markets, their values fluctuate wildly in the modern world. In other words, one of the essential characteristics for money – that they represent a universal, fixed yardstick – has disappeared. And fiat currencies have a very short lifespan. So how valuable are they, really, for anyone but forex speculators?

Until we learn what money, credit and debt really are, we will remain victims … getting poorer and poorer.

Postscript: The Bible says that the love of money is the root of all evil.  On the other hand, the father of modern economics (Adam Smith), Ronald Reagan, economist Milton Friedman, Wall Street titan Ivan Boesky and students who take economics classes all say that greed is good.

Both are naive.

Money and currency are good to the extent that they help create abundance for ourselves and our communities.  They are bad to the extent that they are used to promote warfare and slavery, and that they suck prosperity out of the system.

Big Banks Are Not Really In the Banking Business

Everyone thinks of banks as holding our deposits safe, and extending loans based upon the amount of deposits they hold in their vaults.

This is no longer true.

The big banks currently do very little traditional banking. Most of their business is from financialspeculation (which, sadly, metastasizes into manipulation and criminal behavior).

For example, less than 10% of Bank of America’s assets come from traditional banking deposits.

Time Magazine gave some historical perspective in 1993:

What would happen to the U.S. economy if all its commercial banks suddenly closed their doors? Throughout most of American history, the answer would have been a disaster of epic proportions, akin to the Depression wrought by the chain-reaction bank failures in the early 1930s. But [today] the startling answer is that a shutdown by banks might be far from cataclysmic.

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Who really needs banks these days? Hardly anyone, it turns out. While banks once dominated business lending, today nearly 80% of all such loans come from nonbank lenders like life insurers, brokerage firms and finance companies. Banks used to be the only source of money in town. Now businesses and individuals can write checks on their insurance companies, get a loan from a pension fund, and deposit paychecks in a money-market account with a brokerage firm. “It is possible for banks to die and still have a vibrant economy,” says Edward Furash, a Washington banks consultant.

Indeed, even though the taxpayers have thrown trillions of dollars at the “too big to fail” banks, they largely stopped loaning to Main street … and it was only the smaller banks that kept making loans.

Good for Bitcoin: BRICS Countries Build New Internet to Avoid NSA Spying

BRICS countries are close to completing a brand new Internet backbone that would bypass the United States entirely and thereby protect both governments and citizens from NSA spying. This could also mean Bitcoin will have a new way to reach the world which can not be shut down by the U.S. Government.

BRICS countries are close to completing a brand new Internet backbone that would bypass the United States entirely… 

The so-called Emerging Economies – the BRICS countries – have decided to build their own Internet infrastructure, circumventing American and European wiretapping points. While this is mostly skillful geopolitical play, it spells opportunity for civil liberties online that should be harnessed.  www.privateinternetaccess.com… 

They say it is to stop U.S. spying but it more than that. The BRICS cable was already in development months before the revelations of whistleblower Edward Snowden first became public in June. It is clear there is a huge shift in power coming…. these emerging economies want more autonomy and this is the logical place to start. 

This is good news for Bitcoin. 

It means the U.S. Government won’t be able to shut down the crypto-currency and could led to its wider adoption. If Bitcoin really does become a threat to the dollar, and the dollar were displaced, the world would be better off as a result. Money would be returned to the market whence it came and leave the grasping hands of the political and financial elite who use their monopoly to exploit the rest of us. No more inflation, no more business cycles, no more multi-trillion dollar bailouts. Money would be private property, with a complete separation between money and the state.

Whether the U.S. Government likes it or not, Bitcoin and cryptocurrencies are the future of money. Just as email and texting displaced the U.S. post office, and cell phones have displaced the wall phone the government used to install for us, cryptocurrencies could become the preferred medium for conducting exchange in the age of the Internet. Indeed, with the BRICS new Internet, that prospect has been a certainty. Capital is more mobile than ever and will, over time, tend to seek out liberal jurisdictions over those that regiment every aspect of commerce. 

The U.S. has a very bad habit, one that stands in complete contradiction to the very idea of liberalism. Its most fundamental tenet is that anything that is not heavily regulated probably should be completely illegal. The notion that stuff should just be permitted to happen and take its own shape in the course of trading and competition and the like is just not part of the mindset of an imperial paranoid state like the U.S.. 

The U.S. can slow down the trend but it can’t stop it. Cryptocurrency will find a home and it will be the one that is most welcome. The nations that punish it will die and those that welcome it will thrive. Ultimately, cryptocurrency could erase borders and free humanity from the chains of state economic control. Look to those regions like these BRICS countries that are, for now, open to genuine progress.

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In light of revelations that the National Security Agency hacked German Chancellor Angela Merkel’s phone, in addition to recording information about 124 billion phone calls during a 30-day period earlier this year, the fallout against the NSA has accelerated.

Brazil is set to finalize a 34,000-kilometre undersea fiber-optic cable by 2015 that will run from Vladivostok, Russia to Fortaleza, Brazil, via Shantou, China, Chennai, India and Cape Town, South Africa.

According to the Hindu, the project will create, “a network free of US eavesdropping,” which via legislative mandates will also force the likes of Google, Facebook and Yahoo to store all data generated by BRICS nations locally, shielding it from NSA snooping.

“The BRICS countries have the muscle to pull this off,” notes Washington’s Blog. “Each of the BRICS countries are in the top 25 largest economies in the world. China has the world’s second largest economy, India is 3rd, Russia 6th, Brazil 7th, and South Africa 25th.”

However, some privacy experts fear that this will do little to stop the NSA, given that it has tapped undersea cables since the Cold War era. Others are more positive.

“Any alternative would be a positive thing, writes Michael Dorfman. “The more choice you have, the better. Yet no-one can say for sure whether this new Internet will be safer than its US counterpart and will be able to protect the rights of regular users, including the privacy of personal data and free access to resources, more effectively.”

The BRICS cable was already in development months before the revelations of whistleblower Edward Snowden first became public in June.

In September it emerged that the NSA had been spying on Brazilian government communications as well as Brazilian oil company Petrobras. Spooks hacked into the firm’s computer network to eavesdrop on conversations between CEOs.

The current Internet architecture is dominated by ICANN (the Internet Corporation for Assigned Names and Numbers), which is largely controlled by the United States.

Other entrepreneurs are also fighting back against NSA surveillance. Tech maverick John McAfee recently announced that he was to fund a $100 gadget named Decentral that would sync up with a modem to thwart NSA spying and provide total anonymity.

Asked what he would do if the US government banned the product, McAfee responded, “I’ll sell it in England, Japan, the Third World. This is coming and cannot be stopped.”

NSA and GCHQ target Tor network that protects anonymity of web users

James Ball, Bruce Schneier and Glenn Greenwald
London Guardian
Oct 5, 2013

nsa-ror

The National Security Agency has made repeated attempts to develop attacks against people using Tor, a popular tool designed to protect online anonymity, despite the fact the software is primarily funded and promoted by the US government itself.

Top-secret NSA documents, disclosed by whistleblower Edward Snowden, reveal that the agency’s current successes against Tor rely on identifying users and then attacking vulnerable software on their computers. One technique developed by the agency targeted the Firefox web browser used with Tor, giving the agency full control over targets’ computers, including access to files, all keystrokes and all online activity.

But the documents suggest that the fundamental security of the Tor service remains intact. One top-secret presentation, titled ‘Tor Stinks’, states: “We will never be able to de-anonymize all Tor users all the time.” It continues: “With manual analysis we can de-anonymize a very small fraction of Tor users,” and says the agency has had “no success de-anonymizing a user in response” to a specific request.

Another top-secret presentation calls Tor “the king of high-secure, low-latency internet anonymity”.

Full article here

Former employee of HSBC Uncovers Terrorist Financing, Blows Whistle

Luke Rudkowski interviews Everett Stern, a former employee of HSBC that uncovered and blew the whistle on the company knowingly financing criminals, terrorists and drug cartels.

To find out more about Everett Stern check out https://twitter.com/SternEverett

Oath Keepers “Organize a neighborhood Militia NOW”

Sept 8th Coast to Coast Program. John B Wells interviews the founder of Oath Keepers, Mr. Stewart Rhodes in hour 2nd Hour. A called to Arms. During the interview Rhodes successes that all the listeners read: When Money Dies, by Fergusson, Adam.

Joining John B. Wells, Stewart Rhodes, founder and President of Oath Keepers, argued that there’s a relentless campaign going on to centralize power, militarize the police, and strip power out of the hands of average citizens. This kind of situation sets people up for a dictatorship, such as seen in Stalinist Russia and Nazi Germany, he remarked. Rhodes believes that economic collapse and the ensuing chaos will be used to accelerate the centralizing of power, and the scrapping of the US Constitution.

His organization, the Oath Keepers, works with military veterans, law enforcement, and first responders to remind them of their oaths to defend the Constitution, and not “just follow orders” that go against the people. Their mission also includes training these veterans and officers to become community leaders, to be able to step in during a crisis, and not just wait for FEMA to belatedly offer help. It’s critical that people get involved with their own community, such as participating in a Neighborhood Watch, and learning what skills their various neighbors have, he suggested, adding that it’s also important to understand the logistics of communications, clean water, and power on the local level.

The real war going on is the elites versus the free people of the world, whom they seek to usher into a police state, Rhodes stated. The American people have to get back to their independence, starting with self-sufficiency and food reserves, yet the survivalist approach of working in isolation isn’t going to work, he commented. We have to think in terms of community, he said, such as a local VFW forming its own battalion.
Syria & Geopolitics

First hour guest, political scientist Joel Skousen provided insights on world affairs such as the situation in Syria. He doubted that Assad was behind the chemical attacks on Syrian civilians. The US and Israel have been looking for a way to justify an attack on Iran, and they hope by attacking Syria, Iran may support Assad with a retaliation, which would open the door for a war with them, Skousen posited. The US wants to target Iran not only to curtail their nuclear weapons development but to cut them off as an oil supplier to China, he continued, adding that he foresees an eventual war between the US and Russia & China.