From Libertarian News:

Pay close attention to this ruling.  It could be the beginning of a war on Bitcoin.

Zero Hedge reports:

The Long Arm Of Uncle Sam Just Got Longer

This one’s hot off the presses. Just yesterday, our friends at the Financial Crimes Enforcement Network (FinCEN) issued a press release on its latest ruling related to foreign ‘money service businesses (MSBs).’

An MSB is a private company that provides certain financial services like check cashing, money orders, title pawn, payday loans, travelers’ checks, prepaid stored value cards, tax refund payments, etc.

Frequently, traditional MSB clients tended to be individuals without bank accounts or access to credit.  But increasingly, the US government is looking at companies engaged in electronic payments, crowdsourced funding, and even microcredit finance as money service businesses.

The implication? They should all be regulated. Even if they’re not even US companies.

That’s right. FinCEN’s latest ruling suggests a foreign MSB may now be subject to US regulations AND CRIMINAL PENALTIES “even if none of its agents, agencies, branches or offices are physically located in the United States.”

FinCEN goes on to say that foreign-located MSBs must also comply with US anti-money laundering regulations and submit ‘suspicious activity reports’, i.e. assimilate into the US financial system and become yet another unpaid spy of the US government.

Further, foreign MSBs must register with FinCEN AND appoint a person residing in the United States as a legal representative in matters of compliance. If not, foreign MSBs risk severe civil and criminal penalties.

In other words, FinCEN thinks it has the authority to go after entities such as Mt. Gox that are located in Japan.  Mt. Gox, along with all the other related institutions, such as SpendBitcoins.com that exchange Bitcoins for gift cards, or VirWox which exchange Second Life “Linden dollars” for Bitcoins would be subject to criminal sanction by FinCEN even if they have no physical presence in the US at all.

It should be noted that these are dictatorial decrees by FinCEN.  No legislation has been passed that says FinCEN should be allowed to go after foreign businesses around the globe. FinCEN decided on its own that it has this authority.

I’m not sure if FinCEN is directly targeting Bitcoin with this latest fascist power-grab, but it certainly appears that way.  FinCEN doesn’t like it when people buy and sell things without it being privy to every detail of the transaction.   People might attempt to keep their own money! – gasp!  People might buy evil drugs! – gasp!  THE HORROR!

The relevant regulations:

Foreign-Located Money Services Businesses:

On July 21, 2011, the Financial Crimes Enforcement Network (FinCEN) published in the Federal Register a final rule on definitions and other regulations relating to money services businesses (Final Rule).1 The Final Rule amended the definition of “money services business” at 31 CFR 1010.100(ff). An entity may now qualify as a money services business (MSB) under the Bank Secrecy Act (BSA) regulations based on its activities within the United States, even if none of its agents, agencies, branches or offices are physically located in the United States. The Final Rule arose in part from the recognition that the Internet and other technological advances make it increasingly possible for persons to offer MSB services in the United States from foreign locations.2 FinCEN seeks to ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of the person’s physical location.

Money Services Business:

The term “money services business” includes any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the following capacities:

(1) Currency dealer or exchanger.
(2) Check casher.
(3) Issuer of traveler’s checks, money orders or stored value.
(4) Seller or redeemer of traveler’s checks, money orders or stored value.
(5) Money transmitter.
(6) U.S. Postal Service.

An activity threshold of greater than $1,000 per person per day in one or more transactions applies to the definitions of: currency dealer or exchanger; check casher; issuer of traveler’s checks, money orders or stored value; and seller or redeemer of travelers’ checks, money orders or stored value. The threshold applies separately to each activity — if the threshold is not met for the specific activity, the person engaged in that activity is not an MSB on the basis of that activity.

No activity threshold applies to the definition of money transmitter. Thus, a person who engages as a business in the transfer of funds is an MSB as a money transmitter, regardless of the amount of money transmission activity.

I just thought I would share this so that blog operators can easily add a modifiable BTC price widget to their Wordpress sites.

I'm not sure if this will work on a Wordpress.com hosted site, but it works fine on my stand-alone Wordpress installation.

High traffic blogs should take additional steps to cache the results from Mt. Gox or they may be throttled/blocked from updates by Mt. Gox.  However, this widget should be suitable for most blog operators that don't have a regular viewership of more than several thousand page views per day.

To make this work, install the "PHP Code Widget" from the plugin gallery.

Widget can be found here:
http://wordpress.org/extend/plugins/php-code-widget/

Then add the PHP Code Widget to your sidebar and paste this into the widget's text field.  You can modify the text to display anything you like:

Code:

You can contribute to this site by making Bitcoin donations to: <p><font color="red">xxxxxxxxxxxxxxxxx
</font><p/>Thanks for contributing!
<?php
        //first fetch the current rate from MtGox
        $ch = curl_init('https://mtgox.com/api/0/data/ticker.php');
                curl_setopt($ch, CURLOPT_REFERER, 'Mozilla/5.0 (compatible; MtGox PHP client; '.php_uname('s').'; PHP/'.phpversion().')');
                curl_setopt($ch, CURLOPT_USERAGENT, "CakeScript/0.1");
                curl_setopt($ch, CURLOPT_HEADER, 0);
                curl_setopt($ch, CURLOPT_RETURNTRANSFER, 1);
                curl_setopt($ch, CURLOPT_SSL_VERIFYHOST, false);
                curl_setopt($ch, CURLOPT_SSL_VERIFYPEER, false);
                $mtgoxjson = curl_exec($ch);
                curl_close($ch);
               
        //decode from an object to array
                $output_mtgox = json_decode($mtgoxjson);
                $output_mtgox_1 = get_object_vars($output_mtgox);
                $mtgox_array = get_object_vars($output_mtgox_1['ticker']);
 
?>
<br/>
<br/>
Last:&nbsp;<?php echo $mtgox_array['last'];   ?><br/>
High:&nbsp;<?php echo $mtgox_array['high'];   ?><br/>
Low:&nbsp;&nbsp;<?php echo $mtgox_array['low'];   ?><br/>
Avg:&nbsp;&nbsp;&nbsp;<?php echo $mtgox_array['avg'];   ?><br/>
Vol:&nbsp;&nbsp;&nbsp;<?php echo $mtgox_array['vol'];   ?><br/>

To see it in action (and to donate ), visit my site:
http://www.libertariannews.org/

LOL

Be sure to up-vote this on Reddit.

There is currently a pile of Keynesians who are monitoring the Bitcoin subreddit who are down-voting any articles or propaganda that support Bitcoin.

[Financial crisis of 2007–2010]

After making this contribution to the Austrian Business Cycle page:

Financial crisis of 2007–2010

The financial crisis of 2007-2010 has resulted in a revival of interest in the Austrian business cycle theory,[31] but has also resulted in a revival of interest of theories more critical of Austrian theory, such as Keynesianism and Post-Keynesian economics.[32] In 2006, before home prices began their decline, Peter Schiff, a supporter of the Austrian school, made predictions regarding a crash in home prices. Schiff predicted a dramatic fall in home prices as the result of a bursting housing bubble which was inflated by artificially low interest rates, adjustable rate mortgages and real estate speculation. Schiff felt the bubble was being fueled primarily by the Federal Reserve and GSEs. [33] Ron Paul also indicated that housing was in a bubble back in September of 2001 for the same reasons noted by Schiff. While Paul did not put a date on when he expected a crash in home prices to occur, he did indicate that eventually a crash in home prices would result from the expansionary policies of the Fed and GSEs.[34] Ron Paul also spoke about the Austrian business cycle repeatedly throughout his 2008 presidential campaign.

Through 2008 to 2009 Schiff’s investment firm had not been able to turn a net profit from his strategies, although his firm did have a track record of profitability prior to the 2008 correction.[35][36] Schiff responded to his critics by stating his investment strategy time horizon was longer than the course of a year. The following year, Schiff’s managed portfolios were producing a net profit once again. [37]

Austrian economist Walter Block produced a list of over 25 Austrian school economists who made accurate predictions regarding artificially inflated home prices and the nature of the correction in housing prices that would ultimately precipitate from this.[38] The economists on the list followed the same logic laid out by Schiff and Paul to arrive at their predictions.

My revisions were reverted back to this version:

Financial crisis of 2007–2010

The financial crisis of 2007-2010 has resulted in a revival of interest in the Austrian business cycle theory,[31] but has also resulted in a revival of interest of theories more critical of Austrian theory, such as Keynesianism and Post-Keynesian economics.[32] After the United States housing bubble began its decline in 2006, Peter Schiff, a supporter of the Austrian school, made some predictions[33] regarding a housing crash in the US, though (as of early 2009) Schiff’s investment firm had not been able to profit from strategies based on his predictions.[34][35] Ron Paul also spoke about the Austrian business cycle repeatedly throughout his 2008 presidential campaign.

continue reading about this nonsense here.

The predictions made by Paul and Schiff (the Ron Paul video will floor you if you haven't seen it before... trust me):

Schiff: http://www.youtube.com/watch?v=2I0QN-FYkpw

Paul: http://www.youtube.com/watch?v=48Gfzgxh3ZQ

Keyboard Symbol "Ƀ" = U+0243  Latin Capital Letter B With Stroke

I noticed squarewear.biz using this symbol to represent the coins.

I thought it made for an excellent standardized symbol for the coins since it is already a part of the default Microsoft Arial font.

Thoughts and opinions?

I recently authored an article on the economics of deflation as it pertains to Bitcoins.

I would like to share it with you all for discussion:

As many of my regular readers know, I’ve already written a few articles on Bitcoin that explain why it is money.  In those articles I have addressed why the inherent properties of Bitcoin give it value as a medium of exchange.  One of those properties that I mentioned, but did not go into very deeply, is the deflationary aspect of the currency system.

Bitcoins are inherently deflationary as a currency because they will eventually top out in the number that can be produced.  Eventually total Bitcoin circulation will reach about 21 million coins, and after that, no new coins can be created.  Thus, if no new money can be created, yet if the productive capacity of the economy increases, prices will fall since there will be more goods chasing the same amount of coins.

Most people remember hearing that deflation is just as bad (or worse) than inflation from their high school or college economics teachers.  In this article I will explain why those assumptions are wrong.  Deflation is when a currency gains value over time (i.e. you need less and less of it to buy the same amount of goods in the future).

So let’s list off the reasons why crackpot Keynesian economists think deflation is bad for the economy.  Then I will address each of those points.  You are about to see a guy with a BBA in MIS smash a Noble prize winning PhD economist’s arguments using simple common sense.

Deflation is supposedly bad because:

There are actually three different reasons to worry about deflation, two on the demand side and one on the supply side.

So first of all: when people expect falling prices, they become less willing to spend, and in particular less willing to borrow…even a zero rate may not be low enough to achieve full employment.

A second effect: even aside from expectations of future deflation, falling prices worsen the position of debtors, by increasing the real burden of their debts.

Finally, in a deflationary economy, wages as well as prices often have to fall – and it’s a fact of life that it’s very hard to cut nominal wages — there’s downward nominal wage rigidity.

Those arguments against deflation are typical Keynesian dogma.  In fact I actually wrote out the exact same three arguments before I even read Krugman’s article, but I figured it would be better if I listed them off right from the horse’s mouth.

So let’s address the first argument that people become less willing to spend, and particularly less willing to borrow, and this somehow leads to unemployment.  There will ALWAYS be some unemployment if the economy is not in equilibrium (which it never is, since human desires change over time).  As people shift their desires from wanting notebook computers to iPads, some unemployment will result from this.  Consider that if the demand for notebooks drops while the demand for iPads increases, notebook producers will end up having to lay people off or go out of business while iPad producers will be hiring more people.  The people in transition are going to be unemployed while they look for new work.

But setting that point aside, we have to look at why money undergoes deflation in the first place!  It is not surprising that Krugman doesn’t mention the reasons why deflation occurs in a currency.  There are basically only two reasons (on a macro scale) why a currency would undergo deflation:

1.  The economy is producing more new goods and services at a rate that is above the growth rate of the money supply…. or

2.  In a fractional reserve system, debt is being wiped out through widespread bankruptcies.

Consider that in the first case, this is entirely normal and healthy!  If the money supply is held constant, yet the productive capacity of the economy increases, there will be the same number of dollars chasing more goods.  Inflation is the exact opposite of this, whereby same dollars are chasing fewer goods (or more dollars chasing same/less goods).  Clearly deflation in this sense is beneficial for consumers.  We see this taking place in the electronics industry which is largely free from government regulation and subsidies.  When competition is fierce, the productive capacity of industry over-rides the inflationary aspects of our fractional reserve economy and we see prices come down as more and more electronic goods are produced more efficiently.

Imagine if the electronics industry operated like the government subsidized and regulated healthcare industry.  You would buy all the electronics you could now, because in the future, they would be so expensive you might not be able to afford them!  So yeah, in this sense, inflation encourages spending.  But clearly this is UNHEALTHY spending caused by people fearing the loss of their purchasing power.

Inflation creates a fear based economy that motivates people to spend above their means because the future value of their purchasing power is constantly decreasing.  It would be foolish to try and save money for future expenditures in an inflationary economy, which obviously destroys savings.  People who save for their retirement by putting money in a bank would be fools in an inflationary environment.

In fact if the inflation gets bad enough and interest rates are artificially low, people would be motivated to take out excessive loans and credit card debt to try and get as many things as they could now!  Boy that sure sounds like a problem we are all familiar with doesn’t it?

Krugman’s argument that people would be less willing to spend and borrow, and this would lead to unemployment, is as ridiculous as saying that because computers keep getting better and cheaper into the future, people would be less willing to spend money on a computer today because they could simply wait and buy an even better/cheaper computer in the future.  That is obviously not how people think.  People have needs and desires that have to be met, and they will purchase things as soon as their desire for the product is larger than their desire for future earnings on savings.  That, by the way, is how a healthy economy should operate.  Notice there is no fear involved.  Electronics companies are not going out of business because their products are becoming more abundant and cheaper.

So let us look at Krugman’s second argument that deflation makes debtors worse off.  What is left unsaid in this assumption is that debt is a good thing, while saving is a bad thing.  Does this make any logical sense to anyone?  Consider that if money is undergoing deflation, SAVERS benefit.  Shouldn’t the savers naturally benefit more than someone who is putting themselves into debt?  Savers are forgoing pleasure in the moment for the expectation of even greater pleasure in the future.  This means resources that could be consumed immediately for minimal productive gains are being put aside into bigger projects that could yield even greater gains in the future.  Savings is what builds strong economic foundations.  If the US wasn’t so wildly in debt at the moment we would be in a better economic position with larger prospects for growth!

But also let us consider the impacts of deflation on interest rates.  People who lend and borrow money will know that money will be worth more in the future if the money supply remains constant (like Bitcoins) yet the productive capacity of the economy continues to increase.  This leads to falling interest rates.  Interest rates will naturally come down in a deflationary environment because savings will increase, thereby making more money available to banks to lend.  When banks have a lot of people saving money with them, they will lower rates naturally.  This is in contrast to our present situation where rates are low strictly because the Fed is artificially depressing them by paying banks NOT to lend and by buying up government bonds.

Distortion of interest rates by the Fed also has other deleterious effects on the structure of production that I will not get into here, but according to Austrian Business Cycle Theory, inflation and its distortion of interest rates is the primary driver of business cycles.  Learn more about it by watching this video by Professor Roger Garrison.

Which situation sounds healthier to you?  Low interest rates because a lot of people are saving money or low interest rates because the Fed is artificially depressing them with tax payer money?

So let us address Krugman’s final argument that wages face downward rigidity which makes it more difficult for employers to adjust to the money that is gaining in value.

Consider if you were in this situation:

Your employer gathers up all the employees for a conference and tells you that because the economy is so productive and that the value of money is going up so much, that he is going to have to furlough the workforce to deal with the appreciating currency.

From your perspective, you are getting more time off while your income remains exactly the same in terms of purchasing power.  Who doesn’t want that?  Further, consider that if you don’t get a raise every year, YOU STILL GET A RAISE!  Employers don’t necessarily have to cut wages; they can cut hours or simply not give raises yet people would still be better off than they were the year before.

But let’s say the economy is so productive that money gains so much value that employers are simply forced to cut wages – if this was the case, would anyone seriously give a damn?  We would be living in a nirvana society that had absolutely ridiculous amounts of abundance.  Women could stay home to take care of the kids, one man could provide all the income necessary to take care of his family and still retire, kids wouldn’t have to work three jobs to put themselves through school, etc… etc… etc…

Less people would need to work in such an economy (like they did in the 50s and 60s) which would relieve the need of employers to cut wages.

Oh yes, one more thing.  I suppose I should address the second cause of deflation other than increasing productivity while the money supply remains constant – and that is a deflationary default spiral that results from the unwinding of a Ponzi scheme.  This is the real reason why Keynesian economists fear monger about deflation.  Since in our crazy society, money IS debt, if debtors get themselves into a position where they are so over-leveraged that they are forced into bankruptcy, it can cause a cascading series of defaults that wipe out the banking industry (along with the government and its welfare/warfare state).  As debt gets wiped out, the money supply decreases which leads to deflation.

Keynesian economists have to continually fear monger about deflation because even a tiny amount of it could wipe out our Ponzi debt based economy, and thereby wipe out their fat government aid fueled paychecks.  To learn more about the scam that is our debt based economy, check out The Case Against The Fed.  It offers a clear picture of how the modern banking system operates and why it was created.  If you are looking for something slightly more entertaining, yet still informative, check out The American Dream.  It is gives a great overview of what fractional reserve banking is and why it is nothing more than a Ponzi scheme.

Keynesian economists like Krugman don’t have your best interests in mind when they argue against deflation.  They are far more concerned about keeping the welfare/warfare state alive and well, along with their own paychecks.

I found some humor in making this post on the AdSense forums so I thought I would share.



I'm the owner and operator of Libertarian News, whose articles you may have seen recently on Bitcoinwatch.com or linked on these message boards.

A few of my articles that have garnered some attention within the community:

The Economics Of Bitcoin – Doug Casey Gets It Wrong

Libertarian Goldbugs Hating On Bitcoin – Free Market Money

I hope you are all doing well.