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Interview: Jeff Berwick on the Keiser Report - Life in Mexico, Bitcoin and Anarchapulco

Tue, 01/27/2015 - 19:06

Anarcho-capitalist and Editor-In-Chief of TDV Media, Jeff Berwick, joins Max Keiser from his Mexico City studios to discuss Mexico being a so-called "failed state" and how this is a good thing, the US-led drug war, a challenge for Russell Brand, freedom in Mexico, the Permanent Traveler/Prior Taxpayer (PT) lifestyle, bitcoin, currency collapse and the upcoming Anarchapulco conference (http://anarchapulco.com) held from February 27th to March 1st, 2015, in Acapulco, Mexico.

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Anarchast: Richard Heathen: The Rise of Collectivism!

Tue, 01/27/2015 - 18:47

Jeff interviews Anarchist documentary maker Richard Heathen, topics include: the documentary Hidden Influence, the rise of corporate fascism, public school indoctrination, the rise of the internet, the overton window, the social justice warrior as cultural marxism, minority identity & critical theory, the rights of the individual now subservient to the needs of the community, Peter Joseph, there is no such thing as equality, massive social engineering is underway.

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Of Bitcoin Volatility & Exponential Returns: Gamemake Watch 3

Tue, 01/27/2015 - 00:05

[The following post is by TDV Contributor Scott Freeman]

BITCOIN WATCH – DID WE HIT A BOTTOM?

Thus far bitcoin has rebounded almost 70% from its lows around $150, while litecoin has rebounded over 120% from its lows around $1. This substantial rebound was the strongest in several months and certainly makes $150 into a firm candidate for a bottom.

For the first time in over a year, litecoin rebounded more strongly than bitcoin, and in fact, came close to re-attaining the 1% level it held for much of 2014.

While bottoms are obviously impossible to predict with any certainty, $150 may well turn out to have been the low for 2015. At a minimum, such a scenario merits a probability of at least, say, 40%, and according to some as high as 60%. If we use that 40% figure in combination with a potential upside of, say, $1000, it seems like an attractive bet. Even if the probability is only 25%, it is still an attractive bet. Remember, even a bet with a 25% probability of success can still be a good one if the upside is exponential. To win, I simply have to make enough of these bets.

This kind of bet with the expectation of a loss is a typical contrarian one, because its underlying mathematical logic contradicts emotional logic. Most people prefer not to place bets which they expect to lose, which is one reason why such bets can be so lucrative for the people who DO place them. The recent Swiss franc revaluation was a good case in point. At least from a short-term perspective betting on a Swiss franc revaluation was likely a losing bet. So unsurprisingly, few people made it. But those who did got an exponential payoff.

So will bitcoin or litecoin once again produce exponential returns in 2015? There is no way to know, but it is clearly a possibility worth punting on.

Bitstamp continues to be the market leader, offering the highest prices during most of the rise until today’s $255 top was reached. The fact that Bitfinex price levels temporarily surpassed Bitstamp is a hint that market participants are becoming increasingly confident, since Bitfinex’s margin functionality typically leads it to overshoot the general market. It is also a hint that a short-term correction may well be in the cards.

GAMEMAKER WATCH – TARGETING EXPONENTIAL RETURNS

Thanks to zero percent interest rates and massive asset purchases, the US Federal Reserve has printed the equivalent of over 1.5 trillion new dollars since 2008, more than doubling M1 to almost 4 trillion dollars. Shouldn’t prices then also double on average? Shouldn’t all this printing frighten foreigners from holding them, thus leading to a dollar collapse? This is what many pundits have predicted, and with good reason. And yet, despite rising prices for some goods and services, it has not happened. There has been some inflation of goods and services, but no hyper inflation. And the US dollar has not collapsed. Instead, prices for gold, silver, euros, wheat, copper and yen all collapsed. Not only has the US dollar not collapsed, but it has strengthened.

Technically speaking, inflation is simply an increase in the money supply. If all other factors remain unchanged, this must result in higher prices somewhere. We have in fact seen an explosion in the prices of most stocks which is hard to justify in terms of a booming economy. This is doubtless where a lot of those new dollars landed.

But can that explain away the entire 1.5 trillion dollars, or is there some other factor in play here? It turns out that there is. Specifically one factor is different, and that is the average propensity of capital holders for holding cash. What types of assets do we like to hold? Naturally assets that are rising in value. And what assets have been rising in value across the board for quite some time? You guessed it – US dollars and stock prices.

If everyone’s preference for holding cash goes up, there is less cash available to pump up prices, and – lo and behold – we have a self-reinforcing virtuous circle. There is a catch to this, however: no assets go up in value forever, and especially not ones which are being debased at high rates of speed. So in essence, this is a kind of unsustainable Ponzi scheme, where at some point the up-trend holding up the house of cards must reverse. Given the underlying pressures, at that point the house of cards is likely to come tumbling down rather quickly.

So what will be next to revalue against the dollar? The Danish krona? The Czech koruna? Or gold? Or silver? Or bitcoin? Or litecoin? Or oil? Or wheat? Or copper? Or the Chinese yuan? Or the Hong Kong dollar? I don’t know, but all or them are certainly candidates, and some of them are likely to produce exponential returns when they do finally “revalue”.

Forex platforms such as Oanda support trading in all of the above other than the cryptocurrencies, and at today’s laughably low rates of interest, the cost to maintain a small open position and wait is not high. If your position is small enough that you can afford to lose a bit while you are waiting, your only real risk is that your chosen platform goes bankrupt.

Since this risk is not negligible, don’t forget to diversify your position by spreading it out a bit, for example by keeping some funds in physical form or with comparatively safe banks in Hong Kong, China or Singapore. While one should also be aware of and wherever possible minimize risk, those potential exponential returns arguably justify them.

Act now. Don’t wait.

Comments? Join us in the Comments section...

Scott Freeman is the CEO of the IT Group, which is a Shanghai-based group of companies focusing on information technology and financial services. He’s always on the lookout for self-starters who bring along creativity, enthusiasm and know-how. He can be contacted at sfreeman@tdvmedia.com.

Jeff Berwick Interview On Bitcoin & Anarchapulco - TDV Week In Review: Sunday, January 25, 2015

Sun, 01/25/2015 - 13:46

Originally appeared here.

The following is an interview conducted with Jeff Berwick by Bitcoinomics.Net. Be sure to check out Jeff's interview on Max Keiser right here:

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When did you first hear of Bitcoin and what did you think about it?

JB: I first heard about it in early 2011 from a Dollar Vigilante subscriber, Jeremy Bernal.  I posted an interview with him here in May 2011.  I met Jeremy at Doug Casey’s La Estancia de Cafayate in Argentina over a glass of torontes near a fireplace and was very interested as I had never heard of it before.  I began to follow it near $3 and after interviewing him I then went on to talk more with another person I met in Cafayate, Trace Mayer in 2012.

[Trace] told me, in this interview, why it was so important.  Trace actually walked me through opening my first bitcoin wallet, transferred me $10 in bitcoin and walked me through buying something on the internet with it all within a matter of about a minute and from then on I was enthralled with it.  I’d also have to say you played a role in my bitcoin education as I initially got involved with you on the world’s first bitcoin ATM machine when Cyprus had their bank bail-ins.  Quickly I was on Fox Business, CNBC and Bloomberg and you helped me to gain a better technical understanding of bitcoin at that time to answer the questions I was being asked.

What is your feeling of the Bitcoin ecosystem and the players investing in Bitcoin?

JB: I think it is vibrant and exciting.  It reminds me very much of the mid 90s with the internet… a revolution I was very much a part of as I founded Canada’s largest financial website, Stockhouse.com, in 1994.  Every year you can see more big name people coming on board with bitcoin and with the recent $75 million investment into Coinbase by banks, the New York Stock Exchange and former Thomson Reuters CEO  it shows a lot of people see a major future for bitcoin.

What do you think about the Bitcoin Foundation?

JB: I truly didn’t see much about it until a good anarcho-capitalist friend of mine, Cody Wilson, stated that he wanted to run for President of it and then shut it down.  I then discovered that the main purpose of the Bitcoin Foundation was to integrate bitcoin more with governments and the current banking system and, being an anarcho-capitalist myself, I don’t support that very much.

Is Bitcoin popular in Mexico?

JB: Amongst the general populace, no.  But you could say the same about that in the US.  It is rising tremendously with a vibrant business environment, however.  I have spoken at a few bitcoin conference in Mexico City and every year the audience grows tremendously.

Are there any merchants in Acapulco taking Bitcoin that you know of?

JB: I think I am the only one right now.  We accept bitcoin for our condo sales at Acacondos and at our hotel at Las Torres Gemelas Private Suites.

How can Bitcoin help the Mexican people/economy

JB: Bitcoin can help anyone, anywhere, because it gives us a free market currency option.  Central banks, around the world, including in Mexico, serve no purpose but to impoverish the society, destroy the economy through money printing and price fixing of interest rates and also to fund government wars and other heinous acts.

One area, however, that I think will be massive for Mexico is in the area of remissions.  Many Mexicans still work outside of Mexico and send funds back to their family in Mexico, usually via things like Western Union, which are difficult to use, heavily restricted and very costly.  Bitcoin is easy, completely unrestricted and essentially free to transfer so bitcoin should catch on quickly here once it reaches critical mass.

Are you watching the Silk Road trial closely? Why?

JB: Absolutely.  I recently called it the most important trial of our generation.  The Silk Road was a completely free market (the government calls it a black market because they don’t get a cut of the action) with no restrictions or regulations except those put on by the users themselves.  Ross Ulbricht stands accused of “masterminding” the website and is accused of, essentially, being a drug trafficker because people used the website to trade in things like plants (they call them drugs in government speak).

There were no victims and therefore there was no crime.  The only victim in this case is the one standing trial, Ross Ulbricht, who has been kidnapped (arrested and jailed) and already had all of his bitcoin stolen from him even though he has yet to even be found guilty of anything.  The case has major ramifications because it essentially says that if you have a website, of any nature, and people are on the website and transact that you are liable for their actions.  It is the height of ludicrousness… but that is the police-state of the US today. Everything is illegal and everyone goes to jail.

How has TDV incorporated Bitcoin?  

JB: TDV’s main role has been in championing the currency since 2011.  Aside from that, every single product we offer, whether it be our newsletter (The Dollar Vigilante), second citizenships (TDV Passports), offshore banking and incorporation (TDV Offshore), wealth internationalization and management (TDV Wealth Management) or anything else, we accept bitcoin.

What is Anarchapulco?

JB: I have been an outspoken free market advocate since 2004 and a true free market advocate is an anarcho-capitalist.  I’ve hosted my program, Anarchast, for many years now and had nearly 200 episodes with some of the most amazing free market advocates in the world including Doug Casey, Lew Rockwell, Tom Woods and countless others.  What I found, however, is that there had yet to be a truly anarcho-capitalist event.  Most freedom events are called things like Libertyfest, Libertopia and Freedomfest… but they have all different styles of libertarians at it but don’t focus on the purest form, anarcho-capitalism.  So, I decided to start one this year where I live in Acapulco, Mexico, called Anarchapulco, which I find to be the freest city in North America.  We’ll be holding it from February 27th to March 1st.

What can one expect at Anarchapulco?

JB: The tagline is “Rethink.  Reinvent.  All the Things.”  That really embodies the theme.  We have a two day entrepreneurship camp, an independent media workshop, an unschooling workshop and we have many different speakers on things like precious metals, Austrian economics, anarchist and libertarian philosophy, expatriation and numerous other topics.  The biggest topic is bitcoin and bitcoin/internet 2.0.  We have many of the biggest names in the bitcoin world coming including Roger Ver, the bitcoin Jesus, Cody Wilson of Dark Wallet and countless others including most of the Mexican bitcoin community.

What Bitcoin options will be at Anarchapulco?

JB: I would say 99% of the people coming to the conference are huge proponents of bitcoin for its free-market value and so pretty much anything you can imagine bitcoin related will be there.  And, of course, we accept registration for bitcoin.

Thanks Jeff!

JB: Thank you!

Originally appeared here.

Justin O’Connell is the Chief Executive Officer of GoldSilverBitcoin.  He is also the author of the bitcoin book, Bitcoinomics, and administrator of the Bitcoinomics website. Justin is also a co-host at Our Very Own Special Show, a lifestyle podcast about music, news, life.  He lives in San Diego, California.

 

Before we get to the review, be sure to check out TDV Newsletter, because this month (and year) is going to be special. Jeff is dedicating himself almost full-time to bringing paid subscribers the best information they can receive in 2015, which could prove to be an ever important year in The End Of The Monetary System As We Know It (TEOTMSAWKI).

Subscribe to The Newsletter today, and receive TDV's HomeGrown, as well as special reports, including Getting Your Gold Out Of Dodge. Moreover in the Newsletter, senior analyst Ed Bugos analyzes what is going on in Europe, as well as the yellow metal in what is looking like what could be the first big year for gold in a few years.

If you’re interested in receiving articles beyond what you read here everyday, consider our weekly subscriber-only publications, like our Issue, Dispatches, and Homegrown. You may subscribe here.

January 19, 2015

Gamemaker Watch: Why Bitcoin Crashed and The Franc Spiked

By Scott Freeman

 

Two events from the past week stand out as particularly memorable. One may or may not be remembered a year from now, depending on how things unfold going forward. The other – the Swiss franc revaluation – definitely will be. The possibly memorable event I am referring to was the spike down in the bitcoin price to $160 / 900 RMB. If we consider the shake-out scenario discussed last week, we did indeed reach the $160 target price level, but the price did not remain under $180 for long. Those who bought at $160 did well, since the rebound went as high as $233.

continue reading...

January 20, 2015

Another Highly Suspicious Liberty/Truth Death

By TDV Editor-In-Chief, Jeff Berwick

All the talk last month was about a movie potentially being cancelled, The Interview.  In the end it wasn't cancelled and looks to have been one of the best marketing moves to get the movie massive attention.  This month the talk is about a serial mass-murdering hitman called American Sniper.

continue reading...

January 21, 2015

Cuba Loves America Like a Glutton Loves His Lunch

By TDV Contributor, Wendy McElroy

Last December, a CBC News headline announced, “Cuba, US to restore diplomatic relations after 50-year rift.” Why now? The answer in one word: Venezuela. 

HUGO AND FIDEL, THE FRICK AND FRACK OF COMMUNISM

Venezuela is at the tipping point of a massive collapse. Grocery shelves are bare, with military personnel stationed at stores. Photographing the empty shelves is now a criminal offense. Even in the cities, it is impossible to find diapers, milk and other necessities for children. Average people will withstand state-created deprivations but they will not watch babies and children suffer.

continue reading...

January 22, 2015

The European Central Bank Commits Monetary Suicide

By TDV Senior Analyst, Ed Bugos

Yesterday the European Central Bank (ECB) announced an expanded 1.1 trillion euro (US$1.3 trillion) asset purchase program to start in March 2015 and continue through September 2016 (19 months) that will include the purchases of sovereign (national government) debt. It plans to purchase roughly 60 billion euros ($68 billion) worth of securities monthly, up from about 13 billion, with most of the additional purchases to be allocated to sovereign (national government) debt with a quarter expected to end up in scarce German bunds. The purchases will be restricted to investment grade issues, which would mean no purchases at all if the condition were applied diligently, and will include non investment grade issues like Greek bonds if they have an ongoing budget/spending agreement with the ECB-IMF in place.

continue reading...

January 24, 2015

The Weekend Vigilante - Converting To Anarchy

I made a New Year's Resolution, actually a few months ago, to work a bit less.  By "work a bit less" I mean about 14 hours per day, 6 days per week... and only for a few hours on Sunday whenever possible.  And, also punctuated throughout the day with yoga/meditation and siestas.

After nearly five years of being on planes every other day, at conferences every few weeks and constantly writing, being interviewed and doing interviews I have been feeling a bit burned out.  Plus, with two young children, a beautiful wife and five of the cutest dogs you've ever seen in your life I just felt like I owed it to myself and them to spend more time with all of them. 

continue reading...

TDV VIDEOS

January 19, 2015

Anarchast: RG: Buy your dreams through Corporate Credit!

Jeff interviews multi-entrepreneur and freedom lover, fellow Acapulco resident RG, topics include: E-Hookahs, reality TV comes to Acapulco, US rapidly being locked down, Eat to Live but Live it Up!, starting your own corporation and accessing capital, USSA making foreign places seem dangerous, Greece much freer than the US, expat networks, mentorship and mutual support.

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January 21, 2015

Anarchast: Jayant Bhandari: Capitalism and Morality!

Jeff interviews global investor Jayant Bhandari, topics include: Indian corruption and overwhelming bureaucracy, George Orwell's Animal Farm, Hinduism lacks moorings, US and Canada headed the same way, Indian shops flooded with Chinese goods, very low Indian productivity, Morality and Capitalism Conference, impressions of Cancun and Mexico.

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January 22, 2015

Anarchast: Tuur Demeester: The Whorehouse of Central Banking!


Jeff interviews Bitcoin entrepreneur Tuur Demeester, topics include: unpegging of the Swiss franc, Swiss banking, the population held hostage by their central banks, the move to private currencies, Bitcoin as an insurance, governments to embrace Bitcoin, the religion of statism grows weaker, government shrinks, Bitcoin as the internet of property, Passport to Freedom, entrepreneurship, non-violence, especially to children!

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January 24, 2015

Anarchast: Tone Vays: Bitcoin on Wall Street!

Jeff Berwick in Acapulco interviews Wall Street and Bitcoin trader Tone Vays. Topics include: Wall Street, sound money, discovering bitcoin, cryptocurrencies ripe with trading opportunities, a great way to learn trading, calling the bottom, the limits of manipulation, Bitcoin as political and taxation safety, uncertainty in Europe, the importance of holding some BTC.

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Converting to Anarchy - The Weekend Vigilante January 24th, 2015

Sun, 01/25/2015 - 02:11

Hello from Mexico City,

I'm going to keep this fairly short and reasonably sweet.

I made a New Year's Resolution, actually a few months ago, to work a bit less.  By "work a bit less" I mean about 14 hours per day, 6 days per week... and only for a few hours on Sunday whenever possible.  And, also punctuated throughout the day with yoga/meditation and siestas. 

After nearly five years of being on planes every other day, at conferences every few weeks and constantly writing, being interviewed and doing interviews I have been feeling a bit burned out.  Plus, with two young children, a beautiful wife and five of the cutest dogs you've ever seen in your life I just felt like I owed it to myself and them to spend more time with all of them.  

Also, I am sensing a massive change coming in 2015 and I want to focus more on our paying subscribers and giving them the best on-the-ground information possible as opposed to doing a myriad of other things.  That commitment, subscribers will see, comes in our 40+ page January Issue just about to be released.

I've also been looking to simplify my life.  It had become too complicated.  I was trying to do too much and be everywhere at the same time.  Simple things like unsubscribing from every email I had subscribed to over the years was a nice addition to my life.  I was receiving 300-500 emails per day and at least 100-200 of those were not critical to my life.  They were just a compilation of years (some even decades) of lists I had subscribed to because I was interested.  But, a few months ago I decided to unsubscribe from ANYTHING that wasn't critical to my life today.  With those things that I considered important but not critical I would look to add them to an RSS feed (which I read through Feedly) and then read at my leisure rather than having added to my daily avalanche of emails.

This, alone, enhanced my life as for the first time in a few years my email was manageable.  I was getting to the point, at times, where even responding to fairly important emails would come a month late.

I then tried to find all the chaff I could cut from my life.  As a serial entrepreneur I had accumulated dozens of businesses.  But, after taking some time and serious consideration, it was clear that some were very profitable (both monetarily and for my own happiness) and some definitely weren't.  So, I began chopping the ones that weren't adding tremendously to my life.  Either shutting them down, partnering with someone to manage or selling them off.

That also was a really lightening experience.

I'm a minimalist when it comes to personal matters.  I don't want big houses, cars, yachts or even any material items whatsoever.  I've always found the more you own... the more those things own you.  At any given time, aside from investments, businesses, precious metals, real estate and bitcoin, I really own a few pairs of clothes, a good laptop, phone and PC.  The latter three are all fairly business related... that's where I transact.  So, aside from business and investment related items I virtually own nothing and have no desire to own anything.

And so, lightening my load on extraneous business ventures I have been involved in and, even with this blog, stopping from writing everyday, has been very enjoyable to me personally.

That said, there are still some things I am very passionate about and I have ramped up those items.

Number one, as subscribers are about to find out, is that I am going to be much more active with our insights, alerts, dispatches, reports and more.  The reason is: I think 2015 is going to be absolutely insane and not only do I want to be prepared but I want to make sure those who pay me for my insights receive those insights in a more timely manner.  For this reason you'll probably see a further drop-off in the blog.  Our dispatches will become shorter and more sporadic.  I can only be in so many places at once.

I've also cancelled most conference appearances and will not go to the US or most other places outside of Latin America for the foreseeable future as I found it was too tiring and too stressful to go through places like the US.

That said, I've been very active in other areas.

I recently attended the Passport to Freedom conference in Cancun and interestingly was having drinks and converted Jim Rickards into an anarcho-capitalist when the news broke that the Swiss Franc had unpegged from the Euro causing massive monetary and financial repercussions.  Jim, of course, is very well known for "Currency Wars" and I, of course, am The Dollar Vigilante, so it was fairly surreal to see a major currency event on the road to The End Of The Monetary System As We Know It (TEOTMSAWKI) happen at that time.

Prior to that, Max Keiser visited Acapulco and I converted him into an anarcho-capitalist.  Both him and Stacy Herbert were here and we had a wonderful time.

I then travelled to Mexico City to be on the Keiser Report on RT where I challenged Russell Brand to a debate on his anarcho-communist ideas.

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On the program we talked a lot about another passion of mine, my upcoming Anarchapulco conference from February 27th to March 1st where many of the most amazing anarcho-capitalists from around the world will be ascending upon Acapulco for our own version of Davos.  Except we aren't planning to violently and through extortion change the world.  We are changing the world non-violently through ideas and technologies.

And, since then, I've been back to Acapulco and now back again in Mexico City on some high level talks that I can't discuss publicly yet.

So, I'm still doing things but I'm doing a lot more of the things that I want to do.  I've removed a lot of clutter and a lot of stress from my life and focus more on my passions.

Isn't that what we should always be trying to do?

As I said, I'm keeping this short so I can spend more time with my family and focusing on my own passions including our subscriber newsletter.

Until next time!

Jeff Berwick

Anarchast: Tone Vays: Bitcoin on Wall Street!

Sat, 01/24/2015 - 13:36

Jeff Berwick in Acapulco interviews Wall Street and Bitcoin trader Tone Vays. Topics include: Wall Street, sound money, discovering bitcoin, cryptocurrencies ripe with trading opportunities, a great way to learn trading, calling the bottom, the limits of manipulation, Bitcoin as political and taxation safety, uncertainty in Europe, the importance of holding some BTC.

Click here or on thumbnail

 

The European Central Bank Commits Monetary Suicide

Fri, 01/23/2015 - 13:37

[The following article is by TDV Senior Analyst Ed Bugos]

Yesterday the European Central Bank (ECB) announced an expanded 1.1 trillion euro (US$1.3 trillion) asset purchase program to start in March 2015 and continue through September 2016 (19 months) that will include the purchases of sovereign (national government) debt. It plans to purchase roughly 60 billion euros ($68 billion) worth of securities monthly, up from about 13 billion, with most of the additional purchases to be allocated to sovereign (national government) debt with a quarter expected to end up in scarce German bunds. The purchases will be restricted to investment grade issues, which would mean no purchases at all if the condition were applied diligently, and will include non investment grade issues like Greek bonds if they have an ongoing budget/spending agreement with the ECB-IMF in place.

The purchases will be limited to covered bonds, asset backed securities, and government debt (i.e., equity not included). A day prior, the Bank of Japan (BOJ) announced that it was going to continue its own asset purchase program (mainly JGB’s), forcing insurers and other institutions to seek yields abroad.

The ECB program is twice as large as expected and the governing council appeared to be on side, including the German reps, owing to Draghi’s apparently skilled diplomacy and risk sharing idea – where some portion of the losses would be born by the national central banks rather than the ECB.

The BOJ’s pledge to increase its monetary base at the same 80 trillion yen per year ($676 billion) pace that it has for the past couple of years seems like a bit of a let down though given their bullish rhetoric to increase monetary interventions in 2015 following the Fed’s final QE3 bond purchase.

Stock markets reacted positively around the globe, though gains were tempered (perhaps the news was a tad overly telegraphed!); bond yields ratcheted up a bit except in Germany and Switzerland where they have gone negative in some instances; the euro collapsed along with most currencies against the USD; the precious metals held up well; and the economically sensitive commodities fell.

A far more mixed day than I originally anticipated…but then, again, the moves were widely expected.

Fund managers and other institutions have been front-running this news for over a year.

Uh oh!

Ostensibly, the aim of the policy (intervention) is to combat deflation, or falling inflation, which the policymakers believe “reflects sluggish demand and can paralyze an already weak economy — a problem that has long afflicted Japan, the world's third-largest economy” (click here for source).

It is aimed at boosting private sector investment and consumer confidence simultaneously, just like the Fed did in the U.S., proving, “the actual impulses for growth from sensible conditions must be created, and can be created, by politicians”, said Merkel. Indeed, one source says, “The US Federal Reserve launched three rounds of bond purchases that were credited with helping jump-start the US recovery.”

According to Bloomberg, “Global central banks are petrified of deflation,” said M&G’s Doyle, whose firm oversees the equivalent of about $389 billion. “The real effectiveness of QE is through the portfolio-rebalancing effect. The world is running out of positive-yielding government bonds.”

It is a sad day when crap like this fools people.

You think an idea has died but most people are too dull to recognize it in a different wardrobe.

Like every good Keynesian, Merkel believes that throwing fresh money at sovereign governments can “create” growth? But the myth that anyone can produce wealth this way has long been exploded; as has the myth that government can produce wealth. Government can’t create wealth because it cannot calculate whether what it is doing is efficient or economic, or whether it is wasteful. It can’t coordinate resources inter-temporally between the various stages of production without knowing the prices of capital goods or the natural rate of interest. Nor can governments create wealth by expanding money supply anymore than they can turn stone into bread just by reading enough interpretations of Keynes.

All of this is pure noise.

The True Aim of the Interest Rate Suppression

What has weighed on Japanese growth and Euro growth is the same thing as that which is now weighing on growth in the US: a malignant public sector bureaucracy and out of control public debts.

Falling prices do not plunge the economy into a debt-deflation spiral, they are the product of gains in productivity –i.e., true growth is basically an increase in the supply of goods, greater output per capita.

The debt-deflation that is apparently feared by central bankers is in the first place a risk that was caused by fractional reserve banking - a concept that isn’t broadly feasible in a free and unregulated market - and which is ultimately propped up by deposit guarantees, legal tender laws, taxpayer funded bailouts, and other monopoly legislation. The over use of the policy of suppressing interest rates has incentivized the accumulation of too much public debt everywhere. The real reason for the ECB’s QE policy, besides having built it into the market (leaving no choice but to follow through on expectations), is to obfuscate the insolvency of the “fiscal cripples” that form the EU, and kick the can down the road.

There are long-term reasons as well, like the continued centralization of banking across the euro zone.

But the fear of deflation is an irrational fear fanned by a western alliance of central bankers to hide the fact that they are really just holding out a lifeline to the world’s biggest and most insolvent governments.

For many months now in the TDV newsletter I have been writing about what has been happening in the US, and why it is not the same as growth. Now the ECB wants to do the same to the European economy.

The US economy is not growing faster, its asset markets are just being inflated faster.

Indeed, this fairy tale is part of what I believe is an even greater delusion.

The fact is that Europe (and Japan) has not inflated nearly as much as the rest of the world thinks, and not nearly as much as the Fed has, even in the latest year! The evidence strongly suggests that Japan and Switzerland sterilized their asset purchases while the US and UK did not.

And the verdict is out on whether the ECB plans the former or latter type of QE. This delusion is going to crush yen bears and dollar bulls in one fell swoop, and we warn you now to listen carefully.

Nobody owns the yen!

The Yen makes up the smallest allocation in everyone’s portfolio.

Central banks own just 4% as currency reserves. And same with Japanese Government Bonds: as of a 2011 IMF report foreign ownership of Japanese government bonds amounted to just 5%.

On the other end of the spectrum is the US dollar, which makes up 61% of central bank reserves (down from > 70% at the outset of the euro experiment 1999-2001), and where foreign ownership of Treasury securities approaches the 40% level. Unlike the US dollar, which is over-owned, over-printed, and probably lies in bundles under every hooker’s mattress, Yen is scarce, like Cesium! To boot, the Japanese money supply grew only 4% last year, despite all the rhetoric, compared to over 5% for Europe, and 7% in the US. It has grown just 22% in the past 5 years, cumulatively, compared to 33% for the Euro and over 70% for the USD!

Over the past ten years the BOJ has inflated money by just 32%! That compares to 102% for the Euro area and well over 100% in the US –the US has expanded money by 100% just since 2008- in roughly the same time period. The Swiss numbers for M1 are similar to the EU.

In almost every sense, the Fed has waged the most consistently aggressive monetary policy in the developed world, especially in the post 2008 period, where it has increasingly mirrored policies of countries like South Africa, Mexico, India, Indonesia, and Poland.

Even China has been pursuing a sounder money policy than the Fed since 2008.

Like we said, the US is not growing faster, it is inflating faster.

QE Not the Same as Sterilized Asset Purchases

I first highlighted this delusion months ago in order to point out how the US treasury market and USD were benefiting from the relative suppression of European yields. In my analysis, strength in both the US dollar and US Treasury bond reflects the fact that yields on euro government debt have disappeared. This trade then was the source of the dollar’s rally against the Euro.

If you listen to most media about this, you will come away with the idea the USD has been going up because the Fed has tapered and the US economy has gained traction while the Euro and Yen have been falling because their economies are relatively weak and their central banks have been printing money like mad. Indeed, the decline in the euro in response to the ECB’s press release today should have been more guarded in light of the opposite truth. The market has been wrong about who is really printing money and who is dancing the twist. It is deluded about most things that support the dollar.

In light of this plus the fact that this overly expected event won’t start for another month or two, and also because the Japanese central bank is lowballing its original promise there is risk of a hiccup.

Regardless, don’t be fooled into thinking that this policy is going to help the private economy.

Inflation is what these cats want, and inflation is what they are going to get, good and hard.

One day soon they will be begging for deflation.

[Editor's Note: The Dollar Vigilante's January issue is about to be released and is over 40 pages with insights from Jeff Berwick and Ed Bugos on The End Of The Monetary System As We Know It (TEOTMSAWKI).  It is a look at the year ahead and it isn't pretty.  Jeff Berwick is even calling for some potentially catastrophic events that he refuses to say in public so as not to incite panic.  Subscribe here to gain access.]

Ed Bugos

Anarchast: Tuur Demeester: The Whorehouse of Central Banking!

Thu, 01/22/2015 - 13:20

Jeff interviews Bitcoin entrepreneur Tuur Demeester, topics include: unpegging of the Swiss franc, Swiss banking, the population held hostage by their central banks, the move to private currencies, Bitcoin as an insurance, governments to embrace Bitcoin, the religion of statism grows weaker, government shrinks, Bitcoin as the internet of property, Passport to Freedom, entrepreneurship, non-violence, especially to children!

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Cuba Loves America Like a Glutton Loves His Lunch

Wed, 01/21/2015 - 16:25

[The following post is by TDV Contributor, Wendy McElroy]

Last December, a CBC News headline announced, “Cuba, US to restore diplomatic relations after 50-year rift.” Why now? The answer in one word: Venezuela.  

HUGO AND FIDEL, THE FRICK AND FRACK OF COMMUNISM

Venezuela is at the tipping point of a massive collapse. Grocery shelves are bare, with military personnel stationed at stores. Photographing the empty shelves is now a criminal offense. Even in the cities, it is impossible to find diapers, milk and other necessities for children. Average people will withstand state-created deprivations but they will not watch babies and children suffer.

That is the stuff of revolution, and Venezuela is already an extremely violent nation. A January 2014 headline in The Guardian stated, “24,000 murders last year confirm Venezuela as one of the world's most dangerous countries” (The population in 2013 was approximately 3.5 million)

The official inflation rate is 65%; this means inflation is far higher, of course. On January 13, Forbes reported, “On Tuesday...the ratings agency Moody’s downgraded Venezula to Caa3, one step above default.” The economic situation will only worsen for oil-rich Venezuela if oil prices continue to decline. 

The Cuban “why now?” aspect of Venezuela's woes is due to the close economic relationship the two nations enjoyed for decades. It flourished because of the warm regard in which the two revolutionary leaders Hugo Chávez and Fidel Castro held each other. Chávez called Castro a “mentor.”

In 1999 visit, Chávez declared, “Here we are, as alert as ever, Fidel and Hugo, fighting with dignity and courage to defend the interests of our people, and to bring alive the idea of Bolívar and Martí. In the name of Cuba and Venezuela, I appeal for the unity of our two peoples, and of the revolutions that we both lead.”

In 2000, they entered into the Convenio Integral de Cooperación through which they traded 'goods' that cost the producing nation comparatively little but were desperately needed by the recipient. Cuba benefited tremendously from the flood of oil it received, much of it subsidized by Venezuela. Chávez also invested heavily in the development of the Cuban Cienfuegos oil refinery in order to spur on the island's oil industry.

In turn, Cuba sent tens of thousands of technical experts to Venezuela, including desperately needed medical personal. In April 2005, a series of other agreements drew the nations close together with Cuba agreeing to increase its health care personnel in Venezuela to 30,000, establish about 1,000 free medical facilities and provide medical instruction to approximately 40,000 Venezuelans. On its own soil, Cuba also provided medical care for an estimated 100,000 Venezuelans, especially in the area of eye care. 

Chávez was a godsend for Cuba. 

A RIPPLE EFFECT OF THE SOVIET COLLAPSE

After a long-fought revolution that ended in 1959, the new socialist Republic of Cuba was embargoed by America for more than 50 years; the embargo continues since lifting it requires the cooperation of an uncooperative Congress. Cuba was also befriended by the Soviet Union in a somewhat distant manner. The friendship warmed with two events. First, in the Cuban missile crisis of 1962, America and the Soviet Union squared off against each other for 13 Cold War days.

The Soviets were deploying ballistic missiles to Cuba; the US took this move as an open threat. Cuba was blockaded to prevent the deployment. After teetering toward  nuclear war, the Soviets backed down and America dismantled some of its own missiles to appease Soviet demands. The crisis drew the Soviet Union and Cuba closer but they were still separated by Castro's outreach to communist China toward which the Soviets were now cool.

Then, the Prague Spring occurred in January 1968. Soviet-dominated Czechoslovakia threw off many of the repressive measures it had endured since World War II and began to adopt liberal reforms. In August, the Soviets invaded to reclaim control. Although Warsaw Pact nations joined in, many Soviet allies were openly critical of tanks rolling down the streets of Prague. Castro was an exception. In a radio broadcast, he unequivocally supported the Soviets and denounced the Czech rebels as “fascist reactionary rabble.” The gesture of support was repaid by increased loans and a quick bump up of Soviet oil to Cuba.  

Cuba's economic dependence upon the Soviet Union continued smoothly enough until the latter began to crumble in the late 1980s. By December 1991, the Soviet Union had ceased to exist. Along with it went the Council for Mutual Economic Assistance upon which Cuba was dependent. This economic organization consisted of Eastern Bloc nations along with various other socialist ones, including Cuba. The island entered what was called the Special Period in Time of Peace. This was a bitter depression that began in 1989 and lasted through the 1990s. A scarcity of oil and gas were largely responsible for the  deep economic suffering of Cubans.

ENTER HUGO 

By the mid-2000s, Venezuela was exporting approximately 115,000 barrels of crude oil  a day to Cuba, and Fidel re-exported a portion of it to other nations in order to pocket some hard currency. 

Exit Chávez upon his death in March 2013. The Guardian wondered how long Cuba could expect its “daily subsidy of 100,000 barrels of free Venezuelan crude?” The International Political Review (March 09, 2013) expanded, “With Cuba consuming 120,000 barrels of oil a day, but domestically producing only 80,000, Cuba’s position looks precarious after their great ally’s death. The potential repercussions of Chávez’s death could mean that his successor does not wish to subsidize Cuba in oil anymore. With the US trade embargo still in place, Cuba would be hardpressed to find substitute streams of oil for its internal consumption, as not only does the island nation lack allies with the ability to provide oil to them, it also lacks cash to pay for it.” The situation grows ever worse for Cuba as Venezuela careens around the edge of an economic cliff and, perhaps, a revolutionary one.   

Fortunately, Raúl Castro – Fidel's younger brother and political head of Cuba -- did not wait to take his chances with Chávez's hand-picked but unstable successor, President Nicolás Maduro. Last week, the statistics-driven news site FiveThirtyEight (Jan. 16, 2015) ran an article entitled “Cuba is Hoping to Replace Venezuelan Oil With American Tourists.” Secret negotiations between the US and Cuba began almost immediately after Chávez dropped. Cuba's two main money-makers are tourism and remittances from abroad. FiveThirtyEight  commented, “Only a dramatic opening to the US could prevent a full-scale social and political crisis that could imperil the government’s stability. Raul Castro is a calculating politician, and detente with the US is a move calculated to help his regime survive.”

It is no coincidence that President Obama's first official and conciliatory move toward Cuba is to loosen travel restrictions as well as trade. Americans can travel to the island on government business, for journalism as well as for family, educational, cultural, and religious reasons without requiring permission first. Travel to Cuba formerly required a license from the Treasury Department's Office (DOT) of Foreign Assets Control. 

Americans used to sidestep the license requirement by booking flights from Canada. For the foreseeable future, it appears as though they will still need to do so. Although US travel agents and airlines are allowed to book Cuba-bound Americans, the only current option is for such passengers to debark on foreign soil, such as Canada or Mexico, and make connections to Havana from there. Apparently, a better policy has to be worked out with the DOT before direct flights become legal.  

WHAT'S IN IT FOR OBAMA?

On the positive side, there is a prisoner exchange. Obama announced the return of Alan Gross, held for 5 years in Cuba as a bargaining chip, and a “CIA asset” Rolando Sarraf Trujillo, held for 20 years. Additionally, Cuba agreed to release 53 political prisoners. Cuba will also receive prisoners in America whom it has sought for many years. By contrast with Obama, however, Raúl remains silent on the swap.  

On the politically negative side, Obama has deeply alienated the Cuba Lobby; that is the relatively small but passionate group of Cuban-Americans who detest the Castros and Cuba's communist rule. One of its powerful spokesman, Florida Republican Marco Rubio swiftly decried the detente. He claimed Obama was acting like a pawn for the Castros “providing the economic lift that the Castro regime needs to become permanent fixtures in Cuba for generations to come.” Perhaps Obama believes the boost in Latino support that came from his immigration policies will offset alienating the Cuba Lobby. Perhaps he is looking to legacy. With a series of flubs, like being AWOL from the Charlie Hedbo march in Paris, perhaps he is scrambing for a foreign policy 'win'.

It is difficult for me to become optimistic or upset about one state recognizing another. Critics may be correct in stating that Cuba is the big winner in these negotiations. Perhaps the Castros have acquired a new lease or two on life. There is reason, however, to believe that freer trade and greater prosperity for the average Cuban will weaken and not strengthen the hold of communism on the island. It is called the “revolution of increased expectations” by which people who have reason to hope for a better future also demand more liberty with which to enjoy it. Despair and poverty favor totalitarianism. Hope and a full stomach favor freedom. 

And I am pleased that families who have not seen each other for decades may be able to fold their arms around each other at long, long last. 

Comments and questions? Join us in the TDV Blog. 

Anarchast: Jayant Bhandari: Capitalism and Morality!

Wed, 01/21/2015 - 14:22

Jeff interviews global investor Jayant Bhandari, topics include: Indian corruption and overwhelming bureaucracy, George Orwell's Animal Farm, Hinduism lacks moorings, US and Canada headed the same way, Indian shops flooded with Chinese goods, very low Indian productivity, Morality and Capitalism Conference, impressions of Cancun and Mexico.

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Another Highly Suspicious Liberty/Truth Death

Tue, 01/20/2015 - 17:10

[The following post is by TDV Chief Editor, Jeff Berwick]

All the talk last month was about a movie potentially being cancelled, The Interview.  In the end it wasn't cancelled and looks to have been one of the best marketing moves to get the movie massive attention.  This month the talk is about a serial mass-murdering hitman called American Sniper.

A much, much more important movie, The Gray State, however, had just been reported, according to our sources, to have inked a deal for $30 million to produce the film after the trailer for the film became very popular on the internet.  The movie's tagline was, "When Liberty Dies, Patriot's Rise" and is an amazingly well done and truthful depiction of what I consider is likely to happen during The End Of The Monetary System As We Know It (TEOTMSAWKI) and has been greatly looked forward to by many in the freedom/truth communities.

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However, on Saturday, the movie's writer and director, David Crowley, his wife and his five year old daughter were found dead, apparently by gunshot, in their house in Apple Valley, Minnesota.

Initial reports have some strangeness to them including that it is believed they died prior to Christmas and no one noticed for weeks, the family dog surviving the entire time in the house without food or water and apparently windows wide-open without curtains again without anyone noticing, packages piling up with still no friend nor family noticing and an unlocked back door.

It is far too early to make any reasonable guesses on what happened.  But initial contact with numerous sources who were good friends with David Crowley are mostly leaning towards this being a hit due to, what they say, him having been happy and working on numerous projects and reportedly about to get a Hollywood film contract to complete production of Gray State.  And, of course, the film being perhaps the most graphic and unapologetic look at the true evil of government.

On the other hand was at least one friend of his who stated to us, in confidence, that David seemed to be acting strangely on Facebook for the last few months and even may have indicated he was having money problems.

In either case, whether he was killed or committed murder-suicide, it is sad all around and many people are working to find other ways to get his film completed.

If he was killed it would not be any surprise to many of us in the freedom/truth community where these sort of things seems to be regular occurrences.  

Last year, Phillip Marshall, a former airplane pilot and author whose works included the 2003 novel “Lakefront Airport,”  – “False Flag 911: How Bush, Cheney and the Saudis Created the Post-911 World (08)” and “The Big Bamboozle: 9/11 and the War on Terror,” a 2012 publication in which Marshall theorized it wasn’t al-Qaida but rather U.S. and Saudi government officials who orchestrated 9/11, was found dead along with his two children in their home in California in very similar situation as with Crowley. Reports indicated that all three died of gunshot wounds.

Even just this week, an Argentine prosecutor who accused President Cristina Fernandez of orchestrating a cover-up in the investigation of Iran over the 1994 bombing of a Jewish community center, similar to Argentina's 9/11, was found shot dead in his apartment just days after The Clarin daily newspaper reported that Nisman told the newspaper just a few days earlier, "I could end up dead because of this."

Then Aaron Swartz died in November 2013. Aaron was an American computer programmer and entrepreneur, as well as writer and internet hacktivist. He allegedly committed suicide while under federal indictment for data-theft. His family characterized the prosecution as “the product of a criminal-justice system rife with intimidation and prosecutorial overreach.” In January 2011, Swartz was arrested by MIT police on state breaking-and-entering charges after systematically downloading  academic journals from JSTOR. He was facing 35 years in prison when he allegedly committed suicide.

Mudraker journalist Michael Hastings, who was about to break a major story about the CIA, lost control of his car when it crashed into a tree and apparently exploded, something his Mercedes engine should not have done, from what I understand. UCSD researchers have published studies on how cars connected to the internet, as Hasting’s car was, could be hacked and controlled remotely.  Hastings received awards for his piece “The Runaway General” in Rolling Stone in 2010, and wrote the book The Operators about his time in Afghanistan.

The American conservative Andrew Breitbart died in 2012 at the age of 43 under mysterious circumstances. Well-known for his Breitbart internet news websites, Breitbart died while on a walk in the early morning hours of a March day in Brentwood, in Los Angeles just a day before he said he was going to release "shocking" information about Barack Obama.

Now were these all just accidents, medical emergencies or suicides?  We've seen enough to know to be highly, highly skeptical.  One possibility is that many of the above were being harrassed by the government to the point where they did take their own lives... but even that is murder in my eyes.

The sad thing is that many of the things portrayed in Gray State are likely to come to pass and many won't even be aware of it now.  That's why we must keep up the fight to spread truth and information about all of the government's diabolical criminal and terrorist activities.  

And, even better, separate yourself from the state.  Expatriate, move your financial assets to less dangerous and oppressive offshore tax-free jurisdictions, get out of the central banking money system and into gold and begin using bitcoin.

We are losing heroes fast out here and so we need to not only replace them but do so exponentially if we are going to avoid the US and much of the world turning into the Gray State.

R.I.P., the Crowley Family.

For comments, join us in the comments. 

Jeff Berwick

Gamemaker Watch: Why Bitcoin Crashed and The Franc Spiked

Tue, 01/20/2015 - 01:27

[The following post is by Scott Freeman]

Two events from the past week stand out as particularly memorable. One may or may not be remembered a year from now, depending on how things unfold going forward. The other – the Swiss franc revaluation – definitely will be.

The possibly memorable event I am referring to was the spike down in the bitcoin price to $160 / 900 RMB. If we consider the shake-out scenario discussed last week, we did indeed reach the $160 target price level, but the price did not remain under $180 for long. Those who bought at $160 did well, since the rebound went as high as $233.

If the goal behind recent price action is to scare speculators into selling, several weeks of sideward movement at today’s relatively low levels could be an effective psychological tool to accomplish that.

Time will tell, however, so it’s simply too early to judge if current price levels will do the trick, or if prices still need to go a bit lower, or if a completely different scenario unfolds. All we can say with any confidence is (a) that this is one plausible scenario, and (b) that a bottoming out of the bitcoin price in the near future would potentially fit in with a broad-based reversal in the fortunes of the US dollar. More on that later.

With regard to potential bitcoin price action over the next several months, one development worth mentioning is the tightening of Chinese margin requirements for stock trading. This week the minimum deposit was raised from 300000 to 500000 RMB (approx. US$80000), thus squeezing out some of the gambling public. As a result, the Shanghai stock market promptly fell by 260 points (7.7%).

Both of these developments can be seen as potentially positive for the bitcoin market. Why? For one thing, the Chinese stock market looks ripe for a continued correction to the downside, while the opposite is true of the bitcoin market. Secondly, there are no comparable restrictions applicable to bitcoin exchanges. On the contrary, several offer up to 20:1 leverage to all comers. While these factors alone are unlikely to be sufficient to drive a sustained rebound in price, they certainly supply an ideal context for such a scenario.

UNEXPECTED REVALUATION?

Without a doubt one event will not be forgotten, and that was the revaluation of the Swiss franc by approximately 20% early on January 15th. The Swiss National Bank finally threw in the towel and conceded to reality, dropping its “exchange rate floor” of 1.20 Swiss francs (CHF) per euro, and allowing the Swiss franc to return to its pre-peg rate of 1:1 to the euro.

Apparently the bank’s management decided that the equivalent of 495 billion Swiss francs in rapidly devaluing "reserves" was enough. It was a big day on the financial markets, with both gold and oil jumping on the news.

Media coverage almost universally asserted that the move was “unexpected” and shocked the financial world.” (As always, thanks to Mr. Krugman for that cutting-edge analysis.) Shock or not, for multiple reasons, it was certainly a momentous event.

Before we consider how and why this was such a big deal, let’s consider briefly whether the revaluation was actually as unexpected as Mr. Krugman claims.

As a result of the various bailouts of southern European EU members during 2010 and 2011, during the same period the European Central Bank effectively printed up lots of new euros. All other things being equal, this implied that a 2012 euro would likely be worth less than a 2009 euro.

Since the Swiss National Bank was not participating in this printing orgy, some major players on the financial markets decided that it might be a smart idea to sell euros and buy Swiss francs. Clearly they were on to something, because by August 10th 2011, i.e. in little over 19 months, the Swiss franc had risen from 1.48 francs/euro at the beginning of 2010 to par.

At that point the #1 gamemaker for the Swiss franc, the Swiss National Bank, apparently decided that enough was enough. The bank issued several statements to the effect that things had gone too far and that any additional rise would not be tolerated. About a month thereafter a “temporary” exchange rate floor of 1.20 francs per euro was declared. Take a note of that word.

In the following three years, the Swiss National Bank repeatedly intoned its continued support for the exchange rate floor, right up until early January 2015. Though they have been widely criticized for this, could they realistically have done otherwise while maintaining the floor? Obviously not. And did any of those statements negate their earlier declaration that the floor was temporary? Nope.

Just as was the case with the Russian ruble devaluation several weeks earlier, speculators who simply read carefully and placed their long-term bets accordingly did well.

PLAYING WITH FIRE

There are several reasons why the Swiss franc revaluation was such a big deal.

For starters, it was very profitable for some, at least in theory. Profits on options amounted to 4,000% or more, with an option purchased for US$425 returning US$15700 24 hours later. Speculators holding Swiss francs purchased on margin also reaped exponential returns.

However, it does not appear that very many retail speculators were amongst the winners. If we look at the retail markets where published data is available, only approximately 7% of the open positions in the EUR/CHF market and 38% of the open positions in the USD/CHF were long Swiss francs. Moreover, of the 93% who were long euros in the EUR/CHF market, approximately 83.7% were either force-liquidated or stopped out.

In any case, regardless of who the winners and losers are, the problem is that this is a zero sum game. Where there are big winners, there are also big losers. And when losses are exceptionally large, sometimes the losers will be unable to actually pay the winners.

For a number of these losers the revaluation was spectacularly unprofitable. In fact, it was so unprofitable that it apparently left a number of businesses behind in the dust. Just to cite a few: FXCM, one of the world’s largest forex trading platforms, admitted to sustaining a loss of US$225m. FXCM was only able to stay afloat thanks to last minute financing of US$300m from Leucadia. Forex brokers Alpari and Excel filed for bankruptcy. The US$830 million Everest Capital Global Fund announced that it had been wiped out and would close down. Deutsche Bank, Barclay’s and Citigroup are rumored to have lost approximately US$400m. All in all, fairly substantial – and those are only the initial announcements.

You might wonder, how could so many inside players fail to protect themselves against such risks? Also, how is it possible that a premium of only $425 could justify accepting the risk of a $15700 payout? The answer to the first question is actually not very complicated: if a platform permits its users to purchase an asset on margin, then it is dependent on a functioning stop-loss system to protect itself against loss.

In other words, if Acme Forex Trading only requires you to put up 5% margin to finance a purchase (20:1 margin), and the value of that purchase starts to fall, then it must force-liquidate your purchase before that purchase falls by more than 5% in value.

Ordinarily this is no problem. Markets for currencies and major stocks are typically extremely liquid. However, “normal” does not equate with “always”, and this fundamental error can clearly be fatal. Moreover, we do not live in ordinary times.

The answer to the second question is a bit more complicated, but it boils down to this: as Michael Lewis pointed out in Liar’s Poker, the volatility-dependent pricing model in use for most derivatives is based on a normal distribution of outcomes, a scenario which even in “normal times” does not correspond to reality, much less in today’s highly distorted reality. (We’ll talk more about that in a moment.)

The reality is that the likelihood of sudden drastic change – what is sometimes referred to as punctuated equilibrium in evolutionary terms – is far higher than the 100:1 or 1000:1 probabilities which these models produce. Think about it: prior to the pegging 3 1/2 years ago, the Swiss franc rose almost to parity with the euro.

At the time, the 1.2 CHF/EUR floor was announced as a “temporary measure”. In other words, a return to the pre-peg exchange rate was always within the realm of possibility. And yet, the option pricing implied that the probability of such a return was considered to be less than 3%. Realistic? Not at all.

LOOK MOM, NO HANDS!

This sort of systematic miscalculation is of course a loophole in the system, potentially offering exponential returns to those able to take advantage of it. At the same time, even if we guess right and bet accordingly, getting paid requires picking a counterparty which has deep enough pockets to pay for its foolishness. All of the above should serve to remind us of the precarious base on which the current financial system rests.

Central banks around the world have been printing the equivalent of trillions of new dollars every year for the past 6 years. And yet, in dollar terms the prices for most asset classes have fallen, in many cases drastically. Is this some kind of magic? How can this be? The answer is that it isn’t and it can’t, at least not for very long. Yes, the gamemakers are very clever. They can and do pull many a rabbit out of their bags. But at the end of the day, though their tricks are many and resources enormous, they are not unlimited. In fact, the primary tool in their box of tricks is not money, but rather psychology.

As long as they can maintain “bearish sentiment” in the market for asset X, the speculating public may be willing to suspend belief and refrain from buying it. For obvious reasons this cannot however be maintained indefinitely. The Swiss franc revaluation is the first major break in the mirage of dollar supremacy, but it unlikely to be the last. The reality is that all these paper assets floating around are worth a LOT less than current asset prices would have us believe. The dollar pump show has now been stretched out for 3 1/2 years. It may soon be time to call it a night and go back to the real world.

Questions or comments? Join us at the TDV Blog.

Scott Freeman is the CEO of the IT Group, which is a Shanghai-based group of companies focusing on information technology and financial services. He’s always on the lookout for self-starters who bring along creativity, enthusiasm and know-how. He can be contacted at sfreeman@tdvmedia.com.

Anarchast: RG: Buy your dreams through Corporate Credit!

Mon, 01/19/2015 - 14:29

Jeff interviews multi-entrepreneur and freedom lover, fellow Acapulco resident RG, topics include: E-Hookahs, reality TV comes to Acapulco, US rapidly being locked down, Eat to Live but Live it Up!, starting your own corporation and accessing capital, USSA making foreign places seem dangerous, Greece much freer than the US, expat networks, mentorship and mutual support.

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Do Bitcoiners Think The Bitcoin Foundation Is A Scam? - TDV Week In Review, Sunday, January 18, 2015

Sun, 01/18/2015 - 13:38

Originally appeared at Bitcoinomics.Net

The Bitcoin Foundation has an image problem, and recently it took to Reddit to improve its reputation.

A common concern among the Bitcoin community is that The Bitcoin Foundation is playing softball with government agencies and paving the way for regulation on Bitcoin. Patrick Murck maintains that this is not the Foundation’s intentions:

I’ve found that bitcoin plays well with both political parties in US. Sometimes for different reasons. For us the strategy is to be a resource on the technical rules that govern bitcoin and the social contract that allows the bitcoin network to regulate itself. We can be that resource for politicians or other groups and associations doing work on the ground.

For a lot of the traditional financial companies (banks and other investors on Wall Street), regulation is seen as validation. Whether you agree with that or not, some level of appropriate regulation will bring in new participants to the bitcoin ecosystem and seems inevitable.

Keeping that regulation sane and focused on actual risks is important.

Still, others have other, more acute terms.

I just took the time to read all the comments to date to see if a certain concern had been addressed, opting to not search the page.

Sadly, it had not, but at least I was amused with all the softball questions that I can’t help myself from thinking some were contrived beforehand to control the narrative.

KnC Miner.

KnC Miner and The Bitcoin Foundation are on record in stating that the former paid the $100K USD fee to become a Platinum Member of TBF. TBF ONLY accepts memberships fees via a dedicated bitcoin wallet address, but said fee amount is nowhere to be found.

In spite of all the scuttlebutt on BitcoinTalk, TBF had yet to address concerns about said payment, in spite of such being an important issue at the time due to now/then KnC gaining unique voting rights for the then upcoming elections for vacated board seats in which Bobby Lee and Brock Pierce won.

Question: Where’s the proof that KnC Miner truly did pay for their Platinum Member to join The Bitcoin Foundation, given that such is no state secret because bitcoins were supposed to be used and full-transparency is what TBF adheres to?

~Bruno Kucinskas

The Bitcoin Foundation has yet to show the transaction on the Block Chain. Many people echo the concern of Bruno. As one user says,

It’s a shame nobody will see this. its pretty obvious that KnC miner got a waiver on the fee in exchange for their votes

In a recent blog post entitled “The Next Chapter,” Murck went over The Bitcoin Foundation’s focus for the coming year, highlighting mainly the Foundation’s intention to be more transparent. BitcoinTalk is voting now and at the time of printing 85% of users believed The Bitcoin Foundation to be a scam.

When Bitcoin Foundation was first started, their stated goals were lobbying, more or less, and marketing of Bitcoin to the public. Now, they say they will be focusing on development work for the protocol, effectively working to centralize a once decentralized open-source project. 

Join us in the comments.

Justin O’Connell is the Chief Executive Officer of GoldSilverBitcoin.  He is also the author of the bitcoin book, Bitcoinomics, and administrator of the Bitcoinomics website. Justin is also a co-host at Our Very Own Special Show, a lifestyle podcast about music, news, life.  He lives in San Diego, California.

 

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January 12, 2015

HORSES ALMOST DESTROYED NEW YORK CITY

 By Laissez Faire Books

In 1880, the U.S. brought together a group they considered the world's smartest people to answer one pressing question...

What will New York City look like in 100 years?

New York was in full bloom. It was an unprecedented hub of entrepreneurship and innovation.

Yes, it was an exciting time to be a New Yorker. The world's first elevated train... underground subway... and with the first skyscraper in the hopper...

The Big Apple was changing how the world thought about -- and lived -- in cities.

So everyone was curious: What lies ahead for The City That Never Sleeps?

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January 13, 2015

GAMEMAKER WATCH 

By TDV Contributor Scott Freeman

Imagine that you are the CEO and largest shareholder of Acme Nano-Widgets, a market leading widget manufacturer. Things aren’t looking so great for Acme this year, but this is not yet general knowledge. What do you do if you want to maximize the value of your stock holdings? Do you hold on and hope for the best? Or do you take an active role instead? 

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January 14, 2015

JULIA TOURIANSKI ON THE MOST IMPORTANT TRIAL OF OUR GENERATION

An interview with Julia Tourianksi by Jeff Berwick

In the early morning on January 5th, one of the largest bitcoin exchanges, Bitstamp, stated, "We have reason to believe that one of Bitstamp’s operational wallets was compromised on January 4th, 2015.  As a security precaution against compromises Bitstamp only maintains a small fraction of customer bitcoins in online systems. Bitstamp maintains more than enough offline reserves to cover the compromised bitcoins."

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January 16, 2015

FIAT CURRENCY INSANITY - THE SWISS FRANC SHOCKER AND TEOTMSAWKI

By TDV Chief Editor, Jeff Berwick

Things are really starting to go off the rails now.  The End Of The Monetary System As We Know It (TEOTMSAWKI) is coming to a rapid, volatile end.  It may not be this year but at this rate it would not surprise us if it was.

Many anti-bitcoiners like to point out the problem with bitcoin is that it is very volatile.  And, they are right, it is an issue.  Bitcoin recently flash crashed to nearly $150 and has now rebounded to over $200 as the Bitstamp exchange has re-opened without problem as we expected.

But bitcoin almost appears to be a beacon of stability compared to what is going on with the fiat currencies.

continue reading...

TDV VIDEOS

January 12, 2015

ANARCHAST: AIDEN GREGG: THE PSYCHOLOGY OF ANARCHY!

Jeff interviews Aiden Gregg, a professor of psychology from the University of Southampton in England, topics include: Psychology, Michael Heumer, the spread of Libertarian ideas, the exponential growth in Anarchists numbers, status quo bias, political psychology, Students For Liberty, Saxation - a thought experiment, beefing up the taxation is theft argument, Bitcoin, Anarchapulco is going viral!

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January 14, 2015

ANARCHAST: L DIXON: WAKE THE F@#K UP!

Jeff interviews Rapper and freedom fighter L - Dixon, topics include: the system is flawed!, Barry Cooper, getting people out of jail for victimless crimes, 30 years for marijuana seeds!, the war on drugs is a dark age, the framework for a new world is being built, decentralization, Bitcoin, 3D printers, the new system will render the old obsolete, the revolution/evolution will not be televised, seasteading, life in Mexico, Never Get Busted, Anarchapulco.

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Fiat Currency Insanity - The Swiss Franc Shocker And TEOTMSAWKI

Fri, 01/16/2015 - 19:22

[The following post is by TDV Chief-Editor, Jeff Berwick]

Things are really starting to go off the rails now.  The End Of The Monetary System As We Know It (TEOTMSAWKI) is coming to a rapid, volatile end.  It may not be this year but at this rate it would not surprise us if it was.

Many anti-bitcoiners like to point out the problem with bitcoin is that it is very volatile.  And, they are right, it is an issue.  Bitcoin recently flash crashed to nearly $150 and has now rebounded to over $200 as the Bitstamp exchange has re-opened without problem as we expected.

But bitcoin almost appears to be a beacon of stability compared to what is going on with the fiat currencies.

Of course, the Venezuelan Bolivar and Argentine Peso are lost causes.  But more important currencies like the Russian Ruble have been incredibly volatile. Scott Freeman wrote his contrarian perspective on the ruble ruckus for TDV

Moreover, at least in terms of economics, a devaluation is likely to be a net benefit to the Russian government. This is because most of its costs are in rubles, whereas a significant part of its income is in dollars. According to a recent calculation made by the Moscow Times, at least in the short term each additional ruble per dollar translates into 205 billion rubles per year in additional government revenue. 27 rubles x R205b = US$92 billion at 60:1. While such gains are likely to be partially offset by increased inflation, gains are immediate whereas additional costs are delayed.

Why carry out the devaluation now in the midst of the oil price drop? The answer should be fairly obvious: because the oil price drop provided an excuse – a scapegoat if you will – for something which was both inevitable and planned. According to its own published figures, the Russian government had already expended US$80 billion to defend an unrealistic exchange rate, and anyone with basic math skills could see that a trend reversal was not very likely. It was only a question of timing, and for that, the oil price drop provided an ideal backdrop. The peg was abolished and the rate adjusted. The middle classes tend to be the principal losers in devaluation scenarios, but thanks to the apparent external cause, in this case for the most part they did not blame their government. 

 

Then, yesterday, the Swiss Franc rose nearly 40% in a matter of seconds after the Swiss National Bank stated in a press release that they are going to charge people even more to hold the money:

Swiss National Bank discontinues minimum exchange rate and lowers interest rate to –0.75%

Target range moved further into negative territory

The Swiss National Bank (SNB) is discontinuing the minimum exchange rate of CHF 1.20 per euro. At the same time, it is lowering the interest rate on sight deposit account balances that exceed a given exemption threshold by 0.5 percentage points, to ?0.75%. It is moving the target range for the three-month Libor further into negative territory, to between –1.25% and -0.25%, from the current range of between -0.75% and 0.25%.

The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and an extremely high level of uncertainty on the financial markets. This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate. The economy was able to take advantage of this phase to adjust to the new situation.

Recently, divergences between the monetary policies of the major currency areas have increased significantly – a trend that is likely to become even more pronounced. The euro has depreciated considerably against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar. In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified.

The SNB is lowering interest rates significantly to ensure that the discontinuation of the minimum exchange rate does not lead to an inappropriate tightening of monetary conditions. The SNB will continue to take account of the exchange rate situation in formulating its monetary policy in future. If necessary, it will therefore remain active in the foreign exchange market to influence monetary conditions.

Interestingly enough, I was in Cancun at the Passport to Freedom conference and was having a drink with Jim Rickards, the writer of Currency Wars, when he told me the news on the Swiss Franc!

I looked at him and he looked at me with the same expression.  It's happening!

Of course, Mr. Rickards, who has confirmed to me that he is an anarcho-capitalist, has written extensively on the coming collapse of the monetary system as we know it.  Ourselves, as well, at The Dollar Vigilante, have been talking about this since 2010.  At that time I stated that the current monetary system might last five years but no more than ten.

I now am predicting that we might get pretty close to outright collapse this year, but, if not, no more than a few years.

You just have to open your eyes to see the symptoms everywhere.  Oil crashing just how it did prior to the 2008 crash... currencies going highly volatile... the stock market becoming more volatile... these are the tremors prior to a big quake.  Will this be the ultimate event that takes down all fiat currencies and most of the Western financial and monetary systems?  There's no way to know... but if you still aren't prepared for it you should be really thinking about it.

How to prepare?  We've been saying the same thing for years, get your assets outside of the financial system, internationalize them as much as possible, own precious metals - also outside of your home country - and learn about and get into bitcoin... there hasn't been a better time to get into bitcoin in more than a year.

The January edition of The Dollar Vigilante will be coming out to subscribers (sign up here) in the next few days and it will be epic.  After spending much of last week in Anarchapulco with Max Keiser, who I have also confirmed and reverted him to anarcho-capitalism, and having spent the last few days with Jim Rickards, we are all in agreement.  Something big this way comes.

Hold on to your hats (and your assets, if you can!).

Questions or comments? Join us at The TDV Blog

Jeff Berwick

Julia Tourianski On The Most Important Trial Of Our Generation

Wed, 01/14/2015 - 15:12

[The following post is an interview between Julia Tourianski & Jeff Berwick]

It, quietly, may be the most important trial of our generation.  As with most trials in the USSA, there are no victims and most of the “evidence” used to kidnap, torture and sequester the “defendant” was made up by the mafia… sorry, government.

If you don’t know about it, it is the Silk Road trial.  And the person who has been kidnapped, stolen from and tortured is, of course, the one on trial, Ross Ulbricht.

According to the US government, Ross Ulbricht was the mastermind behind a completely voluntary, free market where participants could trade whatever they like with each other.  Without even convicting them of these ridiculous charges they have already stolen $28.5 million worth of bitcoin from Ross and users of the idyllic free-market known as Silk Road.

Interestingly, this case is finally getting some attention by slaves and sheeple.  We interviewed Ross’ mother, Lynn, in the summer ending in the only edition of my podcast where I almost ended up in tears after talking to his incredibly brave and indignant mother.

And, just yesterday, the Libertarian Party in the USSA actually came out swinging.

Nicholas J. Sarwark, writing for the Activist Post, said this:

Attorney and Simple Justice blogger Scott Greenfield notes the freedoms that are at stake in this trial:

    •    ‘If Ulbricht is convicted, it opens the door for the censure and erosion of a free Internet. Under present law, website hosts are not held responsible in civil cases for illegal actions on their sites. This case could set precedent and open the door to criminal liability for web hosts.

    •    ‘A US citizen’s constitutional rights are being violated with vague allegations that do not cite specific crimes, a violation of the Fifth and Sixth Amendments to the US Constitution. In addition, his Fourth Amendment rights have been violated with illegal warrants and searches and seizures lacking any warrant. If the government can misapply the law against Ulbricht, it can do it to any of us.

    •    ‘In its documents, the government equates the desire for privacy (use of Tor for example) with criminal intent.

    •    ‘This case represents the first challenge to the government’s attempt to expand the money laundering statute to include digital currency.’


De-centralization of the internet, of which we are applauding proponents, will make it so no government, ever, can stop free transaction, trade, speech and money.  But it isn’t fully here yet.

In the meantime, our correspondent on the ground, Julia Tourianski, of Brave the World, is in New York and covering the trial.

Here is our conversation.



The Dollar Vigilante (TDV): Tell us why you are currently in New York City?

Julia Tourianski (JT): To support Ross Ulbricht, who stands accused of being the “mastermind’ behind the Silk Road. I’ve said that I believe he was thrown under the bus by others involved with the website as they felt the breath of the State down their necks. He was the nice one. He was the principled one. So now the defense comes out and says almost that; that Ross simply created the Silk Road as an an economic experiment, quickly handing it off to another entity as it got bigger. That same entity sold him out. He was of a pure heart. He was an easy target.

TDV: For those who many not know anything about Ross or the Silk Road, why don’t you tell us in your own words what it is all about.

JT: Well, the Silk Road was an anonymous free market, where people could choose to sell anything they like. I cannot speak on Ross’s behalf, but it seems to me that the man was not financially motivated (not that that’s a sin) but instead a purist in his ideals; an all or nothing kind of guy. You can’t have a free marketplace while censoring certain products can you? Either way, he was not the only DPR and actually said so in court yesterday. I know individuals who have corresponded with him in the “early days,” having full discussions about freedoms and self governance, and then months later, after trying to contact the same individual, getting confused responses of a different nature. The entire thing is murky; that is the nature of the online world.

TDV: Yes, I actually know many of the “collaborators” in trying to create that particular free market.  The criminal US government can subpoena me all they want on it and can expect a resounding, indignant amount of silence from me.  Their “authority” is not recognized here. Roger Ver, also known as the Bitcoin Jesus (and upcoming speaker at Anarchapulco along with yourself) stated about Ross, “If guilty, he’s a hero. If innocent, he needs help.”  Roger also donated over $160,000 to the Ross Ulbricht defense fund.  Tell us your thoughts on Roger’s statement and also let us know how he has been helping through this process - even despite the fact that he has been banished from entering the USSA.

JT: After hearing the defence’s opening statement, Ross is a hero either way. He is brave. He has not sold out. He has not taken a plea deal. He seems to be simply telling the truth about his story. Ver recognizes this (sorry for the assumption) and has stood by Ross and the Ulbricht family throughout as you have. He made it possible for them to pay their defense team (who are doing an excellent job) and for volunteers to do what needs to be done during the duration of the trial; influence, awareness, reporting, and cathartic presence.

TDV: That’s beautiful and great.  Many in the freedom community have gotten angry at past activists and entrepreneurs who harmed no one but took a plea deal when faced with the threat of kidnapping and torture from the US government, like Adam Kokesh.  And for that reason, Ross is even a bigger hero of liberty for not backing down.  He would make Thomas Jefferson proud.  

Yesterday was the first day of the trial.  Tell us how things have been leading up to yesterday, what happened yesterday and what you expect to happen in the coming days.

JT: First, I want to say, many big names in the liberty movement haven’t said much about this trial.  I thought they would have but it has been very disappointing.

TDV: I do know people are doing things behind the scenes… but it takes a few days to come out.  But, I mentioned the same thing during Adam Kokesh’s heinous kidnapping and torture after he loaded a shotgun on YouTube in Washington, District of Criminals, and I was shocked at the lack of support at his trial.  But, that is one reason I like you, you show up on the ground and work in realtime… you do have to realize that many of these people are working like crazy, around the world, fighting millions of injustices.  It’s not easy.

JT: Aside from that, another thing that shocked or surprised me was to hear the defence say “ ROSS ULBRICHT DID START THE SILK ROAD”.   Woah. But the defence made the prosecution faceplant. They argue that the prosecution’s accusation, of Ross being a “mastermind`’ falls short of common sense. A Mastermind? Who is well versed in security? Who is greedy and egotistical? Who signs into silk road...with a vulnerable bittorrent client running on his machine, in a public library? Makes zero sense.

I came into this quite disenfranchised, and after today, after seeing the prosecution fall so very short (they spent an hour proving that the Silk Road sold drugs….yes we know this, not that relevant) the jury was bored, we were bored, and their credibility was on shaky foundations. I am happy. I am hopeful.



TDV: Do you think boredom alone will result in this man, Ross Ulbricht, being set free from his captors?

JT: Boredom= irrelevance. So if they are focusing on “look, drugs were sold on the silk road” for an hour, how does that prove Ross was the only DPR? It was laughable.

This is history in the making. The Judge is scared of nullification. I was told that the justice said “the organizer of the protest is in the audience.” They are watching, they are weary. So maybe we have more going for us than we figured.

TDV: That is a good point. I also heard the “judge” say that he will do an “anonymous jury” if the protestors outside don’t stop telling jurors about their fully legal right to tell them that if they disagree with the law, itself, they can nullify.  This trial gets more interesting by the day.  Thanks for the update, please keep us updated via your channels and keep safe up there in New York City.

JT: Thank you.

CONCLUSION

In closing, when I first heard the news about Ross Ulbricht my first question was, “Why?  Why did he stay in the USSA?”  The US is near the very top of the most dangerous countries in the world in terms of you getting extorted or kidnapped for virtually anything.

In Mexico, as example, if you told almost anyone in the government that someone was operating a free online marketplace you’d likely get a look back, “So?  Entonces?”

Even if the Mexican government were to go after someone like Ross there’d just be a short meeting, some money would be exchanged, and everyone would just go on with their lives.  

In the US, however, once you get ensnared by the largest police state in human history you rarely get out.  

It is our hope that this trial gets all the attention it deserves as being ridiculous and, we hope, one day soon Ross can get freed from his captors who continue to hold him in a work/rape camp.

If you believe in freedom please get involved by physically showing your support, write/share/like any pro-Ross content or donate to the Free Ross campaign.

There’s an old saying that is apt and can be paraphrased here… “First they came for Ross…”

Comment Below.

Jeff Berwick

Anarchast: L Dixon: Wake the F@#K Up!

Wed, 01/14/2015 - 13:11

Jeff interviews Rapper and freedom fighter L - Dixon, topics include: the system is flawed!, Barry Cooper, getting people out of jail for victimless crimes, 30 years for marijuana seeds!, the war on drugs is a dark age, the framework for a new world is being built, decentralization, Bitcoin, 3D printers, the new system will render the old obsolete, the revolution/evolution will not be televised, seasteading, life in Mexico, Never Get Busted, Anarchapulco.

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Gamemaker Watch

Tue, 01/13/2015 - 20:41

[The following post is by TDV Contributor, Scott Freeman]

Imagine that you are the CEO and largest shareholder of Acme Nano-Widgets, a market leading widget manufacturer. Things aren’t looking so great for Acme this year, but this is not yet general knowledge. What do you do if you want to maximize the value of your stock holdings? Do you hold on and hope for the best? Or do you take an active role instead? 

If you are smart, you will opt for the active role. You arrange to short your stock through brokers not transacting in your name. In fact, you may sell even more stock than you actually own. Then you start issuing pessimistic press releases. If possible, you arrange for negative media coverage of the nano-widget market. What happens to your stock price? It crashes.

Then what? When it has gone down a good bit, far enough that it starts looking undervalued, you cover your shorts. Shortly thereafter, you slack up on the negative press releases and start to hint at a turnaround, conveniently financed of course by all of your winnings from shorting your own stock. A win-win, right? Just not for the dumb-dumbs who bought at the top and sold at the bottom.

Illegal? Maybe. But this strategy is a winner. And winning strategies tend to be popular.

The truth is all markets are manipulated in one way or another. Major stockholders manipulate the stock of companies they control. Investment funds and banks manipulate stocks and commodities in which they are investing. And governments are certainly tempted to manipulate almost everything, from equities to commodities and especially their own currencies. Some have even claimed that Alan Greenspan’s most lasting claim to fame will likely turn out to be his computerization of the gold and silver market manipulation game in the 1970s. Given that manipulation offers advance knowledge of coming events, anything else would be surprising. If you had a choice between playing in a market where you knew roughly what was going to happen and one where you didn’t, which would you choose?

If you are a true believer in the “random walk” and “perfect information” models of market behavior postulated by so many university professors, this column is not for you. According to those theories, financial markets are too vast to be controlled or manipulated by any one entity. Prices simply reflect the latest state of information modified by a randomizing factor. And besides, manipulation is illegal, and thus not typical. OK, maybe I am simplifying a bit, but that’s the general idea.

Regardless of how many charts are drawn or how many professors are on board, ample anecdotal evidence points to the conclusion that such models of reality do not yield good returns on investment. It is far more lucrative to expect manipulation, look for it and play along. So that’s what we’re going to do here: keep our eyes open for the games being played, and see how we might be able to play along profitably.

In that light, let’s take a look at some of the games which are in play at the moment.

DOWN DOWN DOWN

The general news is that since January 1st, almost all asset classes have continued to fall in value against the US dollar. I say “almost” because there is one glaring exception which we will come to in a moment. So what is falling? Oil, of course, now down about 60% since its high in mid 2014. Copper (down 4% today), wheat, corn – all down. The US S&P Index has fallen slightly. Bitcoin fell today as low as $216, which is lower than it has been in over 15 months. But also the Euro, the Canadian, Australian and NZ dollars, the Malaysian ringgit, the Russian ruble, you name it, almost all currencies have continued to fall against the US dollar, some drastically.

What’s up with gold and silver?

The big exception is the precious metals asset class – gold, silver, platinum and palladium. What’s going on there? Well, if you’ve gotten this far, I probably don’t need to tell you that gold and silver prices are not “market-driven”. They are computer-driven, and those computers are probably sitting somewhere in New York City. At any given point in time, those computers can temporarily set the “price” wherever their programmers wish to set it. Some market participants strongly object to this, because they see it as preventing honest price discovery for these metals on the market. What frequently gets overlooked, however, is that price discovery is intimately connected to scarcity of supply. Clearly scarcity is something which does NOT characterize the supply of paper gold and paper silver. These goods are available in virtually indefinite supply.

The paper printers do nonetheless have an Achilles heel: if they maintain a low price for paper metal over a long period, sooner or later there is a risk that they will run out of sufficient real metal to satisfy the demands of paper holders who demand to see the real thing. This is what happened to the US Government in the 1960s, when governments from all around the world demanded to see their gold. This means that the paper printers cannot keep prices suppressed forever.

On Monday morning December 1st the paper silver price spiked down as far as $14.25, following a decline from over $16/ounce the previous Friday afternoon. In total, the plunge amounted to a fall of approximately 11%, immediately followed by a rebound of 18%. It didn’t last more than a few moments however, and it happened while the markets in Europe and the US were closed. This kind of Friday-Monday double punch is a fairly typical phenomenon when the gamemaker plans to reverse direction. The point of the spike down is to take out nearby stops and wipe out highly leveraged speculators, but ideally do so while minimizing the window of opportunity for new buyers to take advantage of the super-low prices.

While it is too early to say for sure whether this spike will ultimately turn out to have been the bottom, it is certainly a distinct possibility. Without access to insider information, guessing a bottom is always challenging, but at a minimum we can conclude that there is limited wiggling room left. We’ll come back to this topic in more detail another day, but for the meanwhile I would certainly recommend keeping an open long position in gold and silver – albeit one which can survive a spike down to the $10/ounce range. If you have access to a platform which allows you to borrow Euros to purchase paper gold and silver, this approach may have somewhat less volatility on the downside, because additional sell-off in gold and silver is likely to be accompanied by a continued fall in the Euro.

BITCOIN CRASH

2014 was not a great year for most bitcoin holders. The price one year ago was around $850/bitcoin, a far cry from where we are right now. So what might be going on here? Well, first we have to consider what the gamemaker’s goals might be. Even if we don’t know who exactly that person or entity is, we do know that there are some large bitcoin holders who seem to also have access to large quantities of US dollars. More specifically, billions. That narrows down range of possibilities quite a bit. In any case, in the period 2012-2013 this gamemaker did a fine job of popularizing bitcoin and convincing people that entries in a decentralized database (the “blockchain”) could be worth billions of dollars. This accomplishment was truly monumental, and regardless of all the contributions of millions of bitcoin enthusiasts worldwide, it could not have been done without the backing of at least one very well financed gamemaker.

One possibility which cannot be excluded is that the original gamemaker was in the game for short-term gain and took his earnings off the table in early 2014 – never to return, i.e. the classic pump and dump scenario. In this case those who continue to hold bitcoins and/or who buy more at today’s “low” prices are likely to be left holding the (empty) bag.

The more likely alternative scenario is that the gamemaker did not go to all this trouble just to make a few bucks in the short-term, but rather has a longer term game plan in mind. In this scenario we are now simply looking at a shake-out phase, where the gamemaker is trying to scare off the less committed players by essentially “breaking them” psychologically, while at the same time improving the short-term stability of the currency. What speaks for this scenario is the incontestable fact that the price decline of the past few months has been fairly orderly and gradual. After every fall in price there were always buyers to cushion the fall. Typically those buy offers were on Bitstamp, and they were consistently higher than those on other exchanges, sometimes up to 4% higher. Small investors might be willing to pay a premium of a few percent, but typically not larger investors. Moreover, such price differentials permit significant arbitrage, which literally costs money. Apparently this is a price that the gamemaker was willing to pay.

If we follow this scenario, what is that psychological barrier likely to be? It’s pure guesswork, but I would guess that 1-2 weeks under the 1000 RMB level (approximately $160) would be sufficient to convince a number of fair weather Chinese investors to cut their losses and sell out their remaining holdings. Such a level would also be more than sufficient to wipe out most investors who had purchased bitcoin on margin. Be that as it may, regardless of the absolute level, the time to buy is always after strong downward spikes. Remember the old adage: “Buy when there is blood in the streets.” If you want to day trade, you can even profit from a falling market by selling off part of your recently acquired stash on the rebound, which in the bitcoin market has historically been highly reliable. Today for example, the rebound took us from $216 back up to $235, a 9% jump. Not too bad for a falling market.

In any case, regardless of which scenario you choose to bet on, accept that most long-term strategies with substantial upsides involve the risk of some downturns along the way. So calculate carefully how much of a downturn you can afford (and are willing!) to ride out, while holding back some powder to buy more on those steep downturns. Will $216 turn out to be the bottom? Seems relatively unlikely, but also not impossible. So place your bets with that in mind.

[Editor's Note: For those interested in hearing from some of the most knowledgeable people in precious metals and bitcoin, including Roger Ver, the Bitcoin Jesus and Cody Wilson of Dark Wallet and the entire Mexican bitcoin community check out Anarchapulco coming up February 27th to March 1st in Acapulco. Visit us today at Anarchapulco.com.]

Questions or comments? Join us at TDV.
 

Scott Freeman is the CEO of the IT Group, which is a Shanghai-based group of companies focusing on information technology and financial services. He’s always on the lookout for self-starters who bring along creativity, enthusiasm and know-how. He can be contacted at sfreeman@tdvmedia.com.

 

Anarchast: Aiden Gregg: The Psychology of Anarchy!

Mon, 01/12/2015 - 15:23

Jeff interviews Aiden Gregg, a professor of psychology from the University of Southampton in England, topics include: Psychology, Michael Heumer, the spread of Libertarian ideas, the exponential growth in Anarchists numbers, status quo bias, political psychology, Students For Liberty, Saxation - a thought experiment, beefing up the taxation is theft argument, Bitcoin, Anarchapulco is going viral!

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Horses Almost Destroyed New York City

Mon, 01/12/2015 - 14:26

[The following post is by Laissez Faire Books]

In 1880, the U.S. brought together a group they considered the world's smartest people to answer one pressing question...

What will New York City look like in 100 years?

New York was in full bloom. It was an unprecedented hub of entrepreneurship and innovation.

Yes, it was an exciting time to be a New Yorker. The world's first elevated train... underground subway... and with the first skyscraper in the hopper...

The Big Apple was changing how the world thought about -- and lived -- in cities.

So everyone was curious: What lies ahead for The City That Never Sleeps?

The team of big brains plugged their gourds together and mulled it over...

They talked. They argued. They rubbed their chins and massaged the bulging veins in their foreheads.

Some of them probably scribbled indecipherable squiggles on the chalkboard and pointed at them.

They said words in convincing tones.

Some nodded. Some stood up and raised their arms and their eyebrows.

"Eureka!" one of them probably shouted.

And then, in the end, they all nodded in unison.

They all came to a unanimous agreement.

"In 100 years time," they said (in essence), "probably well before, New York will be..."

Wait for it...

"... completely destroyed!"

Yep. That was their conclusion and they were sticking to it.

How did they come to such a drastic determination? Well, look no further than the population boom.

And... horses.

In the early 1800s, there were about 30,000 people in New York. And by 1880, that number had ballooned to nearly four million.

The city's population had, on average, doubled in size every decade.

The brainiacs assumed that this trend would continue. And in assuming this trend to continue, they began to wonder how all of these people would get around.

Horrified, they began to imagine all the horses the city would need.

By 1980, the team concluded, New York would need more than six million horses.

Six million!

And six million horses presents an obvious problem.

The city already had 200,000 horses in 1880. Each one, they somehow calculated, dumped a quart of urine and 24 pounds of manure every day.

That's 4.8 million pounds of horse dung and 50,000 gallons of pee already being dumped into the streets... every. single. day.

Needless to say, horse waste was already a problem. The city was already drowning in it.

"The stench was omnipresent," one writer, Eric Morris, wrote in his urban planning Masters thesis...

"Urban streets were minefields that needed to be navigated with the greatest care," the thesis reads.

"'Crossing sweepers' stood on street corners; for a fee they would clear a path through the mire for pedestrians. Wet weather turned the streets into swamps and rivers of muck, but dry weather brought little improvement; the manure turned to dust, which was then whipped up by the wind, choking pedestrians and coating buildings.

"...even when it had been removed from the streets the manure piled up faster than it could be disposed of...early in the century farmers were happy to pay good money for the manure, by the end of the 1800s stable owners had to pay to have it carted off. As a result of this glut...vacant lots in cities across America became piled high with manure; in New York these sometimes rose to forty and even sixty feet."

Worse, manure is breeding ground for flies. And flies spread disease. Typhoid outbreaks, Morris wrote, "and "infant diarrheal disease can be traced to spikes in fly population."

Now times that situation by 30.

It slowly dawned on our intrepid researchers that by 1980, New York's poor sidewalks and streets would gather 144 million pounds of dung... and be awash with 1,500,000 gallons of horse urine.

Again...

Every. Single. Day.

But they soon realized that they wouldn't even make it 100 years. New York, they discovered, may not even make it to see the year 1900!

"With the increased need of horses to keep up with the population," author Jess Stibel writes in his book Breakpoint, "even 20 years of growth would put the city knee-deep in sh*t."

A pressing problem, indeed.

And this is great news.

Great news? As you probably know, New York didn't die from an overload of horse manure.

Every decade has an apocalyptic fear just like this one to call its own -- and so far, due to human ingenuity, they've all been unwarranted.

No one could've foreseen that the automobile would soon revolutionize the way New Yorkers got around -- and fix the looming poop problem in one fell swoop.

Predicting 100 years into the future is impossible.We shouldn't even try.

There are obvious reasons for this.

Our natural inclination is to assume that the future will just be more of the same.

"We take what is current," Stibel explains, "and project it into the future. Or we take what is current and apply some flair (think flying cars). Rarely does one take a novel approach to the future, at least without getting ridiculed."

But just as New York City avoided being slathered in horse doo-doo, so will we benefit from new innovations.

Many of which we cannot yet fathom. Just like the quantum leap of picking up our dates in a Model T rather than a smelly horse.

But those types of quantum leaps are difficult -- if not impossible -- to predict.

That story sounds ridiculous to us today but the sad and crazy part is that bureaucrats and government funded scientists and economists are doing the exact same thing today.

The billion dollar, government funded, science behind Global Warming was no different.  Al Gore predicted the world would be devoid of sea ice by this year... yet sea ice is at record highs.  In the UK they predicted that by now there would be no such thing as a snowfall there.  Instead they are regularly digging themselves out from under snowstorms.  They said that devastating hurricanes would be a regular occurence by now yet it has been a record-breaking nine years since a Category 3 hurricane or higher made landfall along US coastlines.  

And all those predictions were only made a decade ago... not 100 years ago.  

In economics, Keynesian central bankers always try to add up all the numbers in the world and make predictions.  Almost, without fail, they are completely wrong.  Ben Bernanke didn't see the housing bubble coming.  Greenspan didn't see the tech bubble.  And now no one seems to see the government debt bubble that is about to burst.

It wouldn't be so bad if these idiotic bureaucrats were only making predictions.  But, based on their analysis they act on it as though their predictions are valid.  In the case of Global Warming, now rebranded "Climate Change" since it has been so brutally cold in the last few years, they tried, and still try, to bring in another tax!  A carbon tax!  A tax on the very air that we breathe out of our mouths!

In the case of central banking they manipulate interest rates wildly and print money at abandon in response to their view that this will improve the economy... which is, at its most fundamental and basic level, impossible.

There will likely always be ignorant humans making unbelievably bad predictions about the future... and that's why we need to take away their centralized control of governing and central banking.  So, at least if they continue to make ridiculous predictions they won't have the power to force all of us to pay for it in one way or another.

This month, in the TDV Newsletter (subscribe here), myself and Senior Analyst Ed Bugos will be making some predictions of our own for the next year... a year in which I expect massive volatility and turmoil in the political and financial arenas.  Unfortunately, I don't think I am going to be too off the mark as much of what I foresee is already baked in the cake and just a matter of time before The End Of The Monetary System As We Know It (TEOTMSAWKI) comes to its ultimate end.

Questions or comments? Join us at the TDV Blog

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