Feeds:
Posts
Comments

Posts Tagged ‘BitCoin’

Before getting to the main topic today, here are some excerpts from a New York Post story that patriotic American readers will appreciate.

It deals with a protest.

…the group Disarm the Police…had announced on social media that they had planned to burn the flag in protest of NYPD policies.

But the event didn’t go as planned, thanks to members of the Hallowed Sons Motorcycle Club.

One of the bikers rushed forward in a fit of rage and kicked over the grill, sending embers flying. He then doused it as members of the pro-flag crowd chanted “USA! USA!” The bikers then started trying to rough up the protesters.

Here’s where the ironic part of the story.

…anti-NYPD protesters needed New York’s Finest to save their skin from a gang of angry bikers who tried to pummel them… The protesters were shielded by the cops and escorted out of the park.

And here’s some evidence that silly government regulations (a New York City tradition) take the fun out of protesting and counter-protesting.

While it’s illegal to openly burn anything in Fort Greene Park, the self-styled anarchists managed to find a loophole in the law that allows cooking in closed barbecue grills.

A few final comments on this story.

I realize I shouldn’t care, but I’m always dumbfounded when left-wing crazies refer to themselves as anarchists. Don’t they realize that you can’t be an anarchist while simultaneously advocating for much bigger government?

Reminds me of this bit of humor from the Libertarian Party.

In any event, the supposed anarchists obviously aren’t very bright since they thought it was a good idea to get on the wrong side of a bunch of bikers.

Since this is America’s Independence Day, I can’t help but think they got what they deserved, even though in the abstract I support their right to protest and burn flags that they bought with their own money (or, more likely, with money from their parents or from the welfare office).

==========================

Now for today’s main topic.

I appreciate tax havens for many reasons, mostly having to do with the importance of having some sort of external constraint on the tendency of politicians to over-tax and over-spend.

But I also like these low-tax jurisdictions for non-tax reasons. And high on my list is that I want people to have safe havens for their money as an insurance policy against governments that are incompetent, venal, abusive and/or corrupt.

And for the same reason, I like alternative currencies such as bitcoin (click here is you want to see a short and informative primer). These “cryptocurrencies” give people a way of protecting themselves when government mis-manage or mis-use monetary and financial systems.

And we have some very compelling real-world examples of how this works.

We’ll start with Greece, where people with bitcoins still enjoy liquidity. Those using the banking system, by contrast, are in trouble because of irresponsible government policy.

Here are some excerpts from a Reuters story.

There is at least one legal way to get your euros out of Greece these days, to guard against the prospect that they might be devalued into drachmas: convert them into bitcoin. Although absolute figures are hard to come by, Greek interest has surged in the online “cryptocurrency”, which is out of the reach of monetary authorities and can be transferred at the touch of a smartphone screen. New customers depositing at least 50 euros with BTCGreece, the only Greece-based bitcoin exchange, open only to Greeks, rose by 400 percent between May and June, according to its founder Thanos Marinos, who put the number at “a few thousand”. The average deposit quadrupled to around 700 euros.

Why are people shifting to bitcoin?

One part of the answer is that bitcoins are insulated from political risk.

Using bitcoin could allow Greeks to do one of the things that capital controls were put in place this week to prevent: transfer money out of their bank accounts and, if they wish, out of the country. …the bitcoin buyers’ main aim was to shield their money against the prospect that Greece might leave the euro zone and convert all the deposits in Greek banks into a greatly devalued national currency.

And is anyone surprised that there’s interest from other failing welfare states?

Coinbase, one of the world’s biggest bitcoin wallet providers, which is not currently accessible to Greeks, said it had seen huge interest from Italy, Spain and Portugal.

And it’s just a matter of time, I suspect, before there will be interest from France, Belgium, Japan, etc.

Now let’s look at Argentina, another corrupt and dysfunctional government that has a sordid history of abusing both the monetary system and the financial system.

The New York Times in May had an in-depth report on how people in that nation have been using bitcoin to circumvent bad government policy.

His occupation is one of the world’s oldest, but it remains a conspicuous part of modern life in Argentina…to serve local residents who want to trade volatile pesos for more stable and transportable currencies like the dollar. For Castiglione, however, money-changing means converting pesos and dollars into Bitcoin, a virtual currency, and vice versa. …Castiglione joked about the corruption of Argentine politics as he peeled off five $100 bills, which he was trading for a little more than 1.5 Bitcoins, and gave them to his client. …before showing up, he had transferred the Bitcoins — in essence, digital tokens that exist only as entries in a digital ledger — from his Bitcoin address to Castiglione’s.

Why are so many people interested in bitcoin?

Because the government is debasing and manipulating the official currency in ways that indirectly steal from the citizenry.

Had the German client instead sent euros to a bank in Argentina, the musician would have been required to fill out a form to receive payment and, as a result of the country’s currency controls, sacrificed roughly 30 percent of his earnings to change his euros into pesos. Bitcoin makes it easier to move money the other way too. The day before, the owner of a small manufacturing company bought $20,000 worth of Bitcoin from Castiglione in order to get his money to the United States, where he needed to pay a vendor, a transaction far easier and less expensive than moving funds through Argentine banks.

And don’t forget that Argentina’s government is one of the nations with a track record of stealing money when it’s left in banks.

Commerce of this sort has proved useful enough to Argentines that Castiglione has made a living buying and selling Bitcoin for the last year and a half. …The money brought to Argentina using Bitcoin circumvents the onerous government restrictions on receiving money from abroad. …It makes sense that a place like Argentina would be fertile ground for a virtual currency. Inflation is constant: At the end of 2014, for example, the peso was worth 25 percent less than it was at the beginning of the year. And that adversity pales in comparison with past bouts of hyperinflation, defaults on national debts and currency revaluations. Less than half of the population use Argentine banks and credit cards. Even wealthy Argentines fear keeping their money in the country’s banks.

Bitcoin protects consumers from rapacious and feckless politicians.

…in the fall of 2012, when the Argentine government ordered PayPal to bar direct payments between Argentines, part of the government’s effort to slow the exchange of pesos into other currencies. …Argentines were using Bitcoin to circumvent the government’s restrictions. “…competition eliminates all currencies from noneffective governments,” it said… In Argentina, the banks refuse to work with Bitcoin companies like Coinbase, which isn’t surprising, given the government’s tight control over banks. This hasn’t deterred Argentines, long accustomed to changing money outside official channels.

In an ideal world, of course, there would be no need for bitcoin. At least not as a hedge against bad government policy (if a world of private monies, of course, cryptocurrencies presumably would be one of the market-based options).

But we don’t live in an ideal world. Some of us already live in nations where government financial and/or monetary policy make bitcoin a very important alternative.

And others of us live in countries where there is good reason to worry about future instability because of misguided fiscal, monetary, and economic policy. So it will be good if we have options such as bitcoin.

That doesn’t mean, to be sure, that the average person should transfer all their liquid wealth into bitcoin. Indeed, I’ve specifically stated that “I wouldn’t put my (rather inadequate) life savings in bitcoin.

But I certainly want that option if future events warrant a change of strategy.

P.S. If you’re in a patriotic mood (and if you like the Second Amendment), then you’ll definitely enjoy this slideshow.

P.P.S. If you enjoyed the six-frame image about bitcoin owners, you’ll probably like a similar image portraying libertarians.

Read Full Post »

People are getting increasingly agitated about being spied on by government.

The snoops at the National Security Agency have gotten the most attention, and those bureaucrats are in the challenging position of trying to justify massive invasions of our privacy when they can’t show any evidence that this voyeurism has stopped a single terrorist attack.

And let’s not forget that some politicians and bureaucrats want to track our driving habits with GPS devices. Their immediate goal is taxing us (gee, what a surprise), but does anyone doubt that the next step would be a database of our movements?

But the worst example of government spying may be the web of laws and regulations that require banks to monitor our bank accounts and to share millions of reports about our financial transactions with the Treasury Department’s Financial Crimes Enforcement Network.

Money laundering laws were adopted beginning about 30 years ago based on the theory that we could lower crime rates by making it more difficult for crooks to utilize the financial system.

There’s nothing wrong with that approach, at least in theory. But these laws have become very expensive and intrusive, yet they’ve had no measurable impact on crime rates.

As you might expect, politicians and bureaucrats have decided to double down on failure and they’re making anti-money laundering laws more onerous, imposing ever-higher costs in hopes of having some sort of positive impact. This is bad for banks, bad for the poor, and bad for the economy.

And it’s encouraging banks to treat customers like crap. Check out this ridiculous example included in a BBC report.

Stephen Cotton went to his local HSBC branch this month to withdraw £7,000 from his instant access savings account to pay back a loan from his mother. A year before, he had withdrawn a larger sum in cash from HSBC without a problem. But this time it was different, as he told Money Box: “When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.” Mr Cotton says the staff refused to tell him how much he could have: “So I wrote out a few slips. I said, ‘Can I have £5,000?’ They said no. I said, ‘Can I have £4,000?’ They said no. And then I wrote one out for £3,000 and they said, ‘OK, we’ll give you that.’ ” He asked if he could return later that day to withdraw another £3,000, but he was told he could not do the same thing twice in one day.

Here’s another absurd story.

Peter from Wiltshire, who wanted his surname withheld, had a similar experience. He wanted to take out £10 000 cash from HSBC, some to pay to his sons and some to fund his long-haul travel plans. Peter phoned up the day before to give HSBC notice and everything seemed to be fine. The next day he got a call from his local branch asking him to pay his sons via a bank payment and to provide booking receipts for his holidays. Peter did not have any booking receipts to show.

And another.

Belinda Bell is another customer who was initially denied her cash, in her case to pay her builder. She told Money Box she had to provide the builder’s quote.

Why is the bank treating customers like dirt? Well, because they’re pressured to act that way thanks to anti-money laundering laws, which basically require them to act as if unusual transactions are criminal. In other words, customers are guilty until they prove themselves innocent.

HSBC has said…”We ask our customers about the purpose of large cash withdrawals when they are unusual and out of keeping with the normal running of their account. Since last November, in some instances we may have also asked these customers to show us evidence of what the cash is required for.” “The reason being we have an obligation to protect our customers, and to minimise the opportunity for financial crime…” Money Box asked other banks what their policy is on large cash withdrawals. They all said they reserved the right to ask questions about large cash withdrawals.

They’ve “reserved the right”?!? I think Mr. Cotton was spot on when he groused, “You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”

A few politicians also are unhappy about pointless government-mandated spying.

Douglas Carswell, the Conservative MP for Clacton, is alarmed… “All these regulations which have been imposed on banks…infantilises the customer. In a sense your money becomes pocket money and the bank becomes your parent.”

Not let’s look at an example of how anti-money laundering laws lead to foolish intervention in the United States.

We’ll start with a feel-good story from Wired about an entrepreneur coming up with a service that’s desired by consumers.

Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. …by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. …You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service. To spend bitcoins, you need a secret digital key — a string of numbers and letters — and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip. …Caldwell takes a fee of about $50 on each coin he mints.

But our silver cloud has a dark lining.

…he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

And since the hoops are very expensive, we have yet another example of foolish red tape killing a business.

Running afoul of FINCEN is a risky proposition. In the spring, the Department of Homeland Security seized two bank accounts belonging to Mt. Gox. The reasoning behind the $5 million seizure: Mt. Gox, like Caldwell, hadn’t registered itself as a money transmission business. …Because he runs a bitcoin-only business, Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders.

I’m not saying, by the way, that bitcoins are necessarily a good way to hold wealth.

But I do believe that it’s good to see the evolution of private forms of money as a hedge against bad government policy. As I wrote back in 2011, “I have no way of knowing how well this system will work and how insulated it will be from government interference, but I very much hope it will be successful. Governments will never behave if they think people have no escape options.”

Unfortunately, politicians and bureaucrats are in the process of trying to shut down that escape option.

P.S. Switching to a different topic, I don’t know if there are any big policy implications, but I was fascinated to find this map in my twitter feed. It shows the first word that pops up when you ask why a country is so ____?

Europe Google Results

Here are my observations, for what it’s worth. Luxembourg and Switzerland are tax havens, so it’s no surprise that they are rich. Other nations should mimic their successful policies.

Norway, meanwhile, is rich because of oil.

I had no idea the Italians were supposed to be racist, though obviously this map merely shows what Google users are searching for, not what’s actually true.

I’m mystified that Macedonia is “important,” though I suspect Greece was similarly labeled because it is the first domino of the European debt crisis. Hardly something to be proud of.

I’m also surprised that Lithuanians are perceived as suicidal. Isn’t that a Swedish stereotype?

Croatia is beautiful, I’ll agree, at least along the coast.

The neglected people from Montenegro don’t even get a word! Heck, even the Kosovars and Moldovans have Google words.

I won’t comment on the stereotype about France, other than to say that the nation did get in the top-10 on a poll for attractiveness.

P.P.S. Since we’re discussing European stereotypes, here’s some politically incorrect terrorism humor from a British friend.

P.P.P.S. Speaking of stereotypes, here’s some polling data on how the Europeans see each other. I’m not sure how to interpret these results, other than to say that trustworthy people apparently are arrogant and lack compassion.

P.P.P.P.S. It goes without saying that I can’t resist the temptation to share these satirical maps on how the Greeks and Brits view their European neighbors.

P.P.P.P.P.S. Since the main topic of this post is money laundering, let’s end with a joke about how President Obama dealt with these foolish laws.

Read Full Post »

%d bloggers like this: