It Was to Be Expected …

 

As we have frequently pointed out in past articles on Bitcoin, the biggest danger to the currency was always government. The currency challenges the State's money monopoly, even though it does so only in a minor way so far, and even central banks have taken notice. As we pointed out in a previous post, the ECB for instance worries that 'Bitcoin may undermine confidence in central banks' (in this article we have listed all the reasons why one should expect governments to attempt to crush the currency). In other words, Bitcoin is seen as unwanted competition by the money monopolists.

It started out with a concerted attack by the handmaidens of the State, the banking cartel, on the viability of Bitcoin exchanges (which incidentally reminds us a bit of the recent attacks on gold). Many banks simply closed down the accounts Bitcoin exchanges held with them, which linked Bitcoin trades to other currencies. As far as we're aware, in most cases no reasons were supplied as to why these accounts were closed down – it wasn't necessary to supply them. Everybody knows what it's about, so making up spurious reasons would only expose the banks concerned to ridicule.

 

Now the 'Department of Homeland Security' has struck against Bitcoin – something we long expected to happen (as an aside, we continue to be astonished that the political elite has chosen such a  Nazi-sounding name for this department. It goes to show how little effort they are making these days to conceal the true nature of government. They don't expect the sheep to care, and they are mostly right).

 

“Department of Homeland Security officials have reportedly seized an account used to handle bitcoin payments in the U.S. for Japan-based Mt. Gox, which claims to be the largest exchange for the electronic currency.

Gawker reported late Tuesday that the DHS had obtained a warrant from a federal judge to seize the account at Dwolla, a mobile payment processor based in Des Moines, Iowa.

Mt. Gox issued a statement Wednesday saying it was aware of media reports about the action, but that it hadn’t received a copy of the court order or warrant. The affidavit in support of the warrant cited probable cause to believe that the account was used to violate federal laws against unlicensed money transmitting businesses.

Bitcoins were quoted at $114 in recent action on the exchange. Trading activity in bitcoins surged earlier this year as the crisis in Cyprus intensified.”

 

(emphasis added)

See how easy it is for the State to declare any activity it doesn't like criminal? The jungle of administrative law that covers much of what is left of a once free society allows the government to target anyone at anytime it wishes. Since ignorance of the law is no valid legal defense, citizens are presumably supposed to know all the ins and outs of the blanket of prohibitions that covers every nook and cranny of life these days.

 

Is Bitcoin 'Money' After All?

One cannot transmit money without a 'license' apparently. One has to be part of a licensed industry cartel to be allowed to do that. However, does that mean that the government now acknowledges that Bitcoin is actually money?

There are legitimate doubts as to Bitcoin's 'moneyness'. We plan to address the question of how Bitcoin ties in with monetary theory in a separate article soon. Our assessment differs slightly in some aspects from that presented by Keith in an earlier article on the topic.

In any case, it is noteworthy that governments and the banking cartel are apparently getting worried about the crypto-currency. It is of course no coincidence that trading in Bitcoin soared after the Cyprus deposit confiscation – some people are trying to flee the system for what they regard as safer alternatives. Hence the recent full court press against both gold and Bitcoin: the establishment wants to eradicate such ideas before they take root. There is no escape is the message, and the system is 'totally safe'.

As Irish finance minister Noonan for instance declared: "There was general agreement that deposits below €100,000 in any resolution will be sacrosanct."

However, that does not alter the fact that the fractionally reserved banks simply don't have the money. As we have pointed out several times, 'uncovered' money substitutes in the euro area amount to more than € 3.5 trillion. In the US, they amount to more than $6.4 trillion. Again, this is money due to depositors on demand that is in fact not covered by bank reserves (either in the form of vault cash or bank deposits with the central bank). It is money the banks have literally created 'from thin air'. Therefore Noonan's promise is standing on very shaky ground indeed. It is true that many people are apathetic and remain unaware of these facts and of the risks they are exposed to. Rising prices of gold and Bitcoin raise their awareness, hence the authorities and the banking cartel are trying to put their foot down. Meanwhile, in spite of the attacks, Bitcoin's price has remained fairly stable recently – in fact, it has recently been rising against the US dollar:

 


 

Bitcoin




Bitcoin: stable with an upward bias since the April crash – via bitcoincharts –  click to enlarge.

 


 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

4 Responses to “The State Moves Against Bitcoin”

  • therooster:

    The government is correct to prevent gold and silver from being called dollars. It’s important to move toward a break in the debt paradigm. Dollars, even as a measure (as opposed to a currency) are very much like a “rubber ruler”. Precious metals should be coined by weight and adhere to market law. As for bitcom, it’s a centralized algorithm …… so need I say more ? Only precious metals provide the freedom of decentralized debt-free currency ….. along with the current information age age feature of instant global liquidity. Can it get better than debt-free, store of value with instant transferability ??? I doubt it. Keep it simple and don’;t think for a second that any government has the ability to swat flies (decentralization down to the individual) with a hammer. Impossible !

  • This lends credence to the idea of a legal fiction, in the name of JOHN DOE, as opposed to John Doe, otherwise known as a nom de guerre. Note you get nothing from the government in your real name, but in all caps. it is a legitimate question as to why they never address you in your proper name, though it appears so tinfoil. Government, in a constitutional Republic, operates elsewise, in war, under a different set of rules. It appears they are making more and more war rules as we go forward. The public is continually conditioned to buy these rules, under the rule of necessity. But, who is making war?

    My sentiment accordingly, as to why they selected such a NAZI name for the anti-terror organization? Have we progressed so far down the road of totalitarianism that there is no reason to hide the fact? 12USC95a allows them to regulate everything to do with money and declare enemies. This is despite the Constitution guarantees the right to contract and that the government itself should not infringe contract. It also prohibits titles of nobility, which is what a state chartered bank is. None of the rest of us can create money out of thin air, create liabilities that are impossible to pay off and receive the shield of the government in the process. Has our government been hijacked by a small elite or is it even more serious, a group interested in waging war and controlling the world?

  • Jim:

    Excluding the arguments for or against Bitcoin being money, the argument that this is a government move against Bitcoin ignores a few facts. FinCEN has always had regulations in place that made it mandatory for anyone engaged in “Money Transmission” be registered. They also defined any one in the business of exchanging Bitcoin for U.S. Currency (but not the other way around) as a money transmitter. When Mt. Gox’s shell corporation filed it’s paperwork it was asked specifically whether they were going to be exchanging funds into dollars on client demand they stated they would not. That was a untrue. The Feds bought Bitcoin via Mt. Gox and then cashed them in. When Mt. Gox, via their shell corporation, put the money into their Dwolla account, they were in violation of several long-standing Federal regs and the account was seized. In the meantime Bitcoin is rocking along and other exchanges are untouched. Most of the U.S. exchanges currently operating are fully registered and comply with all AML/KYC regs. It is obvious that FinCEN intends to treat Bitcoin like any other currency. If you are going to operate a Bitcoin exchange in the U.S. that is something you have to live with. That isn’t the same thing as attacking Bitcoin, though.

    • Keith Weiner:

      I agree with Jim re: the regulations. A similar case was Bernard von Nothaus and the “Liberty Dollar”. People often paint this as a government attack on silver coinage. There are many privately manufactured silver rounds, medallions, and bars. You just cannot call them by the name “dollar”.

      I do agree with Pater that the trend is clear, the government of the US and the other governments are becoming increasingly desperate to close of all escape routes. They will need exponentially more capital in the future. But I don’t think we are there quite yet, and I rather suspect that the Fed and the big banks do not regard Bitcoin as much of a threat just yet. It’s like Google looking at some voice recognition startup company. Sure, it could grow to become a threat. Right now, it’s not, and if you’re the 800 pound gorilla you can afford to be patient. Many times the startup will self-destruct. If not, you have time to take action later such as acquire it or develop your own technology.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • The Capital Structure as a Mirror of the Bubble Era
      Effects of Monetary Pumping on the Real World As long time readers know, we are looking at the economy through the lens of Austrian capital and monetary theory (see here for a backgrounder on capital theory and the production structure). In a nutshell: Monetary pumping falsifies interest rate signals by pushing gross market rates below the rate that reflects society-wide time preferences; this distorts relative prices in the economy and sets a boom into motion – which is characterized by...
  • How to Get Ahead in Today’s Economy
      “Literally On Fire” This week brought forward more evidence that we are living in a fabricated world. The popular story-line presents a world of pure awesomeness. The common experience, however,  falls grossly short.   There are many degrees of awesomeness, up to total awesomeness – which is where we are these days, in the age of total awesomeness, just a short skip away from the Nirvana era. What is Nirvana, you may wonder? We only know for sure that Nirvana is what...
  • Full Faith and Credit in Counterfeit Money
      A Useful Public Service There are nooks and corners in every city where talk is cheap and scandal is honorable.  The Alley, in Downtown Los Angeles, is a magical place where shrewd entrepreneurs, shameless salesmen, and downright hucksters coexist in symbiotic disharmony.  Fakes, fugazis, and knock-offs galore, pack the roll-up storefronts with sparkle and shimmer.   The Alley in LA – in places such as this, consumers are as a rule well served by applying a little bit of...
  • Gold and Gold Stocks – Conundrum Alert
      Moribund Meandering Earlier this week, the USD gold price was pushed rather unceremoniously off its perch above the $1300 level, where it had been comfortably ensconced all year after its usual seasonal rally around the turn of the year. For a while it seemed as though the $1,300 level may actually hold, but persistent US dollar strength nixed that idea. Previously many observers (too many?) expected gold to finally break out from its lengthy consolidation pattern, but evidently the...
  • US Money Supply Growth Jumps in March , Bank Credit Growth Stalls
      A Movie We Have Seen Before – Repatriation Effect? There was a sizable increase in the year-on-year growth rate of the true US money supply TMS-2 between February and March. Note that you would not notice this when looking at the official broad monetary aggregate M2, because the component of TMS-2 responsible for the jump is not included in M2. Let us begin by looking at a chart of the TMS-2 growth rate and its 12-month moving average.   The y/y growth rate of TMS-2...
  • Fear and Longing - Precious Metals Supply and Demand
      Waiting for Permanent Backwardation  The price of gold dropped 9 bucks, while that of silver rose 3 cents. Readers often ask us if permanent backwardation (when gold withdraws its bid on the dollar) is still coming. We say it is certain (unless we can avert it by offering interest on gold at large scale). They ask is it imminent, and we think this is with a mixture of fear and longing for a higher gold price.   Lettuce hope this treasure is not cursed... but it probably is....
  • Scorn and Reverence - Precious Metals Supply and Demand
      Shill Alarm One well-known commentator this week opined about the US health care industry:   “...the system is designed the churn and burn... to push people through the clinics as quickly as possible. The standard of care now is to prescribe some medication (usually antibiotics) and send people on their way without taking the time to conduct a comprehensive examination.”   From the annals of modern health care... [PT]   Nope. That is not the standard...
  • Global Turn-of-the-Month Effect – An Update
      In Other Global Markets the “Turn-of-the-Month” Effect Generates Even Bigger Returns than in the US The “turn-of-the-month” effect is one of the most fascinating stock market phenomena. It describes the fact that price gains primarily tend to occur around the turn of the month. By contrast, the rest of the time around the middle of the month is typically far less profitable for investors.   Good vs. bad seasonal timing...   [PT]   The effect has been studied...
  • Tales from “The Master of Disaster”
      Tightening Credit Markets Daylight extends a little further into the evening with each passing day.  Moods ease.  Contentment rises.  These are some of the many delights the northern hemisphere has to offer this time of year. As summer approaches, and dispositions loosen, something less amiable is happening.  Credit markets are tightening.  The yield on the 10-Year Treasury note has exceeded 3.12 percent.   A change in pace: yields are actually going somewhere. There is...
  • Is Political Decentralization the Only Hope for Western Civilization?
      Voting with their Feet A couple of recent articles have once more made the case, at least implicitly, for political decentralization as the only viable path which will begin to solve the seemingly insurmountable political, economic, and social crises which the Western world now faces.   Fracture lines – tax and regulatory competition allows people to “vote with their feet” - and they certainly do. [PT]   In the last few months, over 3,000 millionaires have...
  • Why the Fundamental Gold Price Rose - Precious Metals Supply and Demand
      Gold Lending and Arbitrage There was no rise in the purchasing power of gold this week. The price of gold fell $22, and that of silver $0.19. One question that comes up is why is the fundamental price so far above the market price? Starting in January, the fundamental price began to move up sharply, and the move sustained through the end of April.   1-month LIBOR (London Interbank Offered Rate – the rate at which banks lend euro-dollars to each other). LIBOR and GOFO...
  • “Sell In May And Go Away” - A Reminder: In 9 Out Of 11 Countries It Makes Sense To Do So
      A Truism that is Demonstrably True Most people are probably aware of the adage “sell in May and go away”. This popular seasonal Wall Street truism implies that the market's performance is far worse in the six summer months than in the six winter months. Numerous studies have been undertaken in this context particularly with respect to US stock markets, and they  confirm that the stock market on average exhibits relative weakness in the summer.   Look at the part we...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

The Review Insider

Dog Blow

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist