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:

  • Stock Market Manias of the Past vs the Echo Bubble
      The Big Picture The diverging performance of major US stock market indexes which has been in place since the late January peak in DJIA and SPX has become even more extreme in recent months. In terms of duration and extent it is one of the most pronounced such divergences in history. It also happens to be accompanied by weakening market internals, some of the most extreme sentiment and positioning readings ever seen and an ever more hostile monetary backdrop.   Who's who in the zoo in...
  • All the Makings of a Major Economic Fiasco
      Mud Wrestling: Trump vs. Xi About 6,940 miles west of Washington DC, and at roughly the same latitude, sits Beijing.  Within China’s massive capital city, sits the country's paramount leader, Xi Jinping.  According to Forbes, Xi is currently the most powerful and influential person in the world.   Papa Xi, the new emperor of China. [PT]   Xi, no doubt, is one savvy fellow.  He always knows the right things to say.  He offers the citizens of his nation the...
  • How the Global Trade Contraction Begins
    Historical Evidence The world grows increasingly at odds with itself, with each passing day.  Divided special elections.  Speech censorship by Silicon Valley social media companies.  Increased shrieking from Anderson Cooper.  You name it, a great pileup is upon us.   It was probably Putin's fault (just a wild guess) [PT]   From our perch overlooking San Pedro Bay, the main port of entry for Chinese made goods into the USA, facets of the mounting economic catastrophe come...
  • TARGET-2 Revisited
      Capital Flight vs. The Effect of QE Mish recently discussed the ever increasing imbalances of the euro zone's TARGET-2 payment system again in response to a few articles which played down  their significance. He followed this up with a nice plug for us by posting a comment we made on the subject. Here is a chart of the most recent data on TARGET-2 available from the ECB; we included the four largest balances, namely those of  Germany, Italy, Spain and the ECB itself.   The...
  • When the Freaks Run Wild
      Conditioned to Absurdity The unpleasant sight of a physical absurdity is both grotesque and interesting.  Only the most disciplined individual can resist an extra peek at a three-legged hunch back with face tattoos.  The disfigurement has the odd effect of turning the stomach and twisting the mind in unison.   Francesco Lentini, the three-legged man. Born in Sicily in 1881 with “three legs, four feet, sixteen toes and two pair of functioning genitals” he made a career of...
  • Gold Sector – An Obscure Indicator Provides a Signal
    The Goldminbi In recent weeks gold apparently decided it would be a good time to masquerade as an emerging market currency and it started mirroring the Chinese yuan of all things. Since the latter is non-convertible this almost feels like an insult of sorts. As an aside to this, bitcoin seems to be frantically searching for a new position somewhere between the South African rand the Turkish lira. The bears are busy dancing on their graves.   Generally speaking bears have little to...
  • Separating Signal from Noise
      Claudio Grass in Conversation with Todd “Bubba” Horwitz Todd Horwitz is known as Bubba and is chief market strategist of  Bubba Trading.com. He is a regular contributor on Fox, CNBC, BNN, Kitco, and Bloomberg. He also hosts a daily podcast, ‘The Bubba Show.’ He is a 36-year member of the Chicago exchanges and was one of the original market makers in the SPX.   Todd “Bubba” Horwitz and Claudio Grass   Before you listen to the podcast, I would like to...
  • What Have You Done For Me Lately? Precious Metals Supply and Demand
      Aragorn's Law or the Mysterious Absence of the Mad Rush Last week the price of gold dropped $8, and that of silver 4 cents.  There is an interesting feature of our very marvel of a modern monetary system. We have written about this before. It sets up a conflict, between the perverse incentive it administers, and the desire to protect yourself in the long term.   Answer: usually when it is too late... [PT]   Consider gold. Many people know they should own it. They...
  • The Midas Touch Gold Model
      Introductory Remarks by PT Dear readers, we are hereby beginning to publish material from a new author, Florian Grummes of Midas Touch Consulting. Some of you may already know Florian from his contributions to recent issues of the annual “In Gold We Trust” report by Incrementum. He is a well-known and highly respected market analyst (particularly of gold and cryptocurrency markets) in the German-speaking parts of the world and we hope we will be able to contribute a bit to making his...
  • An Inquiry into Austrian Investing: Profits, Protection and Pitfalls
    Incrementum Advisory Board Discussion Q3 2018 with Special Guest Kevin Duffy “From a marketing perspective it pays to be overconfident, especially in the short term. The higher your conviction the easier it will be to market your investment ideas. I think the Austrian School is at a disadvantage here because it’s more difficult to be confident about your qualitative predictions and even in terms of investment advice it is particularly difficult to be confident in these times because we...
  • Climbing the Milligram Ladder - Precious Metals Supply and Demand
    FRN Muscle Flexing Shh, don’t tell the dollar-paradigm folks that the dollar went up 0.2mg gold this week. Or if that hasn’t blown your mind, the dollar went up 0.01 grams of silver. It’s less uncomfortable to say that gold went down $10, and silver fell $0.08. It doesn’t force anyone to confront their deeply-held beliefs about money. But it does have its own Medieval retrograde motion to explain.   Even the freaking leprechaun is now offering government scrip...  this really...
  • Introducing the Seasonax Web App
      Closing the Affordability Gap Up until recently, the Seasonax app was only available to users of Bloomberg or Reuters terminals, putting it out of reach of most non-institutional investors. This has now changed. A  HYPERLINK "https://app.seasonax.com/"web-based version has become available which anyone can use, and it comes at a much lower price point as well. When visiting the site where the app is hosted, this is the welcome screen:   Featured patterns at the Seasonax web app...

Support Acting Man

Item Guides

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