'Dread Pirate Roberts', Drug Prohibition and the Dark Web
By now it is well known that the proprietor of the 'Silk Road' internet marketplace for drugs and other illicit products has been busted by the FBI. Of course, the idea that the State should prohibit drug use by adults is highly questionable. If one studies the history of legislation in this regard, it soon becomes clear that while these prohibitions have been variously dressed up in Puritan morality or appeals to the need to preserve the 'Volksgesundheit' (the peoples' health), these laws really were largely protectionist measures.
For instance, it is no coincidence that marihuana use became illegal around the time chemical concerns such as Du Pont de Nemours introduced artificial fibers. Making the plant that produces marihuana illegal at the same time removed the biggest competition to artificial fibers – hemp.
Similarly, drug prohibition leaves the field of supplying the population with various uppers and downers in the hands of the pharmaceutical industry, which is producing dangerous psychoactive medication by the wagon loads these days. What the long term consequences of feeding the population with various benzodiazepines and other types of psychoactive drugs that influence the serotonin, norepinephrine or dopamine balance in the brain (such as the infamous and widely prescribed antidepressant Prozac) are is not really known, but we do know that a great many mass murderers that have gone 'postal' in modern times have been taking such psychotropic drugs.
Today here is a vast variety of anti-depressants, stimulants, 'mood stabilizers', anxiolytics and anti-psychotic drugs on the market that produce billions in profits for the pharmaceutical industry. We would wager that if the prohibition of currently criminalized drugs (most of which are produced by nature) were rescinded, this business would suffer a steep decline.
The senseless 'war on drugs' has not achieved a single one of its purported objectives. Drug use has not decreased because of it. However, it has had a huge cost both in terms of money and lives. So why is it continuing in spite of the crushing weight of evidence proving that it does more harm than good? That's simple: if you want to know why, follow the money.
A huge amount of money is made because certain drugs are illegal. If prohibition were rescinded, a major source of revenue for criminal cartels would dry up, and a great many minions of the State would see their jobs becoming redundant. Moreover, a major source of their funding would disappear as well, which is currently available to them via 'the same article we argued that the changing social mood could actually lead to an end of prohibition in spite of all the vested interests arrayed in favor of maintaining it.'. As we pointed out previously, this pays inter alia for the militarization of the police, which these days can deploy a great many lethal toys as a result of this source of income. In
The 'Dread Pirate' apparently believed in non-coerced free markets, which he cited as a major reason to open his online drug bazaar. What is perhaps not widely known is that he was actually not busted because of any weaknesses in the TOR-based 'dark web'. He simply made a number of stupid mistakes that allowed the authorities to track him down by employing standard investigative procedures. The following cartoon probably illustrates it well:
How to bust dark web users
(Image source unknown, via askqtp.com)
For readers interested in the technical aspects of the bust, this article at 'The Verge' has more detail on the topic. As the Verge maintains, the 'Dread Pirate' may have been busted, but the 'Dark Web' lives on. Note here that the TOR network is not merely something that is exclusively used by criminals. For many a regime critic and political dissident living in an authoritarian regime the anonymity of the 'Dark Web' is a literally a life saver. Naturally, governments everywhere dislike it, regardless of whether they are democratic or authoritarian: they dislike it simply because it is not under their control. However, there seems nothing they can do about it short of shutting down the internet altogether.
The Bitcoin Connection
In order to make anonymous payments on 'Silk Road' possible, the site used Bitcoin. In fact, when it became widely known that the drug marketplace accepted Bitcoin in payment, the price of the currency began its fantastic climb. This is no surprise, as these news were the first hard evidence that Bitcoin was actually used as a medium of exchange.
Bitcoin detractors everywhere no doubt rejoiced when Solk Road was busted: finally, a major prop helping the currency retain its value had been removed. Bitcoin duly suffered a 'mini crash' when the news hit, but it seems now that the currency's detractors have overestimated Silk Road's importance and underestimated the degree to which Bitcoin has become accepted as a store of value (it is not yet a widely used medium of exchange, but it would probably be correct to refer to it as a secondary medium of exchange by now).
After the initial crash, the currency quickly recovered, as dip buyers stepped in. Note also that Bitcoin has increased by nearly 100% in value since the low it made in July this year.
Bitcoin: after initially crashing on the news of the Silk Road bust, the currency has recovered almost the entire loss – click to enlarge.
We would note here that we still regard Bitcoin mainly as a trading sardine. However, it is possible to integrate its existence into monetary theory: one only needs to keep in mind that its exchange value is highly dependent on the fact that it is convertible into standard money issued by governments. Monetary theorists are debating whether the currency can really be regarded as 'money'. After all, it is not a commodity with a preexisting use value, such as is the case with gold and silver.
However, it can at the same time not be denied that it has arisen in the market. No government committee decided one day 'let there be Bitcoin'. Instead a couple of computer nerds created the currency for the sheer fun of it. In the meantime, it has evidently become a serious contender in the world of currencies. Its rising exchange value suggests that it is widely regarded as a better money than the monies issued by States.
It is easy to see why this is so: although Bitcoin is not a commodity money and has no preexisting use value, it must be 'mined' at great cost and effort. Moreover, its supply is strictly limited: there will never be more than 21 million Bitcoins in existence.
This fact alone makes it interesting to many people as a potential store of value, especially if its acceptance as a medium of exchange continues to increase. Naturally its cash-like anonymity remains a big draw as well. Consider in this context the example of the 'Saddam dinar' in Iraq: after the invasion of Iraq, the currency began to rise strongly. This was so because it continued to be accepted as a medium of exchange, and people knew at the same time that henceforth, printing of the currency would stop. The central bank of Iraq had been forced to cease to add to the supply of Saddam dinars.
Having said all that, until Bitcoin is more widely accepted in exchange (so far its use as a medium of exchange remains rather limited), the main prop keeping its value up is the fact that it can be converted into other currencies. If Bitcoin owners were not certain that they can indeed exchange their Bitcoins for dollars, euro, etc. at anytime at a Bitcoin exchange, its value would immediately come into question. In the end, it is just a collection of bits and bytes – the fact that it is not a commodity money remains its most severe flaw. It is therefore probably best regarded as an extension, or adjunct to existing paper monies.
Bitcoin: nothing but bits and bytes – and yet, a currency that has arisen in the market
Charts by MtGox Bitcoin exchange
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: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
10 Responses to “Bitcoin and the Silk Road Bust”
Most read in the last 20 days:
- Modi’s Great Leap Forward
India’s Currency Ban – Part VIII India’s Prime Minister, Narendra Modi, announced on 8th November 2016 that Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes would no longer be legal tender. Linked are Part-I, Part-II, Part-III, Part-IV, Part-V, Part-VI and Part-VII, which provide updates on the demonetization saga and how Modi is acting as a catalyst to hasten the rapid degradation of India and what remains of its institutions. India’s Pride and Joy Indians are...
- Global Recession and Other Visions for 2017
Conjuring Up Visions Today’s a day for considering new hopes, new dreams, and new hallucinations. The New Year is here, after all. Now is the time to turn over a new leaf and start afresh. Naturally, 2017 will be the year you get exactly what’s coming to you. Both good and bad. But what else will happen? Image of a recently discarded vision... Image by Michael Del Mundo Here we begin by closing our eyes and slowing our breath. We let our mind...
- The Great El Monte Public Pension Swindle
Nowhere City California There are places in Southern California where, although the sun always shines, they haven’t seen a ray of light for over 50-years. There’s a no man’s land of urban blight along Interstate 10, from East Los Angeles through the San Gabriel Valley, where cities you’ve never heard of and would never go to, are jumbled together like shipping containers on Terminal Island. El Monte, California, is one of those places. Advice dispensed on Interstate...
- A Trade Deal Trump Cannot Improve
Worst in Class BALTIMORE – People can believe whatever they want. But sooner or later, real life intervenes. We just like to see the looks on their faces when it does. By that measure, 2017 may be our best year ever. Rarely have so many people believed so many impossible things. Alice laughed. "There's no use trying," she said: "one can't believe impossible things." "I daresay you haven't had much practice," said the Queen. "When I was your age, I always did it for...
- Pope Francis Now International Monetary Guru
Neo-Marxist Pope Francis Argues for Global Central Bank As the new year dawns, it seems the current occupant of St. Peter’s Chair will take on a new function which is outside the purview of the office that the Divine Founder of his institution had clearly mandated. Neo-Papist transmogrification. We highly recommend the economic thought of one of Francis' storied predecessors, John Paul II, which we have written about on previous occasions. In “A Tale of Two Popes” and...
- Where’s the Outrage?
Blind to Crony Socialism Whenever a failed CEO is fired with a cushy payoff, the outrage is swift and voluminous. The liberal press usually misrepresents this as a hypocritical “jobs for the boys” program within the capitalist class. In reality, the payoffs are almost always contractual obligations, often for deferred compensation, that the companies vigorously try to avoid. Believe me. I’ve been on both sides of this kind of dispute (except, of course, for the “failed”...
- Trump’s Trade Catastrophe?
“Trade Cheaters” It is worse than “voodoo economics,” says former Treasury Secretary Larry Summers. It is the “economic equivalent of creationism.” Wait a minute - Larry Summers is wrong about almost everything. Could he be right about this? Larry Summers, the man who is usually wrong about almost everything. As we have always argued, the economy is much safer when he sleeps, so his tendency to fall asleep on all sorts of occasions should definitely be welcomed....
- Money Creation and the Boom-Bust Cycle
A Difference of Opinions In his various writings, Murray Rothbard argued that in a free market economy that operates on a gold standard, the creation of credit that is not fully backed up by gold (fractional-reserve banking) sets in motion the menace of the boom-bust cycle. In his The Case for 100 Percent Gold Dollar Rothbard wrote: I therefore advocate as the soundest monetary system and the only one fully compatible with the free market and with the absence of force or fraud...
- Silver’s Got Fundamentals - Precious Metals Supply-Demand Report
Supply-Demand Fundamentals Improve Noticeably Last week was another short week, due to the New Year holiday. We look forward to getting back to our regularly scheduled market action. Photo via thedailycoin.org The prices of both metals moved up again this week. Something very noticeable is occurring in the supply and demand fundamentals. We will give an update on that, but first, here’s the graph of the metals’ prices. Prices of gold and silver...
- Trump’s Plan to Close the Trade Deficit with China
Rags to Riches Jack Ma is an amiable fellow. Back in 1994, while visiting the United States he decided to give that newfangled internet thing a whirl. At a moment of peak inspiration, he executed his first search engine request by typing in the word beer. Jack Ma, founder and CEO of Alibaba, China's largest e-commerce firm. Once he was a school teacher, but it turned out that he had enormous entrepreneurial talent and that the world of wheelers, dealers, movers and...
- Side Notes, January 14 - Red Flags Over Goldman Sachs
Red Flags Over Goldman Sachs Just to prove that I am an even-handed insulter, here is a rant about my former employer, Goldman Sachs. The scandal at 1MDB, the Malaysian sovereign wealth fund from which it appears that billions were stolen by politicians all the way up to the Prime Minister, continues to unfold. The main players in the 1MDB scandal. Irony alert: apparently money siphoned off from 1MDB was used to inter alia finance Martin Scorcese's movie “The Wolf of...
- Regime Change: The Effect of Trump's Victory on Stock Prices
A Soaring Market On January 20 2017 Donald Trump will be sworn in as the new president of the United States. On the stock market his victory has triggered a lot of advance cheer already: the Dow Jones Industrial Average rose by a sizable 7.80 percent between the election and the turn of the year. Two big winners: the DJIA and Donald Trump - click to enlarge. Many investors are now wondering what effect the change in government will have on stock prices in the new...