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The Fall of Mt. Gox and Why to Buy Bitcoin

 It may seem odd, but at a time when every major news source was reporting the end of Bitcoin, I bought my first Bitcoin today using the Coinbase exchange. While I am new to Bitcoin itself, I have been following its community, primarily via /r/Bitcoin, and from the looks of it, this “crash” pales in comparison to previous ones. How I see it is that Mt. Gox needed to die, and now that’s it’s behind us the Bitcoin community can grow even bigger and better. I’ve never trusted that exchange very much, what with all the trading incidents and stories of being unable to withdraw one’s own money. Despite the recent events that stirred commotion in the world of cryptocurrency, I think that this is one of the best times to get started.

First off, assuming the BTC economy will strengthen, one can buy low right now. At the time this post was written, 1 BTC goes for $540.55 to $560 depending one which exchange. As we’ve witnessed in the past, Bitcoin is fully capable of surpassing $1,000. Secondly, and I’m I disappointed with the media for causing confusion about this, the problem lay in the Mt. Gox exchange specifically, and not the currency itself. Just as one may get scammed when using U.S. Dollars or the Euro or any currency, but you cannot get scammed by the currency itself, this was the case with Bitcoin. And with the paranoia of a “Bitcoin Scam,” came attention from the government, one of the very institutions whose lack of presence in this currency as made it so popular.

Senator Joe Manchin (D-W.V.) has actually called for a complete ban on Bitcoin, just like China and Thailand (because of course that’s where we should get our policy from), writing that it is “disruptive to our economy. If one wants to read his complete letter, Business Insider did an article on it. I’d like to use this post to respond.

Here starts out with:

I write today to express my concerns about Bitcoin. This virtual currency is currently unregulated and has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy.

Allowed user’s to participate in illicit activity? What does he think people usually buy illegal drugs with and is still used in such transactions today? The dollar! Why don’t we ban that too‽ Any currency can be used to buy anything so long as that vendor is willing to accept it in payment. A currency is a commodity just like any other. And as far as it being “disruptive”, it’s pretty clear just by looking at the Coin’s value that there’s pretty high demand for it, and that any government intervention would be many times more disruptive.

Bitcoin is a crypto-currency that has gained notoriety in recent months due to its rising exchange value and relation to illegal transactions . . . [which has made] Bitcoin attractive to some also attract criminals who are able to disguise their actions from law enforcement. Due to Bitcoin’s anonymity, the virtual market has been extremely susceptible to hackers and scam artists stealing millions from Bitcoins users.”

Once again, this brings us back to the argument for banning the dollar. And it’s plain to see that if people continue to trade BTC despite the “dangers” that it does not pose a sufficient threat enough to discourage its use.

It has been banned in two different countries—Thailand and China [and the European Union has] issued warnings to Bitcoin users as their respective governments consider options for regulating or banning its use entirely. I am most concerned that as Bitcoin is inevitably banned in other countries, Americans will be left holding the bag on a valueless currency.

Why can’t Manchin understand that that is the market’s issue to deal with? And Bitcoin’s ban is nowhere near inevitable. The Swiss Government has proposed treating it like any other foreign currency.

As of December 2013, the Consumer Price Index (CPI) shows 1.3% inflation, while a recent media report indicated Bitcoin CPI has 98% deflation. In other words, spending Bitcoin now will cost you many orders of wealth in the future. This flaw makes Bitcoin’s value to the U.S. economy suspect, if not outright detrimental.

Senator Manchin is correct in asserting that deflation discourages consuming in the present. But what it does do is encourage investment. The alternative to using Bitcoin is using the inflationary dollar. Just as deflation discourages present, consumer spending, inflation encourages it. But when that inflation is caused by a government or bank creating money or credit out of thin air and loaning it, it causes investment in places where there naturally would be no demand, and when the investment percolates down to the consumer, in the form of higher wages and incomes, the malinvestment is exposed and must be liquidated, these liquidations being known as depressions, which need only be fleeting as long as government does not try to keep wages, incomes, prices, and spending at pre-depression levels which, unfortunately, is usually the government’s way of “tackling” depressions. Inflations and deflations in the value of money are sustainable given the right demand, if it is in a free market setting, but this is not the case with the dollar

He  goes on to say that is dangerous and we should stop it before it “hurts hard-working Americans.” I don’t know about that; it didn’t seem to hurt people such as Jered Kenna, Charlie Shrem, or Roger Ver. The letter was addressed to various government officials and financial regulators, one of them being the Federal Reserve Chairwoman, Mrs. Janet Yellen. I have to admit that so far I have not been a very big fan of Yellen so far, due to her view on inflation. Nonetheless, I was glad to here yesterday that she responded to Senator Manchin that the Federal Reserve does not have the authority to regulate Bitcoin: “Bitcoin is a payment innovation that’s taking place outside the banking industry. To the best of my knowledge there’s no intersection at all, in any way, between Bitcoin and banks that the Federal Reserve has the ability to supervise and regulate. So the fed doesn’t have authority to supervise or regulate Bitcoin in anyway. One concern with Bitcoin is the potential for money laundering. [FinCen] has indicated their money laundering statutes are adequate to meet enforcement needs. The Fed doesn’t have authority with respect to Bitcoin, but certainly it would be appropriate for Congress to ask questions about what the right legal structure would be for digital currencies. My understanding is Bitcoin doesn’t touch [American] banks.” She finishes that even if they were to try, it would be difficult to regulate, saying, “It’s not so easy to regulate Bitcoin because there’s no central issuer or network operator. This is a decentralized, global [entity].”

So despite what they tell you, this is the best time to start using bitcoins. You can buy low, transaction fees are extremely low, it’s anonymous, allowing you to buy black market goods (and I’d like to point out here that the black market is not inherently evil. There’s the white market, which is the mainstream economy, the black market, which is the underground economy, and the red market, which is the violence-and-theft economy. There are overlaps between them in some cases, but anything black or white, and not red, is completely morally justified in my opinion. Sorry, this was a long parenthetical phrase; and I don’t think your supposed to have multiple sentences inside these), it’s peer-to-peer, so there’s no middleman, and it’s completely decentralized, so there is no central banks controlling it, so no government can control the currency. No more artificial booms followed by very real busts; booms and busts will still exist, only the market will solve its own problems. Let’s get Bitcoin back on track so it can go to the moon!

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The Bible & Liberty

Before I get into the actual bulk of the post, I would like to retroactively wish you all a Merry Christmas. I hope you all had a good holiday and will have a Happy New Year. I know I had a good Christmas. I got what was perhaps the greatest gift in my life– a sitar! If I may direct you to this post, a sitar was number two on my list. I also got a few Pink Floyd and Muse records and various books. I still have no idea how to even begin playing the sitar, nor do I know anyone in my area who actually teaches it. Although I guess everything’s on the internet. But enough of this, I digress.

This is the sitar I got for Christmas!

This is the sitar I got for Christmas!

Now let’s get back to the post. One of my uncle’s much-appreciated gifts to me was an anthology of various liberty-oriented writings “from Lao-Tzu to Milton Friedman”, called The Libertarian Reader. It contains somewhere around 70 short books, articles, essays, etc. I figured every week I would read one and respond to it or delve more into its topic.

Some of you well-versed libertarians might be guessing from the title of this post that the first entry is 1 Samuel 8 from the Holy Bible. Regardless of whether or not you’re Christian, atheist, or voodoo, it is a very relevant piece even today. To those of you who don’t have the Book lying around, it reads,

Israel Requests a King

1 As Samuel grew old, he appointed his sons to be judges over Israel. 2 Joel and Abijah, his oldest sons, held court in Beersheba. 3 But they were not like their father, for they were greedy for money. They accepted bribes and perverted justice.

4 Finally all the elders in Israel met at Ramah to discuss the matter with Samuel. 5 “Look,” they told him, “you are now old, and your sons are not like you. Give us a king to judge us like all the other nations have.

6 Samuel was displeased with their request and went to the Lord for guidance. 7 “Do everything they say to you,” the Lord replied, “for it is me they are rejecting, not you. They don’t want me to be their king any longer. 8 Ever since I brought them from Egypt they have continually abandoned me and followed other gods. And now they are giving you the same treatment. 9 Do what they ask, but solemnly warn them about the way a king will reign over them.”

Samuel Warns against a Kingdom

10 So Samuel passed the Lord’s warning to the people who were asking him for a king. 11 “This is how a king will reign over you,” Samuel said. “The king will draft your sons and assign them to his chariots and his charioteers, making them run before his chariots. 12 Some will be generals and captains in his army, some will be forced to plow in his fields and harvest his crops, and some will make his weapons and chariot equipment. 13 The king will take your daughters from you and force them to cook and bake and make perfumes for him. 14 He will take away the best of your fields and vineyards and olive groves and give them to his own officials. 15 He will take away a tenth of your grain and your grape harvest and distribute it among his officers and attendants. 16 He will take your young men and women and demand the finest of your cattle and donkeys for his own use. 17 He will demand a tenth of your flocks, and you will be his slaves. 18 When this day comes, you will beg for relief from this king you are demanding, but then the Lord will not help you.”

19 But the people refused to listen to Samuel’s warning. “Even so, we still want a king,” they said. 20 “We want to be like the nations around us. Our king will judge us and lead us into battle.”

21 So Samuel had repeated to the Lord what the people had said, 22 and the Lord replied, “Do as they say, and give them a king.” Then Samuel agreed and sent the people home.

The Bible, which until historically recently was used somewhere in most debates on government, political philosophy, and morality, explicitly told people, that unlike the Egyptian belief that the pharaoh is descended from the sun god Ra, there is nothing divine about the state. Undoubtedly, many European rulers conveniently forgot about this little passage, but this one chapter has been very important in the Judaeo-Christian tradition of the distrust of centralized power.

Although religion has in many cases been twisted by the ruling class, whether that be the Emperor of the Holy Roman Empire or certain Republicans, Christianity is at its core more libertarian than any other major religion. To prove that I, being Christian, am not biased, I shall list my reasons below, with evidence from the text of the Bible. But before I start, I would just like to state that I do not believe that religion should not be involved in politics whatsoever, because much of the time the most Christian politicians are not very Christ-like at all.

I’d like to start with the Christian view on war and peace. Jesus was perhaps one of the most hard-core pacifists in history. In the famous Sermon on the Mount, he declared, “Blessed are the peacemakers, for they will be called children of God.” [Matthew 5:9]. More anti-war passages are to be found in the gospel of Matthew: “He who lives by the sword will perish by the sword” [Mt 26:52] and “In everything do to others as you would have them do unto you” [Mt 7:12]; the latter know as the Golden Rule. The former is especially relevant today to the wars in the Middle East. Even 2013 years ago (or 2019, depending on what year Jesus was actually born– but this is irrelevant), Jesus and his disciples recognized the possibility of blowback in war. Michael Scheuer, former chief of the CIA’s Osama bin Laden unit at the Counterterrorist Center, says that our problems in the Middle East are a direct result of our involvement there. I do not mean to criticize anyone’s views too harshly, but it is beyond stupid to believe that people will not want to exact revenge on a government that bombs there innocent people and props up dictators. Let us imagine, for a moment, that the U.S. is a small, impoverished country and Pakistan is a world power. We have someone here that Pakistan wants to kill, for whatever reason (this reason doesn’t matter in this case). Some Pakistani man in a bunker controls a PIA (Pakistani Intelligence Agency) drone and kills a number of Americans, many of them innocent. Now imagine you learn that one of those who died is your father, mother, sister, brother, daughter, son, spouse, or friend. Would not you want to take action against this evil government? This brings us to the Golden Rule. Just as Jesus says that we must do unto others as we would have them to unto us, the United States should not attack a foreign power if we would not have them do so unto us. Let he who is without sin cast the first drone!

Now what about the Christian view on big government? As evident from the 1 Samuel 8 passage above, Christians are to be distrustful of big government. Paul says in his letter to the Church in Ephesus, “All of us used to live that way, following the passionate desires and inclinations of our sinful nature.” [Ephesus 2:3] Notice how it starts with ‘All’? This shows that government is not immune from evil just by being government; that it is just made up of humans and any human may be sinful. If the whole Original Sin part of Christian theology is true, then that means that the government too is made up of sinners, and they will inevitably misuse their power. More on corrupt power can be found in the Parable of the Trees in the Book of Judges. This creative little story reads,

The Parable of the Trees

8 Once upon a time the trees decided to choose a king. First they said to the olive tree, ‘Be our king!’ 9 But the olive tree refused, saying, ‘Should I quit producing the olive oil that blesses both God and people, just to wave back and forth over the trees?’

10 Then they said to the fig tree, ‘You be our king!’ 11 But the fig tree also refused, saying, ‘Should I quit producing my sweet fruit, just to wave back and forth over the trees?’

12 Then they said to the grapevine, ‘You be our king!’ 13 But the grapevine also refused, saying, ‘Should I quit producing the wine that cheers both God and people, just to wave back and forth over trees?’

14 Then all the trees finally turned to the thornbush and said, ‘Come, you be our king!’ 15 And the thorn bush replied, ‘If you truly want to make me your king, come and take shelter in my shade. If not, let fires come out from me and devour the cedars of Lebanon!’ [Judges 9:8-15]

I am sure that regardless of political orientation, people will agree that power can and will attract corrupt rulers.

But what about all the scripture that talks about sharing wealth? How do those fit into a libertarianism? Many socialists use the fact that in the Acts of the Apostles, it said that those in the Christian community shared what they had. These Christian socialist forget that A) the sharing was voluntary, and that B) In the Ten Commandments, it explicitly says, “Thou shalt not steal.” In fact, Acts is very libertarian. Peter and John were speaking to a large crowd of about 5,000 people, and because of this were arrested by the authorities and put in jail until morning. When told that they shall not speak of Jesus, they voiced their disobedience, saying, “Do you think God wants us to obey you rather then him?” Civil disobedience is about as libertarian as you can get!

Finally, what about those socially conservative passages? While certain parts of scripture are against certain acts, Christians are forbidden to correct sinners by force. John Chrysostom, a Church father during the early days of Catholicism, said pretty clearly, “Christians above all men are forbidden to correct the stumblings of sinners by force. It is necessary not to make a man better by force but by persuasion.”

Christianity has obviously not had a perfect record in the liberty department, but what sets it apart from other faiths is that it more than any other respected the individual, and valued freedom.

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Why a libertarian society would be better than the current one (by issue):

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America has come far in securing liberties for every citizen. From fighting off the tyrannical British, to the abolition of slavery, to the civil rights movement, and more recently LGBT rights, the United States has always been a beacon of freedom in the world. Over time, however, the government grew and liberties eroded. Americans forgot what unfreedom meant, and in doing so, began to trust in the government. Only now they trust in it too much. Founding Father George Washington once said, “Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.” The keyword there is forceEver before Anarcho-Capitalists and other Voluntaryists, he and America’s other founders understood very well the value of non-aggression. The problem with America today is that we have not be careful with the fire that is government.

But as government grew, so did reaction to such big government grow. Throughout the 1900s, the libertarian movement gained popularity and flourished. Austrian economists such as Ludwig von Mises and F.A. Hayek furthered the cause through their works, giving a case for a restrained government, and civil rights leaders such as Martin Luther King Jr. fought the system on social issues. The movement really exploded in 1971, when the ones who would be the founders of the Libertarian Party realized, upon examining Nixon: the Republican Party is not the small-government party anymore; we need to fight for freedom in social, political, and economic issues.

Here I will give a case for why a libertarian society would be better than our current system, where we have strayed from the liberty that gave us the quality of life we have today. I will go issue by issue, starting with…

Property- Libertarians believe that one may use their property for their enjoyment in any way they wish, unless that infringes upon the rights of others to do the same thing.  And we’re not just talking about material property; we believe every person is their own property and is sovereign over themselves. And property includes money; we believe in a free market of voluntary exchange where one may use their money in any way they wish and use any commodity as money. This is in contrast to American society today, where property is riddled with restriction and regulation such as controls on wages, prices, profits, production, etc. and legal tender laws. On an everyday basis, Americans’ rights to private property and freedom of trade are being violated. If we were to restrain these violations, people would be able to live their lives as they want, not as some central ruler wants.

Self-defense- Since we believe everyone is their own property, we believe in whatever measures they take to protect themselves and their property so as long as they respect the rights of others. The non-aggression principle is opposed to the initiation of force, but if one person is initiating force by violating another’s life or liberty, we believe that the victim (or anyone working on behalf of the victim, say, a private police force) has the right to violate the boundaries of the aggressor only as much as it takes to have the aggressor stop violating the rights of the victim (any force used greater than that in retaliation is itself an initiation of force). This is opposed to America today, where there is a constant push from the left to regulate and restrict the ownership, manufacture, transfer, and sale of firearms. In all honesty, most of the left’s pressure to take action against guns is done with good intention. They feel that the danger of having a firearm outweighs the use of them as a tool of self-defense. This is however, a mistake; every day somewhere around 30 people are murdered by someone using a gun. When this is multiplied to a year, you get about 10,950 people dead a year. This is a tragedy, but it overlooks the fact that annually, anywhere from 65,000 to 2.5 million people use guns in self defense each year–  under Bill Clinton the Department of Justice put that number at 1.5 million. While the possible range of use varies greatly, even the lowest estimate is still almost six times higher than the murder rate, and 98% of the time the victim merely has to brandish the weapon. And we weren’t given the Second Amendment for personal self-defense only; it was also meant for us to fend off tyranny, whether that come from a foreign power of from our own government. If people were given the right to unhindered self-defense, the nation would be a much safer place.

National Defense- Libertarians believe that we should have strong military- powerful enough to defend the country if a foreign power were to initiate an act of aggression against the United States. That said, we believe that the U.S. should stay out of entanglements with alliances and we should stop policing the world. Before the U.S. went into Iraq, Al-Qaeda was not much of a presence there. Since we have invaded however, recruitment has exploded. In fact, one thing that rallied so many Middle Easterners to Al-Qaeda’s cause was the fatwa titled Jihad against Jews and Crusaders. This document attacked America for its constant military involvement in the region. These terrorist sects got so big over there in reaction to U.S. foreign policy. I am most certainly not blaming America for jihad. The guilty party is obviously the one that carried out such horrible attacks. No terrorist is justified doing what they do, although the U.S. can minimize blowback by scaling down involvement. A libertarian society would be a peaceful society.

Marriage- Libertarians believe that no one has the right to tell you who you can marry and to restrict one’s liberty based on gender identity and/or sexual orientation and preference. We believe that the government should not even take this account at all in their actions. We believe that homosexual and bisexual people should be treated no differently from heterosexual people than blue-eyed and brown-eyed people are. As long as both parties are consenting, they should be able to choose how to run their relationship. Most libertarians, in fact, believe that that the government should not be involved in marriage at all, whether heterosexual, homosexual, or bisexual. Nevertheless, we believe that as long as government is in the marriage business, no one should be treated differently based on these factors. In American society today, there are countless restrictions on personal relationships imposed by conservatives mostly (that said, the Democrats didn’t start supporting gay rights until somewhere around the year 2000. Let liberals not forget that it was Bill Clinton who signed into effect the DOMA). In a libertarian society, people would have the right to choose their partners themselves.

Healthcare- I’ll keep this one short, because I think the answer’s pretty obvious. Believing in the free-market, libertarians also believe in a free-market healthcare system. We believe that people should be able to decide how much health insurance they want and what kind of healthcare they want, if they even want any healthcare. In just 9 days, the Affordable Care Act (or Obamacare) will take full effect. I don’t think I even have to explain all the problems that will create. While Obamacare is supposed to increase the availability of health insurance to more than 10 million people, the American Enterprise Institute estimates 100 million people will lose their insurance whether they “liked their health insurance” or not. In a free society, people would have the ability to make their own healthcare decisions.

Privacy- Libertarians believe in the Fourth Amendment. We are against NSA-type massive surveillance. Anywhere that had or has this type of spying in place didn’t end up very free (see: Soviet Russia -or- STASI). While the National Security Agency was purported to have been created to prevent terrorist attacks, a White House panel member says has “stopped no terrorist attacks.” The same panel went on to say that the NSA is “not essential to preventing terrorist attacks.” So why does the Obama Administration maintain these programs? Edward Snowden, the ex-NSA contractor who leaked the information that started the controversy, says, “These programs were never about terrorism; they’re about economic spying, social control, and diplomatic manipulation. They’re about power.” No major advance in liberty could ever have been made unless they started in secrecy. In a libertarian society, people would have the right to do as they please without there leaders spying on them.

Crime- Libertarians believe crimes should be considered only to be actions that use force or fraud or actions that put others at significant risk. We believe that a “victimless crime” is not a crime at all, and that people should be able to decide their own actions and accept responsibility for said actions. We believe that the use of voluntary actions that only affect oneself, such as the use of drugs, should be up to the discretion of the individuals partaking in said actions. Unlike post-Nixon America, where police can raid your house, just like raiding that of a murderer, for you smoking some plant while you sit at home watching some TV and eating (a lot). If people were allowed to do anything as long as their actions didn’t violate the liberty of others, it would be a much freer society.

There’s a bunch more things that I didn’t cover nor do I feel like covering (I’m not a political writer– why do you think the article’s written so crappily!). I just wanted to lay down what I believe for anyone who has enough time on their hands to read some random person’s unknown blog. But basically this is why, contrary to what you may have learned from school, the media, etc. growing up, more freedom is better.

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