Bit O’Money: Who’s Behind the Bitcoin Bubble? | The New York Observer

It was a tweet from a stranger that crystallized the concept of Bitcoin for Bruce Wagner. “I can explain the benefit of Bitcoin in four words,” one of Mr. Wagner’s 12,000-some Twitter followers wrote. “Briefcases full of cash.”At the time, briefcases full of pennies seemed more apt—one unit of the new virtual currency was then worth $0.06. Then, in one day, the price of a Bitcoin jumped to $0.22. Mr. Wagner, a former I.T. specialist who now produces and stars in his own web TV shows, became obsessed with the things. He sat at his computer, too excited to eat, reading the myriad white papers, trade blogs, technical analyses and forum discussions about Bitcoin. For five days, he hardly slept. He just kept thinking, This is amazing. This is going to change everything.The last time he’d been this excited was when Windows came out. He got his hands on some Bitcoins and sold when the price doubled. It kept climbing. He invested more.Bitcoin is Internet gold, a digital currency developed by a community of programmers in 2009 that represents the first plausible manifestation of an unregulated global “cryptocurrency” first imagined by anarchist computer hackers in the late 90’s. Bitcoins are snippets of code that use encryption to prevent counterfeiting and double-spending. Complex algorithms control the money supply, in theory replacing the need for banks or a central regulator. Right now Bitcoins can be generated—or “mined”—by running a program on a powerful computer. This task requires exponentially more time and processing power as the number of Bitcoins grows, and the absolute number of Bitcoins is capped at 21 million, mimicking the scarcity of gold. There are now 6,539,450 in circulation; $2 million worth were traded on the main Bitcoin exchange Mt. Gox on Friday.

via Bit O’Money: Who’s Behind the Bitcoin Bubble? | The New York Observer.

Can You Be Prosecuted for Using Gold or Silver? – Liberty Dollar by Bill Rounds

The Liberty Dollar case has had a huge impact on the world of gold and silver trading, investing, ownership and use. I covered a lot of ground in Part I and Part II, but there is another important aspect of that case that leaves the legal landscape partly shrouded in ominous and threatening clouds. What is the risk of criminal prosecution or criminal conviction to those who make or use gold and silver rounds of “original design”?

Is There A Risk Of Prosecution For Trading With Gold And Silver

To answer that, we have to fully understand the actual law that was broken. We also need to consider the existing law that was not at issue in the Liberty Dollar case, the threats of prosecutors and the effect of potential constitutional challenges to those laws if a prosecution were undertaken.

Mr. von NotHaus Violated Fraud Based Statutes

The Liberty Dollar Trial was about fraud, not a private currency system as prosecutor Anne Tomkins falsely implied. The jury was asked to decide if the elements of fraud and conspiracy to commit fraud were met, nothing else. No other legal basis for the prosecution was ever presented to the jury and implying that there was another legal basis is mis-stating the facts of the case.

Critical Facts of The Case

Liberty Dollar made, sold, and used rounds that had many similarities to official US government coinage. The rounds were minted with a face value but the FRN value of the silver in the coins was less than this face value. Liberty Dollar encouraged exchanging Liberty Dollars with people who were unaware that the underlying FRN value of the silver was less than the denomination minted on its face. Liberty Dollar profited from this difference in value.

via Can You Be Prosecuted for Using Gold�or�Silver? – Liberty�Dollar by Bill Rounds.

Seth Lipsky: When Private Money Becomes a Felony Offense – WSJ.com

The next chapter in the struggle over sound money may be the case of a newly minted felon named Bernard von NotHaus. Mr. von NotHaus was convicted this month of counterfeiting money by issuing silver coins called Liberty Dollars. His company’s website says it’s been taken down by court order, and absent a successful appeal he could spend years in jail.

Mr. von NotHaus was convicted under a section of the United States Code that makes it a crime to manufacture or pass “any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design.” The law was enacted during the Civil War, soon after the Union began issuing the paper scrip known as greenbacks.

It is too soon to say what Mr. von NotHaus’s grounds of appeal will be, but it is not too soon to say that his case will be one to watch at a time when so many believe our economic troubles are tied to the fact that the dollar has become a fiat currency, and when leaders world-wide are calling for a new reserve currency.

So alarming has been the collapse of the dollar that the legislatures in as many as a dozen American states are considering using their authority—under Article 1, Section 10 of the Constitution—to make legal tender out of gold and silver coins. Lest the ghost of Friedrich Hayek or any other advocate of privately issued money get any bright ideas, however, the von NotHaus verdict will stand as a warning.

The warning is contained in paragraph 33 of the indictment handed up against Mr. von NotHaus in a courtroom at Statesville, N.C. It said:

“Article 1, Section 8, Clause 5 of the United States Constitution delegates to Congress the power to coin money and to regulate the value thereof. This power was delegated to Congress in order to establish a uniform standard of value. Along with the power to coin money, Congress has the concurrent power to restrain the circulation of money not issued under its own authority, in order to protect and preserve the constitutional currency for the benefit of the nation. Thus, it is a violation of law for private coin systems to compete with the official coinage of the United States.”

via Seth Lipsky: When Private Money Becomes a Felony Offense – WSJ.com.

Square’s Disruptive New iPad Payments Service Will Replace Cash Registers

Mobile payments startup Square is announcing big numbers today—500,000 Square card readers shipped, 1 million Square transactions in May, and the startup is now processing $3 million in mobile payments per day. Clearly the company is on a roll in terms of traction and usage. And CEO Jack Dorsey is also revealing the next generation of Square. And Square is about to get a whole lot more disruptive.Today, Dorsey is revealing Square Register, a high-powered point of sale replacement for cash registers and point of sale terminals. And the company is taking it one step further for consumers by launching the Square Card Case, a way for purchasers to access a local merchants’ goods, prices, location, loyalty card and more.For background, Square offers an iPhone, Android and iPad app which allows merchants to process and manage credit card transactions with a handy little credit card swiping device that plugs into the headset/microphone jack. The device and service is the brainchild of Twitter co-founder and recently appointed product lead Jack Dorsey and Jim McKelvey. And Square recently raised $27.5 million in new funding, and announced a strategic investment from credit card company Visa. In Q1, Square did $66 million in payment volume the company expected $40 million and is now in track to process $1 billion in payment volume within a year.

via Square’s Disruptive New iPad Payments Service Will Replace Cash Registers.

Financial System Riskier, Next Bailout Will Be Costlier, S&P Says

The financial system poses an even greater risk to taxpayers than before the crisis, according to analysts at Standard  Poors. The next rescue could be about a trillion dollars costlier, the credit rating agency warned.SP put policymakers on notice, saying theres “at least a one-in-three” chance that the U.S. government may lose its coveted AAA credit rating. Various risks could lead the agency to downgrade the Treasurys credit worthiness, including policymakers penchant for rescuing bankers and traders from their failures.”The potential for further extraordinary official assistance to large players in the U.S. financial sector poses a negative risk to the governments credit rating,” SP said in its Monday report.But, the agencys analysts warned, “we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008.”Because of the increased risk, SP forecasts the potential initial cost to taxpayers of the next crisis cleanup to approach 34 percent of the nations annual economic output, or gross domestic product. In 2007, the agencys analysts estimated it could cost 26 percent of GDP.Last year, U.S. output neared $14.7 trillion, according to the Commerce Department. By SP’s estimate, that means taxpayers could be hit with $5 trillion in costs in the event of another financial collapse.Experts said that while the cost estimate seems unusually high, theres little dispute that when the next crisis hits, it will not be anticipated — and it will likely hurt the economy more than the last financial crisis.

via Financial System Riskier, Next Bailout Will Be Costlier, SP Says.

Catching the Next Big Wave of Revolutionary Wealth Creation

As a student in the 1960‘s there was a whiff of revolution in the air that spread from college campuses to the mainstream media and ultimately to the corridors of power in Washington.  Those were heady times. We felt we were part of the process of making history. More recently as a technology writer I’ve been witness to another kind of revolution – the creation of some game changing technologies and the amazing enterprises that grew out of them.  In 2000, while researching a story on Google, I caught glimpses of this revolution during interviews with Google’s founders, Sergey Brin and Larry Page, and investors, John Doerr, Michael Moritz, Ram Shriram, Andy Bechtolsheim, David Cheritan.  These are the new titans of technology.  They’re all billionaires these days, largely because of their willingness to place big bets during the early stage of the revolution.  Over the last ten years, while interviewing hundreds of venture capitalists, angel investors, bankers and and investment bankers, I’ve learned that there are two questions are ever present on every tech investor’s mind, “What’s the next wave and how can I catch it?”

Beneath the radar, another revolutionary wave of wealth creation is approaching so fast that few yet appreciate it’s true  potential.  Legendary investor John Doerr, who backed Google, AOL, Amazon, Sun and many others, said recently, “Energy is the mother of all markets.” Okay,  but if that’s true, than what’s the “father of all markets?”  What will be the catalyst to the next wave of wealth creation?

Because the money and banking sector is so massive, and so fundamental to all other sectors,  it’s easy to see it as the father of all markets. But this perspective is lost on most tech investors because few of them understand how the money and banking sector works.  Tech investors tend towards a pack investing mentality, investing primarily in what they understand.  Because they are so myopically focused on the echo chamber of retread ideas, will they miss the next big wave of wealth creation?

Bonderman, Stephens Invest in EBay Merchant-Lender Kabbage – Bloomberg

Merchant-lending startup Kabbage Inc., which advances as much as $12,000 to EBay Inc. sellers to buy inventory, raised $6.7 million in venture funding from investors including TPG Capital’s David Bonderman and Warren Stephens of Stephens Inc.

The round of capital, led by BlueRun Ventures with money from United Parcel Service Inc., will be used to expand Atlanta- based Kabbage into marketplaces such as Amazon.com Inc. and Overstock.com Inc., develop software and hire more people, founder and Chief Executive Officer Rob Frohwein said.

Kabbage, which takes its name from a slang expression for money, targets sellers with annual sales of $15,000 to $3 million who are overlooked or rejected by traditional lenders because of their credit scores or lack of collateral.

Stephens, the CEO and owner of Little Rock, Arkansas-based Stephens Inc., said he invested because retailers and merchants need more access to capital.

Kabbage “doesn’t have to dominate a big segment of the market to make the company really successful,” Stephens said in a telephone interview. “It’s very targeted and there’s tons of people in it and if they get just a meaningful share of the market, the company will do very well.”

Stephens was connected to Kabbage through co-founder and Chairman Marc Gorlin, whom he’s known for several years. Stephens also was an investor in a previous company Gorlin co- founded called VerticalOne.

Bonderman, the billionaire who runs Fort Worth, Texas-based TPG Capital, has known Gorlin for years through family connections and past business deals, Gorlin said. Kabbage approached him about a possible investment and he agreed, Gorlin said.

via Bonderman, Stephens Invest in EBay Merchant-Lender Kabbage – Bloomberg.