Fed Dictator Bernanke Needs to Be Toppled

By Paul B. Farrell
MarketWatch
Tuesday, February 15, 2011

http://www.marketwatch.com/story/fed-dictator-bernanke-needs-to-be-toppled-2011-02-15

Fed boss Ben Bernanke is the most dangerous human on earth, far more dangerous than Hosni Mubarak, Egypt’s 30-year dictator, ever was. Bernanke rules a monetary dictatorship that will trigger the coming third meltdown of the 21st century.

But this reign of economic terror will end.

Just as Mubarak was blind to the economic needs of the masses and democratic reforms, Bernanke is blind to the easy-money legacy that’s set the stage for revolution, turning the rich into super rich while the middle class stagnates and peanuts trickle down to the poor.

Warning, Egypt also had a huge wealth gap before its revolution. Bernanke is the final egomaniac in America’s bubbling 30-year wealth gap, where the top 1% went from owning 9% of America’s wealth to owning 23% during this dictatorship.

Bernanke’s ruling ideology is the culmination of a 30-year economic war that has forged together Reaganomics for the super rich, former Fed chairman Alan Greenspan’s toxic allegiance to Wall Street, the extreme Ayn Rand’s capitalist dogma, culminating in the toxic bailouts of Treasury Secretaries Hank Paulson and Tim Geithner, two Wall Street Trojan Horses corrupting government from within.

Since 1981 this monetary dictatorship has caused enormous collateral damage, systematically sabotaging democracy, capitalism and the American dream while fueling the rise of our most dangerous new enemy, China. See “Secret China war plan: trillions in U.S. debt.”

When Obama reappointed Bernanke a couple years ago, “Black Swan’s” Nicholas Taleb was “stunned.” Bernanke “doesn’t even know that he doesn’t understand how things work,” that Bernanke’s economic methods are so inadequate they make “homeopath and alternative healers look empirical and scientific.”

We called Bernanke, the “Captain of the Titanic,” warning that he was setting up the third meltdown of the 21st century, predicted by “Irrational Exuberance’s” Robert Shiller, a coming crash worse than the 2000 dot-com crash and the subprime credit meltdown of 2008 combined. See “Capt. Bernanke sinks the U.S.S. Titanic.”

Inside the Fed: Cassandras, Chicken Littles, governors crying wolf

Unfortunately, as with Egypt’s dictator, the 30-year dictatorship now headed by Bernanke must end soon: And this class war will not be pretty. But it is no black swan; no one can claim they didn’t see a new crash coming.

For several years before the 2008 meltdown we reported on money managers, economists and financial gurus warning of a coming meltdown. They included two Fed governors who warned Greenspan in the early Bush years. And yet, as late as summer 2008 Bernanke, Paulson and Greenspan were systematically dismissing mounting evidence of a mega crash dead ahead.

Read the rest of the article.

For further reading:
"1836: The Death Of Our 2nd Central Bank", C.J. Maloney, January 31, 2011
"Life without the Fed: The Suffolk System", C.J. Maloney, Mises Daily, January 5, 2011

OMC Hypergrid Currency Gained Popularity in 2010

By Anastasia Trombly
Hypergrid Business
Tuesday, February 15, 2011

http://www.hypergridbusiness.com/2011/02/omc-gained-popularity-in-2010/

In the past year, the OMC virtual currency has gained both popularity and usefulness, with both the total currency in circulation and the number of grids it’s available for use on growing.

The OMC, or Open Metaverse Currency, is a virtual currency from Austria-based VirWoX that can be used to buy and sell virtual goods on OpenSim grids. The OMC can be traded in for real money like USD, GBP, CHF and EUR, and can also be traded in for the Second Life virtual currency, Linden dollars.

Because OMC is hypergrid-enabled, this means that instead of each grid having its own currency, just one universal currency can be used on multi-grid shopping trips — and merchants who accept OMC can sell to visitors from many different grids.

The OMC isn’t transferred from grid to grid, instead, it’s kept in an online VirWoX account, requiring each transaction made inside a virtual world to be verified on their website. The status bar on the top of the viewers will show your current OMC currency balance if you are on an OMC enabled grid.

Virtual currency is used when buying virtual objects or obtaining services in a virtual world, and is popular for roleplaying games that take place in OpenSim. Virtual currency is also used by casinos in virtual worlds, since use of virtual currency instead of real currency can help circumvent laws against gambling.

Some grids have their own in-world currency, like InWorldz or 3rd Rock, but these are closed grids and the money can not be used on any other grids.

One of the negative aspects of the OMC is that the security of the virtual money is dependent on the third party system. Grids can’t guarantee the safety as well as they could with their own currency system. Another danger is the merchants themselves. Because open grids, like OSGrid, allow so many people to connect regions, this means that there is a greater chance of illegitimate vendors.

Total OMC in circulation

The amount of OMC in circulation dramatically rose over the course of 2010, going from 100,000 OMC to nearly half a million. The exchange rate for OMC is 270 OMC to US$1, so this amounts to just over $1,600 of virtual currency in circulation.

This is a tiny amount, not only because the currency is typically used for micro-transactions — often a few cents or less — but also because merchants and shoppers are still wary of doing business on the hypergrid, and many OpenSim users are not even aware that the possibility exists.

Number of OMC-enabled grids in 2010

The number of grids that OMC is available started with four and peaked at 23, with 19 grids enabled at the end of 2010. Today, there are 21 grids that accept the OMC currency, according to data from VirWoX.

Number of Registered Users in 2010

The number of users registered to use the OMC went from less than 100 to over 500 by the end of 2010. As of mid-February, VirWoX reports more than 600 registered users of the OMC currency.

OMC transactions in US dollars

The amount of OMC being used in transactions has dropped at the end of the year, after a spike in April.

Because of the many updates OpenSim had in 2010, grids had to upgrade their software on a regular basis — however, not all grids updated at the same pace.

Since it’s not possible to teleport between grids running different versions of OpenSim, this caused transportation problems on the hypergrid, limiting shopping trips.

OMC is particularly strong in Europe, with the German grids — which were among the first to update to newest version of OpenSim and the latest hypergrid teleportation protocol. As a result, their merchants were cut off from OpenSim’s biggest user population, located on the non-profit OSGrid, which updated later. Finally, the education and business-focused ReactionGrid and affiliated private grids still haven’t upgraded.

There are two other multi-grid currencies, the G$ and the V$. However, even thought the V$ is convertible to Linden Dollars, it is not backed by a real company, but an individual, and is widely considered not to be secure enough for serious use.

The G$ is backed by a real company, CyberCoinBank, but is not convertible unless a third party wishes to purchase it.

Of all the virtual currency providers operating in OpenSim, only VirWoX publishes statistics, and CyberCoinBank did not respond to repeated requests for recent data.

As of the end of January, the number of OpenSim users was still low. Even though there were around 160,000 users, this is still only around a tenth of the users of Second Life. However, OpenSim is being promoted. John Lester, a former virtual worlds evangelist at Linden Labs is now promoting the hypergrid. With popularity of OpenSim increasing, it is likely that in 2011 the use of OMC will rise, given past and current trends.

Anastasia Trombly is a freelance technology and medical writer based in Massachusetts. Reprinted with permission.

For further reading:
"Hypergrid currency exchange adds Avination’s C$", Maria Korolov, February 17, 2011
"Does your grid need its own currency?", Maria Korolov, August 31, 2010

EconTalk Interview with George Selgin

On December 6, 2010, George Selgin of the University of Georgia spoke with EconTalk host Russ Roberts about whether the creation of the Federal Reserve in 1913 has been a boon or a bust for the U.S. economy. The interview can be downloaded here.

From EconTalk:

Drawing on a recent paper with William Lastrapes and Lawrence White recently released by the Cato Institute, "Has the Fed Been a Failure?", Selgin argues that the Fed has done poorly at two missions often deemed to justify a Central Bank: lender of last resort and smoother of the business cycle. Selgin makes the case that avoiding bank runs and bank panics does not require a central bank and that contrary to received wisdom, it is hard to argue that the Fed has smoothed the business cycle. Additional topics discussed include whether the Fed has the information to do its jobs well, the role of the Fed in moral hazard, and the potential for the gold standard to outperform the Fed.

For further viewing:
"George Selgin on Free Banking", 8-Part Video Presentation at Loyola University, New Orleans, LA, April 12, 2010

Freedomain Radio Interview with Dr. George Selgin

Professor George Selgin of the University of Georgia explodes the myths of economic stability through central banking, the history of money, and war and death in the 20th century.



For further viewing:
"The Myth of the Free Market: Fractional Banking and Private Currencies", Stefan Molyneux, January 16, 2010

Sealand, HavenCo, and the Rule of Law

Data havens and strong cryptography have long been the bedrock of anonymous and untraceable digital currency transactions and their associated services. James Grimmelmann has published an excellent account of the entire Sealand and HavenCo saga entitled "Sealand, HavenCo, and the Rule of Law".

You can also read James' recent blog entries:
"Sealand and HavenCo Part I: The History of Sealand" (February 14, 2011);
"Sealand and HavenCo Part II: The Rise and Fall of HavenCo" (February 15, 2011).

For further viewing:
"Sealand The Mystery Solved - Part One"
"Sealand The Mystery Solved - Part Two"
"Sealand The Mystery Solved - Part Three"
"Sealand The Mystery Solved - Part Four"
"Sealand"
"Sealand on Bravo Channel 2001"
"Sealand on the UK Evening News Sept 2002"
"Life in Sealand after the Fire"
"Sealand for Sale, an Interview with Prince Michael"

The Validity of Bimetallism

By Sandeep Jaitly
Gold Basis Service
Sunday, January 9, 2011

http://bullionbasis.com/web_documents/the_validity_of_bimetallism.pdf

Bimetallism is often thought of as an unworkable system of monetary arrangement. In the last form that bimetallism existed prior to the ‘de-monetisation’ of silver across the globe in the 19th century, this is certainly true. But in its original form, with floating ratios, it is a perfectly valid monetary system.

The problem, as ever, comes with the attempt to fix prices. Bimetallism – on the strict proviso that the ratio of gold to silver is not fixed – is a perfectly viable system. Since time immemorial, money was defined in terms of silver, not gold. The Pound Sterling was originally defined as 5,400 Troy grains of silver; 240 Pfennigs originally equalled one Troy pound of silver and the Indian Rupee was equal to 175 Troy grains to name but a few. Gold coinage, in so far that it existed, was very much limited in circulation. An often overlooked fact is that gold coinage was never originally defined in terms of silver. Trying to enforce a fixed relationship between gold and silver is like trying to enforce a fixed relationship between the exchange of chalk and cheese.

The United Kingdom’s Pound Sterling will be used as an example to show the blunderfilled journey from a silver based monetary unit to a gold one. Dating back to Saxon times, the Pound Sterling was defined as 5,400 Troy grains of silver divided into 240 pennies or 20 shillings. Henry VIII was the first gross monetary debaser in British history – mixing copper with silver in a ratio of 2:1 thus causing one Troy pound of silver to produce 60 shillings instead of 20. He earned the sobriquet ‘old copper nose’ when his debased coins, after minimal use, produced a coppery shine on the king’s nose.

There had been occasional dalliances with gold coinage in the early medieval period, but each attempt involved fixing the gold/silver ratio such that the gold coins were undervalued leading to them being melted for silver. The first serious attempt at a ‘floating’ gold coin was the guinea issued in 1663. 44½ guineas were defined to equal one Troy pound of gold. It was generally accepted – although fluctuations occurred – at 21 shillings. In 1697, the first blunder happened. A proclamation was made – for reason unknown – that the Exchequer accept guineas at 22 shillings (fixed.) This in effect overvalued gold compared to the rest of Europe: the gold/silver ratio in England had now advanced to 16.01, whereas in the rest of Europe is barely rose above 15. It had the effect of draining silver coin from England and replacing it with European gold: a ‘riskfree’ arbitrage could be made with comparative ease. It must be remembered that the mint was open to both gold and silver in England then. Sir Isaac Newton, master of the royal mint, was consulted about the problem of the vanishing silver specie.

Newton, as one might expect, saw the nature of the problem easily and recommended that the value of the guinea be brought down to be more in line with European rates of gold/silver exchange. The recommendation was taken up and the guinea brought down to 21 shillings by royal proclamation – but this was insufficient according to Newton’s prescription. Even though the implied gold/silver ratio had been brought down from 16.01 to 15.28, it still remained above levels prevailing in continental Europe. In 1715, the Netherland’s West Friesland had an implied gold/silver ratio of 15, as did France. Silver specie continued to flow out of England. Newton, as the records indicate, did not sound out the idea of a floating market rate between the guinea and pound Sterling. As a general frame of thought, ‘change’ is not something the British are generally keen on.

The state of the kingdom’s silver coin had become so dwindled and worn that it was necessary to declare in 1774 that silver should be legal tender for sums over £25 by weight and not by tale (i.e. number of coins.) Silver – completely by blunder – had been replaced by gold, whilst silver remained the legal basis for Pound Sterling. The two states were incongruous. The official closing of the mint to silver in the United Kingdom [as it was by then] was achieved in 1816, when gold became the legal basis for Pound Sterling. This was merely a formality as the gold standard had been implicit for decades as silver left the country.

The road to hell...

It seems like a series of innocuous events led to the adoption of a gold standard in the United Kingdom. With malice not a forethought, the country ended up on a gold standard. All this due to something as simple as fixing a ratio. Other nations followed suit. The United Kingdom, by 1816, was a power with no equal and the rest of the world could not watch idly. The United Kingdom was the first country of size to ‘de-monetize’ silver. By the end of the 19th century – virtually all of Europe had switched to gold as the legal basis for currency (implicit or not) and silver – by the whim of governments – had become a mere token issue.

This transition had horrific consequences across the world – and it was not as pleasant a sojourn as the British experienced. Silver remained the basis for the currencies of India, China and many more. Those that were last to convert their standard from silver to gold suffered the most. In a very short space of time, these countries found that imports [from gold based countries] were getting far more costly, and exports were being paid for in voluminous amounts of silver. In some cases, this caused a rapid escalation in the general price level. This occurred in China prior to the communist revolution. It had the effect of wiping out the agricultural classes and causing mass destitution paving the way for Mao to take command with his ignorant ideologies. India, under the imperial yoke of Great Britain, did not adopt a gold standard until 1893 – after the majority of the “civilized” world. A similar fate awaited them as China. Attempting to fix a gold coin’s price in silver terms, a seemingly innocent desire, was the progenitor of communism.

The correct way of practicing bimetallism

Silver was the legal basis for money across the entire globe and that is the way it should have remained. The ancient currencies (e.g. Rupee and Pound) were defined in terms of silver alone. That was perfectly sufficient. The introduction of gold coin should have been under a different nomenclature so as to imply no fixed relationship between gold and silver. This was initially done – the gold guinea not being defined initially in terms of pounds Sterling.

The two rates of exchange should be left to the market. With the strict proviso that the mints across all countries are open to both gold and silver in any size tender, any geographical differences in the (market traded) gold/silver ratio will tend to be arbitraged away. The market process would naturally achieve what Newton initially wanted: minimal difference between different countries’ gold/silver ratio rates.

A huge discovery of silver reserves in the United States – as occurred in the 19th century – would have the effect of elevating the gold/silver exchange ratio locally. Perversely, the nominal amount of gold within US borders is likely to increase with this glut of silver. A sharp move higher in the US gold/silver ratio would induce surrounding countries to send gold to the United States in exchange for the cheaper silver to be exported. The effect would be to normalise the gold/silver ratio in the United States in relation to the ratio in surrounding countries.

The problem was not with bimetallism but with the mechanics of its establishment. Bimetallism is paradise so long as exchanges between the metal are free, and mints are open to unlimited tender in both metals. It is up to the people to decide which metal they prefer and there should be no hindrance from government in this choice. From a legal perspective, there was nothing lacking in having silver as the basis for money. What was lacking was the prevailing mentality that gold could and should somehow be fixed in relationship to silver. No other pairs of distinct entities have this kind of relationship forced on them. Gold and silver are no different.

Reprinted with permission.

Sources:
Banking and Currency, Ernest Sikes, 1905.
The Early history of Gold in India, Rajni Nanda, 1992.

Facebook: Pay Our Way or Get Out

By Chadwick Matlin
Fortune
Friday, January 28, 2011

http://tech.fortune.cnn.com/2011/01/28/facebook-pay-our-way-or-get-out/

As Facebook starts to host all sorts of commerce -- and is now mandating the use of its currency -- perhaps it's time to stop thinking of it as a company and start thinking of it as a country.

"The strength of a nation's currency is based on the strength of a nation's economy." Richard Nixon, circa 1971, announcing that foreign governments could no longer convert U.S. dollars into gold.

"If you're a very large company, and supporting you is going to cost us tens of millions of dollars, then we want to at least have an understanding of how you're going to use what we're doing, and that you're not going to just import the data but also contribute back to the ecosystem and make peoples' Facebook experience better." —Mark Zuckerberg, circa 2010, explaining its agreements with social game companies that bring in 30% revenue cuts to Facebook.

Earlier this week, Facebook announced that by July 1 developers that have apps on the site must make their users pay for virtual goods using Facebook's official currency, Facebook Credits. Along with Credits come fees: 30% of every credit spent goes to Facebook.

Smaller developers, of course, aren't pleased. They would rather avoid paying Facebook altogether. Facebook, meanwhile, would rather avoid being a site that confuses its users with dozens of currencies.

At first glance, the move suggests Facebook has become a monetary autocracy, forcing the companies critical to its success to use its currency, and to pay a fee for doing so. But on second thought, isn't that more or less how taxes work? As Facebook grows and starts to host all sorts of commerce, perhaps it's time to stop thinking of the social network as a company. Maybe it's best to think of it as a country.

Imagine, for a moment, that you're the central banker of a country with nearly 600 million residents. Your economy is growing quickly, and the bigger it gets, the more foreign investors are knocking at your door, trying to hawk their wares and build within your borders. Nobody knows how much your economy is actually worth -- some place the GDP at $50 billion, making it the 73^rd largest economy in the world, though everyone agrees that your country will be a global force for years to come.

But there's one sector of your economy that won't fall in line. By the end of the year, it'll be worth over a billion dollars and it has proved to be sustainable even during an economic downturn. But a lot of the companies that make up the industry don't want to use the national currency. They'd rather use their own currencies and avoid a hefty 30% tax on all transactions.

But, as a wise central banker, you know that for a country to grow its economy, it needs a singular currency so the proletariat doesn't get confused. You've been able to convince the largest companies to use the national currency, but rogue stragglers remain. What do you do?

Tell them they can either use the currency or get the hell out.

Read the rest of the article.