Have Bitcoin Will Travel - Part 8

Just in case you are too young to remember. The title I have used for this set of commentaries about Bitcoin are a play on an early 1957 Western TV show by the name of "Have Gun will Travel".

Back to Bitcoin:

So what really are the components of this complex Rubik’s cube that had to be developed and arranged to have a shot at accomplishing a very difficult objective. First, bitcoins are a form of crypto-currency where principals of cryptography are incorporated into the very design of the instrument but really nothing more complicated than professionally deployed private/public key security systems based on the SHA-256 standard and beyond - SHA-384 and SHA-512 as new even more unbreakable standards are being introduced.

Bitcoin is in fact the result of lots of work that has been contributed over decades by many talented cryptologists, geeks, hackers, scientists, nerds and represents a substantive triumph in computer science. Just as the development of the Internet into what we use today was the result of incredibly talented academics. Read if you want to refresh your baseline, because to understand Bitcoin you must grow past the belief that it is some funky currency. Read “ https://en.wikipedia.org/wiki/Internet_protocol_suite "

(BTW… even though I do not consider bitcoins as necessarily being only a currency, bitcoins do have some of the characteristics of currency and individuals may and do choose to use bitcoins as currency.) Bitcoins manifest themselves only in digital form, as a pair of private and public keys, existing entirely as binary zeros and ones. The only exception to this digital existence is that you can write that resultant sequence of characters (of your private key) on a piece of paper and save your bitcoins in what is called cold storage. Just as you can write just about any password you use on a piece of paper, you better remember where that paper is because if you lose it, you have forever lost your bitcoin. Note to self. The technical reality of bitcoins is that although miners will eventually extract nearly 21 million bitcoins over the years the depletion of bitcoins lost through carelessness potentially makes the total count substantially less than the theoretical maximum. Maybe getting a little ahead of ourselves here.

What is necessary to comprehend the issues, is to have a fundamental understanding of currencies, bonds and banking. All of us have at best a crude and naive understanding on how these things work. It’s almost as if we don’t want to know because if we knew we would be very upset to see how the sausage is made. We accept the process as unquestioned dogma and believe religiously in the almighty dollar and even nostalgically lament the demise of the gold standard, as if any of us actually knew anything about a gold standard, when in fact throughout history gold was used only by the very rich to abuse money supply and which, for the most part, is the very cause of manipulated depressions as it is easy to artificially constrict the money supply when you use a system based on gold. And unless you historically were in the very elite of the rich and powerful you never could own enough to benefit nor understand how it influenced and made your life miserable. You/we were being played as the pawns (Paladin fits) that you/we are.

For the most part the gold standard allowed the writing of notes that allegedly allowed you to retrieve x ounces of gold but in fact goldsmiths, bankers and governments wrote many times the number of notes and certificates then there were ounces of gold. So notes, and even dollars when tied to the gold standard were nothing but fake promises against nonexistent supplies of gold. We are living and are burdened by the antiquity of technology that describes our monetary system. FIAT currency has its roots in an era that barely had conceptualized electricity let alone computing and certainly didn't anticipate the technology we have today nor was it designed or adapted to the digital age. The science behind Bitcoin is truly remarkable and is the foundation on which global commerce can be safely and fairly deployed. Fundamentally the business of banking is broken and needs a massive restart. Recommended read or better yet view the DVD
,
Jekyll Island: The Truth Behind the Federal Reserve (2013)
the following you might want to read:

The Creature from Jekyll Island by G Edward Griffin, Peter Klimon and Carleen Taylor
Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free by Ellen Brown (Jun 21, 2011)

The Public Bank Solution: From Austerity to Prosperity by Ellen Brown and Hazel Henderson (Nov 7, 2013)

The reason it is important to comprehend and understand the history of currency is that we are shackled to our dogmas. We are born with a belief of certain things that we do not question. We accept that the religion of our family is infallible, the country we live in and the currency we use are nearly perfect or why would everyone around us believe that if it weren’t true. Our social systems create the box from within which we do not venture, occasionally we debate the concepts within the box but not the box itself or we risk expulsion from the social network we depend on. Only the truly adventurous peer out of the box and correctly question the whole container.

We wait for others to pioneer and when a critical mass of our social group accept something new like the Internet we pounce on the new truth but too late to profit from the early adoption. I use the dollar as a proxy for every currency as it is debatably the hardest to find fault with. It still is vintage 1850 and long in the tooth but we do not see it unless we delve into the history, flaws and sources from which it came. Then and only then can we understand the need for a digital currency as a rational replacement of a flawed system or at least a system that can be systematically and substantially improved.

We, in the USA, have had three implementations of a central bank that we call the Federal Reserve Bank -- it is neither Federal, nor has reserves nor is it a bank. It purposely was named such and intentionally sounds like a government or a quasi government institution but it really is privately owned even if indirectly by the banking folks with origins in making sure the rich and powerful stayed rich and powerful by manipulating the Business Cycles of Feast and Famine (even worse sometimes thriving on conflict of national interests in which nations borrow money to defend or assail a neighboring nation). The authors of the Federal Reserve Bank went to great lengths to avoid the perception of it being a central bank so much so that they even regionalized the FRB into 12 districts. I guess that made it look less central. All so they could receive a monstrous sized windfall (billions) and we wouldn’t notice.

The purported purpose of a central bank is to manage the money supply with a sacred trust to do that responsibly for the citizens of there country. In its third iteration here in the USA, it is closer to this ideal. But frankly it’s purpose to manage the money supply to prevent recessions seems to be flawed as we have seen a multitude of depressions including the depression of 1929 but as recently as 2008 and many times along the way. The timeline for the various US central banks in our history follows in Part 9 with commentary. Please understand that the most ardent critics of central banks seem to be overzealous. The lack of transparency by central banks and historical roles all contribute to a fertile ground for all kinds of loonies to use the flaws of central banks to fuel not only legitimate criticism but some pretty ugly conspiracy theories that go way beyond the facts.

Today’s FRB tries to manage the money supply independent from the whims of the government. They do take bonds and charge all of us taxpayers an interest for the privilege of lending/printing money to the government and member banks. The FRB actually gets their physical printed dollars (trivial part of the money supply they manage as most dollars are only electronic entries on checking accounts inside a computer) from the US treasury but they get them at the cost it takes to print them. They pay 6% of their annual profit (estimated to be around 100 billion) to their shareholders and return the rest to the treasury of the government. Because there is neither transparency nor accountability the facts are unverifiable by the taxpayer and not even congress is privy to an audit and this leads to plenty of conspiracy theories about the FRB and the cartels of wealthy folks that own central banks around the world including the World Bank and IMF.

Also as background the Revolutionary war was definitely not waged over a tax on tea. It was waged against the British because they disallowed the colonies right to print currency and required all payments in British currency or precious metals that the colonies didn’t have.

They squeezed the money supply and like always the pain was intense and the minions revolted. The minions of today's manipulated money supply are revolting again.