On the subject of BitCoin.....

As BitCoin Touches $400 The Senate Starts Seeking Answers... As Does The Fed

Submitted by Tyler Durden on 11/09/2013 12:38 -0500

Moments ago BitCoin hit $395, and will likely cross $400 in the immediate future (the chart looks a little less scary in log scale).

So as more and more pile into the electronic currency, some due to ideological reasons, some simply to chase momentum, some out of disappointment with the manipulated gold price looking to park their savings in an alternative, non-fiat based currency, which a year ago traded 40 times lower, the attention of the government is finally starting to shift to what has been the best performing asset class in the past year, outperforming even the infamous Caracas stock market.

Which means one thing: Congressional hearings.

From Bloomberg:

The U.S. Senate Committee on Homeland Security and Governmental Affairs will meet on Nov. 18 “to explore potential promises and risks related to virtual currency for the federal government and society at large,” it said in a statement today.

The hearing, titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” will invite witnesses to testify about the challenges facing law enforcement and regulatory agencies, and include views from “non-governmental entities who can discuss the promises of virtual currency for the American and global economies.”

“Bitcoin is obviously getting a lot of attention from the federal
government on the regulatory side,” Nicholas Colas, an analyst at ConvergEx Group, said in an interview. “Given the involvement of the currency in illegal activities, that is entirely warranted. I expect these hearings to be largely informational, which is good for Bitcoin.”

“The architecture of the system is elegant from a computer-science perspective, but hard for a non-tech person to understand,” Colas said. “Getting industry professionals to close this gap will be very helpful.”

Or not. Because the only thing the government does when its interest is piqued by something, anything, especially things that have to be looked in log-scale, is to promptly regulate it and then tax it, not necessarily in that order. Just how it will achieve this with Bitcoin remains unclear but one thing is certain: it will try.

Especially, now that even the Fed is looking at BitCoin when a few days ago the Chicago Fed issued 'Bitcoin: A primer" in which the Fed states quite simply:

So far, the uses of bitcoin as a medium of exchange appear limited, particularly if one excludes illegal activities. It has been used as a means to transfer funds outside of traditional and regulated channels and, presumably, as a speculative investment opportunity. People bet on bitcoin because it may develop into a full-fledged currency. Some of bitcoin’s features make it less convenient than existing currencies and payment systems, particularly for those who have no strong desire to avoid them in the first place. Nor does it truly embody what Hayek and others in the “Austrian School of Economics” proposed.Should bitcoin become widely accepted, it is unlikely that it will remain free of government intervention, if only because the governance of the bitcoin code and network is opaque and vulnerable.

Finally, while the Fed may be late to the game, the ECB has already made its feelings on BitCoin well-known long ago: recall from over a year ago: "The ECB Explains What A Ponzi Scheme Is; Awkward Silence Follows" in which the European central banks didn't mince its words: BitCoin is nothing but a ponzi scheme to the central bank tasked with preserving the viability of an entire insolvent continent, and a a currency which unlike BitCoin would never survive absent regulatory intervention.

So while the electronic currency is soaring exponentially as it goes through its appreciation golden age, will the one thing that can finally end the dream of BitCoin holders arrive soon: when the government, and existing monetary authorities, start taking it seriously.

Full Chicago Fed paper on BitCoin

http://america.aljazeera.com/articles/2013/11/8/mass-regiona-s-localcurrencyisgettinginternationalattention.html

A Massachusetts local currency gets international attention

by Jonathan Betz

@jebetz

November 8, 2013 5:00AM ET

Dutch nonprofit provides $500,000 grant to start loan program for increasingly popular BerkShares

Topics:: Economy; Business & Finance; Massachusetts

GREAT BARRINGTON, Mass. — Whenever Alice Maggio opens her wallet, she never hesitates about how to pay. It’s always cash, and it’s rarely dollars.

“They’re beautiful,” she coos as she shows off the colored bills, which are unlike any other. “You can take pride in spending them.”

Maggio frowns on dollars, preferring something else, called a BerkShares. The currency is available only in the Berkshires region of western Massachusetts. The area, which long ago embraced the organic and shop-local movements, decided in 2006 to take it a step further by creating its own currency. Town leaders hoped it would encourage people to shop only in stores in Berkshire County.

“When you have BerkShares in your pocket,” Maggio said, “you might not go to McDonald’s. You might choose to go to a locally owned restaurant.”

People can now walk into five banks across the county and change dollars into BerkShares. More than 400 businesses accept the alternative currency. Now 140,000 bills are in circulation, in denominations of 1, 5, 10, 20 and 50 that bear images of local heroes and landscapes.

The idea born in the rolling Berkshire hills is getting international attention: A Dutch nonprofit, the Doen Foundation, this week extended a half-million-dollar grant to expand the program so it can start offering loans.

“Partly as a result of the financial crisis, people no longer believe in banks, and banks are no longer willing to support many of the small, medium-size enterprises,” Doen’s director, Nina Tellegen, said from its headquarters in Amsterdam. “So by introducing this loan system within the BerkShares currency, that’s a very important next step.”

Her group focuses on local currencies around the world as a way to perhaps hedge against events like the euro crisis. The BerkShares program, she said, is one of the largest and most successful her group has worked with. It’s among the front-runners of local currencies, she said.

“They’ve been very successful in involving many people in the community,” Tellegen said. “With the BerkShare initiative … we hope to build a more sustainable and more social world.”

A local sensation

Maggio, 25, has been leading the effort to persuade townspeople and businesses to ditch the dollar.

“I think we’re really on our way to being embraced,” she said. “It’s not like all hippie-dippie businesses taking BerkShares. There are excavators and dentists and lawyers and accountants.”

Phyllis Webb prefers that her customers use BerkShares when they buy ukuleles at her shop. Her company builds and ships thousands of the instruments across the world.

“I go to the store, and I actually enjoy pulling out my money — my BerkShares — a little bit earlier, while I’m waiting in line,” she said. “I’m showing people I’m making more of a commitment. I’m going the extra mile in saying not only do I support local, but I want the money to stay here in the Berkshires.”

That also poses a problem, since BerkShares don’t travel. Webb is limited in what she can spend them on. For instance, she can’t use BerkShares to buy some parts she needs to make her ukuleles.

“There is a certain threshold as a business where if I can't spend them reasonably, I have to sort of find that balance, but we’re not there yet,” she said. “Hopefully, we can grow BerkShares so we can circulate them.”

To encourage people to adopt the currency, a 5 percent discount is built into the exchange. So $19 buys 20 BerkShares. At stores, BerkShares have the same value as dollars. But if you return to the bank to convert BerkShares into dollars, you lose the 5 percent discount. Businesses are the ones largely absorbing that blow. (When BerkShares launched, the exchange rate had a 10 percent cut, but the community softened it two years later.)

“I can’t pay the electric company with BerkShares,” said Matthew Rubiner, who owns a grocery and coffee shop. “I can’t pay most of my vendors with BerkShares. Right now, it’s undeniable the merchants kind of take that 5 percent hit, but we’re not unhappy to do it.”

He doesn’t mind losing money on BerkShares since he says the program has brought publicity — and customers — to his store.

“It does undeniably add to business,” Rubiner said. “It does let everybody know we’re trying to add value to this community.”

http://www.worldwatch.org/node/5978

Local Currencies Grow During Economic Recession

Photo courtesy Jason Houston

Five local banks have printed more than 2 million Berkshare notes since 2006. The 10 Berkshare note features Robyn Van En, a local pioneer of community supported agriculture.The gentle mountain slopes of New England isolate the Berkshires, creating a peaceful remoteness in this southern Massachusetts region.

As a result, independent thinkers have thrived here. Herman Melville penned Moby Dick; Norman Rockwell etched paintings of American life; W. E. B. Dubois authored his first calls for emancipation.

Today, the Berkshires is giving rise to a new wave of free thinking. The region's alternative to the U.S. dollar,Berkshares, is among the most successful of the country's local currencies.

Since the currency's launch two years ago, five local banks have printed more than 2 million paper notes. About 185,000 are currently in circulation, according to Susan Witt, a Berkshare co-founder.

The Berkshires is not alone. More communities are creating their own "complementary" currencies during the current economic crisis in an effort to keep wealth in their region.

Witt is now fielding calls from around the world, she said, especially from the United States and United Kingdom.

"In the last four years, there has been a renewed interest in local economy, local production," said Witt, executive director of the E. F. Schumacher Society, a Massachusetts-based think tank focused on local production. "It just skyrocketed with the collapse of the global economy."

Complementary forms of currency are nothing new, and they frequently appear when mainstream financial systems are in distress. Examples include Greenbacks during the American Civil War, and the British Bradbury "Treasury Notes" and German Kriegsgeld during the First World War.

Alternative currencies, in theory, encourage consumers to make purchases within their communities rather than elsewhere in the country or abroad. "Buying local" circulates wealth in the region, reduces unnecessary imports, and helps avoid higher unemployment levels, supporters say.

At least 4,000 complementary currencies are now estimated to be in circulation worldwide, compared with fewer than 100 in 1990, according to Bernard Lietaer, a co-founder of the Euro and now a local currency proponent.

The currencies take on various forms. Many function similar to the traditional currency but are distributed at a discounted rate to encourage participation, such as the Berkshares or the cimarrón in Venezuela. Others are designed so that each paper note reflects the per hour labor required to create the product, such as Ithaca Hours in New York or Community Oriented Mutual Economy in Hong Kong.

In Switzerland, the WIR (the German word for "we") functions as a mutual credit system. When a buyer makes a purchase from a WIR participant, the seller receives credit in a WIR account. The credit can then be spent by purchasing something from another participant.

Economists have monitored the WIR since it began in 1934. "Whenever the economy goes up, the turnover in WIR decreases.... When business people cannot sell goods in Swiss Francs, then they go onto the WIR," said Margrit Kennedy, a German-based consultant on complementary currencies. "At the present moment, people are much more open to these types of ideas."

Pilot projects similar to the WIR are now under way in Belgium, France, and Germany, Kennedy said.

In order for alternative currencies to succeed, organizations, institutes, or individuals need to be committed to the currencies' additional demands. Not only must the currency be counted separately, but businesses must be convinced to accept the currency and know where they can, in turn, spend it.

In Canada, the Toronto Dollar circulated about $90,000 worth of paper currency last year, less than in years past. Organizers are now attempting to shift to an electronic version to simplify its management. "The labor involved in tracking notes and doing all the accounting involved is too onerous for a volunteer community organization," said David Walsh, the Dollar's co-founder.

Robert Costanza, an ecological economics professor at the University of Vermont, said local currencies support "buy local" programs, but he has not found any currency that has had a significant impact on a region's overall economy. "There are several examples of currencies that survive. They keep going," Costanza said. "But the question is, at what scale?"

Costanza helped launch Burlington Bread, an alternative currency in Burlington, Vermont, ten years ago. His goal was for the bread "slices" to eventually represent at least 20 percent of the local economy. But the currency fizzled out by 2006 when the city of Burlington and other municipal institutions denied requests to help, saying the currency was too risky.

"It's a critical mass problem," Costanza said. "Until you get to critical mass, it's a boutique thing.... It functions more like a gift certificate."

Witt said the currencies offer more than financial support. In the Berkshires, residents had become so accustomed to online purchases that they were neglecting neighborhood stores.

"You don't just go online and use the Berkshare. You go down to Main Street stores, have a conversation with a shopkeeper, hear what it's like to do business in the community," Witt said. "It's a conversation. It's the building of citizenship. We're out of that habit. But when we re-establish the habits, we like it."

http://en.wikipedia.org/wiki/List_of_community_currencies_in_the_United_States

Models[edit]

Currencies[edit]

Colorado[edit]

Butte Bucks Crested Butte, Colorado
Carbondale Spuds Carbondale, Colorado (Inactive)
Community Cash Durango, Colorado (Inactive)
NOCO Hours Fort Collins, Greeley, and Loveland, Colorado
North Fork Helping Hands Paonia, Colorado (Inactive)
Mountain Hours Breckenridge, Colorado
Mile High Hours Denver, Colorado (Inactive)

Connecticut[edit]

Middletown Cash Middletown, CT, Wesleyan University (Inactive)
Thread City Bread Willimantic, Connecticut (Inactive)

District of Columbia[edit]

Potomacs Washington, DC

Florida[edit]

Tampanio Tampa, Florida (a proposed currency based on the BerkShares Model for Tampa, Florida and surrounding communities) (Inactive)
Timucua Dollar Jacksonville, Florida