Investment

US Government Begins BitCoin Crackdown

Zero Hedge,

15 May, 2013

As we first noted here (regulation) and here (supervision), the US government has been gradually encroaching on the independence and freedom of the virtual currency. This week, as The Washington Post reports, the government escalated. 

The feds took action against Mt. Gox, the world’s leading Bitcoin exchange. Many people use Dwolla, a PayPal-like payment network, to send dollars to their Mt. Gox accounts. They then use those dollars to buy Bitcoins. On Tuesday, Dwolla announced that it had frozen Mt. Gox’s account at the request of federal investigators.

It’s the first federal action against the currency. CNet has confirmed that the asset seizure was initiated by Homeland Security Investigations (which among other things is responsible for enforcing the laws associated with money laundering and drug smuggling).

As this crackdown begins, many argue that "you can’t put the genie back into the bottle," as far as shutting down the 'network' of open source transactions; but as one Bitcoin enthusiast added (sadly), "I hate to say it, but the Bitcoin community needs to start lobbying, it needs to start educating policymakers, lobbyists and influencers about the pros of Bitcoin and the impossibility or the difficulty in getting rid of all the bad uses."

Considering the great antipathy the central planners have toward such legacy money as gold and silver, is it any surprise that they would move aggressively and rapidly to halt the emergence of yet another alternative to fiat, especially one which the ECB made it very clear will not be tolerated in an insolvent world. Because all is fair in preserving the FIATH...

Via The Washington Post:

...

 Sen. Chuck Schumer (D-N.Y.) described Bitcoin as an “online form of money laundering” and called for the authorities to shutter the Bitcoin-based drug market Silk Road. Yet until recently, the feds have taken a relatively hands-off posture.

 ... 

That hands-off stance may have started to change this week when the feds took action against Mt. Gox, the world’s leading Bitcoin exchange. Many people use Dwolla, a PayPal-like payment network, to send dollars to their Mt. Gox accounts. They then use those dollars to buy Bitcoins. On Tuesday, Dwolla announced that it had frozen Mt. Gox’s account at the request of federal investigators. It’s the first federal action against the currency.

CNet has confirmed that the asset seizure was initiated by Homeland Security Investigations, a division of Immigration and Customs Enforcement. Among other things, that agency has the power to enforce laws against money laundering and drug smuggling.

...

Jerry Brito, a scholar at the libertarian Mercatus Center at George Mason University, urges federal regulators to tread lightly.“Bitcoin has the potential to be a boon to the economy and a boon to merchants,” he argues.

 ...

Moreover, he says, “You can’t put the genie back into the bottle.” In his view, the federal government would have as much difficulty shutting down the Bitcoin network as major content companies have had shutting down peer-to-peer file sharing. A major crackdown would merely drive the network underground, where it would continue to be used for illicit transactions but would be off-limit to ordinary consumers.

...

“I hate to say it, but the Bitcoin community needs to start lobbying,” he says. “It needs to start educating policymakers, lobbyists and influencers about the pros of Bitcoin and the impossibility or the difficulty in getting rid of all the bad uses.”

What’s next for the silver price?

Money Week,

14 May, 2013

Looking back at the articles I've written about silver over the years, if there's one theme that keeps recurring, it's the word: 'frustrating'.

Silver can meander about and do nothing for years. Then, when your back's turned, it’ll suddenly spike to unheard-of levels, making its owners rich.

Then, just as suddenly, it'll plummet, leaving all those who hold the metal heading for the poor house.

Yet, for all its volatility, for all the dark rumours of shortages and manipulation, it trades in a remarkably symmetrical pattern.

For a few brief hours in the spring 2011, it cost $50 an ounce. Now it’s less than half that price, at $23.

So is it time to be playing the silver game once again?

Silver promises something for everyone

Silver's unique selling point is that it's both a monetary and an industrial metal.

If you get terribly excited by the progress human beings are making in the world of electronics, you might want to invest in silver. Its high conductivity means it finds all sorts of increasing usage in computers, mobile phones and screens.

Or perhaps you're excited by the possibilities in the worlds of nanotechnology, green technology, and even medicine. Well, silver is finding more and more use there too – the path from solar technology to water purification is lined with silver. Then there are the ball bearings, the batteries, the soldering and brazing – silver remains a key industrial metal.

Perhaps you think that soaring stock markets are telling us that the world's economic woes are now behind us. Greater prosperity leads to greater buying of jewellery, which means greater buying of silver.

Or perhaps you're more of the mind that systemic debasement of money is going to lead to some kind of currency crisis. In that case you want to be investing in tangible, monetary metals. Cue silver.

You might look at the fact that annual global silver production currently stands at around 24,000 tonnes, but demand stands some 33% higher, at 32,000 tonnes. (The shortfall is met by recycling, scrap sales, stockpiles and central bank sales).

Then you might look at the cumulative effect of this shortfall, as depicted below by Nick Laird (www.sharelynx.com), and once again you've got that itch to buy silver.

Global silver production

Cumulative production less cumulative demand = cumulative deficit

Or you might look at the fact that silver derivative trading can mean that paper representing as much as 100 times physical production can be traded on the futures exchanges in any given period. It’s not hard to conclude that some sort of short squeeze is inevitable, as it would be impossible to deliver all the silver that is actually sold.

You might even consider the fact that there is about 16 times as much silver in the earth's crust as there is gold. So arguably the silver price is should be 1/16th the gold price: that’s $90 an ounce on current gold prices.

There's something for everyone with silver. Quick. Buy, buy, buy.

LATEST WATERFALL SENDS GOLD & SILVER TO $1300 & $22 HANDLES!

Silver Doctors,

15 May, 2013

Once again after trading in a tight consolidation range throughout the Asian and London sessions, gold and silver have just been greeted with a vertical Demon Drop Waterfall smash, sending gold back to a $1300 handle, and silver to $22.41.

A re-test of the correction lows of $22.005 and $1320 appears imminent.

The cartel has gone back to work the very morning after Jim Sinclair’s chartist Bo Polny proclaimed that the turn date had passed and that the bottom was in for both gold and silver:

Today’s latest waterfall strongly suggests that the correction in the metals is not yet exhausted, and that particularly in silver (but likely also in gold) a re-test of the low of $22.005 is likely.