Tag: money

bookmark_borderInvestments / Savings / Asset Allocation Update

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Investment Recommendation: I Bonds and T-Bills

One of the best investments is Treasury Direct I Bonds. I Bonds’ interest rates are determined by the rate of inflation.

I Bonds can be purchased directly from the Treasury Department without a middle man, brokerage, or bank. There is no risk of losing your principle investment. They are redeemable after 12 months with three months interest penalty. No penalty after 5 years. The maturity is 30 years. Tax reporting of interest can be deferred until redemption or final maturity. If you use the money for qualified higher education expenses, you may not have to pay tax on the earnings.

The bulk of 2023 new investments was in 4-week Treasury Bills. In 2024, the recommendation for younger investors shifted to a 10% holding in 2-year Treasury Notes. Those in or close to retirement age are better suited to remain fully invested in 4-week Treasury Bills.

Savings / Asset Allocation (< 50 years old)
66% Real Estate *
20% Stocks
10% Treasury Bills
2% Treasury I Bonds
1% Precious Metals / Crypto

Savings / Asset Allocation (> 50 years old)
66% Real Estate *
20% Treasury Bills
10% Stocks
2% Treasury I Bonds
1% Precious Metals / Crypto

* Why All Real Estate is at Risk

 

bookmark_borderEconomic Update: Inflation, Interest Rates, AI, Consumer Spending, Climate Change, and Fiscal Policy

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by Daniel Brouse
February 3, 2023

This article is about the economic conditions up to 2023 and a forecast for the foreseeable future. It helps to understand fiscal and monetary polices prior to reading the following.

In 2022 and 2023, the Federal Reserve raised their interest rates charged to other banks 4.75 percent in an effort to fight inflation. In the later part of 2022, inflation appeared to level-off and start to decline; however, it would be a mistake to think the war is won.

In essence, the short term rise in Fed interest rates is a fiscal facade. In the short term, the rise in Fed rates strengthens the dollar reversing the pressure on real market interest rates. The rise in rates causes inflows of foreign currency dampening the effect on the Treasury’s borrowing costs. At the same time, it makes imported consumer goods cheaper. What the Fed has done with rate hikes so far has not touched the root causes of inflation — lack of immigration/young workers, consumer spending and debt, and government spending and debt.

Unfortunately, the first one — immigration/young workers — appears to have caused a new paradigm. Instead of workers/employment/unemployment causing a wage inflation spiral, AI and robotics are replacing human labor at a rapid rate. Whereas before we thought it would be 20-50 years before impacting economic models, it appears to already be happening. We don’t know the impact yet, but likely this will be good for inflation (eg no wage inflation.) However, it will be devastating to workers’ incomes. Though income inequality will likely be justified, it won’t be a good thing since everyone will earn next to nothing. There are still a few years for this to play out, so downward pressure on wage inflation will not be felt in time for our current fiscal fiasco.

The second part — consumer spending and debt — has been increasing throughout the Fed’s rate rises fueled in part by the stronger dollar. As long as there is strong consumer demand, there are inflationary pressures. The GDP has been increasing to historic highs during the Fed rate rises. The greater the consumer debt the more severe the inevitable recession will be (multiplied by how much technology replaces workers.) In addition, climate change disasters and ill health effects are growing exponentially. Consumer spending and mass consumption through the exploitation of natural resources is the greatest long-term risk to world economics (and human life.)

The last part — government spending and debt – is the real part of the worst to come in the short term. The increase in the price of the dollar has kept marketplace interest rates artificially low. Over the last several years, the government has budgeted huge multi-trillion dollar spending packages. Most of this money has yet to be borrowed and spent (see debt limit crisis.). When the money is borrowed, the price of the dollar will get hammered, and consumers will feel a huge jump in inflation of imported goods. Long term marketplace interest rates will come under severe pressure. The Fed will be forced to buy Treasuries and print money. This is also hugely inflationary. Next, when the money is spent, hundreds of millions of dollars will be pumped into the economy causing a shift in the demand curve for many goods and services. Again, this is biggly inflationary. A microcosm of what’s to come can be seen in the stimulus checks. The 3.2k/person stimulus checks caused this first little bump in inflation we are seeing now. This is just a drop in the bucket compared to the trillions of government stimulus yet to come. There are some Republicans trying to squash the borrowing/spending, but I doubt they will be successful. Soo….

In conclusion, it will be near impossible to curb inflation through monetary policy. The greatest risk to short term world economics is US fiscal policy.

UPDATE: November 9, 2023

Attention armchair economists, investors, and homeowners:
the 30-year Treasury auction was “bad” today
… when I say bad, I mean bad for those not investing in Treasuries.

What does it mean? The government went to borrow money today, and people didn’t want to lend them money. The 30-year interest rate spiked higher. This is because the government is borrowing record amounts of money.

A Double Whammy
This has two negative feedback loops.
1) the higher interest rates mean the government has to borrow more money to make the interest payments… resulting in higher budget deficits… resulting in more borrowing… resulting in higher interest rates, etc.
2) the government is borrowing the current trillions of dollars over the next couple years… but they have yet to spend it… spending the trillions will result in inflation… which will result in higher interest rates… causing a larger deficit… requiring more borrowing, etc.

The Greatest Risks to the US Economy

  1. Climate Change
  2. Government Spending / Debt
  3. Lack of Immigration

Human induced climate change is an exponential component of an unordered system (chaos theory).

The Age of Loss and Damage is a new way of thinking about economics by combining economics, climate science, statistics, and physics. Until now, economic models have been unfit to capture the full extent of climate damage. Traditionally, “integrated assessment models” (IAMs) were used to forecast “shock” events. IAMs use “quadratic function” to calculate GDP losses by squaring the temperature change, yet ignore other methods (such as the exponential function) that are better suited for rapid change. “Climate change is fundamentally different to other shocks because once it has hit, it doesn’t go away,” said Thierry Philipponnat, author of a report by Finance Watch, a Brussels-based public interest NGO on financial issues. “And if the fundamental assumption is flawed, all the rest makes little sense — if any.”

Reuters reported, “Critics say this (IAMs) choice is doomed to underplay the likely impact – particularly if the planet hits environmental tipping points in which damage is not only irreversible but happens at an ever-accelerating rate.” Thierry Philipponnat’s report, Finance in a Hot House World, concludes: “Climate risk is growing to disruptive levels throughout the financial system and the guardians of financial stability urgently need to adapt their tools to regain control.” The report calls for economic models that do not mislead, scenario analyses that prepare the market, and a new prudential tool to address the build-up of systemic climate risk.

Traditional economics is based upon the “costs and benefits” to society. Since there are no known long-term benefits of climate change to society, the Age of Loss and Damage economics focuses on the exponential costs of climate change to society.

Loss and damage litigation against oil companies and governments will change world economics.

In the spring of 2023, the USA suspended their national debt ceiling. Included in the debt ceiling suspension is a provision for unlimited emergency federal spending. The result is the government can continue to ignore the causes of climate change and instead give trillion-dollar subsidies to the fossil fuel industry through emergency disaster relief. Yes, another vicious circle — more fossil fuels subsidies result in more climate catastrophes resulting in more fossil fuel subsidies, etc. The end result will be additional trillions in government borrowing while the standard of living declines.

According to NOAA, in 2023 (as of November 8), there have been 25 confirmed weather/climate disaster events with losses exceeding $1 billion each to affect United States. These events included 1 drought event, 2 flooding events, 19 severe storm events, 1 tropical cyclone event, 1 wildfire event, and 1 winter storm event. This is the largest number of climate disasters recorded with a notable increase in extreme precipitation events (violent rain).

Meanwhile, the US politicians also fail to address the declining and aging population. By restricting immigration, the government is forcing the acceleration of AI and robotics technology. Although this is great for “productivity”, neither AI nor robots pay taxes. The US economy is based on population growth. Increased emergency spending and a declining tax base results in insolvency.

ALSO SEE: The Economic Monsters: Inflation and Interest Rates

UPDATE 2024: Economic Facts on Immigration, Budget Deficits and Inflation

Business, Finance, and Economics

bookmark_borderThe Economic Costs of COVID Re-openings

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The mortality rate for COIVD is between 7-8% in PA. (* The actual mortality rate is closer to 14%) It has been since the pandemic started, and still is. An estimated additional 15% of the recovered have permanent disabilities. What is the cost of life and health on the economy? The benefit-cost analysis of a human life is generally accepted as US$10 million/dead person. [It is also referred to as the cost of life, value of preventing a fatality (VPF) and implied cost of averting a fatality (ICAF).]

But, what is the cost of lifelong disability? (COD/cost of a disability) That cost is much more difficult to calculate. How much does it cost to keep me alive? How much pain and suffering must I endure? And, how widely does the cost vary from disability to disability? If I need O2 the rest of my life… or if my leg is amputated… or neurological damage, etc.?

So, if the economy benefits by X amount by reopening early… what is the offsetting cost (X-VPF-COD)?
It seems to me this is a no-brainer. Without a doubt, it will be a negative number: X < VPF+COD Answer: Stop the spread. Stop the dead. Make the bread.

COVID-19 Index

bookmark_borderThe Economic Monsters: Inflation and Interest Rates

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Economist

  1. Economic Forecast = Inflation (2018)
  2. Inflation Bites (2022)
  3. U.S. Mass Consumption Results in Global Economic Disparity, Inequity, and Poverty (2023)
  4. Investment Recommendation: Savings Bonds / I Bonds (2023)
  5. Your National Debt (2023)
  6. Economic Facts on Immigration, Budget Deficits and Inflation (2024)
  7. The Federal Reserve and the Chevron Decision (2024)
  8. Drill, Baby, Drill: The Existential Threat of Trump Economics (2024)
  9. The National Debt and the Printing of Money (2024)

Part I: Economic Forecast = Inflation

In 2006 and 2007, we forecast the impending “great recession”. Our investment advice was to sell all your real estate. If you could not sell it, leverage it to the hilt (so you had your cash out before failure.)

Turned out to be an accurate forecast.

In 2017 and 2018, we are forecasting inflation and rising interest rates. Buy real estate now and lock-in your 30-year interest rates ASAP. [WARNING: Do not buy real estate on or near floodplain. See disclaimer below.] [WARNING: This paper was first published in 2018. Since that time the forecast has reached fruition. It is too late to beat rising interest rates.]

WHY?

* Quantitative Easing and the Troubled Asset Relief Program (TARP) was started during the height of the 2008 financial crisis. In essence, it allowed the Treasury to print money.

* In 2017 Donald Trump started enacting policies that mirrored his personal finances — borrow too much money and don’t plan on paying it back. Mr. Trump has been involved in 6 bankruptcies.

* When the government borrows lots of money without a payback plan, they compete with the private sector to borrow money resulting in a rise in interest rates. This phenomena is known as crowding out (economics). (1)

* President Trump bragged about wage inflation during his State Of The Union (SOTU) address. When wages go up without an increase in productivity, the prices of goods and services inflate.(2)

* “Make America Great Again” policies make the American dollar weak. Tariffs and trade protectionism undermine the value of the dollar and contribute to inflation. (3)

* President Trump replaced the Chairwoman of the Federal Reserve with a new chair who is not an economist. A first in U.S. history.

* Tax cuts without spending cuts result in a budget deficit. The nation’s debt is now bigger than its gross domestic product. Net interest payments on the debt are estimated to total $276.2 billion this fiscal year, or 6.8% of all federal outlays. The tax cuts are expected to make this payment explode.

* The Federal Reserves primary weapon for fighting inflation is to raise interest rates. (4)

You could say inflation and rising interest rates are a two-headed monster. When the government creates money, it is “inflationary.” The government fights inflation by raising interest rates. Rising interest rates exponentially increase the national debt. When the government borrows, it competes with consumer borrowing causing interest rates to rise.

The name given to the worst-case scenario is hyper-inflation. We don’t expect hyperinflation in the US in the near future; however, higher interest rates in the US will result in hyperinflation in other parts of the world. (See Part III below.)

WARNING: Do not buy real estate on or near floodplain.
Do not invest in real estate that is located near floodplain. Make sure your property has land ingress and egress from the closest 1,000-year-floodplain. Do not invest in any property located near a coast. Do not invest in a property that is below sea level. Do not invest in real estate located in Florida.

“Mostly stay away from the coasts because of both wind and rain issues from weather systems spinning inland. Even if you are not in a floodplain, a couple feet of rain in a day will cut off roads and overwhelm your sump pumps. Not to speak of wind taking power and telecom down.” — Sidd Mukerhjee (February 5, 2018)

For more information on Flood Insurance please see “Who Pays For Flood Insurance?“

NOTES
(1) “In economics, crowding out is argued by some economists to be a phenomenon that occurs when increased government involvement in a sector of the market economy substantially affects the remainder of the market, either on the supply or demand side of the market.

One type frequently discussed is when expansionary fiscal policy reduces investment spending by the private sector. The Government is “crowding out” investment because it is demanding more Loanable Funds and it is increasing interest rates from the borrowing, but that was broadened to multiple channels that might leave total output little changed or smaller.” — Olivier Jean Blanchard (2008) “crowding out,” The New Palgrave Dictionary of Economics, 2nd Edition. Abstract and Roger W. Spencer & William P. Yohe, 1970. “The ‘Crowding Out’ of Private Expenditures by Fiscal Policy Actions,” Federal Reserve Bank of St. Louis Review, October, pp. 12-24

(2) “After years of wage stagnation, we are finally seeing rising wages,” Donald Trump (State of the Union 2018)
“The Employment Cost Index, a measure of salary and benefit costs, registered a 2.6 percent gain for the full year, tied for the best since 2007.” — CNBC (January 31, 2018)

(3) “Recently, Trump levied steep tariffs on imported solar panel technology and washing machines, which immediately boosted prices for U.S. consumers.” — The Hill (February 6, 2018)

(4) “Federal Reserve officials followed through on an expected interest-rate increase and raised their forecast for economic growth in 2018, even as they stuck with a projection for three (rate) hikes in the coming year.

“This change highlights that the committee expects the labor market to remain strong, with sustained job creation, ample opportunities for workers and rising wages,” Chair Janet Yellen told reporters Wednesday in Washington following the decision. In her final scheduled press conference, Yellen noted that her nominated successor, Jerome Powell, has been part of the consensus shaping the Fed’s gradual rate-hike strategy.” — “Fed Raises Rates, Eyes Three 2018 Hikes as Yellen Era Nears End” (December 13, 2017)

 

Part II: Inflation Bites

In March of 2020, the global pandemic put the Fed on hold. Then, the Fed reversed course, did not increase rates, and did substantially more (trillions) quantitative easing (see chart below.) In addition, the federal government borrowed trillions of dollars with no repayment plan. A large portion of this money was given to consumers as stimulus. The consumers shifted the demand curve causing a sharp rise in prices. “A demand curve shift refers to fundamental changes in the balance of supply and demand that alter the quantity demanded at the same price,” says The Balance Economic Theory. Consumers continued to spend beyond their means raising consumer debt. “Household debt in the third quarter of 2022, increasing by $351 billion (2.2%) to $16.51 trillion. Balances now stand $2.36 trillion higher than at the end of 2019, before the pandemic recession,” as reported by the Federal Reserve Bank of New York.

UPDATE: January 30, 2022
Inflation has hit 7% — the highest rate in 40 years.

The Fed has signaled that they are:
1) stopping quantitative easing in March
2) raising interest rates in March

Stopping quantitative easing means the Fed will no longer be supporting low Treasury yields by buying bonds. To date, they have bought over 8 trillion in Treasuries and other instruments that undercut interest rates. When the Fed stops buying Treasuries, the demand will go down and rates will go up.

Federal Reserve Balance Sheet 2022
Federal Reserve Balance Sheet 2022

The market has increased their forecast on the Fed raising rates to 4-5 times in 2022. When the Fed raises rates that banks charge each other, the banks charge you higher interest rates.

The 10 Year Treasury Note is the best indicator to watch for mortgage interest rates. It will reflect both the ending of quantitative easing and the increase in Fed funds rates. That is to say, if the Fed raises rates 1/4%, mortgage interest rates will likely rise 1/2%. That changes the forecast for mortgage rates in 2022 to rise 2 to 2.5%.

Borrow any long term money today before it is too late. [WARNING: This paper was first published in 2018. Since that time the forecast has reached fruition. It is too late to beat rising interest rates.] After rates rise for the next several years, there will be a recession. So, a long time before you may see conditions like we’ve had for the last 14 years.

10 Year Treasury Notes Interest Rates
10 Year Treasury Notes Interest Rates

 

Part III: U.S. Mass Consumption Results in Global Economic Disparity, Inequity, and Poverty

In Part I we mention the worst-case inflation scenario is hyper-inflation. We don’t expect hyperinflation in the US in the near future; however, higher interest rates in the US will result in hyperinflation in other parts of the world.

As long as the US Dollar is the world’s reserve currency, it is unlikely that the US will see hyperinflation. The US Congress defines the world’s reserve currency as, “a currency held by central banks in significant quantities. It is widely used to conduct international trade and financial transactions, eliminating the costs of settling transactions involving different currencies.”

When there is inflation in the US, the US Federal Reserve Bank raises interest rates. The rise in US interest rates results in other countries’ investors putting their money in dollar denominated US interest bearing investments. That is to say, foreign investors buy dollars with their home currencies. The result is a widened disparity in the exchange rates between the currencies. The US dollar increases in value and the foreign currency depreciates in value. There is a benefit to the US consumer — imported goods and services are cheaper. The disadvantage to the foreign countries is the dollar disparity causes a much greater rise in their domestic inflation as all their imports experience both the local inflation rate as well the inflation in buying dollars. In an even worse case scenario, the foreign country has debt that has to be repaid in dollars. In essence, their debt is multiplied by a factor equal to the decline in the value of their currency.

In September of 2022, the New York Times reported, “The Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession”

“Those interest rate increases are pumping up the value of the dollar — the go-to currency for much of the world’s trade and transactions — and causing economic turmoil in both rich and poor nations. In Britain and across much of the European continent, the dollar’s acceleration is helping feed stinging inflation.”

Weakening Currencies
Weakening Currencies

Also in September of 2022, the Nikkei Asia reported, “Superstrong dollar threatens debt crisis across emerging economies. Mexico pressured to follow Fed hikes, while Sri Lanka’s repayment costs soar.”

In October of 2022, the IMF reported, “The dollar is at its highest level since 2000, having appreciated 22 percent against the yen, 13 percent against the Euro and 6 percent against emerging market currencies since the start of this year. Such a sharp strengthening of the dollar in a matter of months has sizable macroeconomic implications for almost all countries, given the dominance of the dollar in international trade and finance.”

Dollar Surge
Dollar Surge

Conclusion

The United States has unsustainable mass consumption. US consumers are destroying the world’s environment and economies. The excessive demand of US consumers has resulted in the exploitation of natural resources, the largest emissions of pollution and greenhouse gases, inflation, currency disparity, and the largest redistribution of wealth in the world. Americans’ mass consumption is responsible for creating the greatest income disparity, wealth inequity, and poverty.

Part V: Your National Debt (2023)

ALSO SEE: Immigration and the Wage Inflation Spiral
Anthropologic Climate Change and Pollution

Business, Finance, and Economics

bookmark_borderBitcoins

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Bitcoin is a virtual currency that is open source P2P money. According to the Bitcom website: “Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.”

Wikipedia says, “In November 2008, a paper was posted on the internet under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. In January 2009, the Bitcoin network came into existence with the release of the first open source Bitcoin client and the issuance of the first bitcoins, with Satoshi Nakamoto mining the first block of bitcoins ever (known as the “genesis block”), which had a reward of 50 bitcoins. The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction involving a 10,000 BTC pizza.”

Since then they inventor has gone underground. In theory, Bitcoins circulation will roll out over time without a centralized creator.

The value of a Bitcoin in dollars:

 
Date price for 1 BTC Notes
Jan 2009 – Jan 2010 basically none no exchanges or market, users were mainly cryptography fans, who were sending bitcoins for low or no value
Feb 2010 – May 2010 less than $0.01 user “laszlo” did first transaction – bought 2 pizzas for 10,000 BTC. User “SmokeTooMuch” auctioned 10,000 BTC for $50 (cumulatively), but no buyer was found.
June 2010 $0.08 in five days, the price grew 1000%, rising from $0.008 to $0.08 for 1 bitcoin
Feb 2011 – April 2011 $1 Bitcoin takes parity with US dollar
July 8th 2011 $31 top of first “bubble”, followed by the first price drop
Dec 2011 $2 minimum after few months
Dec 2012 $13 slowly rising for a year
April 11th 2013 $266 top of a price rally, during which the value was growing by 5-10% daily.
May 2013 $130 basically stable, again slowly rising.
June 2013 $100 in June slowly dropping to $70, but rising in July to $110
Nov 2013 $350 – $900 from October $150-$200 in November exponentially rising to $400, then $600, eventually reaching $900 on 11/19/2013.

In October of 2013, the FBI seized approximately 173,991 Bitcoins worth over $33.6 million:

Preet Bharara, the United States Attorney for the Southern District of New York; George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (“FBI”); Brian R. Crowell, the Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”); and Toni Weirauch, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), today announced the unsealing of a protective order authorizing the seizure of approximately 144,336 Bitcoins found on computer hardware belonging to ROSS WILLIAM ULBRICHT, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” a/k/a “Silk Road,” the alleged owner and operator of “Silk Road,” a hidden website designed to enable its users to buy and sell illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. Along with a prior seizure of approximately 29,655 Bitcoins, federal law enforcement agents have now seized a total of approximately 173,991 Bitcoins in connection with the Silk Road case, which, at today’s Bitcoin exchange rate, are worth over $33.6 million.

The Bitcoins have been seized in connection with a civil action previously filed in Manhattan federal court on September 30, 2013, seeking the forfeiture of all assets of Silk Road, including its website and all of its Bitcoins because those assets allegedly were used to facilitate money laundering and constitute property involved in money laundering. Also in connection with that civil action, federal law enforcement agents previously seized the Silk Road website itself. In addition to the civil action, a criminal complaint against ULBRICHT was filed in Manhattan federal court charging him with one count of narcotics conspiracy, one of count of conspiracy to commit computer hacking, and one count of money laundering conspiracy. ULBRICHT was arrested in San Francisco, California, on October 1, 2013, he was subsequently ordered detained, and he is expected to appear in Manhattan federal court within the next few weeks. ULBRICHT has also been charged in a separate indictment pending in federal court in Baltimore, Maryland.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Ross William Ulbricht operated Silk Road—a global illegal cyber business designed to broker criminal transactions—protected by a presumed anonymity and motivated by profit. With his arrest and our subsequent seizures of millions of dollars worth of Silk Road’s Bitcoins, we have sent a clear message to him and everyone else running criminal enterprises on the dark web: we are determined and equipped to hold you to account.”

FBI Assistant Director in Charge Venizelos said: “As alleged in court documents, the creator of Silk Road, Ross William Ulbricht, created a black market bazaar for drugs and illegal services where customer service and anonymity were added value to shoppers and sellers. This market generated millions in illegal profits for Ulbricht in the form of Bitcoins. However, what Ulbricht didn’t count on was that Silk Road’s coffers would not be out of reach of the FBI and our partners to seize. We want to thank our law enforcement partners here and abroad for their support and work on this case.”

DEA Special Agent in Charge Brian R. Crowell said: “The Silk Road underground website was the global venue for drug trafficking and money laundering, producing millions in dirty profits. DEA and others followed the money throughout this investigation, leading to this seizure. The website was used by drug dealers to put illicit drugs into our communities and literally at our doorsteps nationwide. 200,000 people die annually from drug abuse throughout the world, and our investigators worked tirelessly to bring to justice a facilitator who made every effort to hide behind highly encrypted technology while providing 24/7 anonymous services to global drug traffickers and money launderers. Ulbricht’s goals were to make millions from drug use and money laundering while protecting the world’s criminals from law enforcement. Our goal is to shut these people down and protect our children and DEA will continue to be relentless in this effort.”

IRS Special Agent in Charge Toni Weirauch said: “This seizure sends a clear notice to those who think they can commit crimes and conceal the fruits of their criminal activities in digital anonymity. The resolve of the government to uncover criminality and identify criminal proceeds is strong and its investigative capabilities are magnified when different federal agencies, each with its own areas of expertise, unite to achieve a common objective.”

According to the allegations in the complaint, the civil forfeiture action, and the application and protective order unsealed today in Manhattan federal court:

Background on Silk Road and ROSS WILLIAM ULBRICHT

Since approximately January 2011, ROSS WILLIAM ULBRICHT owned and operated the underground website known as Silk Road, which emerged as the most sophisticated and extensive criminal marketplace on the Internet. Throughout the time that ULBRICHT controlled Silk Road, it served as a sprawling black-market bazaar where unlawful goods and services, including illegal drugs of virtually every variety, were bought and sold regularly by the site’s users.

During its approximately two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a hundred thousand buyers, and to launder hundreds of millions of dollars derived from these unlawful transactions. All told, the site generated sales revenue of more than 9.5 million Bitcoins and collected commissions from these sales totaling more than 600,000 Bitcoins. Although the value of Bitcoins has varied over time, these figures are roughly equivalent to approximately $1.2 billion in sales and approximately $80 million in commissions, using the Bitcoin exchange rate in effect when the Silk Road website was seized.

ULBRICHT deliberately operated Silk Road as an online criminal marketplace designed to enable its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement. He sought to anonymize transactions on Silk Road in two principal ways. First, ULBRICHT operated Silk Road on what is known as “The Onion Router,” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses and therefore the identities of the networks’ users. The Tor network is designed to make it practically impossible to physically locate the computers hosting or accessing websites on the network. Second, ULBRICHT required that all transactions on Silk Road be paid with Bitcoins, an electronic currency that is as anonymous as cash. Although Tor and Bitcoins have known legitimate uses, they were intentionally used by Silk Road to further the site’s unlawful goals.

The Silk Road website provided a sales platform that allowed vendors and buyers using the site to conduct transactions online. Silk Road is believed to have been visited by hundreds of thousands of unique users from countries across the globe, nearly 30 percent of whom indicated upon registering on the site that they were from the United States. The illegal nature of the items sold on the website was readily apparent to any user browsing through its offerings. Indeed, the vast majority of the items for sale on Silk Road were illegal drugs, which were openly advertised as such on the site. As of September 23, 2013, Silk Road had nearly 13,000 listings for controlled substances, listed under such categories as “Cannabis,” “Dissociatives,” “Ecstasy,” “Intoxicants,” “Opioids,” “Precursors,” “Prescription,” “Psychedelics,” and “Stimulants.” From November 2011 to September 2013, law enforcement agents made more than 100 individual undercover purchases of controlled substances from Silk Road vendors. These purchases included heroin, cocaine, ecstasy, and LSD, among other illegal drugs, and were filled by vendors believed to be located in more than ten different countries, including the United States, Germany, the Netherlands, Canada, the United Kingdom, Spain, Ireland, Italy, Austria, and France.

In addition to illegal narcotics, other illicit goods and services were also openly bought and sold on Silk Road. For example, as of September 23, 2013, there were: 159 listings under the category “Services,” most of which offered computer-hacking services, such as a listing by a vendor offering to hack into social networking accounts of the customer’s choosing; 801 listings under the category “Digital goods,” including malicious software, hacked accounts at various online services, and pirated media content; and 169 listings under the category “Forgeries,” including offers to produce fake driver’s licenses, passports, Social Security cards, utility bills, credit card statements, car insurance records, and other forms of false identification documents.

The only form of payment accepted on Silk Road was Bitcoins, an anonymous, decentralized form of electronic currency, existing entirely on the Internet and not in any physical form. Silk Road’s payment system essentially consisted of an internal Bitcoin “bank,” where every Silk Road user had to hold an account in order to conduct transactions on the site. Every Silk Road user had at least one Silk Road Bitcoin address associated with the user’s Silk Road account. These addresses were stored on wallets maintained on servers controlled by Silk Road. In order to make a purchase on Silk Road, a user had to obtain Bitcoins (typically through a Bitcoin exchanger) and then send those Bitcoins to a Bitcoin address associated with his or her Silk Road account. Once a user’s account was funded in this way, the user was free to make purchases on Silk Road. When a purchase was made, the user’s Bitcoins were first transferred to an escrow account maintained by Silk Road, pending completion of the transaction. When the transaction was completed, the buyer’s Bitcoins were transferred from the escrow account to the Silk Road Bitcoin address of the vendor involved in the sale. Silk Road also used a so-called “tumbler” which, as the site explained, “sen[t] all payments through a complex, semi-random series of dummy transactions…making it nearly impossible to link your payment with any coins leaving the site.” Silk Road charged a commission for every transaction conducted by its users. The commission rate varied depending on the size of the transaction, but generally ranged from 8 to 15 percent of the total sales price.

Using the online moniker “Dread Pirate Roberts,” or “DPR,” ULBRICHT controlled and oversaw every aspect of Silk Road. ULBRICHT, for example, maintained the computer infrastructure and programming code underlying the Silk Road website; determined vendor and customer policies, including deciding what can be sold on the site; managed a small staff of online administrators who assisted with the day-to-day operation of the site; and controlled the enormous profits generated from the operation of the site. ULBRICHT did so while fully aware of the illegal nature of the enterprise; indeed, he deliberately sought to ensure the anonymity of the drug dealers and other illegal vendors operating on the site, as well as to conceal his own identity as the site’s owner and operator.

ULBRICHT was also willing to use violent means to protect the Silk Road enterprise and the anonymity of its users. For example, in March and April 2013, ULBRICHT solicited a murder-for-hire of a Silk Road vendor, known as “FriendlyChemist,” who was threatening to reveal the real names and addresses of a long list of Silk Road users unless ULBRICHT paid him $500,000. Upon receiving the threat from “FriendlyChemist” to expose the names of Silk Road users, ULBRICHT wrote to another Silk Road user, telling that user that “FriendlyChemist” is “causing me problems,” and adding: “I would like to put a bounty on his head if it’s not too much trouble for you. What would be an adequate amount to motivate you to find him? Necessities like this do happen from time to time for a person in my position.” ULBRICHT later explained that the threat by “FriendlyChemist” to expose the names of Silk Road users “is unforgivable to me. Especially here on Silk Road, anonymity is sacrosanct.” However, there is no record of a homicide at or about that time in the area where “FriendlyChemist” supposedly lived.

The Seizure of Computer Hardware Belonging to ROSS WILLIAM ULBRICHT

ROSS WILLIAM ULBRICHT was arrested in San Francisco, California, on October 1, 2013. At the time of his arrest, ULBRICHT was using a laptop computer, which was seized in connection with his arrest and subsequently searched pursuant to a search warrant. ULBRICHT’s residence was also searched on October 1, 2013, pursuant to a search warrant, and federal law enforcement agents conducting that search found several pieces of computer hardware belonging to ULBRICHT (collectively, along with ULBRICHT’s laptop, the “computer hardware”). Through forensic analysis of the computer hardware, federal law enforcement agents recovered a Bitcoin wallet containing approximately 144,336 Bitcoins.

CHINA
In December 2013, China banned the use of the Bitcoin. Although the value of Bitcoin’s did depreciate by 10% on the news, it still remained over $1,000.00 USD.

On December 18, 2013, China shutdown trading of a Chinese Bitcoin exchange and the value dropped by 50%.

“The Bitcoin bubble has burst and China was the pin that popped it,” writes Mark Williams of Boston University. “The latest move by China puts into question the viability of Bitcoin as a currency alternative and as a liquid and safe commodity.”

bookmark_borderWhy Don’t Christian’s Celebrate Hanukkah?

Posted on by admin

Q: Why don’t Christians celebrate Hanukkah?
A: There is no good reason.

Christians believe exactly the same as Jews up to the point in time known as Christmas, the birth of Christ and God manifesting herself as a human; however, zealous and/or ignorant Christians have tried to separate themselves from their tradition. The reasons for this usually have to do with hate, money and power. Why else would one want to appear as a hypocrite?

A similar theory is put forth as to why Lilith and Mary Magdalene were re-written by the Christians as it relates to discriminating against women.

bookmark_borderWho Is to Blame for the Financial Crisis?

Posted on by admin

A friend wrote:
Three years ago, the US had one of the most horrific financial crises in history caused by a massive fraud. Not a single financial executive is in jail… helllloooooooo!!!

I replied:
Correction… those who committed crimes on the business side, such as, Bernie Maddof, are in jail for a very, very long time (and/or their son committed suicide.) On the other hand, all the homeowners who commtited fraud… I didn’t see any of them go to jail. not paying back one’s debts is what caused the financial crisis.

“forgive us our debts as we forgive our debtors” = debts are not forgiven, they are repaid.

RESPONSE
Adam Harris
Well put. But people were very mislead.

John Bernard
The problem was cause by poor loaning practices in the first place

Daniel Brouse
er, a… poor borrowing practices. it is a conusmers responsibility not to claim ignorance. there was not fraud for that part… consumer greed. as a banker, i blame the individuals who borrowed the money… and the educational system fo…r not teaching even basic finance in public schools.

credit rule number 1 — don’t borrow money you can’t pay back 🙂

Adam Harris
True that. But in times tough to turn an offer like the ones they were given down.

John Bernard
It looks nice on paper when you lay it out like that but it isn’t really so simple. You make the lenders seem like a bunch of little angels that screwed by those devilish poor people. How dare they!

Neal Goldberg
as banker you should probably be publicly flogged you greedy little monkey

Neal Goldberg
Not even tough times if I took on all the credit cards I was offered whether I used them or not I’d be screwed…

Neal Goldberg
Banks are allowed access to 9/10 of what actual money they have… Maybe if you scum sucking assholes didn’t pool bullshit loans together that you knew you wouldn’t get paid for and sell them as securities to China we wouldn’t have to accept their lead poisoned toys and we’d have the balls to say something about it…

Neal Goldberg
A person who lends you something and then cuts your life apart to get it back is known as a LOAN SHARK they work for REAL GANGSTERS

Neal Goldberg
And yeah I guess Bernie committed that crime himself huh? NO there were other bankers, other investors, other political organizations that over looked at the very least what he was doing and all those SCUM BAGS should be in jail too…

Neal Goldberg
http://www.youtube.com/watch?v=41s1oWM9vOQ These are REAL GANGSTA’s

Neal Goldberg
Rule number 1 never ever mistake a banker for an actual human being… Humans are born with sympathy, empathy and they feel pain… Bankers are highly trained autobots who only feel pain in the numerical sense, they have no sympathy for you…r job loss or hunger, and no empathy for your social, economical or racial background… In short they don’t give a fuck about YOU… They are interested in ownership, they are not interested in education, they pay for the commercials you see begging you to buy into what they are selling because you need it and “no” you are not good enough without it… They foreclose house’s on troops in Iraq, they simply don’t give a FUCK…

Daniel Brouse
i guess that makes it easier… to blame the shadows for our own casting

Neal Goldberg
Stop hiding in the Dark BITCH I live on earth why do I have to read the small print cause your crooked mouth can’t say that shit out loud

Neal Goldberg
Tell me the truth you loaned me this money as a predatory lender

Neal Goldberg
I’m sorry why the fuck did we bail out the banks? So they can foreclose on the house they didn’t get paid back for, THATS WHY THE FUCK WE BAILED YOU OUT

Neal Goldberg
Oh wait I can’t pay you back cause you took my job too, and now I’ve got no job no car no house the LEAST of my concerns is paying you back 20% interest on money I shouldn’t owe you in the first place

Daniel Brouse
sorry to say… in this regard, you are correct. a lil’ paper i wrote that predicted the current events…

if ya wanna get into that logic… it is the gov’t that is to blame for borrowing money. the gov’t should not borrow money. citizen…s of the US are to blame for that. of course, in the end… the scales of justice will balance:
The Golden Rule’s Social Justification

Neal Goldberg
Word now we’re getting somewhere but the problem is really that ALL of our money is borrowed because it’s printed by a bank THE FEDERAL RESERVE “BANK” is a privately owned “BANK” every dollar we print comes at “25%” interest too the BANK, …this BANK was never ever in the plans for America. We never wanted a central bank, ever, never, ever. Woodrow Wilson says it was his biggest mistake, and they pushed the legislation through on christmas eve so no one could vote against it… WHO OWNS THE FEDERAL RESERVE “BANK” Rockafeller, Morgan, Rothchild and Warburg

Neal Goldberg http://www.apfn.org/apfn/fed_reserve.htm very interesting shit… We Are the Fools Mr. Brouse but no more….

Marco Sforza
Neal Goldberg, your comments are real. And just amazing. I’m glad i read this all. And dude Neal, you just made me wiser i think. thanks dude. youre really smart. and if ur comments were any more correct I’d start reconsidering perfection to be real again haha. good man. good.

Neal Goldberg
Dude listen I’m not smart or I’d have these people’s heads on a stick but I can’t do it alone I’m just musician and there’s nobody who wants to here songs about this shit… They ain’t putting you on a clear channel owned station if you’re …gonna talk shit about their sponsor’s but together, WE OWN THEM… All their money means shit if we don’t buy their goods… My dream is that Walmart folds with there rottin milk wreaking up their whole cheap store full of shit Americans used to make with their own hands… This whole bank talk has major implications to what is going on in the world… People in the middle east are saying enough is enough but unless an educated extremely righteous person who is willing to sacrifice, steps up we’re all gonna get sucked back into the this bullshit money game…

Neal Goldberg
We are out there we are struggling and they are pitting the middle class against itself, divide and conquer… That union shit is not about better teacher performance it’s about indoctorinating your kids with test scores and ZERO critical t…hinking… How many kids you go to highschool with that did better then you but couldn’t logically find there way around a fucking mall map, gimme a break… it staggering. it’s all connected they are robbing all of us in every possible way, worse yet we’re robbing each other in the name of progress, eat or be eatin… There’s enough food for ALL of us, to bad it’s genetically modified so that you have to buy the fucking seeds from them the next year, like they’re selling you a disposable car charger, like they make each one different for more profit, for a bigger fucking yacht… I hope they burn still tied to the dock… Shit rolls down hill folks lucky I grew up in the Valley, I went to school in the Hills, and I was born so far south that my blood boils with the have-nots…

Daniel Brouse
ha! well, justification is here. guess it doesn’t matter if we like it or not… everything balances out in the end. that’s why they talk about it in the Religions Of The Book… jews, christians, muslims… all believe in gods Book… H…er accounting book… and in the end, they say God’s checkBook will balance 🙂

however, i must disagree with you about being just a musician and not writing songs about this stuff. i find the message of music to be the mose powerful, if we humans are gonna envoke change and help right the injustice?

like this one:
Tell me this again:
Time is growing thin
Many will lose
And, some may win

The who whose
Baring a grin
Looked within
And, gave throughout
The entire route
From birth to death
Earns worth

One second’s value
Is the same as two
The value holds true
I can’t save time
For a rainy day
I can’t accumulate
At any rate
Time

I’m
To emulate
My potential
The energy in me
Make my genetic
Kinetic
The value in me

Figure how
To find the value
In now

One second’s value
Is the same as two…
Or more
The value holds true
For sure
Put meant
In every
Moment
Make very
Important
The presentSee More

Daniel Brouse
ps this conversation seems to be *worth* something… does anyone mind if i repost it publicly?

Neal Goldberg
Word. but banker, man, you are an artist…. Help us fight from the inside… Read their fucking names out loud, who are these scum suckers where can we find them. If some asshole is gonna protest at a funeral about gays in the military I’m …sure I can find some peeps to picket outside dushberries 5 mil. apartment in the city… Lets get the truth out, get angry, you gotta say “I’m a human being god Damn it” The fucking were tolls on the turnpike were to build a fucking bridge that now you’re not gonna build, so tear down down the fucking tolls… We passed the legal marijuana law now fucking build the infrastructure or we’re gonna kick your ass to the curb, YOU DUMB ASS POLITICIANS WORK FOR US THE PEOPLE… Lobbyists should be ousted on site, it BRIBERY a five year old could see that… TELL ALL THE PEOPLE THAT YOU SEE… FOLLOW ME DOWN

John Bernard http://news.slashdot.org/story/11/03/14/1323257/Anonymous-Leaks-Internal-Bank-of-America-Emails?from=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Slashdot%2Fslashdot+%28Slashdot%29

Daniel Brouse
‎”I’m a human being god Damn it”