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Justice Litle
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Justice Litle is editorial director for Taipan Publishing Group. He is also a regular contributor to Taipan Daily, a free investing and trading e-letter and editor of trading research advisory service, Macro Trader. If his name sounds familiar, it's because Justice is regarded as one of the top... More
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  • The End Of Money 1 comment
    Apr 10, 2013 10:39 AM

    The world's monetary system stands on a precipice...

    It may not feel like it. But we are fast approaching what I call "the end of money."

    The process that will lead to the end of money has already begun. That's why central bankers and governments are terrified of the booming "digital currency" bitcoin... and the implications it has for outdated fiat regimes.

    Maybe that's why a government-sponsored cyber-terror agency tried to shut the bitcoin down.

    Instawallet is - or, rather, was - a service that made it easy to store and spend bitcoins. Instawallet was just hacked anonymously - leading it to shut down until it can develop a new hacker-safe architecture.

    Of course, we can't say for sure that the bitcoin cyberattacks are the work of a worried government (or governments). But this is a logical assumption... and, at minimum, a strong possibility.

    Bitcoin is such a threat to the standing fiat money regimes that it would be crazy for them NOT to try to torpedo the bitcoin under cover of darkness.

    Bitcoin is a "decentralized digital currency." It was launched in 2009 by a developer known only by the pseudonym Satoshi Nakamoto.

    You can buy bitcoins through a range of online exchanges. (This is the largest bitcoin exchange.) Once you've bought them, you store them in an online "wallet," a small, unobtrusive program that runs on your computer or phone) and exchange them anonymously... locally or internationally.

    This all take places without any bank, government or other middleman taking a cut.

    The supply of bitcoins is finite. There is no bitcoin central bank. And there is no backing by "fiat" from any government. There is a hard limit of 21 million bitcoins. The rate of new bitcoin issuance is automated. Based on the rate of issuance, the 21 million hard limit will be reached by 2140.

    Currently, the total outstanding supply of bitcoins is worth over $1 billion.

    There are two important reasons why bitcoins have value:

    1. Their supply is strictly limited (much like the supply of gold)

    2. They're nearly impossible to counterfeit.

    Gold has been desirable as a currency for millennia because it is portable, divisible and in limited supply (unlike the paper stuff, which can be cranked out at will). The bitcoin has exactly the same characteristics.

    And all bitcoins are verified by a "transaction chain." This means, to counterfeit bitcoins, the counterfeiter would have to spoof a miles-long transaction record and fool thousands of independent servers instantaneously (a feat orders of magnitude tougher than counterfeiting paper banknotes).

    Bitcoin is ushering in a sea change. It is teaching the users of fiat-backed currency to think and imagine... and what they are thinking about is a monetary future without central bankers.

    The key point here is that the bitcoin is a viable alternative to a system in which the government issues currency... and declares "by fiat" that it is worth something while it prints unlimited amounts of the same currency.

    The mainstream media's scoffs and guffaws... and the shadowy hacker attacks... do not diminish that reality.

    Are bitcoins a good investment right now, as they enjoy the spotlight of a tulip-like mania? Probably not. Wait for price volatility to create better buying opportunities.

    While you're waiting, remember that bitcoins are the harbingers of brand-new realities... and the "end of money" as we know it.

    There will come a time - perhaps soon - when you can denominate the majority of your liquid assets in a stable, private currency of your own choosing...

    One issued by no government. And manipulated by no central bank.

    Carpe Divitiae,



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    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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  • hanakookie
    , contributor
    Comments (956) | Send Message
    The early adopter hoarders will be come the central bank. Time will change but its not different this time. What happens when some one has 1 million coins and decides to make their wallet into holding and then write a program to create a derivative of there holdings and backed by the value of there holding. Then starts to issue the derivative virtual currency to the masses. Oops another central bank.
    12 Apr 2013, 12:21 AM Reply Like
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