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Michael Sweeney is the Bitcoin Partner of Film Annex Networks the venture division of Film Annex, which has been ranked as one of the Top 100 web sites in America with over 25+ million unique visitors per month. Film Annex's business model includes: * Paying content providers through the Film... More
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  • Why Timothy Geithner Needs To Start Thinking About Bitcoin 1 comment
    May 9, 2014 5:34 AM | about stocks: COIN

    Treasury Secretary Timothy Geithner, President Barack Obama and Federal Reserve Chairman Ben Bernanke

    Tim Geithner is the former US Secretary of the Treasury who served President Barack Obama from 2009 to 2013. He was previously the president of the Federal Reserve Bank of New York from 2003 to 2009. He now serves as president of Warburg Pincus, a Wall Street private equity firm, and he is on a book tour for, "Stress Test: Reflections on Financial Crises". Andrew Ross Sorkin interviewed him to promote his new book in the New York Times article, "What Timothy Geithner Really Thinks."

    When I was reading the article, it dawned on me how much we need Bitcoin as a balance to/for Central Banks and "Fiat Currencies" such as the US Dollar, Euro, and Japanese Yen. There are many in the Bitcoin world that have strong Libertarian views, and they see Bitcoin as a way to topple governments. Well I take a more simplistic view and compare it to movies. When I was a kid, you went to a movie theatre to see a movie and a year or two later it came out on TV. Now there are 25 different ways to see a movie, and I still go to movie theatres to occasionally see a movie with my wife. Bitcoin and/or other digital currencies can work the same way. They are alternate forms of wealth distribution that keep Cental Banks in check in a non-political way. The best example of this is the work of our Women's Annex Foundation where we distribute Bitcoin to women in developing countries with our partners Roya Mahboob and Feresteh Forough. They are seen here with Twitter Founder Biz Stone:

    Fereshteh Forough, Biz Stone, and Roya Mahboob

    The most obvious example is the contrast of Geithner's view of "the other side of the cliff. The NY Times article states:

    Perhaps the main challenge that Geithner has found in selling his argument is that to believe that the bailout truly worked, you have to believe that the other side of the cliff would have been worse. This makes his argument something of a counterfactual one, a hypothesis that will always be open to interpretation. Elizabeth Warren, the Massachusetts senator and creator of the Consumer Financial Protection Bureau, has written in her new book, "A Fighting Chance," that Geithner "believed the government's most important job was to provide a soft landing for the tender fannies of the banks." It's an opinion shared by Neil Barofsky, the former special inspector general of TARP. He told me in an email that Geithner, Bernanke and Paulson "consistently put the interests of the banks over those who were supposed to be helped, like struggling homeowners." While Barofsky acknowledges that TARP "undoubtedly helped save the system," he also says, "it was supposed to do so much more."

    In the Bitcoin world, the counter to that is Mt. Gox, which was a Bitcoin exchange based in Tokyo, Japan. From Wikipedia:

    Mt Gox was launched in July 2010, and by 2013 Mt Gox was handling 70% of all Bitcoin transactions. In February 2014, the Mt. Gox company suspended trading, closed its website and exchange service, and filed for a form of bankruptcy protection from creditors called minji saisei, or civil rehabilitation, to allow courts to seek a buyer. In April 2014, the company began liquidation proceedings. It announced that around 850,000 bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million at the time. Although 200,000 bitcoins have since been "found", the reason(s) for the disappearance-theft, fraud, mismanagement, or a combination of these-are unclear as of March 2014. There has been some speculation of hackers being responsible for the missing Bitcoins, but no case has been proven.

    Mt. Gox

    The reality is Bitcoin is in its infancy and it had an exchange with 70% of its trading fail, and yet the building blocks of Bitcoin continue to grow ever day with Bloomberg now quoting the terminal and the first US exchange being announced last week by Atlas ATS.

    Economist really need to start looking at the foundation of Bitcoin because this seems so 5 years ago when Geithner states:

    Geithner paused for a moment. "Can you design a system ever that allows you to be indifferent to the failure of any institution, in any state of the world?" he asked aloud before answering his own question. "You can design a system, and I think we have, that allows you to be indifferent in most states of the world: the five-year flood, the 15-year flood, the 30-year flood, maybe even the 50-year flood," he said. "But there are constellations of storms, of panics, of fires that are so bad that it's very hard to imagine that you could be indifferent to the failure of the financial system."

    Ben Bernanke is the former Chairman of the Federal Reserve who has been a constructibe critic/supporter of Bitcoin, and he seems much closer to reality when he states in the same article:

    "Ironically, the conventional wisdom now is that it was obvious that Lehman should be saved but that the Fed and the Treasury went ahead and made the big mistake of letting it go," he told me. "The truth is actually quite the opposite. Conventional wisdom at the time was overwhelmingly in favor of letting Lehman fail, but Tim (Geither), Hank (Paulson) and I were very much convinced that we should do everything possible not to let it fail. But then of course we ran out of options."

    Too big to fail is a concept that has not been executed by the Obama Administration as banks are bigger than ever. Google "Chase Fines" and there are dozens of stories about the Federal Reserve fining JP Morgan Chase. I too am guilty of supporting the system as I bank with Chase but it is clearly time to create an alternative system that keeps the banks and Central Banks in check. It can't be done in Washington DC with elected officials who are part of the system, it can only be done from the outside in perspective of Bitcoin and similar digital currencies.

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

    Themes: bitcoin, digital currencies Stocks: COIN
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    This is so true... As a Bitcoin owner, user, advocate, and developer... I knows the system... I know the programming and I know the alternative... which has been the ONLY! A monopoly. BTC does and can help, even more, to balance the central banks. America, since 1913, has allowed the WORST MONOPOLY EVER... a private corporation... to control our entire financial system... and it must stop! I petitioned, and gathered many signatures, for Abolishing the Federal Reserve Board, but I often wondered, in reality, how would we do that? I figured, as horrible as it is, that we could not just STOP! So we need to not only allow, but thank and praise Bitcoin, as a financial system and most importantly as a way to keep the Federal Reserve Board in check... it is a completely independent, completely unbiased, completely uncontrolled financial system... only controlled by the rules of mathematics and the needs and desires of the people to buy and sell at their "fair price". Give The FED some competition!
    10 May, 02:22 PM Reply Like
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