Thursday, September 26, 2013

What to do about Banks that are "too big to fail" - Support and Use Bitcoin

It's pretty easy to see that there is a problem when banks are getting bailed out by the government because they are "too big to fail". The problem is that because the government won't let big banks fail, they make risky investments to earn more profit. Why do they make risky investments? It's because they know that if the investment doesn't work out, Uncle Sam will bail them out. This means that while tax payers spend billions or trillions of dollars keeping toxic bank debt from defaulting, bank CEOs are making enormous personal profits.[1] [2] [3]

How do we fix this as a nation? Support Bitcoin. Bitcoin is the most popular crypto-currency, and I believe that it will enhance the usefulness of the internet in the same way that the internet enhanced the usefulness of computers.

For a basic overview of what Bitcoin is, here are some good sources: 

For the current exchange rate of Bitcoin, click here.
Why is Bitcoin going to fix big banks? Because Bitcoin eliminates the most fundamental need for banks; a safe place to store money.

The rest of this article is just going to be about why I like the idea of Bitcoins.
  • Divisibility - 1 BTC can be divided down to 8 decimal places. This is an improvement on standard currencies which can only be divided into discrete coins.
  • Rarity - Each Bitcoin was "mined" and is cryptographically unique. The difficult of mining is predictable and increases with time. The total amount of Bitcoins in circulation is public, predictable, and cannot change from the prediction.
  • Transferable - Bitcoin allows for completely secure transactions from anybody in the world to anybody else in the world given they both have an internet connection
  • Relatively anonymous - It's about as anonymous as cash. If you do research, there are ways to make it anonymous.
  • Unprintable - Nobody can simply make more Bitcoins if they want to. It takes computing power to calculate (mine) Bitcoins. The difficulty of mining Bitcoins increases with time. It is not economical currently for an individual to mine their own Bitcoins at a profit because of the cost of power.
  • Decentralized - A growing network of nodes with an agreed upon open source algorithm determine how Bitcoins work. If one node in the network changes the rules, the rest of the network will reject them.
  • Unregulated - So far the currency is completely unregulated. I believe that in the future the government could only regulate it - if they really cared to - as well as they currently regulate cash (not dollars, but physical printed money). And they can't print more Bitcoins like they can with cash.
  • Secure - You don't need to buy a safe or trust a bank to keep it safe. If you follow best security practices it won't be taken from you.
  • Open Source - anybody can see the programming that makes Bitcoins work. This protects against flaws, vulnerabilities, and allows you to trust it - because you know that if there were big problems, people that understand the code (a lot of very smart young people) would fix it or complain about it until somebody else fixed it.
  • Irreversible -  peer to peer Bitcoin transactions are completely irreversible. This could be looked at as a good thing or a bad thing. I view it as a good thing. It means it's harder for somebody to steal from you also. Quality businesses that trade using Bitcoin will refund you the money if they hope to compete in any market that demands good customer service. But it's there choice if they refund it or not. Also, make sure you send it to the right address.
  • Non-Inflatable - The total amount of Bitcoins will continue to increase until the year 2140 and then after that, no new Bitcoins will be mined. There will be 21 million Bitcoins in existence. It will actually deflate slowly because if people lose their Bitcoins, there is no way to retrieve them. But that's okay because it just means other Bitcoins will be worth slightly more. 
Words of caution:
  • New  - because it's new, it is still volatile. If we treat Bitcoins as an investment rather than a currency, then we can make some good comparisons to trading a stock. The biggest factor in the risk assessment of a stock is how big the company is. This is measured as "Market Cap". Market Cap is calculated by taking the total number of share multiplied by the current price per share. For Bitcoin, here is a link to the total number of Bitcoins - currently ~. Multiply this by the value of an individual Bitcoin - currently ~$160 on 9/26/2013. That is almost 1.9 Billion dollars. If you are a younger stock investor, companies in the 1-20 Billion dollar range are a good risk / reward tradeoff.
  • It could be a bubble - Any investment could be a bubble, or the beginning of something big. I'm personally expecting it's something big because of how revolutionary the idea is compared to anything else we have today. Also, I have zero faith in the (mostly) idiots running the U.S. government to not run our country into the ground. So, as Ben Bernanke continues to Quantitatively Ease (inflate / print) your dollars out of value, Bitcoin will go up in value.
  • New - did I mention it's new? It's not very easy to use yet because companies are still developing ways to make it easy to use. Do careful research, and you can figure it out.
  • Diversity - Buy some stocks, gold, dollars - diversify your investments. Plan for it to fail, and you may be happily surprised when it doesn't.
How do you buy Bitcoin?
  • Sign up for an exchange, give them your bank account information, address, first born child, soul, etc. and they will allow you to trade regular money for bitcoin at the current exchange rate.
  • Buy it from an individual who sells it using - admittedly, this seems sketchy. The idea of taking an envelope with cash in it to a public place to meet somebody so they can transfer Bitcoin to you. Pick your poison from the two main options available. If you choose to meet somebody in person, look for sellers that have 100+ previously good transactions on their account. 

Tuesday, August 27, 2013

Why do Americans Need Guns?

Americans have a long history of gun ownership. The founding fathers built the right into our constitution in the 2nd amendment.
A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.
The U.S. constitution is not a set of "guidelines" made for the government to overstep when it feels like it. It doesn't say, except automatic weapons, or except only in their private residence, and it doesn't say except only with a permit. This is for a very particular reason; democracy only works if the government fears it's constituents. Does our government fear it's constituents? <8/27/2013>
The police are becoming heavily militarized. Many of them think of themselves as soldiers instead of protectors of the public. The war on drugs causes the police viewing the public as their enemy rather than the people they serve to protect. At the minimum, individuals should be able to buy any weapon that a SWAT team can buy as a partial check against corrupt police. Here is a map of all of the SWAT team mishaps [2].

But what about all of the accidental gun deaths each year? Accidental gun deaths are the result of irresponsible people. But it's not the governments job to protect us from ourselves. I oppose all laws meant to protect me from myself. Why should I give up my liberty and rights because some idiot accidentally shoots themself?

There are three rules to guns that would solve all of the accidental shootings:
  1. Don't point a gun at anything you don't want to shoot. 
  2. Always treat a gun like it's loaded.
  3. Store your guns in a safe place where somebody who doesn't know the rules cannot access them.
In addition to protecting us from our own government, guns act as a deterrent for criminals.

Lets assume criminals are the only reason we need guns. If you really dig into the ideology of anti-gun perspectives and pro-gun perspectives, the argument has elements of idealist vs. realist. An idealist would ask:

Would less people shoot each other if there were no guns?
Yes. If there were no guns, it would no longer be possible to shoot somebody. We should remove guns from society. If we start banning guns, we will be moving in the right direction as a society.
A realist would say:
Yes, but we can't take guns away from everybody and we can't keep them off of the black market. So the best thing we can do is empower responsible people to protect themselves from criminals.
Believing in an ideal society is an admirable goal, but an ideal society is realistically impossible. There will always be corruption in a power hungry government, and there will always be criminals with guns. We need to make the best decisions given our practical limitations.

Do you want to control your own safety, or do you want to rely on 911 to keep you safe?
Calling 911 when there is an intruder is not the best option. If somebody is breaking into your house, you may only have 30 seconds to act, and I believe you have the right to defend your property from an intruder. Calling 911 and talking out loud to somebody on the phone will give away any tactical advantage you might have against an intruder. Also, the police won't get there for at least 5-10 minutes. At that point, you and your family could be dead. Intruders should be shot on sight.

How many robberies do you think there would be if everybody had a gun for home defense?
Actually, we can answer that question by comparing the United States, to Switzerland. In Switzerland, every male is given an assault rifle for their military service. Switzerland has a robbery rate of 36 per 100,000 people, while the United States has a robbery rate of 234/100,000. The U.S. has 650% higher robbery rate than Switzerland. [1]

Americans need guns for two main reasons; to defend themselves from criminals, and to defend themselves against tyrannical government.

[1] Source: <Accessed 8/27/2013>
[2] Source: <Accessed 8/27/2013>