Category: Finance

Still Waiting for a Rate Hike

federalreserveThe Federal Reserve and FOMC concluded their two day meeting on Wednesday and announced they would be keeping interest rates near zero. This was expected, of course. What is causing anxiety for market participants is the continued question of when the rate hike cycle will actually start. Today’s decision continues to drag out the anticipation and fuel the debate. In this article, we will first look at the facts of today’s announcement and then analyze the options the Fed is currently facing and the implications for the markets.

Although a rate hike was technically possible, almost all pundits and economists knew that was not going to happen. Instead, the main focus was on any indications by Fed chairwoman Janet Yellen concerning when or if rate hikes would be coming later this year. In this regard, it seems the Fed

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Zimbabwe Ditches Hyperinflated Currency

Zimbabwe is infamous for its hyperinflated currency, with its citizens carting wheelbarrows full of money to the market just to buy a loaf of bread. The country’s hyperinflation hit a peak in 2008, reaching 5 billion percent, making the Zimbabwean dollar virtually worthless. After that, citizens began using foreign currencies, such as the U.S. dollar and the South African rand.

640px-Flag_of_Zimbabwe.svgNow, the Zimbabwean government is finally ditching the currency, offering a deal to citizens in which they can convert their bank account balances to USD. Accounts with balances up to 175 quadrillion Zimbabwean dollars will receive USD$5; accounts in excess of 175 quadrillion Zimbabwean dollars can convert their money to USD at an exchange rate of USD$1 for 35 quadrillion Zimbabwean dollars. People who still hold old Zimbabwean dollar notes can exchange 250 trillion old notes for USD$1.

Zimbabwe’s disastrous hyperinflation is a textbook example of the dangers involved with using fiat currency. Granted, Zimbabwe’s monetary horror story occurred because of extremely irresponsible policies that are not present in the developed world. However, strong currencies like the US dollar are not very different from the Zimbabwe dollar in terms of fundamentals. Both currencies are managed by a central bank and can be printed at will, with no restriction on supply. The only real differences between the two currencies are that the Federal Reserve is better at managing its money supply, and the political climate in the U.S. is much more stable than in Zimbabwe. But those two things could change at any time, placing the U.S. in a similar situation to Zimbabwe.

The only way to guarantee a reliable currency is to completely get rid of central control over money. Arguably, the best way to accomplish this goal is by adopting a currency with a limited supply, as well as preventing banks from issuing money substitutes in excess of real cash. That way, the money supply cannot grow beyond the amount of cash the banks have in reserves. Under such a system, not only would it be impossible for banks and government to create destructive inflation, but volatile business cycles would likely be prevented as well.

Historically, “sound money” has been synonymous with gold. However, as modern technology progresses, the market has produced potential alternatives to gold. Zimbabwe’s move to the United States dollar will undoubtedly be a welcome change for the country’s economy. However, Zimbabweans should understand that the USD is not fundamentally different from their own failed experiment with fiat currency. In the future, they should seriously consider a sound money alternative to fiat currency.

 

Privacy in a Cashless Society

Denmark is quickly approaching the point where cash might no longer be necessary. Legislators recently proposed a law Mobile paymentthat would allow some retailers to only accept digital payments via a credit card or mobile device. If it passes, it’s likely that many brick-and-mortar shops will gladly free themselves from the burden of paper and metal money. Some citizens, on the other hand, are worried about the trackability of non-cash transactions.

This trend is not especially new. Already a third of Danes use MobilePay, an app created by the nation’s largest bank, for making transactions. One report even said that in 2012, 84% of Danish transactions took place with credit cards. Several other European countries have also expressed a desire to do away with cash. For example, in Sweden’s larger cities, the bus systems already restrict payments to digital forms like credit cards and prepaid passes.

Some people are worried about how their privacy will hold up in a cashless society. Right now, paper money is often used as a way to avoid tracking. Records are not essential for cash transactions because they involve the transfer of physical objects. With relative certainty, we can always know who owns the money because we can see who holds the actual paper bills.

Digital money, however, has to be treated differently. Banks and payment processors almost always attach an identity to artificial transactions. In our legacy financial system, that’s the only way to ensure that money doesn’t get lost, duplicated, or misdirected. Many argue that the authorities would have a field day with this kind of information. Electronic databases are extremely easy to search, analyze, and preserve, so the government could theoretically watch where all of our money goes.

Privacy is definitely a legitimate concern, but it’s important to remember that digital transactions do have some serious benefits for businesses.

close up of man counting money and making notesPhysical money is notoriously difficult and expensive (and even unhealthy) to handle, which I can illustrate with a personal anecdote. Like many others, I spent a decent portion of my teenage years working in a fast food restaurant and I remember muttering all the time about how annoying cash was. Without exaggerating, I can say that it often took five to ten times longer to sort bills and count change than it did to swipe a card. That’s a huge factor when you’re trying to serve 120 cars in an hour and it’s only a fraction of the full cost. The owner of the restaurant also had to pay the managers to count money drawers (and the entire safe) several times a day. Then there’s the cost of having bills and heavy change delivered and picked up by armored trucks, and how about touching dirty paper while serving food!

Daniel Brown is the editor-in-chief of You, Me, and BTC.  He’s also the “Everything Elf” at Liberty.me.

Micronations of Liberty

Micronations of LibertyMicronations

First there was Galt’s Gulch (aka Mulligan’s Valley or Atlantis), the secluded community in Ayn Rand’s novel Atlas Shrugged. Founded by fictionalized banker Midas Mulligan, this community was populated by a group of spirited revolutionaries spurred on by the book’s capitalist working-class hero, John Galt. Readers of Rand’s prolific tone remember Galt’s Gulch as the hidden refuge where America’s most forward-thinking creators, industrialists and inventors sought community amidst an American society that had fallen prey to collectivism and government overreach. It is through this experimental culture that Galt sought to promote a transactional community of voluntary exchange, devoid of laws and regulations that hinder foundational principles of freedom and liberty.

Fast forward to 2015 where we could be witnessing a derivative of Galt’s vision, as exquisitely captured in Rand’s book. Known as “micronations,” these developments function as independent nations, states, or even just communities free of the restrictive controls of a central government. In a fully idealized form, these independent milieus might establish a dedicated currency system, community mission and other elements codifying their functional ecosystem.

Liberland Abound

Within libertarian circles, media attention is in full buzz around Liberland, a new micronation situated on a 2.7-mile swath of unclaimed territory between Serbia and Croatia. Originally done in jest as a publicity stunt, this proposed nation-state is now attracting a groundswell of interest, garnering nearly 250,000 citizenship applications over a short period of time from all parts of the world.

Liberland was officially codified on April 13, 2015, by acting President Vit Jedlicka and a couple of other Czech libertarians. Symbolically, this date was intended to align with the birthday of one of America’s founding fathers, Thomas Jefferson. The purposeful intent of Liberland: To embrace the principle of limited government in alignment with voluntary taxes and public services. And according to Jedlica, no, Liberland will not be joining the European Union.

The hope is that Liberland will evolve over time into a libertarian utopia, with a population of 35,000, which would place it in the same category as Liechtensten, another small European state. State decisions will be made by referendum, embodying the philosophy of direct democracy and electronic voting. In lieu of a traditional tax system, the citizenry will be privy to an autonomous decision-making process that allows them to determine how much they want from the state and what they are willing to cough up in terms of money to pay for it.

By Land and By Sea

TaxesThere are also vast bodies of water worldwide being coveted by independent nation enthusiasts seeking to carve out new vistas of freedom and liberty. Perhaps the most ambitious initiative in play is currently fueled by the Seasteading Institute, founded in 2008 by libertarian activists Wayne Gramlich and Patri Friedman, with the aim of erecting autonomous communities on floating platforms situated in international waters. Interest in this concept mushroomed after word that PayPal founder and venture capitalist Peter Thiel was a major backer.

According to the institute, as well as micronation advocates, these free market floating cities are the next big thing, with predictions of these communities taking shape in the next five years.

The “Live Free or Die” State

New Hampshire has always been somewhat of an odd duck among  the U.S. States. But amidst its majestic landscapes and beauty is a micronation initiative that has been showing momentum for some time. Known as the “Free State Project,” a migration of libertarians is taking place in this New England state, and they are intent on fueling a state of unencumbered freedom,

On tap are some lofty ambitions targeted by or before the year 2035: reducing government debt by one-half as well as government employment by 15 percent; the legalization of marijuana and prostitution; abolishing smoking bans; ending sobriety checkpoints; rolling back unnecessary regulation; impacting free enterprise; reducing incarceration rates and tax burdens to among the lowest in the U.S; facilitating the end of victimless crimes, among others.

The Glendale, Colorado Experiment

Quietly nestled within the mile-high City of Denver, Colorado, is a home rule municipality that is engaged in a quasi-micronation experiment. In the village known as Glendale, Mayor Mike Dunafon has a grand vision of transforming this 4,100 person community into the “go-to” destination for freedom lovers across the world.

According to Dunafon, decisions related to how the city is run are predicated on a philosophy or principle which upholds the freedoms and liberties of the individual. Here, the goal at every City Council meeting is to take at least two often obscure laws off the books that unduly target and punish its citizens or even visitors to the area.

Whether in Glendale or in an obscure part of the world where a new micronation community is sprouting up, the goal is to deregulate our lives through limited government and voluntary exchange. As Dunafon is quick to point out, very few, if any, laws are truly needed for people to govern themselves and act like reasonable, civilized people.

Harkening In The New Gults Gulch?

Irrespective of whether Liberland and other micro nation experiments succeed at their quest, this movement reflects a liberty-oriented consciousness that’s catching fire across the globe. Here questions abound:Freedom Land

Why are such onerous laws restricting our liberty still in vogue from days gone past?

Why are we so hemmed in by taxes that serve as barriers to individual initiative and free enterprise?

And what about our privacy rights?

And what about our freedom to use money as we see fit as long as we are not harming others?

Can’t we just live our lives as free human beings?

These questions and more are all spurring interest in autonomous, experimental enclaves where libertarian ideas can be beta-tested a la Galt’s Gulch. Moreover, they suggest growing interest in the principles of freedom and limited government as the new normal for a free society that works for all.

Michael Scott is the Founder and Principal Barista with Bookmark Global Connect, Inc a firm committed to creating collisions between authors and readers one book at a time. Find out more at http://allthatbookjazz.tumblr.com