Max Keiser of Russia Today drops by to explain the genesis and implications of the digital currency Bitcoin, why The Federal Reserve and the banking system should apologise to the people for manipulating interest rates, how Warren Buffett is complicit in the Mexican drug trade by purchasing Wells Fargo, and Max’s crazy times in the 1980s as a New York City stockbroker by day and punk-rock party animal by night.
We’ve seen the stories all over the news and in the papers. The financial landscape of the world is in flux. Venezuela’s inflation is climbing at its fastest pace in decades. Cyprus has followed through with its capital control policy and will be carrying on at least to the end of the year (or so they say). If there’s something positive to be taken away from these dire situations are reports of citizens finding new ways of trading between one another. One of the more prevalent methods being the use of the newest currency in the virtual world, Bitcoin. We were lucky enough to get the story on Bitcoin from Russia Today’s own, Max Keiser.
In this episode Max talked about the current state of Bitcoin and perhaps what we can anticipate from the cryptocurrency in the future.
Satoshi Nakamoto, which is considered by most to be a pseudonym, created Bitcoin as an answer to a financial system he/she/they strongly disagreed with. This currency is heralded as a true supply & demand market. The algorithm upon which it is based allows for only 21 million Bitcoins to be created, half of which have already seen the light of day. It is said that the currency is released at the relatively steady rate of 25 Bitcoins every 10 or so minutes. These coins are then mined (mostly by supercomputers) and added to the system. It’s a market like this that scares people like Bart Chilton, Commisioner of the CFTC. Max had some very choice words for Bart and his friends (I strongly suggest you watch the video if only for this rant, Max is truly a character!)
In addition to enlightening us here at London Real about Bitcoin, Max also gave us the goods on what’s really happening over at the Fed. Something that many people seem to like about Bitcoin is that it’s not being manipulated by the Central Banks. The Fed just recently announced that it will not be lifting off the QE pedal and will continue to purchase $85 billion worth of bonds every month. These “open market operations” continue to keep interest rates artificially low while at the same time helping those who are closest to the source and hurting savers across the board. As Max says, “This just makes it cheaper for speculators to speculate.”
Moreover, the effect of these interest rates can lead to some very perverse markets. In what is being called, “The Great Migration”, we are seeing ordinary people move away from banks and sprint to the stock market. Even the everyday Joe can see that putting their money in savings is a joke. Sure enough this has had an effect on the record highs we’re seeing on Wall St over the last couple of days. Maybe this is the reaction the Central Banks were looking for, but I can’t help but feel that a major market correction potentially lies ahead. The good days don’t go on forever, especially when we can still see major problems in unemployment and fiscal policy that lie ahead.
Ultimately, the first thing many people notice when they dive into the financial markets is the level of corruption. After the Great Recession we saw plenty of bailouts, but how many arrests? The financial industry is one of the most protected and subsidised industries in America. It’s no wonder that we see criminals like Jeff Skilling, former CEO of Enron, getting their sentences cut short. And if you haven’t heard the HSBC case already, they were caught dead to rights laundering Mexican drug cartel money. HSBC settled for only 1.9 billion which is about a months profit, or the cost of doing business. Nobody has seen a jail cell.
And if you thought that was bad listen to this one. Wachovia, a bank in the United States, was caught laundering over $380 billion for the Mexican drug cartels. That’s essentially 1/3 of Mexico’s GDP that was cleaned up and made legitimate right here in America. In fact, Max argues that Wells Fargo, who bought Wachovia while this was happening, is complicit in the crime. As he says, “Warren Buffett is a financial terrorist.” The truth is that this corruption has made its way all the way through. Those who are closest to the source get the most benefits. What we’re seeing today is unprecedented both in the financial industry and in government. Everyone is out to take care of his or her own. Somewhere along the line we lost sight of “what’s right” and “what’s right now.”
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