Nobody yet knows how the Cyprus crisis will finally play out; but the talk of confiscation a percentage of Cypriot’s bank deposits has Spaniards worried that the same could happen to them. The insanity level seems to have kicked-up a bit.
A commenter on my post about the Cyprus crisis suggested it may be time to go back to the days of keeping one’s money under the mattress. Spaniard, Francisco Santos, thinks the same as we learn from Mish’s Global Economic Trend Analysis:
Putting new meaning to an old phrase (keep your money under the mattress), a Spanish firm touts ‘Mattress Savings’ the first mattress with built-in safe.
“Savings, are better under the mattress”. How often have we heard this phrase! The difficult economic situation in recent months and various scandals involving financial institutions have led many to dream about fluffy Spanish euros. Francisco Santos also dreamed, and woke up to make it happen: he created the first mattress with built-in safe.
A bit of a joke? Maybe. But this next “bit” is no joke. Zero Hedge has the story:
Something extreme is happening in Europe. Since Sunday, Bloomberg Businessweek reports a trio of Bitcoin apps have soared up Spain’s download charts, coinciding with news that cash-strapped Cyprus was planning to raid domestic savings accounts to pay off a $13 billion bailout tab. “This is an entirely predictable and rational outcome for what’s happening in Cyprus,” says ConvergEx’s Nick Colas. “If you want to get a good sense of the stress European savers are feeling, just watch Bitcoin prices.”
What is Bitcoin? Bitcoin is a virtual currency where the prices is determined by free market supply and demand. From Wikipedia:
Internationally, bitcoins can be exchanged by personal computer directly through a wallet file or a website without an intermediate financial institution. In trade, one bitcoin is subdivided into 100 million smaller units called satoshis, defined by eight decimal places.
Bitcoin does not operate like typical currencies: it has no central bank and it solely relies on an internet-based peer-to-peer network. The money supply is automated, limited, divided and scheduled, and given to servers or “bitcoin miners” that verify bitcoin transactions and add them to an archived transaction log every 10 minutes. The log is authenticated by ECDSAdigital signaturesand verified by the intense process of bruteforcingSHA256hash functions of varying difficulty by competing “bitcoin miners.”Transaction fees may apply to new transactions depending on the strain put on the network’s resources. Each 10-minute portion or “block” of the transaction log has an assigned money supply. The amount per block depends on how long the network has been running. Currently, 25 bitcoins are generated with every 10-minute block. This will be halved to 12.5 BTC during the year 2017 and halved continuously every 4 years after until a hard limit of 21 million bitcoins is reached during the year 2140.
Confused? Me too. So, I went to another source. “Bitcoin Foundation standardizes, protects and promotes the use of Bitcoin cryptographic money for the benefit of users worldwide.” I am still confused. This virtual cryptographic money stuff is over my head. But, apparently, people do use Bitcoins to transact business over the internet. My guess is that the central bankers do not like the competition. Zero Hedge has more:
The value of the virtual currency has soared almost 30 percent in the last two days. “One hundred percent of that is due to Cyprus,” says Colas. “It means the Europeans are getting involved.” As German economist Peter Bofinger warned in an interview with Spiegel Online: “European citizens must now fear for their money.”
The same apps download data, however, showed that Italians aren’t ready to abandon commercial banking, remarkable as many Italians still recall that black day in 1992 when they woke up to a levy on their savings accounts to prop up the nation’s teetering finances.
The EUR price for a Bitcoin has jumped from around EUR37 to over EUR50 in the last two days as reality hits… and look at the volume…
Nassim Taleb (On Reddit) – via Mike Krieger (@LibertyBlitz):
“Bitcoin is the beginning of something great: a currency without government, something necessary and imperative.”
I may not understand the ins and outs of this cryptographic virtual money; but, the idea of a currency without government or central bank manipulation would be a dream come true. This is a David vs Goliath story if I’ve ever heard one. I’ll be rooting for the David’s, but I won’t be holding my breath.
Well, that’s what I’m thinking. What are your thoughts?