- cypherpunks@lists.ogf.org

An Insider Blows the Whistle on How the Fed Has Allowed Crypto to Invade Federally-Insured Banks
by Gunnar Larson 14 Dec '22

14 Dec '22

https://wallstreetonparade.com/2022/12/an-insider-blows-the-whistle-on-how-… By Pam Martens and Russ Martens: December 14, 2022 ~ Federal Reserve Building in Washington, D.C. Federal Reserve Building in Washington, D.C. Katie Cox worked for the Federal Reserve for 32 years, the last two decades of which were spent overseeing complex proposals for bank mergers. She left the Fed in 2020. Last Wednesday Katie Cox penned a shocker of a column for American Banker. She opened with this: “Suppose you’re a crypto company that wants to own a bank approved to engage in digital-asset activities. Here’s the fast-track way you might achieve that, while complying with rules in place since August: Go buy a bank, any bank. Convert your bank to a Federal Reserve member bank, meaning that your bank’s federal supervisor will now be the Fed, not the Office of the Comptroller of the Currency or the Federal Deposit Insurance Corp. Wait a little bit, maybe six months. Then send the Fed a letter notifying it that your bank is going to engage in digital-asset activities and that you have determined the activities your bank will conduct are permissible. Promise that you will soon establish a risk management framework to manage this complex new business. If you’re lucky, your bank won’t be examined for a year or two. By then, you might have cranked up quite a dumpster fire.” Cox goes on to explain that she’s not recommending this as a strategy, but simply stating that crypto outfits have found a clever means of engaging in regulatory arbitrage. It should also be noted that Cox did not write this column out of an altruistic bent. She is one of a legion of former federal regulators that now work for crypto outfits. Cox now works as an advisor to Custodia Bank, a new applicant for Fed membership that wants to engage in crypto activities. According to Cox, new Fed applicants have a more difficult time than simply taking over an existing Fed member bank. The August 16, 2022 rules put in place by the Fed are known as SR 22-6 and, indeed, leave it up to the bank to notify the Fed and have adequate risk management systems. But the Fed uses the word “should” do this or that throughout this rule instead of “must.” Lots of dumpster fires have ensued. The Fed also makes this statement in rule SR 22-6: “Given the heightened and novel risks posed by crypto-assets, the Federal Reserve is closely monitoring related developments and banking organizations’ participation in crypto-asset-related activities.” Monitoring is, clearly, not the same thing as policing. Twelve days after the disgraced and corrupt crypto exchange, FTX, filed for bankruptcy, the New York Times ran this headline: “Crypto Firm FTX’s Ownership of a U.S. Bank Raises Questions.” The article explains that a tiny bank in Washington state, Farmington State Bank (also known as Moonstone Bank), had received an ownership stake of $11.5 million from FTX’s sister firm, Alameda Research, which at the time was twice the net worth of the bank. The Federal Reserve is the primary regulator of Farmington State Bank according to regulatory filings. Sam Bankman-Fried, who was indicted on eight criminal counts by the U.S. Department of Justice yesterday, is the majority owner of both FTX and Alameda Research, the hedge fund he operated as a personal piggy bank using customer deposits from FTX. Attorney General Merrick Garland had this to say about Sam Bankman-Fried yesterday: “We allege that the defendant conspired to defraud customers by misappropriating their deposits; to defraud lenders; to commit securities fraud and money laundering; and to violate campaign finance laws. As this indictment demonstrates, the U.S. Department of Justice will aggressively investigate and prosecute alleged criminal wrongdoing in the financial system and violations of federal elections laws. We will continue to work to ensure U.S. capital markets operate honestly and with the integrity that investors, lenders, and the American people are entitled to.” The American people are the taxpayers that are now picking up the tab for the Justice Department, the Securities and Exchange Commission, the Commodity Futures Trading Commission and a multitude of state regulators to investigate what appears to be a global fraud perpetrated by FTX and its affiliates. That the alleged kingpin of this fraud, Sam Bankman-Fried, was so easily able to obtain an ownership stake in a federally-insured bank means the Fed needs to move beyond “monitoring” the banks it oversees and into the aggressive role of cop on the beat. Farmington State Bank is not the only bank whose primary regulator is the Federal Reserve and that is feeling the fallout from the collapse of FTX. Silvergate Bank is also primarily supervised by the Fed and experiencing a mountain of pain. Its publicly-traded parent, Silvergate Capital Corp. (ticker SI), closed at $148.20 on December 31, 2021. The stock closed yesterday at $18.73, a decline of 11.9 percent on the day and a plunge of 87 percent year-to-date. That’s not the kind of performance that breeds confidence in the safety and soundness of U.S. banks and how they are supervised by the Fed. Silvergate Capital’s 10-K (annual report) for the year ending Dec 31, 2021 states that “Deposits from digital currency exchanges represent approximately 58.0% of the Bank’s overall deposits and are held by approximately 94 exchanges.” Approximately $1 billion of those deposits at Silvergate Bank came from FTX – meaning that this federally-insured bank has now brought – at a minimum – serious reputational damage on itself and its wimpy cop, the Federal Reserve. Two Senators who sit on the Senate Banking Committee are taking serious note of this situation. Senator Elizabeth Warren (D-MA) and Senator Tina Smith (D-MN) sent a letter last Wednesday to Jerome Powell, Chair of the Federal Reserve; Martin Gruenberg, Acting Chair of the Federal Deposit Insurance Corporation; and Michael Hsu, Acting Comptroller of the Office of the Comptroller of the Currency. The letter seeks answers on just how far crypto has encroached into the federally-insured banking system. In the letter to Fed Chairman Powell, the Senators write: “While the banking system has so far been relatively unscathed by the latest crypto crash, FTX’s collapse shows that crypto may be more integrated into the banking system than regulators are aware. To better understand the scope of the banking system’s exposure to the crypto industry and how banking regulators currently assess crypto-bank relationships, we ask for answers to the following questions no later than December 21, 2022.” Question number three from the Senators demonstrates just how little information Congress has been provided about the encroachment of potential crypto scams into the federally-insured banking system. That question reads as follows: Please specify the number and names of banks regulated by your agency which are currently engaged in the following activities: a. Providing cryptocurrency custody services. b. Holding dollar deposits for crypto-related firms. Of those banks, please specify the number and names of banks that hold dollar deposits as reserves backing stablecoins. c. Acting as nodes to verify customer payments. d. Facilitating stablecoin payment transactions. e. Providing loans to crypto-related firms. (Of those banks, please specify the number and names of banks that accept digital assets as collateral for loans.) Under the rubric of innovation, Wall Street came close to collapsing the U.S. financial system in 2008 with its “innovative” synthetic derivatives, Structured Investment Vehicles (SIVs), and subprime securitizations. Today, dozens of members of Congress have invoked “innovation” to justify allowing crypto to run amok in our financial system. But more than 1,600 of the best scientific and software minds say both crypto and blockchain are shams. It’s time for Congress and federal regulators to find a backbone and competently deal with this confidence-draining mess.

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Greg Barton needs killing ( My 2000 sats )
by professor rat 14 Dec '22

14 Dec '22

https://twitter.com/gregjamesbarton?lang=en " . . . the definition of terrorism as non-state actors using or threatening to use violence against symbolic targets in a bid to force change. . . " https://stiffs.com/celebrity/joebiden KILL the POTUS - Welcome to the revolution!

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More 'resistance ' mush
by professor rat 14 Dec '22

14 Dec '22

“It’s like The Matrix red pills – people need to wake up to what’s going on and resist.” https://www.news.com.au/national/queensland/crime/losers-with-no-authority-… The modern nation state is illegitimate, modern laws have an oppressive hold over the population and people need to “be brave and stand up to dictatorial governments and laws”.

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Elon Musk - Fright risk
by professor rat 14 Dec '22

14 Dec '22

The account @ElonJet which was run by @JxckSweeney and did nothing more that share publicly-available information about Musk’s private jet, has been suspended from Twitter. Snowflakes gonna snowflake. To be men! That is the Mollusk law! . . . We must learn from Elon his sincere intensity his concrete clarity. . . . Elon is the noon, the maturity of a mollusk and his MAGATs. Muskovites, Let us bear this title with pride. . . . Muskrat workers, clerks, women take care of this day! The light has not vanished. The wheels have not disappeared, There is only the growth of Fire, Light, fire, bread, fire and FIRE, more FIRE! In Elon’s invincible time of fire! . . . In recent years the limping Bluebird, Peace, the wandering persecuted rose, Found herself on his shoulders And Elon, the giant, Carried her at the heights of his forehead. . . . A wave beats against the stones of the shore. But Rittenhouse will continue his work.

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Its like the FTX of punk history
by professor rat 14 Dec '22

14 Dec '22

" . . . it must be stressed that any claim to being ‘definitive’ or ‘complete’ is rejected here https://jimdonaghey.noblogs.org/publications/ DrKPopUpConvos Nov 3 Beautiful day to exercise your right to vote. Vote early. Get out there. #Democracy https://twitter.com/drkpopupconvos Wild Bill’s riot oeuvre https://www.researchgate.net/scientific-contributions/Will-Boisseau-2051665… If silence is assent the documented ’ punk culture of resistance ’ totally accepts being Luna eclipsed by cyberpunk’s ’ The Matrix " before being solar eclipsed by the creation of billions in new stateless currencies since 2008. And who was responsible for that? Cypherpunks

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Trad punk bores never even heard of CYBERPUNK
by professor rat 14 Dec '22

14 Dec '22

Those talking up a history of punk since 1867 without once mentioning either CYBER punk or CYPHER punk talk with a corpse in their mouth. Missing the socio-economic importance of a movie like ' The Matrix ' AND crypto-currencies means you are TSTBALAA ( Too stupid to be an activist let alone anarchist ) And way to lie by omission, moron! Spectacular! https://anarchistnews.org/content/punk—dangerous-utopia Reposts only a danger to themselves

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Trad punk is missing out on cypherpunk revolution
by professor rat 14 Dec '22

14 Dec '22

' Resistance ' after 2005 stinks of retreat or worse - defeat Something every left-commie moron " Situationist ' ought to know backwards. The Sids and Nancy's of Marxism. The only big resistance going on right now is how fast existing power can surrender to cryptoanarchism with any self-respect left. Small ' R' resistance to cryptoanarchy since 2010 on the libertarian-left? Tragedy repeating as moronic farce. https://anarchistnews.org/content/punk—dangerous-utopia Reposts from cretins not recommended

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Cryptocurrency: Personal Responsibility, Defund via Selective Spend of P2P Privacy Coins
by grarpamp 14 Dec '22

14 Dec '22

Monopolies And Cartels Are "Communism For The Rich" by Charles Hugh Smith What's unfettered in America is "Communism for the Rich" and the normalization of corruption that results from the auctioning of political power to protect monopolies and cartels. The irony of constantly being accused of being a communist is rather rich. When I point out that "free market capitalism" in America is neither a real market nor real capitalism, those who equate any criticism of "capitalism" as proof of communist leanings are triggered. Noting that Marx got monopoly capitalism and alienation right triggers another group who equate any favorable mention of Marx as proof of communist leanings. There are two ironies in these accusations of being a communist. One is that I've spent 17 years tirelessly critiquing centralized wealth and power--the acme of communism--as the source of our moral, social and economic decay. The other irony is that Communism is absolutely thriving in America in broad daylight: the monopolies, quasi-monopolies and cartels that dominate the American economy and governance are Communism for the Rich. The core goals and functions of communism and monopolies/cartels are identical: snuff out unfettered markets (competition, transparent price information for all participants, etc.) and take control of all market functions, restricting supply and controlling all regulation with the sole goals of further concentrating centralized power and maximizing steady profits (i.e. maximum greed) to benefit those who own/control the concentrated wealth and power. And of course both pump out an endless spew of propaganda about the wonderfulness of the system that benefits the few at the expense of the many. This centralized power to benefit the few at the expense of the many characterizes both Communism and monopolies / cartels. There is no difference between the two other than the structures of control that eliminate competitors, regulates supply and keeps prices high enough to further enrich the already-rich. Those operating monopolies and cartels in America are in effect a private-public Politburo, a concentration of wealth that buys whatever political power is needed to increase profits and protect the monopoly from threats. What's unfettered in America is Communism for the Rich and the normalization of corruption that results from the auctioning of political power to protect monopolies and cartels. "Markets" and "capitalism" only exist on the fringes of the economy, but the myth that America is the home of "unfettered capitalism" is extremely useful cover for the actual system, which is Communism for the Rich.

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Cryptocurrency: Stops The Bleeding and Central Fraudsters of Custody Permission and Theft
by grarpamp 14 Dec '22

14 Dec '22

Bitcoin Stops The Bleeding: A Sound Money System Is The Only Cure For What Ails Our Economy https://bitcoinmagazine.com/culture/bitcoin-stops-the-fiat-bleeding https://www.econlib.org/library/Mises/HmA/msHmA.html https://alilybit.substack.com/p/what-the-fuck-is-going-on https://www.atlanticcouncil.org/global-qe-tracker/ https://www.brookings.edu/research/fed-response-to-covid19/ https://www.youtube.com/watch?v=W6CTHoTTMyo https://twitter.com/canindependent/status/1595460390045028352 As fiat currencies slowly bleed out in value, they are disincentivizing saving. Bitcoin is a cure for the economic calamities... When a doctor operates on a wounded patient, the first thing they do is make sure they can stop the bleeding. No point operating if you can’t get the bleeding under control because the patient will die. Money facilitates mutual exchange and helps market actors coordinate price discovery — it is the literal blood of the economy. As fiat currencies slowly bleed out in value, they incentivize fewer people to save. If you want to stop the bleeding in your financial life, you are going to need to find a way to store your wealth in something else. There are plenty of options, but only one that is programmed to stop all bleeding in 2140. As peoples’ money bleeds out, so too does their education, time and, I’d even argue, their mental sanity. Blood isn’t oozing out egregiously, but rather being siphoned off from tiny cuts, so most people do not even realize it’s happening. This is a hard pill to swallow. Most Western societies teach people not to question authority: raise your hand if you want to ask questions, and trust the experts. Breaking out of this mentality is difficult. Watch this clip of the White House press secretary to get an idea of how those at the top will treat people who dare question the narrative. Watch: Bidens White House Press Secretary refuses to allow a reporter to question Dr. Anthony Fauci during his last press conference as the governments top doctor on the origins of Covid-19. pic.twitter.com/06SRLUQwd9 — The Canadian Independent (@canindependent) November 23, 2022 PAIN IS THE BEST TEACHER Narrative is everything when trying to coerce the masses to accept a “Great Reset” (if you have no idea what the Great Reset is, you can read about it here). The scope of this article won’t cover what the Davos elite is attempting to impose on the rest of the world, but rather why Bitcoin stops money from bleeding out. Trying to calculate all of the variables that bring about the emergent, complex behavior of society is futile. Governments stole trillions of dollars via quantitative easing and blamed their theft on COVID-19. It should not be a surprise that what followed has been chaos in the form of protests and supply chain issues. The Federal Reserve is following up its quantitative easing with tightening monetary policy at record paces trying to get inflation under control. This demand destruction is wreaking havoc all over the economy but is necessary to weed out unprofitable businesses. For better or worse, pain is the best teacher. Hard Money recently reported that Trezor has seen a 300% increase in sales revenue after the FTX debacle. The whole point of Bitcoin is to not trust ,but verify for yourself. Many ignored this because FTX had the stamp of approval from many mainstream news outlets, politicians and celebrities. In the wake of its blow, FTX created tons of new Bitcoin maximalists who now understand why not verifying Bitcoin with your own node means that you are trusting potentially-corrupt third parties. The mainstream media is not doing itself any favors with puff pieces like the one below. Articles like this only serve to increase the pain of those who were robbed and convince more people that the mainstream narrative is corrupt: Source BUT SELF EDUCATION HELPS TOO The remedy to most of these problems is a better education. Tools like Saylor.org, Udemy and plenty of others have lowered the barrier tremendously. It just requires a desire to learn. For me, I found that desire by going down the Bitcoin rabbit hole. Ironically, answering one question would lead me to more questions and that number of questions grew exponentially. It made me wonder how much people are not taught intentionally during their traditional schooling. There is only so much time in the day and teachers must prioritize their curriculums accordingly. I just don’t understand why taxes, how to vote and basic financial literacy aren’t at the top of most public school curriculums. The reader can come to their own conclusions. What’s important is finding a teacher who speaks your language and a subject that brings out your natural curiosity. Learning becomes one of the most euphoric feelings in the world when those two needs are met. The standard way of learning has horrible mental models for teaching people, like memorizing things for a test. Oscar Wilde is quoted as saying, “Experience is merely the name men gave to their mistakes.” People are so focused on learning from the experts that they forget that those who changed the world didn’t ask for permission to do so. They just did it. People want a hero to fix all of their problems but the truth is that no one is coming to save you. I’m not saying one should not find great mentors; it’s super valuable being able to listen to those who have become experts in their fields in order to learn. I’m saying one should not worship people like gods who can’t make mistakes. Just look at Sam Bankman-Friend, who many thought was a hero. Source Despite all of the educational content out there, the reality is most people will come to understand the difference between paper bitcoin and bitcoin you actually hold the keys for via an expensive lesson. When the majority of Bitcoiners self custody their coins, and stop blindly trusting their heroes, that is when we will see fireworks in regards to bitcoin’s price action. Every person is different and has various forms of risk tolerance. For those who are discouraged by recent events, remember: Rome was not built in a day. Sometimes the only way to get a lesson through someone’s head is for them to suffer the pain of said mistake. FTX AND CENTRAL PLANNERS ARE NOT SO DIFFERENT What’s interesting about watching FTX fail so rapidly is that the same thing would happen with our traditional financial system if we didn’t have central banks acting as lenders of last resort. FTX violated its own terms of service by using customer funds to make bets, but 99.9% of the world just turns a blind eye when banks do this because their terms of service legally allow fractional reserve banking. In his book “Human Action,” Ludwig von Mises writes: “The rich, the owners of the already operating plants, have no particular class interest in the maintenance of free competition. They are opposed to confiscation and expropriation of their fortunes, but their vested interests are rather in favor of measures preventing newcomers from challenging their position. Those fighting for free enterprise and free competition do not defend the interests of those rich today. They want a free hand left to unknown men who will be the entrepreneurs of tomorrow and whose ingenuity will make the life of coming generations more agreeable. They want the way left open to further economic improvements. They are the spokesmen of progress.” Technology getting better should lead to massive deflation from productivity gains. Regulatory moats and monopolies prevent this. Fractional reserve banking creates an inflationary environment where tons of capital is misallocated. In a free market, most commercial banks would be insolvent. FTX tried to create its own fractional reserve monopoly by lobbying Congress and creating a regulatory moat around its business which would’ve made it impossible for competitors to compete in the crypto ecosystem. The world is fortunate FTX’s system blew up before it was able to get its way with D.C. Mises was right: It is not the incumbents who will create a more agreeable future, it is entrepreneurs and ideas competing in a free market. Bitcoin has over 10,000 competitors, and that number is growing every day. Many, if not all of these tokens, are Ponzi schemes in my opinion, but the idea that D.C could do a better job deciding this than the free market could is ridiculous. I understand regulation is difficult when technology is changing things at such rapid rates. The little piece of glass in our pocket allows us to hail a ride, order food or listen to some of the greatest minds on the planet whenever we want. All of these things would seem magical to someone who lived before the creation of smartphones. There are going to be hiccups along the way as humanity tries to come to grips with these new tools. This is why I keep this Hal Finney quote as my Twitter header: Source For all of the wonders that technology can do for humanity, it can also drive a whole new level of control. Free markets lead to optimal price discovery. Too much central planning and markets start to break. Price discovery in a free market is like a hash function. It takes inputs of data and spits out an output that only goes one way. With a normal hash, the algorithm works so that it is unfeasible to reverse-calculate the data. You can verify a hash by making sure the same output is achieved based on the input, but you can’t take the output and figure out the input. In this same vein, a free market will set the price of a good, but you can’t figure out how all of the labor, work, travel and other variables created the price of the good. The function only goes one way. Market actors get upset when the coercion variable is notched up and price increases happen. The blame is typically pushed on to the producers rather than the central planners who are causing such issues. Sound familiar? Like say the U.S. government, which is calling out greedy fossil fuel companies for raising the price of gas while at the same time advocating for the end of fossil fuel use. If price controls are imposed, price discovery completely breaks down, resulting in shortages. Until the creation of money is no longer heavily intermingled with politics these issues will continue to play out. BITCOIN IS MORE IMPORTANT NOW THAN EVER As central bank digital currencies (CBDCs) and digital identities are rolled out, it has never been more important to point out why Bitcoin is the remedy. Bitcoin allows the individual to go down a hero’s journey where they can keep the value of their labor in their head. CBDCs and digital IDs offer governments tools to enact monetary policy at the individual level, be at the center of every transaction and turn off people’s money as they see fit. Bitcoin offers a better system, one that no one can cheat if they want to be in consensus with the rest of the network. Preston Pysh said it best: “Bitcoin is like the infinity stone.” It takes a great deal of faith to hold on to an asset that has had multiple 70% to 90% drawdowns before recovering to new all-time highs. Not many can hang on to their bitcoin but those who do over long periods of time are greatly rewarded. The network effects of Bitcoin are insane. There is a Bitcoin website paying people 21,000 satoshis to post a sticker that it ships to you around their cities. Think about that. You can earn sats and increase the value of those sats by helping raise awareness. Bitcoin is full of these win-win scenarios. The tech is exciting, but the passion I see from Bitcoiners in real life is unlike anything I’ve ever seen before. Bitcoin as a technology, a new form of money and an idea are bringing hope to humans around the world who have been disadvantaged because governments have a monopoly on violence. Bitcoin empowers the individual to fight back like never before. There will be growing pains along the way and more turmoil in the short term for those obsessed with measuring things in fiat. The way to fix that is to orient yourself around the new system. The possibilities that will come out of this Bitcoin renaissance are endless. Grappling with what this new form of money means is difficult because the world is full of so many paradoxes. When you learn, you become smarter by ending up with more questions. Monopolies have brought about some of the most prosperous and technologically advanced times in human civilizations while also making George Orwell’s “1984” look like a very plausible path for the future. The internet is connecting people like never before and at the same time, loneliness is increasing. Number go up technology is associated with greed and is what initially attracts people to Bitcoin, yet many stay because they realize Bitcoin is the true effective altruism movement. These paradoxes are a bit mind bending but I do think there is value to be had from chewing on these ideas. It can be easy to get bogged down with all of the bleeding going on in the fiat world. Bitcoin is the Band-Aid to fix it. It gives me a lot of confidence knowing my money is secured by open-source software and math rather than 12 individuals who decide when it is okay to steal and when it’s time to practice fiscal austerity. I’m glad the Fed has finally decided to do the right thing for the economy but it has manipulated the cost of capital for so long that it now risks destroying the entire system if it keeps tightening. The problem is that the Fed’s only other option is to lower rates again, which causes more bleeding via inflation. Bitcoin offers humanity a way out of this paradox where central planners try to fix the bleeding by siphoning more blood out of the patient. Every time central planners manipulate the cost of capital it becomes more clear that market participants are playing a rigged game. Bitcoin is the fairest game humanity has ever created and the best chance we have of separating money and state.

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Proudhon proved right about unions?
by professor rat 14 Dec '22

14 Dec '22

" . . . to exhibit the genesis of the problems of production and distribution is to prepare the way for their solution.” (Système I: 89, 92) Proudhon’s discussion of the associations which would replace wage-labour (and so end labour as a commodity). In these members “straightway enjoy the rights and prerogatives of associates and even managers”, “have a deliberative voice in the council” and so are “a solution based upon equality – in other words, the organisation of labour, which involves the negation of political economy and the end of property.” Hence “the socialisation of capital and property” for “it is necessary that […] all appropriated wealth again become collective wealth, that the capital taken from society returns to society” for “there is supremacy and dependence” between the worker and the capitalist and “capital introduces into society an inevitable feudalism”. (Système II: 204; I: 272–8, 217, 88; II: 168) Unlike the utopian socialists, he rejected the idea of organising labour and instead argued that labour would organise itself. Proudhon proved right about unions? https://anarchistnews.org/content/unions-and-state Reposts not blue-collar police-unions as roadblocks

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