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Chicago Fed shoots itself in the head with Dubya-dumb bitcoin claim

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It’s a strange scenario, to be sure, but we could, one day soon, see libertarian bitcoin fanatics coming to the rescue of a senior economist at the Federal Reserve Bank of Chicago.

The Chicago Fed recently produced a primer on bitcoin. In his conclusion, the paper’s author, François Velde,

francois velde

managed to praise the free-wheeling, fire-breathing and very invisible Nipponese ninja Satoshi Nakamoto,


“(bitcoin) represents a remarkable conceptual and technical achievement.”

One wonders how much it pained both Velde to write those eight words, and his superiors to sign off on them.

In my mind’s eye, I can see them all sitting around a $100,000 table,

bank table

made from the wood of the very last truffula tree,

the last truffual tree

staring at the eight words on a billion dollar screen that rivals the jumbotron at Cowboys Stadium (oops, sorry, that’s AT&T Stadium, now – there you go, there’s your plug, you know where to send the cheque).

cowboy jumbotron

In every corner of the room, endless rivers of oblivious, obedient, faceless tax slaves


march mindlessly into the meat grinders that transform their flesh, blood and heartbeats into the paper, ink and electricity needed to keep the Fed’s printing presses rolling.

meat grinder

Salivating banksters line up at the money making machines as they churn out mountains of moolah.

printing money

When their wheelbarrows are overflowing, the banksters stagger back from whence they came,


down a paved road upon which the words GOOD INTENTIONS are writ large, laughing, as they say, all the way to the bank.

bansters laugh

The presses are making a Hell of a racket and the room is over-heatng. The Fed boys are getting hot under their heavily starched collars,


and they’re wondering if maybe, just maybe, they should shut down the presses.

But the banksters are prepared for this eventuality, this heresy. They’ve brought the Amazing Kreskin with them.


When Kreskin starts ringing the alarm the banksters stop rubbing each other with Franklins long enough to blow their rape whistles.

A chorus line of cancan girls bursts through the doors.

can can

Behind the dancing girls comes Nelly, singing, “It’s getting hot in here, so take off all your clothes.”


Nelly quiets down when the first chord of Metallica’s Enter Sandman fills the room. The door opens again, and through a cloud of smoke appears, no, not Mariano Rivera


No, it’s not



No, this job is so complex, so vile, that there’s only one man for it,

dirty harry

NO, damn it! It’s NOT Dirty Harry.

This is a job for


C’mon… you didn’t see that coming?

Exit light
enter night
take my hand
off to NeverneverLand

The boys from the Fed drink their fill of the KoolAid, the banksters start laughing again, the printing presses keep rolling.

Now, back to this nasty bitcoin business. They stare at the eight words on the jumbotron and grind their hind teeth like a pack of jonesing coke whores. As much as they want to, they can’t shit all over bitcoin without saying something good about it. “Can we?”

Velde stares at his peers in disbelief.

charlie 2

How could they ask such a ludicrous question, he wonders, before shouting an emphatic, “NO! We can’t. What the Hell is wrong with you?”

Velde points a finger at his homeboyz, tells them to B Real

b real
and asks,

Insane in da membrane?
Insane in da brain?
Insane in da membrane?
Insane in da brain?
Insane in da membrane?
Crazy insane, got no brain?
Insane in da membrane?
Insane in da brain?

So, reluctantly, finally, they agree, “it represents a remarkable conceptual and technical achievement.”

“There. We said it.”

The boys at the Chicago Fed should be praised for making their grudging admission in a more expeditious manner than the Vatican did when it was faced with the troublesome claims of that pesky Galileo Galilei guy, when he pointed to the Heavens and dared to ponder and pontificate.

einstein in psace

Still, so reluctant were the Federalis to offer up their sliver of commendation to the ninja Nakamoto and his  problematic piece of programming that they sandwiched those eight delicious words of faint praise between two fat slices of damning bread:

“Should bitcoin become widely accepted, it is unlikely that it will remain free of government intervention, if only because the governance of the bitcoin code and network is opaque and vulnerable.

That said, it represents a remarkable conceptual and technical achievement,

which may well be used by existing financial institutions (which could issue their own bitcoins), or even by governments themselves.”

The Chitown homies are, no doubt, closet admirers of Nakamoto but they remain shamelessly sycophantic to that old Roman Emperor named Status Quo, and lest anyone be mistaken, they again pledge their fidelity to him.

Chitown Fed homeboy Francois Velde grovels for clemency for his transgressions at the feet of his master, Status Quo

Chitown Fed homeboy Francois Velde grovels for clemency for his  eight word transgression at the feet of his master, Status Quo

Those fat slices of damning bread are portentous of the evil that is to come.  No one relinquishes power willingly and the Romans will not go quietly into the night. The boys at the Chicago Fed have admitted what we all already know – digital currency is the future, but the filthy money-lenders will not be cast out of the temple (yeah, yeah, I know, but it’s close enough for rock ‘n’ roll). The powers-that-be will do everything they can to steal bitcoin from the people.

But there will be a fight.

fight coming 1

fight comimng

The capture of Satoshi Nakamoto

The capture of Satoshi Nakamoto

Everyone knows the fight is coming, but that, gentle reader, is not why I am robbing you of your valuable time.

At the opening of this mighty missive I opined that, one day soon, we could see libertarian bitcoin fanatics coming to the rescue of a senior economist at the Federal Reserve Bank of Chicago. That Federali is, of course, Francois Velde.


But why, I hear you asking, would any liberty loving libertine lift a lazy finger to aid any aider and abettor of the master race, any collaborator of the conspirators, instead of raining a little righteous retribution down on him?


The answer to that intriguing question comes on page three of Velde’s three and a half page primer, where he writes:

“Producing one bitcoin per day at current levels of difficulty requires a machine worth about $3000 and about a dollar’s worth of electricity per day. If the machine is depreciated over five years, the cost of producing one bitcoin is about $2.50.”

Clearly, Francois Velde was spending a great deal of time, and bitcoin, chasing the dragon around on Silk Road before the FBI shut it down.

chasing the dragon

$2.50 to mine a bitcoin?

Puff, the magic dragon lived by the sea
And frolicked in the autumn mist in a land called Honah Lee,
Little Jackie Paper loved that rascal Puff,
And brought him strings and sealing wax and other fancy stuff

$2.50 to mine a bitcoin?

Dude? You’re high! You’re higher that Johnny Cash eating cake in a bush, high!

johnny cash

But wait. Maybe Mr. Velde is not high? Maybe he really can produce bitcoins  with $2.50 worth of electricity? if so, he’s outdone Prometheus,


who only stole fire from th Gods.

He’s outdone Nikola Tesla,


who promised to pull electricity out of thin air, but never delivered on the promise.

Where, pray tell, has this man, this God, Francois Velde been hiding? Good God, this man can do anything, no? Well, actually, no.

When I first read Velde’s claim that one bitcoin can be produced for $2.50, or maybe even a buck, I thought maybe I was high, so I went back and read it again. And it said the same thing. So, I doubted myself. This man, after all, is a senior economist at the Chicago Fed. I’m an ignoid when it comes to economics. He could not make such an ignorant mistake. I must be high, I thought again


Then I remembered that I don’t get high, anymore. Well, one of us must be high, and it ain’t me, so it must be him.

Then I thought maybe this paper was written some time ago, so I checked the date – December 2013? Holy fuck! This guy’s so fucking high he don’t even know what month it is.

back to th future

Yeah. Francois did what any bored suburbanite academic researching bitcoin, with an expense account, would do: he got his Afroman on and wandered down to Silk Road

I was gonna research bitcoin
but then I got high
I was gonna save the Fed
but then I got high
now I’ve screwed it all up
and I know why
because I got high
because I got high
because I got high

I know, from a great deal of experience, that it is not an easy thing to keep your shit together when you stat doing serious, firsthand, frontline reporting from the war on drugs. I know what happens when you take on that kind of challenge – you get high. And then, to put it mildly, you get sloppy.

That truth being irrefutable, I presume Hansel Velde will have left a trail of bread crumbs behind him


as he stumbled through the purple haze phase of his research.

purple haye

I further presume that the FBI, with a little help from their intrepid friends at the NSA, will, eventually, find poor, sloppy, drug-addled Hansel’s wallet and ask to have a word with him about his research methods.


And that, my libertine friends, is when we will have to ride to the rescue of Francois Velde, because his conservative cohorts will disown him like a retarded redheaded second cousin.

retard redhead

We all know that getting high is nobody’s business but you own, right? And, if Velde got fucked up on the job, well, haven’t we all? Whether any of us like it, or not, he is one of us, now, brothers and sisters, and we must save his sorry ass before he has to sing another verse from Because I Got High:

I messed up my entire life because I got high
I lost my kids and wife because I got high
now I’m sleeping on the sidewalk and I know why (why man?) yea heyy,
because I got high
because I got high
because I got high

Should such a mission prove to be far too odious for you libertarians, I beg you to stand aside and let us fearless FUNarchists take care of business.

But, before you make a final decision to abandon us on this mission of mercy, think about one thing, SVP: with just two sentences, The Fed has done more to discredit itself in the debate over the merits of disruptive, decentralized, digital currency than it could have if it had dug up Karl Marx

drag marx

put a pink tutu on him, and sent him out to do battle for them.

For that, we owe it to Francois Velde to aid and abet him when the bad guys come knocking on his door.

follow up

I emailed Velde to ask about his estimate. He backpedaled a little bit, but not much, answering:

“This was true when I first drafted the paper some weeks ago, but the hash rate tripled since.  Also, the calculation is not the right one as it assumes a constant hash rate over the depreciation period of the machine.”

I also asked the opinion of real life btc miners. Here’s part of the most definitive answer I got:

“So at $0.10 per kWh and using an Avalon it would be ~$20.00 per BTC in electricity to produce 1 BTC.  Of course most people believe the difficulty will go much higher.  Probably at least triple the current value by the end of the year.  That would mean $80 per BTC using an Avalon with $0.10 per kWh electrical rates.  The factors are going to vary a lot by efficiency, electrical rates, BTC exchange rate, and difficulty but even with future not yet delivered hardware and $0.05 per kWh the cost may get close to $1 at current difficulty of course difficulty will be much higher in the future and thus electrical cost will rise. “


About zilla

i was born with skates on. i have three thumbs. i often wish i was a penguin. but i don't like fish, so maybe not.

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