0205 2015 Bernie Madoff’s Ponzi scheme in the making again – discussion with a centralized payment exchange company official trying to pump their new fiat cryptocurrency

Within the past week I came across and exchanged a few detailed email discussions with a dominant company trying to sell their new fiat cryptocurrency via a scheme that smacks of an IPO (Initial Public Offering) or a Private Placement sharing offering in the stock market. The problem is that they are not properly issuing a stock of a company through a normal securities broker dealer but rather trying to sell in the open market their own new fiat cryptocurrency themselves!

I see the company as perhaps having built a good payment system only, which has yet to be verified. For the version of the new fiat cryptocurrency that they are trying sell to the public on the payment exchange that they have built, it is a bit naive and may even be wishful thinking. They are also trying to keep a big chunk of each new issuance to themselves.

Even Uncle Sam may not be able to pull off such as good deal in issuing a new fiat national currency. I wonder how they could continue to hope to convince people to pay for it and use it. I was told by the official that they had recruited top tiered industry luminaries and ex-government officials as board members and hence the value of their new fiat currency is partially attributable to “who they are”. He tried hard to legitimize what they are doing and distance himself from having to do a security offering under the securities laws. I was not convinced. It is just too obvious.

What they are doing is like hoping to create wealth bubble out of thin air with a Ponzi game. Sooner or later it will burst when people come to realize there is no intrinsic value in their new fiat cryptocurrency. Their fiat cryptocurrency also seems to be primed to be used as a perfect pump and dump candidate.

Mark my words, it is a big disaster in the making. Watch out SEC!

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0204 2015 For Bitcoins to call those national currencies fiat is like the pot calling the kettle black.

0204 2015 Digest of discussions occurred else where.

— On why the French Assinagts and Mandats did not succeed back in 1790

Thanks for providing us with some detailed historical info on the earlier French version of real estate backed currencies, Assignats and Mandats. As could be clearly observed even in your article, the French had the right idea but the wrong execution back in the 1790s, let alone the fact that they were backed by the stolen land!

Even the subsequent Rentenmarks circulated more than one hundred year later in 1924 did not have the necessary legal or technological infrastructure to make it work properly. That is the whole premise of launching the TARELV concept and the associated exchange rate pegging system in 2011 as the modern day new innovative quantitative finance knowhow and method such as FARJHO and the block chain payment ledger technology provided by the invention of Bitcoins could finally make these ideas realistic.

— On possible different types of real estate that could be used to back up currencies:

Absolutely. They are not mutually exclusive. All forms of real estate backing will happen sooner or later. Just remember that lien encumbered properties will not work very well, no matter how small a portion that lien may be. So a portion of the unencumbered equity of a decent office building, a hotel or an apartment could certainly work just fine if the owner is a credible and trustworthy entity.

— On why FARJHO Fund is better:

When you get to analyze the quality and characteristics of underlying assets, you will see the problems with conventional REITs. I understand that you may have mentioned that to express the generic concept.

A FARJHO Fund (or FARJHO itself) has many advantages. Here is to name a few: (1) It  is a pure un-leveraged equity, hence will never get foreclosed; (2) Via FARJHO, each batch of the t-coins will be mined and created by a group of regular homeowners in any part of the world, hence the de-centralized democracy nature that the crypto-currency enthusiasts love so much about could be maintained.

— On Bitcoin’s decentralized Utopian fantasy:

The abuse of fiat currencies and debts have proven in history repeatedly as the root cause of financial instability. In many currency crises, e.g. Asian, Ruble in 1998-1999  etc., the issuers were not the ones who manipulated them but rather the sudden lack of confidence by all participants. That is the problem. Lack of confidence all of a sudden.

Currencies need to be backed by assets, gold standard or real estate (German Rentenmark, French Assignats, Mandats etc.) just like debts need to be collaterized by real assets or equity to provide stability and confidence. That is a problem I was trying to address with TARELV way before these new Bitcoins things even came on stage.

Now for Bitcoins or any other current crypto currencies to claim to call those national currencies fiat is like the pot calling the kettle black.

The idea that these new digital currencies are decentralized or frictionless in transactions is simply a Utopian fantasy. Once they have gained momentum, they will still need many third parties to maintain their ongoing stability to become successful anyway or they die. Their success could only be transient and ephemeral. If they are successful in commanding confidence by finding a backer, layers of middlemen and interest groups will then also come in to impose transaction fees and could make it even worse than those currencies they were intended to replace.

Don’t we already see the same scenario replaying itself over and over again in modern politics? You overthrow a dictator and then came chaos until the next dictator comes again to provide stability.

So the crypto currency’s only advantage is tech oriented, i.e. payment efficiency.  Don’t expect them to come to build a Utopian libertarian society for you.

The real estate or home equity backed digital currencies (t-coins) that I am proposing is different because it is a wide open platform for all kinds of possible grassroots homeowners, for-profit institutions, non-profit organizations and national governments alike. It will be taken out of the monopoly of the government’s hands. For the lack of new terminology at the moment, it is a FARJHO fund from a group of homeowners in a geographical area who mine and create the new batch of t-coins.

To put it in a simple word, it will replace the bad “their” dictator with a new benign “our” democratic dictator. 🙂

01/31/2015 Bitcoin is not enough – we need a new real asset backed Digital Currency

After many years of a long sabbatical leave, I am slowly back on my blog. First, the TARELV supercharged digital currency as a Bitcoins alternative that may bring FARJHO back to into action.

Within the past few years since 2006 I have been working on the new concept and the business method to quantify and create a tradable liquid market for home equity. For those who remembers that product is called FARJHO (Flexible And Reversible Joint Home Ownership). Basically we were trying to build a stock exchange for every single house and condo with each home being a stock that minority shareholders could trade in and out like they would buy and sell Google’s or Facebook’s shares on the stock exchange. Some of my previous work, which is on hold now, could be seen at http://farjho.com, http://wehomeowners.com or http://investorsally.com.

Following that new capability to extract the liquidity out of home equity, academically, I have also followed up to develop a concept and business method in 2009 to create a real estate value backed currency exchange rate pegging system called TARELV (Total Aggregate Real Estate and Land Value). Some of the previous research and blogs could be seen at http://tarelv.com.

TARELV was designed not as a new currency but rather a new foreign exchange backing or pegging system to provide fiat currencies a new life by backing each country’s currency through the value of their real estate via the FARJHO solution.

The problem with Bitcoin is that no matter what advantages they may provide in payment efficiency, it is in itself still a fiat currency with no real value to back it up.

That is where FARJHO and hence TARELV could help. Imagine a new block chain technology backed digital currency (say t-coin for now) that was mined and created since day one by an equivalent amount of partial home equity extracted via a FARJHO contract? Hence this new t-coin will always have a minimum floor value of that original partial home equity amount and could be exchanged back (convertible) into the home equity any time. This could be done in any country in due course so that means t-coins could be mined and created in many parts of the world and utilized universally.

These new real asset backed digital currencies will therefore have both the advantages of the block chain technology that Bitcoin has and the real value backing that the current fiat currencies in circulation do not have. There is a very simple way that we could mine these new types of asset backed digital currency and make it work through FARJHO.

More to come later.