Tag Archive for 'money'

Bitcoin: What It Is and Why You Should Care

Whenever I hear the word “coin,” I can’t help but picture Scrooge McDuck diving into a swimming pool full of gold, or think of old arcades and a handful of tokens. Perhaps the creators of Bitcoin had this in mind when they named their company.

Banks Warn Of Bitcoin RisksSo, What Is Bitcoin?

These days, everything is on the Internet. In 2009, a software developer decided that money should be too. But this isn’t money in the cold hard cash sense, or even in a less tangible sense, like your credit limit. Instead, Bitcoin uses a cryptographic protocol, or a long string of numbers, to identify each piece of currency.

How Does It Work?

Traditional currency (i.e. paper money and metal coins) is circulated by governments. Bitcoin, on the other hand, does not rely on the banks or the powers that be. Bitcoins are created through “mining,” a process where computers running Bitcoin software essentially solve very complex math equations – specifically, encrypted transactions of other Bitcoin users. Once one of these “problems” is solved, it will be logged into a “block chain” which publicly records the transaction, and rewards the problem solver (or solvers) with newly minted bitcoins.

Put simply, Bitcoin is a program that enables users to use its digital currency to exchange goods, services, or whatever their heart desires. This transaction is then recorded with Bitcoin, which is added to a block sequence that can be mined to create more bitcoins. It is akin to interest or transaction fees, but without actually really being interest or transaction fees…if that makes any sense.

Think of it this way: just as paper money has a serial number, bitcoins receive a specific identifying sequence of numbers. The main difference between the two is that one is regulated by the government and banks, and the other is created almost solely by the people.

Why Should I Care?

Bitcoin has been skyrocketing in popularity. Some traditional businesses, such as coffee shops, have started taking it as payment, and there is even news of Bitcoin ATMs cropping up to allow the basic consumer to buy bitcoins at market rate with their cash.

Right, the market value. In 2011, a mere two years after their creation, the digital currency jumped from a rate of $0.30 to $32. It then slipped back down to $2, only to skyrocket in 2013 to upwards of $266. As of today, a single bitcoin is worth about $517.

Make no mistake, Bitcoin is a volatile, high risk investment (in fact, that figure jumped between 515.2 – 518.2 in the 10 seconds I took to confirm the value). But as an alternative to traditional currency, at least for now, it is certainly worth its weight in gold.

Sounds Too Good to Be True. What’s the Catch?

Back before globalization, when the seas were the gateway to the world, gold, silver, and gems were currency, along with spices and fine silks. Essentially, if someone saw value in it, it could be traded for something else of value, like food or a home. And where there was value, there were individuals seeking to exploit other people’s hard-earned livelihood.

Well, the same is true with Bitcoin, but think “Pirates of the Caribbean” only with hackers instead of Johnny Depp. This has resulted in individuals hijacking other individual’s computers processing power through trojans to mine for bitcoins.

Bitcoin has also been linked to illegal gambling or as an exchange for illicit substances via black market websites. For example, in November of 2013, the FBI seized bitcoins from a black market website that were valued at $28.5 million at the time.

The most common problem facing Bitcoin is plain and simple theft. As you’ll remember, each bitcoin is unique. Just like money that was taken from a wallet, if a bitcoin is taken from the owner’s “wallet,” that bitcoin is gone and probably cannot be traced. Most bitcoin theft occurs when a user’s private key to his online wallet is stolen from a payment processor.

Furthermore, and maybe the most worrisome, is the stability and longevity of this unregulated currency. For example, as of yesterday, February 23, 2014, the world’s largest Bitcoin trading site was taken offline. Just before the website went offline, the trading company’s CEO resigned. This type of erratic behavior of platforms where millions of cryptocurrency is changing hands makes some economists and investors wary to give Bitcoin and similar forms of currency their stamp of approval. However, others view it as typical industry evolution that will force bad companies out of the market.

The Future of Digital Currency

Forms of alternative currency are nothing new, but Bitcoin was the first of its kind, and appears to be in it for the long run. Since its inception in 2009, at least seven other cryptocurrencies have shown up onto the marketplace. While volatile and risky, this gives users the ability to choose an alternative to traditional money.

And if you really think about it, considering exchange rates, the fluctuating value of the dollar, and an unstable economy, traditional currency may not be the solid gold standard people once believed it to be.

Are Pet Trusts Valid?

Can I use a trust to leave money and property to my pets? 

Let’s face it, it’s true: a dog is a man’s best friend. Unlike humans, dogs will not ignore your calls or ask you for money. Some dogs are even completely satisfying substitutes for babies. So naturally, people often want to provide for their pets when they die. A pet trust is common used for this purpose.

Pet TrustAre pet trusts valid? In some cases, the courts have ruled that pet trusts to be a waste of resources. However, even if a court reaches this decision, it will often still honor the decedent’s wishes, but will simply reduce the trust amount. For example, in 2007, hotel heiress Leona Helmsley left her dog $12 million and the judge reduced it to $2 million.

On the other hand, Tennessee Courts have held that all pet trusts are valid so long as the decedent was of sound mind and disposing memory when he made the trust. For example, when Leon Sheppard Sr., a retired businessman, died in 2012, he left $250,000 and a 4,270-square-foot home to his two cats, Frisco and Jake. The court allowed the pet trust. But once the cats die, any remainder of the money will go to Sheppard’s relatives.

Although it may be odd to leave such large sums of money to pets instead of family, a pet trust ensures that the decedent’s pets will not be abandoned. And then after the pets pass, the remainder of the trust will go to family members.

Will You Be Charged For Calling 911?

Durand Ford Jr. called 911 at 1:25am on January 1st 2013. Ford Jr. told the Washington D.C. Fire and Emergency Services Station that Ford’s father, Durand Ford Sr., was having problems breathing. At 1:34am, emergency personal arrived – in a fire truck. Unfortunately, the firefighters were not equipped to help a dying 71 year old man, so the Fords and the firefighters waited for an ambulance. The ambulance – from George County – arrived at 1:58am, thirty-three minutes after Ford Jr.’s initial emergency call. Durand Ford Sr. had already died.

A month later though, the D.C. Fire station sent a grieving Ford Jr. a $780.85 bill. Mr. Ford was understandably furious. D.C. Councilwoman Yvette Alexander claims that the station had not charged for similar services in the past. An investigation revealed that there were idle ambulances in the D.C. station on the night Ford Sr. passed away, but the station had lacked the necessary staff to use the ambulances since an unusual number of personal had been on vacation that night.

As cities lose money to recessions, stories about first-responders charging for their services become more common. Indeed the D.C. station had previously been criticized for delaying medical treatment to a 94 year woman with a head injury. Several states have banned first-responders from charging for their services, but most of the country still gives discretion to emergency personal to charge patients and crime victims.

If city governments cannot, or will not, fund police, firefighters, or medical personal, first-responders charging for services is understandable, if frowned upon. Basic economic principles are that materials such as gas, medication, clean-up, and transportation must be paid for. If the cities cannot pay for supplies, the costs will inevitably fall on the party using the supplies. The costs are paid for either indirectly through taxes and insurance, or upfront in a bill, but the costs are always paid. Moreover, although first-responders are extraordinary individuals, they must still support their families.

ambulanceVictims, patients, and most of the general public would counter that they pay for their services through taxes and should not be charged double in this manner. More importantly though, first-responders have an obligation to the community, not just to themselves. Charging people who dial 911 for help creates an unnecessary division along social-economic lines. This division can be acceptable when purchasing automobiles, homes, schools, and even food. It is not acceptable in matters of life and death though, such as emergency medical services, because everyone’s life is, or should be, worth the same. It does not matter if the patient is rich or poor, government services should treat all citizens the same.

First-responders would balk at the suggestion they choose who lives and who dies by charging, since first-responders, even the ones who expect payment, save lives first and send the bill later. However, if a family cannot afford a large bill and they know they cannot afford such a bill, the government would be creating an incentive not to call. A public policy which discourages people from asking for help, or from help others, is not a good policy.

The Ford story, tragic as it is, does raise an interesting question for cities that permit its first-responders to charge bills. The ambulance failed to arrive in time to save Ford Sr., but what if Mr. Ford had been saved? Would the D.C. station still be justified to sending a bill to Ford Jr.? If the answer is yes, then first-responders would be operating on a contingency fee: they would be paid only if they saved a person’s life. Such a system would help family members feel they are not being further victimized when a bill is sent. On the other hand, a contingency billing system would only add economic pressure to the emotional and social pressure faced by first-responders every time someone calls 911.

Defending the Sandy Hook Personal Injury Lawyer

One of the (many) reasons the general public distrusts lawyers is that the public believes that lawyers take advantage of tragic situations in order to make the lawyers wealthier. For example, the 2012 December 14th mass shooting at Sandy Hook Elementary in Connecticut was a big disaster for all the students and teachers involved. Adam Lanza killed 26 people, including his own mother, before committing suicide. When attorney Irving Pinsky wished to represent a six-year old girl at the shooting for a claim of $100 million, Pinsky began receiving numerous letters, faxes and phone calls regarding Pinsky’s moral character.  A few of the messages even contained death threats. I do not believe that attorneys like Pinsky, and the clients they represent, deserve the scorn that members of the public throw at them.

I think some of the bad reputation acquired by attorneys comes from the perception that lawyers are taking advantage of trauma victims. Unfortunately, some of this perception is unavoidable.  People only seek legal aid when an aspect of their life becomes awful. Couples seeking a divorce go to family lawyers, people accused of a crime find a criminal defense attorney, and employees who lose their positions seek out employment lawyers to determine if their terminations were legal. The nature of the legal profession means that lawyers will show up when clients have a problem somewhere in their life.

What I find puzzling though, is that attorneys are hated for this and other professions are not. Surgeons, for instance, are only needed when someone has a complication somewhere in their body. Surgeons are not despised for healing their patients, yet attorneys are hated for representing their clients.

Sandy Hook SchoolPerhaps the cause of loathing for attorneys is the perception that lawyers make money off their clients. This does not make sense to me though. Truth is, not all lawyers make a lot of money. But even if all lawyers were rich, I do not see why that should be a sin particular to the legal profession. Legal advocacy is a job like any other, and lawyers should not be despised for doing their jobs. Surgeons are paid to work for people who are suffering, but surgeons do not receive the contempt of the community. Given that many lawyers work cases pro bono, without payment, and other lawyers work on contingency, it is arguable that a person could obtain legal services easier and cheaper than a surgery.

If money is the issue though, perhaps a possible explanation is the amount of money which could be earned. In the Sandy Hook story, $100 million was demanded. That is a lot of money for a household where the child is lucky to be alive. A few factors should be remembered though. First, the amount of money asked for must be higher than what the client expects or wants because this is the ceiling of what the defendants might have to pay. Second, given that the law requires actual injury before a party can bring a lawsuit, a good chuck of the money awarded will go towards medical expenses like therapy. Third, as mentioned above, the lawyer might get a percentage of the award (the standard is one-third, but this is negotiable).  All these factors mean that $100 million is not the amount which will actually be given.

The final point of interest is that lawyers, by advocating for their clients, must assign blame to a particular party. The actual party responsible for the Sandy Hook shooting, Adam Lanza, cannot be brought to justice. Pinsky, the attorney, was attempting to lay the blame for Lanza’s actions on the school district instead. Pinsky argued that Lanza’s actions were foreseeable given that the school lacked a safety plan for students.

The school district found the charge offensive. First, few people could have predicted a twenty-year old man would massacre an elementary school. Second, many of the teachers killed had shielded the children as the children attempted to flee. One injured teacher had pressed a door shut with her body while Lanza shot through the door. Third, Lanza had shot his way through the school’s locked doors, rendering the school’s protections worthless.

Pinsky’s claim was an understandable one though, even if the shooting is emotionally charged. Pinsky’s claim was not that the teachers and staff were uncaring or cowards. Pinsky believed the school should be accountable for the shooting because the school lacked a real response plan, making student injury from many types of disasters foreseeable.

I don’t know if this was true, but given that one of the functions of the judicial system is to uncover the truth, the idea was worth investigating. Sadly, Pinsky has since withdrawn from the case, citing contradictory evidence. I hope other lawyers are not discouraged from representing those in need by the mere notion of unpopularity.  The most crucial role that an attorney can take is to speak for those who have no voice.

Towns Creating Their Own Currency May Violate The Constitution

It’s no secret that times are tough.  Everyone’s hurting for money and people are always looking for ways to cut corners, while also earning some more dough.  Apparently, some towns have figured out a much better and faster shortcut to solve their community’s cash woes: print their own money.

Alright, you got me, my lead-in paragraph was a little deceptive.  It’s not really a complete contravening of the federal currency system (but in some cases, it’s pretty darn close).

Regardless, it’s an interesting trend to say least.  Small towns across the country from Massachusetts to New York to Oregon have started printing out their own version of currency to be used within their community.  One might be thinking: what would be the point seeing as we already have a national currency that works fine right now (other than the constant inflation, of course).

It’s not as pointless of an exercise as it might initially seem to be.  These local currencies generally hold a higher exchange rate than regular old US dollars in their respective communities.  For example, in Southern Berkshire, Mass., that town’s created currency, dubbed BerkShares, trades at 100 BerkShares to $95.  The little bit of extra money can go a long way in these hard times of ours.  And so far in the communities that have started currency programs like it, spending has gone up within these respective towns injecting some much needed money into their local economies, while also allowing residents to get a little more bang for their buck.

Now it’s always nice to hear when financially struggling people, or in this case a town, figure out a way to help dig themselves out of the red.  However, since this is a law blog, you’ve probably already deduced that I’m likely about to say something to ruin the party.

And you’d be right.  Because as far as I can tell, I’m pretty sure what some of these towns are doing may very well be in direct opposition to the Article I, section 10, clause 1 (aka the Contract Clause) of the U.S. Constitution, which states in relevant part that “No State Shall . . . coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts . . .”  The Contract Clause basically makes it unconstitutional for states to make their own currency, as the power to coin money is one that is reserved for the federal government.

Yeah, I know, I’m a party pooper.  But before you guys start tossing your hate mail at me, let me reiterate that these currency programs only might be unconstitutional.

The link I put up shows ten towns that have enacted their own form of currency.  Of the ten, nine of them seem to be perfectly constitutional because their currency acts more like a bartering or discount services program, ala a Groupon or Living Social deal, rather than a usurping of congressional power.  These nine currency programs were started privately by individuals or organizations who worked out deals with local business to accept their currency which in turn was “exchanged” or rather purchased by locals using actual dollars.  In this sense, these nine currencies are more akin to privately sold coupons than actual money since there are fewer places that actually accept them and treat them like money.

The main issue I have is with Southern Berkshire’s BerkShares, as that one seems to be closest to functioning as actual money.  Over 13 banks in their town accept and deal in it; these banks charge a percentage fee to exchange them, over 400 businesses in town accept them and there have been over 3 million BerkShares issued since the currency was launched in 2006.

However, the most important characteristics that set BerkShares apart from other local currency is that it appears to be endorsed by the local town’s government body and it also is more valuable than U.S. dollars in the community since $95 will get you 100 Berkshares.  These two characteristics of government authorization and devaluation of US currency have been viewed by the courts to be essential to the determination of an illegal currency.

Now it might not seem like a big deal if a town wants to create its own money, but it really is.  The reason is because the creation of unauthorized currency can cause financial instability in the country.  For instance, if a state is independently wealthy using its own money, it would have less incentive to adhere to federal guidelines.  It would in a sense become its own true sovereignty, and while states do have this right to some extent under the Constitution’s state police powers, allowing a state to print its own currency is a step too close to succession.

For now it doesn’t seem like too big of a deal to the federal government as no one other than me appears to have noticed this possibly unconstitutional action over in Southern Berkshire.  It’s helping their community and so far hasn’t led to any declarations of independence, so I guess more power to them.