good afternoon and a welcome to prime interest i'm terry and boring and i'm bob english and let's get to today's headline. wellheads problems are coming to a four one k. near you what the so called alternative investment space has been more and this something that unsophisticated investors can purchase mutual funds once the domain of the retail investor are increasingly being used to make heads along with their higher fees and guess what if the as you see every gets around to implement the jobs legislation which was passed over a year ago hedge funds themselves will be able to advertise their investment wares to the public or we can say is obvious and are and we want to point out unintended consequences here there's a glaring example in the planned economy of china except they didn't plan for a shadow banking that were to destabilize their financial markets when the reality stared them in the face the chinese authorities clamped down and ended up freezing

short term lending market turns out this led to a tremendous sell off and they were going for a trillion dollar bond market sounds like a two thousand and eight redux to certainly does finally it was a great day for high frequency traders at least the ones who bought privileged access to key economic data released earlier this morning the university of michigan's consumer sentiment survey fell by five point one points meaning consumers you and me don't have as much confidence in the economy but fortunately for each of the two firms they made a killing in the fifty milliseconds or so that they were able to run the markets full of confidence. up next is a full day because we interviewed tracy mayer and andrea is the answer no choice on the future of the cryptocurrency and then we had to the hills of virginia's gold belt to see what takes longer mining victorians are mining gold. and here's what's in your prime interest. i.

i. i. there's a new bit coin sheriff in town it's called the digital ad transfer authority or data and it's not just limited to bitcoins it will self-governed most of the actors in the digital currency space and that includes ripple again this is on a purely voluntary basis so with regulators increasingly cracking down on various crypto currencies data is attempting to get ahead of the game and best practices to interact with regulators so earlier i spoke with trace mayer entrepreneur and andres on to no polish internet security expert i first asked if the new regulatory authority data goes against the original purpose of bitcoins and that would be an

unlimited here's what under his first had to say. i don't think it goes against any of the principles this isn't a central story it's just a self interested group of professionals or businesses in this space applying regulation that makes sense for the government comes along and applies regulation that doesn't make sense because they don't understand the space i think that's all it is it doesn't really centralized power in any way it's an entirely voluntary construct and i'd rather have the people who understand that point try to come up with some crack to solve regulations than the government trying to apply them kneejerk yes and that's something we've talked about before especially with the fence and getting involved but trace i want to ask you are there others standards that are we getting set up by other independent people and where are we going from a regulatory perspective. or from a regulatory perspective to start with i think the radio owners are just they're getting educated on what crypto currency is. big coins

a category creator in this new space and it really has you know owns the market right now but it only owns it because it drives down the cost in terms of time money and privacy for this medium of exchange and the regulators it seems that the main point that they want to get at is they want to raise those costs you know they want to raise it either through am hour k y c or source of funds through tax except and so that there's going to be a tussle between big point in the regulators in that sense or if coyne gets neutered by the regulators then their o.b. just some other digital currency that rises up the does drive down those costs in terms of time money and privacy and we're already seeing that with the zerocoin idea that's been floated that would pretty much build anonymity right into the big point protocol so. you know this is it's going to be exciting to kind of see how

this all plays out and certainly we've seen in the cost of regulation that it imposes on the rest of the financial market andreas i'd like to get your take on the regulatory side what surest action does the u.s. have over big coins and where is that going. the u.s. has whatever jurisdiction the u.s. wants to have it's playing unilateral unitary superpower at the moment you know i think a lot of this has to do with the ability of the u.s. to extend control through money internationally and that's one of the things that are going to offer as an advantage which is lower friction and lower costs to operate internationally compared to a fee of currencies that are highly regulated listen if the government tries to regulate bitcoin too early they're going to do similar things as we saw in the early days of the internet where the regulators try to understand the internet from the perspective of a telephone network from the perspective of a cable t.v. channel from the person. back to the fax machine and so you know it's

a bit like about time regulators coming in saying you can have your internet and do all the wonderful things you want all we need is for it to have dial tone fax services i.s.d.n. the nine one one and if you do those things well you know if you do those thing it's not the internet's right so. that's the problem with facing right now is that a lot of these regulations are trying to make bitcoin more like money unfortunately the regulators are trying to pound square pegs into round holes a lot of times now a u.s. judge recently said the i.c.c. can pursue a bitcoin related lawsuit involving a bit coin ponzi scheme and i just want to point out that it's not an allegation that big claims themselves are a ponzi scheme but there is an important precedent does suggest bitcoins could legally be considered money being part of a securities offering so i want to ask you to raise our bitcoins of money from a legal perspective. well we really have to get a little bit more precise in our definition there's money and legal tender and no

bit coins are not legal tender they're not currency or they're not funds what i think that the judge was getting at is the big coin is money in the sense of its consideration it's something of value and it was handed over to the ponzi scam operator as consideration with this common expectation of an investment and you know whether you're contributing big coins or oranges from an orange grove or whatever and those are some other securities regs cases you know that's really what the judges are looking at he's not going to throw out the ponzi scam because somebody contributed something of value even though it wasn't legal tender currency funds and also this person operating the ponzi scam should be very careful about any potential i.r.s. implications for example forgiveness of debt one like if you get short sell your house and you get for it. that that actually constitutes income for i.r.s.

purposes and so this ponzi scam operator when he defaulted on all those obligations to people they could actually claim deductions because they had a loss and they could force him to be hit with the end come and and with the ten ninety nine and now with the recent bill the i.r.s. can actually take your passport away if you're fifty thousand dollars or more delinquent in your taxes and they think that you might be a flight risk or something like that to a different country so i mean the judges and the regulators are not going to throw out cases where people are scamming other people just because they're using something that has value but isn't legal tender that's a fascinating perspective from the i.r.s. point of view that i had not heard before ok and i'm going to take it back to you andrea so we know oranges are not money are big coins of money from a practical perspective. yeah absolutely i mean the bottom line here is that the

i.r.s. will consider money because you as a user of going to write file you from it if you mind but it's income the government will consider money in every way possible in terms of regulation except as legal tender so it's a very broad category from a practical perspective i can use that as a means of exchange i can use it to buy things and therefore as far as i'm concerned it's money i use it to buy things it's money simple as that. i'm going to i'm going to talk to you about the incredible computing power that's being employed no to mine bitcoins there's a cost benefit analysis going on there can you talk about some of the technology that's being employed to do this and are people actually making money on this. well some people are making money but first of all i'd like to point out that the incredible computing power which is now almost four hundred terror hashes per second worldwide is not just used to mend the coins. it's also used to secure all

of the transactions on the network so in fairness we really should compare that to say payment at work like visa where about forty percent of the cost is for for fraud prevention and detection and frauds managements within the network so the mining itself plays a much bigger role than just just creating the new coins that also secured all the transactions it's profitable for those who have highly specialized application specific integrated circuit devices a six which are delivered by a few companies at the moment those can do a very very fast calculation so they can generate bitcoin to rates and the cost of electricity that is that is profitable for the time being but this is a moving target because you have to changing things one is the amount of power on the network increases all the time as these devices reach users and the other one is that the price keeps changing so it's a bit like let's say how the oil cartel tries to carefully manage production so as

not to flood the market with new oil and dump the price similarly you have this challenge for miners where they're trying to estimate how much cash in car will come in on the future and what the price of bitcoin will be to see how they're going to profit in some cases they're taking future options in order to manage that risk and hedge for the bets pretty interesting to think about future options trace is it possible that we'll see a derivatives market for bitcoins. what we already have derivatives markets that exists like impacts or coins that are and mining is a derivative of big coal and what's very fascinating with the development of a six from a monetary theory point of view is that big coin has risen to a new level as a numerary or as something as a tool that's actually used to perform the economic calculation and this is because you're taking into account the difficulty of the network and the future exchange rate of dollar. a bit coins and you're doing it discounted future cash flow to

determine a net present value in terms of both coins and of dollars and it's rising because it's raising bickley into a whole new level and terms of like a monetary instrument it's becoming much more complex as a result of that and we have the derivatives the contracts for the see if these the contracts for difference we have mining futures we have mining itself that you can invest in and we've got a big coin stock exchange where you can actually invest in big coin companies many of them miners and like that ponzi scam was you know though as he says warned us that a lot of these are ponzi scams but one of them a sick miner it has one hundred eighty million dollar market cap and it pays out about a million dollars a week in dividends via big colon and it's currently one of the leading a safe producers and so there's significant value to be had being the innovator in the a six space in this race towards twenty nanometers which is the size of the

chip. was pretty small that was my interview with entrepreneur and investor trace mayer and security expert and response and openness now coming up here again and i brace to see who can get more bang for their buck is it minding bitcoins or mining gold when i do all mark levine on the snowden affair so stay to. previously run the western companies were operating there you know none of those profits ever wound. the populations have never had a share in that country is not valid trade with china investment from china i do

believe it must play a pulse of control maybe essential role in today's rice offering us chinese have benefit from but this a fair trade. zacky what happened that day i don't know but i killed. fears later is when i got arrested. for a crime i did not do. we have numerous cases where police officers lie about polygraph results. and people to confess to police officers don't beat people anymore i mean it just doesn't happen really. in the course of interrogation why because there's been this is like meant no because the psychological techniques are more effective in obtaining confessions than. physical abuse they were taking they

could do what they wanted they can say what they wanted and there was no evidence of what they did or what they say. is.

so bob and i are on a mission to see what's more profitable mining gold or mining bitcoins turns out they both have some inefficiencies well earlier i took a visit to one row park and virginia's gold belt i spoke with the gold mining museum curator tied up on shire he's been mining gold has become so unprofitable that there is no gold mines currently in operation on the entire east coast. of course we could have gone to an exchange and purchased a gram of gold for about forty five dollars however we wanted to get back to basics and see what it takes to get it from the ground up. because it is so expensive to process the court people just go out in prospect and look in the streams and find the gold that's already been freed up by you roshan and that's where i have a gram of gold inside of this little bottle and. this gold was prospected out of

the streams by local prospectors the east coast gold belt runs from georgia to virginia and virginia gold is mostly found in courts but extracting gold from courts is a lengthy and dangerous process that requires chemicals such as mercury since the one nine hundred fifty the gold mining has nearly ceased in the area today gold panning is more common definitely it's more of a hobby most people that i know do not sell the gold but they find they keep it and it's. it's more like a treasure hunt to them it's the it's the lure of the chase it's trying to figure out where in the stream there is goal since the gold bull run in two thousand and nine panning in virginia is creeks and streams have become more popular but is the price of gold high enough to make a living out of panning i think it would be very difficult because there are days that people go out and don't find any gold watch survivor and there's days

they just had their lucky and they have the right spot and they come up with maybe a gram if they're lucky and today a gram is about forty five dollars mr braun shyer gave us a demonstration and it raised the water table to show us how painters would search for gold and a surrounding creek or river so once they get to the stream and figure out where they want to pan they just go and we're going to use my hand but you know they'll use a shovel. and they go all the way to the bottom because that's where all the gold will majority of the gold will you venture lease out all once you get the sand down to the size that you like. like i said painting is getting all the lighter materials out of the pan and leaving just the heavier materials which will contain your gold just shaking back and forth. or just recreating what meets your dog and all these bands have raised ridges on them. and what that does is when

you're painting out to make a little shelf or a pocket and if there's a little piece of gold at the bottom it won't float out because it's so heavy and dense but it might slide along the bottom until it hits that ridge then your gold will settle down into this little pocket right here and that's where you want it you can move it back and forth. i and the top layers peeled off the float off because they're very light cords. go on. the roof and then when you get it down to about this much you can just. wander around and all the lights say move. there's the wall and there's the gold. using that highly technical method of gold panning it could have taken us anywhere from three hours even a week just depending on the luck of the stream to collect

a gram of gold it certainly was a lot of fine it might not be the best thing to plan your business around bob how did your big experience go well i'm not sure if it was as profitable basically i set my computer work for a couple of weeks to mine bit coins and we had a bit of fun with it so let's take it out. well we just saw mission to mind gold plate number one of the team that point you can purchase them on the open market with u.s. dollars euros australian dollars the currency do sure but you can also mine very much similar to gold so exactly how do we do that one program that we use that mentor which we see right here you simply go to the website and download the program and the money engine which we have just done here we go the number of bitcoins that will ever be mined into existence it's twenty one million and we're doing our part but as time goes on it takes more and more processing power to

generate a single bit point in fact on this particular computer it would take one thousand days to mine just one point and just what are these computations that are being made they're basically they're applying other people's transactions in the real world it's as though you could actually make money by making sure others people debit or credit card transactions are legitimate so let's take a look at the results of what we've done with our little mining operation well we've generated point zero zero zero seven points over the last two weeks basically dollars thirty seven at a rate not even enough to buy a cup of coffee at starbucks yeah and that does not include the cost of energy so for most computer systems it's not even a winning proposition. bottom line it would take about three years on my humble laptop to produce a single bit going of course this trace mayor mentioned earlier there are machines capable of doing this much quicker well we saw how their mind now that you have i'm going to buy you a cup of coffee or half a cup of coffee but well there's

a wallet system so you have on your computer and there are various programs that can do this and there are online ways that you can do this where you store your bitcoins and so that means that you can transport them to wherever you want they can even exist on your android phone in your pocket and there's really no threat to losing them unless you. lose your key so that's why it was kind of ridiculous in thailand earlier when they said that they're basically outlawing bitcoins and that people are going to lose their stockpiles they don't just disappear right you have to basically outlaw the internet to outlaw coins anywhere so after looking at all of this what do you think is a more profitable to mine gold or coins i don't know i mean up until we only had a little i mean. i don't change i have a couple little chunks of gold there i mean it's kind of interesting though that you can't really buy anything directly or most things directly with coins or gold so what can you actually do with the stuff well you can make jewelry and you can. bribe your little brother to do your laundry i don't know so it's good sounds good

perry and thank you so much for joining us and i think we're going to get to today's until you do all right let's go to it. all right we're here with mark levine host of the deal the snoop the inside scoop that's what we're going to talk about we're going to talk about snowden and n.s.a. spying so what's your take on all of this i've been arguing against this back in two thousand and four so you may know i used to work on a committee i actually wrote a tiny portion of the patriot act but i wrote a good part not a bad start a part to actually protect people's privacy that is no longer in the law that was

taken out by the republicans but basically ever since we found out that the n.s.a. was spying hundred millions of americans right which started in the bush era i've been complaining about liberals have been complaining about a conservative supported it now we find out obama is doing it conservatives are complaining about it i think that shows that as a conservative a point when you're one of the. other shows i have on our t.v. on cross talk of president it's funny so what about the constitutional aspect of the heart of it is this what the violation is your personal copy of the constitution and carry it wherever i go good for you and if you read the fourth amendment it's very clearly the right of the people to be secure in their persons houses papers and effects against unreasonable searches and seizures shall not be violated except if you have a warrant you have probable cause you have reasonably someone to commit a crime or terrorism go to the n.s.a. technically i'm just playing devil's i think we agree on this but is the n.s.a. technically violating the letter of the law so if you have these presidential signing orders if they're in compliance with the patriot act. how do we justify

this because the presidential executive orders and the patriot act are all subject to the constitution the united states so i actually think it's legal under statutory law but that's not enough it has to be legal under the constitution as far as i'm concerned you can't gather up even the medic data of all american citizens because that's a person's papers and effects belongs to us and we need to have a warrant before you do that what we've learned from the washington post today is that stone was right i mean he's my new hero he was absolutely right there are no safeguards and when the president has people said there were safeguards you know they were lying or they were misinformed right or there was this recent report about it in the wall post as you said today about the new information coming out and they're talking about typographical errors but there are a lot more serious errors that were coming out to what are those twenty seven hundred violations just in the branch that oversees the washing d.c. area and there are lots of other branches this is the heart of what edward snowden tried to tell us he said that they were taking all our data well those of us in the know kind of knew that was happening anyway we had been exposed back in two

thousand and four but more importantly he said anyone can take a look at anything and when they said that well the n.s.a. said no no that's not true we don't want to do or for insider trading you've been for a lot of things and he said that the administration hotly denied it but now we know there's no oversight and when president obama said the pfizer court would do oversight now we find in the files. court that they depend on the government for their oversee this is ridiculous i think there was one particular instance in which the n.s.a. was snooping on people who were trying to snoop on egypt which the country code is to zero and accidently they just put two o two which is the washington d.c. area code right here that's quite what the foreign intelligence surveillance act does allow united states to snoop on foreigners and agents of a foreign power but it doesn't allow them to snoop on american citizens because the constitution prohibits that well it turns out that they accidentally did snoop on american citizens and even that would be ok if they would disclose it to congress to the high rise to the overseers but they didn't disclose it and that's a problem that's the problem though to try to point out to so what's

a resolution to all of that a resolution is much much better oversight and how do we take that kind of what one regulation well one that yes absolutely president obama's proposed something that i really think goes a long way and that is have a privacy advocate in other words you should just be able to go to the foreign intelligence surveillance court and say we're going after these guys you've got an adversary proceeding that's the way american justice works someone who argues hey maybe you shouldn't get that warrant and then let the best argument when i was on a daily do i would say sometimes the justice department does not work here but if you want to weigh in today's show be sure to like us on facebook at facebook dot com slash prime interest you can follow mark here at mark levine talk you can follow me of course that. thank you so much for joining me for today's daily duel thanks bob.

and it was a labor of day on prime interest i had to pretend you had to find gold and it turns out the yellow metal have been arbitraged out of the east coast for quite some time and bob's computer with toiling away for weeks generating a claim but couldn't even come. at the cost of electricity we're still waiting for that solar power supercomputer and thanks to the efforts of trays and re-assess we now have a handle on data the new crypto currency regulator and finally it's no sweat to have mark levine on and talk about our favorite whistleblower thanks for watching come back next the week from everyone at prime interest i'm terry and boring have a great night.