Trade, Terror, Oil Spills
Bitcoin expansion is vital to Somalian remittances---banks blocking them now
Jon Matonis 12, Forbes, "The Somali American Remittance Dilemma", 5/12,
www.forbes.com/sites/jonmatonis/2012/05/12/the-somali-american-remittance-dilemma/
By threatening to close their
Wells Fargo and U.S. Bancorp
accounts
this week, a group representing
Somali
Americans has pushed the
ongoing
hawala remittance issue to a head
. For months now, Somalis in Minnesota
have been barred from making the small regular transfers to their family members in Somalia that they have been making for years.
¶
According to
American Banker, “
Bank officials say they sympathize with the plight of the expatriates but that there is
no clear way to process the payments comfortably within federal rules.
The problem lies in Somalia’s
money services businesses
. Remittance there is done through a loose network of MSBs known as
hawalas
. U.S.-based hawalas work with banks to wire the money to hawalas in Somalia.”
Since hawalas in Somalia are
unregulated, the U.S.
government
worries that
such
intermediaries could assist in funding
terrorism
.
¶
Unfortunately,
it’s not an isolated incident.
This scenario is likely to happen more and more
as
onerous
Bank Secrecy and USA Patriot
Acts make it increasingly difficult for financial institutions to be in
full compliance with anti-money laundering regulations.
Instead of trying to comply, they are
electing to opt out so as not to encounter heavy federal fines. It sure would be nice if the world had a decentralized
peer-to-peer
digital currency
that could be transferred to mobile devices in a secure fashion.
¶
Wait a
minute! Doesn’t
bitcoin
allow for rapid and trustworthy
international value
transfer
? Isn’t bitcoin fairly easy to
obtain in the developed economies of North America and Europe?
Doesn’t Somalia have good telecommunications
infrastructure
supporting mobile phones?
¶
Here’s how the bitcoin money remittance process would work. A hard-working
honest Somali American wishes to send the equivalent of $150 to his mother in Somalia so he purchases bitcoin at one of the many exchanges
that accept cash deposits at banks for bitcoin. Alternatively, our would-be remitter could use the Bitcoin OTC (over-the-counter) exchange and
arrange a person-to-person sale based on reputation history. Once the bitcoin is stored safely in the remitter’s client wallet, he would ask the
overseas recipient to generate a bitcoin receiving address using one of the many bitcoin wallet apps for Android. [Sorry but Apple's App Store is
currently restricting bitcoin wallet apps with send or receive capability.]
¶
After his mother in Somalia has received and confirmed the bitcoin
transaction (approximately 10 minutes), she would be able to maintain the bitcoin balance or change it out into her local currency, the Somali
shilling.
Bitcoin exchangers are already springing up
in many countries around the world including
Brazil, Latvia, and Philippines.
If it hasn’t happened already, a savvy merchant in Somalia will
start accepting bitcoin
for Somali shillings. Or a traditional currency exchange dealer could get in
on the action too
— the spreads are certainly there.
¶
In September 2010, the mobile penetration rate in Somalia was estimated at 25.84%
over a population estimate of 9.9 million. Since the financial flow would be principally in U.S. dollars to bitcoin to Somali shillings, several
aggregators could make a market in bitcoin and then sell their bitcoin in the market to other intermediaries. All it takes is a few Somalia-based
bitcoin outlets to open up their economy to the rest of the world economy.
¶
As a distributed network, bitcoin possesses the
capability to route around
interference and
disruption
. In fact, this was a key design consideration
as resiliency has grown to become an imperative for privacy-enhancing electronic cash. Its
detractors remind me of the holy papacy being fearful of the printing press because it allowed for
individual interpretation and diminished mankind’s reliance on the anointed biblical teachers
.
All remittances have stopped now---new avenues like Bitcoin are vital to preventing al-Shabaab
terrorism and piracy
Madeleine
Moreau 2/24,
Global Risk Insights, "Halt of remittances threatens stability in Somalia", 2015,
globalriskinsights.com/2015/02/halt-of-remittances-threatens-stability-in-somalia/
Increasing pressure on U.S. banks has led to a
complete halt of remittance payments from Somali
immigrants
to family and friends
back home
. The decision puts banks in a frustrating position between government officials who cite
the need to monitor cash transfers to terrorist groups and humanitarian experts who say remittances are an integral part of Somalia’s national
economy.
¶
Last week, the last U.S. bank accepting money transfers from Somali immigrants to
relatives living back home officially halted all transactions.
Government institutions have made it a
priority to monitor these cash transfers more closely
, including stepping prosecution of banks when transfer agencies
they service have been caught sending cash to illicit recipients.
¶
The U.S. Treasury Department and
the FBI cite concerns that
Somali immigrants could be sympathetic to radical Islamic groups such as Al Shabaab operating
within Somalia and use the money to fund their operations
.
¶
Humanitarian institutions such as
Oxfam
America,
however, explain that
remittance payments are a large part of Somalia’s
national
economy. Somali immigrants
living in the U.S. warn of family and friends not being able to survive.
¶
To strike a balance
of these political risks,
a better system
need to be put in place to both ensure greater transparency in cash transfers while also encouraging
the economic opportunity that remittance payments offer
.
¶
Remittances key to national economy
¶
Somalia is one of the poorest, most unstable countries in the world. As a result of years of civil war and violence, thousands have fled the country
in hopes of a better life.
The U.S. hosts some 80,000 Somali migrants
who work and send portions of their income to family
and friends back home.
¶
A study by Oxfam America indicates that of the $1.3 billion in remittances being sent to Somalia annually, $215 million
come from immigrants living in the US.
¶
These
cash transfer are significant, because after years of war
Somalia
still
does not have a central banking system
. There are also no official international transfer companies such as Western Union
in the country.
¶
As a result,
families living abroad have had to rely upon informal networks known as
“hawalas” to deliver money to relatives back home.
One-third of the nation’s economy is
believed to
be
dependent on
these
remittances. The Merchants Bank of California, the last U.S. bank to shut down remittance transfers, handled
60-80% of these payments.
¶
Humanitarian experts say that
the money being sent from
families
abroad is key
to filling
in
the gap
of a poor central banking system
, and could have a devastating effect
on the health
of citizens living there.
¶
In an interview with Al Jazeera, Ifrah Ahmed, a 25-year-old law student in New York who was born in Somalia
but raised in Seattle, used to send $100 to $300 a month back home to relatives. She stresses the importance of these funds in supporting her
family:
¶
“Even though you send remittances to one person, the amount of people that money affects is incredible. If we send money to my aunt,
not only will she feed her children, she will feed her neighbors as well, because they may not get remittances from abroad.”
¶
Fear of terrorist
funding
¶
Government institutions, however, have put increasing pressure on banks that offer cash
transfers to Somalia so as to ensure that the funds are not being used to fund terrorist operations
.
Officials explain that because the cash transfers are operated by the informal hawala networks, it is harder to monitor where remittance payments
are being sent exactly.
¶
The added pressure has made these transactions very risky for U.S. banks, which is
why many of them shut down transfers
.
¶
Treasury Undersecretary David S.
Cohen said in a recent statement
that there are “real money laundering and terrorist financing risks” associated with these cash
payments. The government is working to establish a more secure system so that “legitimate
customers” are receiving funds
.
¶
In addition, State Department spokeswoman Jen Psaki has also said that these cash transfers are
not as significant to the nation’s economy, saying it would be a “stretch” to connect remittances to economic opportunity in Somalia.
¶
The U.S.
government deems
Al Shabaab
a terrorist organization, as it
continues to carry out violent operations
in Somalia
that threaten
US interests.
Officials
also note the rise of piracy off the coast
of the country, which has seized
U.S. ships in the past.
¶
Last month, law enforcement officials arrested a man from Northern Virginia who was allegedly funneling money toward
illicit activities.
¶
At the same time, critics say that cutting off
these
funds could exacerbate the
humanitarian
crisis
in
Somalia
and
actually
strengthen the appeal of terrorism and piracy
. Terrorist groups could exploit
this removal of economic opportunity by offering payments of their own to win over support
.
¶
Striking
a political risk balance
¶
Overall,
authorities seek a balance between engaging in an effective counter-terrorism
campaign without running the risk of funding terrorist organizations
such as Al Shabaab. Greater banking
transparency, in other words, is needed to make sure funds do not end up in the wrong hands.
¶
Engaging with officials on the ground in Somalia
that handle the hawala transfers is a first step in ensuring legitimacy of the customers receiving the payments. This would require an investment
in infrastructure to improve regulation, which would ultimately strengthen Somalia’s poorly managed financial institutions and thus encourage
indigenous economic growth.
¶
Failing to establish some sort of system to allow remittance fund to go through,
however,
could have reverse counter-terrorism effects
and push Somalia into a deeper humanitarian
crisis
.
That collapses global trade, causes devastating oil spills, and finances terror networks
Roger
Middleton 8,
consultant researcher in the Africa Programme at the Chatham House, the Royal Institute of Economic Affairs,
"Piracy in Somalia", October,
http://www.chathamhouse.org/sites/default/files/public/Research/Africa/1008piracysomalia.pdf
What piracy does to international trade Clearly a company whose
cargo
is
prevented from reaching
its destination
on time
will lose money. Add to this
the cost of paying
ransoms and
already
the
damaging economic effect of
Somali
piracy can be seen
. The consequences are not limited only to
companies whose vessels are hijacked;
of wider concern is the growth of insurance premiums
for ships
that need to pass through the Gulf of Aden. The danger means that war risk insurance premiums must now be paid: premiums are reported to have
risen tenfold in a year. 32
If the cost of extra insurance becomes prohibitive
, or the danger simply too great,
shipping companies may avoid the Gulf
of Aden and take the long route to Europe and North America around the Cape of Good
Hope. Indeed this option is mentioned by shipping industry insiders as a very real possibility. The extra
weeks of travel
and fuel
consumption
would add
considerably
to the cost of transporting
goods. At a time when the price of
oil is a major concern
, anything that could contribute to a further rise in prices must be considered very serious indeed.
¶
Potential
Environmental Catastrophe
¶
Large oil tankers pass through the Gulf of Aden and the danger exists that
a pirate attack could cause a
major oil spill
in what is a very sensitive and important ecosystem
. During the attack on the Takayama the ship’s
fuel tanks were penetrated and oil spilled into the sea. The consequences of a more sustained attack could be much worse.
As pirates
become bolder and use ever more powerful weaponry a tanker could be set on fire, sunk or forced
ashore, any of which could result in an environmental catastrophe that would devastate marine and
bird life for years to come
. The pirates’ aim is to extort ransom payments and to date that has been their main focus; however, the
possibility that they could destroy shipping is very real.
¶
Possible co-opting by international terrorist networks
¶
The
other worst-case
scenario is that pirates become agents of
international
terrorism
. It should be emphasized that to date there is no
firm evidence of this happening. However, in a region that saw the attacks on the USS Cole, seaborne terrorism needs to be taken very seriously.
For example, a large ship sunk
in the approach to the Suez Canal
would have a devastating impact on
international trade. Terrorism at sea could take many forms: direct attacks on naval or commercial shipping, such as the 6 October 2002
attack on the MV Limburg, 33 hostages from pleasure boats being used as bargaining chips for terrorists or high-profile victims of an atrocity,
and hijacked ships being used as floating weapons.
Terrorist
network
s could also
use the financial returns of piracy
to fund their activities
around the world. The potentially massive consequences of this scenario must be taken into account along with
the more likely scenario that piracy money is being routed to Al-Shabaab. 34 As has been seen over the last year, pirates in Somalia have become
ever more dangerous, but it is impossible to tell what will happen next. It is best to act to prevent the worst-case scenarios rather than try to solve
the problem once it has escalated.
Nuclear terror causes accidental US/Russia nuclear war---extinction
Anthony
Barrett 13
, PhD, Engineering and Public Policy from Carnegie Mellon University, Director of Research, Global Catastrophic Risk
Institute, Fellow in the RAND Stanton Nuclear Security Fellows Program, Seth Baum, PhD, Geography, Pennsylvania State University,
Executive Director, GCRI, Research Scientist at the Blue Marble Space Institute of Science, former Visiting Scholar position at the Center for
Research on Environmental Decisions at Columbia University, and Kelly Hostetler, Research Assistant, GCRI, 6/28, “Analyzing and Reducing
the Risks of Inadvertent Nuclear War Between the United States and Russia,” Science and Global Security 21(2): 106-133
War involving
significant fractions of the
U.S. and Russian
nuclear
arsenals,
which are by far
the largest of any
nations
,
could
have globally catastrophic effects
such as severely reducing food production for years,1 potentially
leading to
collapse of modern civilization worldwide and even the
extinction of humanity
.2 Nuclear war between the United States
and Russia could occur by various routes, including accidental or unauthorized launch; deliberate first attack by one nation; and inadvertent attack. In an accidental or
unauthorized launch or detonation, system safeguards or procedures to maintain control over nuclear weapons fail in such a way that a nuclear weapon or missile
launches or explodes without direction from leaders. In a deliberate first attack, the attacking nation decides to attack based on accurate information about the state of
affairs. In an inadvertent attack, the attacking nation mistakenly concludes that it is under attack and launches nuclear weapons in what it believes is a counterattack.3
(Brinkmanship strategies incorporate elements of all of the above, in that they involve intentional manipulation of risks from otherwise accidental or inadvertent
launches.4 )
¶
Over the years, nuclear strategy was aimed primarily at minimizing risks of intentional attack through development of deterrence capabilities, though
numerous measures were also taken to reduce probabilities of accidents, unauthorized attack, and inadvertent war. For purposes of deterrence, both U.S. and
Soviet/Russian forces have maintained significant capabilities to have some forces survive a first attack by the other side and to launch a subsequent counterattack.
However, concerns about the extreme disruptions that a first attack would cause in the other side’s forces and command-and-control capabilities led to both sides’
development of capabilities to detect a first attack and launch a counter-attack before suffering damage from the first attack.5
¶
Many people believe that with the end
of the Cold War and with improved relations between the United States and Russia, the risk of East-West nuclear war was significantly reduced.6 However, it has also
been argued that
inadvertent nuclear war
between the United States and Russia has
continue
d
to present
a
substantial risk
.7 While the United States and Russia are not actively threatening each other with war, they have remained ready to launch nuclear missiles in
response to indications of attack.8
¶
False indicators of nuclear attack could be caused in several ways
. First, a wide range of
events have already been mistakenly interpreted as indicators of attack, including weather phenomena, a faulty computer chip, wild animal activity, and control-room
training tapes loaded at the wrong time.9 Second,
terrorist groups
or other actors
might cause attacks on
either
the
U
nited
S
tates or Russia
that resemble
some kind of nuclear
attack by the other
nation by actions such as
exploding a stolen or improvised nuclear bomb
,10 especially if such an event occurs during a crisis between the United States and
Russia.11
A variety of
nuclear terrorism
scenarios are possible
.12
Al Qaeda has sought to obtain or construct
nuclear weapons and to use them against the United States
.13
Other methods
could
involve
attempts to
circumvent nuclear weapon
launch control
safeguards or exploit holes in their security.
14
It has long been
argued that the probability of inadvertent nuclear war is significantly higher during U.S.-Russian crisis
conditions
,15 with the Cuban Missile Crisis being a prime historical example.
It is possible that U.S.-Russian
relations will
significantly
deteriorate
in the future,
increasing nuclear tensions
.
There are
a variety of
ways for a third
party to raise tensions
between the United States and Russia
,
making
one or both
nations
more likely to
misinterpret
events as
attacks
.16
Trade prevents war---best new game theoretical studies
Matthew O.
Jackson 14,
William D. Eberle Professor of Economics at Stanford and Stephen M. Nei, PhD Student in Economics at Stanford,
“Networks of Military Alliances, Wars, and International Trade”, October 2014, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2389300
This instability provides insights into the constantly shifting structures and recurring wars that
occurred
throughout the nineteenth and first half of the twentieth centuries.6 Wars, however, have greatly subsided
in parallel
with the huge increase of trade (partly coincidental with the introduction of containerized shipping in the 1960s):
between 1820
and 1959 each pair of countries averaged .00056 wars per year, while from 1960 to 2000 the average
was .00005 wars per year, less than one tenth as much
. We see this pattern quite clearly in Figure 1.7 These changes also
follow the advent of nuclear weapons, which impacted the technology of war. Indeed,
we show how
nuclear weapons can lead
to some
changes in
stability, but does not generate peace on its own
. Indeed,
in order
to capture
the
actual patterns that have emerged one must add
other considerations - such as
trade
considerations -
since
the base model shows
that networks of alliances would not be stable with nuc
lear weapon
s but without
trade.8
¶
Thus, the second part of our analysis is to enrich the base model to include international trade. Indeed, there has been a rapid increase in
global trade since World War II (partly coincident with the growth of container shipping among other stimuli).
The empirical
relationship between war and trade is an active area of research, with strong suggestions
(e.g., Martin,
Mayer, and Thoenig (2008))
that network concerns may be important
. So, we introduce a concept of a network of alliances
being war and trade stable, which allows countries to form alliances for either economic or military considerations. In this richer model, an
alliance allows countries to trade with each other and to coordinate military activities, and so can be formed for either reason. This restores
existence of networks of alliances that are stable against the addition or deletion of alliances.
Trade provides two helpful
incentives
: first
it provides economic motivations to maintain
alliances
, and the resulting denser
network of alliances then
has a
deterrent effect
; and second, it can
reduce the incentives of a country to
attack another
since trade will be disrupted. This
reduces
the potential set of
conflicts
and, together
with the denser networks, allows for
a rich family of
stable networks
that can exhibit structures similar to networks we
see currently.
¶
We provide some results on the existence and structure of war and trade stable networks of alliances, showing that structures
similar to those observed over the past few decades are economically stable under apparently reasonable parameters. It is important to note that
another dramatic change during the post-war period was the introduction of nuclear weapons, which changes the technology of war and is
generally thought to have greatly increased the defensive advantage to those with such weapons.9 Our model suggests that although world-wide
adoption of nuclear weapons could stabilize things in the absence of trade, it would result in an empty network of alliances as the stable network.
To explain the much denser and more stable networks in the modern age along with the paucity of war in a world where nuclear weapons are
limited to a small percentage of countries, our model points to the enormous growth in trade as a big part of the answer.
We close the
paper with
some
discussion of this
potential
role that
the growth in trade has played in reducing wars over
the past half century
, and how this relates to the advent of the nuclear age
.
¶
Before proceeding, let us say a few
words about how
this paper contributes to the study of war.
The literature on war provides many rationales for why wars
occur. Our analysis here fits firmly into what has become a “rationalist” tradition based on cost and benefit analyses by rational actors, with roots
seen in writings such as Hobbes (1651) Leviathan, and has become the foundation for much of the recent international relations literature.10
¶
To
our knowledge, there are no previous models of conflict that game-theoretically model
networks of
alliances
between
multiple agents/countries based on costs and benefits of wars. 11 There are previous models of coalitions in
conflict settings (e.g., see Bloch (2012) for a survey). Here, network structures add several things to the picture. Our model is very much in a
similar rationalist perspective of the literature that examines group conflict (e.g., Esteban and Ray (1999, 2001); Esteban and Sakovicz (2003)),
but enriching it to admit network structures of alliances and of international trade.
This allows us to admit patterns that are
consistent with the networks of alliances that are actually observed
, which are far from being partitions (e.g., the
U.S. is currently allied with both Israel and Saudi Arabia, Pakistan and India, just to mention a couple of many prominent examples). More
importantly, our Theorem 3 provides a first model in which such non-partitional such structures are stable and provide insight into peace.
Moreover, as we already mentioned above,
the observed patterns of wars and of alliances are not partitional, and
so this provides an important advance in moving the models towards matching observed patterns of
wars, trade and alliances.
¶
Our model thus serves as a foundation
upon
which one can eventually
build more elaborate analyses of multilateral interstate alliances, trade, and wars
. It is also important to
emphasize that
the network of international trade is complex and can in fact be stable (and prevent
conflict) precisely because it cuts across coalitions
. This is in contrast to coalitional models that generally predict only the
grand coalition can be stable or that very exact balances are possible (e.g., see Bloch, Sanchez-Pages, and Soubeyran (2006)). Again, this is
something illustrated in our Theorem 3, and which does not exist in the previous literature. Finally, our model illuminates the
relationships between international trade, stable network structures, and peace
, something not appearing
in the previous literature
- as the previous literature that involves international trade and conflict generally revolves around bilateral
reasoning or focuses on instability and armament (e.g., Garfinkel, Skaperdas, and Syropoulos (2014)) and does not address the questions that we
address here.
¶
The complex relationship between trade and conflict
is the subject of a growing empirical literature (e.g.,
Barbieri (1996); Mansfield and Bronson (1997); Martin, Mayer, and Thoenig (2008); Glick and Taylor (2010); Hegre, Oneal, and Russett (2010)).
The
literature not only has to face challenges of endogeneity and causation, but also of substantial
heterogeneity in relationships, as well as geography, and the level of conflict.
The
various
correlations between conflict and trade are complex
and quite difficult to interpret,
and a model
such as ours
that combines military and economic incentives, and others that may follow, can provide
some
structure with which to interpret some of the empirical observations, as we discuss in the concluding remarks.
Carribean Growth
And, Bitcoin expansion’s key to massive Caribbean economic growth
Paul
Vigna 2/26
, with Michael J. Casey, both authors and economy and finance journalists for the Wall Street Journal, “Bitcoin for the
Unbanked,” 2/26/15, http://www.foreignaffairs.com/articles/143162/paul-vigna-and-michael-j-casey/bitcoin-for-the-unbanked
Roughly
2.5 billion
adults in the world
don’t have access to banks, which means
somewhere in the order of
5
billion people
belong to households that
are cut off from a financial system
that the rest of us take
for granted
. They can’t start savings accounts. They don’t have checking accounts. They can’t get credit cards.
They live in places
where banks don’t want to go, and because of this,
they remain
effectively
walled off from the global
economy.
They are called the unbanked. But
they are not unreachable
, not by a long shot,
and
one
of the biggest and most exciting prospects bitcoiners talk about is using
their
cryptocurrency to bring
these billions of people roaring into the twenty-first century
.
¶
The Caribbean is an area of the
emerging-market world where a strong case can be made for locals to use bitcoin
to get around a
restrictive financial system.
¶
Jamal Ifill, a young, soft-spoken artist with a head full of dreadlocked hair and a warm smile, has been
blowing glass in Barbados for 11 years and has had his own one-room studio-cum-showroom for five years. One of his latest pieces is a
two-foot-high, rectangular, latticework lamp that to our New York eyes looked like one of the Twin Towers. He sells his artwork locally and has attracted
some attention; a piece he made was presented to Princess Anne when she visited the island in 2011. He wants to expand into the U.S. market, but
the logistics and costs of moving money from there to here are prohibitively high, so most of his business remains local.
¶
“I tried everything,”
Ifill says, sitting at the desk that doubles as his office and workspace in his small glass-blowing studio in Bridgetown, Barbados. “Credit cards,
PayPal, Western Union. They’re too expensive.”
¶
Leroy McClain, managing director of the government-run Barbados Investment Development
Corp., explained why that is: The
big international banks are happy to provide merchant-banking services to
companies in the United States and Canada, but they make island businesses jump through far
more hoops
for the same services.
¶
Ifill understands the problem all too well. In fact, he has all the problems of an international business.
The particular glass he uses must be imported from Ukraine. His customers are not only on the island, but overseas. He is competing with foreign
artists who aren’t hamstrung by the costs that tie him up. He tried e-commerce—through a local company—but gave up on it because not enough
customers were using it, which meant he wasn’t getting any business out of it. A vicious circle. “I even tried Etsy,” he says, the online
arts-and-craft site. Again, he couldn’t compete on costs with U.S. artists.
¶
Ifill’s
problem stems
in part
from the difficulty in
shifting money around the region
’s island nations, which requires constant and costly currency
exchanges. Barbados and virtually every nation in the British West Indies has its own, sepa
rately
printed currency—each called the dollar, each fluctuating in value against the others and against
the better-known U.S. dollar
. And the former Spanish, Dutch, and French colonies all have their own pesos, guilders, and gourdes.
The governments of the region have long talked about creating a monetary union to deepen the region’s free-trade arrangement, the Caricom
common market. But as with the development of that free-trade area, progress toward building a single monetary authority and the other
institutions needed for a common currency has been fitful.
A Caribbean dollar remains a pipe dream
.
¶
To make matters worse,
a number of central banks impose capital controls on their citizens
. Barbadians such as Ifill, for instance, are limited in
the amount of foreign currency they can buy. That Barbados, the Cayman Islands, the Bahamas, and other Caribbean nations serve as tax havens
for hedge funds and other foreign financial institutions is an irony not lost on the region’s tightly controlled residents.
This mix of
monetary systems and financial regulations
, and the frustration that it breeds,
make the
sunny
islands of the
Caribbean ripe for bitcoin—or so says Gabriel Abed.
¶
Abed, 27, turned to cryptocurrencies as the answer to a
problem: how to expand e-commerce. He is the CEO of Web Designs, a local business that sells Internet domain registrations, Web site designs,
maintenance, and e-commerce platforms. The last has been a particularly tough sell. Because of the costs of foreign exchange, credit cards, and
PayPal, which can add up to eight or nine percent, he said, most merchants—Ifill was one of them—simply avoid selling abroad.
¶
Abed learned
of bitcoin early on and saw its potential to solve this problem. He began with the idea of a Caribbean cryptocurrency, which he dubbed
CaribCoin, but realized quickly it was a bigger project than he wanted to take on. He pivoted to the idea of a bitcoin exchange, and a merchant
service that he could bundle with his Web-design and hosting service, and began building Bitt (the URL is actually bi.tt, the .tt being the domain
for neighboring Trinidad and Tobago). He also began mining his own bitcoins—in Trinidad, taking advantage of relatively low electricity costs
there, and using the profits from that and from Web Designs to fund Bitt.
¶
Bitt is designed as a Caribbean-focused online exchange and merchant
service, providing trading between different cryptocurrencies and fiat currencies, as well as a module for helping local businesses adopt digital
currencies for payment. His appeal to them is simple: What if I can give you a payment option that costs only one percent?
¶
The catch is that the
one percent fee comes with bitcoins, which as of this writing can’t buy you much in Barbados.
To say that cryptocurrencies are
not big in Barbados would be an understatement. They effectively don’t exist on the island, and
neither does mobile commerce
. While virtually everybody has a cell phone, the proverbial badge of a digital citizen, people use
them only for texting and talking.
E-commerce is barely getting started, as is online banking
.
¶
The way to get over the
dramatically cheaper payment method, they can be talked into accepting that method at their shops. But he has his work cut out for him.
¶
EARLY
ADOPTERS
¶
The chicken-and-egg dilemma will require incentives.
The promise of saving money is certainly one of
them. But there are others. As in the developed world, one hope is that if big
firms or
institutions whose relationships run
deep in the economy start using bitcoin
, they can create incentives for
their
suppliers and customers
to use it
.
¶
Patrick Byrne, the CEO of Salt Lake City-based online retailer Overstock.com, which began accepting bitcoin in early 2014 to
become what was then the biggest revenue-earning merchant to do so, believes his firm can play such a catalytic role creating a bitcoin
“ecosystem” in the developing world.
¶
When we met in June 2014 in Utah,
Byrne explained that he viewed bitcoin as a way
to widen economic opportunity, if only he could get people to accept it.
He was still figuring out the carrots he
would use, but he had some ideas. “In the world of payments and dealing with vendors, there’s all this sensitiv ity around the terms of payment.
Vendors will sometimes give you a two percent discount for shaving off 20 days, because to them that’s like a 36 percent cost of money over the
year. That affects all kinds of things. The very fact that vendors offer those terms means there’s an enor mous opportunity for bitcoin to step up in
this area.” A few weeks later, Byrne announced he would not only be paying bitcoin-accepting vendors one week early, but that he’d also pay his
employee bonuses in bitcoin.
¶
What companies such as Overstock are trying to do with digital-currency payments has parallels with what
Walmart achieved by pioneering communications technology to revolutionize supply-chain management in the 1990s and early 2000s. The
Arkansas-based retailer famously developed a sophisticated network with which to tie all of its suppliers worldwide into a single, integrated
database for managing the goods and services flowing in and out of Walmart’s warehouses. Along with big improvements in shipping logistics,
this allowed the company to optimize its just-in-time inventory management, which drastically cut costs. Walmart parlayed those cost savings
into the cheapest prices anywhere in the United States, which turned it into the iconic and, to some, infamous behemoth that now dominates
American suburbia.
¶
Just as important, its high-tech network had a feedback effect on suppliers, contributing to the concentration of
manufacturing in hubs such as China’s Pearl River Delta. As Walmart became an increasingly powerful but relentless hunter of the cheapest
manufacturing sources, and as other Western buyers caught on to its high-tech lead, factories paying low wages in the developing world would
congregate in locales where it was most efficient to tap into Walmart’s network. Byrne now sees similar opportunities for firms like his to build
influence by leveraging bitcoin in its international payment relationships and thus creating a tipping point from which change starts rippling over
the global economy.
As a group of businesses in one region begins adopting the currency, it will become
more appealing to others with whom they do business.
Once such a network of intertwined businesses
builds up, no one wants to be excluded from it. Or so the theory goes.
¶
“Just as American retail collapsed into Walmart, who
knows how much can collapse into us? And I don’t mean Overstock. I mean bitcoin,” Byrne said. “
You start getting network
effects. You are incentivizing everyone—it’s like we have the first fax machine but nobody else has a
fax machine, so it doesn’t do you any good. But you start adding other nodes and making incentives
to add nodes and eventually get a critical mass.
Now people aren’t just faxing us, they are faxing each other.”
Growth is key to Caribbean stability
Christine
Lagard 14
, Manager Director of the International Monetary Fund, June 27th, 2014, "The Carribean and the IMF---Building a
Partnership for the Future," https://www.imf.org/external/np/speeches/2014/062714.htm
Given this legacy,
the Caribbean was vulnerable going into the global financial crisis, and was hit with
its
full force
.
Six years on,
output has still not returned to pre-crisis levels
, and public debt is still at record highs—
almost 100 percent of GDP in tourism-dependent countries, and 140 percent of GDP here in Jamaica.
∂
As always,
the poor and
the
vulnerable were hit hardest
by crisis
. Across the region, about
a third of young people are out of work
.
In
Jamaica, the poverty rate doubled to 17½ percent.
∂
With the doors of opportunity barred for so many,
the result is
disengagement and disenchantment
. Exclusion creates
an
inflammatory cocktail of crime and insecurity,
and
a steady deterioration in the quality of life
.
∂
Clearly, then, the crisis was a major wake up call.
Caribbean
leaders understand the need for change—not just to free themselves from the
grip of crisis
, but to adapt
to the challenge of the global new normal.
∂
Think about it. The global economy is more interconnected than ever before. The engines of growth
are shifting away from traditional markets in North America and Europe to the far-flung shores of Asia.
The cozy comfort of trade
preferences is long gone
. The specter of climate change hovers over the small island states.
∂
As Derek Walcott put it, “the future
happens, no matter how much we scream”.
∂
Change begins with restoring econ
omic
stability—
this establishes a
platform for rising and shared prosperity
.
Caribbean instability collapses global hotspot management---escalates conflict everywhere
Tim
Gorrell 5
, Lieutenant Colonel in the United States Army, “CUBA: THE NEXT UNANTICIPATED ANTICIPATED STRATEGIC
CRISIS?”, US Army War College Research Project, 3-18, http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA433074)
Regardless of the succession, under the current U.S. policy, Cuba’s problems of a post Castro transformation only worsen. In addition to Cubans on the island, there will be those in exile who will return claiming authority. And there are remnants of the dissident community within Cuba who will attempt to exercise similar authority. A power vacuum or absence of order will create the conditions for instability and civil war. Whether Raul or another successor from within the current government can hold power is debatable. However, that individual will nonetheless extend the current policies for an indefinite period, which will only compound the Cuban situation. When Cuba finally collapses anarchy is a strong possibility if the U.S. maintains the “wait and see” approach.
