It Might Cost You $39K to Crowdfund $100K Under the SEC's New Rules

Here's a great example of how tiny entrepreneurial initiatives can be squeezed out of existence by regulations:

VentureBeat.com reports:

On October 23, 2013 the Securities and Exchange Commission (SEC) issued the proposed rules for Regulation Crowdfunding.  The 585-pages included an explanation of the rules, the feedback it received, and a cost/benefit analysis.

A cost/benefit analysis is common in many regulations to give the public an estimate of the costs associated with implementing the proposed regulation.  It answers the question, “Do the costs outweigh the benefits?”  For Regulation Crowdfunding it sheds light on the question, “How much will it cost to raise money via crowdfund investing, and how do I keep it to a minimum?” Here’s a closer look at what that analysis tells us.

The Background
The legislation requires that the selling of crowdfund securities take place on registered websites.  The websites hosting the transactions are known as funding portals or broker dealers.  These entities must register with the Securities and Exchange Commission (SEC) and the Financial Intermediary Regulatory Authority (FINRA).  The legislation mandates investors have access to a business plan, use of proceeds, a valuation of the company, and financials. Firm may need to retain a Certified Public Accounting firm to certify the company’s financials or audit the company’s books.  Every step costs money, from completing the required documents to retaining professional services to assist in compliance.

The SEC looked at 3 variables:

a) the success fee (in terms of a percent (%) of proceeds) paid to websites for facilitating the transaction,

b) the compliance cost related to the preparation and filing of individual forms both during and after a campaign, and

c) the costs for a Certified Public Accountant (CPA) review or audit (an expense that scales over $100,000).  Certain costs like the success fee as a percent of the raise are variable, others scale like the CPA/Audit costs for raises over $100,000 and others like the compliance costs are fixed.  The SEC provided both low and high estimates for these costs based on assumptions and surveys it took.

For raises under $100,000, the SEC estimates portal and compliance fees will eat up between 12.9% and 39% of the money raised. For raises over $100,000 but less than $500,000, that figure may drop down to 7.96%.  And for raises over $500,000 but under $1M, it may drop to 7.66%.

In other words, unless you have project that can justify a money raise of more than $100,000 and you are willing to dilute your raise by raising more than $100,000, the cost to meet regulations makes it pretty much impossible to crowdfund your project.

Trace Mayer on the Crypto-Wars - Freedom of Speech and Freedom of Transaction

Trace emails:

Here is a copy of my presentation from Inside Bitcoins 2013 in Las Vegas. In it I tie together freedom of speech, cryptography, monetary science as applied to Bitcoin as sound money and property rights. It is fairly comprehensive and the first of its kind that I am aware of.

Consequently, I think many of your readers would like to see it because of the unique intellectual foundation of property rights in the Information Age.

http://www.runtogold.com/2014/01/the-crypto-wars-with-freedom-of-speech-and-freedom-of-transaction/

How The Minimum Wage Benefits The Government

By, Chris Rossini

The economic backwardness of the minimum wage has been covered exhaustively. A quick Google search of EPJ reveals 492 posts on the minimum wage. It never ends. That doesn't mean we stop, of course. Come back in a few years, and we'll be up to 1,000.

But no matter how many times you explain how economically detrimental the minimum wage is, it doesn't make a dent in the fiat armor. They just jam another increase through whenever they feel the time is most advantageous.

Governments can care less that the minimum wage only outlaws jobs, and harms the most economically vulnerable people in society (i.e., the poor, low-skilled, and teenagers). The horrible economics take a back seat to the juicy benefits that government gets from the minimum wage law.

Henry Hazlitt described the juicy benefits way back on Feb. 7, 1949 in Newsweek:

“For every employer must be kept in constant fear of the Federal officeholders, no matter what he pays, and every worker must be made to feel that his welfare is dependent upon governmental favor.”

So you see, that's where the government's bread is buttered. The minimum wage provides a panoply of POWER!

Every employer must always know that the billy club of government can be swung at any moment. Every employee must know that their pay and welfare are dependent on the good graces of politicians.

What's not to like from government's perspective?

The low-skilled are priced out the market? Who cares? Send them to the unemployment office where they can latch onto the government's bosom. If anything, the low-skilled should be thankful, right? After all, government first forces them into unemployment, only to be showered with "benefits" for not working. That's quite a deal!

The minimum wage is a golden goose of POWER for the government.

Don't bore them with economics.

---

Chris Rossini is on Twitter, Facebook & Google+

Murray Sabrin Has Ditched Libertarianism

He is visiting Vietnam and sends along this picture of himself and his wife.

He writes:

First Sabrin Royal couple of Vietnam.   Photo taken in the citadel, hue, Vietnam, 19th century home of Royal couple and site of fierce battles during 1968 Tet offensive.    Off to park hike in a few hours.  So much to write about, especially the immorality of the war.  LBJ and his henchmen should be tried as war criminals posthumously.

Regards,
Murray

UPDATE

Maybe we haven't lost Murray. In a follow up email, he writes:

 I would be the benevolent king.  No more taxes.  My kingdom would be the poorest in all history.

Voluntary donations would sustain the monarchy.  No more wars, no more bureaucrats, no more mandates, no more interventions.   Let freedom reign!

Quacking Over Ducksters As Freedoms Go POOF

By Ilana Mercer

While the nation fretted over the ouster of one Duckster from the parallel reality of a TV reality show, more of the protections enshrined in the Fourth Amendment of the U.S. Constitution evaporated.

Just after Christmas, district-court Judge William Pauley ruled that the privacy protections afforded by the Constitution were relative freedoms, not absolutes ones. As such, Fourth-Amendment rights had to be calibrated against a government's need to maintain a database of records that would (putatively) prevent future terrorist attacks.

Paraphrased by The Guardian, "Pauley argued that al-Qaida’s 'bold jujitsu' strategy to marry seventh century ideology with 21st century technology made it imperative that government authorities be allowed to push privacy boundaries."

EPJ Week In Review - Week Ending 1/3/14

By, Chris Rossini






Below you'll find everything that has been published on EPJ for the week ended Friday January 3, 2014. The hottest posts for each day are highlighted in red.






Friday 1/3/14

• Senate Sets Monday Vote on Janet Yellen to Head Fed
• Ludwig von Mises on Hayek's "The Constitution of Liberty"
• Some Questions for Edward Snowden and Others
• Is the Austrian School of Economics a Cult?
• OMG Joe Lieberman Joins Private Equity Firm
• Pot Goes on Sale in Colorado: Cash or Bitcoin Only
• Neocon Proposes Nutty Two Tier Minimum Wage Law
• Emily Post Etiquette (Bill de Blasio Edition)
• Four Key Lessons From 2013
• How to Handle a Police Encounter
• The Case for the GMU Crowd as Cultists
• Ezra Klein Is Said to Plan to Leave Washington Post
• Walter Block: Paul Krugman Makes the Cult Smear
• What Is Heaven?
• Chris Rossini on the "Austrian Cult"
• Meet Coinye West, the Kanye-Inspired Bitcoin Alternative
• Kim Jong Un ‘Fed Uncle to Pack of 120 Ravenous Dogs’

Kim Jong Un ‘Fed Uncle to Pack of 120 Ravenous Dogs’

NyPo reports:

The uncle of North Korean dictator Kim Jong Un was ripped to pieces by a pack of starving dogs in a slow, barbaric execution that Kim himself watched, an official Chinese newspaper reported.

Jang Song Thaek, the 67-year-old family member once considered Kim’s right-hand man, died horribly with five other condemned officials in a capital punishment ritual called “quan jue”— execution by dogs, according to the Hong Kong newspaper Wen Wei Po, a mouthpiece for China’s government[...]

Quan jue is reserved for North Korea’s most hated enemies— and for those occasions when a simple firing squad doesn’t send a strong enough message, according to the Chinese newspaper.

Jang was stripped naked before and literally fed to the dogs as Kim and hundreds of North Korean officials watched, Wen Wei Po reported. The 120 animals, deliberately starved beforehand, spent more than an hour devouring their six victims, the newspaper reported.

Meet Coinye West, the Kanye-Inspired Bitcoin Alternative

Not many people realize it, but there are hundreds of alternatives to Bitcoin as an e-currency. Most are flaky.

Now comes this. Via PC World:

When Kanye West wrote the lyric, “I’m chilling, trying to stack these millions,” he probably did not mean digital currency. But a new technology might give him pause, or at least have him scratching his head 

In a sign that the frenzy over Bitcoin may have reached a new level of ridiculousness, there is now another phenomenon inspired by it: Coinye West, named after the American hip hop artist[...] 

Coinye West, however, might be the first to be modeled after, and take its name from, a celebrity. “We chose Kanye because of his trendsetting abilities and his originality,” the developers of the currency said via email. They declined to identify themselves due to the collaborative and “decentralized” nature of the currency.

West himself was not involved in developing the currency, and he was notified of its existence only via Twitter[...]

The currency will officially launch on Jan. 11, underpinned by a common-sense goal: To make digital currencies more accessible to a less technical audience. The Coinye West system, its developers said, will use a different algorithm from Bitcoin’s that will let people use their home computers to acquire Coinye West coins instead of having to go out and buy expensive, specialized hardware.

The name of this mining software will be “Gold Digger,” the developers said, presumably after the title of a popular song by West. “We want to bring cryptocurrency to the masses,” they said, “so that anybody can get into mining with a couple of clicks.”[...]

Taking a page from Silk Road's Ross Ulbricht, the creators have also gone out of their way to piss off the government. PC World reports:

The developers of Coinye West[...]dismissed the government’s growing interest in digital currency and used an expletive to indicate their lack of concern for law enforcement.

Chris Rossini on the "Austrian Cult"

Chris emails:

I'm just curious as to who they think the cult leader is...

And how does the cult leader feel about the deep divisions that exists amongst Austrian School supporters? Why does the cult leader allow such divisions?

Guys, we have a very sloppy cult leader, whoever he is!

What Is Heaven?

Bill Barnett replies to Walter Block's email:

Actually, I think that Heaven is when God let's us understand everything.

Walter Block: Paul Krugman Makes the Cult Smear

Walter Block emails:

Dear Bob:

Re this excellent piece of yours (http://www.economicpolicyjournal.com/2014/01/is-austrian-school-of-economics-cult.html)

our man Krugman also calls us Austrians a cult:

Krugman, Paul. 2013. “Fine Austrian Whines.” February 20;
http://krugman.blogs.nytimes.com/2013/02/20/fine-austrian-whines/?_r=0

this article of Chris' lead me to that Krugman cite:

Rossini, Chris. 2013. “Paul Krugman: Hide Thy Enemy.”  December 31;
http://www.economicpolicyjournal.com/2013/12/paul-krugman-hide-thy-enemy.html


Best regards,

Walter

Walter E. Block, Ph.D.
Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics
Joseph A. Butt, S.J. College of Business
Loyola University New Orleans

Ezra Klein Is Said to Plan to Leave Washington Post

Klein is a big name among big time Washington DC/Wall Street operators. His posts on the economy are regularly pointed out to me by them.

Here's NYT:

Ezra Klein, an analyst, columnist and television commentator who runs The Washington Post’s Wonkblog, is making plans to leave the newspaper after failing to win support for a new website he wanted to create within the company, according to four people with knowledge of the negotiations.

Mr. Klein, who quickly ascended into the ranks of the Washington media establishment with a multiplatform blend of policy nuance and number-crunching on Wonkblog, approached Katharine Weymouth, the Post’s publisher, in recent weeks, the people said.

After consultation with the newspaper’s editor, Marty Baron, according to one of the people, he put forward a proposal with detailed revenue projections to build a new website dedicated to explanatory journalism on a wide range of topics beyond political policy. It would have been affiliated with The Post, the person said, but would have been a separate enterprise. The investment he sought, the person said, was in eight figures.

Ms. Weymouth and the paper’s owner, Jeff Bezos, declined to support the project. Since then, Mr. Klein has had discussions with several potential investors and venture capitalists in an effort to start the website himself, said those with knowledge of his plans, who insisted on anonymity in discussing them[...]

As 2013 drew to a close, Neil Irwin, the economics editor of Wonkblog, joined The New York Times. Mr. Klein has been on vacation in San Francisco. Both declined to comment, as did The Washington Post.

Oh yeah, on vacation in SF, where Bernanke printed money is flowing just looking for new ventures.

The Case for the GMU Crowd as Cultists

As a follow up to my post, Is the Austrian School of Economics a Cult?, a friend phoned me and told me a great story.

He once had a conversation with James Buchanan where Buchanan charged that Austrian economics is a cult. My friend asked on what basis he made this claim. Buchanan pointed to the Austrian school-leaning Mises Institute and said that any institute named after an individual was a cult. My friend replied, "So if an institute is ever named after you, it would be a cult?" Buchanan then stopped talking to my friend. But based on this Buchanan rule, can the GMU crowd be considered anything but multi-headed cultists?

Aside from the fact that George Mason University is named after, well George Mason, and the closely affiliated Cato Institute is named after Cato, GMU also has something called, get this, the James M. Buchanan Center for Political Economy at George Mason University.

Of course, in reality, none of this makes them cultists other than perhaps for those mindlessly following the thinking of Buchanan.

How to Handle a Police Encounter

This stuff really works, especially with big city police forces. First and foremost, cops do not want to lose their job. If you show familiarity with the law, they are likely to tread carefully.


Source: Online-Paralegal-Programs.com

(Via Infowars)

Four Key Lessons From 2013

By Simon Black

1) Politicians believe there are no consequences for destroying our liberty…

Stimulus and response. That’s the easiest way of summing this up. When politicians steal, and there are no consequences, they’re going to keep stealing.

Cyprus proved this point handily. The government froze bank accounts for everyone in the country (of course, the big bosses got their money out in time). And yet, there was no violent revolution in the streets. People just accepted it.

Poland nationalized pensions. Argentina imposed severe capital controls. The French are taxing everything under the sun. The US government was caught red-handed spying on… everyone.

And yet, there have been ZERO consequences. Citizens have been trained like caged animals to simply roll over and acquiesce. I imagine the politicians are thinking, “Holy Cow! I can’t believe we just got away with that…”

It only reinforces their behavior. With each destructive act, they become more bold, more brazen in dismantling our liberties, confident that they can continue to act with total impunity.

2) …Central bankers and economists believe there are no consequences to printing money…

The Fed expanded its balance sheet by $1.1 TRILLION in 2013, a whopping 38.5%. Nobody seems to mind. The stock market surged to all-time highs, the bond market remained stable, and everyone pronounced the ‘recovery’ was in.

I attended a dinner a few months ago where Ben Bernanke himself touted how much his quantitative had helped US economic conditions.

They really believe in what they are doing. They really believe that conjuring endless quantities of money out of thin air is the path to prosperity.

Not to mention, our modern society awards its most esteemed prizes for intellectual achievement to the likes of idiot savants like Paul Krugman who tell us that the Fed should be printing even MORE money. And people listen to him.

So we can only expect Ben “I can raise interest rates in 15 minutes” Bernanke, and his heir apparent Janet Yellen, to give us more of the same.

3) …Investors think there are no consequences to deficits, or debasement…

In 2013, headlines like “the US deficit is -only- $700 billion” were actually considered good news.

And markets have given all of these fiascos a pass– from the government shutdown to record-shattering debt levels to downgrades by the rating agencies. AA became the new AAA in 2013.

Nobody cares that the US government ‘borrowed’ a record amount of money from the Social Security Trust Fund. Or that they spent a record amount just to pay interest on the debt at a time when interest rates are at all-time lows.

Rather, they just keep investing… without a single thought to the possible risks. The fear of missing the big boom is greater than the fear of losing money. But then again, it’s not their money at risk. It’s yours.

4) …But Joe Six-Pack knows this is all crap.

In 2013, the collective net worth of the 300 richest people in the world grew to $3.7 trillion, 16.5% higher than 2012. Corporate profits were also at record levels.

Fortune 500s, the super-rich, rich, and even upper middle class have largely been beneficiaries of the central bank induced asset bubble.

But everyone else is getting hammered by inflation… watching their savings and livelihoods melt away before their very eyes.

A report from the US Census Bureau this year showed that median household income has declined for five straight years. And those living in poverty, using food stamps, or receiving unemployment benefits remained at record high levels in 2013.

Meanwhile, the wealth gap has grown to its largest since 1929– the year of that fateful financial collapse.

It’s time for a reality check: something is wrong with this picture.

We’ve become desensitized to everything. “Unprecedented” monetary policy. Record debts. Massive wealth gap. Government surveillance. Theft. Deceit. Inflation.

We’ve become so accustomed to getting screwed, it’s just par for the course now. We sit quietly and wait for the next round of beatings, shrugging it all off as the new normal.

This isn’t normal. This is not how a free society is supposed to function.

A free society does not spy on its own people, threaten them with drone assassination, and award an unelected banking elite with supreme authority to rob purchasing power from the masses in favor of a bubbly stock market.

And despite the conventional wisdom, this is not a consequence-free environment.

History is full of examples of entire nations that reached their breaking points… shouting from the rooftops “I’m mad as hell! And I’m not going to take it anymore!”



2013 already saw violent unrest in some of the most stable countries in the world like Singapore and Sweden, all underpinned by absolute disgust for the status quo.

Whether today or tomorrow, this year or next, there will be a reckoning. The system is far too broken to repair, it must be reset.

It's simply absurd to look at the situation objectively and presume this status quo can continue indefinitely... that this time is different... that we're somehow special and immune to universal principles.

This is not some prediction for doom and gloom. Far from it.

It's actually a message of optimism. For the sooner these crackpot criminal politicians and their central banking ilk are stricken from power, the better off we'll all be.

Unfortunately there's going to be quite a bit of turmoil to get there.

Here's to 2014. It's going to be a hell of a year.

Simon Black is Senior Editor  at SovereignMan.com. Follow Sovereign Man on Facebook, Twitter, Google+

Emily Post Etiquette (Bill de Blasio Edition)

By, Chris Rossini

New Yorkers picked themselves quite a Mayor. Hopefully you didn't miss yesterday's piece on his astounding beliefs. I'd like to zoom in on de Blasio's Postian etiquette skills that he displayed so nicely during his big speech (my emphasis):

We will ask the very wealthy to pay a little more in taxes so that we can offer full-day universal pre-K and after-school programs for every middle school student.

Asking those at the top to help our kids get on the right path and stay there. That’s our mission.

So please remember: we do not ask more of the wealthy to punish success.

Isn't that sweet?

Those unfortunate kids will need to learn a few definitions when they "report in" and take their assigned seats.

The first definition is for the word "Ask":

verb. request (someone) to do or give something.

The next definition is a little tougher, but most important. It's a word called "Euphemism":

noun. a mild or indirect word or expression substituted for one considered to be too harsh or blunt when referring to something unpleasant or embarrassing.

So the first thing that the unlucky kids should learn is that when a politician uses the word "Ask", he is really using a "Euphemism" for the word "Steal".

In other words (for the more visual learners) when a politician "Asks," he does not mean this:

He really means this:

---

Chris Rossini is on Twitter, Facebook & Google+

Neocon Proposes Nutty Two Tier Minimum Wage Law

This is truly goofy. It would result in businesses hiring teenagers over breadwinners. Since the advocate Charles Krauthammer seems to understand that raising the minimum wage causes unemployment, his proposal has to be classified as pathological altruism.

Here's Philip Klein on the problems with Krauthammer's proposal:

On a Fox News panel earlier this week, Charles Krauthammer floated a proposal for a two-tiered minimum wage system in which the rate would be raised for individuals who are the breadwinners of their families and remain the same for others. But this would be an absolutely terrible idea.

By way of background, during the minimum wage segment, Krauthammer correctly noted that raising the minimum wage would result in some job losses because "it's an axiom of economics: If you raise the price of everything, you are going to lower demand."

But then he went on to argue, "What conservatives ought to do is to say if you can't feed a family on this -- and as a result of our lousy recovery, a lot of people are depending on this wage -- then I think for people who are the breadwinners in a family, it ought to be raised. But I think what you want for entry-level jobs -- it's really going to hurt teenagers, it's really going to hurt minorities because they are going to lose the jobs which would help them to get started. I would have a two-tiered system. And I think that probably would be a way, a reasonable answer, that Republicans and conservatives could offer. It's not heartless, but it keeps in mind how this would hurt."

There are two main reasons why this idea would backfire.

To start, launching a two-tiered system would create a lot of logistical problems. It would mean coming up with criteria to determine who counts as a "breadwinner" for the purposes of the law. Then there would have to be a whole new government bureaucracy to police whether or not businesses were paying the correct wages to each tier of employees. And businesses would have to take on more compliance costs to make sure they're paying the proper wages and to verify that applicants claiming to be breadwinners actually are supporting families.

Beyond this, the economic effects would be most detrimental for those Krauthammer's proposal is intended to help. Under Krauthammer's idea, businesses who want to avoid paying the higher minimum wage on breadwinners have an easy solution: Shift toward hiring more teenagers or other nonbreadwinners.

Krauthammer's co-panelist Stephen Hayes interjected by saying, "Why would you want that if it's going to cost the very people it intends to help? It would cost those jobs."

In response, Krauthammer said, "Because I do think if somebody is the only wage earner in the family, I think it would be humane to raise it to a level they can cover their expenses."

This is truly amazing. The man is a walking, talking advocate of contradictory policy.

Diagnosis: pathological altruism.