I often am asked at lunches and speaking engagements whether people should be investing in bitcoin. My answer was always that it was a scam and to be avoided at all costs.

I was vindicated when the value of the online cryptocurrency collapsed 74% from its peak, from $1,230 to $320 to the US dollar.

After all, why should an arbitrarily valued currency, like bitcoin, be worth more than any other, like the US dollar?

I really hope the pizza parlor in New York City that sold a pizza for 8 bitcoins years ago unloaded their proceeds before the crash.

After some major security upgrades, the cryptocurrency has since rallied back up to $670.

Then Marc Andreessen, of leading venture capital firm, Andreessen Horowitz, made some comments the other day that piqued my interest.

He said that he was a major investor in several parts of the bitcoin ecosystem. He thought it had a great long-term future and he was especially interested in bitcoin infrastructure plays.

Smelling a rare opportunity to smash my own preconceived notions, biases, and prejudices, I started making a few phone calls around Silicon Valley.

It wasn?t long before someone put me in touch with Mr. Celso Pitta, the CEO of BTCJam. BTCJam is the world?s first peer-to-peer bitcoin lending company and they are paving the way for alternative crypto-currency investing.

What I learned from him was fascinating.

Long considered a ?gold for nerds? and ?online gold?, the financial community is in fact taking bitcoins seriously. Recently, the US Treasury and the Department of Homeland Security held a conference in Florida to bring the industry into its anti-money laundering payments standards.

Where do bitcoins come from? Bitcoins are ?mined? by computers. Every couple of minutes the bitcoin network releases an algorithm and the computer that solves the algorithm first, receives the bitcoin.

They are created from scratch by bitcoin ?miners? who exchange them for local currencies to cover their own costs and compensation for the bitcoin infrastructure.

Bitcoins are a completely decentralized, transparent, and digitally traded currency. Some predict that cryptocurrencies like bitcoin may replace traditional fiat paper currencies in the near future.

In the end, bitcoins are just a giant global payment ledger balanced out by debtors and creditors. As it is electronic, it can be sent and administered for free.

BTCJam has created from scratch a global online marketplace of borrowers and lenders in over 180 countries. Go to their site (https://btcjam.com) and you will find a parade of borrowers from around the planet looking to take out loans and bitcoin lenders looking to invest. Look at the individual players and it is clear that they are young and tech savvy.

Each potential borrower lists the details for their loan, along with a host of personal information. The purposes cited I found included a new transmission for a broken down car in England, a vacation to Japan and the start up of many small business. It also seems a lot of young Americans are seeking to consolidate student loans.

Once a user signs up, BTCJam subjects every application to its credit evaluation software, which examines more than 300 different parameters.

BTCJam uses traditional data that banks use such as personal identification, banking confirmation, and income verification, but they also use a host of other resources such as: LinkedIn, Facebook, PayPal, and eBay accounts.

Believe it or not, a person with 1000 Facebook friends has a much better credit standing and a lower default rate than someone with only 1 friend.

Customers are then given an ?A? to ?E? rating based on their loan algorithm. This software was developed by CEO Pitta, a native of Brazil, who boasts a heavy background in artificial intelligence and facial recognition software.

The company is taking advantage of the void of lending resources in emerging nations; frequently, these people can only turn to loan sharks and other risky loan sources.

Large international banks are reluctant to invest in these places because of the local currency risk. When a loan on BTCJam is fully funded, the borrowers convert their bitcoin into local currencies to spend in the local economy.

Remember how the poorest countries leapfrogged telephone landlines and went straight to cell phones 20 years ago? Well, the same thing is now happening in consumer credit through peer-to-peer lending.

Many developing countries suffer from the complete lack of credit rating agencies. There, every client is considered high risk, and lending is priced according to the standards of the worst borrowers.

Credit card interest rates run as high as 200% in Brazil, 90% in Mexico, and are well into double digits in Indonesia and the Philippines. Overall, they average 175% in the BRICS. As a result, the rates charged by BTCJam seem like a bargain by comparison.

When borrowers sign up at BTCJam and input all their information, they are given a suggested interest rate. They then have the choice to set their monthly interest rate as high or low as they want.

Loans that follow the suggested interest rate are more likely to be funded quickly by investors. Over time, the loan is gradually paid back in full by the borrower as they convert their money back into bitcoin.

Now for the lender side of the equation. BTCJam has investors from all over the world: they attract people that already have bitcoins and are looking for returns on their bitcoins. They also bring in lenders who are new to bitcoin and buy a few for the purpose of investing in BTCJam.

Lenders are completely free to choose which loans they want to invest in and how much they want to invest. Interest rates vary based on the risk profile of the borrower. They range all the way from 14% for the highest quality ?A+? borrowers to 100% for the low-end ?E-? hopefuls.

BTCJam is a bitcoin-only platform: lenders invest bitcoin and borrowers receive bitcoin. Borrowers have the option to link their loan to USD, which helps them avoid the risk of volatility long term. This enables them to lock in the bitcoin price at the time they receive the loan.

BTCJam lists every outstanding loan, and the investors connected to that individual. There is an online discussion on the potential advantages and disadvantages of each borrower. Some of the comments are quite funny. Others are downright rude.

It gets better: BTCJam will soon introduce automatic investments. Lenders will then have the opportunity to set specific criteria such as: the amount they want to invest, which asset class they want to invest in, and for how long. This will significantly enhance the use of the website and lenders will never have to miss out on good loans.

Pitta told me that globally, the total loan portfolio has a 10% default rate. But if you focus on only their ?A? rated customers, that rate plunges to a mere 1.8%. This is in the same ballpark as the largest US consumer lenders.

Do the math with high yields and a non-payment rate this low, and you can easily see that risk sophisticated and tolerant depositors will do these loans all day long.

The peer-to-peer lending model is one of the fastest growing corners of the financial industry. The giant Credit Ease in China is the largest, with a $9 billion loan portfolio. They are followed by the $3-$4 billion Lending Club. The UK has Zopa, with a $1 billion loan book.

This all compares to total credit card debt for the US alone of $1 trillion. Clearly, there is an enormous, high cost, low return, entrenched market to be explored here.

The entire bitcoin story did get tarnished by the bankruptcy of Mt. Gox operation in Japan, which went under with $60 million in liabilities. They claimed they were the victims of the hackers.

Industry insiders say that incompetent management, inferior software, and lax controls are much more likely culprits. These
are common transgressions in every start up industry.

Which brings me to BTCJam?s own business model, which recently obtained several million in seed capital from venture capitalists, like Ribbit Capital and the Founders Club.

They are poised to eat the lunches of emerging nation banks, which have always ignored, overcharged, or abused their local customers. It all seems to me ripe ground for disruption.

I think it is safe to say that in 20 years, the global financial system will be unrecognizable from what it is today. Ultimately, Bitcoin and BTCJam may have a large influence in the transition from traditional currencies to an all out system of online money.

As a long term observer of America?s demographic picture, I was shocked to hear of a recent report from the US Census Bureau (click here for the website).

The US population grew by a scant 0.72% in 2012, the lowest since 1942.

You can?t start or expand a family when an essential partner in the process is off fighting WWII, and there were 17 million of them.

This is far below the 2.09% replacement rate that the country was holding on to only a few years ago.

At the end of 2012, there were 316,128,839 Americans. This accounts for 4.4% of the global population of 7,137,577,750, which was up 1.1%. If the growth rate remained the same, there are more than 317 million of us by now.

This places American population growth at the bottom of the international sweepstakes, down with Italy (0.32%), Germany (0.11%), and Poland (0.02%).

According to the World Bank, 22 countries suffered population declines, like Portugal (-0.29%) and Japan (-0.20%) (click here for the website).

The tiny Sultanate of Oman, one of my old stomping grounds as a military pilot, enjoys the planet?s highest growth rate at 9.13%.

The obvious cause here was the weakness of the US economy. There is a high correlation between economic health and fertility a year later.

So we can only hope that the modest improvement in the economy this year will send more to the maternity ward.

If it doesn?t, it could be great news for your investment portfolio. Fewer births today translate into a shortage of workers in 20 years. That brings rising wages, flying inflation, rapid price hikes, and a housing boom.

Corporate profits go through the roof, as does the stock market. It also produces fewer relying on government services in 40 years, which makes it easier for the government to balance the budget.

This Goldilocks scenario is already scheduled for the coming decade of the 2020s, when a 15-year demographic headwind flips to a tailwind, thanks to the coming demise of the ?baby boomer? generation, now a big cost to the economy.

The new data suggests that the next ?roaring twenties? could extend into the 2030?s and beyond.

California was the most populous state, with over 38 million, followed by Texas and New York. Two states saw population declines, Maine and West Virginia, where the collapse of the coal industry is sucking the life out of local businesses.

Parsing through the report, it is clear that prediction of population trends is becoming vastly more complicated, thanks to the increasingly minestrone-like makeup of the US people.

By 2040 no single group will be a majority. That is already the case in San Francisco, and will be true for the entire State of California by 2020.

America will come to resemble other, much smaller multiethnic societies, like Singapore, South Africa, England, Israel, and Switzerland. This explains much about the current state of politics in the US.

Texas saw the greatest increase in population, with a jump of 387,397, to 26,020,000, as people flock in to take advantage of the big increase in local government hiring there.

Some 80% of new Texans were Hispanic and Black, confirming my belief that the Lone Star State will become the next battleground in presidential elections.

This is why gerrymandering (redistricting) is such a big deal there, with the white establishment battling to hang on to power at any cost.

Further complicating any serious analysis is the rapid decline of the traditional American nuclear family where married parents live with their children.

With a vast concentration of wealth at the top, and a long-term decline of middle class standards of living, this is increasingly becoming a luxury reserved for a prosperous elite.

As a result, the country?s birthrate has declined by half since 1960.

Those who do procreate are having fewer kids, the average family size dropping from three to two. In 1964, the final year of the baby boom, 36% of Americans were under the age of 18.

Today, that figure is just 23.5%, and is expected to fall to 21% by 2050. Only 80% of women have children now, compared to 90% in the 1970s.

One possible explanation is that the cost of child rearing has soared to $241,080 per child now. Rocketing college costs are another barrier, with 70% of high school grads at least starting some higher education.

I was a bargain as a kid, costing my parents only a tenth of that. I went to Boy Scouts and Little League baseball, each of which cost $1 a month. A full scholarship covered by college expenses.

When I look at the checks I have written for my own children for ski lessons, soccer, youth sailing, braces, international travel and assorted masters degrees, I recoil in horror.

Fewer women are following that old adage of ?marriage before carriage.? Some 41% of children are born out of wedlock, up 400% in 40 years.

It is definitely an education and class driven divide. Only 10% of college-educated mothers are still single, compared to 57% for those with a high school education or less.

It is a truism in the science of demographics that educated women have fewer children. It makes possible careers that enable them to bring home paychecks instead of babies.

Blame Roe versus Wade, the Equal Rights Act, and Title Nine, but every social reform benefiting women of the past half century has helped send the birthrate plummeting.

More women wearing the pants in the family hurts the fertility rate as well, as they are unable, or unwilling, to bear the large families of yore. The share of families where women are the primary breadwinners has leapt from 11% to 40% since 1960.

When couples do marry, they are sometimes of the same sex, now that gay marriage is legal in 16 states, further muddying traditional data sources. Some 2 million children are now being raised by gay parents. In fact, there is a gay baby boom underway, which those in the community call the ?gayby? boom.?

All female couples have produced one million children over the last 30 years, 95% of whom select blond haired, blue eyed, Aryan sperm donors who are over six feet tall ($40 a shot for donors if you guys are interested and live walking distance from UC Berkeley. I?m told that water polo players are particularly favored).

The numbers are so large that it is impacting the makeup of the US population.

There was a time when I could usually identify the people standing next to me on San Francisco BART trains. That time has long passed. Now I don?t have a clue.

Whenever we go to war, we become our enemy to a modest degree, both as a people and a culture.

After WWII, 50,000 German and 50,000 Japanese wives were brought home as war brides. Sushi, hot tubs and Volkswagens quickly followed.

The problem is that the US has invaded another 20 countries since 1945, and is now maintaining a military presence in 140. That generates a hell of a lot of green cards.

This has spawned sizable Korean, and later, Iranian communities in Los Angeles, a Vietnamese one in Louisiana, a Somali enclave in Minneapolis, and a large minority of Afghans in San Jose.

The fall of the Soviet Union in 1992 unleashed another dozen Eastern European ethnic groups and languages on the US. Have you noticed the proliferation of Arab fast food restaurants in your neighborhood since we sent 20 divisions to the Middle East?

What all this means is that the grand experiment called the United States is entering a new phase.

Different ethnic, racial, religious, and even political groups are blending with each other to create a population unseen in the history of the world, with untold economic consequences. It is also setting up an example for other countries to follow.

Get
your investment portfolio out in front of it, and you could prosper mightily.

Ignore Demographics at Your Portfolio?s Peril