Wednesday, April 11, 2018

Cryptocurrencies, stock buybacks, regulations... they are counting on you being bored!

== Cryptocurrencies ==

Coin mining (prime number factoring) operations are now using as much electricity as the Republic of Ireland.

In the last 5 months I’ve joined the advisory boards of FIVE ICOs, or Initial Coin Offerings, learning far more about blockchain and “tokens” than I ever really wanted to know. I’ve had to point out things that some of these bright fellow never thought-of. Like some important ways to stay out of jail.

Oh, then there’s this: Bitcoin “tape-washing” by the top 1000 Bitcoin owners (40%) of all coins) lets them boost price simply by selling to each other, luring in suckers.

Do I believe in Adam Smith and the power of flat-fair-open-competitive-creative markets?  You bet! 

Has the magic ever, ever, ever - even once - happened on this planet without regulatory frameworks to stymie cheating? Not once. Ever. 

Lefties are fools to ignore the creative power of competition. Righties are jibbering insane to ignore 6000 years of history wrought by market-ruining cheaters. 

Adam Smith would be a moderate, pro-enterprise democrat, today.

== Stock Buybacks ==

Under the Greatest Generation (when America was 'great') this was illegal. Almost a $trillion will be spent on Stock Buybacks in 2018, rewarding the top 1% but especially the CEO caste, who thus trivially get their stock-price-tied incentive bonuses, without increasing actual value of the company one cent. The tax cut's shills said this would stimulate investment in R&D, productive capital, infrastructure and new jobs. Those could have been incentivized in the bill. But as in all previous Supply Side scams, it never happens. Instead we get:

1. Shortened ROI (Return on Investment) horizons, from the traditional 5 years down now to 5 weeks!

2. Less investment in R&D, productive capital, infrastructure and new jobs. Yes, these go down every single time the GOP has its way.

3. Steeply falling Money Velocity. (Exactly what Adam Smith said happens, when the rentier aristocracy hogs all the money. More on this, in a future posting.)

4. Skyrocketing wealth disparity.

5. Decisions on our economic destiny made by an ever-narrowing caste of delusional, conniving, incestuously conspiratorial, secretive oligarchs, demolishing any hint of the flat-fair-open-creative competition that both Hayek and Keynes agreed to be the core essential of market enterprise.

An interesting aspect to this! John Mauldin points out that there are some LIBERAL constituencies who benefit. Pension funds do great in this environment, and they certainly qualify as "rent-seeking" centers of money-slowing investment. Pension funds are indeed, fellow culprits in almost-zeroing money velocity. Only, unlike oligarchs, they cannot cash-out when the market has peaked. Their benefit is brief.

Note also that a minority of those investors benefiting from all of this hate what's happening. Warren Buffett and Bill Gates and most of the tech zillionaires will take this free money being shoved at them. But they vote and demand better policies that might actually no good for civilization and the republic. They know this is how feudalism returns, and the renaissance (that made them successful) ends.

== On Regulation ==

Ironic that Friedrich Hayek is generally dismissed as an apologist for elimination of all market regulation, yet the liberal (leaning-Keynesian) economics site - Evonomics - explores Hayek’s views on both market theory and evolution with considerable respect. (Evonomics is also the one place, online, that most often studies and lauds Adam Smith!)

In this conversation, several leaders in both economic theory and evolution start by praising Hayek’s revelations that markets are about information and how over-regulation is inherently fraught with errors that stymie the crowd- and open-sourced wisdom of markets.

Alas, Hayek thereupon was lured to the opposite extreme, as his arguments were used to justify elimination of regulations that kept markets flat-open-fair and competitive. If 500,000 civil servants are too narrow a clade to allocate economic resources well, then how is an incestuous, conniving-secretive and conspiratorially greedy CEO caste of golf buddies supposed to be more wise?

Hayek’s criticisms of socialism applied cogently to Leninist regimes, but as these scholars point out, they’re much less meaningful when aimed at Norway. Hayek’s greatest failing? His inability to refer to the other great enemy of market enterprise, feudalism, which wrecked far more nations and economies than poor, dumb socialism could ever dream of.

A flawed and stupid system that wrought hell in 99% of past cultures, feudalism is rooted in human temptation to cheat, and it appears to be roaring back. And the shills who work for the lords are - alas - really good at oversimplifying and misquoting Friedrich Hayek.


== Rising Corporate Profits ==

Why have corporate profits (and hence dividends to the owner caste) skyrocketed and stayed high across 25 years, while wages stagnate? Economist Jonathan Tapper makes it clear in an appraisal that’s circulated widely by John Mauldin, a conservative newsletter guy who knows something’s gone wrong with the branch that has taken over U.S. conservatism. 


“Something has indeed gone very wrong with capitalism. In a competitive market, if a company is making a lot of money, other companies will get excited by the prospects of high profits and will enter the industry and compete. Eventually margins decline as more competitors fight each other. That is how dynamic, capitalist economies should be. Something is profoundly broken with capitalism if corporate profit margins do not revert to the historical mean. 

“Rising industrial concentration is a powerful reason why profits don’t mean revert and a powerful explanation for the imbalance between corporations and workers. Workers in many industries have fewer choices of employer, and when industries are monopolists or oligopolists, they have significant market power versus their employees…. The Economist found that over the fifteen-year period from 1997 to 2012 two-thirds of American industries were more concentrated in the hands of a few firms.” 

Let me add that monopoly or duopoly is a reason most profits aren’t plowed back into R&D and production (as Supply Siders always promised.) Because these CEOs don’t fear new rivals, so they might as well grab the profits for themselves, rather than invest.

Tapper continues: “In a monopoly, there is only one seller, while in a monopsony, there is only one buyer. The extreme example of a monopsony is a coal town in West Virginia, where the only buyer of labor is the coal company. Large parts of America are dominated by monopsonies.” 

The trend is far worse in rural America, which puts a real fear into the confederate masters, because at any moment the voters in those areas might start to see through the propaganda that “liberals, unions, scientists and government” are responsible for all your problems; so never, ever look over here at plutocrats!” This plan is anchored in the notion that folks will reliably and always forget their own parents were union men and women, who supported anti-trust laws and whose favorite living person was Franklin Roosevelt.

Tapper continues: “In the U.S. CEO pay has exploded. From 1978 to 2013, CEO compensation adjusted for inflation increased 937%. By contrast, the average worker’s income grew by a pathetic 10% over the same period.”  He documents the plummet in union strength, even as the right’s media portrays unions as villains against poor, virtuous CEOs.

Sign up to receive chapters in Tapper’s growing book The Myth of Capitalism

83 comments:

LarryHart said...

Dr Brin in the main post:

Coin mining (prime number factoring) operations are now using as much electricity as the Republic of Ireland.


I've got many questions about bitcoin as a concept, but you've just added a new one at the top of the list. Is this cost-effective at all?

What I mean is, if it took a billion dollars worth of man-hours and mining equipment to extract a few thousand dollars worth of gold from the earth, the entire process would be abandoned because the owner would be spending more money than he'd get back from the operation. It sounds as if that might be true of bitcoin.

occam's comic said...

Hrmmm

Dave said

"Do I believe in Adam Smith and the power of flat-fair-open-competitive-creative markets? You bet!


Has the magic ever, ever, ever - even once - happened on this planet without regulatory frameworks to stymie cheating? Not once. Ever "


Does that mean that you finally recognize that your support for globalization of trade played right into the hands of the oligarchic cheaters?

Are you starting you realize the damage that support caused working class Americans, to ecosystems around the globe, the damage to our republic and all the other crap that flows from the unregulated global trade ?

Alfred Differ said...

John Mauldin says...

Something is profoundly broken with capitalism if corporate profit margins do not revert to the historical mean.


No. No. No. A thousand times no.

This is true only if one expects the context in which the markets function hasn't changed. Change that expectation and allow for a possibility that the context HAS changed and one could explain the fact that corporate profit margins haven't reverted to the old mean with the fact that they are converging on a new mean.

Yah. I know that destroys the predictive power of theory. Economics is like that, though. They ignore so many dimensions of possible change that one should be ultra wary of every forward looking conclusion let alone universal statements.

In this case, there IS a possible context change. We could argue that this version of the globalization of trade (this is NOT the first globalization) is actually causing a phase change in the markets much like the two major waves of industrialization did. In this case, our globalization effort is pulling in billions of new market participants who are 'getting on' with some of the lessons learned by the liberal West.

Mauldin goes on to argue against the evils of market concentration of industries. I have no disagreement there. I might argue about what to do about it, but concentration creates a larger danger that the 'concentrator' will be able to sway market rules and turn cheating strategies into legal ones.


What the embedded chart shows that should catch everyone's attention is that the old norm was for corporate profits to inversely correlate with compensation. Why this would happen isn't hard to understand. However, it did not happen during the recent financial meltdown and the years after and has only recently begun to re-occur. THAT is the breach that should draw our attention.

Alfred Differ said...

LarryHart | It sounds as if that might be true of bitcoin.

That depends on what you count as income for the miners. If the folks setting up a company are after a different goal, they might look at the mining operation as a cost to be paid. If it brings in anything, that helps defray the cost and would be good.

I can think of a few business plans that range from well-intentioned to utter frauds that would pitch mining operations, but have a real focus elsewhere. Socially conscious tokens on one end to fly-by-night salted mines on the other.

As a rule, you can trust that a negative ROI will halt a business operation (eventually), but if it keeps going that probably means you don't understand what they are really doing. For example, if the bicycle repair shop on the corner doesn't have many bicycles coming and going and stays open for years, they are probably selling something out the back door. My maternal grandmother ran a grocer's shop in London and made sure there was enough coming and going through the front door to look reasonably legit. The real product came and went through the back door, though, because in those days she traded in small, stolen goods.


LarryHart said...

@Alfred Differ,

Great story, and I see the point you're making, but I don't see how it applies to bitcoin.

Do you suppose someone is "stealing wheelbarrows"?

Alfred Differ said...

@LarryHart | Bitcoin has a track record of being used in the blacker markets. It certainly CAN be used in white markets (and is used), but an investor should pay close attention. So should the rest of us who prefer living in a culture that enforces ethics norms.

I used to run a little app that watched the transaction record to discover the country of origin in transactions. After watching for a while, I was quite certain there was some money laundering going on. There is also a lot of "hide the money from the sovereign" going on worldwide.

If you can live with yourself afterward, there is a lot of money to be made there.

If you don't mind swimming with the sharks, there is a ton of money to be made there.

LarryHart said...

@Alfred,

We've had various discussions about the various pros and cons of bitcoin here before. The question I'm raising right now, though, is a very specific one, having nothing (I can see) to do with morality or ethics. Does the energy it takes to "mine" bitcoin use up more value than the bitcoin that results from the mining is worth? And if so, is the value worth pursuing in the first place?

LarryHart said...

...In other words, is the mining worthwhile to the miner?

If you're saying that illicit traders will value the bitcoin enough to make it worth the mining, ok, I can see that as a possibility. But is that what is happening in reality?

Or am I reading too much into the cost of the electricity and computing power that Dr Brin is talking about?

Richard said...

In Bitcoin, mining is not "factoring large primes". Miners are generating Proofs-of-work (PoW): https://en.bitcoin.it/wiki/Proof_of_work

Even if the NSA was working to factor large primes to try and break the cryptography behind Bitcoin, it would be a futile attempt.

I'd love to have you look into Bitcoin and analyze it in the context of your "Transparent Society" thesis.

RE: ICOs - your reputation is worth too much for you to be involved with even well meaning and self deluded scammers.

donzelion said...

Paul SB: Thanks for the note yesterday; not sure if I'm back, but for the moment...

LarryHart: Toms Hardware ran an impressive series on crypto-currency mining last year, focusing on ethereum (one of Bitcoin's successors). Their conclusion seems to be that in some instances, it can be profitable, but that's based on a large number of factors [har har, weak pun].

As for yesterday's discussion on 'rules of corporatics' - if I didn't like something in your original premise, I wouldn't have engaged. Your intent strikes me as a good one; my goal wasn't to undermine that, but to supplement with some observations from a different vantage. The farmer's complaint in the Grapes of Wrath illustrates a bigger principle: it's actually an advantage that no one can fix problems by trying to identify the right person to kill to stop the dispossession - either we unite with others, or we have no chance.

LarryHart said...

donzelion:

my goal wasn't to undermine that, but to supplement with some observations from a different vantage.


I know. Likewise. We're refining each other's thoughts, which is like real science.


The farmer's complaint in the Grapes of Wrath illustrates a bigger principle: it's actually an advantage that no one can fix problems by trying to identify the right person to kill to stop the dispossession - either we unite with others, or we have no chance.


I mentioned that passage as an illustration of a counter to your "corporations only do what they're told." Sometimes, they defy what anyone tells them and just do something anyway. They're every bit as juggernaughtish (to coin a word) as those machines that Kipling warns about in that poem that ends with:

But remember, please, the Law by which we live,
We are not built to comprehend a lie,
We can neither love nor pity nor forgive.
If you make a slip in handling us you die.


Incidentally, you indirectly remind me of a thought I've had about Asimov robots. The Three Laws don't distinguish a robot's "rightful owner" from any other human being (in the original, I don't even think "human" was specified, although who else could give a robot an order?). A robot has to follow orders, period. I don't even remember Asimov ever writing a story whose plot revolved around someone illicitly making use of someone else's robot. It just never came up. In this, robots were portrayed as much like antebellum slaves in the American south--I doubt a slave could refuse an order just because the order was given by a white man other than his owner.

But a corporation sure "knows" who is allowed to give it instructions and who it doesn't have to care about.

Alfred Differ said...

@LarryHart | Does the energy it takes to "mine" bitcoin use up more value than the bitcoin that results from the mining is worth?

That depends on the value of the ‘energy’. See the connection? A number of things might contribute to ‘energy’ like the actual electricity, hardware purchases, and tech advances produced to create cutting edge hardware. A number of things might contribute to ‘value’ like the stuff exchanged for the coins, the reputation acquired for operating a cutting edge mining operation, and intellectual property developed to create those mining operations. Don’t forget that a big mining op can crunch some serious problems. They might have other uses.

I strongly suspect the answer is ‘Yes’ without having to rely upon illicit traders. With the black markets, the answer is probably ‘Hell Yes!’.

Electricity isn’t all that expensive in most places and computing power costs are still dropping. Those GPU’s are phenomenal. [Fair notice: I have a serious chunk of my investment money in companies that act as industrial suppliers for those things. I don’t care about the industrial cycle much when I think about the foundries. Those folks are going to matter in a serious way. They are beating Intel at its own game!]

Alfred Differ said...

I liked Donzelion's "Make us proud" variation. Mine was more long-winded. "Don't make us write a story about you used to teach our children a particular vice. At least TRY to be among the virtue stories."

I wasn't one of the heavy detractors of Bill Gates back in the day, but I WAS pretty negative about the whole MS thing. I didn't like the business model and liked Oracle's even less. I spoke of each with my potential business partners as examples of what I did not want to do. Gates has since made up for some of his shenanigans and I'm impressed at his inclination to join the right side of an argument now and then. Still. Some of what he did at the helm for MS was Wrong.

David Brin said...

Richard: “I'd love to have you look into Bitcoin and analyze it in the context of your "Transparent Society" thesis.”

Blockchain works both for and against transparent accountability.

1. It appears to offer a dispersed ledger that ensures each transaction or contract is open-code, transparent, verifiable and incorruptible.

2. It offers ways for the owners in the background to be dark, unverifiable and utterly corrupt.

There are ways to get the good and eliminate the bad.

LH: “The Three Laws don't distinguish a robot's "rightful owner" from any other human being (in the original, I don't even think "human" was specified, although who else could give a robot an order?). A robot has to follow orders, period.”

This was always a major flaw in the Asimovian world. The Second Law needs an internal hierarchy of authority for humans and yes, for management bots.

Occam: “Does that mean that you finally recognize that your support for globalization of trade played right into the hands of the oligarchic cheaters?”

No sir, and you are fullavit. International trade uplifted FIVE billion people out of grinding poverty. But the wealth it generated attracted cheaters, as it always does. You are a quaint old fart who believes things like the notion that Lockheed and “arms makers” are the drivers behind wars. Grow up. It’s more complicated.

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Tom Foale said...

This article strongly concurs with my views on economics. The most efficient way to allocate resources is the PERFECT free market. This is mathematically proven. The perfect free market relies on assumptions that, in the real world, never exist - perfect competition, perfect information, unlimited resources and rational economic man. Therefore most regulation is about creating as close a simulation of the perfect free market as possible, by eliminating cheating, dealing with monopolies and economies of scale, dealing with externalities like resource limitations, and ensuring that no-one is left without the means to survive. That includes everything from human rights through criminal and civil law to the creation of institutions like the NHS and disability support systems.

donzelion said...

Occam: “Does that mean that you finally recognize that your support for globalization of trade played right into the hands of the oligarchic cheaters?”

In the days before globalization in its current incarnation (GATT/WTO, etc.), the oligarchic cheaters would just start wars with one another. Don't like a tariff? Send in the marines. Same if they don't pay back your debts. The current round has its faults, but is less bloody than global war.

donzelion said...

Alfred: The way I understand it, the algorithms used in crypto-mining evolve to keep pace with the hardware (at least for etherium, don't know about others). Even if GPU capabilities double on a per watt basis, more demanding calculations to generate the next coin results in a tendency for power draw to increase. That's why Tom's folks found that 'old coins' are 'worth' more than new coins (at least, it costs less to mine them) - and also why the market price for GPUs has gone through the roof.

But aside from the expectation that insiders will always cheat (e.g., set the next evolutionary cycle in complexity to take effect immediately after their newest gear comes on line, before others could follow suit) - the real risk is cost shifting.

Real, at least, in the sense of how society gets screwed by this phenomenon (and not just the participants in the industry).

E.g., one house that defaults on the power bill, or fails to pay a credit card used to buy GPUs or whatever - gets cut off pretty quickly. But big fish can lock in debts for millions of dollars in power, parts, labor, etc. - then avoid payment when the debt comes due (e.g., a strategically timed bankruptcy). If they do that, the full price of the power gets shifted back to other users of the power grid (or the courts will confiscate the unpaid for GPUs - which for some reason aren't worth so much 6-18 months later..). And that's just a few of the more obvious cost-shifting schemes...

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Tony Fisk said...

If the *perfect* free market does not exist, the question to ask is how rapidly does curtailing that assumption of freedom invalidate economic models?

To be perfectly honest, economics bores me. Why should this be? I'm not sure. It's an important topic, but I find talk about markets rapidly blurs into background noise. Possibly this has to do with the question I opened this comment with.

Paul SB said...

Tony,

I completely agree with your sentiments. Pretty much anything to do with money puts me right under the table, loud snores emanating from my respiratory system. I have to rely as much as possible on people who get it better than I do - and it's at least part of why I distrust the stock market. On the other hand, my background in the study of human behavior does tell some important things, most of which serve to act as bullshit detectors.

Tom,

On the subject of ... virtually everything you wrote I agree with, based on what I have seen of the science. One big, big caveat, though - the "rational actor" models are all wrong. There is a problem with relying on models that is captured well by the computer science term GIGO - Garbage In - Garbage Out. The only people who act like those models are economics students, who are the people most of the data have generally been drawn from in economic experiments. But even the most devoted rationalist among the economists do not behave half as rationally as they think they are behaving. So much of what happens in markets has as much to do with psychology and cultural norms as it does with the distribution of money and capital. As long as you humans act like humans, there can never be a perfect system. The best we can do is be constantly vigilant and open to change when the best science shows a better way.

LarryHart said...

Alfred Differ:

I liked Donzelion's "Make us proud" variation. Mine was more long-winded. "Don't make us write a story about you used to teach our children a particular vice. At least TRY to be among the virtue stories."


I like yours too, (as well as donzelion's).

It's a less-comic-bookish way of putting my own, "Don't be a cartoon supervillain", which I usually phrase more as a question, "Why does so-and-so want to be a cartoon supervillain?", or more accurately, as a statement of confusion, "I don't understand why so-and-so wants to be a cartoon supervillain."

LarryHart said...

Dr Brin:

LH: “The Three Laws don't distinguish a robot's "rightful owner" from any other human being (in the original, I don't even think "human" was specified, although who else could give a robot an order?). A robot has to follow orders, period.”

This was always a major flaw in the Asimovian world. The Second Law needs an internal hierarchy of authority for humans and yes, for management bots.


Well, Asimov's idea of what role robots played changed much between the 50s and the 80s. As a writer of the "series finale", you understandably think in his later terms, while I tend to remember the earlier tales as definitive. If you think of a robot as a child or as an employee, then what you say makes absolute sense, but I don't think that's what Asimov was going for in the earlier stories.

A car functions for whoever is driving it, regardless of ownership status. Ok, most cars require a key to start, so let's say a bicycle. My bike doesn't refuse to work for someone else. Neither does a tv set or a knife or a ladder or any other kind of tool. An early Asimov robot was meant to function as a very versatile tool, but a tool nonetheless. Yes, I notice the absence of a way to resolve conflicting orders, but I don't see that as a fatal flaw--more like a potential plot element.

What I see as more of a fatal flaw in the Second Law is the lack of limits on the kinds of orders a robot can be expected to carry out. If I ordered a robot to leap to the moon under his own power, what would he do? He obviously couldn't obey. Could he just say "I am not programmed to respond in that area" and be done with it? Would he tie up more and more of his internal resources attempting to obey the order, like the Star Trek computer trying to compute to the last digit the value of pi? Would he go about inventing a new efficient thruster which he could incorporate into his body and thus carry out the order, even after taking years to do it? That last one actually does mimic what Daneel supposedly did by deciding that he could only properly care for humanity if psychohistory was available as a tool, and then went about engineering human history in order to bring a Hari Seldon into a position to invent it.

Separately--I also can't escape the sense that Asimov was well aware of the Jim Crow south, and that its economy depended upon negroes following orders, because they were the only ones who knew how to do any actual work. The analogy was very explicit in The Currents Of Space. I think to some extent, his early robots were modeled after antebellum slaves and post-bellum civil servants--even to the point that self-preservation took a back seat to following orders.

LarryHart said...

Alfred Differ:

@LarryHart | Does the energy it takes to "mine" bitcoin use up more value than the bitcoin that results from the mining is worth?
...
I strongly suspect the answer is ‘Yes’ without having to rely upon illicit traders. With the black markets, the answer is probably ‘Hell Yes!’.


Unless I'm mistaken, you just did a good imitation of the funny blooper from a 1960s Captain America comic where he says, "Only one of us will walk away under his own power...and it won't be me!"

In other words, didn't you mean "Hell, No!" when you said "Hell, Yes!"?

LarryHart said...

Tony Fisk:

To be perfectly honest, economics bores me. Why should this be? I'm not sure. It's an important topic, but I find talk about markets rapidly blurs into background noise.


My guess? A nagging sense that the talk is irrelevant, because it all comes down to "The ones who know how to game the system will win at my expense."

Jon S. said...

"Yes, I notice the absence of a way to resolve conflicting orders, but I don't see that as a fatal flaw--more like a potential plot element."

The Asimov story "Escape!" comes to mind, with the positronic computer bugging out because it had to design an FTL drive that would (it transpired) kill its occupants, but only temporarily - they'd get better later. So building it kind of violates First Law, but kind of not, and then there's the Second Law to consider, and then Susan Calvin tries convincing the system that humans don't really mind dying...

LarryHart said...

Jon S:

The Asimov story "Escape!" comes to mind,...


I thought I had read all of the early Asimov robot stories, but that one isn't ringing a bell.


and then Susan Calvin tries convincing the system that humans don't really mind dying...


I really enjoyed that element of the old robot tales--the almost lawyerly negotiating with the robots over the meaning of the Laws. I doubt real robots or real AI would ever work quite that way, but it made for compelling drama.

greg byshenk said...

For Paul SB (among others): I'd suggest that the 'rational actor' is in fact one of the least problems with textbook "econ 101" models. When making economic decisions, most actors are actually rational, at least within certain limits. What are much less realistic are the suppositions of perfect information, unlimited resources for making decisions, and so forth. I propose that, if indeed actors had access to perfect information and unlimited decision-making resources, their economic choices would be very close to "rational", in light of their goals and desires. But in a state of imperfect information and decision constraints, actions can be only partially rational.

LarryHart said...

greg byshenk:

But in a state of imperfect information and decision constraints, actions can be only partially rational.


The problem is that, although "partially rational" sounds like "almost as good as rational", the potential is there for imperfect information to lead to "rational" decisions which are worse than random coin flips would have been. If a contractor does work for Donald Trump without the information that he regularly stiffs those who he employs, they might think they're acting rationally, but they would have been better off spending the time lounging on a beach or flushing dollar bills down a toilet.

Alfred Differ said...
This comment has been removed by the author.
LarryHart said...

Alfred Differ:

What I should have said was 'No' and 'Hell No!'.


What I should have said was...

"The word you are looking for is 'No'. But that is not 'Yes'. It's a different thing, in fact the opposite thing."

In my defense, I wasn't 100% sure I wasn't the mistaken party, and I didn't want to get too pompous about it if I was in fact wrong.

Alfred Differ said...

(sorry... gotta fix my math)


@LarryHart | Good catch. I should be more careful with negations. 8)

What I should have said was 'No' and 'Hell No!'.

To clarify, even without black markets, I suspect there are a number of cases where the energy it takes to mine these coins does NOT use up more value than appears in trades involving those coins. Include the black markets and I'm certain those coins are worth far more than the effort to create them.

Think about this. The US inflation rate currently hovers in the neighborhood of 2%. It isn’t steady at that rate, but if it was that would mean the dollar lost half its value every 36 years or so. If we use the CPI, the value of a dollar the year I was born (1962) is about $0.12 today in terms of those older dollars. If $1 then grew to about $8 in today’s dollars, it would be a wash. How much would it be worth to the average American to take a bite out of that inflationary loss? If they had an investment from then purchased for $1 and worth $0.25/$4 today (old/current dollars), they’d be better off than if they had kept dollars. Virtual currencies are too immature right now to offer this option to Americans because we will turn to equity and bond markets and even savings accounts with banks, but that is not the case with citizens of some other countries today. How do you value that, hmm?

@donzelion | the algorithms used in crypto-mining evolve to keep pace with the hardware

That is my understanding too. The intent (with bitcoin at least) was to control the pace at which new coins were minted without having a human in the loop. Sovereigns have a track record through the 20th of inflating their currencies when it suits them, sometimes personally. Like your cost shifting argument, those of us who can't create currencies wind up bearing the burden. I get your cost shifting concern, but those big players are a whole lot smaller than nation-states at present, so I'm not overly concerned. I worry more about intentional inflation than creditors stupidly lending up until the creditors think they can get some kind of insurance from the sovereign.

The bigger risk isn't from default, though. It is from a speculative bubble in the semi-conductor market. My experience in tech as a worker-bee covers a generation now and as an investor about half that. I've come around to the conclusion that a volatility index on our niche is more multi-dimensional than most of us realize. I don't think people are accounting properly for possible singularities in the first or second derivatives of some of what counts in asset valuation. IP is notoriously hard to value. Disruptive IP is kinda like an alien visitation. BANG! Everything changes. Even the folks who plan to cheat and cost shift are going to have a hard time predicting their timing needs.

Alfred Differ said...

@LarryHart | messing up negations is a sure fire way to confuse a friendly reader. Sorry about that. 8)

All I'm really trying to point out is that you might not be seeing the actual value of virtual currencies if you focus too much on the strange behaviors of speculators. As long as these things are treated like tulips of olde, we are valuing them by beliefs and not by the cost of electricity and hardware.

LarryHart said...

@Alfred,

I think I get that you're saying that bitcoin as an investment might appreciate in value to where it is worth the mining, even if it is not worth it at the moment.

I tend to think of bitcoin as currency whereas you tend to think of it as an appreciable investment. I think most bitcoin enthusiasts are thinking more like you, so that's cool. I just happen to think that the investment's inherent value derives from its usefulness as a form of currency, and without widespread faith in bitcoin qua currency, the investment value is doomed to collapse, very much like tulips.

I have trouble seeing how bitcoin can accomplish what you describe relative to inflation unless it is the only currency game in town. If available goods and services increase beyond bitcoin's ability to increase the money supply appropriately, then you'll either have massive deflation (depression) or else other forms of currency will pick up the slack, driving the investment price of bitcoin back down.

Alfred Differ said...

@LarryHart | It is a currency, an investment, and a way out of a terrible situation all at the same time. How much do you know about what is going on in Venezuela? If you lived there, would you want to use the legal currency? Could you survive while doing so?

Americans tend to think of currencies as stable things. Prior to 20th century inflation solutions to national debts (vs national defaults), that was a decent assumption. Gold or silver standards could limit a sovereign from printing whatever was needed. Such standards would be impossible today because there isn’t enough silver and gold let alone enough cooperation on the setting of standards, but we’ve gone further with fiat currencies and our inclination to trust the sovereigns. American’s have it real cushy. Our ‘sovereign’ only destroys half the value of the currency over a span of a human generation, so we are lulled into torpor. Many other sovereigns are not so careful. In those nations, there isn’t much of a difference between a currency and an investment.

On top of all that, you have us pesky libertarians who value being able to hide our transactions from the sovereign. Actual criminals like to do that too, so I’d challenge anyone who thought they could describe how these virtual coins should be valued. 8)

LarryHart said...

Alfred Differ:

Americans tend to think of currencies as stable things.
...
American’s have it real cushy. Our ‘sovereign’ only destroys half the value of the currency over a span of a human generation, so we are lulled into torpor.


Yeah, I get that. Which is probably why the American dollar is considered valuable currency even outside of our borders.

I wonder, though, if you're not concentrating too much on the value of currency as a buy-and-hold investment. Yes, if I acquired a stash of dollar bills when I was seven years old in 1968, stashed them in my mattress for 50 years, and brought them out to spend now, I'd have lost a lot of spending power. I don't think that's how most people use money, though. Most people are spending what they earn in the next week, or certainly in the next year. Inflation isn't taking anything from them, unless wages fail to go up with inflation.


On top of all that, you have us pesky libertarians who value being able to hide our transactions from the sovereign.


And you think an internet-based scheme is going to do that better than trading in paper C-Notes? I wouldn't be surprised if Facebook (and therefore Cambridge Analytica) knows every bitcoin transaction you've ever made, and with whom, and for what in exchange. And even if I'm exaggerating, I trust you take my point.

Alfred Differ said...

Regarding perfect markets and definitions of efficiency, I have to pull out a soap box again. [Anyone tempted to write this post for me shouldn’t find it difficult.]

Not only are humans not rational players [we use a richer set of virtues than a prudence singleton], the concepts of ‘efficiency’ and ‘perfection’ are pretty stupid. As theoretical exercises, they don’t describe humans as individuals, as families, or even as communities.

Most everyone realizes by now that humans don’t optimize on prudence except in situations where the other virtues appear to be irrelevant. That tempts us to limit ‘perfect market’ theories to large, impersonal real-life markets and then press-on with the scholarly work. Popping this thought bubble isn’t hard, though, if you look at what ‘efficiency’ can mean. In economics, it implies prudence in resource usage decisions. In physics, it implies an energy ratio between what gets used effectively for the intent of the engine and what is provided. The concepts are similar, so English speakers are tempted to use the same word. If a baker wastes 1% of the flour they buy to bake bread, they use 99% of the flour efficiently.

The pin that pops the balloon, though, is found by thinking about ‘intent’. A single baker with 100 kg of flour can economize. A small group of bakers in the same company will likely agree on how to economize the flour too. Each will look at what they might earn, choose what to produce, and minimize wastes to which costs can be attached. The ‘engine’ in this case is the baker or a small group of them. If the group grows too large, though, they may have trouble coming to an agreement. They might not agree on how to economize because they might not agree on what they intend to do. Without ‘intent’, the engine isn’t an engine at all. It is revealed to be an ecosystem OF engines. Imagine all the bakers in a city trying to agree on what to produce ‘efficiently’. If they are allowed to compete (humans DO), they will agree only partially. Some of them might realize that the fools across town want to do something so badly that they’d be willing to purchase more flour at higher costs. Those bakers might sell, not bake anything at all, and deem that to be the most efficient use of their resources.

“Perfect markets” assumes many behaviors of participants that don’t hold for real humans. One of them is the assumption that efficiency can be defined at all. If goals are not shared among members of a market, there is no such thing as efficiency. They won’t economize. They will trade. In Hayek’s terms, this is the distinction he made between an ‘economy’ and a ‘catallaxy.’ Economies tend to be small where efficiency can be defined. Catallaxies are larger and composed of economies. Catallaxies are the ecosystems in which we trade when participants do NOT share goals and intentions.

donzelion said...

Alfred: "I get your cost shifting concern, but those big players are a whole lot smaller than nation-states at present, so I'm not overly concerned."

Hence, the growth of energy use that our host started his post with matters. How long did it take the Republic of Ireland to develop it's power grid? Miners grew to consume as much energy in the space of a few years...

The problem isn't 'stupid creditors' but novel parasites. Parasites usually don't want to eradicate the system in which they evolved - but they change it, sometimes fundamentally. Historically, major consumers of energy had no interest in sabotaging the system that fed them - why would they? A factory that makes widgets will be around for a while; they don't just want the power to run their systems today - they need it tomorrow. Not so for this particular sort of player...

"I worry more about intentional inflation..."
Inflation merits 'concern,' but probably not 'worry.' It's not a magical phenomenon. We have robust means of addressing it (open question whether we have the political will to do so).

"The bigger risk isn't from default, though."
On the contrary. 'Strategic bankruptcy gambits' have long been a key factor in how mining/extraction get done, in America and globally. In a sense, the 'private sector' 'fixed' the problem by inventing goliaths who were too big to play it- and then empowering certain key players to drive those goliaths (e.g., Kochs). It's a big deal.

"IP is notoriously hard to value."
Only if you believe in some 'objective value' other than price. From one vantage point, IP is the 'easiest' thing to value: "I invented it, I believe it's worth billions, and if I can convince enough people, then that belief becomes true." The trick is all in the 'convincing enough people' part - the more sophisticated the players, the more 'proofs' they'll want to see. Yet how much is Amazon worth today? How much profit do they report?
Isn't profit (or at least, EBITDA, or it's successor measures) one of the 'fundamental' measures used in assessing value?

Personally, I like trying to tie 'value' to 'social utility' in some way - which is one reason I am skeptical of the crypto-currencies. I want to see some social gains from a massive expenditure of energy; if I do not, I'll not think highly of that use.

donzelion said...

Alfred: "As long as these things are treated like tulips of olde, we are valuing them by beliefs and not by the cost of electricity and hardware."

The problem with measuring the value of tulips is that most folks look at the Dutch side of the equation, and omit perspective of the Dutch East Indies...how many Dutch traders who went bankrupt on tulips repaid their debts through the transatlantic slave trade?

Cost-shifting, my friend, is the secret explanation behind most of the worst atrocities in human history.

Alfred Differ said...

@LarryHart | Most people are spending what they earn in the next week, or certainly in the next year. Inflation isn't taking anything from them, unless wages fail to go up with inflation.

That is EXACTLY the solution available to the ‘common man.’ Meanwhile, your rich neighbor has found a way around the problem and is able to save some of his income. Another richer neighbor has figured out the game and buys and resells your labor instead. Fast forward a generation and each of their children go to better schools than yours do.

If the common man understood the game, our markets would be utterly changed. Instead, we think economics and finance are boring and in that belief we are kept in our place by a cage of our own design.

We should be angry. Instead we are lulled.

And you think an internet-based scheme is going to do that better than trading in paper C-Notes?

I don’t know if it is better. It might be worse. However… it IS different. Innovation requires experimentation and some experiments fail. How much will you risk to improve your lot in life? How much will you risk to improve life for the ‘common man?’

And even if I'm exaggerating, I trust you take my point.

I’d bet they don’t. I’d bet they’d like to and easily could if people don’t mind sharing, but some of us mind sharing.

I’m not the best example and I know you aren’t personalizing this to me, but I’ll share this with you anyway. I’ve made exactly two bitcoin transactions and they involved a US company that would be required to share information with Law Enforcement in the right situation. The transactions involved a high degree of encryption, so unless someone has installed a keylogger on my machine, I doubt anyone knows except that company, me, and my wife…. and now all of you. 8) Each transaction involved switching money around in a speculative bet. Nothing shady. I did it to learn how. I did it to motivate my learning effort while reading about blockchain and related algorithms.

While I learned, I could see how my maternal grandmother would have LOVED the idea of bitcoin. She would have moved her fencing operation online and made it damn difficult for LE to trace the money. She wouldn’t have needed our host’s reminders about the ways LE can use other capabilities to get information. She would have accepted that her job was simple. Just make it harder and more expensive for them. That and a few other tricks would support a defense-in-depth strategy.

It’s not just the criminals who want to avoid sharing. A reasonable citizen of Venezuela might want that too.

Alfred Differ said...

@donzelion | Cost-shifting, my friend, is the secret explanation behind most of the worst atrocities in human history.

I don't doubt you. It is also the secret behind learning from one's failures and doing better next time.

It all comes down to whether we choose to be good people or not, hmm?

Alfred Differ said...

@donzelion | How long did it take the Republic of Ireland to develop its power grid?

So what? How long did it take humanity to grow from 200 million to 500 million? Nowadays we add 300 million far quicker. That’s the nature of geometric growth. That is the nature of large markets.

I used to work in the energy industry when I was at CAISO. They taught us the basics. Utilities sell bonds, build capacity, and pay back their debts from revenue. Bond buyers are betting on the value of the utility’s capacity. Sometimes they get it right. Sometimes they don’t. Utilities are speculating on the demand for their capacity. They can be right or wrong too. If you buy bonds from utilities selling capacity to operations that might not be there tomorrow, you should make sure you price them accordingly. They might be riskier than the ratings agencies currently predict. Those agencies have been wrong in the past and will be wrong again in the future. THINK. LEARN. PLAN.

Major consumers of network bandwidth had no interest in sabotaging their system either, yet many went bust near the end of the 20th century and a lot of dark cable lay on ocean floors. The value of that capacity plummeted quickly as our modern tulip craze burst. Costs got shifted, right? Were their parasites in there? I don’t doubt it. Some. Is there a modern equivalent to slaves being traded to make up for it all? Maybe. It depends on what you think of IT operations moving to India to employ/exploit them and all that dark cable. Half a generation later, though, the world is very different. That dark cable isn’t so dark anymore and our markets have grown in previously incomprehensible ways.

From one vantage point, IP is the 'easiest' thing to value

Yah. I’ve done that in one of my start-ups. It’s amazing how quickly a business partner/investor gets pissed off when they perceive a shift in the value of the IP. He invested cash/his life savings. I brought the IP. It’s a messy story from which I’ve learned a lot, but I was only out $1000 at the end. I’m sure you can imagine the details.

Sometimes the initial illusion is made real. It all starts with an illusion, though. Even the guy bringing cash helps to construct the illusion of value. There is a REALLY fine line between a successful start-up and a con job.

I like trying to tie 'value' to 'social utility' in some way

If I thought there was a decent way to define that utility, I might side with you. It’s one of those things we might agree is there when we see it. With that working definition, I’d tentatively place myself in your camp, but I’d be a wary ally. I’d be watching for universal definitions of utility and running if I thought you were drinking that koolaide.

I think skepticism of the crypto-currencies is appropriate right now. I think some of the players in that space are exploiting gullible fools in rich markets and doing far worse to people trapped in a situation like exists in Venezuela. Some of them, but not all of them. My money is invested in the chip foundries who supply this stuff because I think they’ll weather the ups and downs and not be criminally associated with the vultures feeding on people who can’t fend them off. I won’t put my money on a start-up where I would worry about the ethics of company founders.

A.F. Rey said...

To veer off the subject for a moment, P.Z. Myers found an old (circa 1977) essay by Michael Moorcock on the Fascist tendencies in the science fiction at the time. He makes interesting points about Heinlein, Tolkien and others, although he seems to use anarchist and libertarian interchangeably. But the most interesting part I found was his comments on Star Wars:

This sort of implicit paternalism is seen in high relief in the currently popular Star Wars series which also presents a somewhat disturbing anti-rationalism in its quasi-religious 'Force' which unites the Jedi Knights ... and upon whose power they can draw, like some holy brotherhood, some band of Knights Templar. Star Wars is a pure example of the genre (in that it is a compendium of other people's ideas) in its implicit structure -- quasi-children, fighting for a paternalistic authority, win through in the end and stand bashfully before the princess while medals are placed around their necks.

Star Wars carries the paternalistic messages of almost all generic adventure fiction (may the Force never arrive on your doorstep at three o'clock in the morning) and has all the right characters. It raises 'instinct' above reason (a fundamental to Nazi doctrine) and promotes a kind of sentimental romanticism attractive to the young and idealistic while protective of existing institutions. It is the essence of a genre that it continues to promote certain implicit ideas even if the author is unconscious of them. In this case the audience also seems frequently unconscious of them.


Perhaps he should have been a special witness in Star Wars on Trial? 8)

Duncan Cairncross said...

Cryptocurrencies
I see perfectly good electricity and computing resources being wasted - they are GONE

On the plus side it's simply Tulips or was it "Cabbage Patch Kids"?

No inherent value whatsoever

donzelion said...

Alfred: "It all comes down to whether we choose to be good people or not, hmm?"

Good - yes, but also, smart/competent/attentive, which are features possessed by both the good and the bad. ;-)

Alfred Differ said...
This comment has been removed by the author.
Alfred Differ said...

@Duncan | I see perfectly good electricity and computing resources being wasted

Yes. You can say that because you are well defined enough in your goals and intent. Efficiency is definable at our level.

Personally, I felt this way when I saw Seti@Home. I switched to other projects when they became available. [No surprise I wasn't interested in helping to compute the quadrillionth digit of pi.] Bitcoin is more likely to be useful.

@donzelion | features possessed by both the good and the bad

So Very True.

I'll side with you and your friends when you make a good case that someone is too much of a parasite, but I'll tolerate the lesser ones because they help drive evolution. Parasite complexity speaks volumes about the health of a host.

donzelion said...

Alfred: "Utilities sell bonds, build capacity, and pay back their debts from revenue."

That's how they're built, yes (mostly). The bond buyers price the bonds, and feel relatively safe with utilities since 'they can just raise rates.' The risk is priced into the value; that risk incorporates models anticipating default rates by customers, which in turn assume certain things (a business will fail to pay many different creditors before it lets its power be turned off...so this is much lower risk than elsewhere). The distribution/sales processes are usually more convoluted...but likewise incorporate models assuming how most customers will act.

And who would consciously plan on a default here? Who would want 6 month's worth of power, rather than 20 years? Since the risk is unforeseeable, nobody designed robustness into this system to address it: there just aren't any big players who would shrug off losing power....until now.

And this is only one gambit, a modest tweak to tactics previously typical in mining/extraction (and the way that the biggest get bigger). I know how this gambit works because I've seen (albeit in another context). There are many possibilities I haven't seen.

"Major consumers of network bandwidth had no interest in sabotaging their system either,"
A dot-com styled parasite exploited mania about valuation using risk capital. If the coin miners consume many terawatts of power, they're tinkering not with risk capital - where they'd potentially crush the dreams of folks who wanted to ride the Enron-Webvan to prosperity - but with home heating and cooling, water flows...the stuff that makes much of the country livable. Raise utility rates for elderly folks living on social security, who can't move, may not be able to adapt...

"Sometimes the initial illusion is made real."
Indeed. But I don't know if it's 'illusion' or an 'idea' - the distinction between the two means everything.

"My money is invested in the chip foundries who supply this stuff..."
You've weathered more than a few storms, and will figure something out even if a bunch of the plans go awry. But there are others who aren't quite so likely to adapt and adjust to, say, a 10% increase in their monthly utility bill (my Mom, for one, forced out of her house and now going through an 'emergency' downsizing - though it's one I warned would become necessary some time ago).

David Brin said...

Tim Foale you know which two types believe in the perfect free market, free of all cheating and empowering each individual to make best deals? Both libertarians and Karl Marx. Both dream the same dream, differing over HOW to get there… and I show how both are absurd re HOW.

http://web.archive.org/web/20101031100957/http://reformthelp.org/reformthelp/marketing/positioning/models.php


LarryHart said...

Alfred Differ:

@LarryHart | "Most people are spending what they earn in the next week, or certainly in the next year. Inflation isn't taking anything from them, unless wages fail to go up with inflation."

That is EXACTLY the solution available to the ‘common man.’ Meanwhile, your rich neighbor has found a way around the problem and is able to save some of his income. Another richer neighbor has figured out the game and buys and resells your labor instead. Fast forward a generation and each of their children go to better schools than yours do.


By temperament, I'm the type who would rather salt money away in the mattress to have for my old age, and it bothers me that the money in (say) 2030 won't be worth what it was in 2018 or 1968. But I also wonder if that is a problem with fiat currency, or if it is more of a problem with entropy. I can't stuff my mattresses full of pizza (for example) for 50 years and expect to enjoy that same pizza later. Things deteriorate over time. Money is abstract enough to seem as if it can theoretically hold value over time, but at the point of spending, the value of currency is intimately tied with what value is available for purchase at the time. Wouldn't that hold for bitcoin as well as for fiat currency?

Alfred Differ said...

@donzelion | The bond buyers price the bonds, and feel relatively safe with utilities since 'they can just raise rates.'

Yes. They do, but they are incorrect. They believe in an insurance policy of sorts that might not pay off. In places where PUC’s can be moved by politics, that insurance is weak. A smart buyer will price higher risk into bonds when the seller can be constrained like that. I ran into this when my brother converted some of my father’s assets when he passed to dividend paying utilities to stabilize things for my mother. That made sense for her, but after she passed and I got to see everything, I converted away because I couldn’t predict the political pressures some of his purchases would face. ‘Raising the rates’ wasn’t a sure thing, so the bonds weren’t really as low risk, so the utilities themselves should exposed their shareholders to more share price changes. My concerns haven’t happened yet, so his value play might be out-producing what I’ve done since, but I’ve seen electricity utilities up close and don’t feel so sure about them.

I feel for your mother. I’ve had my wife’s mother under my roof for about 8 years now. There was some emergency downsizing when the financial bust hit and she became a fixed income earner. It sucks, but it is the reality. She and others like her help remind me not to take libertarian ideals to extremes. It’s true I’m solving the problem myself and not expecting tax money from the rest of you to cover her, but not everyone has that option. And yes… I understand Social Security enough to know she isn’t getting back what she paid in. 8)

Who would want 6 month's worth of power, rather than 20 years?

Better get used to it. The world is changing fast. Unless you are providing electricity to big cities with diverse customers, you’d better think about the stability of your demand like every other business has to do. The electricity folks think they are somewhat immune to these changes. They aren’t and some of us know it.

they're tinkering not with risk capital - where they'd potentially crush the dreams of folks who wanted to ride the Enron-Webvan to prosperity

It was much more than that. Jobs went poof. Dreams WERE crushed at home. It wasn’t as bad as what happened in 2008, but it didn’t just hit speculators. Those entrepreneurs hired people and I felt for them all. What you all are going to have to face, though, is that the market segments that used to move slowly and with decorum won’t for long and it’s not the bitcoin miners fault. AI is being dished up as if it was electricity. Need some more cognition in that app? Here is the price. Want your shoes on the internet? Here is the price. Want to resell the power you stashed in your car or home overnight at daytime spot prices? Here is the price. This is all energy intensive stuff that will demand impressive amounts of computational power. Some will try to surf the wave to prosperity. Some will simply hope for a meaningful, paying job. Utilities are likely to become innovation centers again. Those who do not will fail. Bet on it.

'illusion' or an 'idea'

It’s all about incantations.
Each of us is a storyteller.

Alfred Differ said...

@LarryHart | Your temptation to salt money away probably predates us all being human. Primates too. Maybe even mammals. Every critter that successfully hoarded food or some other critical resource contributed to that urge within us. 8)

It’s not fiat currency OR entropy. It is fiat currency AND entropy AND environmental changes. People who hoard silver and gold can reasonably expect the metal won’t decay (much) while other forms of capital do, but I don’t think it would be smart. My maternal grandmother would have shown them how their stash decays. It’s true that your pizzas would become inedible, but before that happened, the rats would show you how they decay too. Virtual currencies decay too.

It’s the environmental change that matters the most as far as I’m concerned. Your currency represents fungible debt and is just another commodity in a market where prices change. If you aren’t surfing the waves in the market, you are hoping values don’t change much between acquiring stuff and spending stuff. To stash stuff away successfully, you should think about those waves. Better yet, use those waves AS your stash by 1) diversifying your portfolio, 2) risking some in wild ideas, and 3) stabilizing some in hedged structures. Diversity is for robustness during roller-coaster years. The hedge is where you go when things go disastrously wrong. The wild ideas will likely flop, but they… just… might… put your kids in a top-notch school. Who knows?

Money is abstract enough to seem as if it can theoretically hold value over time

Don’t be fooled. It is semi-stable. What happens to the value of the US dollar if Two Scoops lobs a few nukes at NK or Syria? Not likely to happen, right? Market prices depend on a balance of buyers and sellers. If balance is maintained, prices are stable. If not, they zoom in one direction or another. I was in the sub-prime industry when the financial meltdown in SE Asia occurred in the late 90’s. The Russian Ruble collapsed. Bond buyers went home for a while in the US. Our competitors couldn’t meet payrolls let alone service the loans in our care. What a @#$%ing disaster that was. Not many Americans realize this, but many folks in SE Asia do. No one lobbed nukes, though. Smaller screw-ups can demonstrate the semi-stability of currencies and you might not even see them coming. Taleb explained it better than I can.

A.F. Rey said...

Ack! Sorry, I forgot to include the link to the essay. Well, they say memory is the second think to go...

Here is Moorcock's essay:

https://libcom.org/library/starship-stormtroopers-michael-moorcock

Paul SB said...

Donzelion & Alfred,

"It all comes down to whether we choose to be good people or not, hmm?"

This is opening up a huge can of worms, isn't it? Probably a bigger storage tank than an average can. One of the most obvious layers is the who gets to define "good" question. In corporate culture, good means the one who wields the most power and gets the most money. For them being ethical is stupid and a hindrance to being "good" which is synonymous with "smart" and "successful" in the bluntest financial sense of that word. In most church cultures it's whoever does the best job of fending off the malicious gossip and looks the most lily white, which is most often accomplished by distracting outrageous accusations against themselves by hurling even wilder accusations against others (this social context is what makes some people dumb enough to fall for shit like PizzaGate). In Yanomami culture it's the fiercest warrior who fights off the neighboring villages and brings back the most screaming, fertile female captives.

Then there's the question of choice. Just how much of our choice is really our own discretion, versus unconscious conformity to norms and the equally unconscious influences of twitchy hormones and mostly unexplored neurotransmitter triggers.

Then there's the circumstantial/historical context that frames the decision-making process.

Then there's the whole bit about individual choice versus social issue. Libertarians share with conservatives a level of blindness about social issues that is quite self-destructive. If most towns have one or two town drunks, you are probably looking at a handful of individual problems. If the number of alcoholics suddenly skyrockets, you don't have a whole bunch of "losers" - you are seeing a major change in the social environment. Failing to see that and blaming all negatives on individual choice is great for the egos of those who are fortunate/rich enough to not be directly affected by the problem, but blaming, shaming and firing does not solve problems. It's funny how the memes out there have inner city drug addicts as evil, hedonistic swine, but now that the drugs are flowing into rural America there is some recognition that the massive explosion of opioid addicts is not their individual faults, but an actual social problem caused by our economic heroes - the Gordon Geckoes of the pharmaceutical environment.

Just about anyone you ask will claim - and honestly believe - that they are good people. The ironic exception comes in the form of people who are victims of Major Depressive Disorder and related mental conditions where the chemical/energy crisis in their frontal lobes leads them to extreme lows in self esteem. Not only are they victims blamed by society for things they had no choice in, but their conditions make them inclined to agree. At 20% of the American people, they are among the most discriminated against demographics around (but I'm getting a little off-topic here).

Jon S. said...

Alfred, there's a fundamental flaw in your analysis of cryptocurrencies vs. government-backed currencies (whether fiat or "hard").

In your example of someone living in Venezuela today, a man with investments or sufficient savings could reasonably desire to place those into a cryptocurrency. On the other hand, the (far more common) situation of a man making just enough to feed and house his family would only have use for such a currency if he can find grocers and landlords who accept it. And what happens if someone institutes such an exchange, but you're heavily into Bitcoin and your grocer only takes Etherium? For that matter, how can you purchase a loaf of bread when the value of the currency pitches about wildly while you're shopping?

In my life, "money" isn't a thing I salt away, because I haven't made enough over my current expenses to do so since I was a young enlistee in the USAF (living in the barracks and eating at the chow hall was a tremendous savings). Instead, it flows out at roughly the same rate it flows in; when things work well, the outflow does not exceed the income. (Thanks to a new variation in tax rates instituted to fund "rapid transit" that doesn't come within ten miles of here, my car license tabs tripled in price this year, so that was a fun month.) I don't have the luxury of thinking of my money as investment fodder - "the future" is "can I cover next month's water and electricity bills?", not "how can I retire?" (especially since the discs in my cervical and lumbar vertebrae have all begun to disintegrate, meaning that I can't get a job any more, and since so many people cheated the system with nonspecific "back pain", I can't present enough evidence of my issues to get disability).

Cryptocurrencies are an amusing topic for conversation, but from my point of view, they're completely useless. I can't order a pizza with my Bitcoin wallet, nor fill my gas tank with Etherium. Dollars work for both purposes, though.

Adam Smith said...

Profits remain high because of chronic enormous federal budget deficits.

Stop taking my name in vain.

Adam Smith said...

Norway taxes Asian made consumer goods at 25%. It's very Trumpy over there.

Most of Europe does something similar.

Inconvenient Truth, that.

(Look up VAT.)

Mike W said...

Um...VAT <> tariff. It's a consumption tax on all goods, including those domestically produced. Jeesh. Not a bad idea for USA to have a national VAT like Norway and actually fund spending rather than borrow, but I don't think that is what this "Adam Smith" imposter would suggest.

donzelion said...

Jon S.: I'm not sure you're pointing out 'fundamental flaws' in cryptocurrencies. If you're heavily into Bitcoin and your grocer goes into Etherium, then the two trade currencies (or find a third party to do so on their behalf) - as with dollars, pesos, and bolivars now.

Currency is part of the solution to the problem of how to facilitate trades. If currency fails, it fails because of parasites trying to profit from outside the system. Most of the time, famine, shortages, instability, and war are undesirable conditions - to most people - yet there are parasites who actively desire these conditions because they ensure their own profit.

Take the 'back pain' market: consumers want to avoid pain, doctors want to help them do so and get compensated, pharms create and sell products that help mitigate the pain - a series of trades among those players helps solve the problem. But parasites look on those trades and find opportunity through prolonging your suffering. I have a problem with that.

donzelion said...

Paul SB: "It all comes down to whether we choose to be good people or not, hmm?"

LOL, I thought I was suggesting to Alfred that there's more to it than that - we can't just 'be good' - we also have to be 'smart' - at least, 'smarter than the bad people.' Most people in the business sector must be ethical most of the time - were they not, they'd never be able to find anyone to trade with them. But they also have to be savvy about cheating (or hire folks who are able to guard them against it). Some benefit of the doubt is warranted...but also some caution. Familiarity with the possibilities of cheating can generate temptations to indulge in the practice.

The problem with Gordon Geckoes isn't greed so much as cheating. In securities markets, they often get away with cheating because white collar crime has been perceived as 'victimless' (or rather, the cheating distributes suffering so broadly that no single player has an incentive to stop it). I am not impressed by greed; I believe that the most greedy are also the most likely to cheat. That's probably a reflection of my own depressive tendencies - I find narcissists to be nasty, and bigots or bullies to be tiresome at best. Yet I appreciate that others with different mental states actually see narcissists as 'heroic' - there's a reason Trump won after all.

I'll give the benefit of the doubt to the business world - even the narcissists have to play by rules in order to get ahead - but the second someone crosses a line into cheating, I'd throw the book at them (or something a little harsher).

David Brin said...

Huh. "Adam Smith" wouldn't know Adam Smith if he'd been born next door.

Most of those citing him have zero knowledge of his writings, or of history, or the meaning of his proposed revolution against 6000 years of oligarchic cheating that's the true enemy of flat-fair-competitive markets.

Alfred Differ said...

@Jon S | If we were neighbors, I’d happily make pizza for you in exchange for bitcoin as long as we could agree on a price. My costs in making pizza might occur in dollars if I can’t find suppliers who also take bitcoin, but I could juggle numbers and make sure it worked for me while shielding you from exchanges in dollars. Bitcoin’s dollar exchange rate goes up and down, but that’s what futures contracts are for. I could also just buy ahead and warehouse my supplies if it was worth it.

It is the people who have monthly cash flows that are essentially even that stand to lose the most when prices gyrate. In the US they use dollars as a reserve whether they can save or not. The value of a dollar doesn’t change much from week to week, so it is relatively safe to do this. That is not true for someone in Venezuela where their currency is experiencing hyperinflation. It would be smarter for them to convert that currency to bitcoin immediately and cope with its ups and downs instead because the local currency is simply going down.

When buying bread (as in your example) it is important to remember that the value of the crypto-currency is changing relative to the local currency. It might not be changing the same way relative to bread. Prices aren’t absolute numbers. They are more like ratios. For this loaf of bread I want $2.95. See the ratio? $2.95/1 loaf. When you buy or sell a virtual currency, it is also a ratio. 1 bitcoin/$8K. That would suggest 0.36875 milli-bitcoin/1 loaf, right? If you know two of those ratios, you can calculate the third. That means knowing the virtual currency exchange rate isn’t enough.

Real markets are more complex. The seller of bread has to pay rent, taxes, and so on. That means there are a lot of ratios they juggle when thinking about how to price bread in ANY kind of currency. You might not see them making these decisions in the open, but they DO when they tally up their books each day, week, and month.

As an American, you have the luxury of working with a currency that loses half its value over the span of a generation. That makes your calculations simpler. If you are employed, you just need your employer to provide a COLA adjustment each year. I know… easier said than done. It is still the case that some employers do. Mine has managed most years, so I don’t harass them. What they’ve had a harder time handling is the inflation rate for my health care insurance. I’ll forgive a missed COLA, but I’ll be a hard-ass about medical coverage because that inflation rate gets into hyperinflation territory now and then. In that sense, I should be thinking about alternate ways to play this game, but my insurer doesn’t take bitcoin yet. No surprise there. They can’t afford to juggle that among all the other ratios they handle. 8)

Alfred Differ said...

@Paul SB | This is opening up a huge can of worms, isn't it? Probably a bigger storage tank than an average can.

That’s why I’m grateful you recommended Sapolsky.[I’m in the Us/Them chapter now.] His descriptions of how we define ‘good’ are enlightening. How we handle misdeeds in a world of in/out groups is even better. For example, your definition of ‘good’ in corporate culture quickly demonstrates you see them as outside your in-group. I do too, but probably not as distant as you do because I’ve tried to start companies. I know your definition is simplistic and Donzelion shows why when he points out that most of us have to be ethical most of the time to find partners, employees, and customers.

Just about anyone you ask will claim - and honestly believe - that they are good people.

Agreed. I think I’m downright saintly at times and y’all should imitate me. Fortunately for the world we have means for competition and cooperation among the memes we host. We have ecosystems for them where they can ‘demonstrate their fitness.’ The jerks most inclined to cheat have to face people like Donzelion at times. Even if he doesn’t win, he helps make cheating (as he defines it) more expensive. We all do this to some degree as we interact with each other. It’s no wonder many of us are so good at conforming.

My short response to Donzelion wasn’t meant to imply any of this was easily. I was suggesting that our conversation was heading into virtue ethics again and on much of that I think I’m already in agreement with him. Whether someone is ‘good’ and self-identifies that way is always done in a social context because the applicable virtue is Justice. Am I good? Am I behaving in a just manner? Those are almost the same question. Since Justice DOES depend on the community around you, the solution for curtailing cheating starts with a change to the community around the cheater. I doubt he and I would disagree on more than details here.

LarryHart said...

Paul SB:

Just about anyone you ask will claim - and honestly believe - that they are good people.


That's what I used to believe, until the rise of such luminaries as ISIS and Boku Haram. They seem to actively brand and market themselves as cartoon supervillains.

reason said...

Hey,
I clicked the link to "the myth of capitalism" and the first thing I saw was "pass go and collect $200". I'm pretty sure that the book is not a plea for a universal basic income, but that is my line in trying to push it. Look if the system is justified in terms of satisfying people's need (which people), then giving money to all the people is a good way to align incentives to what the system is supposed to be for (we seem to keep forgetting that somehow).

In my view, it is not just competition that is needed, but redistribution also. Monopoly will only work with redistribution. Think about the game and how long it lasts, and what the end is. We need the game of monopoly to go on forever.

reason said...

Larry Hart,
"What I mean is, if it took a billion dollars worth of man-hours and mining equipment to extract a few thousand dollars worth of gold from the earth, the entire process would be abandoned because the owner would be spending more money than he'd get back from the operation. It sounds as if that might be true of bitcoin."

Spending more money? Don't care about that at all. Wasting resources - yes I care a lot.

A quote attributed (perhaps eroneously) to Warren Buffet:
"Gold gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

Gold is exactly the same as bitcoin, except that it co-incidently has other uses.

reason said...

Tim Foale
"The most efficient way to allocate resources is the PERFECT free market. "

No, that "efficiency" is defined to make that statement true. (The statement is just a tautology - basically if you replace "efficient" with "allocative efficiency", which means "I can't increase utility by trading" then obviously the free market is the optimum way to do this. But allocative efficiency is not a very useful concept - and neither is utility.)

donzelion said...

Alfred: "I doubt he and I would disagree on more than details here."

To be honest, I usually disagree the most on the details with people whose overall premises I strongly embrace. I try to sharpen what is 'good' and make it better. That includes my own mind, which so often needs sharpening.

re Adam Smith: Ironically, Adam Smith came up here in Anaheim just a few days ago. A labor union conducted a survey of Disney employees, finding that most earn too little to provide for themselves even after 15 years of employment, and about 11% had been homeless at some point in the last two years. A candidate for city council dubbed this the 'Karl Marx report' - and proposed introducing the 'Adam Smith' report next time around. I'd happily meet him in that debate: Smith's work directly chastises Republicans who extended $300m in subsidies to Disney - such fools invoking Smith know little about what he actually wrote, and only think it's useful for political argument.

Alfred Differ said...

Gold serves a purpose once it is assigned to someone as property. It stands in for something of stable value against which other prices are measured. It is a bit like the numbers printed on a ruler in that it provides a standard for those who want to use it. It can’t do this while it sits in the first hole, but it can after it is placed in the second hole. 8)

It is pretty strange, though, because it stands in for our willingness to pay our debts. We externalize something inherently intangible. Very strange when all that is really needed is something rare and not easily created by anyone. A reasonably stable supply of anything would do the trick.

Didn’t someone once suggest two dollar bills filling that role after the apocalypse? 8)

Alfred Differ said...

@donzelion | I try to sharpen what is 'good' and make it better.

That's what makes it worth clashing swords with you. 8)


I was listening to the Fresh Air interview last night concerning evictions. There is a ton of work to do for people who give a damn about people barely making enough to get rent below 70% of their monthly income. It sounded to me like the solutions had to be local.

donzelion said...

Alfred, yes - 'There is a ton of work to do for people who give a damn about people barely making enough to get rent below 70% of their monthly income' - but almost none of it pays your own rent/mortgage (and if you do too much of it, you'll be toxic to clients with deep pockets). It's grueling, heartbreaking work, with almost no reward. You don't even feel good about winning a temporary reprieve - you know that next month the same battle starts all over again.

"It sounded to me like the solutions had to be local."
Yes...and perhaps also regional. Federal solutions tend to result in ambitious local managers squirreling away significant sums in grant money, which eventually get diverted to pet projects (usually benefiting developers/owners, rather than the intended beneficiaries).

Alfred Differ said...

Heh. You are thinking like a lawyer again. I was thinking as a someone leading a non-profit who ponders getting into the market to compete with landlords in poor neighborhoods. It would take people who hear it as a calling, but it would appeal to my libertarian sensibilities.

David Brin said...

reason: “In my view, it is not just competition that is needed, but redistribution also.”

Got it backwards. Competition cannot reach its creative potential unless the market for competitive endeavor is relatively open-flat-fair. This never happened in human history, except in rare places where moderate revolutions found ways to redistribute without wrecking incentives for work, investment and saving. The US founders redistributed a quarter of all land and wealth. Later generations did it too, but always with a mind to not killing the goose that lays golden eggs.

The core meme of the oligarchy is “you cannot redistribute and flatten things without killing the goose. All of US history refutes this. And all the REST of human history - the french, russian, chinese etc revolutions - shows the price they will pay if they prevent moderate generational reforms.

TCB said...

Paul SB: >Just about anyone you ask will claim - and honestly believe - that they are good people.


LarryHart: >That's what I used to believe, until the rise of such luminaries as ISIS and Boku Haram. They seem to actively brand and market themselves as cartoon supervillains.

They brand themselves as heels to the outsiders, but in their own councils I'm sure they still think they're the heroes.

Paul SB said...

TCB,

I was going to make that exact same comment (though with a whole lot more words, to be sure) last night, but was too tired to tackle it then. There is a word for this: Negative Identity. "Society treats us like dirt, therefore dirt must be good and all that crap society thinks is ideal is a load of crap." Not a very grown up way of thinking, but this starts at a very young age. It also produces blocks of hominids who are unwilling to talk, listen, compromise or negotiate in good faith.This is exactly why our host is correct not only about accepting human diversity within our ranks, but rejecting any ethnocentric beliefs. It is the beliefs, however, that must be rejected, not the people who hold them. I don't have a problem with white people, but I do with the KKK. Ditto La Rasa and violent, racist street gangs. I don't have a problem with either men or women, but I do with sexists of all stripes. People whose sexual inclinations don't match mine are just fine as long as they don't harass me or anyone else. You can worship any gods you feel like so long as you don't try to force anyone else to conform to your gods' rules.

Old Robby Heinlein wrote a line about your right to swing your fist around ending where my nose begins. That's exactly why I never go to Fascist Fillet or shop at Nazi Lobby. The owners of a business really have no right imposing their religious beliefs on their employees. Lots of Catholic schools have figured this one out. I know of agnostics and Buddhists who teach in Catholic schools, and one Coptic Christian. It's not a problem as long as they teach their subject and not their religion.

Paul SB said...

Alfred,

Wouldn't you expect Donzelion to think like a lawyer?

"I doubt he and I would disagree on more than details here."
- True, as would I, but you know who lurks in the details ... And on the subject of details, I'm glad you're still making use of Sapolsky's book. Anyone who gets that reality is more complicated than campaign slogans and talk radio spiels would get some very useful understandings out of that book.

Having said that, I will take issue with your appraisal of who is in or out of my Us. In theory I have the most inclusive horizons out there - I'm sure most people will see this as ridiculous pie-in-the-sky idealism, but I doubt the human race will be able to keeping lurching toward a future while clinging to ancient modes of keeping their horizons tiny. The species is too big and interconnected, and until the outer space frontier opens up the millennia-old escape valves are no longer options. If, for instance, those radical anti-immigration fascists get their way, they won't be too happy what happens to the cost of their food, and over-priced food can lead to some pretty ugly consequences for a nation. In practice, however, I'm sure I come across as excluding business people from my tribe, given how often I raise hue and cry against them. But I think of it this way: there are 215 species of sharks, but only 8 of them have ever attached humans. Nothing scary about 207 kinds of shark - it's those 8 we have to watch out for. The thing about business sharks is the you can't tell the dangerous ones from the okay ones by looking at them, you have to see what they are doing when no one is looking (though many of the bolder ones are so suer of their superiority they can be pretty blatant about eating people). These are the people who are doing the most damage to hominid kind, far more than the governments they corrupt.

Paul SB said...

Donzelion,

My 9th grade English teacher had a poster on his door that pictured a knight in armor with a lance, but the armor was rusty and the lance bent. The caption read: "Be not simply good, but good for something." Unfortunately, the struggle to just survive in Capitalist society makes it pretty hard for anyone at all to be good for something, except in very small ways. I recently emailed the housing authorities in Ventura and Santa Barbara counties about super adobe architecture as a replacement for highly flammable wooden houses, and Los Angeles County about the 3D printed houses as a way of making inexpensive but robust alternatives for the ever-growing homeless population (I also pointed out that they would do much to alleviate nimbyism if they spread them out among communities instead of making concentration camps for the homeless). None of these counties have written me back, so chances are I'm just spitting in the wind, though. If I wasn't struggling to survive and had the backing of millions I might start my own business to bring these innovations to more attention.

There is a direct, causal relationship between greed and cheating. if you defeat the memes you can prevent much of the behavior. "That's probably a reflection of my own depressive tendencies..." I completely understand that tendency to throw up our hands and give up hope that people will ever change. Clouds of gloom seem to spread over humanity on a regular basis. But consider the ways in which people HAVE changed. The government abolished slavery a century and a half ago, so the trogs responded with Jim Crow. Slowly those Jim Crow laws were abolished, and mainstream society no longer treats melanin content as an indicator of human worth. There are still large segments who do, and they are pushing back with their anti-diversity memes and at times violence and blatant discrimination. But when the KKK marched through very conservative Greeley, Colorado in the '90s when I was there, the vast majority of the community came out and jeered. Only 30 years earlier they would have come out and cheered.

On the other hand, I can get pretty OCD about morality, and won't be satisfied until all hominids are treated equally not just under the law but by our cultural superstructure as well. It's not just racism and sexism. The world is full of people who are labelled and treated unfairly through no fault of their own in the same way that no one choses their base melanin settings or which set of gonads they have at birth. We need to point out that the greatest sin of all is to blame victims and treat victims as if they were criminals.

donzelion said...

Paul SB: I get it, trust me. One thing though: the struggle to survive in feudalist society is even worse. I actually lived in one long enough to see the effects...in a country that declares it has no depression whatsoever and those people with all the symptoms are just not praying enough, you'd see the physical evidence of despair in well over 40% of the population...

"None of these counties have written me back, so chances are I'm just spitting in the wind, though."
They probably won't. I wonder about community action groups...Habitat for Humanity, among many others. You'll never get permits in the face of the nimbots, BUT perhaps some of these guys would have ideas on places to give it a try - and if a few beautiful adobe dwellings were built, they'd be just a little harder to tear down than tents or cardboard. They would still get torn down. But the psychic pain of seeing it happen might win a few hearts, and one by one...

And yet...and yet...there is still hope. How do we win? "I will do my part to defend justice, and I will get up today and find others who are trying, and I'll learn what they're up to and try to help do it as well."

I'm off to go canvassing. You're in a relatively safe blue district, so find your nearest red one (the 39th is imminently flippable, and we've even got a blue colonel running). It won't pay the bills. It won't result in a job. Getting doors slammed and being ignored sucks. But we gotta do what we can. We gotta fight however we can. And it does feel better.

donzelion said...

By the way, Paul, Habitat would never condone building adobe houses without permits even if it could help - but the folks they'd bring in who do their community work would be better positioned to know others who might be interested in such semi-rebellions.

Kal Kallevig said...

Paul | "super adobe architecture"

Adobe has some advantages over wood and stucco in that materials are more readily available and because relatively low tech workers can do the building.

But if the objective is energy efficiency it is not as good as some others. About an inch and a half of sheetrock gives as much thermal mass as can heat and/or cool in a day so all that adobe mass does not provide much additional.

So what is good? It is insulation on the outside of the frame. Think of your down jacket, it goes on the outside to keep your heat in. About 2 or more inches of foam insulation on the outside of the framing of a conventional house is about as good as you can do. Then cover that with some kind of waterproof (fireproof is good too) covering, possibly stucco, and you have the basics.

A couple of years ago we visited a friend, shortly after a fire had swept through, who lives in the manzanita brush above San Jose in an off grid house that is built along those lines and it survived. He had cleared a reasonable area around the house. Scorch marks were clearly visible along the base of the building where burning things had apparently lodged, but the house did not catch fire. I suppose it would have been a lot harder to keep that house safe in among tall trees.

If your comment was directed more to the crime of so many homeless in America, there are resources enough to solve that problem with dwellings that are safe and comfortable; small would be fine in my opinion. But energy efficient is essential if we are to keep the planet from getting too hot.

By the way, another friend a few years ago who came from a small town in Nebraska returned there to retire and bought a house for $4,000. There are probably a lot of others that are vacant because so many people left those areas when big ag moved in and also in the rust belt. There are no jobs, but it would not take so much to support someone in those circumstances and maybe we could repopulate the heartland at the same time.

David Brin said...

onward

onward

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