Deep sigh.
This follows on from my "Why Krugman is an Idiot" post horribly well.
You're safe. You don't have to read that one. In it I criticise the start point of Krugman's thought experiment as distorted to fit his conclusions. There you go. That was easy!
Well take a look at this then ...
Got that? A chunk of missing NZ data for whatever reason, that's royally messed up a currently widely respected and followed piece of economic research.
Tell that to the families and friends of the suicides in Greece.
Just one huge deep sigh at how we are being led increasingly by stupidity instead of ability.
My father was an educational researcher. It's a messy hard to explain field. Fundamentally though a lot of it rests on data, analysis and research of whichever area is under the microscope. What he did well, and seems to have rubbed off on me. Is respect for source data.
It's the same from instruments, through good old record decks right up to modern audio systems. The quality of source data is vital. If that's deformed, mangled, distorted in any way at all, then there is no way in hell you are going to make up for it no matter how good the analysis is that follows.
If done properly, the life of the educational researcher is a test of skills in that respect. The source data is often a mix of quantitative and qualitative data. The funding for time spent on gathering it is often as little as humanly possible. Each scrap of data is like a tiny nugget of gold. One inept field researcher can demolish vast swathes of valid input.
Where am I going with this? Just that the art of good research and solid conclusion based on it seems to be slowly fading away from the world. Outside the world of the purely scientific, it seems anything goes as long as it pays. Well actually. Even within the world of the scientific. Look at climate change deniers and who funds their papers.
Just another facepalm night in a world full of fail.
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
17 Apr 2013
12 Apr 2013
Why Krugman Is An Idiot
Recently an article Krugman wrote in 1998 has been quoted and used as a reason to slate bitcoin.
Luckily, we don't even have to debate bitcoin this time. Krugman doesn't even understand babysitting.
Here's the basics of his article. Don't worry. You don't have to understand economics in great detail to see exactly why Krugman is talking out of his arse. It's pretty simple.
It claims to capture the essence of hoarding being a problem in an economic sense by comparing it to a baby sitting club using 1 hour coupons.
In Krugman's model. One couple (let's call them the Krugman's) decide to undermine the basis of the coupons and increase the value of them by hoarding them.
First problem. To hoard the coupons, the Krugman's spend months baby sitting and gathering vouchers. They never accept an offer for baby sitting in return. In effect, they are being rather generous.
After a couple of months, the baby sitting group meets up and notices the vouchers are running low. There is discussion. Everyone agree's the Krugman's are a bit weird, but they did get some baby sitting done, so it's no real problem. They buy another book of coupon's and carry on exchanging coupon's, some even seek out the Krugman's knowing they will never be asked to babysit in return.
There is no devaluation or economic point you can make out of any of this whatsoever for one very simple reason:
A one hour baby sitting coupon is worth one hour of babysitting. Hoarding it doesn't change anything. It's an hour of baby sitting. All the other coupons don't become worth more or less. Even supplying more to the people that do baby sitting doesn't change the value. Every voucher is still worth one hour of baby sitting no matter what the Krugman's do.
Any other conclusion is a severe distortion of reality. Why do you need to contrive a completely unrealistic situation to prove a point? Hmm... What kind of lunatic baby sitting club would declare a problem with supply of vouchers is causing the value of every voucher to change? Or to simply dissolve the baby sitting circle as an answer?
The Krugman's however are left with a vast pile of vouchers, now to cash in!!! Except ... you can only spend one voucher, per hour, per babysitter. So it's going to take them rather a long time to do it. The Krugman's have in fact taken on additional risk. What if the baby sitting pool vanishes before they can spend all the vouchers? What if the children grow up and don't even need them? ... In short ... The Krugman's are trying to manipulate a bubble and may get burned for it because they don't understand it. Are you listening Paul? I so wish I could know you read this one day.
All Krugman's efforts to demonstrate a problem with hoarding in baby sitting voucher's illustrates is that here is an economic "guru" who doesn't understand simple value and exchange.
It's a stupid model, a stupid analogy, ill thought out and deeply flawed as an example of anything except Krugman's own stupidity.
We don't even have to go on to apply his conclusions to bitcoin, because if he can't even get the economics of a baby sitting circle right, what's the point?
I've had people get back to me and say "No you don't get it. In Krugman's model, they can't get any more coupons, that's the whole point of his argument". To which I say. No. You don't get it. It is trivial for the group to get another book and issue coupons for baby sitting. That is what would happen in reality. To say "Well in Krugman's model they simply can't". Is just dumb. If Krugman wants to prove his point, he needs a real world example of what he's trying to argue where it's not trivially easy and reasonable for the group to just get more coupons.
If he can't find a model that actually fits what he wants to say. Just Maybe what he is saying is flawed as well? To love Krugman's reasoning on this one, you have to also love the fact that his conclusion may be just as contrived and unrealistic as his basic original model.
Yes I am aware of how thought experiments work. When it comes to mathematics, you can be quite fanciful if your end aim is admittedly a theoretical exercise only. For example: We know two men row a boat so fast. I wonder how fast 500 men could row the same boat? It is impossible of course to fit 500 men in the boat, but for the purposes of testing out your theories on how fast the boat might go, it'll do. When it comes to economics, it's not a scientifically testable or correct outcome from a thought experiment, so your start point needs to be pretty darn valid if there's going to be any faith in the conclusions you come to.
In the boat example, you might start off by asking how good are the rowers? How long do they have to sustain that speed? You define reasonable assumptions and the basics for later calculation. If you want to skew the results, you find two very slow rowers, or two very fast rowers and don't pay any attention to that fact in your conclusions. It's called selecting the data to suit the assumption. That's exactly what Krugman is guilty of here.
The perfect world:
"Yes Mr Krugman, I can see you have started from an excellent simple model with which I can find no major flaws whatsoever. I shall consider your final conclusions when applied to economics as a whole with a degree of belief".
Where we are:
"Mr Krugman? Why can't the group just buy more vouchers?"
"Because I said they can't."
"Could you have chosen an example where limit of supply was more realistic?"
"I don't care. This way I get to prove a problem with hoarding."
"Why babysitters?"
"Limited supply of a small number of vouchers!"
"But that's not at all realistic is it Mr Krugman? Gold would be a better example of limited supply wouldn't it? Why not make your argument using gold as a start point?"
<silence ... mutters something about hoarding examples not working so well for gold>
"So why does your final conclusion work out the way it does?"
"Because I said it does and it matches the original model."
"M'kay. Is this sounding a little circular in the logic department?"
<silence>
So no it's not okay to say Krugman's theory is valid even if he got baby-sitting dynamics wrong. Krugman chose an example to illustrate a principle he believed in. His example is deeply flawed. How much do you trust his principle now? You can't extend a theory from bullshit.
People listen to moron's like Krugman because they have money. Don't. People with money can also be incredibly stupid, as I have just demonstrated in one very short blog post.
On this one. Maybe we get a glimpse of how the great economists controlling our nation's think. They don't very much. They know how to play the numbers given to them in the game they know how to play. They lack a fundamental knowledge of how it all works when the wheels start falling off and basic supply and demand is the economic factor. They live in a world where a "one" is a billion. They no longer have any clue how the part's work that made the "one" possible.
-----
Postscript Diversion
Hey if we can contrive whatever we like out of a situation to prove the point we want to make? Here's my version. Just for the lulz. I'll even stick to the original impossible to replace idea.
We take it that the Krugman's have a significant share of the the impossible to replace vouchers as described above. The circle meets, there is no easy solution. If the Krugman's are excluded from the club then the vouchers can never be earned back in to circulation. Nobody wants to see value adjustment of existing vouchers, nor is there a simple and agreeable way to do it. Dissolving the circle and starting with new vouchers is impossible. These are the only baby vouchers that will ever exist, and each is quite clearly marked "One Hour". The circle meeting breaks up with little in the way of solutions, vowing to meet again next week and review the situation. A few days later, under cover of night, a small faction of baby sitting gun owners storm the Krugman's demanding the return of the vouchers.
Nobody is hurt, but arrests are made. Three of the father's in the baby sitting circle are now facing charges in custody. First the wives of those three, then a larger support group form a passive 24 hour resistance group that camps outside the Krugman's. Hurling abuse at them and demanding the vouchers back whenever they are seen outside the house.
Infuriated that the voucher hoarding plan hasn't worked and harassed by the support camp. The Krugman's light a bonfire one night and burn the vouchers they do have in full sight of the baby sitting support camp.
The cries of loss from the camp are unbearable. All hope is lost.
The remaining vouchers can't sustain even a small baby sitting circle and the group disbands. No baby sitting is ever possible in the town again for the rest of eternity. The Krugman's eventually leave town and try to join baby sitting circles in the next place they put down roots, only to find that they are excluded. Denied the joys of equitable baby sitting, the Krugman's argue bitterly and eventually divorce at great personal cost.
Meanwhile, over a period of decades, the town the Krugman's removed virtually all baby sitting vouchers from produces less and less children, and attracts less and less families with children. It gradually becomes a ghost town, eventually only populated by the childless over the age of 40. Such is the economic wasteland left by the Krugman's hoarding and burning of irreplaceable baby sitting vouchers.
News of the tragedy spreads across America, and soon all baby sitting circles have set an absolute upper limit on the number of vouchers any one couple can hold. It becomes known as "The Krugman Limit". Thus the rest of America is spared the horrors of baby sitting voucher hoarding and the tragic loss to humanity that results.
Well hey. You did say the vouchers were totally impossible to replace right? I like my version better than Krugman's anyway. It has social resistance, drama, fires and divorce in it. What's not to like?
Luckily, we don't even have to debate bitcoin this time. Krugman doesn't even understand babysitting.
Here's the basics of his article. Don't worry. You don't have to understand economics in great detail to see exactly why Krugman is talking out of his arse. It's pretty simple.
It claims to capture the essence of hoarding being a problem in an economic sense by comparing it to a baby sitting club using 1 hour coupons.
In Krugman's model. One couple (let's call them the Krugman's) decide to undermine the basis of the coupons and increase the value of them by hoarding them.
First problem. To hoard the coupons, the Krugman's spend months baby sitting and gathering vouchers. They never accept an offer for baby sitting in return. In effect, they are being rather generous.
After a couple of months, the baby sitting group meets up and notices the vouchers are running low. There is discussion. Everyone agree's the Krugman's are a bit weird, but they did get some baby sitting done, so it's no real problem. They buy another book of coupon's and carry on exchanging coupon's, some even seek out the Krugman's knowing they will never be asked to babysit in return.
There is no devaluation or economic point you can make out of any of this whatsoever for one very simple reason:
A one hour baby sitting coupon is worth one hour of babysitting. Hoarding it doesn't change anything. It's an hour of baby sitting. All the other coupons don't become worth more or less. Even supplying more to the people that do baby sitting doesn't change the value. Every voucher is still worth one hour of baby sitting no matter what the Krugman's do.
Any other conclusion is a severe distortion of reality. Why do you need to contrive a completely unrealistic situation to prove a point? Hmm... What kind of lunatic baby sitting club would declare a problem with supply of vouchers is causing the value of every voucher to change? Or to simply dissolve the baby sitting circle as an answer?
The Krugman's however are left with a vast pile of vouchers, now to cash in!!! Except ... you can only spend one voucher, per hour, per babysitter. So it's going to take them rather a long time to do it. The Krugman's have in fact taken on additional risk. What if the baby sitting pool vanishes before they can spend all the vouchers? What if the children grow up and don't even need them? ... In short ... The Krugman's are trying to manipulate a bubble and may get burned for it because they don't understand it. Are you listening Paul? I so wish I could know you read this one day.
All Krugman's efforts to demonstrate a problem with hoarding in baby sitting voucher's illustrates is that here is an economic "guru" who doesn't understand simple value and exchange.
It's a stupid model, a stupid analogy, ill thought out and deeply flawed as an example of anything except Krugman's own stupidity.
We don't even have to go on to apply his conclusions to bitcoin, because if he can't even get the economics of a baby sitting circle right, what's the point?
I've had people get back to me and say "No you don't get it. In Krugman's model, they can't get any more coupons, that's the whole point of his argument". To which I say. No. You don't get it. It is trivial for the group to get another book and issue coupons for baby sitting. That is what would happen in reality. To say "Well in Krugman's model they simply can't". Is just dumb. If Krugman wants to prove his point, he needs a real world example of what he's trying to argue where it's not trivially easy and reasonable for the group to just get more coupons.
If he can't find a model that actually fits what he wants to say. Just Maybe what he is saying is flawed as well? To love Krugman's reasoning on this one, you have to also love the fact that his conclusion may be just as contrived and unrealistic as his basic original model.
Yes I am aware of how thought experiments work. When it comes to mathematics, you can be quite fanciful if your end aim is admittedly a theoretical exercise only. For example: We know two men row a boat so fast. I wonder how fast 500 men could row the same boat? It is impossible of course to fit 500 men in the boat, but for the purposes of testing out your theories on how fast the boat might go, it'll do. When it comes to economics, it's not a scientifically testable or correct outcome from a thought experiment, so your start point needs to be pretty darn valid if there's going to be any faith in the conclusions you come to.
In the boat example, you might start off by asking how good are the rowers? How long do they have to sustain that speed? You define reasonable assumptions and the basics for later calculation. If you want to skew the results, you find two very slow rowers, or two very fast rowers and don't pay any attention to that fact in your conclusions. It's called selecting the data to suit the assumption. That's exactly what Krugman is guilty of here.
The perfect world:
"Yes Mr Krugman, I can see you have started from an excellent simple model with which I can find no major flaws whatsoever. I shall consider your final conclusions when applied to economics as a whole with a degree of belief".
Where we are:
"Mr Krugman? Why can't the group just buy more vouchers?"
"Because I said they can't."
"Could you have chosen an example where limit of supply was more realistic?"
"I don't care. This way I get to prove a problem with hoarding."
"Why babysitters?"
"Limited supply of a small number of vouchers!"
"But that's not at all realistic is it Mr Krugman? Gold would be a better example of limited supply wouldn't it? Why not make your argument using gold as a start point?"
<silence ... mutters something about hoarding examples not working so well for gold>
"So why does your final conclusion work out the way it does?"
"Because I said it does and it matches the original model."
"M'kay. Is this sounding a little circular in the logic department?"
<silence>
So no it's not okay to say Krugman's theory is valid even if he got baby-sitting dynamics wrong. Krugman chose an example to illustrate a principle he believed in. His example is deeply flawed. How much do you trust his principle now? You can't extend a theory from bullshit.
People listen to moron's like Krugman because they have money. Don't. People with money can also be incredibly stupid, as I have just demonstrated in one very short blog post.
On this one. Maybe we get a glimpse of how the great economists controlling our nation's think. They don't very much. They know how to play the numbers given to them in the game they know how to play. They lack a fundamental knowledge of how it all works when the wheels start falling off and basic supply and demand is the economic factor. They live in a world where a "one" is a billion. They no longer have any clue how the part's work that made the "one" possible.
-----
Postscript Diversion
Hey if we can contrive whatever we like out of a situation to prove the point we want to make? Here's my version. Just for the lulz. I'll even stick to the original impossible to replace idea.
We take it that the Krugman's have a significant share of the the impossible to replace vouchers as described above. The circle meets, there is no easy solution. If the Krugman's are excluded from the club then the vouchers can never be earned back in to circulation. Nobody wants to see value adjustment of existing vouchers, nor is there a simple and agreeable way to do it. Dissolving the circle and starting with new vouchers is impossible. These are the only baby vouchers that will ever exist, and each is quite clearly marked "One Hour". The circle meeting breaks up with little in the way of solutions, vowing to meet again next week and review the situation. A few days later, under cover of night, a small faction of baby sitting gun owners storm the Krugman's demanding the return of the vouchers.
Nobody is hurt, but arrests are made. Three of the father's in the baby sitting circle are now facing charges in custody. First the wives of those three, then a larger support group form a passive 24 hour resistance group that camps outside the Krugman's. Hurling abuse at them and demanding the vouchers back whenever they are seen outside the house.
Infuriated that the voucher hoarding plan hasn't worked and harassed by the support camp. The Krugman's light a bonfire one night and burn the vouchers they do have in full sight of the baby sitting support camp.
The cries of loss from the camp are unbearable. All hope is lost.
The remaining vouchers can't sustain even a small baby sitting circle and the group disbands. No baby sitting is ever possible in the town again for the rest of eternity. The Krugman's eventually leave town and try to join baby sitting circles in the next place they put down roots, only to find that they are excluded. Denied the joys of equitable baby sitting, the Krugman's argue bitterly and eventually divorce at great personal cost.
Meanwhile, over a period of decades, the town the Krugman's removed virtually all baby sitting vouchers from produces less and less children, and attracts less and less families with children. It gradually becomes a ghost town, eventually only populated by the childless over the age of 40. Such is the economic wasteland left by the Krugman's hoarding and burning of irreplaceable baby sitting vouchers.
News of the tragedy spreads across America, and soon all baby sitting circles have set an absolute upper limit on the number of vouchers any one couple can hold. It becomes known as "The Krugman Limit". Thus the rest of America is spared the horrors of baby sitting voucher hoarding and the tragic loss to humanity that results.
Well hey. You did say the vouchers were totally impossible to replace right? I like my version better than Krugman's anyway. It has social resistance, drama, fires and divorce in it. What's not to like?
11 Apr 2013
Hello Granddad!
I'm having fun watching traders sneer at bitcoin today because of it's fall from grace. Personally I think it's done remarkably well. I was expecting it to drop to the $50 - $60 level before climbing back up. I felt quite proud of the little currency that could when it refused to go under $100. That should be a fair chunk of the early "easy" money and speculators out of it.
Got to admit. I did get a smile out of seeing the speculators moaning to high heaven about MtGox going slow. People these days seem to think Google is search and that's it. There are other major exchanges, during the panic they all seemed to be working fine to me. Hey guys? Try logging in to a different exchange next time?
At the moment it's trying to level out at $170 (that bit written about 8 hours after the dump). I'm still smiling. That's not bad at all! It takes us back 4 or 5 days of the crazy speculators bitcoin bubble. Back to something looking like a more realistic current value. (I still think it's a bit high actually!)
Anyway!
Today it's "this is a joke of a currency" on Twitter, as after a few hours a few began to admit it wasn't about to reset to zero.
History lesson time!
America introduced the dollar back in 1792 and pegged it to the value of silver originally. So that's not the same as bitcoin. If you want a better equivalent to trying to introduce bitcoin, then you need to look at the rise of the paper dollar. That's where the system makes a leap of faith to a non precious metal backed physical thing.
So what happened then? Well between 1777 to 1788 they had a go at it, but it got counterfeited so often that it vanished again as worthless. Cough. Yeah. That happened to dollars. It didn't happen to bitcoin. Ooops!
In 1878 they tried again, this time with a bit more thought about "I promise to pay the bearer on demand", thus tying it in theory back to precious metal.
Here we go ...
Buying power of one U.S. dollar compared to 1774 USD
Year Equivalent buying power
1774 $1.00
1780 $0.59
1790 $0.89
1800 $0.64
1810 $0.66
1820 $0.69
1830 $0.88
1840 $0.94
1850 $1.03
1860 $0.97
1870 $0.62
1880 $0.79
1890 $0.89
1900 $0.96
1910 $0.85
1920 $0.39
1930 $0.47
1940 $0.56
1950 $0.33
1960 $0.26
1970 $0.20
1980 $0.10
1990 $0.06
2000 $0.05
2007 $0.04
2008 $0.04
2009 $0.04
2010 $0.035
2011 $0.034
As you can see, it's not been exactly rock solid stable even for a currency theoretically tied to gold. That early printing run seems to have put a dent in around 1780. I'm trying not to look at the bottom of that table. I would love to see the best data available for 1774 to say 1784. I'm willing to bet it didn't cruise in to existence with no jitters whatsoever, and that's for a currency where exchange would be very slow and difficult compared to bitcoin.
I don't think any currency has an easy time achieving acceptance. Guess all I'm saying is that the bitcoin haters are making comparisons with existing, established forms of exchange. Bitcoin is still very much in the initial uptake stage so volatility is going to be high to begin with.
What bugs me about the bitcoin haters is that they portray themselves as knowledgeable and trustworthy economic scholars. They then just dismiss a new economic phenomena happening right under their noses because they fail to understand it. I'm loving this as a unique chance to see raw finances in action. It's testing my abilities to predict support and resistance. It's not chopped to bits by HFT traders, manipulated by a central bank or played by whales. It's a lesson in raw non-manipulated supply and demand that we haven't seen for decades. Even if you think it's going to fail, it's still fascinating to watch and learn. It deserves that much recognition at least doesn't it?
Hey stupid traders on Twitter?! Bitcoin didn't die today. It is not tulips. You don't understand it.
I'm laughing at some of you guys. It's like watching granddad struggle to understand why on earth anyone would want a mobile phone.
Say hello to the financial guru's I call granddad. Please speak loudly and clearly and don't worry too much. Maybe granddad just doesn't need a mobile phone. So @zerohedge @chrisadamsmkts @ReformedBroker @MNYCx @MonetaAdvisors and many many more, we salute you granddads. And some of us laugh at you a bit as well.
"We're very skilled traders with a huge knowledge of complex sounding financial things and we make money on financial predictions ... except we can't understand bitcoin for what it is, or predict what it does".
The morning after the crash? Granddad has forgotten calling Bitcoin tulips for now. Granddad is now calling it a penny stock. Closer! Almost! Keep trying! Maybe admit you were wrong?
Got to admit. I did get a smile out of seeing the speculators moaning to high heaven about MtGox going slow. People these days seem to think Google is search and that's it. There are other major exchanges, during the panic they all seemed to be working fine to me. Hey guys? Try logging in to a different exchange next time?
At the moment it's trying to level out at $170 (that bit written about 8 hours after the dump). I'm still smiling. That's not bad at all! It takes us back 4 or 5 days of the crazy speculators bitcoin bubble. Back to something looking like a more realistic current value. (I still think it's a bit high actually!)
Anyway!
Today it's "this is a joke of a currency" on Twitter, as after a few hours a few began to admit it wasn't about to reset to zero.
History lesson time!
America introduced the dollar back in 1792 and pegged it to the value of silver originally. So that's not the same as bitcoin. If you want a better equivalent to trying to introduce bitcoin, then you need to look at the rise of the paper dollar. That's where the system makes a leap of faith to a non precious metal backed physical thing.
So what happened then? Well between 1777 to 1788 they had a go at it, but it got counterfeited so often that it vanished again as worthless. Cough. Yeah. That happened to dollars. It didn't happen to bitcoin. Ooops!
In 1878 they tried again, this time with a bit more thought about "I promise to pay the bearer on demand", thus tying it in theory back to precious metal.
Here we go ...
Buying power of one U.S. dollar compared to 1774 USD
Year Equivalent buying power
1774 $1.00
1780 $0.59
1790 $0.89
1800 $0.64
1810 $0.66
1820 $0.69
1830 $0.88
1840 $0.94
1850 $1.03
1860 $0.97
1870 $0.62
1880 $0.79
1890 $0.89
1900 $0.96
1910 $0.85
1920 $0.39
1930 $0.47
1940 $0.56
1950 $0.33
1960 $0.26
1970 $0.20
1980 $0.10
1990 $0.06
2000 $0.05
2007 $0.04
2008 $0.04
2009 $0.04
2010 $0.035
2011 $0.034
As you can see, it's not been exactly rock solid stable even for a currency theoretically tied to gold. That early printing run seems to have put a dent in around 1780. I'm trying not to look at the bottom of that table. I would love to see the best data available for 1774 to say 1784. I'm willing to bet it didn't cruise in to existence with no jitters whatsoever, and that's for a currency where exchange would be very slow and difficult compared to bitcoin.
I don't think any currency has an easy time achieving acceptance. Guess all I'm saying is that the bitcoin haters are making comparisons with existing, established forms of exchange. Bitcoin is still very much in the initial uptake stage so volatility is going to be high to begin with.
What bugs me about the bitcoin haters is that they portray themselves as knowledgeable and trustworthy economic scholars. They then just dismiss a new economic phenomena happening right under their noses because they fail to understand it. I'm loving this as a unique chance to see raw finances in action. It's testing my abilities to predict support and resistance. It's not chopped to bits by HFT traders, manipulated by a central bank or played by whales. It's a lesson in raw non-manipulated supply and demand that we haven't seen for decades. Even if you think it's going to fail, it's still fascinating to watch and learn. It deserves that much recognition at least doesn't it?
Hey stupid traders on Twitter?! Bitcoin didn't die today. It is not tulips. You don't understand it.
I'm laughing at some of you guys. It's like watching granddad struggle to understand why on earth anyone would want a mobile phone.
Say hello to the financial guru's I call granddad. Please speak loudly and clearly and don't worry too much. Maybe granddad just doesn't need a mobile phone. So @zerohedge @chrisadamsmkts @ReformedBroker @MNYCx @MonetaAdvisors and many many more, we salute you granddads. And some of us laugh at you a bit as well.
"We're very skilled traders with a huge knowledge of complex sounding financial things and we make money on financial predictions ... except we can't understand bitcoin for what it is, or predict what it does".
The morning after the crash? Granddad has forgotten calling Bitcoin tulips for now. Granddad is now calling it a penny stock. Closer! Almost! Keep trying! Maybe admit you were wrong?
10 Apr 2013
BTC Dynamics
I know! I know!
This one is about another misconception I see flying around, but also some of my own ponderings.
The idea is, that Bitcoin 2 will appear, render bitcoin obsolete, and the whole thing will just be a bunch of tulip bulbs.
What this viewpoint misses is that the BTC chart for the last few months has shot up like crazy, but if you look at the entire BTC history, you'll see a good two years of low level existence which had a bit of spike around June 2011, when adoption of the idea initially kicked off.
If you're an uninformed mainstream media commentator .. or any other kind, you also probably fail to realise the investment for many people, and some subtle economics of supply and demand in the processing power thrown at BTC.
Start with investment. A lot of people have sunk thousands of dollars / pounds in to "Mining Rigs". Even before the current crop of even faster ASIC custom chips are appearing, GPU mining became a thing. That's using a Graphics Card to compute the parts of the block instead of the ordinary main processor in your computer. What some people did, was build computers with as many of the best graphics cards they could in, and mine BTC for themselves with that. So what?
Here's your first economic curve to build in. By saying "best graphics card" it isn't always the fastest. The trade off is against electricity consumed. There's no point spending more on electricity than you mine in BTC. When BTC was in the $12 to $15 range, this was a huge issue. Many people will eventually have done the maths and turned off the miner to play games instead. The effect of the recent huge up for BTC, is that even scraping a hundredth of a percent from a block becomes worth the electricity again. So processing power and investment returns.
Investment? Yup. You might not believe it, but some folk are chucking in the region of tens of thousands of dollars in to systems now that can only mine bitcoins. You can't even run tetris on them. They do it very economically as well in terms of electricity consumption.
Why am I bothering to explain this? Because the investment in technology and time prior to this sudden surge is much larger than some people are considering. Any incompatible rival bitcoin system now will have to attract all that investment away from BTC for a very good reason.
Sure, that could still happen. All bets are off in BTC land. But there is a fair bit more to it than someone saying "Hey! Use this instead!" and everyone leaving.
The other reason for inertia in moving away from BTC, is that over the entire lifespan, it has already proven itself to be a reliable secure system. So far at least, any problems have been overcome and the system has proved itself as at least very robust. Ironically, the more computing power that gets thrown at it around the world, the more robust it becomes. Why change to a new system when this one is secure, works well, and more importantly, has personal investment in it?
Yet another reason for inertia is the simple "It has to be better" argument. There needs to be some compelling reason why an established system should be ditched. At the moment, LiteCoin is the main alternative to Bitcoin. If you dig in to LiteCoin, you find it's simply an adjustment to the parameters of bitcoin. It produces more coins, and they appear faster. But it trades off security. I've seen regular transactions in Bitcoin of around £15,000 or so. If I'm sat there, wondering how to transfer my £15,000, I'm going to go with Bitcoin. It doesn't really matter if it's a theoretical problem and in reality LiteCoin turns out to be as secure as bitcoin. It's certainly not more secure than bitcoin, so why trust it? LiteCoin is basically an attempt to make some cash out of the bitcoin idea for those who can't afford the processing power to mine bitcoin at the expense of a degree of security. I can't see it going far when the security of bitcoin is already constantly being questioned. But who knows? Maybe we end up with parallel crypto-currencies at the end of the day? Some say LiteCoin is the silver to BitCoin's gold. That looks like another flawed analogy to me. Bitcoin isn't gold.
So for MegaBitCoin to appear, it'll need to be substantially better somehow than bitcoin. That's going to take some doing. I'm not even sure how you'd approach a model of something to be better as a currency than bitcoin. I have a vague idea that it will be to do with transaction times, but (and it's a big but! (Sorry ladies!)), it can't sacrifice transaction time to security, and that level of care about transaction time involves having a huge volume of bitcoin transactions, far greater than where we are now.
Finally!!!! On that point!!! Honest!!! If MegaBTC appears, and it does have ultra fast verification of transaction on top of at least equally good security, and it does begin to attract users away from BTC, there's no reason to believe BTC would instantly die. A lot of people would be nervous of moving to an untested new system. It would seem more reasonable to expect a gradual wind down of BTC as people moved to MegaBTC, especially if BTC was still working perfectly well for the majority of users.
Then we come on to the nature of the curve :)
It's a wow of a spike isn't it? But unlike a forex chart, there's no obvious points to whack your Fibonacci scale on it. The moving averages are basically permanently in catch up and meaningless. In trader terms, there's no apparent support and resistance. Or is there?
You'll like this. This is brilliant. (Well to my twisted mind anyway).
Well actually, yes there is. There are plenty of BTC out there that were gained back when it was around $12 to $15. These people are not traders. To them at the moment, nirvana is unfolding. Remember, these guys don't have an accounts manager to answer to. They can decide to cash out with a big smile any time they want. Chances are, not many will while it's rocketing up as it is at the moment, but given a sudden peak and drop? A whole bunch of them will freak out and sell.
I'm predicting when that happens, BTC will drop by a fair whack. Not just the jitters in government clampdown whispers that caused the drop or whatever it is, but a wave of sells from the early adopters.
How far down it goes? Well reasonably we could say back down to $12. Except now we have people who have bought in to BTC from $50 up with big chunks of money (big in comparison to bitcoin), we have people with mining rigs invested in when BTC was just curving up from $30 and are feeling mighty smug. There is support on the way down, some of these guys will keep the faith, see a falling BTC and even buy back in to it assuming the basic integrity of the system remains intact.
I guess here is the chance that everybody really freaks out and BTC gets sold out to near enough $0 for it to vanish. There's no accounting for crowd mentality. That would be a shame and a waste if the basic mechanism was working fine. The world though has done stupider things before, and no doubt will again. But even with the $0.01 scenario, if the thing still works .. people are still going to use it. That in itself prevents a 0.01$ situation if even only a few million $ across the globe still want to use it. There is a bottom end in value for utility built in to bitcoin. I have no idea of it's value. But it's there as long as it reliably works.
It's going to be choppy! It's going to be fun! But when it does spike and drop? Watch for the BTC is DEAD! Foghorn's. If the integrity of BTC remains. They will still be wrong, and we should see a more reasonable curve back to actual value.
That's my theory anyway and I'm sticking to it.
This one is about another misconception I see flying around, but also some of my own ponderings.
The idea is, that Bitcoin 2 will appear, render bitcoin obsolete, and the whole thing will just be a bunch of tulip bulbs.
What this viewpoint misses is that the BTC chart for the last few months has shot up like crazy, but if you look at the entire BTC history, you'll see a good two years of low level existence which had a bit of spike around June 2011, when adoption of the idea initially kicked off.
If you're an uninformed mainstream media commentator .. or any other kind, you also probably fail to realise the investment for many people, and some subtle economics of supply and demand in the processing power thrown at BTC.
Start with investment. A lot of people have sunk thousands of dollars / pounds in to "Mining Rigs". Even before the current crop of even faster ASIC custom chips are appearing, GPU mining became a thing. That's using a Graphics Card to compute the parts of the block instead of the ordinary main processor in your computer. What some people did, was build computers with as many of the best graphics cards they could in, and mine BTC for themselves with that. So what?
Here's your first economic curve to build in. By saying "best graphics card" it isn't always the fastest. The trade off is against electricity consumed. There's no point spending more on electricity than you mine in BTC. When BTC was in the $12 to $15 range, this was a huge issue. Many people will eventually have done the maths and turned off the miner to play games instead. The effect of the recent huge up for BTC, is that even scraping a hundredth of a percent from a block becomes worth the electricity again. So processing power and investment returns.
Investment? Yup. You might not believe it, but some folk are chucking in the region of tens of thousands of dollars in to systems now that can only mine bitcoins. You can't even run tetris on them. They do it very economically as well in terms of electricity consumption.
Why am I bothering to explain this? Because the investment in technology and time prior to this sudden surge is much larger than some people are considering. Any incompatible rival bitcoin system now will have to attract all that investment away from BTC for a very good reason.
Sure, that could still happen. All bets are off in BTC land. But there is a fair bit more to it than someone saying "Hey! Use this instead!" and everyone leaving.
The other reason for inertia in moving away from BTC, is that over the entire lifespan, it has already proven itself to be a reliable secure system. So far at least, any problems have been overcome and the system has proved itself as at least very robust. Ironically, the more computing power that gets thrown at it around the world, the more robust it becomes. Why change to a new system when this one is secure, works well, and more importantly, has personal investment in it?
Yet another reason for inertia is the simple "It has to be better" argument. There needs to be some compelling reason why an established system should be ditched. At the moment, LiteCoin is the main alternative to Bitcoin. If you dig in to LiteCoin, you find it's simply an adjustment to the parameters of bitcoin. It produces more coins, and they appear faster. But it trades off security. I've seen regular transactions in Bitcoin of around £15,000 or so. If I'm sat there, wondering how to transfer my £15,000, I'm going to go with Bitcoin. It doesn't really matter if it's a theoretical problem and in reality LiteCoin turns out to be as secure as bitcoin. It's certainly not more secure than bitcoin, so why trust it? LiteCoin is basically an attempt to make some cash out of the bitcoin idea for those who can't afford the processing power to mine bitcoin at the expense of a degree of security. I can't see it going far when the security of bitcoin is already constantly being questioned. But who knows? Maybe we end up with parallel crypto-currencies at the end of the day? Some say LiteCoin is the silver to BitCoin's gold. That looks like another flawed analogy to me. Bitcoin isn't gold.
So for MegaBitCoin to appear, it'll need to be substantially better somehow than bitcoin. That's going to take some doing. I'm not even sure how you'd approach a model of something to be better as a currency than bitcoin. I have a vague idea that it will be to do with transaction times, but (and it's a big but! (Sorry ladies!)), it can't sacrifice transaction time to security, and that level of care about transaction time involves having a huge volume of bitcoin transactions, far greater than where we are now.
Finally!!!! On that point!!! Honest!!! If MegaBTC appears, and it does have ultra fast verification of transaction on top of at least equally good security, and it does begin to attract users away from BTC, there's no reason to believe BTC would instantly die. A lot of people would be nervous of moving to an untested new system. It would seem more reasonable to expect a gradual wind down of BTC as people moved to MegaBTC, especially if BTC was still working perfectly well for the majority of users.
Then we come on to the nature of the curve :)
It's a wow of a spike isn't it? But unlike a forex chart, there's no obvious points to whack your Fibonacci scale on it. The moving averages are basically permanently in catch up and meaningless. In trader terms, there's no apparent support and resistance. Or is there?
You'll like this. This is brilliant. (Well to my twisted mind anyway).
Well actually, yes there is. There are plenty of BTC out there that were gained back when it was around $12 to $15. These people are not traders. To them at the moment, nirvana is unfolding. Remember, these guys don't have an accounts manager to answer to. They can decide to cash out with a big smile any time they want. Chances are, not many will while it's rocketing up as it is at the moment, but given a sudden peak and drop? A whole bunch of them will freak out and sell.
I'm predicting when that happens, BTC will drop by a fair whack. Not just the jitters in government clampdown whispers that caused the drop or whatever it is, but a wave of sells from the early adopters.
How far down it goes? Well reasonably we could say back down to $12. Except now we have people who have bought in to BTC from $50 up with big chunks of money (big in comparison to bitcoin), we have people with mining rigs invested in when BTC was just curving up from $30 and are feeling mighty smug. There is support on the way down, some of these guys will keep the faith, see a falling BTC and even buy back in to it assuming the basic integrity of the system remains intact.
I guess here is the chance that everybody really freaks out and BTC gets sold out to near enough $0 for it to vanish. There's no accounting for crowd mentality. That would be a shame and a waste if the basic mechanism was working fine. The world though has done stupider things before, and no doubt will again. But even with the $0.01 scenario, if the thing still works .. people are still going to use it. That in itself prevents a 0.01$ situation if even only a few million $ across the globe still want to use it. There is a bottom end in value for utility built in to bitcoin. I have no idea of it's value. But it's there as long as it reliably works.
It's going to be choppy! It's going to be fun! But when it does spike and drop? Watch for the BTC is DEAD! Foghorn's. If the integrity of BTC remains. They will still be wrong, and we should see a more reasonable curve back to actual value.
That's my theory anyway and I'm sticking to it.
9 Apr 2013
Yeah. Again!
Maybe I should just call this the bitcoin blog.
Time to place myself firmly in the middle again. There are some on one side predicting bitcoin will die right back to $5 or even completely, on the other side are the hopeless optimists seeing it race to thousands of $ per BTC.
Me? I'm in the middle.
It is indeed on an entirely unsustainable ramp. That much I know. Well. I think I do. With every other commodity / share / currency that I know of. Yup. That's an unsustainable up-curve. A whole bunch of logic in me tells me this. But this is something a bit odd, in certainly unusual times. If anything faith in traditional currency and freedom of exchange is on an increasing dive. That is going to mean yet more cash pumped in to BTC. So the question really is, what's the sustainable level? I have no freaking idea. It could be $50/BTC it might end up being $5000/BTC or .... god only knows! Somewhere in this range of freaky is a level it will eventually settle down to. It seems unlikely at this point that the value will be $0. It seems to have achieved escape momentum. It has, or is beginning to achieve that holy grail of currency, acceptance as a means of transfer and value for it.
It's set against a bizarre backdrop. The money printing presses of the world just keep going, and the stock markets and forex charts look super healthy. Everything has a David Lynch like saccharine sprinkling to hide any evil that may lie below. To me ... and well ... I could be wrong here. It looks like an increasingly dangerous disconnect. The viewpoints are incredibly polarized. The government statistics look increasingly, how can I put this? Imaginative. I'm not an expert in all fields, but I know a few have thrown hands up in horror at reality vs US commercial property occupancy and employment figures, and here in the UK we have some numbers that really don't add up on employment as well.
Maybe it's always been like this, and I'm late to appreciate it. That is possible. But gut feeling tells me (all praise the truthiness!), that maybe it has always been a little bit true, but now we're taking it to epic proportions.
Hell no. On a limb on this one. I've watched the EURUSD long enough, and the whole deal is ... bizarre. When the Greece crisis was originally hitting, things sort of made sense. Hits to the Euro gave you chunks in shorts. I mean. It went down. Things have changed. The market's still don't like it if the Troika look like they've lost the plot, but other than that, as long as Ben keeps printing, and Troika keeps just about getting away with it, there's no danger here folks! Up we go!
Once again, it's a people in glass houses scenario. Yes BTC looks crazy at the moment, but the rise is actually just due to demand, there's no mystery reason beyond that. People are just willing to pay that much for BTC at the moment. That doesn't make it invincible. But then look at the stock markets, they seem to be on an ever rising up curve based on money printing and bail-outs or bail-ins. That doesn't seem all that sustainable either when just about every underlying economic indicator tells you there's a hard hitting recession going on outside the stock markets. So who's the fool at the moment? The BTC buyer or the perma bull on the markets? Both maybe?
It's not just an increasing disconnect in finances I'm picking up. It's social as well. Thatcher's death highlighted it strongly today. I was alive back when Costello was singing and I prayed people would listen to Spitting Image. I remember being a teenager. Swearing with friends that we'd book a minibus together and go piss on Thatcher's grave. If you weren't in the UK around that time at an age to appreciate the hack and slash job Maggie did on the UK, you'll no doubt think that's cruel, stupid and evil. But million's of us did and do still think like that. We all noticed she supported apartheid, we hated her for it. Our skin crawled as she declared Pinochet a friend of Britain. We knew she was destroying unions and industry out of pure ideological malice against them. We saw all the jobs vanish and even now, lack of production and manufacturing sector in the UK that resulted. We even got to see her install Rupert Murdoch. Possibly the most corrupt and corrosive media barron the world has ever known. It was him that got her re-elected. The Sun knew it. They even bragged.
I'm not glad she died.
I wish she'd never existed.
If I can?
Yes.
I'll keep the promise to my friends.
If I have caused harm to anyone as much as Thatcher did to a nation. You're welcome to piss on mine.
Meanwhile ... Those that credit Thatcher with easy wealth and massive growth in the finance industry, who worship her vicious direct style of leadership "she got things done". Can't understand why there were street parties the night she died. Strangely, these people also seem to own virtually every single newspaper, radio and television station. I can't think of a single world leader except for known established dictators who's death has inspired celebration. I'm certain Maggie will be buried in a very secure location, probably with CCTV monitoring, so I and many like me, won't ever get the chance to stay true to our promises of years ago. What level of social disconnect are we managing to achieve here? It's beyond strange. It's a society living in some kind of psychosis.
Time to place myself firmly in the middle again. There are some on one side predicting bitcoin will die right back to $5 or even completely, on the other side are the hopeless optimists seeing it race to thousands of $ per BTC.
Me? I'm in the middle.
It is indeed on an entirely unsustainable ramp. That much I know. Well. I think I do. With every other commodity / share / currency that I know of. Yup. That's an unsustainable up-curve. A whole bunch of logic in me tells me this. But this is something a bit odd, in certainly unusual times. If anything faith in traditional currency and freedom of exchange is on an increasing dive. That is going to mean yet more cash pumped in to BTC. So the question really is, what's the sustainable level? I have no freaking idea. It could be $50/BTC it might end up being $5000/BTC or .... god only knows! Somewhere in this range of freaky is a level it will eventually settle down to. It seems unlikely at this point that the value will be $0. It seems to have achieved escape momentum. It has, or is beginning to achieve that holy grail of currency, acceptance as a means of transfer and value for it.
It's set against a bizarre backdrop. The money printing presses of the world just keep going, and the stock markets and forex charts look super healthy. Everything has a David Lynch like saccharine sprinkling to hide any evil that may lie below. To me ... and well ... I could be wrong here. It looks like an increasingly dangerous disconnect. The viewpoints are incredibly polarized. The government statistics look increasingly, how can I put this? Imaginative. I'm not an expert in all fields, but I know a few have thrown hands up in horror at reality vs US commercial property occupancy and employment figures, and here in the UK we have some numbers that really don't add up on employment as well.
Maybe it's always been like this, and I'm late to appreciate it. That is possible. But gut feeling tells me (all praise the truthiness!), that maybe it has always been a little bit true, but now we're taking it to epic proportions.
Hell no. On a limb on this one. I've watched the EURUSD long enough, and the whole deal is ... bizarre. When the Greece crisis was originally hitting, things sort of made sense. Hits to the Euro gave you chunks in shorts. I mean. It went down. Things have changed. The market's still don't like it if the Troika look like they've lost the plot, but other than that, as long as Ben keeps printing, and Troika keeps just about getting away with it, there's no danger here folks! Up we go!
Once again, it's a people in glass houses scenario. Yes BTC looks crazy at the moment, but the rise is actually just due to demand, there's no mystery reason beyond that. People are just willing to pay that much for BTC at the moment. That doesn't make it invincible. But then look at the stock markets, they seem to be on an ever rising up curve based on money printing and bail-outs or bail-ins. That doesn't seem all that sustainable either when just about every underlying economic indicator tells you there's a hard hitting recession going on outside the stock markets. So who's the fool at the moment? The BTC buyer or the perma bull on the markets? Both maybe?
It's not just an increasing disconnect in finances I'm picking up. It's social as well. Thatcher's death highlighted it strongly today. I was alive back when Costello was singing and I prayed people would listen to Spitting Image. I remember being a teenager. Swearing with friends that we'd book a minibus together and go piss on Thatcher's grave. If you weren't in the UK around that time at an age to appreciate the hack and slash job Maggie did on the UK, you'll no doubt think that's cruel, stupid and evil. But million's of us did and do still think like that. We all noticed she supported apartheid, we hated her for it. Our skin crawled as she declared Pinochet a friend of Britain. We knew she was destroying unions and industry out of pure ideological malice against them. We saw all the jobs vanish and even now, lack of production and manufacturing sector in the UK that resulted. We even got to see her install Rupert Murdoch. Possibly the most corrupt and corrosive media barron the world has ever known. It was him that got her re-elected. The Sun knew it. They even bragged.
I'm not glad she died.
I wish she'd never existed.
If I can?
Yes.
I'll keep the promise to my friends.
If I have caused harm to anyone as much as Thatcher did to a nation. You're welcome to piss on mine.
Meanwhile ... Those that credit Thatcher with easy wealth and massive growth in the finance industry, who worship her vicious direct style of leadership "she got things done". Can't understand why there were street parties the night she died. Strangely, these people also seem to own virtually every single newspaper, radio and television station. I can't think of a single world leader except for known established dictators who's death has inspired celebration. I'm certain Maggie will be buried in a very secure location, probably with CCTV monitoring, so I and many like me, won't ever get the chance to stay true to our promises of years ago. What level of social disconnect are we managing to achieve here? It's beyond strange. It's a society living in some kind of psychosis.
6 Apr 2013
Yet another other bitcoin post
I've been thinking around the possible pitfalls of Bitcoin looking for weaknesses. The process has been helped by some other thoughtful folk out there asking questions which do indeed make you go "Hmm". Here we go!
"Taxation will be impossible"
It does seem different for sure, but it's not impossible. Car tax, council tax are easy. They either got paid or they didn't. There's even a slight advantage that it's harder to cheat on the bitcoin system. I can't turn up at the DVLA with fake notes (knowingly or not) to buy my car tax and get away with it in bitcoin.
The two head scratchers are income tax and VAT. Income tax paid at source by the employer out of the employee's pay packet is simple enough to record per transaction. If there's an audit all the transactions can be looked up and you can see the timestamp for each. For self employed it gets a little more tricky.
It would be relatively easy to simply not declare income and therefore avoid tax. It sounds like the first major pitfall of bitcoin, but actually, it's the exact same problem you have with cash at the moment. No better. No worse. However. With the current system, undeclared work and income is only traceable by unidentified increases in bank balance with a careful check (if the cash ever reaches a bank balance that's being checked for fraud). At least with bitcoin, if you take a random sample of clients for a self employed person and ask them to show the payment transactions, you can double check they paid someone something. If the self-employed persons records show a few blanks in receipt and declaration, then you know you've got some tax avoidance going on. It's different, but not impossible. It becomes more a case for whistle-blowers to say "I don't think this guy is paying his taxes! Here's my transaction!" and it's incredibly easy and cheap for a government taxation department to just look up the transaction and see if it got declared by the self-employed person. The nasty then is ... some git pretending they paid you something just to get you in to trouble. Ah ha. Yes. Well. We have a problem here. It is possible to dodge some income tax for the self employed, but it's even worse news when it comes to someone trying to get you in to trouble. A possible external solution would be a government registered pay account address. The customer pays that address, the supplier gets the payment via a simple "got it, recorded it, passed it on" transaction. The supplier is expected to pay up tax for the sum of transactions through that address at year end. There's a bit of a black hole here bitcoin fans. Ok so it's the exact same problem you have at the moment in reverse. But it's still a problem. Any answers out there?
VAT is a bit more strange. At the moment it's charged to the customer then paid by the merchant. With bitcoin it becomes an audit trail of transactions from the lead supplier down. Say the manufacturer produces 10 things and sells them for X to a merchant for sale. As a producer, it's very important to record that you're not just giving the stuff away for free for your own records, so that side works. The merchant then needs to be able to provide transaction key evidence for the sale of each of the 10 units. So for a simple commodity based example, audit trails are still entirely possible and checkable. It's again not impossible. It does require a rethink of how correct taxation can be checked, because the "I can see how much you have in your wallet (bank)" part is removed. But as already noted. That's not a terrifically good way of detecting fraud at the moment anyway. Witness the rise of secret off shore accounts to see how well the current system is doing.
So ... different .. yes. In some cases trivially easy to still tax people. For income and sales tax, a little more tricky, or at least different, but not impossible.
The self employed black hole is a problem, as are malicious claims. But that's because we're looking at it from the perspective of the current taxation system and it's development. It would still be possible for a government to raise significant taxes, and to adjust those taxes. The method and place where taxation occurs though would in some cases have to shift to allow traceability and indemnity under bitcoin. Taxation at point of sale as in tax on fuel at the moment seems to take focus rather than backdated taxation. It's a problem to be solved, but not an impossible one, and if anything it appears to be the small fry self employed who have most ability to dodge taxes instead of the multi-national company. You may think that's no bad thing overall.
"You can't artificially deflate it in the case of a crisis"
True. Here we're beginning to enter uncharted ground. Bitcoin claims to answer this by it's divisibility. If it came to it, 0.0000000001 bitcoins could be the equivalent to a 4 bedroom house. That doesn't matter so much if it's trivially easy to use 0.000000000000001 bitcoins to buy a loaf of bread anyway. You don't need the wheelbarrows full of cash scenario with runaway inflation either. If it took 400,000,000 bitcoins to buy a house, then 1,000 bitcoin would still get you a loaf of bread. But this is something of a theoretical answer to the real problem. If you have a rapid fluctuation in either inflation or deflation direction, the real value of however many bitcoin you have in your account changes.
This probably is a weak point of bitcoin. (Found one!). Bitcoin is a new and previously unknown and untested model. It is easily subdivided without needing trillions of bits of paper to buy a loaf of bread. So that bit is nice to know. However, bitcoin is designed to have an absolute limit of 21,000,000 bitcoins. That's it. That's all there will ever be. In hard traditional economic theory, that sounds like complete stupidity. It's normal to expect a degree of inflation with all known currency systems. How will that work even with trivial subdivision for a currency? No one knows. It's also unknown how much inflation and deflation is due to government and central bank intervention. Economists have views on it. But there's no right answer. Fluctuations in supply and demand will inevitably happen. How much damage that would do to a persons bitcoin wallet is unknown. How much damage it would do to a society using bitcoin as it's currency is wild speculation. This truly is a brand new, never before known adventure in economics.
But .... Once again you're back to comparing with the current known fiat systems. In the cases of gradual inflation or deflation, bitcoin seems well able to allow controlled variation in bitcoin value to compensate with zero cost and minimal harm to bitcoin holders. In the case of massive sudden changes in fluctuation ... well ... your start point is, that's horrible news for any currency and society. How could a government compensate? Quantitative easing isn't an option. You can take the view that's a fantastic thing, and the reality of the economic situation will be brutally dealt with (some people will go bust for bad bets). We flirt with that at the moment, but at the moment, money printing seems to make things worse for everyone outside of bond holders and banks. Nobody defaults, because nobody in a position of money and power wants to allow that to happen. The knock on effects are simply too horrible in the current rehypothicated debt scenarios. Instead we have a system where people are basically cast out of the system to save the major investors. Right up to increasing suicide rates, axing health care and welfare and the resultant homelessness and premature deaths that will result. No really. It's that simple. The current system is killing some of it's own population to preserve the status quo.
Here? You'll have to form your own considered view. Some will see a lack of artificial intervention as the best thing that could possibly happen for a reliable currency to exist, even if that does punish failure by some. Other's will think that's a nightmare scenario that can't possibly be tolerated.
Ok lets look at this another way...
Hyperinflation - Not going to happen under bitcoin. The supply of the currency is not only limited, but it's exact curve of supply is known and predictable over time. In classical terms, that makes hyperinflation .. well lets say .. highly unlikely unless there's another world war.
Hungary in 1946 is your prime example for hyperinflation. The trigger was the aftermath of the second world war. Great! Let's see how bitcoin would cope with that situation! You can't. Bitcoin is a global currency. That hasn't happened before. The purchasing power of bitcoin will be averaged across all the countries and people that adopt it. Hyperinflation in Hungary in 1946 would have resulted in a very weird case scenario. The relative value of bitcoin would have remained stable(ish) so it's hard to know what the overall effect to a global currency after WWII would have been without looking at gold. If you look at gold over that period then it looks pretty darn stable. We'll have to assume bitcoin would be similar because I can't think of a better comparison. So the result in Hungary itself may have been the goods and services costing less and less in terms of bitcoins until they were in the millionths of a bitcoin to buy a house. Yes. I know that sounds backwards. Your brain wants to flip it back to what actually happened which was increasing quantities of currency to buy the exact same thing. What that means in reality though, is that compared to the currency, everything actually seemed to get a lot cheaper. It's the supply of money that went bonkers, not the underlying barter and exchange of value in society. Except ... it wouldn't pan out like that. If everyone is apparently finding everything very cheap, people spend. Curiously, Hungary after WWII looks like it might have had a very weird time of it under bitcoin, but without the crazy money printing being required, new bank notes, new coinage, the economy may have recovered even faster than it did.
The thing is in cases like this, the actual real value of goods and services to the people that supply and use them remains fairly constant. It's almost back to barter. I did you 12 hours work, so I expect to be able to buy this sort of thing tomorrow with the money I gained from the work. You could easily still do that under bitcoin. Or at least it appears that way. In fact in the case of 1946 Hungary, it would seem bitcoin might have levelled out the fluctuations naturally. Nobody can know for sure. This is speculation on historical fact with an unknown new element. Curiously, the subdivision factor doesn't help here at all. The relative stability of value in a global currency is the deciding factor.
Bitcoin may actually help even out cases of extreme hyper inflation across countries as well as the lamented gold standard was supposed to have done. Except without external influences fiddling with it.
Bitcoin may seem anti-capitalist, but at it's heart, it's brutally set to allow supply and demand to find it's own value within it's spectrum in a very hard line capitalist way.
There's more .... I think I need to do yet another post in a few days time ...
But I'll leave you with this!
The main catch I can find in bitcoin, is that the current investors and those that profit from the fiat system we have in place will try and kill it. That's one huge chunk of power levelled against it. At which point does bitcoin become it's own valid currency immune to that because the same set of people have money in bitcoin? Who knows? It's a new one. I doubt we are anywhere near there yet even with the current high value, it's not mainstream yet. It's a promising alternative with practical application problems to overcome in it's current state. Only the degree of adoption will change that in to problems solved and accepted.
"Taxation will be impossible"
It does seem different for sure, but it's not impossible. Car tax, council tax are easy. They either got paid or they didn't. There's even a slight advantage that it's harder to cheat on the bitcoin system. I can't turn up at the DVLA with fake notes (knowingly or not) to buy my car tax and get away with it in bitcoin.
The two head scratchers are income tax and VAT. Income tax paid at source by the employer out of the employee's pay packet is simple enough to record per transaction. If there's an audit all the transactions can be looked up and you can see the timestamp for each. For self employed it gets a little more tricky.
It would be relatively easy to simply not declare income and therefore avoid tax. It sounds like the first major pitfall of bitcoin, but actually, it's the exact same problem you have with cash at the moment. No better. No worse. However. With the current system, undeclared work and income is only traceable by unidentified increases in bank balance with a careful check (if the cash ever reaches a bank balance that's being checked for fraud). At least with bitcoin, if you take a random sample of clients for a self employed person and ask them to show the payment transactions, you can double check they paid someone something. If the self-employed persons records show a few blanks in receipt and declaration, then you know you've got some tax avoidance going on. It's different, but not impossible. It becomes more a case for whistle-blowers to say "I don't think this guy is paying his taxes! Here's my transaction!" and it's incredibly easy and cheap for a government taxation department to just look up the transaction and see if it got declared by the self-employed person. The nasty then is ... some git pretending they paid you something just to get you in to trouble. Ah ha. Yes. Well. We have a problem here. It is possible to dodge some income tax for the self employed, but it's even worse news when it comes to someone trying to get you in to trouble. A possible external solution would be a government registered pay account address. The customer pays that address, the supplier gets the payment via a simple "got it, recorded it, passed it on" transaction. The supplier is expected to pay up tax for the sum of transactions through that address at year end. There's a bit of a black hole here bitcoin fans. Ok so it's the exact same problem you have at the moment in reverse. But it's still a problem. Any answers out there?
VAT is a bit more strange. At the moment it's charged to the customer then paid by the merchant. With bitcoin it becomes an audit trail of transactions from the lead supplier down. Say the manufacturer produces 10 things and sells them for X to a merchant for sale. As a producer, it's very important to record that you're not just giving the stuff away for free for your own records, so that side works. The merchant then needs to be able to provide transaction key evidence for the sale of each of the 10 units. So for a simple commodity based example, audit trails are still entirely possible and checkable. It's again not impossible. It does require a rethink of how correct taxation can be checked, because the "I can see how much you have in your wallet (bank)" part is removed. But as already noted. That's not a terrifically good way of detecting fraud at the moment anyway. Witness the rise of secret off shore accounts to see how well the current system is doing.
So ... different .. yes. In some cases trivially easy to still tax people. For income and sales tax, a little more tricky, or at least different, but not impossible.
The self employed black hole is a problem, as are malicious claims. But that's because we're looking at it from the perspective of the current taxation system and it's development. It would still be possible for a government to raise significant taxes, and to adjust those taxes. The method and place where taxation occurs though would in some cases have to shift to allow traceability and indemnity under bitcoin. Taxation at point of sale as in tax on fuel at the moment seems to take focus rather than backdated taxation. It's a problem to be solved, but not an impossible one, and if anything it appears to be the small fry self employed who have most ability to dodge taxes instead of the multi-national company. You may think that's no bad thing overall.
"You can't artificially deflate it in the case of a crisis"
True. Here we're beginning to enter uncharted ground. Bitcoin claims to answer this by it's divisibility. If it came to it, 0.0000000001 bitcoins could be the equivalent to a 4 bedroom house. That doesn't matter so much if it's trivially easy to use 0.000000000000001 bitcoins to buy a loaf of bread anyway. You don't need the wheelbarrows full of cash scenario with runaway inflation either. If it took 400,000,000 bitcoins to buy a house, then 1,000 bitcoin would still get you a loaf of bread. But this is something of a theoretical answer to the real problem. If you have a rapid fluctuation in either inflation or deflation direction, the real value of however many bitcoin you have in your account changes.
This probably is a weak point of bitcoin. (Found one!). Bitcoin is a new and previously unknown and untested model. It is easily subdivided without needing trillions of bits of paper to buy a loaf of bread. So that bit is nice to know. However, bitcoin is designed to have an absolute limit of 21,000,000 bitcoins. That's it. That's all there will ever be. In hard traditional economic theory, that sounds like complete stupidity. It's normal to expect a degree of inflation with all known currency systems. How will that work even with trivial subdivision for a currency? No one knows. It's also unknown how much inflation and deflation is due to government and central bank intervention. Economists have views on it. But there's no right answer. Fluctuations in supply and demand will inevitably happen. How much damage that would do to a persons bitcoin wallet is unknown. How much damage it would do to a society using bitcoin as it's currency is wild speculation. This truly is a brand new, never before known adventure in economics.
But .... Once again you're back to comparing with the current known fiat systems. In the cases of gradual inflation or deflation, bitcoin seems well able to allow controlled variation in bitcoin value to compensate with zero cost and minimal harm to bitcoin holders. In the case of massive sudden changes in fluctuation ... well ... your start point is, that's horrible news for any currency and society. How could a government compensate? Quantitative easing isn't an option. You can take the view that's a fantastic thing, and the reality of the economic situation will be brutally dealt with (some people will go bust for bad bets). We flirt with that at the moment, but at the moment, money printing seems to make things worse for everyone outside of bond holders and banks. Nobody defaults, because nobody in a position of money and power wants to allow that to happen. The knock on effects are simply too horrible in the current rehypothicated debt scenarios. Instead we have a system where people are basically cast out of the system to save the major investors. Right up to increasing suicide rates, axing health care and welfare and the resultant homelessness and premature deaths that will result. No really. It's that simple. The current system is killing some of it's own population to preserve the status quo.
Here? You'll have to form your own considered view. Some will see a lack of artificial intervention as the best thing that could possibly happen for a reliable currency to exist, even if that does punish failure by some. Other's will think that's a nightmare scenario that can't possibly be tolerated.
Ok lets look at this another way...
Hyperinflation - Not going to happen under bitcoin. The supply of the currency is not only limited, but it's exact curve of supply is known and predictable over time. In classical terms, that makes hyperinflation .. well lets say .. highly unlikely unless there's another world war.
Hungary in 1946 is your prime example for hyperinflation. The trigger was the aftermath of the second world war. Great! Let's see how bitcoin would cope with that situation! You can't. Bitcoin is a global currency. That hasn't happened before. The purchasing power of bitcoin will be averaged across all the countries and people that adopt it. Hyperinflation in Hungary in 1946 would have resulted in a very weird case scenario. The relative value of bitcoin would have remained stable(ish) so it's hard to know what the overall effect to a global currency after WWII would have been without looking at gold. If you look at gold over that period then it looks pretty darn stable. We'll have to assume bitcoin would be similar because I can't think of a better comparison. So the result in Hungary itself may have been the goods and services costing less and less in terms of bitcoins until they were in the millionths of a bitcoin to buy a house. Yes. I know that sounds backwards. Your brain wants to flip it back to what actually happened which was increasing quantities of currency to buy the exact same thing. What that means in reality though, is that compared to the currency, everything actually seemed to get a lot cheaper. It's the supply of money that went bonkers, not the underlying barter and exchange of value in society. Except ... it wouldn't pan out like that. If everyone is apparently finding everything very cheap, people spend. Curiously, Hungary after WWII looks like it might have had a very weird time of it under bitcoin, but without the crazy money printing being required, new bank notes, new coinage, the economy may have recovered even faster than it did.
The thing is in cases like this, the actual real value of goods and services to the people that supply and use them remains fairly constant. It's almost back to barter. I did you 12 hours work, so I expect to be able to buy this sort of thing tomorrow with the money I gained from the work. You could easily still do that under bitcoin. Or at least it appears that way. In fact in the case of 1946 Hungary, it would seem bitcoin might have levelled out the fluctuations naturally. Nobody can know for sure. This is speculation on historical fact with an unknown new element. Curiously, the subdivision factor doesn't help here at all. The relative stability of value in a global currency is the deciding factor.
Bitcoin may actually help even out cases of extreme hyper inflation across countries as well as the lamented gold standard was supposed to have done. Except without external influences fiddling with it.
Bitcoin may seem anti-capitalist, but at it's heart, it's brutally set to allow supply and demand to find it's own value within it's spectrum in a very hard line capitalist way.
There's more .... I think I need to do yet another post in a few days time ...
But I'll leave you with this!
The main catch I can find in bitcoin, is that the current investors and those that profit from the fiat system we have in place will try and kill it. That's one huge chunk of power levelled against it. At which point does bitcoin become it's own valid currency immune to that because the same set of people have money in bitcoin? Who knows? It's a new one. I doubt we are anywhere near there yet even with the current high value, it's not mainstream yet. It's a promising alternative with practical application problems to overcome in it's current state. Only the degree of adoption will change that in to problems solved and accepted.
4 Apr 2013
The "other" bitcoin post
Wow.
I've been busy most the day, glancing through my twitter timeline when I've had the chance and just ... WOW! Some of the misinformation and assumptions about bitcoin flying around are really quite spectacular! So I'm here again!
What I notice most is that most the criticisms fired at bitcoin are not only misinformed, but if you fire the exact same criticism back at fiat money in terms of £, $ or Euro. They actually stick and do damage.
"You want security? Buy gold or silver! Not Bitcoin!"
Fair enough in principle. Except for a few things. The first is one my own (hugs) 12 year old son came up with when I told him about the gold idea. "But there's not enough gold in the world is there? I heard it would all fit under the Eiffel tower". Proud Dad moment. Yup. For one thing. IF gold was underpinning all the cash in the world, there simply isn't enough of it at it's current value. But gold doesn't underpin the value of the cash in your pocket. Re-hypothicated debt does.
Let's go a little further here. Say I did actually really go for it. I buy a small bar of real solid gold. I even have it bored and tested to ensure it's not gold wrapped round some other heavy metal like some bars in the bullion banks. (You can't cheat like that with bitcoin) This is it ... the real deal. I have a lump of gold.
I can't use it to pay for anything much. I could in theory shave bits off it and attempt to trade it at my local supermarket for my shopping. I doubt it would work. This is the exact same criticism levelled at bitcoin. "But what can I do with it?" .. well actually, you can do more with Bitcoin in the world than you can with a lump of gold.
Even further on from that, the scams that gold has been involved in are many. There has been an attempt to make a virtual currency before backed by gold. It failed. There are groups that claimed to sell us ordinary folk gold backed securities, only to find they never had any real gold linked to the accounts at all. That also failed.
Bitcoin doesn't have that. You either have real genuine bitcoin in your wallet, or you have zero bitcoin in your wallet. There is no fake bitcoin wrapped in gold. There is no broker lying to you about gold backing. You either have it, or you don't.
"It's just like tulips!"
If you didn't know, around 1620-1630 tulip bulbs were acceptable currency in the Netherlands, and achieved quite a huge rate of return. However the person making this statement is only illustrating one thing. They have absolutely no idea about how bitcoin works. Yes. It's possible for any medium of currency to suffer a loss of confidence. That's why bitcoin is so popular now. There's a lack of confidence in the Euro (and increasingly in the dollar as the money press keeps churning out billions of dollars to sustain America). But tulips are a relatively easy plant to grow with infinite supply. Bitcoin is not very easy to grow and has a limit built in. Bitcoin was designed to be a secure and highly adaptable currency by a guy that had a pretty good grasp of currency and an excellent knowledge of cryptography and security, tulip bulbs are tulip bulbs.
"It's a ponzi scheme!"
How exactly? Show me on the map of the globe who benefits from a distributed network of currency transaction validation. Nobody. There is no "Bitcoin Inc." running the show. There is no bank or person pretending to be a bank involved. Yes, early adopters may get lucky on the uptake, but that's what you'd call good sense if you bought in to an unknown tech stock that suddenly took off like bitcoin has. Apparently, if it's on standard exchanges and involves fiat currency, it's ok to make a killing on a lucky buy in. If you do it with bitcoin? Well that's just not on. Probably because most of the market trader minds have utterly ignored bitcoin and now see a currency exchange graph kicking them up the backside that they wish they had been in on.
"Who would invest in such a volatile asset? It's a joke!"
Well quite frankly. See above. While some market traders are happy with slow and steady takings, a pretty huge chunk of the market just LOVES volatility when it's in a field they understand. You can short it, long it, generally make a killing in a short time frame. I don't see many market traders complaining about that kind of volatility. Besides. It would be fair to say that at the moment, BTC is searching for it's own sustainable level. Sure it might ramp way above it's sustainable level on news such as Cyprus bank losses. But that's exactly what Forex traders love about trading EURUSD. It ramps, it drops, it levels to an average .. that's how you make money. An entirely stable currency pair is a zero profit currency pair.
"Who would put money in to some hackers scheme?"
Well I've seen the original creator of Bitcoin described as "a hacker". But these days that term tends to extend to anyone with geek skills above average. I'm not actually aware of any hacking at all claimed against or by him. (I could be wrong here, but I've not seen any big flashing "HACKER" signs around bitcoin). Oh and btw. Bitcoin was not invented by Anonymous. O.o
Bitcoin is in fact an extremely elegant solution to security in transaction via cryptography. So much so that it actually beats the pants off fiat money. Transactions are final. They cannot be faked. There is no such thing as a fake bitcoin credit card. There is no fake gold bar bitcoin. There are no fake bitcoins in existence. This is the whole point of bitcoin. It's INCREDIBLY secure.
Better yet. Your bitcoins are not subject to being devalued by a government or central bank policy of money printing. They are not held by a bank that the Troika can plunder to save the bank at your expense. They are not held in a bank that the likes of Fred Goodwin can utterly destroy at insane expense to the tax payer. They are owned on a self verifying, global, digital network.
Oh and if you have the skill and knowledge. Here it is. The bitcoin source code. It's been around for a few years already, why don't you go ahead and see if you can spot the hacker code that's going to drain your account to zero? Nobody else has. Can you say there's anything like the same level of transparency about how your bank does business?
"It's not even backed up by anything real!"
Well I've got news for you. Neither is the £, $ or Euro. Currency is always based entirely on faith. Yes there are pledges on bank notes (that are utterly meaningless). Yes in theory the government and central bank will protect your monetary value, but in practise? Well actually no. Governments and central banks will happily devalue your currency. In Cyprus they'll even basically steal whatever currency you had in the bank to pay off debts. And even better, capital controls can be put in place that prevent you using your currency as you'd like to.
Confidence can be lost in your home currency, as is happening with the Euro. Countries can even indulge in exchange rate wars, deliberately reducing the overseas value of your cash to attempt to boost export demand at home.
No. Bitcoin isn't backed up by anything real except strong cryptography and trust in a system that can't be easily fiddled with and distorted by governments and banks. Trust is everything for currency. Bitcoin is strong on trust and validity. Far more so than traditional fiat currency.
This is one of the prime examples of accusing bitcoin of something only to find it's your traditional currency that has either the exact same problem or worse.
---
Once people begin to realise that bitcoin is a viable and incredibly secure system for storing and transferring wealth without bank intervention, it's only likely to take off even more than it has already.
With one provision. The established powers that be utterly loathe bitcoin. They can't control it. They can't rob it. They can't sieze your assets. That makes it attractive to users, and attractive to highly funded government black hat hackers. I strongly suspect Instawallet was taken out by government intervention today. I can't predict how nasty and low the attacks on it will stoop, or if they will dent confidence in bitcoin itself. I can predict though. That the basic security of bitcoin will carry on regardless.
And ... Like I said before "DO NOT PUT YOUR BITCOINS IN AN ONLINE WALLET". They are only as safe there as the website they are stored on. Store and backup your own wallet locally.
I'll take questions at @fluffkin on twitter if people want to know more, but please keep it to DM's. I don't really want my timeline flooded with it. Also, I'm no expert. I'm fairly well informed, and honest about my limits of knowledge. Apparently that puts me light years ahead of main stream media and paranoid market traders.
PS. You ain't seen nothing yet. Underlying the basic framework that is bitcoin you can see today are built in systems for safe escrow, where the third party never gets to hold your money. Micro-transaction payment channels for things such as payment for tiny data usage on roaming wifi network usage *as you drive by* that don't load the network unnecessarily. Bitcoin isn't just a wallet with highly secure systems in place (better than any bank in the UK currently offers). It's a system designed from the base to be a very good currency medium.
I've been busy most the day, glancing through my twitter timeline when I've had the chance and just ... WOW! Some of the misinformation and assumptions about bitcoin flying around are really quite spectacular! So I'm here again!
What I notice most is that most the criticisms fired at bitcoin are not only misinformed, but if you fire the exact same criticism back at fiat money in terms of £, $ or Euro. They actually stick and do damage.
"You want security? Buy gold or silver! Not Bitcoin!"
Fair enough in principle. Except for a few things. The first is one my own (hugs) 12 year old son came up with when I told him about the gold idea. "But there's not enough gold in the world is there? I heard it would all fit under the Eiffel tower". Proud Dad moment. Yup. For one thing. IF gold was underpinning all the cash in the world, there simply isn't enough of it at it's current value. But gold doesn't underpin the value of the cash in your pocket. Re-hypothicated debt does.
Let's go a little further here. Say I did actually really go for it. I buy a small bar of real solid gold. I even have it bored and tested to ensure it's not gold wrapped round some other heavy metal like some bars in the bullion banks. (You can't cheat like that with bitcoin) This is it ... the real deal. I have a lump of gold.
I can't use it to pay for anything much. I could in theory shave bits off it and attempt to trade it at my local supermarket for my shopping. I doubt it would work. This is the exact same criticism levelled at bitcoin. "But what can I do with it?" .. well actually, you can do more with Bitcoin in the world than you can with a lump of gold.
Even further on from that, the scams that gold has been involved in are many. There has been an attempt to make a virtual currency before backed by gold. It failed. There are groups that claimed to sell us ordinary folk gold backed securities, only to find they never had any real gold linked to the accounts at all. That also failed.
Bitcoin doesn't have that. You either have real genuine bitcoin in your wallet, or you have zero bitcoin in your wallet. There is no fake bitcoin wrapped in gold. There is no broker lying to you about gold backing. You either have it, or you don't.
"It's just like tulips!"
If you didn't know, around 1620-1630 tulip bulbs were acceptable currency in the Netherlands, and achieved quite a huge rate of return. However the person making this statement is only illustrating one thing. They have absolutely no idea about how bitcoin works. Yes. It's possible for any medium of currency to suffer a loss of confidence. That's why bitcoin is so popular now. There's a lack of confidence in the Euro (and increasingly in the dollar as the money press keeps churning out billions of dollars to sustain America). But tulips are a relatively easy plant to grow with infinite supply. Bitcoin is not very easy to grow and has a limit built in. Bitcoin was designed to be a secure and highly adaptable currency by a guy that had a pretty good grasp of currency and an excellent knowledge of cryptography and security, tulip bulbs are tulip bulbs.
"It's a ponzi scheme!"
How exactly? Show me on the map of the globe who benefits from a distributed network of currency transaction validation. Nobody. There is no "Bitcoin Inc." running the show. There is no bank or person pretending to be a bank involved. Yes, early adopters may get lucky on the uptake, but that's what you'd call good sense if you bought in to an unknown tech stock that suddenly took off like bitcoin has. Apparently, if it's on standard exchanges and involves fiat currency, it's ok to make a killing on a lucky buy in. If you do it with bitcoin? Well that's just not on. Probably because most of the market trader minds have utterly ignored bitcoin and now see a currency exchange graph kicking them up the backside that they wish they had been in on.
"Who would invest in such a volatile asset? It's a joke!"
Well quite frankly. See above. While some market traders are happy with slow and steady takings, a pretty huge chunk of the market just LOVES volatility when it's in a field they understand. You can short it, long it, generally make a killing in a short time frame. I don't see many market traders complaining about that kind of volatility. Besides. It would be fair to say that at the moment, BTC is searching for it's own sustainable level. Sure it might ramp way above it's sustainable level on news such as Cyprus bank losses. But that's exactly what Forex traders love about trading EURUSD. It ramps, it drops, it levels to an average .. that's how you make money. An entirely stable currency pair is a zero profit currency pair.
"Who would put money in to some hackers scheme?"
Well I've seen the original creator of Bitcoin described as "a hacker". But these days that term tends to extend to anyone with geek skills above average. I'm not actually aware of any hacking at all claimed against or by him. (I could be wrong here, but I've not seen any big flashing "HACKER" signs around bitcoin). Oh and btw. Bitcoin was not invented by Anonymous. O.o
Bitcoin is in fact an extremely elegant solution to security in transaction via cryptography. So much so that it actually beats the pants off fiat money. Transactions are final. They cannot be faked. There is no such thing as a fake bitcoin credit card. There is no fake gold bar bitcoin. There are no fake bitcoins in existence. This is the whole point of bitcoin. It's INCREDIBLY secure.
Better yet. Your bitcoins are not subject to being devalued by a government or central bank policy of money printing. They are not held by a bank that the Troika can plunder to save the bank at your expense. They are not held in a bank that the likes of Fred Goodwin can utterly destroy at insane expense to the tax payer. They are owned on a self verifying, global, digital network.
Oh and if you have the skill and knowledge. Here it is. The bitcoin source code. It's been around for a few years already, why don't you go ahead and see if you can spot the hacker code that's going to drain your account to zero? Nobody else has. Can you say there's anything like the same level of transparency about how your bank does business?
"It's not even backed up by anything real!"
Well I've got news for you. Neither is the £, $ or Euro. Currency is always based entirely on faith. Yes there are pledges on bank notes (that are utterly meaningless). Yes in theory the government and central bank will protect your monetary value, but in practise? Well actually no. Governments and central banks will happily devalue your currency. In Cyprus they'll even basically steal whatever currency you had in the bank to pay off debts. And even better, capital controls can be put in place that prevent you using your currency as you'd like to.
Confidence can be lost in your home currency, as is happening with the Euro. Countries can even indulge in exchange rate wars, deliberately reducing the overseas value of your cash to attempt to boost export demand at home.
No. Bitcoin isn't backed up by anything real except strong cryptography and trust in a system that can't be easily fiddled with and distorted by governments and banks. Trust is everything for currency. Bitcoin is strong on trust and validity. Far more so than traditional fiat currency.
This is one of the prime examples of accusing bitcoin of something only to find it's your traditional currency that has either the exact same problem or worse.
---
Once people begin to realise that bitcoin is a viable and incredibly secure system for storing and transferring wealth without bank intervention, it's only likely to take off even more than it has already.
With one provision. The established powers that be utterly loathe bitcoin. They can't control it. They can't rob it. They can't sieze your assets. That makes it attractive to users, and attractive to highly funded government black hat hackers. I strongly suspect Instawallet was taken out by government intervention today. I can't predict how nasty and low the attacks on it will stoop, or if they will dent confidence in bitcoin itself. I can predict though. That the basic security of bitcoin will carry on regardless.
And ... Like I said before "DO NOT PUT YOUR BITCOINS IN AN ONLINE WALLET". They are only as safe there as the website they are stored on. Store and backup your own wallet locally.
I'll take questions at @fluffkin on twitter if people want to know more, but please keep it to DM's. I don't really want my timeline flooded with it. Also, I'm no expert. I'm fairly well informed, and honest about my limits of knowledge. Apparently that puts me light years ahead of main stream media and paranoid market traders.
PS. You ain't seen nothing yet. Underlying the basic framework that is bitcoin you can see today are built in systems for safe escrow, where the third party never gets to hold your money. Micro-transaction payment channels for things such as payment for tiny data usage on roaming wifi network usage *as you drive by* that don't load the network unnecessarily. Bitcoin isn't just a wallet with highly secure systems in place (better than any bank in the UK currently offers). It's a system designed from the base to be a very good currency medium.
18 Mar 2013
Petrol & Cyprus
Let me explain why the Cyprus thing has me spooked a bit.
As of tonight (early Monday morning, a good 7 hours+ before most main markets open up), EURUSD has fallen around 120pips on open. On twitter I'm seeing a bizarre few lines on banter about the Cyprus deposit snatch. A surprising number of people take the "It's only a few %" line. I'm not going to argue that point here. A more significant sample of the fiscal heads I follow are talking exclusively about "calming the markets". Which is understandable. But not why I'm a bit worried.
Here we go...
In the UK recently, we had a petrol shortage. The funny thing was, there was no shortage of petrol. I don't pretend to understand the social mechanism that went on behind this. But simply the fear that there might be a petrol shortage was enough to prompt everyone to buy petrol, and that caused a petrol shortage. As it turned out, the tanker driver strike never happened. There was no need at all for the shortage to happen by logical, reasonable standards.
It seems to me a lot of fiscal heads are doing what I did with the petrol shortage. Looked at quite logically ... "What's the fuss about?", or at worst, how to calm the markets in the next week or so. But that's not the problem with bank runs and petrol shortages.
You don't need need an actual risk of loss for people to take money out of the bank. All you need is a certain critical mass of people to do it for whatever reasons they may have, even if wrong. Like petrol queues, people see and hear of the withdrawals, so they do the same.
That's the angle that's got me a bit worried on this one. I don't see the powers that be factoring in what a mass of people and a mild bit of panic can snowball in to. Maybe I'm reading it wrong. Maybe they are safe in the knowledge that they can quell any public momentum via media control and running cash between banks behind the scenes. I don't know. But it looks very risky to me.
As of tonight (early Monday morning, a good 7 hours+ before most main markets open up), EURUSD has fallen around 120pips on open. On twitter I'm seeing a bizarre few lines on banter about the Cyprus deposit snatch. A surprising number of people take the "It's only a few %" line. I'm not going to argue that point here. A more significant sample of the fiscal heads I follow are talking exclusively about "calming the markets". Which is understandable. But not why I'm a bit worried.
Here we go...
In the UK recently, we had a petrol shortage. The funny thing was, there was no shortage of petrol. I don't pretend to understand the social mechanism that went on behind this. But simply the fear that there might be a petrol shortage was enough to prompt everyone to buy petrol, and that caused a petrol shortage. As it turned out, the tanker driver strike never happened. There was no need at all for the shortage to happen by logical, reasonable standards.
It seems to me a lot of fiscal heads are doing what I did with the petrol shortage. Looked at quite logically ... "What's the fuss about?", or at worst, how to calm the markets in the next week or so. But that's not the problem with bank runs and petrol shortages.
You don't need need an actual risk of loss for people to take money out of the bank. All you need is a certain critical mass of people to do it for whatever reasons they may have, even if wrong. Like petrol queues, people see and hear of the withdrawals, so they do the same.
That's the angle that's got me a bit worried on this one. I don't see the powers that be factoring in what a mass of people and a mild bit of panic can snowball in to. Maybe I'm reading it wrong. Maybe they are safe in the knowledge that they can quell any public momentum via media control and running cash between banks behind the scenes. I don't know. But it looks very risky to me.
5 Mar 2013
Why so glum?
More thoughts that don't fit in tweets.
This one to do with a certain sense of gloom. You see, many people have this optimistic view that things are improving. I'm not sure what to call it exactly, but it's a pervading wish in society. "America is over the worst", "Europe is fixed", "Next year growth will return". That sort of thing. I guess it's fair enough to wish for the best.
But the problem I see is that there's virtually no drive or will for anything to actually change, and the causes of the problems that are popular to blame are wildly wrong. The Occupy movement had basically the right idea, but that largely (for now at least) has been beaten back and stalled. Other than that, you're very hard pressed to find even an activist movement, let alone a political party willing to take on the real problems.
And what pray tell do I think they are?
I think the system of wealth and how it runs our entire lives is perhaps workable in theory, but horribly flawed in it's current state. One of the manifestations of the current problem is in a curve of opportunity that comes with wealth. Lets concentrate on this one for now, because I think it helps explain why we seem to be on a hockey stick curve of doom.
If you're in the lower, middle, even low high end salary brackets these days, your money is largely tracked, identified, taxed and there's little you can do about it. You're in the bracket that can't afford legal tax avoidance. Or. If you can to some small degree, you're talking about a few thousand saved, enough to give you a smile maybe, but not enough to materially alter your overall financial position. You also can't afford to speculate on the markets to any real degree. Again, it's possible, but because the amounts that can be risked are fairly small, the amounts that can be made are also fairly small, and because you can't afford off shore accountants and brokers, the gains are going to get noticed and taxed.
At a certain point though, you're out of the woods. You can afford to offload all your tax affairs to experts in the dark arts of tax avoidance, and you can afford to pay the sums involved in setting up such schemes as a small blip compared to the quantities saved. You can also afford to speculate on the markets, you don't have to do it. Your broker will happily take that on for you, and unless you've picked a duff broker and tax accountant, you're pretty much home and dry.
The point is, at a certain point, wealth has been allowed to snowball wealth. Not just for individuals, for corporations as well. In the UK and USA you can find large corporations paying zero tax despite good earnings for the year in question. You can even find them being paid by the tax man just for having the grace to be in business and having good accountants.
You can muddle along with that sort of thing going on up to a certain point, but after a while, you begin to notice that far too much of the profit in just about everything is getting sucked out by those who can afford to squirrel it away and avoid the tax, or invest it to make yet more money to help pay for the money that's tucked away off shore.
This is just one aspect. The ability past a certain point for wealth to magically become almost untaxable because you can afford all the dodges and cheats available to you, and the benefit out weighs the costs. There are more. The culture of gouging as much money as possible out of any public expenditure is another, but that's another story.
So when you're looking at the world and wondering where has all the money gone? It's up there folks. At the top. In huge quantities. And it ain't trickling down.
If anyone can point me at a potentially viable political party willing to tackle even this one basic problem? I'd love to hear about them. All the serious political parties that I know about are funded by those exact same rich corporations and individuals. If you think they are willingly going to give any of that up you're just plain crazy. It's easier to let a few thousand commit suicide from austerity measures than even admit there's a huge wealth distribution problem.
You think I'm exaggerating?
See if this helps you picture the problem more clearly...
When is that going to change?
Well. I'd say it'll take civil wars, even international wars, financial collapse, mass poverty, and a huge depression to even begin to redistribute the wealth. I don't particularly want any of that to happen. It's just that's the only way I can see any of the current system changing in any meaningful way. Until then? Get used to things getting slowly worse, because nobody in power or close to getting power wants to do anything about it at all.
Hey. It's only human lives that get messed up and considerably shortened in the meantime. Don't be so glum. Us humans seem to love taking what could be a perfectly enjoyable lifetime and screwing it up for as many people as possible. It's how we do business. It's normal.
This one to do with a certain sense of gloom. You see, many people have this optimistic view that things are improving. I'm not sure what to call it exactly, but it's a pervading wish in society. "America is over the worst", "Europe is fixed", "Next year growth will return". That sort of thing. I guess it's fair enough to wish for the best.
But the problem I see is that there's virtually no drive or will for anything to actually change, and the causes of the problems that are popular to blame are wildly wrong. The Occupy movement had basically the right idea, but that largely (for now at least) has been beaten back and stalled. Other than that, you're very hard pressed to find even an activist movement, let alone a political party willing to take on the real problems.
And what pray tell do I think they are?
I think the system of wealth and how it runs our entire lives is perhaps workable in theory, but horribly flawed in it's current state. One of the manifestations of the current problem is in a curve of opportunity that comes with wealth. Lets concentrate on this one for now, because I think it helps explain why we seem to be on a hockey stick curve of doom.
If you're in the lower, middle, even low high end salary brackets these days, your money is largely tracked, identified, taxed and there's little you can do about it. You're in the bracket that can't afford legal tax avoidance. Or. If you can to some small degree, you're talking about a few thousand saved, enough to give you a smile maybe, but not enough to materially alter your overall financial position. You also can't afford to speculate on the markets to any real degree. Again, it's possible, but because the amounts that can be risked are fairly small, the amounts that can be made are also fairly small, and because you can't afford off shore accountants and brokers, the gains are going to get noticed and taxed.
At a certain point though, you're out of the woods. You can afford to offload all your tax affairs to experts in the dark arts of tax avoidance, and you can afford to pay the sums involved in setting up such schemes as a small blip compared to the quantities saved. You can also afford to speculate on the markets, you don't have to do it. Your broker will happily take that on for you, and unless you've picked a duff broker and tax accountant, you're pretty much home and dry.
The point is, at a certain point, wealth has been allowed to snowball wealth. Not just for individuals, for corporations as well. In the UK and USA you can find large corporations paying zero tax despite good earnings for the year in question. You can even find them being paid by the tax man just for having the grace to be in business and having good accountants.
You can muddle along with that sort of thing going on up to a certain point, but after a while, you begin to notice that far too much of the profit in just about everything is getting sucked out by those who can afford to squirrel it away and avoid the tax, or invest it to make yet more money to help pay for the money that's tucked away off shore.
This is just one aspect. The ability past a certain point for wealth to magically become almost untaxable because you can afford all the dodges and cheats available to you, and the benefit out weighs the costs. There are more. The culture of gouging as much money as possible out of any public expenditure is another, but that's another story.
So when you're looking at the world and wondering where has all the money gone? It's up there folks. At the top. In huge quantities. And it ain't trickling down.
If anyone can point me at a potentially viable political party willing to tackle even this one basic problem? I'd love to hear about them. All the serious political parties that I know about are funded by those exact same rich corporations and individuals. If you think they are willingly going to give any of that up you're just plain crazy. It's easier to let a few thousand commit suicide from austerity measures than even admit there's a huge wealth distribution problem.
You think I'm exaggerating?
See if this helps you picture the problem more clearly...
When is that going to change?
Well. I'd say it'll take civil wars, even international wars, financial collapse, mass poverty, and a huge depression to even begin to redistribute the wealth. I don't particularly want any of that to happen. It's just that's the only way I can see any of the current system changing in any meaningful way. Until then? Get used to things getting slowly worse, because nobody in power or close to getting power wants to do anything about it at all.
Hey. It's only human lives that get messed up and considerably shortened in the meantime. Don't be so glum. Us humans seem to love taking what could be a perfectly enjoyable lifetime and screwing it up for as many people as possible. It's how we do business. It's normal.
26 Feb 2013
Negative Reality
Concerning alternatives to QE, this, from the Telegraph:
"Another concern is that the Bank’s £375bn Quantitative Easing scheme has pushed down the value of annuities - although the Bank has pointed out that the money printing programme has also bolstered the value of pension pots by boosting share prices, leaving people, ultimately, no worse off."
Makes my jaw drop.
QE has boosted the appearance of share prices. With printed money.
To make that balance out somehow, we have a government that's decided wages, workers rights, health care, education and services have to be slashed from public spending, and that taxes for just about everyone have to go up. At the same time .. hey? Guess what? Even if your printed money goes straight in to bonds, it's still inflationary!
It's just a blatant lie. "No worse off".
Oh hell in that case, why haven't we been printing billions every year since dot? I mean shit, everyone's better off or at least no worse for it right? ... Right? Why bother with Austerity at all if we could just print our way out of it with nobody any worse off whatsoever?
Sometimes something will leak out of the lofty halls of power that just stuns me with either it's intense stupidity or wilful ignorance. This is one of them.
Either the Bank of England is insanely delusional, or they think any old crap excuse will do because we're all a bunch of suckers.
"Another concern is that the Bank’s £375bn Quantitative Easing scheme has pushed down the value of annuities - although the Bank has pointed out that the money printing programme has also bolstered the value of pension pots by boosting share prices, leaving people, ultimately, no worse off."
Makes my jaw drop.
QE has boosted the appearance of share prices. With printed money.
To make that balance out somehow, we have a government that's decided wages, workers rights, health care, education and services have to be slashed from public spending, and that taxes for just about everyone have to go up. At the same time .. hey? Guess what? Even if your printed money goes straight in to bonds, it's still inflationary!
It's just a blatant lie. "No worse off".
Oh hell in that case, why haven't we been printing billions every year since dot? I mean shit, everyone's better off or at least no worse for it right? ... Right? Why bother with Austerity at all if we could just print our way out of it with nobody any worse off whatsoever?
Sometimes something will leak out of the lofty halls of power that just stuns me with either it's intense stupidity or wilful ignorance. This is one of them.
Either the Bank of England is insanely delusional, or they think any old crap excuse will do because we're all a bunch of suckers.
31 Jan 2013
Adjustment
Just going to home in on a gap in understanding for a few brief minutes.
Countless are the tweets declaring austerity as a war on the poor. However...
Walk with me in my twilight, unpopular thinking mode for a while.
It seems to me that what's happening is more of a readjustment. We understand now that money itself isn't behaving that well. It seems that those in wealthy positions of power tend to extort the system, often beyond the point of criminality to retain and gain wealth. It seems avenues of legal or potentially problematic but virtually untraceable tax avoidance are openly available for the £150k+ earning of the world, and often used.
That accounts for some of the individual abuses of the monetary system. Now lets layer on top corporate abuse. The scope is stunning. From insider & high frequency trading, to thousands of offshore tax havens. from the lowly picking up unpaid workers struggling to get off welfare, via the rent inflating landlords coining it in from the welfare state and blaming the soul that had to claim housing benefit, all the way up to government scale manipulation of currency markets, bond prices and lets not forget the power of political lobbying in cash for gain.
The vast array of abuses of money are laid out. So what's with this "War on the poor" thing? Well ... If only.
I see it more as the results of the system attempting to balance what a £ or $ is worth against the world but still within the terms of reference that nobody really cheats that much. It's a bogus assumption, but it's not a war on the poor in strict terms. It's a huge unsustainable cloud of debt and expectation for cash returns that hangs over all of us. At the moment it's adjustment time, and the huge hole in world finances is being adjusted by demolishing any and all support that was provided to the poor and ill. That all vanished. The heads full of money (breadheads?) will see it as simply unsustainable without question of why. The bottom line counts. Cut the deficits by cutting welfare. It's simple. But.
Yes ok, I can see that simplistic interpretation and why the money of the world protects it's interests that way, but it's simplistic and lives in a world of denial.
The system isn't working because it's being abused at any level you care to look at. Money in effect is being syphoned out towards large corporations and the rich list tax avoidance schemes faster than Mr & Ms Jones on the Clapham Omnibus can keep up. If you keep punishing Mr & Ms Jones for it ... disaster happens.
Ok. So I was wrong about expecting a market crash in 2010-11. I still think it would have happened i it wasn't for massive central bank / ECB intervention, but that's beside the point. We're here now. And here's what I'll cast out for now in my own limited sphere of knowledge.
The UK is going to be hit in April with cuts it didn't even know were coming. A huge number of people probably won't even realise where all the spare money has gone until June or July. Austerity cuts have been scheduled on a scale and depth beyond which even fairly switched on readers and observers will expect. I'm a cynical bugger, and even I'm caught out by finding new implications for the cuts about to start biting. Even smug little me is going to get a bigger bill or two come April, despite my best efforts.
So here's how I see it ...
The UK is in for a horrific 2013. The extent of which probably won't begin to bite home till late summer. By the time autumn swings around and official statistics have caught up, Britain will be already staring the kind of recession people have muttered about in the face. It won't just be a theoretical "As bad as the great depression" problem. It'll be here. Now. In pretty much everyone's face.
The British though are a docile race. It's fair to say the probability of civil disobedience on a massive scale will be much higher, but then again, the chances of the British getting of their arse's and doing anything about it are also reasonably slim. At this point though, we'll be diving back past "Poll Tax" riot potential in to new, uncharted realms.
The bad news is. Some of you will die as a result. I might be one of them. Cuts in healthcare will reduce life expectancy. The homeless can expect significantly shorter lifespans. Some of us will even commit suicide in the face of impossible odds. I'm afraid that all comes with the territory ... but .. while you die ..
Relax.
Smile.
It's not a war on the poor. It's simply a religious faith in money and it's protection taking precedence over life and humanity. The banks will be fine. Most the hedge funds will somehow survive. The core will survive. And .. that's all that matters ... right?
Countless are the tweets declaring austerity as a war on the poor. However...
Walk with me in my twilight, unpopular thinking mode for a while.
It seems to me that what's happening is more of a readjustment. We understand now that money itself isn't behaving that well. It seems that those in wealthy positions of power tend to extort the system, often beyond the point of criminality to retain and gain wealth. It seems avenues of legal or potentially problematic but virtually untraceable tax avoidance are openly available for the £150k+ earning of the world, and often used.
That accounts for some of the individual abuses of the monetary system. Now lets layer on top corporate abuse. The scope is stunning. From insider & high frequency trading, to thousands of offshore tax havens. from the lowly picking up unpaid workers struggling to get off welfare, via the rent inflating landlords coining it in from the welfare state and blaming the soul that had to claim housing benefit, all the way up to government scale manipulation of currency markets, bond prices and lets not forget the power of political lobbying in cash for gain.
The vast array of abuses of money are laid out. So what's with this "War on the poor" thing? Well ... If only.
I see it more as the results of the system attempting to balance what a £ or $ is worth against the world but still within the terms of reference that nobody really cheats that much. It's a bogus assumption, but it's not a war on the poor in strict terms. It's a huge unsustainable cloud of debt and expectation for cash returns that hangs over all of us. At the moment it's adjustment time, and the huge hole in world finances is being adjusted by demolishing any and all support that was provided to the poor and ill. That all vanished. The heads full of money (breadheads?) will see it as simply unsustainable without question of why. The bottom line counts. Cut the deficits by cutting welfare. It's simple. But.
Yes ok, I can see that simplistic interpretation and why the money of the world protects it's interests that way, but it's simplistic and lives in a world of denial.
The system isn't working because it's being abused at any level you care to look at. Money in effect is being syphoned out towards large corporations and the rich list tax avoidance schemes faster than Mr & Ms Jones on the Clapham Omnibus can keep up. If you keep punishing Mr & Ms Jones for it ... disaster happens.
Ok. So I was wrong about expecting a market crash in 2010-11. I still think it would have happened i it wasn't for massive central bank / ECB intervention, but that's beside the point. We're here now. And here's what I'll cast out for now in my own limited sphere of knowledge.
The UK is going to be hit in April with cuts it didn't even know were coming. A huge number of people probably won't even realise where all the spare money has gone until June or July. Austerity cuts have been scheduled on a scale and depth beyond which even fairly switched on readers and observers will expect. I'm a cynical bugger, and even I'm caught out by finding new implications for the cuts about to start biting. Even smug little me is going to get a bigger bill or two come April, despite my best efforts.
So here's how I see it ...
The UK is in for a horrific 2013. The extent of which probably won't begin to bite home till late summer. By the time autumn swings around and official statistics have caught up, Britain will be already staring the kind of recession people have muttered about in the face. It won't just be a theoretical "As bad as the great depression" problem. It'll be here. Now. In pretty much everyone's face.
The British though are a docile race. It's fair to say the probability of civil disobedience on a massive scale will be much higher, but then again, the chances of the British getting of their arse's and doing anything about it are also reasonably slim. At this point though, we'll be diving back past "Poll Tax" riot potential in to new, uncharted realms.
The bad news is. Some of you will die as a result. I might be one of them. Cuts in healthcare will reduce life expectancy. The homeless can expect significantly shorter lifespans. Some of us will even commit suicide in the face of impossible odds. I'm afraid that all comes with the territory ... but .. while you die ..
Relax.
Smile.
It's not a war on the poor. It's simply a religious faith in money and it's protection taking precedence over life and humanity. The banks will be fine. Most the hedge funds will somehow survive. The core will survive. And .. that's all that matters ... right?
24 Jan 2013
Ramble On
Today has had something rattling round my brain. It won't fit on twitter, so here, with my audience of zero, I'll log it instead.
Last night, Apple's share price fell around 10%, through the day there was no bounce at all, last I looked it was down around 12%. Everyone and his mothers brother has been ranting about $APPL on my slightly fiscal slanted twitter timeline for months. It's the saviour of America, responsible for a chunk of the GDP, a sure winner, tipped to reach over 1,000 share value. So I've heard. Well tonight it's around the 450-460 mark.
In theory, there should be a bunch of hedge funds and investors fantastically out of pocket. Confidence in America's entire stock market should have felt a bit of a tremor. But no. Something weird has happened. In general stocks have surged again. The dollar has barely felt any pain from it at all. It's almost as if nobody had any money in Apple at all, and nobody has suffered a loss.
It's nailed home to me the level of ... I don't whether to call it cognitive dissonance or double-think. In the world today. Lets call it double-think. Nicely Orwellian.
The markets are surging higher, finance ministers and politicians are proclaiming we are over the worst, that 2013 will see a return to expansion in Europe and America. Everything is fine. Europe is fixed. America doesn't have a debt problem. The world is fine.
Except it isn't. I only have my own perception of reality to go on, same as any of us. But I don't see the good times rolling. For the last 3 or 4 years in the UK, I've heard of countless employers laying off workers, the people I know are either trying to find better than temporary work (and failing), or stuck in low paid jobs with no hope of finding a better one. I also know of people who aren't technically unemployed, they either can't claim, or claiming and being forced in to a poverty job is less appealing than the cash in hand jobs they can get. I'm know I'm finding it harder to find new work to keep me going. I'm spending less than I was and caring more about finding a good deal than I was two or three years ago.
Town centres have slowly gained more vacant shops or pound stores where large chain stores used to be. I've suffered more crime against me in the last two years than I have for my entire lifespan before. People are talking about moving to much smaller housing because they can't afford where they are, one of them even to the point of only having bedrooms for the kids and sleeping on the sofa.
Of course some of this is my distorted perception. Maybe I've just been unlucky with the recent crime spree. But overall, I can't help get the feeling things are getting a lot worse on the ground ... from the plebs eye view.
Now I look back to the soaring stock markets and vast profits made by the banking sector ... and I ask ...
"From what?"
The system seems to be living in a dream. Like a cartoon coyote who doesn't realise it's run out of cliff yet. Today's schizophrenic reaction to Apple's loss in share price has really nailed it home to me. Either my perception of reality is horribly depressing and unfortunate, or the eventual crash is going to be totally horrific. Tonight I don't know which of those it is, but something is wrong somewhere.
Last night, Apple's share price fell around 10%, through the day there was no bounce at all, last I looked it was down around 12%. Everyone and his mothers brother has been ranting about $APPL on my slightly fiscal slanted twitter timeline for months. It's the saviour of America, responsible for a chunk of the GDP, a sure winner, tipped to reach over 1,000 share value. So I've heard. Well tonight it's around the 450-460 mark.
In theory, there should be a bunch of hedge funds and investors fantastically out of pocket. Confidence in America's entire stock market should have felt a bit of a tremor. But no. Something weird has happened. In general stocks have surged again. The dollar has barely felt any pain from it at all. It's almost as if nobody had any money in Apple at all, and nobody has suffered a loss.
It's nailed home to me the level of ... I don't whether to call it cognitive dissonance or double-think. In the world today. Lets call it double-think. Nicely Orwellian.
The markets are surging higher, finance ministers and politicians are proclaiming we are over the worst, that 2013 will see a return to expansion in Europe and America. Everything is fine. Europe is fixed. America doesn't have a debt problem. The world is fine.
Except it isn't. I only have my own perception of reality to go on, same as any of us. But I don't see the good times rolling. For the last 3 or 4 years in the UK, I've heard of countless employers laying off workers, the people I know are either trying to find better than temporary work (and failing), or stuck in low paid jobs with no hope of finding a better one. I also know of people who aren't technically unemployed, they either can't claim, or claiming and being forced in to a poverty job is less appealing than the cash in hand jobs they can get. I'm know I'm finding it harder to find new work to keep me going. I'm spending less than I was and caring more about finding a good deal than I was two or three years ago.
Town centres have slowly gained more vacant shops or pound stores where large chain stores used to be. I've suffered more crime against me in the last two years than I have for my entire lifespan before. People are talking about moving to much smaller housing because they can't afford where they are, one of them even to the point of only having bedrooms for the kids and sleeping on the sofa.
Of course some of this is my distorted perception. Maybe I've just been unlucky with the recent crime spree. But overall, I can't help get the feeling things are getting a lot worse on the ground ... from the plebs eye view.
Now I look back to the soaring stock markets and vast profits made by the banking sector ... and I ask ...
"From what?"
The system seems to be living in a dream. Like a cartoon coyote who doesn't realise it's run out of cliff yet. Today's schizophrenic reaction to Apple's loss in share price has really nailed it home to me. Either my perception of reality is horribly depressing and unfortunate, or the eventual crash is going to be totally horrific. Tonight I don't know which of those it is, but something is wrong somewhere.
7 Jan 2013
Further down the sprial
Thoughts on crumbling empires.
This started from a bit of a thought experiment I've been tinkering with. I wondered if for a change, I'd have the guts to announce future predictions on what happens next in Europe and America. After batting the ideas around for a while, I realised I couldn't, but ... I could narrow it down.
I'm basing this on the concept of de-leveraging that's occurring in the world. It's not the banks rebalancing books to safe levels in particular, and the upper say 20% of America and Europe certainly aren't loosing much in the way of creature comforts. All the correction of unsustainable debt appears to be falling on the poorer end of society through tax hikes, food inflation, welfare and healthcare cuts. This is where the missing billions of correction to the system appear to be coming from.
Now I tried to guess how this would play out. A fair number of analysts are predicting a turn around for national finances in 2013. "We're through the worst" sort of thing. I don't buy that so much. In the UK cuts are only just starting to bite, in Spain and Greece lost tax revenue from the oceans of unemployed and an increasing unwillingness or inability to pay tax are undermining any recovery, and it's just beginning. As I see it, 2013 is the year when all the Austerity talked about in 2011 & 2012 is finally going to bite for millions.
There's a disconnect to contend with though. I'm not in the grand conspiracy theory set. I tend to think the elites, rich list, 1%, 10%, 20%, whatever you want to call them act more though two things. Greed and a lack of empathy. From earlier scribbles, you'll know I see greed as a human problem that covers the entire spectrum from those in poverty, right to the top. The lack of empathy is more of a kicker. The end result is that top say 15% of wealth in any country doesn't really have a clue what all the tax cuts and care cuts mean in real terms for millions of less well off people.
But... It's not only the 15% that will politically support and maintain any measures that preserve the status quo of the top, it's anyone who believes they are near that bracket (even when demonstrably the intended cuts will leave them or very close relatives worse off), and the lovely Mass Media. The likes of Fox News and the putrid Murdoch's of this world are in with the top percentile. Far too many uncritical thinkers just go along with the political spin, and at time down right lies from low grade media aimed at them. They won't even notice huge stories being skipped entirely by the press and media. When things get bad later, they'll blame Muslim's or the Polish or the Socialists, or the unemployed. Whatever Fox News and Co. aim the cross hairs at.
So we have a system of inequality that is trying very hard to maintain equilibrium, and *that's* why I can't predict much. Logically, you'd expect things to fall apart in to fiscal defaults, companies going bankrupt and social unrest. However, with the vast majority of money in the world selfishly protecting it's own interests, and a big chunk of the population blindly following the resulting rhetoric ...?
I see two options ... That's as good as I can get it.
Either the interests of the money effectively win. That is, the poor are ground further and further in to debt slavery and ill health. Inequality soars, but the state puts in place increasingly draconian policing and social control. Eventually it wouldn't matter if three major banks all did fail, or if every pension pot in the land got emptied. Once the oppression reaches a certain state, what's the public going to do about it even if the main stream media is kind enough to let them know about it?
Or! The more optimistic version. Things break before we find ourselves living as slaves in police states. Major losses are sustained by the financial sector and hit a big chunk of the 15% top end. I say optimistic. Actually it's almost as miserable as the other option. You could reasonably expect major social unrest and a period of huge political and financial uncertainty before things get any better.
Fun huh? Yup. That's how I see the two main potential outcomes of the current situation.
Oh wait.
Except...
War.
But who is brave enough to predict the next war in scale, location, involvement or scope?
Not me. But it is the other option.
This started from a bit of a thought experiment I've been tinkering with. I wondered if for a change, I'd have the guts to announce future predictions on what happens next in Europe and America. After batting the ideas around for a while, I realised I couldn't, but ... I could narrow it down.
I'm basing this on the concept of de-leveraging that's occurring in the world. It's not the banks rebalancing books to safe levels in particular, and the upper say 20% of America and Europe certainly aren't loosing much in the way of creature comforts. All the correction of unsustainable debt appears to be falling on the poorer end of society through tax hikes, food inflation, welfare and healthcare cuts. This is where the missing billions of correction to the system appear to be coming from.
Now I tried to guess how this would play out. A fair number of analysts are predicting a turn around for national finances in 2013. "We're through the worst" sort of thing. I don't buy that so much. In the UK cuts are only just starting to bite, in Spain and Greece lost tax revenue from the oceans of unemployed and an increasing unwillingness or inability to pay tax are undermining any recovery, and it's just beginning. As I see it, 2013 is the year when all the Austerity talked about in 2011 & 2012 is finally going to bite for millions.
There's a disconnect to contend with though. I'm not in the grand conspiracy theory set. I tend to think the elites, rich list, 1%, 10%, 20%, whatever you want to call them act more though two things. Greed and a lack of empathy. From earlier scribbles, you'll know I see greed as a human problem that covers the entire spectrum from those in poverty, right to the top. The lack of empathy is more of a kicker. The end result is that top say 15% of wealth in any country doesn't really have a clue what all the tax cuts and care cuts mean in real terms for millions of less well off people.
But... It's not only the 15% that will politically support and maintain any measures that preserve the status quo of the top, it's anyone who believes they are near that bracket (even when demonstrably the intended cuts will leave them or very close relatives worse off), and the lovely Mass Media. The likes of Fox News and the putrid Murdoch's of this world are in with the top percentile. Far too many uncritical thinkers just go along with the political spin, and at time down right lies from low grade media aimed at them. They won't even notice huge stories being skipped entirely by the press and media. When things get bad later, they'll blame Muslim's or the Polish or the Socialists, or the unemployed. Whatever Fox News and Co. aim the cross hairs at.
So we have a system of inequality that is trying very hard to maintain equilibrium, and *that's* why I can't predict much. Logically, you'd expect things to fall apart in to fiscal defaults, companies going bankrupt and social unrest. However, with the vast majority of money in the world selfishly protecting it's own interests, and a big chunk of the population blindly following the resulting rhetoric ...?
I see two options ... That's as good as I can get it.
Either the interests of the money effectively win. That is, the poor are ground further and further in to debt slavery and ill health. Inequality soars, but the state puts in place increasingly draconian policing and social control. Eventually it wouldn't matter if three major banks all did fail, or if every pension pot in the land got emptied. Once the oppression reaches a certain state, what's the public going to do about it even if the main stream media is kind enough to let them know about it?
Or! The more optimistic version. Things break before we find ourselves living as slaves in police states. Major losses are sustained by the financial sector and hit a big chunk of the 15% top end. I say optimistic. Actually it's almost as miserable as the other option. You could reasonably expect major social unrest and a period of huge political and financial uncertainty before things get any better.
Fun huh? Yup. That's how I see the two main potential outcomes of the current situation.
Oh wait.
Except...
War.
But who is brave enough to predict the next war in scale, location, involvement or scope?
Not me. But it is the other option.
29 Dec 2012
Pots & Kettles
"Only in America could the rich - who pay 86% of income taxes - be accused of not paying their "fair share" by those who pay nothing."
That's a tweet that wandered past recently. I can't begin to reply to it in a tweet. So here I am in Blogger again.
Firstly, I was unaware that the top rate of income tax in America was 86%, perhaps because it's nothing like that much. A quick Wikipedia check suggests between 21% & 16% "Effective income and payroll tax rate".
Somebody is hyping that 86% a little. But lets ignore that and just nod our heads sagely and say "Hmm yes, the rich sure are liable for a lot of Income Tax on all that money".
Notice I use the word "liable". Unfortunately, the very rich end of any countries population can afford to use tax loopholes like offshore tax haven accounts, declaring spouses as employees, declaring business expenses, and evading tax liability in basically as many wonderful ways as their tax avoidance guru accountants can suggest to them. Since we are dealing with people in the $400,000+ income bracket here, such avoidance quickly adds up to tens of thousands of $ per person. Hundreds of thousands for the super rich. Add them all together and ... that's a fair few million / billion in lost tax revenue. Most of it legal.
The bottom end of the salary scale doesn't get as much chance to avoid tax legally, but lets face it, wherever you look on the income scale, people will be attempting to pay as little tax as possible. If it's taxed at source in your pay packet though like a vast majority of working Joe's and Joanne's, that's it. It's paid in full. No argument.
Right down at the bottom you get the black economy of cash in hand work. Add all of that lot up together and ... hey .. it's also a fair whack of cash. Although individually we're only talking about a few $100 to $1000 avoided, there are a lot more poor people than rich people. Figures are murky here. A big chunk of low paid workers still pay the income tax and just struggle on in life, so we can deduct that from lost tax. It seems likely that the total tax evasion of the lower classes is still a lot less than the massive sums avoided by the upper classes.
BUT.
The argument is screwed from the start. The problem is, if EVERYONE at the top, bottom and middle of society actually paid the taxes without either legal or illegal tax avoidance then the amount taxed on everyone could be less. The problem is all the loopholes and dodges, mainly at the upper end of tax avoidance, that get exploited and never dealt with.
And it also ignores the far bigger problem of corporate tax evasion. The entire loss in tax income across all income tax for all citizens of the US is far smaller than the loss in tax due to corporate tax evasion. That doesn't even get a mention.
You can spot this one in the current fiscal cliff farce talks in Washington. Yes it is pretty pointless talking about solving a trillion $ debt problem by increasing personal taxation on the wealthy. But nobody in government has the balls to say "Well actually, it's the companies and corporations we need to collect proper taxes from".
And that folks. Is capitalism at work. It owns the government, it maintains the loopholes and god forbid anyone should try and address the real problem because they'll threaten you all with job losses and economic recession if you even dare think about it.
See?
Wasn't going to fit in a tweet was it?
That's a tweet that wandered past recently. I can't begin to reply to it in a tweet. So here I am in Blogger again.
Firstly, I was unaware that the top rate of income tax in America was 86%, perhaps because it's nothing like that much. A quick Wikipedia check suggests between 21% & 16% "Effective income and payroll tax rate".
Somebody is hyping that 86% a little. But lets ignore that and just nod our heads sagely and say "Hmm yes, the rich sure are liable for a lot of Income Tax on all that money".
Notice I use the word "liable". Unfortunately, the very rich end of any countries population can afford to use tax loopholes like offshore tax haven accounts, declaring spouses as employees, declaring business expenses, and evading tax liability in basically as many wonderful ways as their tax avoidance guru accountants can suggest to them. Since we are dealing with people in the $400,000+ income bracket here, such avoidance quickly adds up to tens of thousands of $ per person. Hundreds of thousands for the super rich. Add them all together and ... that's a fair few million / billion in lost tax revenue. Most of it legal.
The bottom end of the salary scale doesn't get as much chance to avoid tax legally, but lets face it, wherever you look on the income scale, people will be attempting to pay as little tax as possible. If it's taxed at source in your pay packet though like a vast majority of working Joe's and Joanne's, that's it. It's paid in full. No argument.
Right down at the bottom you get the black economy of cash in hand work. Add all of that lot up together and ... hey .. it's also a fair whack of cash. Although individually we're only talking about a few $100 to $1000 avoided, there are a lot more poor people than rich people. Figures are murky here. A big chunk of low paid workers still pay the income tax and just struggle on in life, so we can deduct that from lost tax. It seems likely that the total tax evasion of the lower classes is still a lot less than the massive sums avoided by the upper classes.
BUT.
The argument is screwed from the start. The problem is, if EVERYONE at the top, bottom and middle of society actually paid the taxes without either legal or illegal tax avoidance then the amount taxed on everyone could be less. The problem is all the loopholes and dodges, mainly at the upper end of tax avoidance, that get exploited and never dealt with.
And it also ignores the far bigger problem of corporate tax evasion. The entire loss in tax income across all income tax for all citizens of the US is far smaller than the loss in tax due to corporate tax evasion. That doesn't even get a mention.
You can spot this one in the current fiscal cliff farce talks in Washington. Yes it is pretty pointless talking about solving a trillion $ debt problem by increasing personal taxation on the wealthy. But nobody in government has the balls to say "Well actually, it's the companies and corporations we need to collect proper taxes from".
And that folks. Is capitalism at work. It owns the government, it maintains the loopholes and god forbid anyone should try and address the real problem because they'll threaten you all with job losses and economic recession if you even dare think about it.
See?
Wasn't going to fit in a tweet was it?
1 Dec 2012
Welfare Mythology
Current popular wisdom in economic circles is that the welfare state is doomed and in part, or entirely to blame for some of the economic troubles of the world.
First off, there are components to this generic Welfare term.
Pensions, healthcare, social security.
Pensions
In my humble opinion, the problem with pensions is not only that when birth rates decrease, fewer people are around to generate the wealth for the pension pots, but also the constant bubble mentality of pension fund planners. Expected annual growth of funds is estimated too high over lengthy periods of time. All it takes is a few years downturn or an unforeseen event in the basket of bonds & shares to knock a big hole in the finances.
So my view on pensions? Yeah big problem. Anticipating yields over 30 years simply isn't something we seem to be good at. There are far too many unknown variables. We even seem to have entirely failed to take in to account changing demographics as a factor. It's more a case of stupidity than the pension plans of the world sucking the life out of economies. Hey ... Guess what kind of people it is that manage the pension funds and happily promise high yield returns? Nope. It's not that guy who's worried about loosing his job through ill health at the factory, it's that other guy who just got a huge bonus and has private healthcare.
Sadly the end result is. Yes. Pensions are now a problem for developed economies all over the place.
Healthcare
Here I've got a bit of an inside view on the UK's NHS problems. Being a bit of an oldie it spans a few years. Over that time I've seen a continuing cycle:
"We need cheaper centrally managed healthcare, it's an economy of scale"
vs.
"We need regional efficient, effective deployment of services"
There are many back arguments to the above, but that's the cycle I've seen repeating often with each change of government. So what happens then?
A few things. The old sites need to be sold off, often in such a bulk that it distorts the market a little in each region. Sometimes the huge sites lie dormant for years and years. They need paid security to stop travellers and squatters moving in. They don't immediately sell for millions and fund the changes. Funnily enough, when the call comes back to centralise, the derelict ex-hospital sites aren't considered because they are now so out of date and in need of demolition that it's cheaper to do a deal with a developer on a PFI deal on a new site, or expanding a smaller existing site.
So there's your every 4 year+ for various developers to take a bite out of the NHS. A fair few years back, the NHS had to bin it's own property management and architects. "Couldn't afford them. Would be cheaper to out source it". Ping. Wave goodbye to staff who previously had decades of experience managing NHS property. That costs! And welcome in PFI Bob and his golf buddy friends. No. Actually they aren't quite as bothered about getting value for money for the tax payer as the guy who was being paid by the tax payer. They'd rather have a new BMW / Audi for the family, and a nice big wedge of cash out of the next deal thank you very much. Oh. And they know less about hospitals than the people we just put out of a job.
It's not just the property department either. (Can you tell what side of the NHS I dealt with yet?). Every time this contraction, expansion cycle happens, it's taken as a chance to shed some staff along with the few that just can't physically work from the new locations. There goes some more in house skill.
The personal skill factor of employee's is something I see ignored. I think it costs businesses a hell of a lot more over time than is appreciated, especially so in an organisation as huge as a government or health service. It's like constantly stripping the bonus efficiency you had out of a system and binning it. It's also often false economy. Binning the NHS property management levels actually cost more in external consultancy fees even before you get to the increased costs in contract administration, and you're doing with people who know less than the people you had, so on a time charge basis, you're just screwing yourself badly.
Sighs.
Point is. I've seen the NHS get mauled like this time and time again. Every time you get a new bunch of suits and ties who gouge out a profit for as long as they can. PFI was a gift to everyone except the NHS and the tax payer. You're not talking pennies here. Each cycle of change would be flipping costs in the £100's of millions *per county*. A big chunk of that was heading in to private firm hands with the emphasis firmly on profit ahead of value for tax-payers money.
It's even possible. That there may have been the odd bit of behind closed door deals going on. Contractors like public funded work. The bills get paid.
Back to the point. No. Actually, I don't see the NHS as being an entirely impossible idea. I see continual greed and mismanagement, right up to government sanctioned PFI deals, cashing in on the NHS time and time again. I see skills being bled out of the system with very little chance for a system to develop before it's ripped up and changed again. Then there's Mr Economist pointing his finger at it and saying "Hey the NHS costs too much". It never stood a chance Mr Economist. Guess who kicks these cyclical changes off? The finance and economics departments looking for targeted savings with each change of boss. There is no easy billion £ saving, so lets just re-organise the whole thing again, and by the time you've done that, I'll have my pay packet and be out of the door.
Social Security
By now I've almost lost the will to keep typing.
Just no. Are you honestly telling me, that if someone gets made redundant, or falls ill, we as a society just don't give a shit. Nope. I don't want to put my employment insurance with one firm and my health insurance with another, because I've seen what profiteering ass-holes run insurance funds. I've already got private pension funds in my past that are worth nothing now. The government wanted me to go on to those because they didn't want to pay so much out on my state pension. Cheers guys. Nicely shafted me again. So no. I'm not buying that private insurance is safe at all, if it even ever paid out. "We're you miss sold PPI?"...
Blurgh
I'm getting so fed up with the stupidity and narrow minded view on "Welfare" same as the "Socialism" warmongering. I'm fed up with people who have run systems that have constantly failed for decades to be telling us that the only hope of salvation is more of the same. Maybe try figuring out the economics for a system not based on greed for once in the entire history of the human race? What if you did run a health service with very tight monitoring of *any* external profit made from tax-payer money? You supply towels? Beds? Buildings? Machines that go ping? We want to see all your accounts and you're allowed X% profit. No more.... Well ideally, you'd actually get value for money with fair profits and wages resulting from it. In reality? You'll get falsified salary claims, beefed up expenses, all the same old greed as usual, just via new and different methods. Even so. I'd still rather give my method a try than let people die for loosing a job.
First off, there are components to this generic Welfare term.
Pensions, healthcare, social security.
Pensions
In my humble opinion, the problem with pensions is not only that when birth rates decrease, fewer people are around to generate the wealth for the pension pots, but also the constant bubble mentality of pension fund planners. Expected annual growth of funds is estimated too high over lengthy periods of time. All it takes is a few years downturn or an unforeseen event in the basket of bonds & shares to knock a big hole in the finances.
So my view on pensions? Yeah big problem. Anticipating yields over 30 years simply isn't something we seem to be good at. There are far too many unknown variables. We even seem to have entirely failed to take in to account changing demographics as a factor. It's more a case of stupidity than the pension plans of the world sucking the life out of economies. Hey ... Guess what kind of people it is that manage the pension funds and happily promise high yield returns? Nope. It's not that guy who's worried about loosing his job through ill health at the factory, it's that other guy who just got a huge bonus and has private healthcare.
Sadly the end result is. Yes. Pensions are now a problem for developed economies all over the place.
Healthcare
Here I've got a bit of an inside view on the UK's NHS problems. Being a bit of an oldie it spans a few years. Over that time I've seen a continuing cycle:
"We need cheaper centrally managed healthcare, it's an economy of scale"
vs.
"We need regional efficient, effective deployment of services"
There are many back arguments to the above, but that's the cycle I've seen repeating often with each change of government. So what happens then?
A few things. The old sites need to be sold off, often in such a bulk that it distorts the market a little in each region. Sometimes the huge sites lie dormant for years and years. They need paid security to stop travellers and squatters moving in. They don't immediately sell for millions and fund the changes. Funnily enough, when the call comes back to centralise, the derelict ex-hospital sites aren't considered because they are now so out of date and in need of demolition that it's cheaper to do a deal with a developer on a PFI deal on a new site, or expanding a smaller existing site.
So there's your every 4 year+ for various developers to take a bite out of the NHS. A fair few years back, the NHS had to bin it's own property management and architects. "Couldn't afford them. Would be cheaper to out source it". Ping. Wave goodbye to staff who previously had decades of experience managing NHS property. That costs! And welcome in PFI Bob and his golf buddy friends. No. Actually they aren't quite as bothered about getting value for money for the tax payer as the guy who was being paid by the tax payer. They'd rather have a new BMW / Audi for the family, and a nice big wedge of cash out of the next deal thank you very much. Oh. And they know less about hospitals than the people we just put out of a job.
It's not just the property department either. (Can you tell what side of the NHS I dealt with yet?). Every time this contraction, expansion cycle happens, it's taken as a chance to shed some staff along with the few that just can't physically work from the new locations. There goes some more in house skill.
The personal skill factor of employee's is something I see ignored. I think it costs businesses a hell of a lot more over time than is appreciated, especially so in an organisation as huge as a government or health service. It's like constantly stripping the bonus efficiency you had out of a system and binning it. It's also often false economy. Binning the NHS property management levels actually cost more in external consultancy fees even before you get to the increased costs in contract administration, and you're doing with people who know less than the people you had, so on a time charge basis, you're just screwing yourself badly.
Sighs.
Point is. I've seen the NHS get mauled like this time and time again. Every time you get a new bunch of suits and ties who gouge out a profit for as long as they can. PFI was a gift to everyone except the NHS and the tax payer. You're not talking pennies here. Each cycle of change would be flipping costs in the £100's of millions *per county*. A big chunk of that was heading in to private firm hands with the emphasis firmly on profit ahead of value for tax-payers money.
It's even possible. That there may have been the odd bit of behind closed door deals going on. Contractors like public funded work. The bills get paid.
Back to the point. No. Actually, I don't see the NHS as being an entirely impossible idea. I see continual greed and mismanagement, right up to government sanctioned PFI deals, cashing in on the NHS time and time again. I see skills being bled out of the system with very little chance for a system to develop before it's ripped up and changed again. Then there's Mr Economist pointing his finger at it and saying "Hey the NHS costs too much". It never stood a chance Mr Economist. Guess who kicks these cyclical changes off? The finance and economics departments looking for targeted savings with each change of boss. There is no easy billion £ saving, so lets just re-organise the whole thing again, and by the time you've done that, I'll have my pay packet and be out of the door.
Social Security
By now I've almost lost the will to keep typing.
Just no. Are you honestly telling me, that if someone gets made redundant, or falls ill, we as a society just don't give a shit. Nope. I don't want to put my employment insurance with one firm and my health insurance with another, because I've seen what profiteering ass-holes run insurance funds. I've already got private pension funds in my past that are worth nothing now. The government wanted me to go on to those because they didn't want to pay so much out on my state pension. Cheers guys. Nicely shafted me again. So no. I'm not buying that private insurance is safe at all, if it even ever paid out. "We're you miss sold PPI?"...
Blurgh
I'm getting so fed up with the stupidity and narrow minded view on "Welfare" same as the "Socialism" warmongering. I'm fed up with people who have run systems that have constantly failed for decades to be telling us that the only hope of salvation is more of the same. Maybe try figuring out the economics for a system not based on greed for once in the entire history of the human race? What if you did run a health service with very tight monitoring of *any* external profit made from tax-payer money? You supply towels? Beds? Buildings? Machines that go ping? We want to see all your accounts and you're allowed X% profit. No more.... Well ideally, you'd actually get value for money with fair profits and wages resulting from it. In reality? You'll get falsified salary claims, beefed up expenses, all the same old greed as usual, just via new and different methods. Even so. I'd still rather give my method a try than let people die for loosing a job.
3 Sept 2012
The World According To Me
Nice title huh?
Ok bits of the world...
Assange
It's impossible to be 100% certain, but I'm going with 95% sure the whole rape allegation thing is a set up with the CIA behind it. The lone accuser has known ties with CIA affiliated groups. The CIA is known to frame people with whatever bogus crime they can chuck at them to bring them down. The FBI has even been known to be involved in entrapment in such cases that Federal America doesn't like.
It stinks to high heaven and it plays on the worst side of human emotion. Rape is a horrific thing. By painting Assange as a rapist, they have turned every defender of him in to a "Rape Apologist". Humans tend to think in black and white. That's what it plays on. "The reliable main news media says Assange is wanted for serious rape charges, so he must be a rapist". These people forget who won awards for Journalism and revealed tens of thousands of documents and the Collateral Murder video. If you've not seen that video. Go look on youtube for "Collateral Murder". Go watch a trigger happy helicopter crew waste over a dozen people including those who came to rescue who had been shot already. As far as I know, attempting to get someone who has been shot to hospital is not a crime punishable by death from above. According to Federal America? Yeah it is. Nothing to see here. Move along.
If you're still unconvinced, do your own reading *at source* not via main stream media or some biased blog you found that has already judged Assange guilty of rape.
In my world? Yup. Assange may have some odd bedtime habits. I don't think he's a rapist. I think Federal America just wants him down for revealing the contempt Federal America has for foreign countries and foreign citizens via WikiLeaks.
The Euro
Roll up and witness the spectacle of the 2000's. Witness the unbelievable truth that when it comes down to it, it's not Goverments that control the world. It's the money that control's governments. You will not believe how the goal posts can be moved, time can be bought or how many millions of citizens can be screwed in to the ground to protect the interests of ... money. It's a meme thing. It's not (in my view) some vast Illuminati conspiracy. It's a meme. I know of some fairly clever people in the fiscal world who are still baying for the money presses to turn, for anything at all to happen to keep the market bullish to a degree and screw the people. They are not in some huge group (ok maybe the masons, but I doubt the women are so much).
It's just the mantra since around the 1980's (depends where you draw the line) has been continual growth, ever expanding liquidity based on ever expanding trickery. The ride can't stop. We made billions out of this! It just can't stop! Blame the population on less than average wage. Screw them. I want my thousands to keep piling up like they have done for decades ... The rich get richer. That's how it works right?
That's what you're up against. The machine can't fail for these people. They will happily short a falling market to make a profit. But when defaults and wipe out bankruptcy on a large scale becomes an issue? Oh hell no. They can't go there. Might actually loose a bundle of cash on that one.
Stupidity
We live in a world of sheep.
It's annoying as hell how these people breed and spread yet more sheep. We live in a world where potential statesmen can talk of "Legitimate Rape" and how women can magically reject sperm if it's not. We live in a world where people still believe the every word of the bible is true (that they choose to focus on). We live in a world of climate change deniers. On this already screwed up world we then have yet more billions who focus on the actions of minor celebrities and brand label products to validate themselves and determine who they can and can't associate with. It's the same world harbouring the new wave of Nazi. A whole wave of people who hate immigrants, gays and any other bogus religion except their own bogus religion.
But hey ... don't worry ... we can make jokes on Twitter and get pissed off with all that and just ignore it ...
Uh... Yes that's tempting. But it just lets the whole things slide towards slowly getting more and more stupid as each year, month, week, day, hour, minute, second passes.
It's insanely hard work fighting stupidity when you're outnumbered by thousands to one. But ... What's the alternative?
...
The world according to me is pretty bleak isn't it? On some levels I can get by on the fact I've just got this lifespan to go, then I'm out of it. Having children complicates it. Feels to me like there's little I can do beyond chipping away as best I can to give them a very tiny bonus for when I'm gone. I try to tell them not to be sheep. I don't know if it will stick. The sheep seem to be winning. If the sheep win. My children loose.
Ok bits of the world...
Assange
It's impossible to be 100% certain, but I'm going with 95% sure the whole rape allegation thing is a set up with the CIA behind it. The lone accuser has known ties with CIA affiliated groups. The CIA is known to frame people with whatever bogus crime they can chuck at them to bring them down. The FBI has even been known to be involved in entrapment in such cases that Federal America doesn't like.
It stinks to high heaven and it plays on the worst side of human emotion. Rape is a horrific thing. By painting Assange as a rapist, they have turned every defender of him in to a "Rape Apologist". Humans tend to think in black and white. That's what it plays on. "The reliable main news media says Assange is wanted for serious rape charges, so he must be a rapist". These people forget who won awards for Journalism and revealed tens of thousands of documents and the Collateral Murder video. If you've not seen that video. Go look on youtube for "Collateral Murder". Go watch a trigger happy helicopter crew waste over a dozen people including those who came to rescue who had been shot already. As far as I know, attempting to get someone who has been shot to hospital is not a crime punishable by death from above. According to Federal America? Yeah it is. Nothing to see here. Move along.
If you're still unconvinced, do your own reading *at source* not via main stream media or some biased blog you found that has already judged Assange guilty of rape.
In my world? Yup. Assange may have some odd bedtime habits. I don't think he's a rapist. I think Federal America just wants him down for revealing the contempt Federal America has for foreign countries and foreign citizens via WikiLeaks.
The Euro
Roll up and witness the spectacle of the 2000's. Witness the unbelievable truth that when it comes down to it, it's not Goverments that control the world. It's the money that control's governments. You will not believe how the goal posts can be moved, time can be bought or how many millions of citizens can be screwed in to the ground to protect the interests of ... money. It's a meme thing. It's not (in my view) some vast Illuminati conspiracy. It's a meme. I know of some fairly clever people in the fiscal world who are still baying for the money presses to turn, for anything at all to happen to keep the market bullish to a degree and screw the people. They are not in some huge group (ok maybe the masons, but I doubt the women are so much).
It's just the mantra since around the 1980's (depends where you draw the line) has been continual growth, ever expanding liquidity based on ever expanding trickery. The ride can't stop. We made billions out of this! It just can't stop! Blame the population on less than average wage. Screw them. I want my thousands to keep piling up like they have done for decades ... The rich get richer. That's how it works right?
That's what you're up against. The machine can't fail for these people. They will happily short a falling market to make a profit. But when defaults and wipe out bankruptcy on a large scale becomes an issue? Oh hell no. They can't go there. Might actually loose a bundle of cash on that one.
Stupidity
We live in a world of sheep.
It's annoying as hell how these people breed and spread yet more sheep. We live in a world where potential statesmen can talk of "Legitimate Rape" and how women can magically reject sperm if it's not. We live in a world where people still believe the every word of the bible is true (that they choose to focus on). We live in a world of climate change deniers. On this already screwed up world we then have yet more billions who focus on the actions of minor celebrities and brand label products to validate themselves and determine who they can and can't associate with. It's the same world harbouring the new wave of Nazi. A whole wave of people who hate immigrants, gays and any other bogus religion except their own bogus religion.
But hey ... don't worry ... we can make jokes on Twitter and get pissed off with all that and just ignore it ...
Uh... Yes that's tempting. But it just lets the whole things slide towards slowly getting more and more stupid as each year, month, week, day, hour, minute, second passes.
It's insanely hard work fighting stupidity when you're outnumbered by thousands to one. But ... What's the alternative?
...
The world according to me is pretty bleak isn't it? On some levels I can get by on the fact I've just got this lifespan to go, then I'm out of it. Having children complicates it. Feels to me like there's little I can do beyond chipping away as best I can to give them a very tiny bonus for when I'm gone. I try to tell them not to be sheep. I don't know if it will stick. The sheep seem to be winning. If the sheep win. My children loose.
26 Aug 2012
The Profit Problem
A very simple one this.
"What's good for capitalism is bad for the purchaser".
That's the simplest I can boil it down to.
If profit is the main motive of any business transaction, then extracting the most money from the payee is the goal.
It's bad enough if you're an individual on a budget trying to get by. You may have seen some of my early posts on the junk we all get sold at "low, low" (actually as high as we can get away with it) prices. If you keep your wits about you, you'll notice these days it's actually only a percentage of goods at the supermarket that are actually cheap. If you wanted to stretch your money as far as possible, you can often find cheaper deals for specific items in local pet centres, hardware stores, butchers, veg stalls, even sometimes in the corner shop. No I'm not saying everything they sell is cheaper. But certain items often are.
So your ideal shopping route in the UK (cost wise) would now involve darting around all local shops and the supermarket, then buying up what you actually wanted at the best deal from each shop. Not going to happen is it?
I'm getting distracted. I just hate the supermarket model. It doesn't provide nearly as much locally recycled income and work. I digress ...
Privatisation. That was my point.
There's an insane view that privatising things makes them somehow more efficient. In one very narrow term of the word efficient this is true. They become efficient at maximising profit. It doesn't automatically make them any safer, faster, easier or anything that might actually matter to the end consumer "efficient".
This somehow seems to have got extended to a capitalism v socialism argument. Socialist want unions and the state running things, capitalists believe the free market can do a better job.
Hang on a minute. If we are talking about a provision that can be opened up to multiple effective competing companies, then yes, ok, we can argue capitalism might do a good job. Trouble is there are very few examples of this actually happening in the real world. When it comes to things like railways, electricity, water, gas, phone lines, one of two things tends to happen ...
You either get entirely false competition (say UK railways here) and replace unions with incredibly limited providers subsidised and in bed with the government interests in making profit. OR ... You get something like the current UK electric provider farce which manages to get what should be opposing companies collaborating behind the scenes on price setting for mutual profit.
The problem isn't state funding / union power vs free market capitalism. The problem is effectively controlling either solution to prevent profiteering at the expense of the consumer.
The kicker? If you want to go the free market way, you have to invest in a government funded and effective regulation system. I don't mean the jokes we have like offcom, the PCC, the IPCC, even HMRC Tax Offices! They all get cut back to a point where they are inefficient an unable to control the sector they are supposed to, or find it's easier to get by jumping in bed with the sordid crew they are supposed to be monitoring.
Free market solutions come with a cost that free market idealists are not willing to pay.
State provided solutions come with the exact same problems .. but at least you're removing one step in the profit chain of pain to the end user.
What it keeps coming back to is ... motive for profit, either in a state funded or free market system is the killer. Greed. Money. Unreasonable earnings for what eventually becomes sub-standard provision.
As a species, we don't yet seem to have a way round that.
Once again I seem to find myself in a lonely place watching most of humanity arguing about socialism v capitalism, and shouting in to the wind .. "Guys? It's greed and corruption screwing us up whichever way we do it!"
"What's good for capitalism is bad for the purchaser".
That's the simplest I can boil it down to.
If profit is the main motive of any business transaction, then extracting the most money from the payee is the goal.
It's bad enough if you're an individual on a budget trying to get by. You may have seen some of my early posts on the junk we all get sold at "low, low" (actually as high as we can get away with it) prices. If you keep your wits about you, you'll notice these days it's actually only a percentage of goods at the supermarket that are actually cheap. If you wanted to stretch your money as far as possible, you can often find cheaper deals for specific items in local pet centres, hardware stores, butchers, veg stalls, even sometimes in the corner shop. No I'm not saying everything they sell is cheaper. But certain items often are.
So your ideal shopping route in the UK (cost wise) would now involve darting around all local shops and the supermarket, then buying up what you actually wanted at the best deal from each shop. Not going to happen is it?
I'm getting distracted. I just hate the supermarket model. It doesn't provide nearly as much locally recycled income and work. I digress ...
Privatisation. That was my point.
There's an insane view that privatising things makes them somehow more efficient. In one very narrow term of the word efficient this is true. They become efficient at maximising profit. It doesn't automatically make them any safer, faster, easier or anything that might actually matter to the end consumer "efficient".
This somehow seems to have got extended to a capitalism v socialism argument. Socialist want unions and the state running things, capitalists believe the free market can do a better job.
Hang on a minute. If we are talking about a provision that can be opened up to multiple effective competing companies, then yes, ok, we can argue capitalism might do a good job. Trouble is there are very few examples of this actually happening in the real world. When it comes to things like railways, electricity, water, gas, phone lines, one of two things tends to happen ...
You either get entirely false competition (say UK railways here) and replace unions with incredibly limited providers subsidised and in bed with the government interests in making profit. OR ... You get something like the current UK electric provider farce which manages to get what should be opposing companies collaborating behind the scenes on price setting for mutual profit.
The problem isn't state funding / union power vs free market capitalism. The problem is effectively controlling either solution to prevent profiteering at the expense of the consumer.
The kicker? If you want to go the free market way, you have to invest in a government funded and effective regulation system. I don't mean the jokes we have like offcom, the PCC, the IPCC, even HMRC Tax Offices! They all get cut back to a point where they are inefficient an unable to control the sector they are supposed to, or find it's easier to get by jumping in bed with the sordid crew they are supposed to be monitoring.
Free market solutions come with a cost that free market idealists are not willing to pay.
State provided solutions come with the exact same problems .. but at least you're removing one step in the profit chain of pain to the end user.
What it keeps coming back to is ... motive for profit, either in a state funded or free market system is the killer. Greed. Money. Unreasonable earnings for what eventually becomes sub-standard provision.
As a species, we don't yet seem to have a way round that.
Once again I seem to find myself in a lonely place watching most of humanity arguing about socialism v capitalism, and shouting in to the wind .. "Guys? It's greed and corruption screwing us up whichever way we do it!"
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