Quotulatiousness

March 7, 2014

Breaking news – Satoshi Nakamoto isn’t really “Satoshi Nakamoto”

Filed under: Economics, Media — Tags: , , , — Nicholas @ 08:00

Self-described Bitcoin detractor Colby Cosh explains how “Newsweek” got conned by “Satoshi Nakamoto” (yes, both sets of scare quotes are ‘splained):

Newsweek’s Satoshi is a 64-year-old Japanese-American living in Temple City, California. “Satoshi Nakamoto” is the name on his birth certificate, although he goes by Dorian. Mr. Nakamoto has a physics degree and has done computer engineering for a number of military-industrial firms, as well as one online stock-price provider. Much of his work history is shrouded in official secrecy, or perhaps just the habitual truculence of defence-tech professionals. He is known to have a libertarian streak, has had some run-ins with the financial system, and is thought by friends and relatives to capable of cooking up something like Bitcoin.

But it is now looking as though he had the square root of bugger-all to do with it. Newsweek concluded its investigation of Dorian S. Nakamoto with a police-supervised doorstep interview in which the gentleman is supposed to have said “I am no longer involved in that and I cannot discuss it. It’s been turned over to other people.” Dorian has now told the Associated Press that when he said “no longer,” two words on which Newsweek hung an entire feature, he was referring to the engineering profession generally. He denied being involved in any way with what he repeatedly called “Bitcom,” explained the work he had briefly done for a financial-information company, and read the Newsweek piece to himself, displaying increasing confusion and annoyance as he did so.

I have to say, having read New Newsweek’s article, that it does appear to rest on a fairly slender foundation. Aside from that “no longer,” the evidence that Dorian Satoshi Nakamoto equals “Satoshi Nakamoto” amounts to the obvious coincidence of names and a bunch of quotes from the man’s semi-estranged family. Unfortunately, neither “Satoshi” nor “Nakamoto” are uncommon names for individuals of Japanese ancestry; the article acknowledges that there are several more just in the United States. The Bitcoin-inventing “Satoshi” clearly does not much want to be found; the name is obviously a pseudonym, has always been taken to be one until now, and was probably chosen precisely for its red-herring flavour.

Okay, so Satoshi Nakamoto is probably not “Satoshi Nakamoto”, but why is Newsweek actually “Newsweek” in scare quotes?

A lot of people are asking how something like this could happen to Newsweek, not realizing that the Newsweek nameplate has basically been asset-stripped and repurposed in order that the remaining credibility and familiarity might be squeezed out of it. (This will happen to Maclean’s someday — two years from now, or 200. I’m hoping it’s 200.) No one expected this cred-squeezing process to happen quite so quickly and powerfully, but IBT Media, buyer of Newsweek, seems to have blundered into a singular piece of ill luck: the wrong reporter matched at the wrong time with the wrong story, one in which an informed intuition about any number of subjects might have saved the day.

March 5, 2014

MazaCoin is now the official currency of the Lakota nation

Filed under: Economics, USA — Tags: , , — Nicholas @ 16:07

Adrianne Jeffries talks about a Bitcoin-like currency that the Lakota have adopted as their official currency:

The programmer and Native American activist Payu Harris raised a gavel Monday night and vigorously banged the bell to open trading at The Bitcoin Center, a meeting space for virtual currency geeks that looks like an empty art gallery in the middle of New York’s Financial District.

Harris was there to promote MazaCoin, a cousin of Bitcoin that is now the official currency of the seven bands that make up the Lakota nation. After an hour of questions, Harris thanked the small crowd and was promptly accosted by a tall man and a woman in red who wanted to buy some MazaCoin, which Harris was selling for 10 cents apiece. The two trailed him around the room as he hunted for a printer so he could issue the digital currency on paper. MazaCoin is a month-old cryptocurrency based on the same proof-of-work algorithm as Bitcoin, the virtual currency that approximates cash on the internet — but no one in the room was equipped to make a digital trade.

There have been a slew of copycats since the rise of Bitcoin in 2009. The first wave attempted to improve on the basic Bitcoin protocol. The second wave, which includes the meme-based Dogecoin and the Icelandic Auroracoin, are catering to specific groups.

February 26, 2014

MtGox Bitcoin “owners” didn’t actually own their Bitcoins

Filed under: Business, Economics — Tags: , , — Nicholas @ 09:09

I haven’t been following the Bitcoin situation too closely — although if I’d had extra money lying around over the last year or two, I might have dabbled — but it’s hard to figure out what really happened from the media reports. At Samizdata, Bruce Hoult explains the details:

What has happened is that people who bought Bitcoins on MtGox thought they owned them. They did not, according to the Bitcoin system. MtGox did. MtGox kept their own records of who ‘owned’ what. And MtGox were incompetent.

Which should have been apparent from the start: MtGox learns Bitcoin

The proper way to use Bitcoin is to keep your wallet of Bitcoins on your own computer. And back it up. Several times. Print it on paper if you want — it will likely fit on one side of A4 in not very small print. Keep it secret. Keep it safe. It is a bearer certificates. If you lose your wallet or forget the password then those Bitcoins are gone out of circulation forever.

That is not what happened with MtGox. They gave Bitcoins that people thought they owned (but did not) to other unauthorised people. It is theft. Just like a bank robbery. Those Bitcoins still exist, just in other hands.

This has absolutely no effect on people who keep their Bitcoins on their own computer (or phone). There are the same number in circulation as before. Bitcoins still can’t be counterfeited or inflated.

If you want/need to use a place similar to MtGox to turn normal money into Bitcoins then DO NOT LEAVE THEM IN YOUR ONLINE WALLET THERE. Make yourself an identity and wallet on your own computer and make a payment from your account on the Bitcoin exchange to your own identity. Then you are perfectly safe.

Well, you are if you do your backups diligently.

Or, if you want to turn normal cash into Bitcoins, find someone who has Bitcoins and wants cash, agree a price, have them do a transfer of Bitcoins from their wallet to yours (using the actual Bitcoin system, not an exchange), and hand them the cash.

February 24, 2014

Paul Krugman on Scottish money

Filed under: Britain, Economics — Tags: , , — Nicholas @ 09:40

I rarely find much of interest in Paul Krugman’s blog, but he’s pretty good in this brief analysis of Scotland’s monetary future in a post-independence scenario:

Whether it’s overall a good idea or not, however, independence would have to rest on a sound monetary foundation. And the independence movement has me worried, because what it has said on that that crucial subject seems deeply muddle-headed.

What the independence movement says is that there’s no problem — Scotland will simply stay on the pound. That is, however, much more problematic than they seem to realize.

[…]

In fact, Scotland-on-the-pound would be in even worse shape than the euro countries, because the Bank of England would be under no obligation to act as lender of last resort to Scottish banks — that is, it would arguably take even less responsibility for local financial stability than the pre-Draghi ECB. And it would fall very far short of the post-Draghi ECB, which has in effect taken on the role of lender of last resort to eurozone governments, too.

Add to this the lack of fiscal integration. The question isn’t whether Scotland would on average pay more or less in taxes if independent; probably a bit less, depending on how you handle the oil revenues. Instead, the question is what would happen if something goes wrong, if there’s a slump in Scotland’s economy. As part of the United Kingdom, Scotland would receive large de facto aid, just like a U.S. state (or Wales); if it were on its own, it would be on its own, like Portugal.

As Stephen Gordon points out, this is “another analysis where you can substitute Qc/RoC for Scotland/UK”.

February 21, 2014

Delingpole’s “love” letter to Scotland

Filed under: Britain, Economics, Food — Tags: , , — Nicholas @ 12:12

He spends just about as much time trying to persuade Scots to stay as he does in winding them up:

Anyway, here are my ten reasons why I think Scotland and England are much better together than apart.

[…]

3. Deep Fried Mars Bars.

As every Englishman knows, these are the staple diet of inner city Scotland*, usually served with a side order of deep fried pizza, washed down with Irn Bru, and followed with a heroin chaser, which makes them vomit it all up again, as seen in Irvine Welsh’s hard-hitting documentary Trainspotting. (*Although we of course are aware that outside the cities, you subsist on haggis and whisky)

Some Scots like to claim that this a grotesque caricature which is typical of the contempt in which they are held by the snide, ignorant, condescending English. But then, the feeling’s mutual, isn’t it? In any international sporting event, the Scots will always support whichever foreign team is playing England.

And isn’t that exactly what’s so wonderful about our relationship? All the best marriages are based on partial loathing: look at Anthony & Cleo; Taylor and Burton; Petruchio and Katherina. It’s the spark that keeps it all alive.

4. The Pound.

As Bank of England Governor Mark Carney has made perfectly clear, an independent Scotland is not going to keep the pound. Why not? Well look at what Greece did when — with a little book-balancing sleight of hand from its friends at Goldman Sachs — it snuck into membership of the Euro.

So if you want a future where you travel abroad, my Scottish friends, or indeed where you want to be able to be able to import anything at all, it’s very much in your interests to maintain the Union. Otherwise you’ll have to find a currency more in keeping with your new global status: the Albanian Lek, perhaps, or the West African CFA franc, as used by your economic soul-mate Burkina Faso.

5. The economy.

Let’s be blunt: apart from the whisky industry, and what’s left of the tourist industry that hasn’t been wiped out by Alex Salmond’s wind-farm building programme, Scotland doesn’t really have one. It is a welfare-dependent basket case, with near Soviet levels of government spending and a workforce who’d mostly be out of jobs if they weren’t sucking on the teat of state employment.

For various historical and emotional reasons, the English taxpayers who bankroll most of this welfarism — e.g. through the iniquitous Barnett Formula, whereby around £1000 more per annum is spent by the government on Scottish citizens than English ones — have decided generally to be cool about this.

But when we hear about Scotland’s plans to go it alone economically, we’re about as convinced as the parents of stroppy teenage kids are when they threaten to leave home right this minute. The difference is that when in ten minutes’ time we get the phone call “D-a-a-d. Will you come and pick me up? I’ve run out of pizza money” we’re not going to come running.

February 18, 2014

“No-one knows where the Canadian dollar is going”

Filed under: Cancon, Economics — Tags: , — Nicholas @ 10:13

In Maclean’s, Stephen Gordon assures you that there is no mastermind at work, determining what happens to the Canadian dollar:

The Canadian dollar fell from 97 cents US to below 89 cents US in the weeks following the Bank of Canada’s decision to shift its monetary policy stance away from a tightening bias. (It has recently rebounded to hold steady at around 91 cents as I write.) These developments have provided additional fodder for those pundits who are in the habit of offering their views about where the dollar should go and/or where it will go (the two are separate issues). These views fill up media space, but they shouldn’t be taken too seriously. The foreign exchange market is one where the “semi-strong“ form of the Efficient Market Hypothesis holds: movements in exchange rates cannot be predicted using publicly-available information.

If everyone really believed that the Canadian dollar will end up at (say) 85 US cents, then everyone would sell CAD at its current price to buy USD, wait for the price of USD to increase – which is the same thing as waiting for the CAD to depreciate – and then sell at the higher price. But if everyone does that, the CAD would be bid down to the point where it is no longer profitable: 85 cents. This is why you should take predictions about foreign exchange movements with a grain of salt: if you could actually predict them, the last thing you’d do is tell anyone.

This doesn’t mean that exchange rate movements are completely random: some of the fluctuations can be ascribed to variations in the ‘fundamentals’. But what really drives these movements are the unexpected changes in the fundamentals. And unexpected changes are, by definition, unpredictable. The most reliable forecasting model is a random walk: the exchange rate next period is the current exchange rate plus a white noise error term. The best prediction for where the exchange rate is going is where it is now.

February 10, 2014

The difference between money and wealth

Filed under: Economics — Tags: , , , , — Nicholas @ 11:37

At Ace of Spades HQ, Monty gives an introduction to Say’s Law:

Jean-Baptiste Say, an 18th-century economist and follower of Adam Smith, recognized one of the most fundamental laws in all economics: the entirely common-sense observation that consumption requires production. This axiom is called Say’s Law of Markets.

However, this axiom is often mis-stated as “production creates its own demand”. This is incorrect — production is necessary for consumption to take place, but production anticipates demand, it does not cause it. Production is speculative in this sense. The simple act of producing some good or service does not, in and of itself, create demand for that good or service. (This is true even for basic commodities.)

What Say’s Law really says is that production is the source of wealth. Market-driven production creates value and provides choice to consumers. Inventors and innovators bring new products to market, and as consumers are exposed to these new products, demand rises with the utility or desirability of these new products. New markets are opened by innovators who are able to tap into needs and wants that consumers didn’t even know they had until a new product or service is offered.

And he explains why money is not wealth:

So what is “wealth”, really? (I could write a whole book on the difference between “wealth” and “money”, but I’ll try to boil it down.) Wealth is options. Wealth is choice. Wealth is variety. Wealth is agency — being able to do what you want to do when you want to do it. Wealth is surfeit — having more than the essentials of life. It is comfort, leisure, ease — or at least the agency and option (those words again) to avail oneself of leisure. Simply put, wealth is stored value that can be drawn down in various ways, only some of which involve the exchange of money for goods and services. And how is wealth created? Through production, because production must necessarily precede consumption.

Money correlates with wealth because money is a medium of exchange and a store of value. Rich people have a lot of money because they are wealthy, not the other way around. Wealth allows us to buy a bigger house or better car or nicer furniture. It pays for a nice dinner for two at an upscale restaurant. Note well: wealth buys these things, not money per se. Consumption is the draw-down of wealth, not the simple expenditure of money.

Money is the oil in the machine of an economy, but money is not in and of itself wealth. If I am stranded on a desert island with a thousand gold coins, I am just as poor as if I were a homeless vagrant living in an alleyway somewhere, because I cannot exchange my gold for things I want or need. It does not give me options or variety or comfort. My gold facilitates neither production nor consumption absent a market mechanism that makes use of it.

January 27, 2014

HSBC now requires “Mother, May I” letters from British customers for large withdrawals

Filed under: Britain, Business — Tags: , — Nicholas @ 09:32

HSBC has irritated some of their British customers with a new requirement for justifying why large cash withdrawals are necessary before authorizing them:

Stephen Cotton went to his local HSBC branch this month to withdraw £7,000 from his instant access savings account to pay back a loan from his mother.

A year before, he had withdrawn a larger sum in cash from HSBC without a problem.

But this time it was different, as he told Money Box: “When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.”

Mr Cotton says the staff refused to tell him how much he could have: “So I wrote out a few slips. I said, ‘Can I have £5,000?’ They said no. I said, ‘Can I have £4,000?’ They said no. And then I wrote one out for £3,000 and they said, ‘OK, we’ll give you that.’ ”

He asked if he could return later that day to withdraw another £3,000, but he was told he could not do the same thing twice in one day.

He wrote to complain to HSBC about the new rules and also that he had not been informed of any change.

The bank said it did not have to tell him. “As this was not a change to the Terms and Conditions of your bank account, we had no need to pre-notify customers of the change,” HSBC wrote.

As you might imagine, this new policy drew strong criticism, so the bank issued the following statement yesterday:

As a responsible bank we must track all financial transactions. Cash presents more risk, and in particular financial crime risk, than other payment methods. It also leaves customers with very little protection if things go wrong. Therefore, we need to monitor particularly closely movements of cash in and out of the banking system. This is why we ask our customers about the purpose of large cash withdrawals when they are unusual and out of keeping with the normal running of their account.

Since last November, in some instances we may have also asked these customers to show us evidence of what the cash is required for. However, it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We apologise to any customer who has been given incorrect information and inconvenienced.

H/T to BenK for the links.

January 18, 2014

Austrian economics

Filed under: Economics — Tags: , , — Nicholas @ 11:35

Published on 26 Sep 2012

Steve Horwitz, Professor of Economics at St. Lawrence University, explains what Austrian Economics is and what Austrian Economics is not, clearing up some common misconceptions.

This video is based on Steve’s essay by the same name:
http://www.coordinationproblem.org/2010/11/what-austrian-economics-is-and-what-austrian-economics-is-not.html

To learn more about Austrian Economics, visit http://www.fee.org

January 14, 2014

2014 Economic Freedom Rankings

Filed under: Cancon, Economics, Liberty — Tags: , , — Nicholas @ 10:51

The Heritage Foundation has posted their 2014 economic freedom rankings. Here’s a slideshow of the top ten countries by Heritage’s ranking formula:

The United States missed the top ten, coming in at #12. Canada ranked number six:

Canada’s economic freedom score is 80.2, making its economy the 6th freest in the 2014 Index. Its overall score is 0.8 point better than last year, reflecting improvements in investment freedom, the management of government spending, and monetary freedom. Canada continues to be the freest economy in the North America region.

Over the 20-year history of the Index, Canada has advanced its economic freedom score by 10.7 points, the third biggest improvement among developed economies. Substantial score increases in seven of the 10 economic freedoms, including investment freedom, fiscal freedom, and the management of public spending, have enabled Canada to elevate its economic freedom status from “moderately free” 20 years ago to “free” today.

A transparent and stable business climate makes Canada one of the world’s most attractive investment destinations. Openness to global trade and commerce is firmly institutionalized, and the economy has rebounded relatively quickly from the global recession. The financial system has remained stable, and prudent regulations have allowed banks to withstand the global financial turmoil with little disruption.

December 18, 2013

Bank of England switching to plastic from paper

Filed under: Britain — Tags: , , — Nicholas @ 09:41

Following the example of Australia (and more recently, Canada), the Bank of England will be printing bank notes on plastic from 2016 onwards:

Winston Churchill concept art for 5 pound note

Mark Carney, the governor of the Bank of England, has formally announced that Britain will switch to using plastic banknotes in 2016, ending 320 years of paper money.

After a public consultation in which 87% of the 13,000 respondents backed the new-style currency, the Bank said it would introduce “polymer” notes, as it prefers to call them, in two years’ time, starting with the new £5 note featuring Winston Churchill in 2016 and the Jane Austen £10 a year later.

Speaking at a press conference in the Bank’s Threadneedle Street headquarters, Carney said: “Our polymer notes will combine the best of progress and tradition. They will be more secure from counterfeiting and more resistant to damage while celebrating the history and tradition that is important both to the Bank and the nation as a whole.”

The move follows Carney’s native Canada, where plastic notes are being rolled out, and Australia, where they have been in circulation for more than two decades.

Carney launched a public consultation on polymer banknotes, seen as cleaner and more durable, shortly after arriving at the Bank this summer. However, the Bank’s notes division has been considering plastic money for several years.

I’m still not convinced about the Canadian polymer banknotes: they tend to stick together much more than the paper notes did and they are reportedly susceptible to “fusing” together in high heat.

September 29, 2013

Portland’s tainted $2 bills

Filed under: Business, USA — Tags: , , — Nicholas @ 11:32

Last year there were a large number of red-stained $2 bills circulating in Portland, Oregon. Mary Emily O’Hara investigated the situation:

The manager at the McDonald’s on Northwest Yeon Avenue glanced at the money in the customer’s hand, a $2 bill that looked as if its edges had been dipped in blood. He grew tense, shook his head and turned away.

“Oh, no,” he says. “We’re not allowed to accept those.”

McDonald’s employees had seen the mystery money before — crimson-stained, smeared, always $2 bills — as have food carts, bars, retail stores and other businesses across the Portland area.

The bills have amused some people and alarmed others, who aren’t sure if the stains come from real blood, if the cash is counterfeit, or if the bills were marked by an exploding dye pack during a bank robbery gone wrong.

Thousands of these tainted bills are in circulation around the city, but their source is no longer a mystery: They’re a marketing gimmick for Casa Diablo, a Northwest Portland strip club that is taking U.S. currency and smearing it with blood-red ink.

You’d think defacing the currency would be a problem for the government … and it is:

But the feds have taken a dim view of Zukle’s actions: It’s against federal law to deface U.S. currency with the intent to make it unusable.

WW has learned Zukle and Casa Diablo are now under investigation by the Secret Service. Jon Dalton, resident agent in charge of the Secret Service’s Portland office, tells WW the fact the bills are being rejected show Casa Diablo’s inking of the money violates federal law.

Dalton says his office has told Casa Diablo three times to stop handing out the tainted bills. He also says his office has prepared a cease and desist order and is consulting with federal prosecutors about criminal charges. (WW has also learned the FBI paid the bar a visit in February.)

H/T to Marginal Revolution for the link.

July 4, 2013

“Buenos Aires […] is the headquarters for the central planning bad idea bus”

Filed under: Americas, Economics, Government — Tags: , , , , , — Nicholas @ 08:32

At the Sovereign Man blog, Simon Black discusses Argentina’s sad history of central planning failures:

The more interesting part about Buenos Aires, though, is that this place is the headquarters for the central planning bad idea bus.

Argentina’s President, Cristina Fernandez, continues to tighten her stranglehold over the nation’s economy and society.

This country is so abundant with natural resources, it should be immensely wealthy. And it was. At the turn of the 20th century, Argentina was one of the richest countries in the world.

Yet rather than adopting the market-oriented approaches taken by, say, Colombia and Chile, Argentina is following the model of Venezuela.

Cristina rules by decree here; there is very little legislative power. She may as well start wearing a crown.

Just in the last few years, she’s imposed capital controls. Media controls. Price controls. Export controls.

She’s seized pension funds. She fired a central banker who didn’t bend to her ‘print more money’ directives. She even filed criminal charges against economists who publish credible inflation figures, as opposed to the lies that her government releases.

Inflation here is completely out of control. The government figures say 10%, but the street level is several times that.

[. . .]

Being here in this laboratory of central planning makes a few things abundantly clear:

1) Printing money does not create wealth. If it did, Argentina would be one of the richest places in the world again.

2) All of these policies that are ‘for the benefit of the people’ almost universally and up screwing the people they claim to help.

Printing money creates nasty inflation. If you’re wealthy, it leads to asset bubbles, which can make you even wealthier. If you’re poor, you just get crushed by rising prices. Or worse – shortages (remember the recent Venezuelan toilet paper crisis?)

3) Desperation leads to even more desperation. The worse things get, the tighter government controls become… which makes things even worse. It’s a classic negative feedback loop.

Both the United States and pan-European governments are varying degrees of this model, with only a flimsy layer of international credibility separating them from the regime of Cristina.

So Argentina is really a perfect case study in things to come.

May 31, 2013

Reason.tv: What Game of Thrones teaches about crony capitalism

Filed under: Books, Economics, History, Media — Tags: , , , , — Nicholas @ 00:01

“The game of thrones in general is a game of cronyism because it’s all about forming political alliances, especially with people who can make you better off economically speaking,” says Auburn University Economics Instructor Matthew McCaffrey.

McCaffrey has recently written about the economics involved in the popular Game of Thrones novels by George R.R. Martin as well as the HBO series based on the books. He sat down with ReasonTV’s Tracy Oppenheimer to discuss the various economic concepts that develop alongside the character-driven plot line, such as sin taxes, coin clipping, and the ever-present cost of borrowing.

According to McCaffrey, Martin extensively researches historical economic systems to make “the Realm” as plausible as possible.

“As part of his process he ends up uncovering a lot of historical details that usually get lost in a fantasy book of this kind,” says McCaffrey, “just practical difficulties of running a kingdom, how public finance works, how the game of thrones corrupts the people who play it and how it ends disastrously for the people who don’t play it well.”

May 20, 2013

Counterfeit $100 bills now in circulation, despite all the anti-counterfeiting features

Filed under: Cancon, Technology — Tags: , , , — Nicholas @ 09:44

The new polymer bills were touted as having very hard to counterfeit features, and people apparently believed what they were told — because they haven’t been bothering to check the new bills:

Less than two years ago, the head of the RCMP said Canada’s new polymer bank notes would go a long way in deterring the threat of counterfeiting.

Just last month, the Bank of Canada announced the notes’ sophisticated transparency and holography made them “the most secure bank note series ever issued” by the institution.

Too bad somebody forgot to tell criminals in British Columbia.

Mounties and municipal police in Metro Vancouver are warning the public that several of the fake $100 bills have been detected in the region over the past few weeks.

The fanfare about the security features on the bills, may be part of the problem, said RCMP Sgt. Duncan Pound.

“Because the polymer series’ notes are so secure … there’s almost an overconfidence among retailers and the public in terms of when you sort of see the strip, the polymer looking materials, everybody says ‘oh, this one’s going to be good because you know it’s impossible to counterfeit,'” he said.

“So people don’t actually check it.”

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