Thursday, August 18, 2016

Everything is a pyramid scheme

What is Steemit?

Launched in March and gaining prominence in July, Steemit, a self-described "blockchain-based social media platform", has seen this level of notoriety in just its first few months of operation. To date, it has polarized blockchain experts while winning scores of newcomers to the technology.

The brain-child of Daniel Larimer, founder of BitShares, and Ned Scott, a former financial analyst, Steemit aims to provide a place for individuals to create content, promote the content they believe is good and comment on stories — all while earning money.

But Steemit is more than just a website for earning spare change.

It’s an actual blockchain built on a piece of technology developed by Larimer called Graphene, which allows for the deployment of application-specific blockchains.

Scott, in interview with CoinDesk, explained that the team only had the idea for Steemit back in January and, because of the Graphene framework, they were able to quickly roll the project out.

The rest, like most things in the blockchain space, is a bit difficult to explain...

Translation: It's a pyramid scheme.

Crypto-currencies are pure fiat, just like government legal tender, except they don't have an armed government with a legal market to back them up. They will be exchangeable for real goods and services, until they won't be. The subtext to all this: if you can't explain what you're about in one declarative sentence, you're probably a pyramid scheme.

The Twitter thread above got me thinking about this old post titled, "Storing Paco" [reminder - it's all been said on here already]:
Tyler's metaphor, his pet dog Paco, refers to the fact that savers now have to pay the banks to store their money (Paco) instead of having their money run around and play (generate positive returns). Negative interest on deposits basically transforms cash into gold, implying huge, zombie-army levels of risk, like a survivalist who incurs storage and opportunity costs in order to hoard canned beans and ammo. But the risk doesn't seem to be out there, with healthy profits and positive consumer confidence. So this implies, to Tyler, that there is some barrier to new investment. (He loses me at this point--economic stagnation? wealthy entrepeneurs cashing in their chips?)

Tyler continues: "I liked Paco (more importantly Paco liked me), but I do not enjoy living in a Paco economy. I think of the calm before the storm and wonder how to reconcile the observed calm and the potential for the storm. I do not like the most obvious attempts at reconciliation."

In other words, something really obvious should be happening to explain negative interest rates (which, as a practical matter, are economically impossible) but darned if anybody can find it.

So what is "it?" And I think I've found "it." Every person I talk to is seeing their margins squeezed. Competition is pretty brutal on an inter-connected planet of 7 billion people. This doesn't mean we're all going to die; it just means our profits are going to be ever lower. Add in a constant stream of new money, and quality trends downward and more and more people see their living standards fall, thus driving high-IQ people who want to make a lot of money into value-transference activities like Steemit instead of, say, discovering how to repair damaged neural tissue.

Thus the conundrum for the rich: there really isn't any "next big thing" left out there, and bank deposits are only insured up to $250,000, so they're storing their money in cash equivalent: government bonds. There are a lot of externalities in play as well which I won't go into. But what this also means is there is a lot of over-valued trash and the rich know it, which is why they're stockpiling cash. Note too that they are counting on the current bond issuers (the EU, the US government et al.) still being around to honor their debt obligations. Of course, the issuers are going to do this by pure money-printing but productivity and markets seem to be growing just enough that this is not a problem for the debt holders. Yet.

The system is fragile in that the over-valued trash (like Steemit) must eventually reflect the underlying fundamentals, and the government is borrowing too much. I suspect the situation will flip and the flight to real assets (land, gold, ammo, vodka) will come when it's obvious that the future mean-90 IQ peoples of the US and Europe will not and cannot repay the obligations incurred by mean-100 IQ Americans and Europeans. So good news for my fellow 52-year olds: the system has about 30 more years left in the tank.

Finally, apologies for the delayed posting. I am going to try and follow my friend the Rat-Faced Man's advice and post weekly, even if (when) the quality suffers.

Friday, July 15, 2016

The year Rudyard Kipling was proved right about everything

The Stranger within my gates,
He may be evil or good,
But I cannot tell what powers control--
What reasons sway his mood;
Nor when the Gods of his far-off land
Shall repossess his blood.
BREAKING: At least 80 people were killed and 18 others were seriously injured Thursday when a terrorist drove a large truck loaded with guns and hand grenades into a crowd that had gathered for a Bastille Day fireworks display in the southern French city of Nice.

There was no immediate claim of responsibility, but two sources, including a U.S. counterterrorism source who collects and monitors jihadist social media, told Fox News that accounts linked to ISIS were "celebratory" and their followers were told to use the hashtag "Nice".

The death toll was confirmed by French Interior Minister Bernard Cazeneuve early Friday morning. A source told Fox News that two Americans – a father and his son – were among the dead in the attack.

Earlier, French President Francois Hollande said that children were among the dead, and said his country was "under the threat of Islamic terrorism. We have to demonstrate absolute vigilance and show determination that is unfailing."

There were a number of weapons in the truck; France's strict gun control does nothing to keep weapons out of the hands of Islamic militants. The perpetrator is apparently first-generation French, of Tunisian origin: Mohamed Lahouaiej Bouhlel (Are you muttering to yourself that that's not a French name? I'm calling Homeland Security you hateful bigot.) Immigrant populations in France remain resentful and marginalized through successive generations. They hate it there; the French hate them there. France is under martial law, with armed soldiers patrolling her streets. Naturally, nobody but the Alt-Right (Fascists! Nazis!) dares suggest that maybe this is what separate countries are for.

Why is it not a deadly sin to squander your children's inheritance of a high-trust society by importing violent, immiscible peoples, just so you can have cheap labor and more consumers to sell crummy gewgaws and cellphone plans to?

Obviously, when I say "Rudyard Kipling," I may as well be saying "Donald Trump."
We must stop importing extremism through senseless immigration policies.

A pause for reassessment will help us to prevent the next San Bernardino or worse -- all you have to do is look at the World Trade Center and September 11th.
By what stretch is this unconscionable bigotry, as opposed to an eminently debatable proposal in light of the facts on the ground? Different people are different; a Tunisian Muslim has different heroes, different history, different creed, different norms, and on and on, with little in common to French celebrating their own version of July 4. The immigrant is what he is; the real traitors are the thoughtless bureaucrats and merchants who think countries are just lines on a map.

Wednesday, June 22, 2016

Constitutional fetishism

Remember the great and glorious Third Amendment to the U.S. Constitution?
No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.
I am going out on a limb and saying that this Amendment has never been invoked against the US government since its founding, or maybe somebody can point me to some case from the extremely episodic War Between The States.

We forget that the Constitution, an admittedly cogent Enlightenment-era document, really was a creature of its times. Having a bunch of drunken soldiers sprawled in your living room, leering at your daughter and barking commands at your wife would loom large in a colonist's mind. In 2016, the notion seems very quaint. Besides, if the US military rolled into town to put down a tax protest, the government would just exercise its eminent domain powers to kick you out of your house, with the blessing of federal judges and the Constitution. Actually, the Amendment just means Congress has to pass a law to quarter soldiers in your house.

Remember Art. I, Sec. 8 under Congress's enumerated powers?

To establish Post Offices and post Roads;

Which, as we all know, gives businesses the right to hire the US Pension, er, Postal Service to distribute their corporate marketing materials at subsidized rates.

In a nation of 320 million with satellite communications and any number of competing delivery services the USPS could surely be shut down, and FedEx or UPS would tell the few households living away out in the sticks that they and not their more sensibly located neighbors will bear the cost of a 10-mile trek into town for their deliveries. The broke, busted USPS could be decommissioned by reading Sec. 8 as a list of permissive powers, not as a mandate, which was surely the original intent, but the men who wrote the document are no longer around to tell us that was the original intent. Therefore, the Constitution means whatever nine government lawyers say it means.

This odd dynamic turns elections into winner-take-all contests over existential issues. Once the winners can seize the levers of State power and install their own judges to say what the Constitution means, they can do whatever the hell they want, same as any old despot. The Constitution is just words on paper; it's not a talisman and doesn't actually conserve anything.

Conservatives need to get over their fetish with the Constitution. It's become a ghost shirt they put on and dance around in, hoping the old gods will come back and drive the evil Liberals back into the sea. They would be better served by just being honest and saying they want that old America that was 85% Anglo-European.

Sunday, June 19, 2016

Moderated comments

I am moving to moderated comments going forward. My criteria at this point are, "No Spam" and "No Corvinus." Otherwise, based on the history of this blog, you should expect that your comment will be posted in full. Sorry to have to do this.

"Negative Rates, Plunging Yields and a 'Fix' for the Economy"

Good exposition from Mike Whitney:
On Tuesday, the 10-year German bund slipped into the bizarro-world of negative rates where lenders actually pay the government to borrow their money. Aside from turning capitalism on its head, negative rates illustrate the muddled thinking of central bankers who continue to believe they can spur growth by reducing the cost of cash. Regrettably, the evidence suggests otherwise. At present, there is more than $10 trillion of government sovereign debt with negative rates, but no sign of a credit expansion anywhere. Also, global GDP has slowed to a crawl indicating that negative rates are not having any meaningful impact on growth. So if negative rates are really as great as central bankers seem to think, it certainly doesn’t show up in the data.
There are a number of factors effecting bond yields: Fear, that a Brexit could lead to more market turbulence and perhaps another financial crisis. Pessimism, that the outlook for growth will stay dim for the foreseeable future keeping the demand for credit weak.. And lack of confidence, that policymakers will be able to reach their target inflation rate of 2 percent as long as wages and personal consumption remain flat. All of these have fueled the flight to safety that has put pressure on yields. But the primary cause of the droopy yields is central bank meddling, particularly QE, which has dramatically distorted prices by reducing the supply of USTs by more than $2.5 trillion in the US alone.
So far, so good. Then we get to this.
So what can be done? Is there a way to turn this train around and put the economy back on the road to recovery?

Sure. While the political issues are pretty thorny, the economic ones are fairly straightforward. What’s needed is more bigger deficits, more fiscal stimulus and more government spending. That’s the ticket.

[Ahem] Pardon, Lord Keynes. Your slip is showing.

Keynesians have been telling us that public deficits to stimulate consumption when consumers decide to pay down debt or save for their futures is the cure to what ails us since the 1930′s. The result has been a continuous cycle of booms and busts that is nearing its denouement.

The U.S. is getting older and less white. The economy is, perforce, going to contract. This would not be a problem but for the fact that we are leveraged so far into the future that any contraction spells disaster for large segments of the population (voters, which is why the problem never gets solved). The biggest Bubble right now is the one in public debt. That is what is starving the real economy of capital and why Mike looks in vain for signs of growth. I do think he is half-right, in that roads, bridges, nationwide wi-fi, etc., would probably generate positive ROI versus kerosene and diesel for military logistics.

The Japanese are further down this road than we are. They have no growth despite public debt measured in the quadrillions. By the Keynesians’ hysterical reasoning, public debt should be pushed into the quintillions lest the Japanese starve and their corpses pile up in the streets. The Japanese have not yet exhausted the asset side of their ledger, in the form of high human capital and savings.

There is more debt than can ever be repaid and this economic deadweight is increasingly patent. Can it just be rolled over into infinity? I think if it could, a lot of former governments would still be around. So history has not stopped and eventually this debt, like the mortgage-backed-securities in 2008, will be discounted to the ability of the debtors to repay. Again, like 2008, the Fed will blow up its balance sheet and paper over the drop in nominal values. I don’t think there will be enough left in the tank of the real economy at that point, evidenced by the fact that the economy has barely grown since 2008. Entire sectors will have to disappear for capital to be reallocated to productive uses. Many of us won’t make the cut and will sink into poverty. I wish I were younger.

Saturday, June 18, 2016

The Age of Evangelism Is Over, cont'd

Russell Moore makes Rod Dreher feel all tingly inside.

The premise is that religious liberty, perforce, includes the freedom to practice Islam as well, so therefore the 11th Commandment requires Christians to refrain from opposing the construction of mosques in the United States. If Hindu, Jewish, Muslim and Buddhist immigrants are to be encouraged in their active religious practice, then U.S. Christian churches cannot, in good conscience, continue to insist that their congregations fund overseas missions.

This is how multicultural empires end: the electorate can no longer agree on the existential, ontological questions on which a society is based. We are seriously supposed to believe that a country consisting of Hindus, Buddhists, Muslims, Jews, Christians and Atheists can function into perpetuity? Where has this ever been the case in all of human history? After Babel, Macedonia, Rome, Byzantium, Austro-Hungary, the USSR, Yugoslavia, tribal Africa, the Levant, it's the United States that finally got it right? It's the End of History!

Multiculturalism depends on a wealthy, intelligent market-dominant ethnicity who have most of the guns and money keeping the peace, like the hidalgo minorities who rule (and misrule) all the artificial countries of Central and South America, or the authoritarian Han majority who run the Singaporean city-state. When those market-dominant groups lose their grip, like the Alawites and Christians in Syria or the Sunnis in Iraq, that glorious multiculturalism blows away faster than you can say blood is thicker than water.

This is why Donald Trump paradoxically represents the last, best hope of propositional nationhood for the U.S. Either Trump wins and slams the gates shut, and the Anglo-Europeans get busy and start baby-making in order to preserve their super-majority status, or the U.S. continues its devolution along its ethno-cultural lines.