The Idiocy of Bitcoin

Tyler Cowen has a thought experiment on Bitcoin and the usual suspects are vibrating in ecstasy over it. Bitcoin has become a religion for most of these people. That means they have lost the ability to see the enterprise in rational terms. When they see things they like, they start singing the songs that celebrate the cult. When the see things they don’t like, they began chanting the incantations that are supposed to make the bad men go away. The comments sections of Bitcoin stories look like something from the local lunatic asylum.

The basic thrust of Tyler’s post is that Bitcoin is like any other commodity. Once a sufficient number of others get into the cryptocurrency racket in sufficient numbers, the price for all of these “currencies” falls to cost plus some tiny profit. Why anyone would consider something that functions like this a currency is never addressed. Tyler just treats Bitcoin like any other producible commodity, sort of a fusion of gold and some cheap manufactured good. Since the currency has no intrinsic value and no authority to set the value, the market sets the value based on utility, I guess.

Putting aside my complaints about Bitcoin as a currency (I think it is a clever reinterpretation of Pet Rocks), the main problem with these cryptocurrencies is the same problem we saw in the Free Banking Era. Central governments hate the idea of a currency they cannot easily manipulate. That has been true since Pheidon. If you control the money, you control the people. Naturally, ruling elites will seek to control the money as a top priority. It has nothing to do with economic efficiency and everything to do with order. Order is what allows the best citizens of the polity to rise and remain at the top of the status system. It is also what allows the less talented to live something close to a sane existence. Order is how humans guard against the anti-social fraction that exists in every human population.

This natural desire for order naturally leads to a ruling class that is the final authority. That authority, in order to be an authority, needs a method to control the people and thus the society over which they rule. Controlling the money is the most efficient way to accomplish this. Controlling land or monitoring individual transactions is unworkable over the long haul. The Soviets found this out after 70 years of Marxism. A simple way to control the populace is through the coining of money. That makes taxing easier for the authorities and it gives them control of trade and labor. It allows for the authorities to audit the citizenry to ensure compliance. Having a raft of competing currencies defeats these attempts and therefore can never be tolerated.

Think about it this way. Let’s say I come with a digital heroin. That is, a drug that can be transmitted on-line that you load on a flash drive, shove up your ass and get high for eight hours. Obviously, I’m not getting a lot of takers initially. The cost of making it is, for the sake of this example, cheaper than getting real heroin on the wholesale market. But, the lack of customers means I’m losing money every time I make a batch. Heroin addicts are not on-line so I go to where they are and start selling my new drug. I manage to get a few takers to try it and begin to build a client base through word of mouth. I hit the same spots at predictable times and sell my digital heroin the old fashioned way, but it is not illegal so I can do it at the mall or Starbucks.

This goes on for a while and no one is the wiser. The cops don’t care as it looks nothing like criminality from their perspective. The drug gangs don’t care at first because I’m not doing business on their turf. They are unaware of the threat I pose initially. But, they notice a drop in sales eventually as I build my business and they begin to make inquiries. Eventually they will figure out that someone is taking their customers. They may figure out it is me before they figure out what I’m selling or it may be the other way around, but at some point they put it together. They are losing control of their drug market because some outside group is selling a new product.

The drug gang will have three choices. They can kill me, but that will require knowledge they may lack. I could have advanced to the point where I’m selling my drug on-line. Drug dealers are not fools and they will recognize their lack of knowledge and see that as a risk in itself, perhaps a bigger risk. Killing me could create unknown problems. The other choice is to figure out what I’m doing and that means muscling in on my business. There is a reason we have such an array of street drugs. A clever guy creates a new product and the drug gangs eventually take it over and add it to their portfolio. The same guys controlling the weed sales in one area control the heroin sales too.

The third option is to enlist the state to take out my business. I’m conducting business and that means taxes are involved. It also means a mountain of rules and regulations. My drug may be legal, but not paying taxes on sales is illegal. Not filing for a business license and not abiding by the laws governing record keeping are against the law. If I have employees, then I need to pay them and that means taxes, workplace laws, social security, Medicare and unemployment taxes. As any small businessman knows, the state can shut you down on a whim.

Here we ultimately see the problem with Bitcoin. We are back to where we started. Disruptive technology is not ignored by the folks at the top of the established order. In the drug example, the established authority is the drug game, which served as a proxy for the state. In the above ground world, the state will defend itself from the threat posed by Bitcoin and they have many tools at their disposal. They also have tanks, planes, missiles and other military goodies. Bitcoin can only exist as long as the state allows it to exist. That means it will have to serve the interests of the state to survive, which brings us right back to where we are now.

The Bullshit Business

In the last few years, I’ve found myself reading mainstream punditry less and less. I still scan the representative political sites, but I read a lot less off what they offer, at least the opinion/prediction stuff. I’ve stopped watching TV news entirely. I have no idea where CNN is on my dial and I have not watched Fox for so long I have no idea what makes up their lineup. I’m vaguely aware of a shakeup last year. The primary reason is bias. That would be my bias. I found in the last few years I tend to put too much weight on punditry I find agreeable and dismiss that which is unpleasant. I really thought Mitt Romney, for example, had a chance to win in 2012 because my only news source was Drudge and the punditry sites.

That bias thing has become something that pops up in my head whenever reading anything about politics. Almost all political coverage is about telling us what will happen next. There’s a small amount of time covering what happened in the past. In fact, it seems that modern times is as much about erasing the past as it is about anything else. That came to mind when looking at this piece in the NYTimes. Granted, I rarely read this guy, but I never would have remembered his errors unless he wrote about them. In fact, no one ever remembers the batshit crazy predictions and prognostications of the pundit-ocracy. I suspect most people, like I used to do, skim the stuff they wish was not true and soak in the stuff they hope is true. Since nothing ever changes that much, it all gets flushed down the memory hole.

This post by Steve Sailer is a good insight into the bullshit business. Most predictions about tomorrow are wrong because they start with the assumption tomorrow will be noticeably different from today.

Now that I think about it, I wouldn’t be surprised if a fair amount of competence in this tournament derives from having a sense of just how long it takes for stuff to happen. Since the game looks at typically annual time frames so that it can determine winners and losers in a reasonable amount of time, I bet a lot of losers have a tendency to say, “Yeah, that will probably happen” without estimating how long it could take for it to happen.

Then there is the bias toward bias. Fox News knows their audience is made up of rightward folks who wants confirmation and leftward folks and leftward folks who want to do battle with the right by yelling from the couch or through a proxy. Therefore, having people predict bad things for the Cult of Modern Liberalism is good business.  Then of course, there’s the peanut gallery effect. The more yells and screams that come from the crowd over one set of predictions or opinions, the more of that we are sure to get. Even if money is not the currency, just the sound of folks chanting your name is enough to buoy the prognosticator.

Knowing all of this, I wonder if my expectations of the near future will improve. By that, I mean will events unfold more like I expect or will my willful ignorance of the chattering classes make me less informed? I now devote much more of my leisure time to reading old books and studying odd stuff. I’m now reading an 18th century novel and a book on Bayesian probability. I have followed the health care stuff, for example, very little beyond the initial hilarity. Will my expectations about how it unfolds in 2014 be better without having kept up or worse? For the record, I doubt much of anything changes and some other event sucks all the air out of that room, at least for a while.

I predict I’ll never know.

Duck Hunters 1 – Dick Hunters 0

In the great something measuring contest between old weird America and the cosmopolitan perverts knows as the gay lobby, old weird America came out ahead. I’ve never seen a minute of Duck Dynasty, but I’ve met those guys many times living in the South. They don’t give up easy. There’s a reason why the US military relies so heavily on young men from that part of the country. While I’m cynical about the future of the nation, I can’t bet against the crackers in old weird America.

Reconsidering The Drug War

For most of my life, I have been a drug legalizer. I came to this conclusion while sitting at a campus lounge reading Adam Smith’s treatment of the English corn laws. It struck me at the time that if you replaced “corn” with “drugs” you have a nearly flawless argument against prohibition. It was one of those revelations common in the youth of the intellectually curious. It is also common amongst lunatics who end up in cults, but that’s not unimportant. At that age, simplicity is naturally more attractive because the mind is untrained and inexperienced. As you grow older you come to understand that the world is an infinite combination of simple transactions, thus making itself unknowingly complex.

Still, I have stuck with the idea of legalizing drugs.  The cost of locking up a million drug offenders is high. That portion alone is something like 50 billion in taxes. Layer on the courts, cops and social service barnacles and the war on drugs probably costs us a hundred billion a year on the conservative side.  These guys say that’s a good number, but this site puts the number much higher. Put a million people in jail at $50K a man and you get 50 billion. The basic numbers alone have always struck me as proof enough that the drug war is a scam and a failure. Even accepting there is a cost to legal drug use, it has always seemed to me that the scales tip in favor of legalizing as Milton Friedman argues here.

There is another argument, one I’ve often used against libertarians when I don’t feel like hearing them go on forever about weed. That is, people are all for legal drugs until Walmart has a sale on their extra special brand of heroine. That’s when the women start mobilizing for the children. Libertarians hate that argument, because it is true. Libertarians, like liberals, have an uncomfortable relationship with the human condition. Honestly, I never much cared for it either, but it avoided hearing yet another lecture on the evils of the drug war. Libertarians are like all fanatics in that they can’t change their mind and they won’t change the subject.

What I’ve never thought through, has been well thought out by Peter Hitchens. I don’t entirely agree with Hitchens, but he offers up something I’m finding more attractive as I grow older. That is the central question of human society. What sort of society do you want to live in as a free man? Do you want one where drug addicts fill the parks and drunks fill the doorways? Or, do you want one where the drunks and drug addicts find it hard to be drunks and drug addicts? If it is the latter, then the question is not about how we legalize. The question is how we come up with better forms of prohibition.

In that regard, Hitchens is correct when he argues against addiction as a disease. This exchange is good stuff. Drug addiction is no more a disease than jumping off a building. I have some tendency toward addiction. I know this because I have plenty of addicts in my family tree. I really like getting drunk and I used to like tobacco. I temper my drunkenness and avoid tobacco. I hate cancer and tooth decay. There’s nothing I can do to prevent either of them other than pray. Calling addiction a disease is simply excusing behavior that civil and sane people want to limit in themselves and others.

I don’t know the right answer, but I am reconsidering the idea of legalization. It may be more economically efficient to legalize drugs. It may be economically efficient to kill malformed babies. It may be more efficient to kill old people when they reach 70. Western civilization did not come into existence because of efficiency. There’s no libertarian argument to explain the rise of the West. The story of the West is like minded people working to create a world they wanted and killing anyone who tried to stop them. There’s an appeal there that does not exist in the ovens of the Left or the soulless machinery of the libertarian.

The Language of Fantatics

The hallmark of the fanatic is absolutism. The fanatic creates this imaginary world where everything is defined by its relationship to the wall. The wall being the barrier surrounding the intellectual and emotional asylum in which they feel safe and sane. Anything and everything on the other side of the wall is bad. The fanatic will have a range of words they use to describe the undifferentiated other on the other side of the wall. The colorful language from North Korea to describe their enemies, real and imaginary, is a good example. The fanatic spend a lot of time worrying about the people on the other side. The fanatic is in a perpetual state of war, always checking the perimeter to make sure nothing breaches their defenses.

I thought about that when reading this article at Reason about the Duck Dynasty guy. Even they call his comments “anti-gay.” I’m admittedly not a student of this guy’s work, but what has been published is not “anti-gay” if we are restricting ourselves to English. His brand of Christianity, like 99% of Christianity,  considers sex outside of marriage a sin. Therefore, gay sex is a sin. That’s it. He said the same thing about bestiality and drunkenness. No one is upset at him for being anti-animal or anti-booze. The reason, of course, is those things lack a band of dedicated fanatics defending that activity. Sodomites have a phalanx of nuts willing to attack anyone that gets too close to the walls.

That’s the way it must be with fanatics. You are either with them or against them. There’s no room to be indifferent. Even if you are indifferent, they will force you to choose sides. It’s why their language becomes stark. You are either in favor of “gay rights” or you are anti-gay, a homophobe, a bigot, etc. You’ll note they have a long list of words to describe their enemies. The neo-fascist twit, Piers Morgan, is a solid example of the modern fanatic in that his language is infused with outlandish claims about the vast array of bogeymen he imagines are stalking him.

The reason for this is, in part, psychological. The fanatic is most likely biologically driven to be a fanatic. As Eric Hoffer noted, the true believer will jump from one fanaticism to another, often participating in many at the same time. For instance, an environmentalist will also be a member of some Marxist group, a vegan and an animal rights nut. They may also be obsessive about hobbies. I have some fanatic friends who are both crazy liberal and obsessed with certain supporting hobbies like mountain biking or English soccer.

Another reason, I suspect, is it works. Evolution is about trial and error. In another time, shaming manifested itself in a more violent way. Wayward women would be stripped in public and have their hair cut off. Blasphemers would have their tongue cutout. Today, thank goodness, we go for the hotly worded letter, but it works the same.  The Reason folks start to hyperventilate when they are forced to defend the culture. You get, instead, the mealy mouthed nonsense about the first amendment not covering private enterprise. The more people the fanatics can bully into standing aside, the better their odds.

End of the Free Money Era?

It is easy to forget that the way things are now is not the way they have always been. It also means the ways things are now is probably not how they will be tomorrow. For instance, the giant book stores that are going out of business never existed forty years ago. When I was a kid, there we old crusty book sellers and the mall shops. If you wanted mass market paperbacks, you went to the mall. If you had more exclusive tastes you sought out the old crusty place. Then with the flood of free money, every town in America suddenly had a massive book superstore. Now, they are going under as people remember that they don’t really read that much after all.

The same is true of casual dining. Thirty years ago, casual dining meant a local joint run by local people, usually foreigners. Then all of a sudden we’re flooded with massive chains like Olive Garden and Red Lobster. Now it appears they may be following the path of Borders and Barnes & Noble.

In a move sure to set the culinary world and classy guys everywhere reeling, Darden has announced that it will either sell or spin off its Red Lobster restaurants.

Adding to the devastation, the company, which also runs Olive Garden and other fine-dining establishments, said it will suspend the opening of new Olive Garden locations and slow down new locations for LongHorn Steakhouses.

Why, you ask? Dear God, why??

Because Darden isn’t doing so good. It seems that consumers are turning their noses up at hoity-toity sit-down places like Red Lobster and Olive Garden these days in favor of cheaper chains like Chipotle.

Darden is one of the largest companies in the casual dining industry, with a market value of $6.7 billion, but its core chains have had stagnant growth, according to The New York Times. Last quarter the company experienced a 31 percent drop in net earnings. “The reduced unit growth will lower capital spending by at least $100 million annually,” the company said in a statement.

Red Lobster has 705 restaurants in the United States and Canada and had annual sales of $2.6 billion in 2013, but we guess that wasn’t enough for ol’ Scrooge Darden.

Putting aside the millennial snark from the writer, there could be a bunch of reasons for this that have nothing to do with the economics of chain restaurants. Red Lobster is awful. I’ve had to eat at them while traveling, they tend to be near motels and business parks, and I never had a good meal. They even put butter on salad. I like butter, but there’s a limit to everything. Olive Garden is a bit better. They tend to be in the same locations as Red Lobster so I’ve been to a few in my day. The food is better, but the value proposition is not great. Pasta is cheap. Paying $25 for spaghetti seems wrong. Maybe people have simply turned on these two chains in favor of others.

There’s something else. The rise of massive chain stores is due in large part to the credit boom. When you can bet money at 2% you will make different bets than when the money costs 10%. More important, you can make money from things with 2% money that you can’t with 10% money. Big capital projects like restaurant and bookstores can’t exist at borrowing rates at or above historic averages. Olive Garden is as much a creature of the free money era as bloated corrupt banks. Let interest rates rise to historic levels and a lot of things go away quickly, including Olive Garden.

Interest rates remain artificially depressed, but lending is not as free as we saw for two decades leading up to the crash. Giant corporations can get plenty of credit, but their customers are a different story. The Fed keeps pumping money into the system hoping the clogs eventually break free, butt hat’s looking like a fool’s errand at this point. Eventually, interest rates will return to normal and everything based on cheap money will go away, including a healthy chunk of government. Maybe this is another step along that path.

More BitClown Hilarity

I’m no fan of BitCoin. The idea of a digital currency is fine as it already exists to a certain extent. I carry little because I use a card for most purchases. That’s an electronic version of my home currency, which happens to be USD.  This is made possible by the vast digital network that allows me to engage in commerce digitally. Specifically, it allows me to convert my currency into a digital format for transmission around the globe. One of the primary attributes of currency is portability. cash and coins are more easily transported than  sheep or bales of hay.

Another primary attribute of currency is it is not easily destroyed. Coins are hard to destroy. If one is damaged, it can be exchanged at the mint for a new one. Similarly, paper money is quite durable. It does not decay over time if properly cared for by the holder. I have paper money that is 200 years old and it looks great. if I have some paper money that is damaged, I can exchange it for new money. This is the bulk of what the US Bureau of Engraving and Printing does every year. In other words, currency is durable and the replacement of that which is destroyed is predictable and orderly. This avoid wild fluctuations in value and unexpected changes in supply.

That last bit is what gets lost in discussion about BitCoin. A cryptological currency has a finite supply. The cost of getting the first “coin” is X. The next coin is X plus some amount. The next coin is X plus a slightly larger amount. This continues on at a predictable rate until the final coin is minted. The cost of minting, however, increases with each coin so the cost of minting coin X is less than the cost of coin X+n. This means the coins increase in value over time. A single currency unit of labor, for example, will increase in value. Put another way, the amount of lawn work I can buy with a currency unit today will be less than I can buy tomorrow. That makes the currency deflationary by design. In times of great technological progress, it will be wildly deflationary.

Now we have another big problem with BitCoin. It is easily stolen. The QR code *is* the money, not the bit of paper on which it was printed. Try stealing a coin on paper currency through the television and see how that works for you. For better or worse, stealing hard money, so to speak, means physically taking to from the holder. There are no special precautions one need take to keep their money safe when it is physical coin or paper. Like any other bit of property, you keep it in a safe place. With BitCoin, there’s no truly safe place. Worse yet, you don’t know it is stolen, in this case, unless you try to use it.

Now, this raises two other issues. One is the currency is not self-validating. I can examine a coin or paper and determine if it is real. I do not require a third party. BitCoin requires validation of each transaction. The guy on TV had no idea if he held money or just bits of paper. He needed someone else to be a party of his transaction to tell him that he was holding worthless paper. That someone else is a network of computers, but they are not anonymous. To work, they must keep a record of every transaction of every coin. That means the third party tracks your every move in order to function as a validating authority.





Rule By Dumb Young Twats

As I grow older, it is clear that the most supercilious and ridiculous cohort in modern society is  single young females. Young females with anything on the ball have snagged a husband and are on their way to become mothers. They may lack experience, but they have some idea of right and wrong. The single twenty-somethings are almost always stupid twats with head full of feminist nonsense and convinced the world wants to hear from them. The truth, of course, si they are dumb as dirt and simply prove the Muslims don’t have everything wrong. There’s a reason single young women don’t turn up in history books very often.

That comes to mind when I saw this this morning. Jennifer Lawrence is probably well intended, but she is a clueless dimwit who hit the lottery. As she makes clear, we know about her because her name was picked out of a hat. She and a bunch of other young girls willing to blow a director for a job are a dime a dozen in Hollywood. She got lucky and blew the right director or agent. No harm in it, but it is no reason to put the stupid twat on TV and ask her about anything other than acting and blowing directors. The irony of Barbara Wawa doing the interview should not be skipped. In the Middle Ages she broke into the news bunny business on her back. So we have an old dumb twat interviewing a young dumb twat.

Anyway, you see this sort of nonsense turning up all over the culture. Commercials for TV shows tell me the dominant theme now is the “strong woman” plating the role of the man. The ideal modern woman is the leading man of the fifties with tits and a narrow waist. The ideal man is a hairless male prostitute or an agreeable lesbian with a dick. In politics, the ruling party is in power due to their ability to get the stupid twat vote out in force. That’s a hell of a way to run a country, but what could go wrong? After all, the progressive future is inevitable. Why bother listening to the people who have some idea how to do anything important? Let’s just take advice from 20-something lottery winners.

The Death of National Review

Mark Steyn’s response to Jason Lee Steorts may be the end of his relationship with that publication. Rich Lowry will most likley side with his editor and Steyn will be sent packing. At this point, there are only two reasons to read National Review. One is Mark Steyn and the other is Kevin Williamson. Williamson is an empirically minded guy who does not have a lot patience for the trendy oogily-boogily that makes up most of modern discourse. He’ll piss off the queers eventually or maybe the race hustlers. It is just a matter of time before National Review looks more like the Nation than anything Buckley imagined. Time magazine, after all, was a right-wing publication into the 60’s. Then Henry Luce passed from the scene and before long Time was a lunatic outpost. So it goes.

The decline of National Review is a bit shocking in its speed. Rich Lowry has proven to be a ridiculous fop and coward. It was pretty clear that he was a rump-swab from the beginning. The guy is a talentless boob, but managed to ingratiate himself to Buckley and O’Sullivan. That type is familiar to anyone who has worked in a organization of more than three people. usually this type is quite ruthless once they get power. Lowry is turning out to be quite incompetent. Then again, National Review is not his primary interest. He is trying to make himself a TV star and NR is just a rung on the ladder. It is a shame, but there it is. Once guys like Steyn and Williamson are gone, NR will morph into a David Brooks role. That is, celebrating the left but occasionally offering up and few doubts.

The Beta War

Chateau Heartiste is mostly credited with popularizing the term “beta male” as a term of art to describe the over-class definition of masculine. I have no idea if it is true, but it seems right. The site is the Mecca and “game” theory, which is different than game theory. In that world, dividing the male population into betas and alphas is important so it makes sense they would be heavy on the use of the term. It does not matter much other than to point out that within the Resistance, there’s a strain of rebellion against the imposition of the Beta Male on American culture. The guys reading that site may not want to be hairy chested he-men, but they want to get laid and if that means being a little butch in public they will do it. A virtuous cycle that is under assault by the CML. The same people drugging little boys in school are peddling the pajama wearing queer in the health care ads.

The war is taking an odd turn this week. Mark Steyn takes on the hilarious story of the Duck Dynasty guy getting axed for being a public Christian. Steyn’s take is that it is a part of the stifling of non-leftist speech. He’s certainly right that the Left wants to stamp out religion, particularly Christianity. Liberalism in America is a lot like Islamic fanaticism. The reason is the the leading thinkers in Islam learned at the knee of Western leftists. The list of things that are unmentionable in public grows longer every day and most of Christianity is now on the list. I suspect we will look back in a few decades and wonder how an open Christian like George Bush won election. The day when that is a disqualification from office is at hand.

The hysterical reaction of National Review’s house gay, Jason Lee Steorts, shows there is another angle. The Duck Dynasty guys are emblematic of the traditional American male. That’s the guy who shaves because he has to, likes blowing things up and shooting guns. You see guys with big beards and bandanas and you assume they are not to be trifled with, unless you are a tough guy. Guys like Steorts hate these people because their mere existence puts the lie to effete culture. The Duck Dynasty guys are the ones who go out in the streets when there is trouble. Steorts stays in the salon and comforts the women. It is a lot easy to pretend your an alpha male if there are no alpha males around to prove otherwise.

I’m reminded by a story G. Gordon Liddy used to tell about one of his roommates at Fordham. The guy was French and it was just after WW2. Liddy, after getting to know him, asked how it was the Germans were able to march right through the French. His roommate replied that after the Great War, the French mothers prepared their sons  for peace, while German mothers prepared their sons for war. Perhaps humanity has advanced to the point where the Eloi can now enslave the Morlocks. Maybe we don’t need the Morlocks at all and we can regress to living like children in a land of plenty. If that’s true then the beta males will win. If not, then the serious looking men with beards will have the final word.