Tuesday, March 30, 2021

Bitcoin and Walmart

What happens when Walmart buys $1billion of bitcoin? 

On March 2 here I wrote about, or at least hinted, how a cryptocurrency such as bitcoin could make international transactions easier. Presently to buy goods from foreign sources, Walmart likely faces cross-currency transactions of many kinds -- Euro, Japanese yen, Chinese yuan, India's rupee, etc. Imagine how much simpler it could be for Walmart if all these transactions could be done with only bitcoin, with the foreign trading partner pricing what it sells to Walmart in bitcoin rather than its local currency. That would greatly simplify matters for Walmart and probably require far fewer man-hours. 

Making transactions easier and simpler is not limited to current ("spot") transactions. Futures and options contracts are available for bitcoin. Walmart could use them to "lock in" prices for things it steadily buys or sells for weeks ahead of time. In other words, such contracts facilitate planning and reduce uncertainty.

Of course, the Bitcoin magazine article is speculative, not about how things are now. But if the speculative situation were to become real, it could be quite revolutionary.  

Addenda 4/1/2021Bianco Research CEO Says Next Reserve Currency Will Be a Cryptocurrency Can crypto actually take on the $US’s reserve currency role around the world?

Federal Reserve and home prices

Federal Reserve under fire as home prices soar  The following quotes are from this CNBC article.

The Federal Reserve is one of the largest, if not the largest, source of money for getting a home mortgage. "It now owns more than a third of the MBS market."

"Home prices nationally in January rose 11.2% year over year, according to the latest S&P CoreLogic Case-Shiller Index. That is the largest annual gain in nearly 15 years."

"Mortgage rates loosely follow the yield on the 10-year Treasury note, which fell dramatically during the pandemic. ... Mortgage rates are [as far below] 10-year Treasury yields as they have been for the past decade."

So rather than raise mortgage interest rates in step with the 10-year Treasury yield, the Fed has kept rates low, which has fueled demand for house buyers and thus higher house prices. A lower interest rate implies a lower monthly payment, which permits borrowing more, which often means paying more for a house. 

My personal experience agrees with higher prices for houses during the past year or so. Zillow.com publishes z-estimates of home prices on its website. The z-estimate of our house has risen about 24% since Jan 2020. Luckily for us, we got a contract to sell it for more than the asking price. We are buying a brand new house for which the builder probably set the price months ago. So our timing seems good and/or lucky.

Thomas Reid's theory of ideas

Friend and philosophy professor David Potts (City College of San Francisco) published Thomas Reid and the Theory of Ideas. Potts credits Reid's attributing intentionality to our ideas and criticisms of the Empiricist or representational views of John Locke, David Human, and George Berkeley.

I would need to read Thomas Reid's and John Locke's works again more closely to opine more, but I believe I would portray Locke's theory somewhat more favorably than David Potts and Thomas Reid did.

Friday, March 26, 2021

Bad news bias

 Bad News Bias by David Leonhardt of The New York Times  

Bruce Sacerdote, an economics professor at Dartmouth College, and two other researchers built a database of Covid coverage from every major network, CNN, Fox News, Politico, The New York Times and hundreds of other sources, in the U.S. and overseas. The researchers then analyzed it, classifying the coverage as positive, neutral or negative. 

"The coverage by U.S. publications with a national audience has been much more negative than coverage by any other source that the researchers analyzed, including scientific journals, major international publications and regional U.S. media."

"When Covid cases were rising in the U.S., the news coverage emphasized the increase. When cases were falling, the coverage instead focused on those places where cases were rising. And when vaccine research began showing positive results, the coverage downplayed it."

"About 87 percent of Covid coverage in national U.S. media last year was negative. The share was 51 percent in international media, 53 percent in U.S. regional media and 64 percent in scientific journals."

"Sacerdote is careful to emphasize that he does not think journalists usually report falsehoods. The issue is which facts they emphasize."

I credit Leonhardt for reporting on the study. It's still a case of the pot calling the kettle black. Leonhardt himself did some very negative reporting about Covid, President Trump, and the U.S.A. compared to other countries. I wrote about some of his reporting on this blog. 

Coronavirus - sloppy, biased NY Times

Coronavirus -- NY Times biased statistic

Coronavirus -- NY Times biased statistic #2

Wednesday, March 24, 2021

George Orwell as a Public Choice Economist?

George Orwell as a Public Choice Economist? is an essay by Michael Makovi.

George Orwell's famous novels Animal Farm and Nineteen can give the impression that Orwell was an anti-socialist. However, he was not strongly anti-socialist. Makovi holds that:

- George Orwell was a (democratic) socialist, despite his famous novels being biting satires of socialism, and

- Orwell’s criticisms were directed not against socialism per se but against the Soviet Union and similarly totalitarian regimes.

The Wikipedia article about Orwell agrees. "His work is characterised by lucid prose, biting social criticism, opposition to totalitarianism, and outspoken support of democratic socialism."

What's unique about both articles is that Makovi portrays Orwell as a public choice economist. Orwell died in 1950 before public choice economics gained much recognition in the 1960s, but there were strands of public choice economics in the 1950s. 

The first article has a good description of public choice economics in layman terms. 

"This interpretation of market activity as being based largely on self-interest is probably familiar to most readers, even those not trained in economics. Yet somehow, when we shift to the study of politics, the general assumption is often that political officials are not  self-interested, that they serve only the public good for conscience’s sake."

"No doubt, there are many individuals who are in politics because they sincerely wish to advance the public weal. But Public Choice is skeptical of the assumption that just because someone is in government office, he is an altruist. Public Choice argues that we ought to assume that political officials are every bit as self-interested - or not - as market actors - no more, no less. In other words, Public Choice assumes moral, behavioral, and psychological equivalence between public and private actors. This does not necessarily mean people seek to maximize their financial wealth alone, for self-interest means only seeking to obtain whatever an individual person subjectively desires, which may or may not be money." 

I add that the politician's self-interest may also be power over the lives of other people. The politician is in a position of using coercion or threat of coercion -- typically with somebody else, the police or the court system, doing the enforcing -- to punish or induce said others to act in a manner desired by the politician.

This is not to say that I view all power negatively. High-level executives in a private business have lots of power. The decisions they make may strongly affect the business and its employees. However, the executives generally do not have the power to enforce their decisions in the manner that politicians do, backed by a coercive government. 

Thiinterpretation of market activitas beingbased largely on self-interest is probably familiar tomost readers, even those not trained in economics.Yet somehow, when we shift to the study of poli-ticsthe general assumption is often thapoliticalofficials are
 self-interested, that they serve onlythe public good for conscience’s sake.

Monday, March 22, 2021

Atlanta shootings were "hate crimes"?

FoxNews: Andrew Sullivan of the Weekly Dish blasts the Washington ComPost and The New York Times for describing the Atlanta shootings as "hate crimes" (link). 

Sullivan's article is here. The following are excerpts.

"[T]his story has also been deeply instructive about our national discourse and the state of the American mainstream and elite media. This story’s coverage is proof, it seems to me, that American journalists have officially abandoned the habit of attempting any kind of “objectivity” in reporting these stories."

"[T]he NYT ran nine — nine! — separate stories about the incident as part of the narrative that this was an anti-Asian hate crime, fueled by white supremacy and/or misogyny. Not to be outdone, the WaPo ran sixteen separate stories on the incident as an anti-Asian white supremacist hate crime. Sixteen! One story for the facts; sixteen stories on how critical race theory would interpret the event regardless of the facts."

The Washington ComPost, The New York Times, and some others media companies love to portray such events as political or cultural. That such acts are simply committed by deranged persons doesn't fit their narrative. 

Saturday, March 20, 2021


Stablecoins And How They Work The following text within quotes are from the article.

"A stablecoin is a cryptocurrency whose value is pegged to a real and stable asset like gold or fiat currencies, in order to combat the price volatility experienced by cryptocurrencies like Bitcoin or Ether."

"Many stablecoins are collateralized at a 1:1 ratio with certain fiat currencies, such as the U.S. Dollar or the Euro, which can be traded on exchanges. Other stablecoins can be pegged to other kinds of assets, such as precious metals like gold, or even to groups of cryptocurrencies.

This means that if you buy a stablecoin that is pegged to the U.S. dollar at 1:1, meaning 1 stablecoin is equivalent to $1, you can sell your stablecoin and redeem your $1 at any time."

"Stablecoins, as digital currency that can be used to make payments across the world, have the potential to serve th[e] huge unbanked and underbanked population." China - 225 million unbanked adults in 2017. India - 190 million. U.S -  25% of U.S. households (> 50 million adults?). "From migrant workers who want to send money home, to businesses who make payments to overseas suppliers or employees, stablecoins have the potential to replace traditional currency to facilitate faster, more secure, easier, and cheaper cross-border payments."

1. Fiat, the most common, pegged to the U.S. dollar or the Euro.
2. Crypto-collateralized pegged to other cryptocurrencies.
3. Commodity-collateralized backed by stable assets, like precious metals, gold, real estate, and oil.

Nigerians Turn to Stablecoins for Protection Against Inflation

The inflation rate of Nigeria's currency naira has been more than 10% since 2016 (link). So many Nigerians have turned to stablecoins for protection of savings. Informal small savings accounts, called esusu, are formed by around 12 or more friends, colleagues or neighbors. Allegedly, Nigeria’s informal “cash” economy accounts for around 64% of 
Nigeria's GDP.

Stablecoins are not as prominent in the U.S.A, presumably because the $US inflation rate has been low. On the other hand, the cryptocurrency that Facebook has talked about creating is the stablecoin type (link). I suspect Facebook's customers for its product would be largely foreign, or U.S. residents sending money outside the USA. 

Stablecoin Regulation in The United States

Tuesday, March 16, 2021

Cryptocurrency outlook #5

Bitcoin MagazineThe Insurance Industry And Bitcoin

The article pertains to and refers to life insurance companies. It doesn't mention other kinds of insurance products, such as auto, homeowners, commercial property, and health, and therefore doesn't apply to them or much less so. The magnitude of interest rates affects the pricing of life insurance and annuities more so than the other products because the former are longer-term and without the ability of the insurer to adjust premiums after the contract is issued.

The following numbers illustrate the effect of interest rates on (pure) premiums for whole life insurance.  Here "pure" means they don't include non-mortality expenses or the probability of policy termination. (The premium amount buyers pay include these things.) For an issue age 40 or less the annual premium with the interest rate = 0.05% is more than 2x the annual premium with the interest rate = 5.0%. The ratio declines above age 40, but at age 60 is still about 1.4x times that for 0.5% interest than for 5.0% interest. For annuities the effect of lower interest rates on premiums is even more.

While such pure premiums are not what buyers pay, they are used in calculating reserves -- as required by statutory insurance laws -- for a life insurance company's in-force policies. Such reserves appear on the liability side of an insurer's balance sheet and thus have a real effect.

Kiplinger: How much Bitcoin should you own?


Saturday, March 13, 2021

The pandemic and black-owned businesses

ProPublica: How the Pandemic Economy Could Wipe Out a Generation of Black-Owned Businesses

Several times on this blog I criticized ProPublica's smear campaign against TurboTax and other makers of software for filing income taxes. ProPublica accused TurboTax especially of  "bait and switch", luring customers to file for free and then getting them to pay for another version of TurboTax after the customers find out they don't qualify for filing with TurboTax's free version. (There were also two versions of TurboTax that used "free" which probably confused some people.) Searching for "TurboTax" on this blog yields several such posts, most in May 2019 and the first quarter of 2020. 

It's widely known that the pandemic has affected black and Hispanic employees more than others, because so many of them work in the kind of jobs hit hardest by the the pandemic, like in restaurants and hotels and jobs involving close personal contact such as nursing homes and home health care. This ProPublica article about the pandemic's effect on black-owned businesses by Lydia DePillis tells the story with the example of a woman, Danette Wilder, whose business makes O-rings used in aerospace, medical and other industries. I admire Wilder's apparent competence and grit in business. She has faced hard times and is still standing. 

However, hard times are not limited to black-owned businesses. The between-the-lines message of this ProPublica article seems to be that Wilder has faced harder times because she is black. DePillis cites a statistical disparity favoring her opinion. "According to the Census Bureau, in 2012, 6,269 out of 7,032 manufacturing firms in Kentucky were white-owned, while 122 were owned by Black people." 7,032 - 6,269 - 122 = 641. Firstly, that was nine years ago, so there may be less disparity in more current numbers. Anyway, the numbers suggest 641 were Asian, Hispanic or other. According to this page, Kentucky's population is 8% Black, 4% Hispanic, 2% Asian, and 2% Multiple Races. Thus in the population Blacks number about the same as Hispanic + Asian + Multiple Races. 122/641 = 0.19 or 122/(641+122) = 0.16.  Thus Blacks seem to be underrepresented among owners of manufacturing firms. Whether or not that is due to racial discrimination is an open question in my opinion. There are many possible reasons. Suppose Asians are under-represented among owners of quick oil change businesses, McDonald's franchises, or yard maintenance companies. Are those statistical disparities due to racial discrimination, too? 

It thus seems that DePillis used Ibram X. Kendi's ployWhenever and wherever there is a statistical disparity, it is due to racism. Regardless of the real traits of those accused of racism, such traits are not relevant. The accused are automatically and subconsciously guilty.

Thursday, March 11, 2021

U.S. federal government interest payments

The Committee for a Responsible Federal Budget asks: How High Are Federal Interest Payments?

It will be about $300 billion this year. The amount of U.S. federal debt is $28 trillion. So the average interest rate paid on that debt is $300 billion/$28 trillion = 1.07%. In the early 1980s the aggregate or average interest rate on Treasury securities was over 8%. Interest rates on new 30-year bonds exceeded 14%, and rates on short-term issues exceeded 17%. Reaching an aggregate 8% again seems very improbable, but reaching 3% or 4% is not. Of course, reaching 3% or 4% instead of the current 1% implies the federal government's interest payments would triple or quadruple, and this would put pressure on other federal government spending. That's except to those unconcerned about deficits and debt, which includes the majority of politicians and bureaucrats.

Page 24 here shows (as of 6 months ago) when Treasury securities mature (and will be replaced by new issues).  Most mature within 5 years, so the aggregate interest rate will lag a rise of interest rates on new issues, but not for a long time (unlike all securities being long-dated).  

The graph on this page shows how the yield on 10-year Treasury bonds have risen this year from about 0.9% to 1.6%

Tuesday, March 9, 2021

GameStop stock price soars again

Apparently the fat lady hasn't sung yet. 😊

"GameStop Corp. mania was reignited Monday after the video-game retailer tapped Chewy Inc. founder and activist investor Ryan Cohen to helm its e-commerce business shift."

Of course, there are contrary opinions about what that news portends for the stock price. 

After the two spikes in January, the price of GameStop stock stayed in a range of about $40-$60 during most of February. Since then the price has more than tripled ($194.50 at yesterday’s close) and today’s pre-market points even higher ($227 at 9:05 a.m.). See the graph here and click on YTD for Jan. 1 - Mar. 9.

Voting rights bill H.R. 1

The Democrats’ voting rights bill is an assault on election integrity

The Washington Compost's op-eds are mostly leftist, but there are a few to the contrary. The above by Henry Olsen is one of them.

"The bill’s primary danger lies in its virtual abolition of any safeguards to ensure that a vote represents the true desire of a single, eligible voter. States would be effectively barred from mandating the use of a photo-ID to establish that a person is the registered voter they claim to be, instead permitting a prospective voter to merely sign a sworn affidavit. States would also be required to adopt same-day voter registration in federal elections, even during early voting, so that a person could show up at a poll, sign a registration form and cast a vote without any checks to ensure the person was actually eligible to vote."

The effect is an an open invitation to (what should be) fraud -- one person can vote many times using multiple identities. It's one thing for P1 to persuade P2 how to vote. P1 voting using P2's identity -- especially if P2 is unwilling to even make the effort to vote -- is very different. It a violation of the principle of one person - one vote. Too many Democrats don't care about this principle. Winning is the primary goal; how it's done matters far less.  

Joe Biden is using his bully-pulpit to push this agenda (link).

See the section titled "The Election Bills: HR 1, the Save Democracy Act, and the Carter/Baker Commission" here for more details about the content of HR 1.

Dem Duo Deem to Destroy Democracy

Sunday, March 7, 2021

Killing The SAT Means Hurting Minorities

The Weekly Dish: Killing The SAT Means Hurting Minorities

"The evidence is clear. But the woke refuse to accept it."

"The rationale for the SAT abolition movement is — surprise! — critical theory, which insists that any measurement that results in different outcomes among ethnic or racial groups is a priori racist. (Except for all cases when non-whites and non-Asians do better than whites or Asians, in which case, never mind.)"

"[This] argument is pure Ibram X. Kendi: the results are solely and exclusively what determines if a test is racist." Me: If there is any statistical disparity, it is due to somebody's "racism," whether or not that somebody admits it or even recognizes it as racist.

"There is no countering this argument because it is not an argument. It is a threat."

Thursday, March 4, 2021

Cryptocurrency outlook #4

Joe Biden picks Gary Gensler as SEC Chair. Fox Business and Bitcoin.com comment on the possible effects on government regulation of Bitcoin and other cryptocurrencies. 

Fox: "If bitcoin and other cryptocurrencies were deemed to be securities, they would fall under the purview of the SEC. Exchanges that facilitate the trading of such cryptocurrencies would also need to have the appropriate investor protections in place," Gensler said (my bold).

"He pointed to improvements in the areas of payments systems, trade finance, and medical-records technology as areas where blockchain has proven useful. Gensler is currently a professor at the Massachusetts Institute of Technology and teaches about blockchain."

Bitcoin.com: Gensler clarified: “To the extent that somebody is offering an investment contract or security that’s under the SEC’s remit, and they have exchanges that operate there, then we have to make sure there’s investor protection” (my bold).

On the other hand, “If it’s not that, and it’s a commodity, as bitcoin has been deemed to be, then it’s either a question for Congress … or it’s possibly a question for the Commodity Futures Trading Commission,” he described (my bold).

Furthermore, the professor also said that the SEC must ensure that crypto markets “are free of fraud and manipulation.”

This is an example of whether or not x falls under the concept X in the context of government regulation. Whether it does or not can have significant consequences. Maybe x falls under both. For cryptocurrencies there is one concept - investment contract or security - for the SEC and another - commodity - for the Commodity Futures Trading Commission. 

Tuesday, March 2, 2021

Cryptocurrency outlook #3

Bitcoin is at a tipping point and could become 'currency of choice' for global trade, Citi says

“A focus on global reach and neutrality could see bitcoin become an international trade currency. This would take advantage of bitcoin’s decentralized and borderless design, its lack of foreign exchange exposure, its speed and cost advantage in moving money, the security of its payments, and its traceability.”