Populism

Posted: January 12, 2023 in Political Philosophy
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By Richard Martin

Populism is used as a term of abuse and derision by too many people who should know better. They associate it with the political right, especially the extreme right as they see it.

But if we examine its etymology, it comes from Latin, “of/for the people.” Note that “democracy” comes from the Greek, and means “rule by the people.” So, if you’re against populism and populists, does that make you anti-democratic? Just asking.

According to etymonline.com, it refers to “political movements that sought to rally ordinary people who see their concerns as being disregarded by established parties and elites, but it also is used pejoratively for irrational or simplistic demagoguery.”

If your concern is with irrationalism and demagoguery, then maybe the vituperation should be aimed at those who practise those. And “populists” are no more guilty of such tactics than anyone else.

In addition, etymonline.com gives the following definition for “populist”:

1892 (n.) “an adherent of populism,” also (with capital P-), “a member of the Populist Party;” 1893 (adj.); American English, from Latin populus “people” (see people (n.)) + -ist. Originally in reference to the U.S. Populist Party (or People’s Party), organized February 1892 to promote certain issues important to farmers and workers (expansion of the currency, state control of railways, and restriction on the ownership of land). The term outlasted the party, and by 1920s came to mean “representing the views of the masses” in a general way, and from the 1950s as “anti-establishment” on either the left or the right.

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Wokeness

Posted: January 12, 2023 in Op-Ed
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by Richard Martin

I have no problem with the content of wokeness, to the extent that it is simple a recognition of the fact of human diversity and the obligation to respect everyone’s right to be themselves, so long as they don’t harm others.

I do, however, take issue with a small minority shaming and coercing others to think and act in a manner that they find acceptable. That is the ideology of wokeness.

As an ideology, the woke are not content with just emphasizing diversity and respect. They seek to define and enforce “correct” thinking. They don’t consider it enough for everyone to behave in a socially respectable and civilized manner. Everyone also has to actually BELIEVE what the woke put forward as TRUTH.

Whether we call this ideology of mind conformity the dictatorship of the proletariat, political correctness, or wokeness, the results are the same. It generates conflict and pushback.

You’re free to say and believe what you want, but you’re NOT free to impose them on me or anyone else.

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This work is licensed under a Creative Commons Attribution 4.0 International License.

By Richard Martin

Mises and most Austrian economists states that praxeology and, specifically, economics, are purely deductive sciences. On the the other hand, most conventional economists claim that economics is an inductive, empirical science. This is a false dichotomy. It can be both.

In formulating a praxeological law, we can never be certain that we have identified all logical deductions from the axioms. Sometimes, we have to see the results of action to confirm the exhaustiveness of the axioms, inferences, and conclusions. There is always a real world limit to the definiteness of deductions. This is especially the case with new discoveries or inventions, which may have to be implemented in real life to see how they will play out.

The axioms and inferences may be completely valid, but it may nonetheless be necessary to see them in action “in the arena” to see their actual consequences in the behaviour of flesh and blood human beings. Bitcoin is in this category, as it was invented at a definite place and time. It is working itself out in a dialectical manner. We can therefore speak of its eduction from first principles and rules.

© Richard Martin

by Richard Martin

There’s a saying: “An armed society is a polite society.”

Let’s apply that to cyberspace. The problem right now is that there is no real world, physical cost to bad behaviour. Online, many people act like the courageous driver who gives others the finger while safely ensconced behind the wheel, thinking they’re beyond retribution for their impoliteness.

We all really don’t need to worry about the occasional online jerk and troll. The more important problem is with the truly malicious actors. We’re not talking about trolls. We need to focus our attention on the cyber criminals, the state actors, and the epistemological warriors who exploit our openness, naïveté, and gullibility.

In the real world, most (yes, most) people will act in a civilized manner because there are real world consequences to being a jerk. They can be avoided, ostracized, punished, or even physically harmed. I don’t advocate aggression, but we all have an inherent right to self-defence.

The fix for cyber aggression is to make it too PHYSICALLY costly. I don’t mean to go beat someone up. I mean imposing a real world cost on bad or aggressive behaviour.

What if someone had to pay you to spam you? Or a cyberattack would lead to a counterattack that would drain someone’s resources, especially energy?

Copyright Richard Martin

CBDCs Are Programmable Money

Posted: December 18, 2022 in Economics
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By Richard Martin

Central Bank Digital Currencies are not just digital money, which is simply money represented symbolically in digital ledgers.

They are much more; they represent the switch to fully Programmable Money.

They are similar to loyalty program points, usable in only certain conditions and for specified purposes and durations.

With Programmable Money, the state no longer has to convince or coerce intermediaries to prevent use of money in proscribed exchanges or encourage its use in favoured transactions.

This is part of a wider trend toward private disintermediation, where private parties can contract directly without going through a third party.

Private disintermediation is generally a net positive, as it gives greater power to the parties to the exchange as they don’t have to convince a 3rd party to the transaction, nor do they have to conform to the 3rd party’s rules.

On the other hand, Programmable Money empowers the government as the unique intermediary for all monetary transactions, obviating the requirement to coerce or convince parties in specific transactions, especially intermediaries and other 3rd parties.

In other words, the state wishes businesses to be simple order takers who do the will of the government, rather than exercise their own free will or that of the owners/entrepreneurs.

When the government forces businesses to do its bidding, this is the very definition of fascism, turning the free market business owner and entrepreneur into executors of the government’s will, what the Nazis called Betriebsführer (shop or factory manager).

As Programmable Money, CBDCs will allow the issuer to take even this limited freedom of action and initiative away from the contracting parties and the intermediaries.

The government issuer of Programmable Money can build automatic functions in to the currency to achieve what it views as desirable outcomes or characteristics through predetermined activation and deactivation protocols.

This could include building in functionality to ensure a specified duration of validity (spend before date); specified use cases (only for approved exchanges); geographical constraints (only in certain territories); types of users (e.g., not for minors); and manipulation of currency denominations akin to stock splits, merges, and swaps (1 unit is now 10 units, or vice versa).

The fact that China is implementing a “digital yuan” should have us all concerned about this, especially if it becomes the norm in supposedly free societies.

© Richard Martin

Purchasing Power of Money

Posted: December 10, 2022 in Economics

by Richard Martin

What can you get for your money, for instance an ounce of gold? That’s the question. You have to look at the long-term trend. Look at the second graph. Which is most volatile, oil priced in USD, or in gold?

I’ve marked up the third graph. Circle A represents the Civil War inflation and the creation of the greenback. Circle B shows the government confiscation of gold by Roosevelt. That gold was never returned and the government added insult to injury by devaluing the dollar right after. Private ownership of gold was banned in the US until the 70s.

The US has been on a de facto fiat standard since then internally and on a gold exchange standard internationally until 1971. The whole world has been on a fiat dollar standard since then backed by the “full faith and credit” of the US.

The really interesting part though is the long-term downward trend in commodities priced in gold, with shorter-term movements around a declining average. Has this downward price trend been catastrophic?

Of couse not. That’s why Bitcoin is so important. We can reclaim the hardness of gold, while overcoming its weaknesses.

Source: Ammous, Saifedean, The Bitcoin Standard

Saifedean Ammous, The Bitcoin Standard (citing Jastrow in The Golden Constant)
Saifedean Ammous, The Bitcoin Standard
Saifedean Ammous, The Bitcoin Standard

Money Is Subjective Value

Posted: December 10, 2022 in Economics
Tags: ,

by Richard Martin

All value is entirely subjective. It resides in the minds of people. Money is the most widely accepted medium of exchange. People acquire it mainly for purposes of trade and as a store of value. Gold became the money because it was the most marketable good and would therefore be the most readily exchangeable.

Before gold, there were other forms of money, all of them commodities with variable monetary qualities. Archeologists have excavated sites full of seashells and beads on strings. Some of these go back almost 100,000 BP. Rarity, beauty, skill, durability, and proof of work were required to make a good acceptable as money.

I believe that grave goods were meant to be used in the spirit world as money and a sign of wealth and status in the next life.

© Richard Martin

by Richard Martin

There is no need for governments or central banks to “manage” the money supply and the economy. Inflation is caused by governments taking over the money supply and politicizing it for various ends. THIS is the cause of increasing economic inequality and centralization. It stems originally from governments wanting to control money and the financial system to finance their wars by avoiding taxation.

Inflation is basically the seizure of wealth by stealth. If the official inflation rate — i.e., based on CPI — is 2% per annum, then the value of what your money buys is halved in 35 years. If it’s 5%, the value halves in about 15 years. You only need to apply the rule of 72. Since the start of the latest round of “quantitative easing,” newspeak for money printing, the money supply has grown at about a 20% clip. That makes your money lose half its buying power in about 3.5 years! And that’s only the official CPI inflation. In actuality, it’s much greater than that.

In the second half of the 19th century, the world was on a gold standard, where all currencies were fully redeemable in gold at a set rate. In other words, gold was the money, and national currencies were issued on fixed ratios to that. For instance, the USD was approximately 1/20 ounce of gold, by definition. That meant that all currencies were fully interconvertible at fixed exchange rates. And global trade, investment, and industrialization exploded. In 1914, the world economy was more globalized and open than at any time previous to that and since then. Even the most recent wave of globalization, which is now unravelling at breakneck pace, was arguably not as effective and efficient.

Contrary to popular belief, the 20th century has been not only the most deadly, but also the most economically contentious and disruptive to international trade, industrialization, and equality of opportunity. The worldwide stock of gold increases by an average of 2 % per year, as does global productivity, primarily due to investment in new technology and capital. In the latter part of the 19th century, most prices were stable or falling on a gentle grade. What would have happened if the world had stayed on the gold standard? We’d all be richer now.

Unfortunately, all of the belligerents in WW1 went off gold when the war started, the most important being the UK in 1914 and arguably never really went back on it, at least without assistance from the US. In 1934, Roosevelt issued an order for all US citizens holding gold to turn it in for USD at the 1:20 exchange rate, then changed it 1:35, immediately devaluing the dollars they had just received. Nice eh? This stayed the official rate until 1971 when Nixon officially closed the exchange window (only for sovereign dollar holders) because allies were trying to exchange their eurodollars for gold, as had been promised at Bretton Woods in 1944.

It’s been downhill ever since then. If you want to see the economic and social effects of this default, check out https://wtfhappenedin1971.com. If you want to explain Trump and “populism” (I have problems with the term, but that’s for another time), it’s all right there.

© Richard Martin

by Richard Martin

Bitcoin has already been attacked unsuccessfully several times. If it were possible for a government to take down Bitcoin it would have already happened, and probably in China first. The ECB head, Christine Lagarde said almost two years ago that it was her goal to regulate crypto and bitcoin. The former is possible and should be done, the latter can’t. The ECB can’t, nor can the Fed. The only thing they can do is to conjure up CBDCs (Central Bank Digital Currencies), but if the market (i.e., the people) don’t accept them, there is nothing they can do. But they’ll try to talk them up and trash talk crypto, hoping that it will take down Bitcoin in the process. It won’t happen.

The fact that BTC can be lost or “hoarded” is irrelevant. In the past, gold was buried in hoards and graves and lost in shipwrecks. It didn’t affect a thing and only made the remaining gold more valuable. Bitcoins and other cryptos have been stolen from online exchanges since the start, the most prominent being the Mt. Gox heist in 2014.

But they can’t be stolen by hacking if you don’t hold them in an online exchange or on a device that can be accessed through the internet. These are known as “hot wallets,” a fitting term. If you hold BTC in a “cold wallet,” i.e., offline, then they can’t be stolen through hacking. There are also services that offer cold storage and multiple signatures to access them. Bitcoin ownership is linked to your private signature, which can be accessed through a 12-word or 24-word seed phrase. If you lose your cold wallet or it is stolen, all you have to do is enter your seed phrase in a new wallet to have access to BTC again, while the old wallet will be automatically zeroed. There are cases of people leaving countries with capital controls who memorized their seed phrase and reaccessed their BTC savings after they left their original jurisdiction.

There have already been hundreds of attempts to change the Bitcoin network by what’s known as hard forking the blockchain. All that happened is that the ones trying to use the “new” BTC lost out, as it depends on the consensus of work nodes (miners), verification nodes and holders/users. In 2017 there was a concerted and coordinated attempt by the great majority of miners — something like 80% — to hard fork the network to allow more and faster transactions. It failed miserably and the original blockchain won out.

There is a theoretical possibility of what’s called a “51% attack,” but that would require some entity to control over 50% of the mining power and then maintain that essentially forever. The energy costs would be astronomical and would require a grouping of sovereign entities around the world to even consider it at this stage. I’ll leave you to consider whether that is a realistic possibility.

The solution to that is to treat all crypto, except Bitcoin, as securities, and thus subject to securities laws and regulations. The heads of the SEC and the CFTC (Commodities Futures Trading Commission) in the US have both stated publicly that Bitcoin is a commodity. This means it’s an actual thing that can’t be manipulated or conjured out of thin air. It’s like pork bellies and corn. You have to expend energy and do work to create them.

 © Richard Martin

By Richard Martin

What follows is a summary of my current understanding of the “crypto” space, including Bitcoin. I am interested in this because I think it’s a fascinating topic and very important. I think there will be an overreaction (what else is new) with all kinds of regulations that will end up having unintended consequences. We keep reliving Bastiat’s “broken window fallacy.” See also the writings of Thomas Sowell.

1. “Crypto” is either a scam, a means to perpetrate a scam, or a bad idea that leads to unintended consequences, most of which are bad.

2. You don’t need crypto to scam people, although it helps if it’s dressed up as magic internet money. Madoff didn’t need crypto to scam people, nor did Ponzi (of eponymous fame), John Law, and many others throughout history too numerous to name or remember.

3. Setting aside the shady aspects of crypto, we can say that the whole “industry” comes from attempts to improve on Bitcoin through various means. The Bitcoin source code was published in late 2008 by an anonymous developer (or group) under the pseudonym “Satoshi Nakamoto.” “Nakamoto” disappeared into the ether at the end of 2010 and hasn’t been heard from since.

4. Anyone can download the code as it is freely available and try to tinker with it. But there is only one widely used and accepted implementation, Bitcoin Core, which is used to run most of the Bitcoin network.

5. So far, no one has come up with an objectively better version of the original Bitcoin concept, although there have been minor adjustments that have been adopted through the consensus of node operators, miners, and holders.

6. There have been attempts to take over the Bitcoin network, but they have all failed, and the network has only become more robust and resilient over time. In essence, you either: 1) need a massive amount of energy to take over Bitcoin, or 2) must convince the great majority of stakeholders to accept proposed changes. The former is coercive while the latter requires the changes to be advantageous for all stakeholders, both in perception and in reality.

7. Probably the best way to characterize BTC is as a form of digital gold. Like gold, it can’t be conjured out of thin air, like the USD and all other government enforced currencies. Like gold, it is intended to have saleability through time (i.e., preserve its value), but contrary to gold, it also has saleability through space (see The Bitcoin Standard by Saifedean Ammous). You can move BTC anywhere in the world at the speed of the internet at minimal cost. Gold requires massive storage and security, with enormous transportation costs to move safely and securely. As an example, France sent an aircraft carrier in the 1960s to New York to recover its gold that was still being held by the US Treasury because of WW2.

8. Given all this, BTC is intended to replace the USD as a global base money. Whether that happens or not is open to conjecture. We can think of any number of scenarios of how the US and other states react over time, some bordering on the conspiratorial.

9. In my opinion, the most likely path forward is that the Fed, SEC, CFTC, etc., plus central banks and securities/monetary regulators around the world will try to limit or even coopt crypto and BTC to maintain the current government-controlled fiat monetary system. Whether and how that happens is not predictable at present.

10. One crypto-like idea being discussed extensively is CBDCs, or Central Bank Digital Currencies. From what I gather, the idea is to create and launch fully programmable – and thus controllable – digital money. The Fed seems hesitant, but the Chinese Communist Party thinks it’s a great idea! How could it possibly go wrong?

11. As for blockchain technology, my understanding is that it is a method of storing data and information in a decentralized ledger. The Bitcoin network uses a blockchain to ensure its ledger is public, distributed, decentralized, and fully auditable. Every transaction is recorded in the blockchain and maintained by the network, which includes both the verification nodes and the work nodes (miners). Whether or not blockchains are useful in other areas remains an open question. From what I’ve read and heard, it is inefficient as a means of managing data, and centralized databases remain the gold standard (pun intended) in information management.

© Richard Martin