Don't Worry Consumers, Steve Mnuchin Wants to Protect You from Bitcoin

Don't Worry Consumers, Steve Mnuchin Wants to Protect You from Bitcoin

01/12/2018Tho Bishop

It seems like its only a matter of time before the US government introduces a new wave of regulations on cryptocurrency.

Steve Mnuchin was asked about the topic today at an event hosted by the Economic Club, and the Treasuy Secretary was quick to rattle off a number of cliched responses always used to justify bigger and more intrusive government:

"We want to make sure that bad people cannot use these currencies to do bad things," he said Friday at an event hosted by the Economic Club of Washington. He added the U.S. is working with world leaders in the G-20 on "making sure that this doesn't become the Swiss numbered bank accounts."...

Mnuchin also said he is concerned about speculation in cryptocurrencies. The price of bitcoin shot up 1,200 percent last year, and other digital tokens, such as ethereum and Ripple's XRP, have grabbed their share of attention. "I want to be sure consumers trading this understand the risks," he said on Friday. "I'm concerned consumers could get hurt."

Of course, there is some humor in the notion of Treasury Secretary Mnuchin as the protector of consumers against dangerous financial scams. After all, as owner of OneWest Bank bank, it was he that was accused by the California State government for engaging in fraudulent mortgage practices following the financial crisis. As CNN Money noted:

By January 2013, when the memo [written by California investigators] and complaint were prepared, OneWest had foreclosed on 35,000 California homes and had begun foreclosing on 45,000 more, the complaint said. The draft complaint accused OneWest of "widespread violation" of California foreclosure laws.

The memo said that OneWest backdated documents and caused them to be filed with county recorders. It also said that OneWest made unlawful bids at trustee sales, resulting in "the wrong parties winning auctions," and failed to comply with state rules for the timing and mailing of foreclosure documents.

"OneWest's false filings and unauthorized conduct in the course of the foreclosure process harmed homeowners by denying them timely and important information about their foreclosures and potentially shortening the amount of time they had available to find a way to become current on their mortgage obligations," the memo said.

The memo also said that investigators could not subpoena bank records and had been hampered by OneWest's "obstruction" of another state investigation.

Of course, in terms of defrauding consumers, any shenanigans at OneWest bank pail in comparison to Mnuchin's most outlandish con:

 

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Trump Tries to Shift Blame for High Oil Prices

04/21/2018Ryan McMaken

Oil prices headed upward more rapidly this week, hitting $68 per barrel (WTI), which is the highest price since December 2014. 

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Even if adjusted for inflation (according to the CPI), oil prices are still near a four-year high. 

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Trump took to Twitter this week to attempt to blame OPEC for the high prices, stating "Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!"

While OPEC can no doubt take some credit for pushing down production totals, Trump had best look in the mirror if we wants to find another major contributor to the recent rise in prices.

After all, prices haven't exactly been helped downward by the Trump administration's continued promises of ongoing military action in the region. Although Syria is not an oil exporter, interventions that threaten to destabilize the region further aren't a boon for consumers of oil. 

Essentially, what we have now is a president who is threatening a war in the Middle East, a trade war with China, and new sanctions against Iran. 

An additional potential threat lies with Washington's habit of imposing and expanding sanctions on Russia. As Julian Lee at Bloomberg notes

President Donald Trump already has Iran in his sights. The clock is ticking -- May 12 is the deadline for him to extend the waiver on sanctions that are suspended by the nuclear deal.

More recently he has turned up pressure on Moscow with a new raft of sanctions aimed at individuals and companies close to President Vladimir Putin.

In December, Russia — which is not a member of OPEC — had reached a deal with OPEC to limit its own production to keep prices up. Faced with uncertainly surrounding sanctions, it seems, Russia is now saying it will keep its options open when it comes to production. 

But even if Russia wants to expand production, US sanctions may limit this ability since Russia needs capital to keep production going, and "[d]ue to sanctions and the inability for Russian energy companies to obtain funding in U.S. dollars, Russia often has to turn elsewhere for backing, including costlier Chinese funding." 

That could impact total production, and thus drive prices up further. 

Given that Russia vies with Saudi Arabia and the US to be the world's top oil producer — It was number 3 in 2017 according to the EIA — policies that lead to cuts in Russian production will lead to higher global prices, all else being equal. 

In 2017, Russia provided 12 percent of global production, and Iran is an additional 5 percent. 

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If Trump were truly concerned about oil prices, he'd brush off continued efforts by Washington interventionists searching for yet more ways to isolate and limit trade with Iran and Russia. 

Moreover, openness toward oil-exporting states is all the more important since "[g]lobal oil supply has already been tightened by the OPEC-led supply cuts, and boosted by the collapse in Venezuelan output and drop in Mexican production. The group is nearing "mission accomplished" in draining excess oil inventories."

In other words, if US policy succeeds in limiting production in any countries outside of OPEC — such as Russia — that's only helping OPEC. 

As Ellen Wald at Forbes wisely suggested, though, Trump's blaming of OPEC for high prices is a savvy political move since the average America — who knows next to nothing about US sanctions, falling Mexican production, or the situation in Iran — will now associate pain at the pump with OPEC. 

We already know that blaming foreigners is a winning political strategy — as with the current brewing trade war against China — so this tactic may work nicely also. 

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Comey's Book Tour Is All About 'Truth' — but His FBI Tenure, Not so Much

04/20/2018James Bovard

In his ABC interview last Sunday, former FBI chief James Comey boasted endlessly of his devotion to truth, which he said “has to be central to our lives.” Touting his role in bringing down Martha Stewart, he declared, “The truth matters in the criminal justice system.” But, when he was FBI boss from 2013 to 2017, his agency duped the American public whenever convenient.

In 2014, Comey declared that “We do use deception at times to catch crooks, but we are acting responsibly and legally.” His comment was spurred by revelations that an FBI agent had masqueraded as an Associated Press reporter and fabricated an AP story. The Associated Press complained that the FBI’s tactics undermined “the vital distinction between the government and the press," while the Reporters Committee for Freedom of the Press protested that the ruse “creates the appearance that it is not independent of the government.” But Comey declared the technique was “proper and appropriate,” allowing such scams to continue.

The AP charade was chump change compared to the FBI’s next media flim-flam. After a high-profile confrontation between federal agents and Nevadan ranchers in 2014, the FBI created a bogus independent film crew that spent almost a year hounding the Cliven Bundy family and their supporters, taping their comments to propel federal charges against them. The feds eventually arrested and prosecuted Bundy family members.

This past January, federal judge Gloria Navarro dismissed all charges, denouncing “flagrant” and “reckless” misconduct by federal prosecutors. The FBI was exposed for lying for more than three years regarding its deployment of sniper teams around the Bundys’ ranch prior to the Bundys summoning supporters to protect them.

The Justice Department inspector general last month exposed Comey’s arguably deceitful tactics regarding his campaign to outlaw private encryption, which he perennially portrayed as a grave peril to public safety. After a Muslim couple gunned down 14 people in San Bernardino, Calif., the FBI invoked a 1789 law to sway a federal judge to order Apple to write anti-encryption software that would hand the FBI the keys to break into the terrorist’s iPhone (and all other iPhones).

Read the rest at The Hill
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Money-Supply Growth Rebounds to 10-Month High

04/20/2018Ryan McMaken

In March, growth in the supply of US dollars increased at the highest rate seen in ten months. This comes after a year-long period of falling growth rates, at the end of which money-supply growth fell to a near-ten-year low of 2.6 percent, year over year. 

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By March of this year, however, growth rates had headed upward again, rising to a year-over-year growth rate of 5.1 percent. 

The money-supply metric used here — an "Austrian money supply" measure — is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on this metric and its growth.

Meanwhile, the more commonly used measure of money supply, M2, continued to experience falling growth rates through the first part of this year. In March, M2 increased 3.9 percent, year over year, making it the smallest increase in M2 in 87-months. 

Part of what pushed the Austrian measure of money supply upward was an increase in treasury deposits at the Fed. 

The inclusion of deposits at the Fed is a key difference between M2 and the Austrian measure of the money supply, and growth in these deposits has added to the differences seen in growth between M2 and the Austrian measure. 

In March, treasury deposits at the Fed hit a 15-month high, rising to 273 billion. The highest level for treasury deposits ever reported occurred in November of 2016, at a total of $394 billion. 

What does the trend in money supply indicate? 

Historically, a sizable drop in money supply growth rates suggests that a recession is on the horizon — but not on the immediate horizon. 

In this graph, provided by RealForecasts.com, we see how dips in the money supply growth rate often precede recessions, but with a lag period of a year or so. In many cases, money supply growth is trending upward again by the time the recession officially begins. 

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Does the recent downturn and subsequent uptick indicate a recession? 

It's difficult to say how long the current boom period will last. Home prices continue to sail upward for now, although we do see volatility in the stock market. Unemployment data doesn't point to anything catastrophic at this time. 

Some indicators suggest problems, however. Delinquencies in auto-loan debt continue to trend upward, and growth in commercial loans remains new multi-year lows. 

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Canada is Not a Free Trade Zone

04/19/2018Tho Bishop

When lampooning the various arguments for trade barriers, Murray Rothbard would like to try to use the arguments offered against foreign trade to trade between states themselves.

As he wrote in Making Economic Sense:

The best way to look at tariffs or import quotas or other protectionist restraints is to forget about political boundaries. Political boundaries of nations may be important for other reasons, but they have no economic meaning whatever. Suppose, for example, that each of the United States were a separate nation. Then we would hear a lot of protectionist bellyaching that we are now fortunately spared. Think of the howls by high-priced New York or Rhode Island textile manufacturers who would then be complaining about the "unfair," "cheap labor" competition from various low-type "foreigners" from Tennessee or North Carolina, or vice versa.

Fortunately, the absurdity of worrying about the balance of payments is made evident by focusing on interstate trade. For nobody worries about the balance of payments between New York and New Jersey, or, for that matter, between Manhattan and Brooklyn, because there are no customs officials recording such trade and such balances.

If we think about it, it is clear that a call by New York firms for a tariff against North Carolina is a pure rip-off of New York (as well as North Carolina) consumers, a naked grab for coerced special privilege by less-efficient business firms. If the 50 states were separate nations, the protectionists would then be able to use the trappings of patriotism, and distrust of foreigners, to camouflage and get away with their looting the consumers of their own region.

Unfortunately such "absurdity" has been ruled to be the law of the land in Canada. As the National Post reports:

After a legal battle fought all the way to Canada’s highest court, a New Brunswick man’s quest to be able to buy slightly cheaper alcohol in a neighbouring province has failed.

In a unanimous decision handed down Thursday, the Supreme Court of Canada ruled provincial trade barriers are constitutional as long as they’re aimed at a valid purpose within the province’s jurisdiction, with only an incidental effect on trade. Canada’s constitution simply “does not impose absolute free trade across Canada,” it declared....

On its face, the case was about booze. But had the challenge been successful, the precedent could have struck down a massive swath of provincial trade barriers, from agricultural supply management to e-commerce to environmental controls. Crown attorneys from every province had lined up at the Supreme Court to argue against the challenge, with the federal government siding with them.

The ruling declared that allowing “full economic integration” within Canada would “significantly undermine the shape of Canadian federalism, which is built upon regional diversity within a single nation.” Federalism means there must be “space to each province to regulate the economy in a manner that reflects local concerns,” the court ruled.

As Maxime Bernier, a Conservative Member of Parliament and a student of Austrian economics noted, "Sad day for defenders of economic freedom in Canada."

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Waco: 25 Years Later

04/19/2018James Bovard

25 years ago this morning, FBI tanks were busy collapsing the home of the Branch Davidians atop their heads. FBI was also gassing the children, women, and men - leading to a conflagration that left 76 people dead. Waco shows that it is not an atrocity if the U.S. govt. does it - that federal aggression against Americans will often be ignored by the media - and that Congress cannot be trusted to expose federal outrages.

Read more from Jim Bovard at The Hill: Bitter lessons 25 years after Waco, Texas, siege

 

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Gratitude and Wonder for the Internet

04/18/2018Gary North

This is a simple video, cheap to produce, and free to post. It is about the fact of its own existence. The talking head is the remarkable investigator James Corbett.

A Moment for Wonder

We are witnessing an incomparable transformation of world civilization, and we barely recognize it. We are too busy to recognize it. We are hard-pressed to think through the implications of it for our own lives, let alone the lives of seven and a half-billion other people. But the transformation is taking place. We have gone through it, almost oblivious to the fact that we have been going through it. We almost take it for granted. That was Corbett's point.

I want to make another point. The most important unanswered question that any historian can ask is this one: what made possible, beginning around 1800, compound economic growth per capita of about 2% per annum? Historians rarely ask this question. None of the ones who have attempted to answer it have come up with a plausible answer. Yet that phenomenon has led to the creation of the world that would be completely unrecognizable to anybody born in 1800. This has taken place within the lifetime of three generations. I have come back to this point repeatedly. John Tyler was born in 1790, and he became President in 1841. I have interviewed his grandson, Lyon Tyler. Both Lyon and his brother Harrison are still alive. This is inconceivable.

The 2% per annum per capita real economic growth that has taken place over the last two centuries was imperceptible to the people living through the transformation. Year-by-year, the world got richer, and the only exception was the decade of the 1930's. Yet people did not perceive the transformation. Gadget by gadget, the world was completely changed, but people only noticed the gadgets that applied to their lives. There is more to life than the compounding of gadgets, yet the compounding of gadgets ultimately transformed the world.

Corbett's point applies to the last two decades. Here, breakthroughs were made, based on Moore's law, which have changed our lives. Moore's Law accelerates a lot more than 2% per annum. It accelerates at something close to 50% per annum. Despite this, we have lived through the repercussions since 1965 in the field of silicon technology, and we have adjusted without any problem. We barely notice what is taking place around us. We take it for granted. That's why I thought Corbett's video was impressive. Using digital technology, he made his point in such a way that we understand it. He did it simply by using a piece of digital music. At first, it was not clear what he was getting at. But, by the end of the presentation, it was clear what he was getting at.

To his sense of wonder, I add a sense of gratitude. I am a writer. Writers want to find readers. In the history of mankind, up to 1996, writers had to find either a publisher that would print and distribute their materials, or else they had to become direct response marketers who could seek out an audience through the use of mailing lists. I tried the first approach, and I failed. I tried the second approach, and I succeeded.

Today, as the extraordinary experience of Jordan Peterson indicates, all you have to be is good. Never before in the history of man has the principle outlined in Albert J. Nock's 1936 essay, "Isaiah's Job," been truer: the Remnant will seek you out. To use the words of the voice that spoke to Kevin Costner, if you build it, they will come. Warning: if it's not any good, they won't stay long unless they are crackpots. Of course, there is always a large number of crackpots. You may get an audience, but they won't be worth recruiting.

We now are being pressured to restructure our lives. We do it voluntarily. People who use Facebook and social media, which I do not, have had to re-budget time in their lives. The way we communicate has changed. We are told that the way people get elected has changed. There is nothing that the critics can do about it. That really is the bottom line. All the handwringing about the supposed Russian involvement in American politics is essentially irrelevant. The two main candidates used the system to the hilt. Trump used it cheaper. He won. The candidates will always use the best tools available.

There is nothing anybody can do about it that is significant. The establishment doesn't like it. The people who were the pioneers of the transformation want to be in the establishment. More or less, they have been adopted by the establishment. But our lives are changing in a completely un-predictable way. The geniuses who created Facebook, Amazon, and all the other digit-based institutions have been financially successful, and they have solved little problems to make their empires grow. But they have no control over the direction in which history is moving, because, visibly, there are so many new directions in which it may be moving. So many different groups use Facebook that there is no way of knowing which group is going to be successful. Everybody has some eschatology. Everybody has some theory of the future. But, with respect to specific predictions about how old movements are going to use specific new technologies, nobody has a clue.

Let me give a recent example. Google, renamed Alphabet, has a subsidiary: Waymo. Waymo has developed the new technology of self-driving cars. I have thought myself radical in saying that I think self-driving cars are going to be widespread in 2025. Little did I know. Waymo has just ordered 20,000 self-driving Jaguars, which will be delivered between now and the end of 2020.

Waymo Live Unveil Highlights: Self-Driving Jaguar I-PACE

My wife understands their strategy. She says they're going to appeal to rich people whose time is valuable. Waymo thinks that their cars will be driving a million trips a day in 2020. If this turns out to be true, there will be tremendous pressure on everybody else whose time is valuable to either use Waymo or else buy self-driving cars of their own. Other companies, such as Uber and Lyft, are going to have to compete by using self-driving cars.

Let's talk politics. If the rich people find that self-driving cars save them money, then they are going to make certain that politicians vote for policies that will enable the spread of self-driving cars. That's another reason why Waymo is buying Jaguars. Anyway, that's my theory.

For articles on this, go herehere, and especially here.

NYC cab drivers demand action to stop suicide crisis

New York City cabbies are going to be out of business in 48 months. They see what is coming. They are desperate for politicians to save them. It will not work. Some have begun committing suicide.

This protest is futile. Moore's law is relentless. Self-driving cabs are coming. We must adjust. Despair is futile. Politics is futile. An unplanned, widespread, international process of innovation is irreversible, short of a total breakdown of world civilization. This is unlikely.

Hayek called this the spontaneous order. The free market is replacing politics in the realm of economic planning. The state is on the defensive.

The central planners are holding up signs: "Stop!" The process will not stop. They will be run over.

It is a time for gratitude, not just wonder.

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The Mises Lecture That Inspired Ron Paul to Run for Congress

04/18/2018Tho Bishop

It's amazing what you can find in the Mises digital archives.

Here is a lecture by Ludwig von Mises on Socialism that he gave at the University of Houston. In the audience was a doctor from Lake Jackson, TX. After listening to this talk, he decided to run for Congress.

This was the only time Ron Paul met Mises, as he notes in his book Mises and Austrian Economics: A Personal View.

Because of my interest in individual liberty and the free market, I became closely associated over the years with friends and students of Mises, those who knew the greatness of Mises from a long-term personal friendship with him. My contact, however, was always through his writings, except on one occasion. In 1971, during a busy day in my medical office, I took a long lunch to drive 60 miles to the University of Houston to hear one of the last formal lectures Mises gave—this one on socialism. Although 90 at the time, he was most impressive, and his presentation inspired me to more study of Austrian economics.

Between Mises's Austrian accent and the recording quality of the 70s, it's not the easiest to understand. But still, a very neat piece of history. 

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Historical Controversies Podcast: Season 3

04/18/2018Mises Institute

Today, Chris Calton kicked-off the third season of his Historical Controversies podcast, which will recount the controversial history of the American Civil War.

The complete series (including Seasons 1 and 2) is available on iTunes, YouTube, Soundcloud, Google Play, Stitcher, Mises.org, and via RSS feed.

If you enjoy the podcast, please leave a positive rating and review.

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Peak Politico

04/18/2018Tho Bishop
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Trump Nominates Another Obama-Approved Federal Reserve Nominee

04/17/2018Tho Bishop

In no area has President Trump differed more from his campaign rhetoric than the field of monetary policy. Yesterday Trump announced the nominations of Richard Clarida and Michelle Bowman to the Federal Reserve Board of Governors, with the former to fill the role of Vice Chair. Clarida’s nomination in particular illustrates how uninspiring Trump’s appointments have been, as he was a finalist for a Fed governorship under Obama until he withdrew his name from consideration. Interesting enough, doing so resulted in Jay Powell, Trump’s new Fed Chair, to fill the position.

Richard Clarida, a former Bush Treasury official, currently serves as a Columbia University professor and an adviser to Pacific Investment Management Co.  He is a New Keynesian who has published a great deal on “Optimal Monetary Policy.” (Guido Zimmerman has an interesting QJAE article on the topic which references some of Clarida’s work.)

In terms of his policy views, he offers an interesting contrast to fellow Marvin Goodfriend – whose nomination has currently been stalled in the Senate. To Clarida’s credit, he reject’s Goodfriend’s support for negative interest ratesgoing so far as to question their legality for the Fed. In his advisory role at Pimco, his analysis has questioned the effectiveness of contemporary monetary activism. As he co-wrote in a June 2016 analysis:

In recent years we have described “riding a wave” of central bank interventions, as a range of unconventional policies have been rolled out across countries, driving asset price returns. This wave-riding has worked well in the past. Looking out over the secular horizon, however, diminishing returns to central bank interventions – and the potential for policy activism to do more harm than good, notably in the case of negative policy rates – advise against such an approach.

Of course he also differs in one area where Goodfriend is good, the use of the Fed’s balance sheet. Goodfriend has warned that the Fed’s buying of non-Treasury assets, like mortgage backed securities, gets it into the business of allocating capital. Instead, Clarida thought the Fed was too modest in buying up assets following the financial crisis.

As Matthew C. Klein  of Barons notes:

Clarida thought the Fed could effectively respond to downturns by committing to buying as many bonds – including mortgage bonds and corporate bonds – as necessary to "cap" interest rates at the levels it wants:

Much of the existing literature either misses entirely or under-appreciates how robust an LSAP [large-scale asset purchase] program can be at lowering bond yields and/or credit spreads...a central bank can everywhere and always put a floor on any nominal asset price (or set of nominal asset prices) for as long as it wants...So long as the central bank is willing to buy an unlimited volume of those bonds (potentially including the entire outstanding stock) at the interest rate it wishes to put a ceiling on, it will succeed. And of course, the above reasoning also applies directly to an Lsap program targeted at corporate bonds or mortgage backed securities.

The Fed successfully capped U.S. government borrowing costs in the 1940s, and this experience was cited by the Fed's staff in mid-2003. While the idea failed to gain traction among American policymakers, the Bank of Japan has successfully used "yield curve control" to limit yields on Japanese government bonds since 2016. Clarida's position in 2010 suggests he would be keen on something similar, perhaps also including mortgage bonds and corporate bonds, should he be at the Fed during the next downturn.

In terms of Fed reform, Clarida is likely to be an ally for House Republicans who have pushed to make the Fed adopt a rules-based monetary policy framework. Clarida has long written about the advantages of a rules-based framework and even has his own “forward-looking” version of the Taylor Rule.

As a voting Fed member, Michelle Bowman will also have an impact on the future of monetary policy – but as far as I can tell she has made no public comment on the subject. Rather than being an economist, she’s an attorney who had a long career as Washington staffer. Her employers include Senator Bob Dole, House Transportation Committee, the House Oversight Committee, FEMA, and Homeland Security Secretary Tom Ridge. Not the best resume for draining the swamp.

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