On the Rocks of Mt. Gox

A guy takes it into his head
To eschew dollar bills and the Fed,
And throws in his lot

With a currency wrought 

By anonymous hackers instead. 

Though treasured by crooks and by cranks,

It constantly surges & tanks,

While hackers purloin

The internet coin

That's issued without central banks.

While enjoying the untraceability

And capital gain volatility

Our guy never saw

A programming flaw
Referred to as "malleability."

It's a ruse by the hackers that blocks

The appearance of trades on Mt. Gox,

So it's not noticed when

They "spend" it again,

Invisibly fleecing the flocks. 

So our bitcoin investor's been lacquered

By a shadowy internet blackguard. 

With no restitution,

The only solution's

A sad, little protesting placard. 

*****************************

The world of virtual currency was dealt a blow this week, when it came out that the Tokyo-based bitcoin exchange known as Mt. Gox had a technical flaw that had enabled hackers to steal bitcoins for months without anyone realizing it. Missing were 750,000 virtual coins worth about $400 million at the time of the revelation. 

My. Gox then shut down in both the physical and online worlds, with no apparent recourse for those who held bitcoins through the exchange. If that was you, you're out of luck. 

However, as Heidi Moore opines in the Guardian, this scandal may be a blessing in disguise, by shaking the amateurish players out of the nascent virtual currency business. The link to her column is below. 

http://www.theguardian.com/money/us-money-blog/2014/feb/25/bitcoin-mt-gox-scandal-reputation-crime

(Thanks to my friend Art Dawson for the inspiration!)

#FedValentine

Dear Janet, this valentine's for you,

We economists simply adore you;

If to growth you respond 

By tap'ring our bond,

Please measure your steps, we implore you. 

There are blogs which the Hawks are condemnin' in,

As sour as a mouth with a lemon in,

'Cause they've had enough of

The Sign of the Dove

From the Head of the Fed, who is feminine. 

But we hope that the Fed's intervenin'

May get more employers to lean in,

So the new Madam Chair,

(The  dovish one there)

May proceed with the stimulus weanin'. 

Until the economy's hot,

You're bound to hear Yellen a lot,

As it falls to the Fed

To goose it instead,

As the GOP Congress is not. 

We hope in your heart there is room

To let the economy bloom,

And kindly deplete 

The Fed's balance sheet

To let normal markets resume. 

Nothing to Tweet About

The outlook for Twitter is blah;

Is it having its final hurrah?

They're losing morale

With a growth rationale

That is premised on je ne sais quoi.

The secret to growing more revenue

Is something the company never knew,

But it's more of a feat

Getting newbies to tweet

Than skeptical analysts ever knew. 

*******************

Twitter (NASDAQ: $TWTR) held its first earnings call as a public company, and investor reaction showed just how high the expectations are for this company. Although quarterly revenues of $243 million exceeded the $218 million consensus forecast, participants in the call were spooked at how few new users had signed up to send their first tweets. The 241 million users in December were only 4% more than those in the previous quarter. Apparently, the new-user experience is not as friendly as it ought to be. 

This perhaps explains the lackluster growth in the number of followers for @DrGooseEcon?

Bowled in the Cold

By now everyone and his mother heard 

All the hype, and will not want another word

Of the Super Bowl game

And the way that it came

To be played in a swamp in East Rutherford. 

If a Wall Streeter gets in his Maybach,

To drive to the game it's a way back

Through traffic so bad,

You'd think that it had

To do with political payback. 

We wanted a "cold-weather Bowl"

- If we're honest - to further the goal

That the Jets or the Giants

Could have more reliance

To play in a championship role. 

But the outcome of all of our schemes

Was not the result of our dreams;

Though the Bowl's in our venue,

It's not as fun when you

Are watching two out-of-town teams. 

*************

Regardless, good luck to the Denver Broncos and Seattle Seahawks today, and may the better team win!

Expert Opinion

The experts' opinions diverge

On whether to taper or surge;

You may go to your death

While holding your breath

For consensus to fin'lly emerge. 

*****************

Over the last day I read a couple of thought-provoking essays on the nature of economic expertise, and how to take the expert opinions we are constantly reading. The Guardian's US finance & economics editor Heidi Moore reminds us that it's as much of an art as a science.  Says Ms. Moore: "Here's the problem: Even the experts don't agree on where the economy has gone. Some believe it's improving. Some believe the evidence is thin."  Of course, "the economy" is big and complex, so it's no wonder. 

Economist Chris House, in his Order Statistics blog, points out that even Nobel laureates may have true expertise in only a narrow field, so one must keep that in mind when listening to an international trade expert expounding on, say, behavioral finance. 

Let the reader beware!

Heidi Moore (The Guardian): Rumors, the US Economy & 2014: What You Need to Know http://www.theguardian.com/money/us-money-blog/2014/jan/29/us-economy-state-rumors-federal-reserve

Chris House (Order Statistic blog): The Wisdom of Laureates  http://orderstatistic.wordpress.com/2014/01/30/the-wisdom-of-laureates/?utm_content=buffer82a4d&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

Paranoid Plutocrats

At times one encounters the views

Of a few with a billion to lose,

Who imagine a threat 

From the left-leaning set

Like the Nazi pursuit of the Jews. 

Despite holding fast to the reins
Of the Congress and capital gains,

"Our wealth," they will say,
"May be taken away,"
Which reality scarcely explains.

The proportion of income that went

To the point oh oh oh one percent

Has been higher in fact

In the age of Barack 

Than the last GOP president. 

If you're rich and you fear persecution
To compare to the Final Solution,
A more accurate view

May classify you

As a bag that is suited for douchin'.

****************

Retired billionaire venture capitalist Tom Perkins provoked scorn and derision this week with his comments that the rich in this country face a potential wave of persecution comparable to the Nazi Kristallnacht. This was the opening act of the Holocaust in 1938, when uniformed thugs smashed, burned and looted Jewish businesses and institutions in Germany. 

In a letter to the Wall Street Journal, Mr. Perkins sought to "call attention to the parallels of fascist Nazi Germany's war on its 'one percent,' namely its Jews, to the progressive war on the American one percent, namely the 'rich.'"

Many institutions of capitalist success rushed to distance themselves from Mr. Perkins, including his old venture capital firm Kleiner Perkins Caufield & Byers, which appeared ready to excise the name of one of its founders. 

However, before dismissing Perkins' words as the rant of some crank, it may be appropriate to recall some of the almost-as-paranoid remarks made by American billionaires before and during the 2012 election. For more perspective on the persecution complex of the plutocracy, see the thoughtful essay by Josh Marshall in Talking  Points Memo. 

******************

Here, until I learn how to embed links in the mobile version of Blogger, are the links referenced above:

Steven Schwartzman's comparison of higher taxes on private equity with Hitler's  invasion of Poland: http://www.businessinsider.com/steve-schwarzman-taxes-hitler-invaded-poland-2010-8

Josh Marshall's attempt to explain Tom Perkins' paranoia: http://talkingpointsmemo.com/edblog/the-brittle-grip-part-2

Mr. Perkins' letter: http://m.us.wsj.com/articles/SB10001424052702304549504579316913982034286?mobile=y

Tweet from Kleiner Perkins in response: https://twitter.com/kpcb/status/427185213261623297

En (La)Garde Against Deflation

Said Lagarde, of a threat that dismayed 'er:
"There's a danger that prices may crater. 
We're conditioned to fear
That things become dear
But deflation's the risk that is greater."

"With deflation, the instinct is human
To save and cut back on consumin',
But though disciplined ways
Are worthy of praise,
They prevent the economy's boomin'."

"To all of those countries who plan
To avoid the malaise of Japan:
Forget all the rules
Of conventional tools,
And stimulate now, while you can!"

The West In Decline

Said a banker of world reputation:
"It's an Age of Reduced Expectation. 

For workers, the answer

Is less social transfer;
The rich face diminished taxation."

HSBC Chief Economist Stephen King, in a New York Times op-ed piece entitled When Wealth Disappears, argues that "We are reaching end times for Western affluence."  While the Post-War generation seemed to live in a world in which rising prosperity and markets guaranteed a comfortable future, now "the numbers no longer add up. Even before the Great Recession, rich countries were seeing their tax revenues weaken, social expenditures rise, government debts accumulate and creditors fret thanks to lower economic growth rates."

What's interesting about this quote, and many others like it, is the degree to which economic forces that the writer wishes to portray as unstoppable waves actually resulted from government policy choices that he himself likely supported, and for which his industry energetically lobbied. 

Over the last generation, US tax revenues have weakened largely because tax rates have fallen. The most important reason that our social expenditures have risen is the cost of healthcare. Years ago, some Republican think tanks, alarmed at runaway medical spending as well as the prospect of a single-payer system to fix it, proposed a "social market" alternative, which was actually successfully implemented in Massachusetts. Why don't any of them acknowledge that now that a similar system is being implemented federally?

I do not mean to denigrate Mr. King's economic forecasting ability or the depth of his social concern. But one has to be skeptical when one hears the representatives of the 1% arguing that the 99% must accept diminished expectations as their destiny.  

Lowdown on the Shutdown

You may think that this poem's on the deficit,
So kindly allow me to preface it
That the shutdown impending
Is not about spending;
There's no one who even professes it.

It's a high-stakes political drama,

Unneeded if heads had been calmer,

A tactical ruse

By those who refuse

Affordable Care from Obama. 

The Tea Party Capitol faction

Appears to take no satisfaction,

Though we're not in the black

In the age of Barack,

That the deficit's cut to a fraction. 

The foregoing limerick is just a reminder that, as the US federal government heads toward a shutdown over the parties' inability to agree on a budget, that the budget itself is not the issue; neither are debts and the deficit. Although the fact is not well publicized, and has more often been deliberately obscured, the federal budget deficit has been cut in half since President Obama took office in 2009. 

The the intractability of the fight over the budget is therefore a strategy by the House Republicans, and especially their Tea Party faction, to throw yet another attempted roadblock in front of the rollout of Obamacare.