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December 2017

Should-Read: Chris Ellis: Bitcoin: Additional Suspicious Developments-Winklevoss Bitcoin Trust ETF (Pending:COIN): "Summary: Tethers are being issued at a pace of 13 billion per year...

  • No one knows where the money is, but no one seems to care.

  • Bitfinex halted new accounts registrations.

  • Bitfinex employee's profile suggests that he or the company is being investigated.

  • Tether Limited runs the Bitfinex playbook by imposing redemption minimums, effectively freezing customer funds.

  • This idea was discussed in more depth with members of my private investing community, Core Value Portfolio.

In my previous articles, I talked about the surprising correlation between the supply of Tether and the price of Bitcoin.... There are good reasons to believe that Tether Limited is issuing Tethers that are not backed by USD as promised in order to purchase Bitcoin through Bitfinex.... I believe that Tether's correlation to Bitcoin is no simple coincidence. It continues to baffle me why this issue is not the most talked about topic in the Bitcoin community.... At the time of writing, there were over 1.2 billion Tethers outstanding. Meanwhile, no one actually knows or seems to care about where Tether Limited is holding the USD funds. If market participants truly care about the integrity of the cryptocurrency, this should be the most pressing issue at hand....

Many readers have urged me to forward my findings to relevant authorities, and it is interesting to note that a Bitfinex employee's warrant canaries have disappeared. Warrant canaries serve as a warning mechanism that indirectly indicates to the public that the related entities have not been investigated. Their disappearance implies that he or the firm are being investigated by law enforcement...."

Must-Read: Once upon a time in the past the size and location of cities was underpinned by fundamentals in the sense first of agricultural resources and transport, and then of agricultural plus manufacturing resources and transport, on top of which was built, agglomeration economy, increasing returns, and congestion layer of determination. In the future it looks as though it will be not production but consumption suitability: the fundamentals underpinning cities will be where people find it pleasant to live, on top of which there will be a congestion layer, plus a three-fold path dependence increasing returns layer of determination: the consumption culture, the production culture, and the infrastructure left from the past. Will we all live in one million population mile-long thousand foot-wide thousand-foot high arcologies in Greater San Diego? Not all. But a lot of us may: Paul Krugman: The Gambler’s Ruin of Small Cities: "Once... towns and small cities... served as central places serving a mainly rural population engaged in agriculture and other natural resource-based activities...

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Should-Read: Jelani Cobb: @jelani9 on Twitter: "I was frankly embarrassed by @CornelWest’s threadbare commentary...

...It’s one thing to challenge and interrogate. Quite another to cloak petty rivalry as disinterested analysis. Neoliberal?... This points to a broader concern I might as well air. One of the more fascinating things I’ve observed as @tanehisicoates has become more prominent is the unifying contempt of a striking array of black intellectuals.... People as intellectually diverse as John McWhorter and Glenn Loury are mad at the same dude as @CornelWest and Adolph Reed. I can’t tell you how many times black academics have tried to turn me against my friend on the low. One who sniffed indignantly to me “He hasn’t written anything that’s not on my syllabus.” Then you should’ve sent your syllabus to @TheAtlantic. But underlying all this is another dynamic. Plain classical elitism.... Straight up: many people hate the fact that the person being hailed as possibly the sharpest black intellectual writing about race is an HBCU dropout. They prefer their self-made intellectuals to be of the deceased variety

Frankly I preferred not to say any of this. @tanehisicoates is a grown man. He can fight his own battles. But it’s a little tiresome to see and hear the hypocritical bullshit of academics who would prefer the community not be defended if doing so means accolades for someone else...

Should-Read: And now it is official: the official non-Trumpist Republican line is now that all of that stuff about the tax "reform" bill delivering materially faster economic growth in exchange for widening inequality was just boob bait for the bubbas. Robert Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz, John. B. Taylor, James C. Miller III, Barry W. Poulson, Charles W. Calomiris, Jagdish Bhagwati, Martin Feldstein, Greg Mankiw, and company take note: Allegra Kirkland: Rubio: GOP Tax Bill ‘Probably Went Too Far’ On Helping Corporations: "Sen. Marco Rubio (R-FL) said Friday that he believes the recently passed GOP tax bill did too much to help the bottom line of America’s largest corporations...

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Should-Read: WTF?! To cite §2.7 of your paper to claim that a critic is wrong when there is no §2.7 in the version of the paper that the critic read is just bizarre. You don't claim that critics are wrong and then cite to a rewritten version of your paper!: Eric Posner (Written with Glen Weyl): Response to Matt Klein’s post on Alphaville on Harberger taxation: "Matt Klein’s post on Alphaville about a recent paper of ours made a number of errors...

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Should-Read: This seems to be a counterproductive line to pursue: the people who would be triggered to go to the polls to vote to repeal the state gasoline tax hike are also people who would like more of their SALT deduction back. They would seem eager to punish McCarthy and company for taking that away. Does the California Republican House delegation have any polling indicating otherwise? Dan Morain: California congressional Republicans seek gas tax repeal: "Now that most of California’s House Republicans have voted for a tax overhaul that will raise taxes for many of their constituents, you have to wonder what more good cheer they’ll bring.... I’m thinking roads and other infrastructure...

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Should-Read: Tyler Cowen's line in early 2016—that 30% of America has always been crazy, but that the crazy used to be split between the two parties, and so was contained, but is now concentrated in one—has stuck with me. He meant it to be reassuring. But the crazy concentrated in the Republican Party turned out to be large enough to take it over. And then there were the 19% who were willing to go along with the crazy in November 2016. And now there are the officeholders who believe that they are tied to Trumpism. (1) Find different officeholders. (2) Break the 19%'s tolerance for Trumpism. (3) Split the 30% so it can no longer win a Republican primary. Those are the three principal tasks to recreate a constructive American politics. And easily grifted morons in and around Johnstown, PA are not key to understanding how to accomplish those tasks: Ezra Klein: “Trump country” stories help explain our politics, not the next election: "Michael Kruse’s Politico story revisiting diehard Trump supporters in Johnstown, Pennsylvania...

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Should-Read: One very good line here is that Nancy MacLean's book is true about Murray Rothbard even though (largely) false about James Buchanan. But I have considerably more sympathy for MacLean than Friedman does: Just how is MacLean supposed to read "The Public Choice Theory of John C. Calhoun" anyway? The disjunction between the public statements and the private correspondence of, say, a James J. Kilpatrick makes her—makes one—confident that a bunch of Southern white herrenvolk discourse in the second half of the twentieth century was profoundly Aesopian: "liberty" in large part did mean "our power over Blacks"—and that was what the bulk of conservative Virginians from the 1950s to, well, very recently thought a good political system should preserve. It is hard to find American libertarians for whom liberty-as-power-over-minorities is not in the mix: everyone who draws a distinction between state action and state funding, or between state funding and public accommodation, does so: Jeffrey Friedman: Public Choice Theory and the Politics of Good and Evil: "So now we finally know. Libertarians aren’t the ditzy bumblers exemplified by 2016 presidential candidate Gary (“What is a leppo?”) Johnson...

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Should-Read: We are moving from a statistical culture that focused on the taming of sampling variation to a different statistical culture that... what? Guarding against overfitting and computational economy seem to be the most important goals, and they are linked And behind everything lurks the problem of induction: in what ways are we justified in assuming that the future will be like the past, and in what ways are we not? For if we assume the future will be like the past in ways that it will not, we are simply hosed: Michael Jordan: On Computational Thinking, Inferential Thinking and Data Science: "The rapid growth in the size and scope of datasets in science and technology has created a need for novel foundational perspectives on data analysis...

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Comment of the Day: heebie-geebie: Awfully Specific Advice: "Always draw the unit circle before you draw the axes, on the chalkboard. It's easier to aim the axes through the middle of the circle than it is to center the circle on the axes..."

Procrastination for December 28, 2017


Yes, this feature was dropped on the floor during chaotic December. Why do you ask?

But it is now time to pick up the slack:

Worth Highlighting at Grasping Reality:

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Should-Read: The Winklevii's line is that BitCoin disrupts gold: that BitCoin is currently undervalued by a factor of two if only one-fifth of the world's gold bugs decide that it is appropriate to move half of their hoard into gold. And since the goldbugs of the world ain't too tightly wrapped, it could happen. That it could happen is why there has not been a crash yet. But his is nuts—there is still no compelling use for a blockchain, ingenious as it is, and no compelling reason why BitCoin would be the and they only blockchain in whatever blockchain future might emerge: Kai Stinchcombe: Ten years in, nobody has come up with a use for blockchain: "For the person paying for a product, the key feature of a new payment system...

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Should-Read: When I consider how much time people spend on their smartphones—and how incredibly expensive it would have been in any previous decade to actually produce what the smartphone does—I do wonder about the math behind slow measured economic growth. The pessimists must die on the hill that everything smartphones do are close substitutes for things that were done cheaply in the past. But is that really the case? I want to see a sample of representative daily smartphone use patterns to assess this. And, of course, the very sharp Greg Ip thinks we ain't seen nothin yet: Greg Ip: A Tech-Driven Boom Is Coming; Please Be Patient: "There isn’t a paradox: automation hasn’t advanced nearly as far as evangelists claim, and where it has, it’s often created more jobs than it’s destroyed...

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Should-Read: Originally dense populations had to be located in productive agricultural regions and on water trade routes. Then with the coming of the railroad and manufacturing we added raw material locations and transport routes to the mix. Now? Weather, local recreational amenities, density and amenities created by past cycles, and opportunity—opportunity for immigrations, both immigrants to the place and immigrants to the human capital-based economy—are where it is at. And the Trumpist Midwest looks as hosed as does Appalachians expecting the coal mining jobs to somehow come back: Noah Smith: A Road Map for Reviving the Midwest: "John Austin believes that there are 'two Rust Belts'...

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Live from the Journamalists' Self-Made Gehenna: Nate Silver is wise and correct here. Go interview some swing voters instead. And if you must interview Trump die-hards, let them speak for themselves—as I do not believe the current crop of reporters and reports do: Nate Silver: @natesilver on Twitter: "Part of what bugs me about these stories is that the conclusions seem preordained...

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Should-Read: WTF?! Real economic outcomes are not invariant to the monetary policy rule. A gold standard, a silver standard, adoption or non-adoption of Bagehot's Rule, a constant stock of high-powered money rule, a constant broad money stock rule, a k% growth rate rule, a k% growth rate rule with base drift, a k% growth rate rule with catchup after unexpected shortfalls, inflation targeting, price level targeting, inflation targeting switching to price level targeting with catchup at the ZLB—to claim that "real outcomes are invariant to the monetary policy rule, not just to the trend in inflation" is to ignore most of monetary economics. Why are these people writing this?: Robert E. Hall and Thomas J. Sargent Short-Run and Long-Run Effects of Milton Friedman's Presidential Address: "The immediate effect of Friedman's 1968 AEA presidential address on the economics profession was the introduction of an adaptive term in the Phillips curve...

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The Broken Political System of the United States...: No Longer Fresh at Project Syndicate

America s Broken System

Project Syndicate: America’s Broken Political System: From an Olympian perspective, the "tax reform" bill is not the biggest of deals. It is medium-sized news. The big news is elsewhere—but related.

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Live from Near Gehenna: Whether or not the Trump camarilla is involved in this, the entire Middle East believes that it is because of the timing of the Jared Kushner visit to Saudi—and the absence of any public reason for the visit Mohammed Ayesh: Arabic press review: Saudi Ritz Carlton prisoner dies after torture: "According to London-based newspaper Al-Quds Al-Arabi, major general Ali Alqahtani...

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Should-Read: I think the very smart Jeffrey Friedman gets this... not quite right. The case for the empirical benefits of capitalism is very strong—but only if one is willing to remove libertarian blinders and focus on eliminating the market failures (in distributions, in aggregate demand, in externalities, in information, etc.) that keep the function the market maximizes from being a good proxy for societal well-being. And once one has the market properly supported and disciplined, the philosophical discussion can commence: Jeffrey Friedman: What's Wrong with Libertarianism: "Libertarian arguments about the empirical benefits of capitalism are, as yet, inadequate...

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Should-Read: You really cannot do the history of economic thought without being willing to do counterfactuals! Now it is true that many times the counterfactual will be "somebody else would have done exactly this same work five or fifteen years later: it was immanent in the structure of the theory and in the empirical data being fed to the profession by the world". But not always: John Maynard Keynes: Essays In Biography "If only Malthus, instead of Ricardo, had been the parent stem from which nineteenth-century economics proceeded, what a much wiser and richer place the world would be to-day!...

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For the Weekend: Stephen Vincent Benét: John Brown's Body I

John Brown

For the Weekend: Stephen Vincent Benét: John Brown's Body I: INVOCATION

American muse, whose strong and diverse heart
So many men have tried to understand
But only made it smaller with their art,
Because you are as various as your land,
As mountainous-deep, as flowered with blue rivers,
Thirsty with deserts, buried under snows,
As native as the shape of Navajo quivers,
And native, too, as the sea-voyaged rose.

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Weekend Reading: Sidney Blumenthal on the Finances of Stephen "The Little Giant" Douglas

Illinois Central

Weekend Reading: From Sidney Blumenthal: Wrestling With His Angel: The Political Life of Abraham Lincoln: "In 1836, the legislature granted a charter for a railroad running from Galena in the northwest corner to the southernmost tip of Illinois at the confluence of the Mississippi and Ohio Rivers...

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Three Books for 2017: Economics for the Common Good, Janesville, Economism

3 books

Ken Murphy asked me for three books for 2017. Mine are: Amy Goldstein: Janesville: An American Story, Jean Tirole: Economics for the Common Good, and James Kwak: Economism: Bad Economics and the Rise of Inequality:

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Must-Read: Ezra Klein: @ezraklein on Twitter: "I don’t know what the [New York] Times should’ve done with Thrush. But I watched the efforts to plant oppo and smear @lkmcgann in the aftermath of her reporting. Anyone who thinks coming forward with these experiences is easy, even now, is wrong. I am beyond proud to be her colleague..."

Must-Read: If you are neither a plutocrat nor an activist seeking validation of your ethno-cultural grievances, you are not of concern to today's Republican Party. We're looking at you, the entrepreneurial and enterprising white upper-middle class who were both Teddy Roosevelt and Ronald Reagan's core supporters: Laura J Keller, Ben Steverman, and Charles Stein: Inside Wall Street's Towers, Traders Grouse Over Trump Tax Plan: "Many are figuring out greater benefits will go to billionaires. One, sipping a Bloody Mary, vows to quit the Republican party...

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Karl Polanyi, Classical Liberalism, and the Varieties of "Neoliberalism": Hoisted from the Archives

Communists need to co opt the neoliberal agenda The Real Movement

Hoisted from the Archives: Karl Polanyi, Classical Liberalism, and the Varieties of "Neoliberalism": Virtual Office Hours from Espresso Roma CCXXVI: July 25, 2014: Karl Polanyi's The Great Transformation is certainly the right place to start in thinking about "neoliberalism" and its global spread. But you are right to notice and do need to keep thinking that Polanyi is talking about pre-World War II classical liberalism, and that modern post-1980 neoliberalism is somewhat different.

First, as I, at least, see it, there are three strands of thought that together make up the current of ideas and policies that people call "neoliberalism":

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Six Tax "Reform"-Related Appeals to Various People to Do Their Jobs for Their Country's Sake—and Even, in the Long Run, Their Selves' Sake

Battle of the Colline Gate

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Should-Read: The end of the second volume of Sidney Blumenthal's Political Life of Abraham Lincoln: Sidney Blumenthal: Wrestling With His Angel: The Political Life of Abraham Lincoln Vol. II, 1849-1856: "When [Lincoln] hurtled on a train to Bloomington for the founding of the Illinois Republican Party on May 29, 1856, it was a familiar trip to a place he had visited many times to practice the law...

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An Appeal to the Republican-Supporting Plutocrats of America

Comment of the Day: JEC: An Appeal to the Republican-Supporting Plutocrats of America: "I've written more about this in my own space, but the short version is: 'Would somebody please remind the plutocrats that they are not the kleptocrats' natural allies; they are the kleptocrats' natural prey?'...

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