Daily Archives: February 16, 2014

Yanis Varoufakis: BITCOIN: A Flawed Currency Blueprint with a Potentially Useful Application for the Eurozone

Naked Capitalism has the article Yanis Varoufakis: BITCOIN: A Flawed Currency Blueprint with a Potentially Useful Application for the Eurozone.

Bitcoin is a hard-core version of the Gold Standard, in that the money supply is algorithmically fixed to grow at a pre-determined rate and, eventually, to reach a maximum quantity of Bitcoins that remains fixed forever.

Actually I like this article for its explanations of several things.  It has a good explanation of problems that deflation presents.  It has the above explanation of one feature of Bitcoin like currencies. Lastly, it has a good discussion of the economic issues in the Eurozone.

I follow and understand most of the explanations, but dealing with money and economics in situations that are outside our normal experience takes a little more mental effort than I am used to.

The article answers a question about why poorer people are not helped by deflation.

In a recent debate, I was confronted with the argument that deflation is a godsend. “Poorer people crave lower prices”, I was told, “and they cannot understand why ‘elitists’, like yourself, oppose them”. Of course people, especially those who struggle to make ends meet, prefer lower to higher prices other things being equal. But under the heavy shadow of deflation other things are not equal . Deflation is indiscriminatory. Once it sets it, all prices subside, including the price for labour. In fact, wages tend to fall faster than prices of other goods during deflationary times, leaving the weak poorer. Worse still, deflation reduces investment which, in turn, raises unemployment.

However, there is another part of the answer that it leaves out.

Another important point about deflation is its effect on borrowers. As we have seen, when you have a mortgage on your house and the house price drops precipitously, it can wipe out all your wealth, and still leave you owing money. Same is true for any borrower for other things – cars, home appliances, payday loans, college loans.

I also had my problems wrapping my head around a few ideas in the article – not saying the article is wrong, though.  I probably just need to think about it some more.

I see where deflation hurts a manufacturer who buys her raw materials at a high price, but has to sell at a deflated price. You’d think then that inflation would allow a manufacturer to buy raw materials at a lower price, but sell at a higher price. I haven’t quite been able to figure out why this is not good for a manufacturer. It seems the manufacturer is squeezed in both directions. Of course the worker is also squeezed in both directions. Although borrowing on the inflated value of real estate in an inflationary period seemed to be heaven sent for a while.

My other problem is understanding why a Bitcoin like deflationary FT-coin is a solution in times of deflation. The FT-coin would have to deflate faster than the Euro to make people want to hold it.

Shocking Interview With Michael Dunn’s Neighbor: ‘He Always Wanted To Shoot Somebody’

The Crooks and Liars web site has the article Shocking Interview With Michael Dunn’s Neighbor: ‘He Always Wanted To Shoot Somebody’ that contains the video below.

Here is the YouTube description that goes with the video.

Charles Hendrix, Michael Dunn’s former next-door neighbor, describes violent behavior, lies, insurance fraud, cocaine use, bragging about putting a hit out on someone, and a first wife who said he’d held a gun to her head and threatened to kill her. He says Dunn bragged that he was smarter than everyone else and could outthink them.

I am not a lawyer, but I have seen one on television. I suppose none of what was said in this video interview would have been acceptable in court. It would prejudice the jury, I suppose. I guess the idea is to keep the jury focused on the facts of the case, and not let them be swayed by personalities. I get the reasoning, but sometimes I don’t think it serves justice. Perhaps the judge will be able to consider this information in the sentencing phase.