Category: Current Affairs

A MimbleWimble Explainer

TechnologyReview: In July 2016, someone using the name Tom Elvis Jedusor (the real name of Lord Voldemort, the main villain in the Harry Potter universe, in the French edition) posted a link to a text file in a chat room frequented by Bitcoin researchers. Voldemort’s document described MimbleWimble, a blockchain system that would hide the identifying information associated with Bitcoin transactions.

…The person who started Grin [one of the first new currencies built on a blockchain that implements MimbleWimble] is also pseudonymous, going by the name Ignotus Peverell (the original owner of Harry’s invisibility cloak), and has never been seen. Peverell recently used a text-to-speech program to address attendees at a Grin conference.

So to sum up, Grin is a new currency on the MimbleWimble blockchain imagined by Lord Voldemort and implemented by the invisible Ignotus Peverell.

…Eric Meltzer, an investor for crypto-focused Primitive Ventures, recently estimated that $100 million of “mostly VC money” has already been invested in Grin mining operations.

New Zealand facts of the day

All of New Zealand’s major cities were rated as “seriously” or “severely” unaffordable, with a house in the least expensive city, Palmerston North, priced at five times the median income.

Mr. Pavletich, one of the report’s authors, said smaller markets like Tauranga, a coastal city on the North Island with a population of 128,000, had seen an influx of people who had left Auckland in search of more affordable housing. Average property values in Tauranga had risen to $497,000 from $304,000 in the last five years, and Demographia now rated it among the 10 least affordable cities in the world — along with famously expensive locales such as Hong Kong, San Francisco, Sydney and Vancouver, British Columbia.

People, I have been to Palmerston North (though not Tauranga, which seemed too empty and remote, now the fifth largest urban cluster in a country of 4.8 million), way back in the 1990s, and I recall a feeling of dullness above all else.  If you had asked me whether this outcome was possible, I sooner would have thought Donald Trump would be elected president.

Here is the full NYT story by Charlotte Graham-McLay.  P.s. they haven’t built enough homes.

The politics of a wealth tax

That is the topic of my latest Bloomberg column, here is the end sequence:

Besides which — a fact that is getting too little notice — the U.S. already has what is in essence a wealth tax: Tax rates on capital gains are not indexed for inflation. With this nominal-based tax system in effect, it is harder to accumulate wealth over time, and the nominal-based tax erodes the real value of the asset base.

Whether or not you think this capital-gains policy is a good idea (I do not), it is striking how few Americans understand that it serves as a wealth tax. It is not marketed or proclaimed as such. And I don’t expect Republicans or Democrats to counter Warren by saying, “Don’t worry, we already have a wealth tax.” Isn’t this a sign that voters simply are not yearning for a wealth tax?

The other major form of wealth taxation in the U.S. is of course the property tax, which is paid by large numbers of Americans and used to finance local services, rather than being primarily directed against the wealthy. It is seen as a way of making local government accountable to those who vote and pay for it, not as an engine of wealth redistribution. If anything, by maintaining the quality of school districts in wealthy communities, its net distributive effects are anti-egalitarian. That system seems to be a permanent part of the American political landscape.

Finally, think about politics in the broadest possible terms. What Americans really want is for their lives, their jobs, and society in general to get better — an admittedly ill-defined but nonetheless instantly familiar concept. Americans also want their leaders to deliver such outcomes with the considerable resources already at their disposal. Is that so unreasonable?

Anyone promoting a wealth tax is in essence saying that there aren’t many ways of improving society within current resource constraints. That is a brand of pessimism which Americans voters have not often rewarded.

File under: the Twitter reactions are self-refuting.  But if you would like the opposing point of view, here is Eric Levitz.

San Francisco fact of the day

San Francisco has more drug addicts than it has students enrolled in its public high schools, the city Health Department’s latest estimates conclude.

There are about 24,500 injection drug users in San Francisco — that’s about 8,500 more people than the nearly 16,000 students enrolled in San Francisco Unified School District’s 15 high schools

Here is more, via an MR reader.

Me on wealth taxes from 2013

I don’t usually like to rerun material, but every now and then it seems appropriate.  Here is the opening paragraph from my NYT column from six years ago:

If you’d like to know where American political debates are headed, the data suggest a simple answer. The next major struggle — in economic terms at least — will be over whether taxes on personal wealth should rise — and by how much.

There is much more at the link.

One shutdown lesson is that Americans need to save more

That is the topic of my latest Bloomberg column, here is one excerpt:

Indeed a higher savings rate is possible, and not just for the wealthy. Most Mormons in the U.S., for example, manage to tithe at least 10 percent of their incomes. This suggests it is possible to curtail one’s consumption without losing the best things in life. Mormons also tend to have especially large families, making tithing all the more difficult. If Mormons can tithe so much, is it so impossible for the rest of us, including government employees, to save more?

There is also a new “gospel of savings” in the U.S., being led by such renowned (but non-mainstream) figures as Dave Ramsey and Mr. Money Mustache. They reach millions of Americans, imploring them to strip down their consumption to essentials and to save a much higher percentage of their incomes, sometimes 20 percent or more. Ramsey wrote a column giving advice to unpaid federal workers, including “sell stuff” and to cancel Netflix.

Do read the whole thing.

Eric Kaufmann’s *Whiteshift*

The subtitle is Populism, Immigration, and the Future of White Majorities, and might this be the must-read book of the year?  It is “to the right” of my views on immigration policy, but still I found it informative, fascinating, and relevant on just about every page.  Here is the author’s opening framing:

First, why are right-wing populists doing better than left-wing ones?  Second, why did the migration crisis boost populist-right numbers sharply while the economic crisis had no overall effect?  If we stick to data, the answer is crystal clear.  Demography and culture, not economic and political developments, hold the key to understanding the populist moment.

Kaufmann, by the way, is Professor of Politics at Birkbeck in London, but hails from Canada.  As for the basics, there is this in addition:

Much of this book is concerned with the clash between a rising white tribalism and an ideology I term ‘left-modernism.’

If you wish to understand “all the stuff that is going on today,” maybe Whiteshift is the best place to start?  Kaufmann, by the way, is not a mega-pessimist and he seems to think that “broadening the category of white” will lead to a “good enough” solution for many of the Western democracies.  Still, much of this book is disturbing, especially for readers who might consider themselves to be on the left.  Most of all, he sees “whiteness” as a legitimate cultural interest, and one which, if we deny, will lead to more overt racism rather than less.

Here is Kaufmann on Brexit, brutal but I think largely correct:

…many analysts bring a political lens to their analysis which inclines them to want to tell a story about wealth and power.  Over half the country voted Leave and we can’t condemn such a large group.  So we pretend populist voters are motivated by the same things we are: economic stagnation (for fiscal conservatives) or, for left-liberals, inequality and resentment of the establishment.

Kaufmann also has strong evidence for the “immigration backlash” hypothesis, for instance:

…a higher immigrant share is a consistent predictor of higher opposition to immigration over time…in Western Europe there is a .63 correlation between projected 2030 Muslim share and the highest poll or vote share a populist-right party has achieved.

On top of all of its other virtues, Whiteshift provides the best intellectual history of the immigration debates I have seen.  It also has the best discussion of why Canada seems to be different when it comes to immigration, and I may cover that in another blog post.

Kaufmann does very much argue that the left-wing values of diversity and solidarity stand very much in conflict.  How is this for an “ouch” sentence?:

Casual observation would suggest that being black in diverse San Francisco is not necessarily better than being black in white-majority Fargo [North Dakota].

By no means am I convinced by everything in this book.  I don’t think European politics can handle systematized refugee camps in Europe itself (rather than Turkey and Lebanon), and most of all I am not sure that recognizing whiteness as a legitimate cultural concern will diminish rather than boost racism.  I wish he had said much more about gender, and how immigration and gender issues interact.

Nonetheless this book has more points of interest yet, including an original and persuasive take on residential clustering, a good analysis of racial intermarriage, and a sustained argument that avoiding the “no dominant ethnic group” approach of Guyana and Mauritius is imperative.

Strongly recommended, it is out next week, you can pre-order here.

That was then, this is now (a continuing series)

Even if the Nobel committee does not consider Mr Tsipras and his Macedonian counterpart, the 44-year-old Greek prime minister is barely recognisable as the leftwing firebrand who threatened to denounce Greece’s eurozone bailout, ban German politicians from visiting Athens and pull the country out of the euro if its creditors rejected his demands for debt forgiveness.

Four years after his first narrow election victory for his radical Syriza party, Mr Tsipras has become a surprising anchor of Greek financial discipline. His government is generating the sort of budget surplus that Athens’ creditors could once only have dreamt of. And he has reinvented himself as a southern European pragmatist, committed to being a co-operative EU partner while deepening relations with Washington in the interests of regional security.

“Tsipras now has a new international profile, that of the mature leader ready to incur political cost to carry out unpopular policies, whether it’s over Macedonia or the difficult economic reforms needed to keep Greece in the eurozone,” said Aris Hatzis, an Athens university professor of law and economics.

Here is more from Kerin Hope at the FT.  Note that Tsipras is currently not especially popular in Greece: “he is widely expected to be ousted from office when Greece holds a general election this year. Opinion polls show Syriza still lagging more than 10 points behind the centre-right opposition New Democracy party, which has rejected the Macedonia deal.”  Bryan Caplan, telephone!

How the government shutdown will end the real Deep State has acted

Here is a reprise from my January 17 column:

The real power here is held by government employees, especially those in critical jobs. Let’s say that more TSA screeners decided to walk off the job. It’s already the case that the TSA absentee rate has gone up to 7.6 percent, from 3.2 percent a year ago. It is possible to imagine screeners staying home in much greater numbers, thus crippling the entire nation. That could either force President Donald Trump’s hand or lead to a congressional override of a potential presidential veto.

And the close:

So what does the final equilibrium look like? Some number of extra weeks (months?) of talking about Trump and the wall. Trump over time becoming less popular. Congressional Republicans folding, and Trump lying about both the outcome and the process. Democrats looking better, at least relatively. Federal workers emerging with bruised morale, but mostly intact.

If you think those are implausible outcomes, you haven’t been paying close enough attention to the last two years.

File under Prophets of the Marginal Revolution…

Nav Canada

As La Guardia closes due to the government shutdown, this seems like an opportune time to think about Nav Canada.

We are Canada’s Air Navigation Service Provider (ANSP) managing 3.3 million flights a year for 40,000 customers in over 18 million square kilometres – the world’s second-largest ANSP by traffic volume.

Our airspace stretches from the Pacific West coast to the East coast of Newfoundland and out to the centre of the North Atlantic, the world’s busiest oceanic airspace with some 1,200 flights crossing to and from the European continent daily. It also stretches from the busy U.S-Canada border with major international airports to the North Pole where aircraft fly polar routes to reach Asia.

We are also the world’s first fully privatized civil air navigation service provider, created in 1996 through the combined efforts of commercial air carriers, general aviation, the Government of Canada, as well as our employees and their unions.

Our revenues come from our aviation customers, not government subsidies. By investing in operations and controlling costs, we strive to keep customer charges stable, while improving safety and flight efficiency.

In addition to Canada, New Zealand, Germany, Australia, and the United Kingdom have moved in recent decades towards a more private system based on user fees rather than government funding. See also my earlier post on European airports.

The new U.S.-China Cold War

That is the topic of my latest Bloomberg column.  It’s not my most fun piece, but in terms of content arguably the most important.  Here is one short bit:

The new dynamic affects people as well as products. China is asking state firms to avoid travel to the U.S. and its allies. And if you were an American or Canadian tech company executive, would you travel to China right now, given that Canada has detained a leading Huawei executive (and daughter of the company’s CEO) for extradition to the U.S.? Meanwhile, many American universities are kicking their local Confucius Institute off campus, most notably the University of Michigan, amid complaints that those institutes are spying on Chinese nationals who attend those schools. Whether or not that is true, this is another sign of the collapse of trust.

This is the deeper issue with the U.S.-China relationship: the continuing erosion, in an era of rapid deglobalization, of previous ties built at least partly on a common sense of purpose. Looking back at 2018, it now seems obvious that this was the most important story of the year.

Do read the whole thing.  It is much easier to break trust than to rebuild it.

The wisdom of Arnold Kling (a Kamala Harris parable)

Here is the opener of my Bloomberg column:

One of the worst tendencies in American politics is to restrict supply and subsidize demand. (The phrase is from the economist Arnold Kling.) The likely result of such policies is high and rising prices, restricted access and often poor quality. If you limit the number of homes and apartments, for example, but give buyers subsidies, that is a formula for exorbitant prices.

That is what makes early accounts of Senator Kamala Harris’s economic plans so disappointing. There is still room for course corrections as she campaigns for president, but too much of what is being bandied about seems designed to annoy Arnold Kling.

Do read the whole thing.

Facts that contradict the standard housing bubble story

Here I am doing a mix of quoting and paraphrasing the excellent Kevin Erdmann:

1. “Housing construction has been constricted in our most prosperous cities.”

2. “Home prices in many developed countries rose at least as sharply as inthe US.”

3. “…rent inflation has been persistently high for 20 years.”

4. “Growth in real rent expenditures generally had been declining throughout the supposed boom period.”

5. “During the boom, the relative income of the typical homebuyer did not decline.”

6. During the boom, homeowners were not “buying up.”

7. Homeownership rates, even at their peak levels in 2004, among age groups under 65 years old, were no higher than homeownership rates had been in the late 1970s and early 1980s.”

8. “…when taking into account all types of housing, the number of new housing units never even rose very far above the long-term average.”

Those are all from Kevin’s new and very important book Shut Out: How a Housing Shortage Caused the Great Recession and Crippled Our Economy.  The simple “housing bubble” story is not in fact as true as it might seem, as Kevin shows, and furthermore just look at how many parts of America now have home prices at or above their “bubbly peaks.”  I hope this work gets the attention it deserves.

Short-term lending in response to the government shutdown

Gridlock in Washington over President Donald Trump’s plans to build a wall on the border with Mexico has deprived hundreds of thousands of government employees and contractors of their wages. As a result, some have turned to specialist consumer-finance companies to bridge gaps between earnings and outgoings. Shares in World Acceptance, a South Carolina-based short-term lender, are up 22 per cent since the shutdown took effect about a month ago. EZ Corp, a pawnshop operator based in Austin, Texas, is 20 per cent higher over that period. In both cases, the rises are much more than benchmarks, suggesting investors could be betting on a surge in demand to cover unexpected expenses.

…Chad Prashad, chief executive of World Acceptance, said his company was seeing demand in Texas and the south-east of the US where there were big airports employing government workers. In response to the shutdown, World Acceptance is offering cash-strapped government employees deferrals on their loans without interest or fee penalties. New customers can get up to $1,250 in a 10-month loan with 0 per cent interest and no fees.

Here is the full FT article by Nicole Bullock.