How some economists feel about their impact on actual policy
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Category Archives: news
Price controls causing exactly what you’d expect in Venezuela
Chavez has instituted price controls in Venezuela. So now it’s hard to find flour. And toilet paper. It’s only not laughable since these policies are affecting everyday Venezuelans and damaging the economy, which is the last thing a slightly wobbly South American economic and political setup at the moment.
Beginnings of the European realisation that austerity is mis-timed
Austerity has an encouraging family responsibility and belt-tightening feel to it. An analogy that is entirely misguided when it comes to national finances. Watch the PIIGS chase their austerity tail into a depression.
Meanwhile, the Dutch and some other European countries, former supporters of the ridiculous 3% deficit rule, are starting to question that “wisdom”.
Digital currencies and more
Bitcoins are a bad idea. I’ve put this forward from multiple directions already.
What’s interesting is the range of new, government-sponsored digital currencies that are in development. Digital currencies might also be a little bit of a stretch, they’re still more like digital payment methods. Unlike Bitcoins, there is much to recommend about low-cost, high-security, electronic digital payment platforms.
Japan is toying with slightly different ideas. Rather than using a traditional ATM card to withdraw cash, you might simply use your palm. It really is only a matter of time before the ubiquitous plastic card disappears into a cellphone, embedded chip, retina scan or something.
Sweden is moving towards a cashless economy, with one of the driving factors being security – as in personal safety. Maybe I’ve missed some news stories (or not read Dragon Tattoo enough times) but I wouldn’t have thought that Sweden would be first in the world at worrying about personal safety.
To be clear, there are several wide-scale advances in this area around the world already. These aren’t specifically digital currencies, but rather different, more efficient methods of payment. The UK Oyster card is a good example of a wide-scale contactless payment system that works well for small payments in a fast-speed transaction environment. The precursor of the UK’s Oyster is Hong Kong’s Octopus card, which is actually used or micro-payments on transport systems, many parking areas and even vending machines.
Google and PayPal have systems allowing small digital payments that are cost-effective, but still linked to an account so your account information is linked directly to the transaction. One of the apparent virtues of Bitcoins is their anonymous nature. Now for the most part most individuals aren’t particularly bothered by anonymity, but it is a genuine concern. Do you really want a vending machine company to know when and where you buy your Coke and Vitamin Water from their vending machines? Would you want this information to be aggregated with your online purchases and fuel purchases and airline ticket purchases? Very soon the information that Google currently stores on you would be a drop in the information ocean from these real world movements and transactions.
So Canada’s proposal for an anonymous, digital currency is really interesting. Government backing is one good way of giving credibility and scale to a system that many competing system will not be able to manage.
For me, one of the most interesting aspects of the story was the Canadian Mint’s IPO of an exchange traded listing for gold receipts for gold stored at the mint. This is basically the oldest form of gold-backed currency – receipts of gold on deposit at an institution where the receipts were tradeable and allowed “gold” to be used for transactions more conveniently and safely that gold bars and coins.
What once was old is now new.
I can’t resist making a bit of noise about this
The second largest Bitcoin exchange is shutting down (possibly to reopen elsewhere).
Bitcoin experienced a rough night on Monday as TradeHill, the second-largest Bitcoin exchange, announced that it was closing its doors. In a statement, CEO Jered Kenna cited regulatory problems and the loss of $100,000 in a dispute with one of its payment processors as major factors in the decision. He has pledged to open a new site once these issues have been resolved.
So apart from the problems with Bitcoins, it turns out the security and marginal attractions of the construct are a little tarnished too.
Interview with Nicolaas Kruger
Alec Hogg over at Moneyweb interviewed Nicolaas Kruger on being an actuary and CEO, the growth of Momentum and MMI Holdings.
what a difference several years make
The laminated card in the seat pocket of the SAA Boeing 737-800 I’m flying in describes how I can use most devices in “flight mode” once in the air.
It’s dated November 2011, but I’m quite sure I’ve still heard cabin crew telling people off for not having their phones off over the last two months. However late, be it several years or several years and two months, the relaxation of the draconian and relatively unique restrictions on the use of electronic devices in the air has been lifted.
So rather than losing 4 hours of my life with every Cape Town – Joburg trip, I now lose more like 2 hours and get to plough through an embarrassingly large list of unattended emails and arrive with a sense of accomplishment, lower stress levels and hopefully fewer irate colleagues waiting on email replies.
Now I can’t wait for a wifi connection so I can retrieve truncated emails and attachments and communicate in real time. And publish the posts I write while on the plane!
No nationalisation, more certainty and probably higher taxes
There are times when I’m impressed with elements of government and the ANC. It took them far too long, they allowed too much debate and uncertainty, but their ultimate conclusions on nationalisation and how to direct additional mineral wealth back into the fiscus, further develop a beneficiation industry around the mining industry are solid.
I always maintained that “nationalisation” isn’t necessarily appropriation of assets without compensation, although the popular views and worst fear-mongering viewed this as the only possibility. It’s refreshing to hear that “nationalisation” was considered on its merits against private operation of firms rather than just as a way to redistribute wealth. (Ok, at least one article wasn’t mad panic.)
The increase in taxes is also basically expected. Although new and changing taxes does add uncertainty, it provides a sense that the rules are being followed. Tax rates on energy companies in many Middle Eastern countries is high – sometimes near 50%. So the government fiscus does benefit from the energy that belongs to all its citizens.
It’s also a, slightly sneaky, way of re-settting historical land ownership and mineral right royalties and licensing. If “we got it wrong and sold them too cheaply in the past, we can always recoup through higher or new taxes”. Maybe a little cynical but not surprising.
The real free market fanatics will no doubt be in uproar about higher taxes destroying jobs and misallocating resources. There is a debate here, but the free market fanatics all too quickly forget that it’s hard to argue that the value of the minerals under our country have been fairly priced. Those markets can easily be described as “failed markets” with a number of externalities involved.
Even the hardest neoclassical economist will recognise these are very real limitations on Adam Smith’s invisible hand.