For those who thought that popular delusions and manias were a thing of the past, like the Tulips in XVII Century Amsterdam, not possible in the age of information and the knowledge economy, now we have two manias to prove otherwise.
The Pokemon craze has quietly waned, but the Bitcoin is now raging with the prospect of getting some official recognition by the Chicago Mercantile Exchange (CME). The first game consisted on searching hidden toys for pleasure. The Bitcoin consists on searching for a computer code hidden in a mathematical algorithm. But because the code is promoted as being money (a cryptocurrency) some people are getting crazy about the possibility of getting rich quickly.
So, will Bitcoin end quietly like Pokemon? Probably not, given the money involved.
Should the authorities do something about this madness? Some would say no, with the argument that people must learn from their own stupidity.
Personally, I would agree with that if the Central Banks had not been given the monopoly of issuing money. But since they have it, Central Banks are responsible to guarantee that the money in circulation is not false. So, I have denounced their inaction in this post.
Should the government do something about it? Yes. If, as most people say, Bitcoin is used regularly by criminals to hide their transaction and money laundering, then the government has a unique to opportunity to tax those criminals. Moreover, its quite easily done! It simply needs to tax any purchase or sale of Bitcoins against any legal currency or other type of asset by 50%.
So, what are Central Banks and Governments waiting for? To create a major financial crisis? Let’s hope not!
Showing posts with label anti-capitalism. Show all posts
Showing posts with label anti-capitalism. Show all posts
Monday, 11 December 2017
Thursday, 17 May 2012
Facebook, popular delusions and capitalism
Today Facebook will close its first sale of shares to the public (IPO) at a record price to an unprecedented retail demand.
In the process it will make the kid who created this popular site (that signed one in every seven human beings) a billionaire beyond his wildest dreams. Will his invention ever return profits that justify valuing his company at such high price (26 times its sales)? Probably not!
As usual, some pundits will protest against such market irrationalities that, from time to time, degenerate into speculative mass delusions of a Ponzi-like kind. Some will even use such episodes to claim that capitalism is rotten and needs to be replaced by a more rational system.
Yet, past manias (tulips, canals, railways, dot.com, etc.) have shown that such episodes are temporary purges providing a peaceful escape to the many frustrations accumulated periodically in all societies.
This was recognized brilliantly by the most quoted critic of unregulated free markets – John Maynard Keynes – in this famous sentence: “It is better that a man should tyrannise over his bank balance than over his fellow-citizens.”
Indeed, the fact that capitalism ends peacefully its own episodes of irrational exuberance is a testimony to the beauty of the capitalist system.
Be prudent but do not blame the system.
In the process it will make the kid who created this popular site (that signed one in every seven human beings) a billionaire beyond his wildest dreams. Will his invention ever return profits that justify valuing his company at such high price (26 times its sales)? Probably not!
As usual, some pundits will protest against such market irrationalities that, from time to time, degenerate into speculative mass delusions of a Ponzi-like kind. Some will even use such episodes to claim that capitalism is rotten and needs to be replaced by a more rational system.
Yet, past manias (tulips, canals, railways, dot.com, etc.) have shown that such episodes are temporary purges providing a peaceful escape to the many frustrations accumulated periodically in all societies.
This was recognized brilliantly by the most quoted critic of unregulated free markets – John Maynard Keynes – in this famous sentence: “It is better that a man should tyrannise over his bank balance than over his fellow-citizens.”
Indeed, the fact that capitalism ends peacefully its own episodes of irrational exuberance is a testimony to the beauty of the capitalist system.
Be prudent but do not blame the system.
Thursday, 13 October 2011
The 1960s and Now
The social movements in the 1960s should be an important reminder for the current wave of discontent, whether it is the anti-globalization, Spain’s “yes we camp” or the “Occupy Wall Street” movements.
Then we had the anti-Vietnam War protesters, the hippies and the students’ revolts of May 68 in Paris and elsewhere. Then, like now, various political forces and trade unions tried to profit from the discontent, namely the Maoists who tried to export their “cultural revolution”. My generation was at that time one of the most radical and generous generations - demanding unconditional peace, free love and absolute equality.
My generation is now one the most disillusioned generations, having created just the opposite of what we dreamed then. We have now the greatest inequality, declining social mobility and rampant corporate kleptocracy. How did we replace generosity by greed and fairness by indifference? Why could we get it so wrong?
Partly, as is common in revolutions, because we used slogans and demonstrations instead of intelligent debate. But mostly because we ignored what was happening to the capitalist system and wanted to replace it by XIX century utopias who were failing everywhere but that we choose to ignore or excuse.
We did not anticipate that the simultaneous rise of big government and big corporations without controlling owners would create the conditions for collusion between the two and generate a new plutocracy in society made up of managers and politicians. Progressively we began accepting that management compensation was more important than paying dividends to the capitalists (shareholders).
While in the past the “robber barons” would consider that paying managers more than 40 times the average worker was a steal in their pockets we lost the notion of fairness and began accepting in the 1970s compensation ratios of 60 and more and kept quite while their compensation continued escalating to the current 200 to 400 times over average pay. Meanwhile, we ignored that due to the growth of pension funds and share ownership workers were now part of the capitalists being robbed by the corporate kleptocrats.
Outrageous state growth led to outrageous tax rates and inefficient public services. Instead of rolling it back we introduced tax breaks and privatized the government monopolies. Guess who benefited from these? It was the incumbent insiders in big government and big corporations.
From time to time a new generation feels blocked or despaired about the future and believes that revolution is the only way out. It is understandable. But what should true reformists do? Stand aside and let them learn with their own naiveté and errors? Fight left and right wing prophets and demagogues who are manipulating their discontent into their utopian solutions of the past? Or, join in to explain why market capitalism is the solution not the problem?
I hope many take the last road.
Then we had the anti-Vietnam War protesters, the hippies and the students’ revolts of May 68 in Paris and elsewhere. Then, like now, various political forces and trade unions tried to profit from the discontent, namely the Maoists who tried to export their “cultural revolution”. My generation was at that time one of the most radical and generous generations - demanding unconditional peace, free love and absolute equality.
My generation is now one the most disillusioned generations, having created just the opposite of what we dreamed then. We have now the greatest inequality, declining social mobility and rampant corporate kleptocracy. How did we replace generosity by greed and fairness by indifference? Why could we get it so wrong?
Partly, as is common in revolutions, because we used slogans and demonstrations instead of intelligent debate. But mostly because we ignored what was happening to the capitalist system and wanted to replace it by XIX century utopias who were failing everywhere but that we choose to ignore or excuse.
We did not anticipate that the simultaneous rise of big government and big corporations without controlling owners would create the conditions for collusion between the two and generate a new plutocracy in society made up of managers and politicians. Progressively we began accepting that management compensation was more important than paying dividends to the capitalists (shareholders).
While in the past the “robber barons” would consider that paying managers more than 40 times the average worker was a steal in their pockets we lost the notion of fairness and began accepting in the 1970s compensation ratios of 60 and more and kept quite while their compensation continued escalating to the current 200 to 400 times over average pay. Meanwhile, we ignored that due to the growth of pension funds and share ownership workers were now part of the capitalists being robbed by the corporate kleptocrats.
Outrageous state growth led to outrageous tax rates and inefficient public services. Instead of rolling it back we introduced tax breaks and privatized the government monopolies. Guess who benefited from these? It was the incumbent insiders in big government and big corporations.
From time to time a new generation feels blocked or despaired about the future and believes that revolution is the only way out. It is understandable. But what should true reformists do? Stand aside and let them learn with their own naiveté and errors? Fight left and right wing prophets and demagogues who are manipulating their discontent into their utopian solutions of the past? Or, join in to explain why market capitalism is the solution not the problem?
I hope many take the last road.
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