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 crowd madness. Show all posts
Showing posts with label crowd madness. Show all posts
Monday, 11 December 2017
Wednesday, 9 November 2016
After the 1st Black President, the 1st neo-Nazi President, … what next?
The election of Donald Trump as President of the United States has thrown the US and the World into a dangerous era. So, what lies ahead?
I examine here a benign and a catastrophic scenario, not because I believe that they may occur exactly that way, but to allow us to assess the direction the world is taking during his first year in office.
In the benign scenario, the victory of Trump will mean a victory of the anti-politically correct against the politically correct ideology. These two extreme stances in values and policies, would be refuted by a moderate electorate tired of social experimentalism at the end of his mandate(s).
In the catastrophic scenario, Trump will follow his neo-Nazi ideals based on racial (white) supremacy, state capitalism and imperialist arms race, to be paid through predatory conquests, that will lead to a war clash with other aspiring imperialists and terrorists. This, sooner or later, will end in a nuclear war destroying most or all humankind.
So, what forces will drive us in each direction?
For the benign scenario, we need most of following developments:
1) That the madness of crowds who drove Trump into power, subsides;
2) that Trump, himself, moderates his team and policies and be content with a role as the star of a national virtual reality show;
3) that the few moderate republicans remaining are not afraid to join the democrats in defeating any of his attempts to change the constitutional order and balance of power between institutions in the USA;
4) that the democrats avoid becoming taken over by the PC defeated crowd of Sanders left-wingers;
5) that the Trump mania does not spread to Europe with a victory of Marie Le Pen in France and the victory of similar candidates in Germany and the UK;
6) that the European Union does not disintegrate and finds its own Churchill to lead the democratic values in the World;
7) that Putin does not seize the opportunity to retake the Baltics, Ukraine and other former satellites of Russia;
8) that China does not be tempted to seize dominance in Asia and settle its historical grievance with Japan; and, last but not least,
9) that his economic ignorance does not cause havoc in free international trade and financial systems causing a major world recession.
The catastrophic scenario, implies that most of these developments will take place:
1) he fulfils his promise to expel millions of emigrants and build a wall between Mexico, causing havoc in Mexico and other Latin American countries;
2) he promotes the rise of state and crony capitalism through his plans to increase public spending in armaments and infrastructure while making huge tax cuts for the rich, thus creating an imploding public deficit and a declining dollar;
3) he turns his back on his European Allies, weakening (or destroying) NATO, and entering in a kind of Hitler-Stalin deal to give Putin territory in the Ukraine, the Baltics and Poland;
4) he does not enter into a similar deal with the Chinese to give them leeway in the Pacific in exchange for a more or less disguised form of default in America debt;
5) he transforms the American Administration in a Putin-style security apparatus or on a Hitler-style SS militia based on his core fanatic supporters;
6) he implements a Chinese/Russian type of control over social media and the Internet;
7) he tries to curb the rising US external debt and deficit through international debt restructuring/default (after all, his business experience is in bankruptcy deals), protectionism and competitive devaluations;
8) he initially robs migrants (the way Hitler robbed the Jews) and expels them, before bringing them later on into new forms of labour slavery;
9) he promotes the political breakup of the European Union and its invasion by Eastern and African migrants (mostly Muslim) to create a three-power geo-political world;
10) the remaining three totalitarian powers play a game of mouse and cat until one of them decides to try to eliminate the other(s) through a nuclear holocaust. Given his unstable nature, it could be Trump himself to be the first to push the button.
As I said at the beginning, it is unlikely that the world will move immediately into one of these routes. There will be a lot of zig-zagging.
Let’s pray that the USA will move away from the catastrophic route and into the benign direction.
But, for that, it is fundamental that all those who wish peace and progress, do not compromise, lower their arms or support the extremists.
More than ever, the world survival lies on reason prevailing over dogma and fanaticism!
I examine here a benign and a catastrophic scenario, not because I believe that they may occur exactly that way, but to allow us to assess the direction the world is taking during his first year in office.
In the benign scenario, the victory of Trump will mean a victory of the anti-politically correct against the politically correct ideology. These two extreme stances in values and policies, would be refuted by a moderate electorate tired of social experimentalism at the end of his mandate(s).
In the catastrophic scenario, Trump will follow his neo-Nazi ideals based on racial (white) supremacy, state capitalism and imperialist arms race, to be paid through predatory conquests, that will lead to a war clash with other aspiring imperialists and terrorists. This, sooner or later, will end in a nuclear war destroying most or all humankind.
So, what forces will drive us in each direction?
For the benign scenario, we need most of following developments:
1) That the madness of crowds who drove Trump into power, subsides;
2) that Trump, himself, moderates his team and policies and be content with a role as the star of a national virtual reality show;
3) that the few moderate republicans remaining are not afraid to join the democrats in defeating any of his attempts to change the constitutional order and balance of power between institutions in the USA;
4) that the democrats avoid becoming taken over by the PC defeated crowd of Sanders left-wingers;
5) that the Trump mania does not spread to Europe with a victory of Marie Le Pen in France and the victory of similar candidates in Germany and the UK;
6) that the European Union does not disintegrate and finds its own Churchill to lead the democratic values in the World;
7) that Putin does not seize the opportunity to retake the Baltics, Ukraine and other former satellites of Russia;
8) that China does not be tempted to seize dominance in Asia and settle its historical grievance with Japan; and, last but not least,
9) that his economic ignorance does not cause havoc in free international trade and financial systems causing a major world recession.
The catastrophic scenario, implies that most of these developments will take place:
1) he fulfils his promise to expel millions of emigrants and build a wall between Mexico, causing havoc in Mexico and other Latin American countries;
2) he promotes the rise of state and crony capitalism through his plans to increase public spending in armaments and infrastructure while making huge tax cuts for the rich, thus creating an imploding public deficit and a declining dollar;
3) he turns his back on his European Allies, weakening (or destroying) NATO, and entering in a kind of Hitler-Stalin deal to give Putin territory in the Ukraine, the Baltics and Poland;
4) he does not enter into a similar deal with the Chinese to give them leeway in the Pacific in exchange for a more or less disguised form of default in America debt;
5) he transforms the American Administration in a Putin-style security apparatus or on a Hitler-style SS militia based on his core fanatic supporters;
6) he implements a Chinese/Russian type of control over social media and the Internet;
7) he tries to curb the rising US external debt and deficit through international debt restructuring/default (after all, his business experience is in bankruptcy deals), protectionism and competitive devaluations;
8) he initially robs migrants (the way Hitler robbed the Jews) and expels them, before bringing them later on into new forms of labour slavery;
9) he promotes the political breakup of the European Union and its invasion by Eastern and African migrants (mostly Muslim) to create a three-power geo-political world;
10) the remaining three totalitarian powers play a game of mouse and cat until one of them decides to try to eliminate the other(s) through a nuclear holocaust. Given his unstable nature, it could be Trump himself to be the first to push the button.
As I said at the beginning, it is unlikely that the world will move immediately into one of these routes. There will be a lot of zig-zagging.
Let’s pray that the USA will move away from the catastrophic route and into the benign direction.
But, for that, it is fundamental that all those who wish peace and progress, do not compromise, lower their arms or support the extremists.
More than ever, the world survival lies on reason prevailing over dogma and fanaticism!
Wednesday, 5 October 2016
Extraordinary popular delusions and the madness of crowds – the Trump case
A day hardly goes by without new revelations about Mr. Trump’s crookedness. His activities as a large scale tax dodger, a bigot, fraudulent businessman, liar, unethical and paranoid personality have been exposed and yet his popularity among American voters remains high.
So, the question must be raised whether the explanation lies in Trump or in his followers. Possibly, it applies to both. For those interested in the hypothesis that he is cunningly using the media and his speeches to manipulate public opinion I recommend The Mass Psychology of Fascism, a 1933 book by Wilhelm Reich, but the reader must replace his theory on sexual repression by its reversal the libertinage and anti-political correctness.
Here I will explore the second hypothesis, which was sublimely examined in Charles Mackay (1852) on his classic book on mania with the title that I used in this post. I read the book many years ago, but decided to check it again to see if the Trump story fits well among its celebrated cases. It turns out that it fits well in at least two chapters.
The book examines the folly of crowds in relation to financial schemes, fortune tellers, witch mania, haunted houses, duels, relics and other episodes of collective madness. I will examine just two, where the Trump story would fits well – the belief in alchemists and the popular admiration of great thieves.
The idea behind alchemy is that it is possible to transform any cheap metal into gold. The equivalent in Mr. Trump is that he may achieve anything through “deals”. Based on his business experience, he believes that by exploiting loopholes in the tax and bankruptcy codes one may get rich by destroying businesses and leaving the losses to the creditors.
He blatantly ignores that such schemes will only enrich a few at the expense of millions while destroying wealth.
And God forbid, should Mr. Trump be elected on such policies, his history would fit well next to that of the reckless extravagance of Marechal de Rays in 1420 or that of Avicenna whom the Sultan Magdal Douleth asked to try his powers in the great science of government. Preferably the later because it only ended showing that “he could not rule his own passions, but gave himself up to wine and women, and led a life of shameless debauchery”.
The popular admiration for great thieves is common to all countries where the “multitude, feeling the pangs of poverty, sympathise with the daring and ingenious depredators”. Again, Mr. Trump’s business practices place him well in this chapter.
He cannot be listed next to Robin Hood, unless one wants to describe him as an anti-Robin Hood type, because his tax proposals are to take from the poor to give the rich and his treatment of women is not one of gallantry and respect.
He would sit best next to Jack Sheppard, an XVIII century brutal ruffian, who managed to become a folk hero for his escape from Newgate. Trump is also admired for the way he escaped for so many years without paying taxes and by telling all types of idiocies and lies without being contested. Or, to describe him in the words of a lady admirer: “he is dangerous, but is the only one with balls”.
For those who might think that this was true in the past, but is now impossible because the American people is more educated and has access to more information through social media, please note that these phenomena have taken place since antiquity and increased after the appearance of the printed press. Moreover, remember that Nazism was born in a well-educated Germany and that social media shares many features of the pamphlets used in the 19th century.
Let us hope that history does not repeat itself.
So, the question must be raised whether the explanation lies in Trump or in his followers. Possibly, it applies to both. For those interested in the hypothesis that he is cunningly using the media and his speeches to manipulate public opinion I recommend The Mass Psychology of Fascism, a 1933 book by Wilhelm Reich, but the reader must replace his theory on sexual repression by its reversal the libertinage and anti-political correctness.
Here I will explore the second hypothesis, which was sublimely examined in Charles Mackay (1852) on his classic book on mania with the title that I used in this post. I read the book many years ago, but decided to check it again to see if the Trump story fits well among its celebrated cases. It turns out that it fits well in at least two chapters.
The book examines the folly of crowds in relation to financial schemes, fortune tellers, witch mania, haunted houses, duels, relics and other episodes of collective madness. I will examine just two, where the Trump story would fits well – the belief in alchemists and the popular admiration of great thieves.
The idea behind alchemy is that it is possible to transform any cheap metal into gold. The equivalent in Mr. Trump is that he may achieve anything through “deals”. Based on his business experience, he believes that by exploiting loopholes in the tax and bankruptcy codes one may get rich by destroying businesses and leaving the losses to the creditors.
He blatantly ignores that such schemes will only enrich a few at the expense of millions while destroying wealth.
And God forbid, should Mr. Trump be elected on such policies, his history would fit well next to that of the reckless extravagance of Marechal de Rays in 1420 or that of Avicenna whom the Sultan Magdal Douleth asked to try his powers in the great science of government. Preferably the later because it only ended showing that “he could not rule his own passions, but gave himself up to wine and women, and led a life of shameless debauchery”.
The popular admiration for great thieves is common to all countries where the “multitude, feeling the pangs of poverty, sympathise with the daring and ingenious depredators”. Again, Mr. Trump’s business practices place him well in this chapter.
He cannot be listed next to Robin Hood, unless one wants to describe him as an anti-Robin Hood type, because his tax proposals are to take from the poor to give the rich and his treatment of women is not one of gallantry and respect.
He would sit best next to Jack Sheppard, an XVIII century brutal ruffian, who managed to become a folk hero for his escape from Newgate. Trump is also admired for the way he escaped for so many years without paying taxes and by telling all types of idiocies and lies without being contested. Or, to describe him in the words of a lady admirer: “he is dangerous, but is the only one with balls”.
For those who might think that this was true in the past, but is now impossible because the American people is more educated and has access to more information through social media, please note that these phenomena have taken place since antiquity and increased after the appearance of the printed press. Moreover, remember that Nazism was born in a well-educated Germany and that social media shares many features of the pamphlets used in the 19th century.
Let us hope that history does not repeat itself.
Thursday, 28 November 2013
Bitcoin madness: I wrote to the FED and the ECB and they are playing ostrich
Judging from the current media frenzy surrounding Bitcoins, one wonders if almost four hundred years after the tulip mania in the Netherlands humanity is as gullible as ever when it comes to get-rich-quickly speculation.
What is remarkable this time is that the speculation is global and the object of speculation is not a venture or a commodity but a virtual form of private fiat money, notwithstanding the fact that the debate on the free issue of money was closed almost a century ago when central banks were given the monopoly of issuing fiat money.
Indeed, contrary to what some economists and central banks say, Bitcoins are not a form of virtual of real money and the scheme has the hallmarks of a gigantic Ponzi scheme – anonymous/dubious issuers promising returns that are too good to be true to be achieved through undisclosed (but implicitly illegal) sources.
If nothing is done to stop this scheme, the madness of crowds may reach proportions similar to the infamous Mississippi and South Sea bubbles and we might see again a situation where “puritan ladies” begin selling their jewels and virtue to buy Bitcoins.
This should not be happening now, since we are supposed to be protected by a plethora of financial regulators paid by taxpayers. So, I decided to search the site of some of them to check what advice they had for us. I limited my visits to the sites of the FED and ECB because they have the monopoly of issuing the two major currencies – the Dollar and the Euro, respectively – and play a key role in their corresponding payment systems.
In the FED’s site I could not find a single reference to Bitcoins while the ECB site had a single link to a policy paper with an academic tone and a badly disguised sympathy for private “virtual” moneys like the Bitcoins. So, I decided to email them to question the legality of private virtual moneys in the following terms:
Dear Sir/Madam,
Would you please confirm if the following operations are legal?
1) To pay and accept payment in Bitcoins
2) To trade Bitcoins against the USD/Euro
3) To issue Webcoins, a money similar to Bitcoins, except that it will be issued by mining real goods
4) To establish an electronic brokerage or exchange to trade Bitcoins and Webcoins against the Euro and other currencies.
I would appreciate an answer ASAP.
With kind regards
Marques Mendes
So far the FED has not answered (see note at the end of this post) my email of the 27th November, but the ECB replied promptly by directing me to the paper mentioned above as follows:
Dear Mr Mendes,
Thank you for your interest in the European Central Bank.
The ECB's position on virtual currencies such as Bitcoins is outlined in this report:
http://www.ecb.int/pub/pdf/other/virtualcurrencyschemes201210en.pdf.
With kind regards,
EUROPEAN CENTRAL BANK
DG Communications and Language Services
Press and Information Division
Both played ostrich by not replying directly to my specific questions on the legality of such currencies. Yet the answer should be easy.
Indeed, Bitcoins cannot even be categorized as a temporary currency substitute like the chips used by casinos, the token notes used by monopoly game players or the pieces of metal used by some farms to pay harvesters. The reason being that at the end of the day there is no issuer obliged to convert the Bitcoins into legal money like there is for chips, tokens or pieces of metal.
The sponsors of Bitcoins claim that it is not a Ponzi scheme, because like the growing of tulips in the Netherlands, there is no central organization and anyone can create Bitcoins by “virtual mining” a mathematical algorithm that generates the encrypted codes used for transfers among peer-to-peer electronic networks. This, is obviously a fallacy because someone has to hide the codes. The process of mining Bitcoins is just like the popular garden game of hide-and-seek messages in Easter eggs played by children. In fact, it is less competitive and worthy because in the end players do not even get something with value like the eggs.
Bitcoin promoters are equally fraudulent when they claim that Bitcoins can be exchanged through peer-to-peer networks anonymously like the legal notes and coins. In fact, a central organization (bitcoin.org) is needed to support the network software and the peer-to-peer participants have to date stamp them so that a trail is inevitable.
Moreover, peer-to-peer networks do not provide any type of anti-fraud guarantee to their users. As a payment system, its security is even less than that of informal payment networks like the Hawala system used in Asia and India. Hawala is based on the performance and honour of known money brokers whose honesty users can check, not on some anonymous internet counterparty.
Any fiat money must be issued by known issuers on whose reputation rests its value. Of course its issuers may be central banks or private entities and these may be more or less creditworthy. Indeed, we can even foresee the existence of competing issuers. However, using as a medium of exchange fiat money issued by anonymous entities it is a complete stupidity that any half-witted regulator should be able to understand.
In conclusion, Bitcoins or any similar faceless Webcoins (the Web here stands for Worthless Economic Bullshit) must be considered as a fraud.
P.S. If I were in any doubt about the fraudulent nature of Bitcoins, that doubt would be over on the 6th of January 2014 when someone went through the trouble of writing an email to me pretending to reply from the FED and directing me to a bogus organization (Coindesk) based in the UK which claims that Bitcoins are legal "depending on what you’re doing with it".
What is remarkable this time is that the speculation is global and the object of speculation is not a venture or a commodity but a virtual form of private fiat money, notwithstanding the fact that the debate on the free issue of money was closed almost a century ago when central banks were given the monopoly of issuing fiat money.
Indeed, contrary to what some economists and central banks say, Bitcoins are not a form of virtual of real money and the scheme has the hallmarks of a gigantic Ponzi scheme – anonymous/dubious issuers promising returns that are too good to be true to be achieved through undisclosed (but implicitly illegal) sources.
If nothing is done to stop this scheme, the madness of crowds may reach proportions similar to the infamous Mississippi and South Sea bubbles and we might see again a situation where “puritan ladies” begin selling their jewels and virtue to buy Bitcoins.
This should not be happening now, since we are supposed to be protected by a plethora of financial regulators paid by taxpayers. So, I decided to search the site of some of them to check what advice they had for us. I limited my visits to the sites of the FED and ECB because they have the monopoly of issuing the two major currencies – the Dollar and the Euro, respectively – and play a key role in their corresponding payment systems.
In the FED’s site I could not find a single reference to Bitcoins while the ECB site had a single link to a policy paper with an academic tone and a badly disguised sympathy for private “virtual” moneys like the Bitcoins. So, I decided to email them to question the legality of private virtual moneys in the following terms:
Dear Sir/Madam,
Would you please confirm if the following operations are legal?
1) To pay and accept payment in Bitcoins
2) To trade Bitcoins against the USD/Euro
3) To issue Webcoins, a money similar to Bitcoins, except that it will be issued by mining real goods
4) To establish an electronic brokerage or exchange to trade Bitcoins and Webcoins against the Euro and other currencies.
I would appreciate an answer ASAP.
With kind regards
Marques Mendes
So far the FED has not answered (see note at the end of this post) my email of the 27th November, but the ECB replied promptly by directing me to the paper mentioned above as follows:
Dear Mr Mendes,
Thank you for your interest in the European Central Bank.
The ECB's position on virtual currencies such as Bitcoins is outlined in this report:
http://www.ecb.int/pub/pdf/other/virtualcurrencyschemes201210en.pdf.
With kind regards,
EUROPEAN CENTRAL BANK
DG Communications and Language Services
Press and Information Division
Both played ostrich by not replying directly to my specific questions on the legality of such currencies. Yet the answer should be easy.
Indeed, Bitcoins cannot even be categorized as a temporary currency substitute like the chips used by casinos, the token notes used by monopoly game players or the pieces of metal used by some farms to pay harvesters. The reason being that at the end of the day there is no issuer obliged to convert the Bitcoins into legal money like there is for chips, tokens or pieces of metal.
The sponsors of Bitcoins claim that it is not a Ponzi scheme, because like the growing of tulips in the Netherlands, there is no central organization and anyone can create Bitcoins by “virtual mining” a mathematical algorithm that generates the encrypted codes used for transfers among peer-to-peer electronic networks. This, is obviously a fallacy because someone has to hide the codes. The process of mining Bitcoins is just like the popular garden game of hide-and-seek messages in Easter eggs played by children. In fact, it is less competitive and worthy because in the end players do not even get something with value like the eggs.
Bitcoin promoters are equally fraudulent when they claim that Bitcoins can be exchanged through peer-to-peer networks anonymously like the legal notes and coins. In fact, a central organization (bitcoin.org) is needed to support the network software and the peer-to-peer participants have to date stamp them so that a trail is inevitable.
Moreover, peer-to-peer networks do not provide any type of anti-fraud guarantee to their users. As a payment system, its security is even less than that of informal payment networks like the Hawala system used in Asia and India. Hawala is based on the performance and honour of known money brokers whose honesty users can check, not on some anonymous internet counterparty.
Any fiat money must be issued by known issuers on whose reputation rests its value. Of course its issuers may be central banks or private entities and these may be more or less creditworthy. Indeed, we can even foresee the existence of competing issuers. However, using as a medium of exchange fiat money issued by anonymous entities it is a complete stupidity that any half-witted regulator should be able to understand.
In conclusion, Bitcoins or any similar faceless Webcoins (the Web here stands for Worthless Economic Bullshit) must be considered as a fraud.
P.S. If I were in any doubt about the fraudulent nature of Bitcoins, that doubt would be over on the 6th of January 2014 when someone went through the trouble of writing an email to me pretending to reply from the FED and directing me to a bogus organization (Coindesk) based in the UK which claims that Bitcoins are legal "depending on what you’re doing with it".
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