Wednesday, January 17, 2018

It's On!: Walter Block Takes on the Wage Gap Controversy and Beyond

Loyola University-New Orleans Professor Walter Block sent this email out to his students:
Dear Students:

Since this is about our textbook author, and, also, about one of the subjects we'll be studying in class, I thought you'd be interested:

I'm also copying on this my econ faculty colleagues, plus Bob Wenzel, the author of the url.

I'll be discussing the male-female wage gap in class this coming thursday, weather permitting

Best regards,


Walter E. Block, Ph.D.
Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics
Loyola University New Orleans
6363 St. Charles Avenue, Box 15, Miller Hall 318      
New Orleans, LA 70118            
Skype: Walter.Block4            

Loyola Economics Students Published Widely in Refereed Journals;

Wenzel, Robert. 2017.  Interview with Walter E. Block. “The Inside Scoop on Studying Economics at Loyola University-New Orleans” September 3;

Tuesday, January 16, 2018

Lies, Damn Lies and Government Poverty Statistics

I am getting inundated with emails pointing me to a Los Angeles Times op-ed, Why is liberal California the poverty capital of America? 

The essay reaches this conclusion by using data from the Census Bureau’s Supplemental Poverty Measure. In other words, consider this government drama. Don't come to California expecting to see 20.6% of the population living in shacks without running water and, heaven forbid, no cable or cell phones.

The only time I have ever seen shacks in America was in the 1960s when I was very young and my mother and grandmother took me by Greyhound bus from

Bitcoin Price Breaks Below $12,000: UPDATE Now Below $11,000

In volatile trading, the bitcoin price has dropped under $12,000 this morning and is down more than 18% in the last 24 hours.

The immediate driver of the price break in the e-currency was overnight comments made by South Korea Finance Minister Kim Dong-yeon during a radio program interview where he said that "the shutdown of virtual currency exchanges is still one of the options" the government has, according to an English-language report Tuesday from South Korea's Yonhap News.

This falls in line with my warning that there are four potential threats to the bitcoin price:

1. Transaction processing difficulties

2. Government interference

3. A recession

4. Simply a natural exhaustion of buyers

I believe we are seeing factor 4, buying exhaustion, in play. Since bitcoin is merely a momentum play, with no fundamental factors holding the price up, you need constant strong no buying to push the price higher and that kind of strong buying is just not happening.

Factor 2, government interference is beginning to play an increasing role in the bitcoin price. In addition to the comments from the South Korean finance minister, China plans to block domestic access to Chinese and offshore e-currency platforms that allow centralized trading, according to a Bloomberg report.

The bitcoin price is now some 40% off its recent high of $19,343.



The price of bitcoin has broken under $11,000 and is currently trading at $10, 565. It is down more than 24% in the last 24 hours.

The Wall Street Journal Warns That Interest Rates Are Headed Higher

Justin Lahart, in the high profile Wall Street Journal column Heard on the Street, writes in the article titled, "Trouble Ahead for the Treasury Market":
The most important question in the financial markets today is whether bond yields will keep rising and how high they will go. If you untangle the forces driving the market, it is reasonable to see 10-year Treasury yields at 3.5% at the end of the year.
The Treasury is going to be very lucky if the 10-year yield only climbs to 3.5%. It says here that 5.0% is a very real possibility from its current 2.5% range, thanks to accelerating price inflation and Trump shifting significant government funding from taxation to debt financing.


Higher Price Inflation Ahead

Michael S. Rozeff gets it right when he writes:
The price movements in financial markets are often difficult to interpret, but recently they are acting as if higher inflation lies ahead. It’s the uniformity of reactions in several markets that suggest this.

The key event that launched these moves is the tax cut that passed in early December in the Senate and Dec. 20 in the House.

Gold began a strong upward move starting on Dec. 12. The dollar as measured by UUP fell against other currencies starting on the same date.

The stock market, which already had been making new highs, waited until 10 days ago and then launched an upward move to daily new highs that was even stronger than earlier.

Twenty-year treasuries made a local high on Dec. 15 (128.59 on TLT) and then sold off to its current 124.52.

The implied 10-year breakeven inflation rate as measured by TIPS shows a recent rise too. Its pattern shows a long-term basing pattern that began 3 years ago. This rate appears poised to break out to higher levels.

Hence, all the markets are saying the same thing. Not only will federal deficits rise, but so will inflation.

Monday, January 15, 2018

Government Shutdown Looms

Chances of a government shutdown grew Monday as Republicans concluded that they would be unable to reach a long-term spending accord by the Friday deadline. GOP leaders are now turning to a short-term funding measure in hopes of keeping agencies open while talks continue, but Democratic leaders say they are unlikely to support any deal that does not protect young illegal immigrants, reports The Washington Post.

According to WaPo, aides to key negotiators from both parties planned to meet Tuesday in an effort to rekindle budget talks, setting up a Wednesday meeting of the leaders themselves. If they cannot agree, the government would shut down at midnight Friday for the first time since 2013.

Of course, this is not the real, permanent, shutdown of most government services that small-government and libertarian advocates would like to see, it is a Congressional shuck and jive show. If things shut down, the shutdown won't last anywhere near long enough. say, a good 200 years.


Researchers Find Bitcoin Price Manipulation

Tech Crunch reports:
Researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman have written a fascinating paper on Bitcoin price manipulation. Entitled “Price Manipulation in the Bitcoin Ecosystem” and appearing in the recent issue of the Journal of Monetary Economics the paper describes to what degree the Bitcoin ecosystem is controlled by bad actors.
To many it’s been obvious that the Bitcoin markets are, at the very least, being manipulated by one or two big players. “This paper identifies and analyzes the impact of suspicious trading activity on the Mt. Gox Bitcoin currency exchange, in which approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired,” the researchers wrote. “During both periods, the USD-BTC exchange rate rose by an average of four percent on days when suspicious trades took place, compared to a slight decline on days without suspicious activity. Based on rigorous analysis with extensive robustness checks, the paper demonstrates that the suspicious trading activity likely caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months.”
This finding doesn't surprise me at all. Indeed, I suspect that the recent advance (which may have hit exhaustion)  may be a manipulation.

I have stated more than once that bitcoin is not a fraud, it is not a Ponzi scheme but it does have the characteristics of a stock market pump and dump.

I suspect the operator(s) are very skilled pump and dump operators who have likely created the greatest pump and dump in history. If they gave out Nobel prizes in pump and dumps, these operators would be a shoo-in.


(ht Mark Addleman)

The Experiences of an 80-Year Old Man in the Early 21st Century

Bread and Coca 
By Robert Wenzel

The New York Stock Exchange is closed today for Martin Luther King Day and since I don't publish the EPJ Daily Alert when the NYSE is closed, it is a relatively lazy day for me.

I slept in an extra couple of hours and put up the Venezuela price inflation post from home.

I eventually headed out, and before going to my office, I stopped at Bread and Coca on the southeast corner of Sutter and Kearny streets here in San Francisco for a large coffee and a bowl of steel-cut oatmeal.

There were a few open tables. One was by

Venezuela's Price Inflation Hits 5,067%...

...a new high.

This means one thing, a central bank money printer on steroids.

(via Steve Hanke)

The former Socialist Party lawmaker Ricardo Sanguino is head of the central bank. Blame it all on him:

 Ricardo Sanguino


Double Whammy Trouble for the US Dollar

The US dollar has fallen to its lowest level against the Chinese yuan in the last two-years.

The US dollar against the Chinese yuan.

At the same time, Japanese purchases of US Treasury securities are collapsing.

The Nikkei reports that Japanese investors' net purchases of mid- to long-term foreign bonds (mostly Treasury securities) nosedived 94.6% on the year to 1.1 trillion yen ($9.9 billion) in 2017, Japan's Finance Ministry said Friday. Yes, a decline of 94.6%. It was the first annual decline in four years.

These are just two data points but they are significant in suggesting a major shift is underway from the US dollar. And given that Trump has shifted from tax financing to additional debt financing, things could get pretty vicious for the dollar on foreign exchange markets. This could result in a kind of tiger by the tail situation with interest rates climbing which results in the Treasury requiring more funding thus pushing rates even higher. The climbing rates, anticipated overseas, will result in even less Treasury buying thus resulting in a continued decline in the dollar and even more advances in interest rates.


Trump Considering a Multi-Billion Dollar Hike in the Federal Gas Tax

The stable genius is trying to figure out he will raise $200 billion.
Chris Edwards writes:
The Trump administration will release its long-waited infrastructure plan in coming weeks. The plan is expected to include $200 billion over 10 years of federal funding. Where will the money come from? The president has pondered raising the federal gas tax.
So much for Trump shrinking government.