Sunday, October 19, 2014

Bitcoin Trader Goes Belly-Up

Bitcoin Trader, a service that billed itself as a means for users to earn passive Bitcoin income online has ceased operations.

On the 6th of October, users began reporting the inability to withdraw funds from the service.

The owner of the operation has put out the following letter:

Dear Clients

Regrettably I have to announce the failure and closure of Bitcoin Trader.

While preparing for the final audit results, a task we were working on for weeks now, our bitcoin wallet has been hacked and emptied, just after exchanging our fiat holdings within the exchanges to bitcoin and transferring our entire holdings to our wallet, in order to proof our solvency.

It is a known fact that I personally opposed any proof of solvency, but agreed to conduct it for the sake of a few dozen small and medium investors.

The hacker contacted me shortly after he took advantage of our holdings and demanded a ransom in order to transfer the coins back. I have agreed to a 25% ransom of the entire sum, but haven’t heard back from him for several days now.

My aim was to create something based on trust, just as bitcoin itself is based on distributed trust. Unfortunately I must admit today, I have failed. All left to do now is to declare bankruptcy with the Panamanian authorities and to hand over all relevant files and information for further investigation.

Sincerely, John Carley
NEWSBTC comments:
[W]hile the statement seemingly said everything it needed to, it raised so many questions about the validity of Carley’s statements.
Why would a hacker make such demands? Why weren’t financial audits published previously?
Many in the community are declaring Bitcoin Trader to be a HYIP (high-yield investment program), a type of Ponzi scheme....Disclosure: Bitcoin Trader has previously sponsored NEWSBTC, along with a number of other publications and bitcoin-related events. When I learned about the questionable activities of the company, I immediately pulled their banner ad.

Best Cities for Millennial Homebuyers

According to a report from the National Association of Realtor:

Median home price: $226,000
Job growth: 4.2%
About 110 people are moving to Austin every day -- and many of them are under the age of 35.

Grand Rapids, Michigan
Median home price: $123,000
Job growth: 4.2%
Between 2010 and 2012, nearly 27% of new residents were between the ages of 24 and 35.

Dallas, Texas
Median home price: $175,000
Job growth: 3.9%
Home prices are about 9% cheaper than the rest of the country.

Des Moines, Iowa
Median home price: $153,000
Job growth: 3%
The area's low unemployment rate has attracted many Millennials, with 29% of new residents under the age of 35. That's compared to 23.5% nationally.

Ogden, Utah
Median home price: $184,000
Job growth: 2.7%
This small metro area north of Salt Lake City has one of the best combinations of low home prices and higher than average incomes in the nation.

While home prices have risen roughly 9% over the past year, homes are still far from expensive: the median home price is $184,000. Meanwhile the median income is $68,500.

That has attracted a lot of newcomers to the area, about 30% of whom are Millennials.

Denver, Colorado
Median home price: $288,000
Job growth: 2.7%
Median household income almost 20% higher than the national median

Seattle, Washington
Median home price: $340,000
Job growth: 2.6%
Between 2010 and 2012, 28% of all people moving into the city were Millennials.

New Orleans, Louisiana
Median home price: $158,000
Job growth: 2.5%
The Big Easy has experienced a huge "brain gain" since Hurricane Katrina, according to Ben Johnson, president of the New Orleans Chamber of Commerce.
the unemployment rate is only 4.8%.

Salt Lake City, Utah
Median home price: $233,000
Job growth: 2.4%
Unemployment is below 4%.
The city also ranked number one in a Harvard study of upward mobility, surpassing Silicon Valley havens like San Jose and San Francisco, as well as Boston and New York.

Minneapolis, Minnesota
Median home price: $188,000
Job growth: 1.5%

(via CNNMoney)

Why Food Stamp Use Isn't Going Down

Robert Doar discusses:
Something peculiar is happening to our nation's food assistance program. The recently renamed food stamp program - now called the Supplemental Nutrition Assistance Program or SNAP - is supposed to respond to difficult economic conditions by providing financial assistance to purchase food to poor Americans. As bad times hit and more people need assistance, SNAP caseloads should go up. And as the economy strengthens, the number of SNAP recipients should decline - at least in theory.

For most of the history of the program, that is what happened. As the accompanying chart shows, from 1969 until 2003, SNAP has been very responsive to changes in the unemployment rate with the number of recipients rising as unemployment rises and declining as unemployment declines.

But that seems to have changed. As unemployment declined between 2003 and 2007, the number of SNAP recipients marched steadily higher. Then, as the Great Recession hit, the SNAP caseload went even higher. The recovery after the 2001 recession did little to interrupt SNAP growth and now-as the economy has strengthened with unemployment declining and jobs growing (although slowly)-the number of SNAP recipients has barely come off its all-time peak of 47.8 million recipients hit in December 2012. Since then, the number of SNAP recipients has only declined by 2.7% -- and oddly ticked up in the months of April and June 2014.

If we compare the current recovery with the recovery after the recession of the 1980s, whose duration and unemployment levels are most comparable, the change in SNAP's responsiveness becomes clear. Adjusting for population, in the four years following the 1981-1982 recession, there was a 12.5 percent decline in SNAP recipients. In the four years following the 2007-2009 recession, SNAP recipients increased by 15.6 percent. If this recent recovery had behaved like that of the 1980s, by 2013 only 11.5 percent of the population would have been receiving SNAP benefits: 36 million individuals as opposed to 47.6 million...

My experience and many studies of low-income communities suggest that at least some of the SNAP recipients who report no earnings have earnings which they receive off the books.

Then there is the Casey Mulligan effect, named that after the University of Chicago economist who has shown that various safety net programs - absent a work requirement - are allowing people to stay out of work longer than they otherwise would if no benefits were available. In the past, I have been skeptical of this position when it is directed at SNAP benefits alone. It is difficult to see how a voucher for food with an average household benefit of less than $230 per month could provide enough aid to make someone decline looking for work. But if that benefit is combined with other benefits -- such as housing assistance, Medicaid or Unemployment Insurance benefits -- it is then possible, even predictable, that this layering of programs may lead some to decide that full time, on-the-books employment is not worth the effort.

A Nobel Prize-Worthy Economist Figured Out How to Destroy Terrorism

By Diana Furchtgott-Roth

We’re used to academic giants who win Nobel prizes in economics for their myriad articles and clever theories.

But what about a Nobel Prize for an economist who can fight terrorism and raise living standards in emerging economies? That would be Peruvian economist Hernando de Soto, president of the Institute for Liberty and Democracy in Lima, Peru.

As the Nobel prizes rolled out this month, I hoped that de Soto, born in 1941, would be awarded the Nobel Prize in Economic Sciences. French economist Jean Tirole, who used game theory to analyze markets, was a worthy choice, and has more academic publications to his name than de Soto does. But de Soto’s efforts in advancing entrepreneurship and raising living standards in developing economies around the world make him a leading contender for the prize.

These days, with terrorists taking back Iraq and entrenching themselves elsewhere in the Middle East, it is helpful to see how economic systems can be used to fight back. We’re not using boots on the ground, so why not use economics? If people have jobs, homes, families and a life where they can progress, they become less willing to rebel.

As an adviser to Peru’s president, de Soto worked with the government to roll back red tape. ... Over the past 20 years Peru’s GDP has grown twice as fast as the average of the rest of Latin America.

De Soto meticulously measured the cost of bureaucracy and documented the obstacles to starting a business and getting housing and transportation in Peru in the 1980s. The costs of getting formal approval were staggering, and explained why standards of living were so low and why many residents turned to the unprotected informal sector in despair. De Soto described the bureaucratic nightmare in 1989 in his first book, The Other Path: The Invisible Revolution in the Third World. The title is a reference to the Shining Path, the communist-guerilla movement that terrorized Peru in the 1980s, touting the “shining path to revolution.”

Just a few examples: De Soto calculated that it took 289 days for someone living in Lima to get the necessary permits to set up a company. Potential entrepreneurs had to visit multiple government offices, including the Ministry of Industry, the City Council, the Ministry of Labor and the Ministry of the Economy. The cost was $1,231, or 32 times the monthly minimum wage at the time. Opening a formal market, a group of stores, took over 14 years. No wonder that more Peruvians did not start legal businesses but became informal sector street vendors instead.

Read the rest here.

The Year-To-Date Performance Of Every Major Asset Class In The World

Click on chart for better view.

(via BI)

Energy Policy and It's Implication for the Extreme Poor

Lady Gaga Buys Awesome Malibu Estate

Property records show it was recently purchased under a trust for $22.5 million. The home has a secret door leading to a “batcave.”

A Key Indicator to Watch that May Be a Strong Indicator of Future Price Inflation

By Robert Wenzel

The Fed has pumped massive amounts of new money into the system since the financial crisis of 2008, so where is the price inflation?

Part of the answer is soaring productivity, especially in the energy and high tech sectors,

But another part of the answer is the strong desire by individuals and corporations to hold on to large cash balances. A very rough indicator of this is the declining velocity of money, since the crash.

There was a major decline in velocity during the Dot Com Bubble, but the it started to recover again, only to nosedive in line with the more recent financial crisis.

What could turn this around? At this point, consumer and corporate optimism. Which is why I keep a close eye on the the Thomson-Reuters/University of Michigan sentiment index. The more optimistic consumers are at this point, the more likely they are going to spend more of their cash balances.

The  preliminary October sentiment index "unexpectedly" (by Keynesian economists) increased to 86.4 from the final September reading of 84.6, according to a source who has seen the numbers, reports WSJ.

It's a continuation of increases in sentiment since the lows reached during the peek in the financial crisis.

At some point, the sentiment will become so positive that consumers will start spending so aggressively that it will overpower any productivity gains and that's when price inflation will really kick in. Timing on this is always difficult, but the trend is pretty obvious.

The Fed, Paul Krugman and most Keynesians (except probably Marty Feldstein) do not understand this. They are simply watching the current price inflation trendline (of just under 2%) and are projecting this out in their heads without understanding the powerful underlying force that will eventually cause price inflation to rocket.

Be prepared my friends, it's coming.

Robert Wenzel is Editor & Publisher at and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics

MAP European Countries Where Governments Collect Tax From Church Members

European Countries With Church Taxes

Pew Research reports:

In many cases, the churchgoer pays the tax as part of their personal income taxes and the government passes the money along to the church. A few examples:

  • In Italy, taxpayers pay an “eight per thousand” tax (0.8%) and express their preference for whether the money should go to one of the religious groups listed (including the Catholic Church, several Protestant groups and the Jewish community) or the state.
  • Spanish law “provides taxpayers the option of allocating a percentage of their income tax to the Catholic Church but not to other religious groups,” according to the U.S. State Department.
  • The Evangelical Lutheran Church in Denmark – the country’s national church –receives funding through a specific church tax imposed on members and also receives additional support from the Danish government. Denmark reports that nearly 80% of its people were church members as of 2012.
  • Two other northern European countries – Sweden and Finland – also collect church taxes from members, both at rates that range from 1% to 2%.
  • In Switzerland, church taxes are imposed at the canton level; most of the 26 cantons, or states, collect a church tax in some form. In some cantons, private companies must pay a church tax, according to the State Department, which also reports that some cantons collect taxes “on behalf of the Jewish community,” but that “Islamic and other ‘nontraditional’ religious groups are not eligible.”
  • Iceland’s church taxes are collected from members of registered religious groups –including secular humanist organizations.

10 Medical Breakthroughs Helped Re-Shape Healthcare This Year:

I expect that medical breakthroughs will dramatically decline once Obamacare fully kicks in. Below, the Cleveland Clinic reports on recent pre-Obamacare breakthroughs :

  • targeted therapy

    10. Targeted therapy for cancer

    There’s new hope for people with chronic lymphocytic leukemia (CLL), a cancer responsible for 4,400 American deaths per year. After promising clinical trial results, the first-in-class oral drug ibrutinib is expected to be approved by the U.S. Food and Drug Administration for treatment of CLL. The drug targets malignant cells while sparing a patient’s immune system.

  • heart risk

    9. Heart risk through the gut

    In 2013, researchers added a new biomarker to the hunt for heart disease: TMAO. Your body produces TMAO (trimethylamine N-oxide) when your gut bacteria digest choline, which is found in egg yolks, red meat and dairy products. Choline is thought to promote hardening of the arteries. TMAO provides an accurate screening tool for predicting future risks of heart attack, stroke and death.

  • personal sedation

    8. Personal sedation station

    Novel, personalized “sedation station” technology will allow healthcare professionals other than anesthesiologists to deliver the light sedation required for life-saving colonoscopies. The technology could help bring the nationwide cost of this crucial test down by an estimated $1 billion per year.
  • AMAZING A Central Banker Speaks Three Truths in One Speech

    By David Stockman

    Once in a blue moon officials commit truth in public, but the intrepid leader of Germany’s central bank has delivered a speech which lets loose of three of them in a single go. Speaking at a conference in Riga, Latvia, Jens Weidmann put the kibosh on

    Advice For A Career In Economics (Sort of)

    Adam Ozimek is an economist at Moody's Analytics. Given the advice he provides students who want to pursue a career in economics, it is obvious he doesn't get, or never read, Friedrich Hayek's The Counter-Revolution of Science.

    In the book, Hayek details the case that economists who attempt to mimic the physical sciences through empirical study and complex mathematical creations, fail to understand the true nature of economics as a science. For Hayek, economic theory is a qualitative science not an empirical science.

    Thus, the below advice from Ozimek (written for Forbes) would be rejected by Hayek (and also Mises and Rothbard)
    One theme that was reflected in every panelists’ comments was the importance of learning how to program. Statistical packages are one particular kind of programming language, and it’s important to learn more than one of these. Among these my personal preference is Stata, but I’ve also learned R and Fortran in the past, and have dabbled in others. But you never know which you’ll have to use at your first job. So more important than learning any particular language is learning how to learn one. Your first programming language will be hard. Your second one will be easier. By your third you’ll be learning how to learn and it will be much easier.

    If you have a chance learning GIS can be a big advantage too. In a similar vein, taking a machine learning class will really open your eyes to techniques for working with Big Data that are becoming increasingly important but almost always neglected in econometrics classes.

    I want to go into a little more detail about what it means to learn how to do statistical programming. I don’t mean take the dataset your professor gave with all the variables organized neatly, run some regressions, and then interpret the coefficients. In the classroom this is often the approach, but in the real world finding, assembling, and manipulating the data will be a big part of the work you do. Today many researchers provide code on their websites so you can go from the raw data to the results in their papers. You will learn a lot by trying to recreate the results of a paper you enjoy without the code, and then reading their code and seeing how they did it. Take your time with this. Start by trying to do the whole thing from scratch, and if your answer is wrong (it will be), steal their first few lines of code and then try again to do it on your own from that point. Who knows, you may even find an error in a superstar researcher’s paper and then get famous.

    In my personal experience, it also helps you really learn econometrics to program estimators from scratch. And by scratch I mean without even using pre-packaged matrix multiplication. Maybe this is just my own learning deficit, but I didn’t really understand method of moments estiamtion until I had to program it.
    Tragically, in one important sense, Ozimek is correct, in that currently almost all major university graduate programs focus on this type of faulty mathematical and programming work. If you hope to get a major university graduate degree in economics, this is what you will have to waste your time doing. An alternative is to study economic history. Also, I believe that it is possible to get a graduate degree in sociology and pretty much do Austrian economics---as long as you don't call the work you are doing Austrian economics.

    I offer no insight into the job prospects for those with doctorate degrees in economic history or sociology, I just don't know. They probably aren't great. But if you are driven to become a sound economist, despite limited job prospects in academia, then economic history and sociology are sound options. But you are going to have to be very inner driven to make something out of your career long term. with the academic approach.  If you want a degree in economics, and want to avoid the mathematical programs, there are some schools out there, none in the Ivy league, where that is possible.

    If you aren't hung up on getting a graduate degree, Gary North does make the case that you don't need one and this is probably true, but you will still have to be very driven to succeed.

    FORECAST: If oil prices stay below $90 for a while, we will witness fiscal squeezes and regime changes in production countries

    Steve Hanke writes:
    If oil prices stay below $90 per barrel for any length of time, we will witness massive fiscal squeezes and regime changes in one or more of the following countries: Iran, Bahrain, Ecuador, Venezuela, Algeria, Nigeria, Iraq, or Libya. 

    Saturday, October 18, 2014

    Is Money a Unit of Value or Unit of Measure?

    By Bionic Mosquito

    Answer first, analysis later: money is a perfect unit of measure; there is no such thing as a unit of value.

    John Tamny is out with a piece suggesting that David Gordon, of the Mises Institute, inadvertently attacked Ludwig von Mises when Gordon reviewed Money, the book released last summer by Steve Forbes and Elizabeth Ames. (HT EPJ)

    I have, in the past, found much to agree with in Tamny’s writings, and some to disagree with.  I have agreed with him on topics that were disagreeable to some in the Austrian school.  Sadly, Tamny even prompted me to write one of the dumber posts I think I have ever written – or at least one aspect of my post was such (boy, I hate re-living that one…).

    Back to the current Tamny piece:

    What struck this writer as odd is that in lightly attacking Forbes and Ames, Gordon only succeeded insofar as he perhaps unintentionally revealed a strong disagreement about money with the intellectual father of the Institute which employs him, Ludwig von Mises.

    I am not going to deal with the views of Mises on this matter, for two reasons: first, I don’t read enough of Mises directly to comment either way.  I have explained why this is so elsewhere, but in a nutshell: I want to work through problems of economics myself; if I later find that I landed where someone like Mises has previously landed, I feel pleased. If I find I disagree with someone like Mises, I feel confident.  But for me, the journey is most important.

    Second, if someone wants to challenge David Gordon on just about any topic, he better bring his lunch…and dinner.  Don’t let Gordon’s

    Peter Schiff: QE4 is Coming

    Where Twitter Beats Google

    Google is known for its spectacular cafeterias.

    Bon Appetit has even written the cafeterias up:
    Imagine if your office pantry had a professional-grade espresso maker and a popcorn popper instead of a perpetually broken vending machine. Or if the company cafeteria served beer-braised short ribs and roast black rock cod with heirloom-tomato relish instead of soggy turkey sandwiches.

    As if Google perks like nap pods and on-site masseuses didn’t already stoke your envy, the tech giant has reinvented workday dining. Its offices in Mountain View, California, and Manhattan have more than 35 canteens offering fresh, delicious meals and hundreds of pantry-like “micro-kitchens” stocked with snacks and beverages (including Kind granola bars and Stumptown coffee). And it’s all free.

    Unlimited breakfast, lunch, dinner (for staffers burning the midnight oil), and snacks sounds like a recipe for the corporate version of the freshman 15. But it’s not.

    Though the cafeterias feature their share of decadent offerings (like crispy pork carnitas and butterscotch-pecan-cookie pie), they’re also strategically designed to “make it really easy for people to make healthy choices,” says Scott Giambastiani, Google’s head chef..

    Every dish in the cafeterias is identified with a color-coded label that indicates the food’s healthful-ness. Taking cues from a traffic light, “green” options such as minimally processed fruits, vegetables, and whole grains can be eaten in large quantities; “yellow” foods like lean proteins should be eaten in moderation; and “red” foods– heavily processed or high in fat or sugar–should be eaten sparingly....

    Technically Google’s cafeterias also qualify as all-you-can-eat buffets, and as anyone who’s ever grabbed six slices of bacon knows, it can be nearly impossible to gauge how much you’re really eating. To address this, Google installed kitchen scales within the New York cafeterias so employees can keep track of what they’re piling on..

    BUT I hear Google doesn't come close to offering the feast that is available at the Twitter cafeteria in downtown San Francisco.

    EU's 'Fiscal Austerity' is a Joke

    So says Steve Hanke, and he is correct.

    Hanke notes:

    Govt spending is >50% of GDP in Greece, France and Italy.

    Estimates of How Many People Will Lose Employer-Provided Health Coverage Keep Rising

    The below chart shows the year-by-year increase in the estimates by the Congressional Budget Office of how many people will lose employer-provided health-care coverage by 2019.

    Americans From Which Professions Are Most Likely to Own Homes?

    Roughly 90% of optometrists in the U.S. owned a home in 2012, according to, which analyzed census data going back to 1900. So did 87% of dentists and 81% of pharmacists. By contrast, only 46% of roofers owned homes, and only 27% of waiters and waitresses. Dance instructors? Just 23%.

    62% of musicians and music teachers own homes, along with 63% of artists and art teachers.

    Firefighters rank very high at 84% home ownership. Some 78% of mail carriers own homes—the same as for lawyers and judges. Teachers (74%) ranked higher than economists (64%).

    Here's the full data: