HERE IT COMES: MasterCard Seeks 'Level Playing Field' for Bitcoin Regulation

MasterCard has spoken out against bitcoin's perceived risks and called for regulators to create a "level playing field" for payments systems.

The statements were made as part of an ongoing Australian inquiry into digital currencies, headed by the Senate Standing Committee on Economics.

In a document, the credit card company argues that all financial services should be held to the same standard, stating that it is imperative all consumers and merchants are able to conduct business and commerce in a way that is safe and simple for all.

The statement says:

"It is our view that all participants in the payments system that provide similar services to consumers should be regulated in the same way to achieve a level playing field for all. Moreover, any regulations should be technology neutral to ensure that they can and do apply to all new providers of payment services to consumers, especially with advancements in technology."

 MasterCard "strongly advocates" the application of industry standards on any payment service, including digital currency, explaining:

"It must be safe, stable and reliable for consumers; it must provide an accepted value guarantee without exposure to significant fluctuation and risk; and it must offer all the basic protections that consumers and other stakeholders (regulators, governments, banks and merchants) have come to expect."

(via CoinDesk)

I wrote earlier this year:

I expect that at some point, under the guise of protecting consumers, government regulation will require that Bitcoin middlemen at the retail level, such as Bitpay, allow chargebacks against purchases made with Bitcoin, , in a manner similar to the chargeback process required of Mastercard, Visa, and American Express, if a consumer is unhappy with a product.

This will wipe out the low transaction cost advantage that Bitcoin now has. And, note well, as I have reported, Mastercard has recently hired 5 lobbyists to lobby on behalf of Mastercard and against Bitcoin.

What Do US Consumers Buy Online?

(via WSJ)

Paul Krugman is Right on This Point and Some Austrians are Wrong

For some reason, and I haven't quite figured out why, some Austrian economists have identified the 1921 recession and its aftermath as an example of the Fed staying out of the way and allowing a non-manipulated recovery to occur.

James Grant, a quasi-Austrian, even has a new book out on this point, The Forgotten Depression: 1921: The Crash That Cured Itself . (Note: I haven't read Grant's book, yet, but I will, no doubt have further comment after I do.)

Paul Krugman argues otherwise about Grant's assertion in a blog post today:

Two things to say about the bizarre citation of the 1921 economic recovery as somehow refuting everything we’ve learned about macroeconomics since then....The 1921 thing is of no use precisely because it looks like the kinds of recession where the Fed creates a slump with tight money, then relents...Second, there is a familiar phenomenon here, in which a certain kind of would-be economic expert loves to cite the supposed lessons of economic experiences that are in the distant past, and where we actually have only a faint grasp of what really happened. Harding 1921 “works” only because people don’t know much about it; you have to navigate through some fairly obscure sources to figure out that it’s a tight-money recession that ended when the Fed reversed course.

His comments surrounding this observation are typical nonsense, but his observation about 1921 is absolutely spot on in my view. I wrote about this last year:

There is no reason to single out the 1920-21 recession as different from other Federal Reserve money manipulations.

According to A Monetary History of the US by Friedman and Schwartz (Table 10) money growth was at 15% between May 1919 and May 1920. This according to Austrian theory would have fueled the boom. Eyeballing Chart 1 in Friedman-Schwartz one can see that money supply growth peaked in 1921 but then bottomed in 1922. Thus, money supply would have started to slow in 1920, but would have started to climb in 1922. Indeed, money growth according to Murray Rothbard (America's Great Depression Table 1) for the period June 1921 to June 1922 was at  4.1%. but for the period June 1922 to June 1923 money growth was at 9.8%. This growth would  have thus started in 1922, when the economy was coming out of the recession. Thus, as far as I am concerned, the boom, bust and new boom were all the result of Federal Reserve money manipulations.

I have no idea how the urban myth started that the 1921 recession was different from other Federal Reserve manipulations, that said, after this period for the remainder of the 1920s, money supply growth until 1928 was pretty much between 5% and 10% (See Rothbard, Table 1), which justifies...Austrian claims that it was money printing in the 1920s that caused the 1929 stock market crash and start to the Great Depression.

Ron Paul's claim that government stayed out of the way in the early 1920s, applies more to the propping up of wages and businesses, that didn't occur, so there was no suffocation of the overall economy as occurred in the 1930s and at present, but the Fed was, indeed, up to its dirty tricks in the early 1920s.

(ht Travis Holte)

Just What Europe Needs: "Tax Harmonisation"

“Capitalism breathes through...loopholes" -Ludwig von Mises

Germany, France and Italy have launched a campaign to tighten EU tax rules that appears aimed at practices in Luxembourg and will add political pressure on the new European Commission president Jean-Claude Juncker, the Grand Duchy’s former premier, reports FT.

The three countries are calling for an EU-wide law by the end of next year that would outlaw “aggressive tax planning” and close some common loopholes used by companies and member states to limit their tax bills.

“The lack of tax harmonisation in the European Union is one of the main causes allowing aggressive tax planning, base erosion and profit shifting (Beps) to develop within the internal market,” say the three finance ministers – Germany’s Wolfgang Schäuble, France’s Michel Sapin, and Italy’s Pier Carlo Padoan – in a letter to Pierre Moscovici, the European economy, finance and tax commissioner that was obtained by FT.

The Budget Impact That Falling Oil Prices is Going to Have on Venezuela, Iran and Russia

Last year, approximately 65% of Venezuela's government spending came about because of oil revenues. That will be impossible with the oil price plunging.

In Iran, oil revenues accounted for roughly 50% of government spending.

Russia's take of oil revenues accounted for 40% of the countries government budget.

The great government squeeze by falling oil prices is om.

(budget estimates via WSJ)

How Lefty is Elizabeth Warren?

President Obama has nominated Antonio F. Weiss to be under secretary of the Treasury.

He is co-author of a white paper calling for higher taxes on the rich and has donated hundreds of thousands of dollars to the Democratic Party. 

Yet, Senator Warren is opposing the nomination because, according to NYT,  "Obama’s nominee to be under secretary of the Treasury for domestic finance, has given the left an unlikely rallying cry to press for a more aggressively liberal economic policy agenda...the Warren wing’s belief that Democrats must realign their economic policies with the interests of working-class voters, particularly white men without college degrees."

Under Pressure From Uber, Taxi Medallion Prices Are Plummeting

The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data, reports NYT.

In other big cities, medallion prices are also falling. In Chicago, prices are down 17 percent. In Boston, they’re down at least 20 percent. In Philadelphia, the taxi authority recently failed to sell any medallions at its asking price of $475,000; it will try again, at $350,000.

The cause of the price decline?

Uber circumventing the taxi cartels that exist in most major cities, which is resulting in more competitive rates.

 In Chicago, notes NYT, for example, a seven-mile ride from the Loop to the University of Chicago in a medallion taxi costs about $26, including tip. The same trip cost $12.29 this April with UberX, the lowest-cost service option from Uber.

The Best Things to Buy In December (Swimming pools, for one, are a great buy now)

Here's Lifehacker's list:

• Champagne: New Year's is coming up, and that means champagne is actually going to get cheaper, according to Sharon Castillo, director of the Office of Champagne USA. In this case, the high demand means companies are trying to undercut their competitors to sell more during this peak time.
• Golf Clubs: As you might expect, it's not exactly the best month to go play a round of 18 holes, so golf clubs are going to be on sale right now. New England Golf Monthly points out that they'll probably be last year's models, so you won't be getting the absolute latest and greatest, but if you're hunting for a deal, now's the time.
• Pools: You may not be looking to go for a dip in the cold winter, but it's a good time to get that pool set up for summer. A number of pool installers have blogged about the factthat winter is the best time to buy a pool, mainly because no one else is buying them, so they need to keep prices down in order to keep up work. And, since they're doing so much less work in the winter, it's often of higher quality, too.
• Televisions & Other Electronics: You should see sales continue after Black Friday and through the holidays. Though if you can wait, February is probably a better time than now to buy that new TV.
• Tools: Like we said last month, tools are on sale during the holiday season. If you shop around, you can probably find some good holiday sales on tools, so it's a good time to buy—particularly if you want to winterize your home before the cold really sets in. Check out our guide to stocking the perfect toolbox and our list of the DIY home repairs you can do yourself while you're at it.

Bestselling Books at EPJ-TL in the Month of November 2014

Here are the combined bestselling books at EconomicPolicyJournal.com and Target Liberty in the Month of November 2014.

1. Progressivism: A Primer on the Idea Destroying America by James Ostrowski. Because of this. Second month on list.

 2. Real Dissent: A Libertarian Sets Fire to the Index Card of Allowable Opinion by Thomas Woods. Because of this. Second month on list.

3. How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness by Russ Roberts. Because of this. 

4. Million Dollar Habits: 10 Simple Steps To Getting Everything You Want In Life by Robert Ringer. Because of this. Fourth month on list.

5. Defending the Undefendable by Walter Block. Third month on list.

6. The Secret of Selling Anything by Harry Browne --On list because of this:  How to Get a Wall Street Job in One Hour Seventh appearance on the list.

7.  Against the State: An Anarcho-Capitalist Manifesto by  Llewellyn H. Rockwell Jr.---Because of this. Third appearance on the list.

8. Wall Street, Banks, and American Foreign Policy by Murray Rothbard

9. Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics by Henry Hazlitt

10. The Great Deformation: The Corruption of Capitalism in America by David Stockman--Because of this: David Gordon on "The Great Deformation" Second appearance on list.

Hayek's Warning: The Social Engineer's Pretense of Knowledge"

Richard Ebeling emails:

Dear Bob, 

I have a new article on the news and commentary website, “EpicTimes,” on, “Hayek’s Warning: The Social Engineer’s Pretense of Knowledge.”

December 11, 2014 marks the 40^th anniversary of Friedrich A. Hayek receiving the Nobel Prize in Economics at the formal award ceremony in Stockholm, Sweden, during which Hayek delivered his official Nobel lecture on, “The Pretense of Knowledge.”

Hayek warned of the danger from those in the intellectual and government policy decision-making community who arrogantly believe that they have the ability and wisdom to redesign or regulate the complex market order.

He emphasized the hubris on the part of those who fail to understand and appreciate that in the developed market system there is more knowledge and different types of knowledge that are dispersed and decentralized in the respective minds of all the participants of the society than any government master minds could ever successfully integrate or coordinate better than is done through the competitive market price system.

He particularly singled our the presumption of knowledge by the Keynesian Economists who assumed that the construction and manipulation of a series of quantitative macroeconomic statistical aggregates could serve as the policy means for managing total output and total employment, and the general wage and price levels in the economy.

What is generated by such policies, Hayek argued, are unsustainable “booms,” followed by an inescapable economic downturn, with those falsely drawn into employments during an inflation now having to adjust and rebalance their activities to be consistent with a post-inflationary environment.

More generally, Hayek warned of those social engineers who refuse to accept the humility of how little they know to plan or micro-manage a society, but by pursuing their coercive political plans threaten the long-run survivability of a free society.

This is a message that is as true and relevant today as when Hayek delivered these warnings four decades ago at the Nobel Prize ceremony.

 http://www.epictimes.com/richardebeling/2014/12/hayeks-warning-the-social-engineers-pretense-of-knowledge/

Moody’s Downgrades Japan

Uncertainty over the government’s deficit reduction goals in the wake of Shinzo Abe’s decision to push back a sales tax increase was blamed for the decision to dock Japan’s credit rating by one notch from Aa3 to A1.

Of course, the best solution is to reduce government spending. Raising taxes would only choke the economy further.

Harvard Business Review: How to Lie with Charts...

Using:

• Color Coded charts
• A truncated Y-Axis
• Cumulative growth games

This is very good, here.

Analyst Linked to Secret Information Leaked From Within the Fed

Craig Torres at Bloomberg has the details:

Alarms went off inside the Federal Reserve: the Fed’s innermost secrets had leaked to Wall Street.

Confidential deliberations of the Federal Open Market Committee made their way into a research note circulated among traders.

The report -- a fly-on-the-wall account of the FOMC’s September 2012 meeting, with hints of Fed action to come that December -- prompted a mole hunt that reached the highest levels of the central bank.

The story of the FOMC leak underscores the lengths to which outsiders will go to penetrate the inner workings of the Fed, and how valuable access can be. The Fed has never disclosed the investigation or its findings...

The 2012 report on the FOMC came from Medley Global Advisors, a member of Washington’s policy intelligence community...

Medley issued its FOMC report on Oct. 3, 2012, one day before the Fed released its minutes. People who received the Medley report could have positioned to profit from a decline in U.S. Treasury security prices that followed the Fed’s official release...

The Oct. 3 report was written by Regina Schleiger, a former financial journalist who is now a senior managing director at Medley...

The September meeting was a half step toward what would become one of the most aggressive moves in U.S. monetary history. The world got a hint of what was coming that December when the FOMC minutes were released on Oct. 4.

Medley clients got an early peek.

“The minutes of September’s meeting will show, however, that the groundwork for further action in coming months has been laid, and that labor market improvement is unlikely to be substantial enough to stave off new Treasury purchases into 2013,” Schleiger wrote in her Oct. 3 note.

Alarming Report

Schleiger’s “special report,” titled “Fed: December Bound,” was so detailed that it alarmed Fed officials...

Bernanke also asked the pair to look into sources behind a Sept. 28, 2012, article in the Wall Street Journal. The reporter, Jon Hilsenrath, had described internal documents the FOMC had used in making its decision on Sept. 13, though in less detail than Schleiger.

Prior to joining Medely,  Schleiger worked as a reporter for Knight-Ridder Financial News and Bridge News.

Medley was founded in 1997 by Richard Medley, former chief political strategist for George Soros. Medley left the firm in 2005 and died in 2011 at age 60.

Moody’s Cuts Amazon Outlook to Negative

Moody's Investors Service today changed the outlook for Amazon.com, Inc. ("Amazon") to negative from stable, and affirmed the Baa1 senior unsecured rating.

"The change in outlook to negative results from Amazon's announcement this morning that it was issuing a sizeable, though amount to be determined, level of new senior unsecured notes," stated Moody's Vice President Charlie O'Shea. "Proceeds are to be used for general corporate purposes in support of Amazon's myriad growth initiatives, and it is Moody's expectation that the funds will not be utilized for any form of shareholder returns. While the new debt will further exacerbate Amazon's already weak interest coverage due to, among other things, the lack of visibility surrounding the cadence for deployment of proceeds, potential areas of future growth and investment utilizing these proceeds, and the timing of potential positive returns, Moody's believes that the company's excellent liquidity provides sufficient cushion to affirm the Baa1 rating."

Moody's went on:

Amazon's Baa1 senior unsecured rating reflects its excellent liquidity and conservative financial policy relative to shareholder returns, which overcome a presently weak overall quantitative credit profile resulting from prodigious growth-oriented spending. The rating also recognizes Amazon's dominant position as an online retailer, though Moody's believes it is facing increased competition from brick-and-mortar retailers as they morph their successful businesses online, as well as its leading position in cloud-based storage and other services via Amazon Web Services. The rating also reflects Moody's expectation that this present investment cycle will begin to generate positive returns as measured by improved interest coverage during 2015, as well as the expectation that Amazon will continue to maintain high cash balances during the present investment cycle until positive returns from these significant investments begin to generate. The negative outlook reflects the impact the new debt will have on interest coverage that is already weak at 1.2 times for the LTM September 2014, as well as debt/EBITDA, which will increase meaningfully as well. Given present weak interest coverage due to expense levels that are likely inflated as a result of significant investments in both technology and SG&A, any potential upward rating movement in the near-to-medium term is unlikely. Over time, ratings could be upgraded if Amazon's interest coverage was maintained around 5 times and RCF/net debt was sustained above 35%. Ratings could be downgraded if RCF/net debt fell below 20% with interest coverage maintained below 3 times, or if liquidity were to weaken.

Given how low interest rates are, it is actually a shrewd move for Amazon to raise debt at these rates. All the smart money is doing this. Warren Buffett included. As interest rates climb (and price inflation picks up) borrowing at current rates is going to look like a very shrewd move.

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To listen to this course live. it would have cost you $320.00.

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Listen to it all at once or break it up in different segments, the choice is yours.

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Of Course The Keynesian Model Is True; That's How We Define The Keynesian Model

Tim Worstall nails it:

Scott Sumner points us to this interesting proof that the Keynesian economic model must be true. For the Financial Times is crowing about the fact that when government spending rises then so does GDP. And when government spending falls, so does GDP. Thus, getting government to spend more increases GDP. Proof perfect that the Keynesian model works! Unfortunately there is a little flaw with this argument. That flaw being that right at the beginning, when we define GDP, we say that an increase in government spending increases GDP. It’s absolutely nothing at all to do with the Keynesian model, nor any other economy model: it’s an attribute of the way that we calculate GDP, nothing else...And if we look closer at this, and we find that the relationship is actually only one to one, then we’ve a disproof of the central Keynesian contention. Which is that a rise in government spending (when in recession, when there’s unused assets lying around) increases GDP by more than the increase in government spending. We were certainly in recession, government spending certainly changed, but if GDP only changed by the amount of spending change then that’s a disproof, not a proof, of the central Keynesian claim.

Venezuela: On the Edge

Socialist policies and falling oil prices are a witches brew for Venezuela.

Venezuela’s international reserves declined $1.3 billion last week even after President Nicolas Maduro transferred $4 billion of Chinese loans to the central bank, reports Bloomberg.

Maduro on Nov. 18 ordered the Chinese loan proceeds to be moved from an off-budget fund, so that they would show up in reserves and help boost investor confidence in an economy beset by the world’s highest inflation and widest budget deficit.

The country’s reserves now stand at $22.2 billion.