Friday, April 29, 2016

A fake war on space aliens is what we need



Ok, this is really old, but I don't think I have posted it before.  Krugman thinks that if we thought space aliens were attacking and we spent a lot of money to defend ourselves, that would fix the economy.  And then we discover it was all a mistake, but at least the economy is fixed.

The Insanity of Helicopter Money

"Among the most prominent advocates of MFFP is Adair Turner, whose latest book,“Between Debt and the Devil,” provides an insightful thought experiment on the use of helicopter money. Turner and his fellow MFFP advocates seem to believe that placing more money in the hands of the public is practically always welcome.  In their view, it is not only a straightforward way instantly to boost real demand; it also seems preferable to debt-financed fiscal stimulus, owing both to political constraints on debt-burdened governments and to MFFP’s more direct — and thus faster — impact on economy-wide spending."  --http://www.marketwatch.com/story/why-japan-is-resisting-the-false-allure-of-helicopter-money-2016-04-29

Umm, the author either hasn't thought this through or is an idiot (or maybe it is me who is misunderstanding something).  We are comparing and contrasting two different things - "helicopter money" / MFPP ("money-financed fiscal program") vs "government investment" / DFFS ("debt-financed fiscal stimulus").  I will use the acronyms because it sounds more erudite.
I will start with the second option, DFFS.  In this option, the Keynesian economists call for more spending, like a bridge to nowhere, or a war against space aliens or paying one person to dig a hole and another person to fill it back in, or increases to welfare, etc.  So Congress will vote on some spending program, it doesn't matter what, and increase the deficit.  It raises the money through selling bonds, which have pretty low rates right now.  The money will go to some consumer, who will hopefully spend it and it will ripple through the economy, raising the GDP at least temporarily.  And the Fed can optionally engage in QE and buy up the newly issued bond and increase the money supply.  Keep in mind this is the sane option.
The first option is MFPP.  Remember that the Central Bank's balance sheet must always be balanced.  Printing money causes an increase in liabilities.  If you just give it away, there is no increase in assets.  So you just made your Central Bank insolvent.  But, you say, we can always print more money.  Yes and that causes "quasi-fiscal deficits".  And that is when bad things really start to happen (hyperinflation).  Once the Central Bank's balance sheet is thrown out of balance, it is almost impossible to get  back into balance.  (I guess the government could bail it out, but that would be a hard sell, asking taxpayers to bail-out the banks).  And once it is out of balance, why not keep going?  It's so fun being Santa Claus, err, giving money to your politically connected buddies.  Next thing you know, Zimbabwe.
So no, we don't want "helicopter money" at least the MFPP kind.  Let's just stick to straight DFFS, which is crazy enough.  Crazy is enough, we don't need batshit psycho insanity.

People in Phoenix rent converted shipping containers for $1,000 per month

PHOENIX -- A stack of shipping containers sitting in a lot in an industrial section of Phoenix has some developers thinking inside the box.
The structures usually used to transport cargo have been transformed into eight apartments. Scuff marks, old serial numbers and shipping company logos remain, but a look inside each unit reveals a 740-square-foot modern home.
"It doesn't even feel like a shipping container. It's also insulated really well," said Patrick Tupas, who is in the Air Force and along with his wife signed a one-year lease for $1,000 a month. "It just feels like a regular apartment."

Thursday, April 28, 2016

Microsoft to use DNA as long-term storage

'As our digital data continues to expand exponentially, we need new methods for long-term, secure data storage,' explained Doug Carmean, a partner architect within Microsoft's Technology and Research organisation.
Researchers will transfer the 1s and 0s of binary code into the four bases of DNA - A, C, T and G - transferring the data from the digital to the biological.
Microsoft and University of Washington researchers will work to translate a volume of binary code to a corresponding DNA, with Twist Bioscience then making strands of synthetic DNA according to the sequences.
'They give us the DNA sequence, we make the DNA from scratch,' Dr Emily Leproust, CEO of Twist Bioscience, told IEEE Spectrum.

Last year, researchers in Slovenia conducted a proof of concept study, to store data in the DNA of a plant. They transferred the '1's and '0's of binary into the four bases of DNA: A, G, T and C. 
A was 00; C was 10; G was 01; and T was 11.

Read more: http://www.dailymail.co.uk/sciencetech/article-3563508/Microsoft-joins-drive-store-data-DNA-Firm-buy-millions-DNA-strands-long-term-storage.html



Wednesday, April 27, 2016

Central Bank Assets

This is an interesting article about the liquidity of the Swiss National Bank:  https://snbchf.com/snb/marc-meyer/central-bank-independence-farce/.  Most of the assets of the SNB are holdings of foreign currency, either US dollars or Euros. If dollars or euros go done in value against the Swiss franc, then the SNB loses money.

And it has lost money, boatloads.  "Throughout the past decades, our National Bank has invested in foreign currencies. The accumulated foreign exchange losses of the SNB have approximately reached into the three-digit billions – at the expense of Switzerland."

If the franc keeps going up against dollars and euros, then the SNB could become technically insolvent, with liabilities exceeding assets.  How could it get out of this mess?  By printing more francs and buying euros and dollars with them.  This would cause the value of the franc to drop and the value of euros and dollars to rise, thus creating foreign exchange gains, but causing inflation internally.

So the SNB has a vested interest in keeping the euro and dollar strong.

=====================================================

Now, contrast this with the Federal Reserve.  Its assets are mostly US Treasury Bonds and Fannie Mae and Freddie Mac bonds.  If interest rates rise, then the value of its assets will drop, and if they drop enough, the Fed could become technically insolvent.  It would fix it primarily by suspending payments of interest to the Treasury.  But it may need to do more than this, by printing more dollars to buy more Treasury bonds, which could cause the value of the bonds and Fed assets to rise and interest rates to drop (QE), thus weakening its liabilities (FRNs) against its assets.

=====================================================
To take this a step further, what would happen if both of these occurred at the same time?  The SNB would be printing more francs to buy dollars (to try to strengthen the dollar) and the Fed would be printing more dollars to try to weaken the dollar.  The net effect is that the SNB is indirectly purchasing Treasury bonds.

So just a thought, why doesn't the SNB buy US Treasury bonds directly (maybe it already is, I don't know).  Except then it would face losses if interest rates rise.  And another thought that the SNB is enabling more US debt.  And a final thought, why did the SNB sell off most of their gold?  It sure seems like a safer long-term investment than the ever-increasing U.S. debt.

The New Gilded Age

From: http://www.nytimes.com/2016/04/24/business/economy/velvet-rope-economy.html

"With disparities in wealth greater than at any time since the Gilded Age, the gap is widening between the highly affluent — who find themselves behind the velvet ropes of today’s economy — and everyone else."

Sunday, April 24, 2016

Taken for a ride

The failed Washington Metro subway

The First Keynesian - Alexander Hamilton

Alexander Hamilton was the first Keynesian, although he lived a couple hundred years before Lord Keynes.  In 1790, he promoted redeeming government debt at full-face value to the current holders, who had paid as little as 10% of the value to the original holders, who were usually soldiers who had been given the notes in exchange for the service.

Representative James Madison vigorously led the opposition to Hamilton’s “redemption”, though he fully supported the development of good credit. In his address to the House on February 11, 1790, he characterized Secretary Hamilton’s “redemption” as a formula to defraud “battle-worn veterans of the war for independence”  and a handout to well-to-do speculators, mostly rich northerners, including some members of Congress. Madison’s “discrimination” promised to correct these abuses in the names of financial rectitude and natural justice. --wikipedia

Why did Hamilton want to do this?  To promote confidence in the public debt to and promote crony capitalism (my words), err, to strengthen commercial investment by concentrating capital into fewer hands and to give wealthy, influential investors a stake in the national government.  Also to make debt "answer most of the purpose of money".

He was the father of centralized government.  Of course the federal government was a vast improvement over the Articles of Confederation, but he made it this omnipotent entity in a financial sense.  I don't know his position on the gold standard, but he wanted debt-backed money to be equivalent to hard currency.

That is why he will survive on the ten dollar bill and Andrew Jackson will be banished into the Hall of Shame of racist, white supremacists.

See also In Hamilton's Debt by Paul Krugman.  Krugman adores Hamilton and uses the occasion to argue for MOAR DEBT and to damn the fiscal scolds.  "it would be better for almost everyone, the story goes, if governments were to issue more debt, investing the proceeds in much-needed infrastructure even while providing the private sector with the collateral it needs to function. And it’s a very persuasive story to just about everyone [except the global warming/debt "deniers"] who has looked hard at the evidence."

Thursday, April 21, 2016

Dire Straits

What if you had an emergency and had to come up with $400 within two hours?  Furthermore, you are not allowed to use credit cards, borrow, or sell anything to come up with the cash.  Would you be able to?  47% of Americans would not.

http://davidstockmanscontracorner.com/desperate-straits-the-secret-financial-crisis-of-middle-class-americans/

The Secret Shame of Middle Class Americans

See also: 47 Percent Of Americans Cannot Even Come Up With $400 To Cover An Emergency Room Visit

Wednesday, April 20, 2016

Ya Te Olvide

Monday, April 18, 2016

April 19 is Bicycle Day

Bicycle Day celebrates Swiss scientist Albert Hofmann's discovery of lysergic acid diethylamide or LSD in 1943, and the subsequent, and at times harrowing, ride home on his bicycle after deliberately ingesting a dose of the drug.
http://www.abc.net.au/news/2016-04-19/bicycle-day-albert-hoffman-lsd-psychotherapy-research/7336712

Note: This is a different person from Abbot "Abbie" Hoffman who was an anarchist and social activist in the '60s and '70s. He died on April 12, 1989.

Sunday, April 10, 2016

World's tallest tower to be built .. in Dubai

Emaar Properties PJSC plans to build a $1 billion skyscraper in Dubai that will exceed the height of the Burj Khalifa, currently the world’s tallest building.   Construction will start at the end of June and will finish before Dubai hosts the World Expo in 2020.
http://www.bloomberg.com/news/articles/2016-04-10/dubai-developer-of-world-s-tallest-tower-going-to-new-heights

The Diamond Empire

The next recession in 2018 will cause trillion dollar deficits as far as the eye can see

... implicit in the CBO projections is the assumption that we will not have a recession in the next 10 years. Plus, the CBO assumes growth above what we’ve seen in the last year or so. We randomly decided that we would hypothesize our next recession to occur in 2018. Whether it happens in 2017 or 2019, the relative numbers are the same. Entitlement spending and interest would greatly exceed revenue.  The deficit would balloon to $1.3 trillion. And if the recovery occurs along the lines of our last (ongoing) recovery, we will not see deficits below $1 trillion over the following 10 years—unless we reduce spending or raise revenues.
--http://www.zerohedge.com/news/2016-04-09/these-2-charts-show-next-recession-will-blow-out-us-budget

Thursday, April 7, 2016

Forevermark Diamonds

Wednesday, April 6, 2016

Berkshire Hathaway Value

Berkshire Hathaway has two classes of stock, Class A and Class B.  Class A has never been split.  Class B originally was worth 1/30th of Class A and was split 50 to 1 in 2010, so they are now worth 1/1500th of the value of Class A.  Each Class A share can be split into 1500 Class B shares, but not the reverse.  The current value as of April 6 is as follows:

Berkshire Hathaway Valuation



As of April 6, 2016




Symbol Shares O/S Price/Share Total (M)
Class A BRK-A 0.80724 212990.00 171,934.05
Class B BRK-B 1250 141.70 177,125.00





Total


349,059.05

Facebook Value

What is the value of Facebook Inc?  The stock is split into 2 classes, with Class A sold on the market under FB and Class B being privately owned, but each share having 10 voting rights.  The number of Class B shares is listed as 551,589,813 as of 12/31/15 here, so I am using the number 551.6 million. Here is the calculated value:

Facebook Stock Valuation



As of April 6, 2016




Symbol Shares O/S Price/Share Total (M)
Class A FB 2380 113.71 270,629.80
Class B (Private) 551.6 113.71 62,722.44





Total


333,352.24

Google Value

What is the total market value of Alphabet, Inc, the parent company of Google?  It is very confusing. I like a simple answer: just multiple number of shares outstanding time the price per share.  With Alphabet, however, there are three classes of shares, A,B and C.  Class A shares have voting rights and have the ticker symbol GOOGL, Class B stock is the same except each share has 10 voting rights and they are privately owned, Class C shares have no voting rights and have the ticker symbol GOOG.  The number of Class B stock is unknown, except I saw the number of 52 million shares here.  The price of Class B stock is also unknown, except for this purpose I will use the same number as Class A stock.  So here is the value I come up with as of today (April 6):

Alphabet Stock Valuation



As of April 6, 2016




Symbol Shares O/S Price/Share Total (M)
Class A GOOGL 292.58 768.07 224,721.92
Class B (Private) 52 768.07 39,939.64
Class C GOOG 345.54 745.69 257,665.72





Total


522,327.28

Now I need to do the same analysis for Berkshire Hathaway and Facebook, whose valuation is also confusing.

Monday, April 4, 2016

How to buy a diamond



Vintage video from the early 90s

100 carat emerald diamond

Friday, April 1, 2016

Antwerp

Blue Nile

Brian Gavin Diamonds

Astralis Diamonds