Economics – Miscellaneous – Page 6 – education and deconstruction.com

Digital Gold

The Book of the Week is “Digital Gold– Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money” by Nathaniel Popper, published in 2015.

This ebook is about Bitcoin, a bookkeeping system used on various websites that distributes, records and stores the value of units called Bitcoins.

The system was created in 2009 by a computer geek who called himself Satoshi Nakamoto. His vision was to create a worldwide means-of-exchange to be used online that would be:

a decentralized network of users so that no one central authority has the majority of power over the system– unlike the current situations in the world; in other words, place power in the hands of the users, rather than the economic royalists. (Nevertheless, the irony is that Bitcoin has largely stayed in the realm of the wealthy computer geeks- so there has basically been redistribution of wealth among the wealthy);
created and maintained by users of the system on a consensus basis rather than by the powers-that-be, whose political campaigns are funded by financial institutions, and who stay in power by doing their will;
anonymous (like cash– no third parties acquire the information of buyers and sellers);
secure (no one point of failure would mean vulnerability for the whole system, plus have protections against identity theft, malware, counterfeiting etc.); and
offered at a lesser cost than the current system (avoiding financial institutions with their fees).

However, no utopian vision is perfect. Various tech-startups around the world have been created to store and exchange Bitcoins. That is all well and good. In the last seven years or so, a “remarkably engaged online community” has sprung up to discuss the ideology and all the different issues attendant to the new system. Even the major American financial institutions, fearing competition, have begun to rethink the security of their online dealings, and so have assembled task forces to research how to harness Bitcoin’s loss-prevention technology.

Bitcoins are acquired by computer users who log on to a specific site on the Internet. The users get the virtual “coins” for free, but might have to pay to store them elsewhere to keep them secure.

Bitcoins are more like a security than a means of exchange like cash because:

The system distributing Bitcoins is like a combination slot machine and a financial market where instruments are bought and sold, and the value of Bitcoins fluctuates.
There’s an inherent unfairness in the system in that– technologically astute users of the system have banded together to create devices that mine Bitcoins at a significantly faster rate than individual users.
People can acquire a national currency such as the American dollar in many more ways than they can Bitcoins, most of them honestly– earning, borrowing, begging or stealing.

Anyway, the purpose of Bitcoins as a means of exchange has yet to catch on among mainstream consumers of industrialized countries. There is no sufficiently compelling reason for consumers to start to buy things online with Bitcoins rather than credit cards. “Why should they trust a digital code that had nothing backing it but the computers of some libertarian nerds?”

Argentina is one country where Bitcoins have been useful. The super-speedy inflation of the peso there has meant people must spend their Argentinian money the minute they acquire it or risk the inability to buy anything because they wouldn’t be able to afford it– even food. In China, Bitcoin is popular because the government regulates the yuan exchange rate in order to stem “capital flight” and sell more of its own goods to the world.

As with all human-created systems that rely on the honor system, ALL users must act ethically. One American Bitcoin-processor in particular created a drug-distribution entity called Silk Road that was deemed illegal according to U.S. law.

Another bad actor hacked into a company called Mt. Gox in Japan. All users of that service suffered. “Bitcoin users eventually went to government authorities that Bitcoin had been designed, at least partly, to obviate.”

Besides, the Treasury Department’s Financial Crimes Enforcement Network has been examining the legal aspects of Bitcoin as a virtual currency. Homeland Security is concerned about the fact that Bitcoins could be anonymously sent to terrorist cells overseas.

Read the book to learn much more about the good and bad consequences of the creation of Bitcoin.

Mastering the Art of Soviet Cooking

The Book of the Week is “Mastering the Art of Soviet Cooking” by Anya Von Bremzen, published in 2013. This volume recounts the food-related details of the lives of the author (born in 1963) and her mother, who, up until 1974, lived in the former Soviet Union before moving to the United States. As can be surmised, they suffered many hardships from successive oppressive regimes that gave rise to hunger.

Under Vladimir Lenin in 1918 Russia, “The very notion of pleasure from flavorful food was reviled as capitalist degeneracy.” Millions died of starvation under Stalin in 1927 when he took over the means of grain production. The author’s grandfather, possessor of exceptional survival skills, was an intelligence officer under Stalin, so Von Bremzen’s family had access to the food of the wealthy. The author’s mother raised her to be a food snob. Stalin’s personal culinary expert Anastas Mikoyan visited America in 1936. “Unlike evil, devious Britain, the US was considered a semi-friendly competitor – though having American relatives could still land you in the gulag.” That attitude had changed by 1952.

The author’s mother celebrated the anniversary of Stalin’s March 1953 death, with a dinner party. She wed in 1958 at a government office and “…moved into her mother-in-law’s communal apartment where eighteen families shared one kitchen.”

The Soviets recycled mayonnaise jars all the time for many purposes, including medical samples; the jar itself was expected to be provided by the patient. When the author and her mother moved to the U.S., “Ahead of us was an era of blithely disposable objects.” Von Bremzen’s culture shock arose while food-shopping not from the dizzying array of products, but from the inability to show off those products to less fortunate people, such as Soviets. All Americans took such cornucopia for granted. She was disgusted that American food appeared to be phony and lowbrow, like Spam. At Christmas, Von Bremzen was grossed out by Oreos: “…charcoal-black cookies filled with something white and synthetic. A charcoal-black cookie! Would anyone eat such a thing?”

Mikhail Gorbachev’s anti-alcohol campaign ired many Soviets, as “Getting booze for the holidays ranked at the top of everyone’s concerns.” All the Soviet intelligentsia drank excessively. It was unpatriotic to not drink. Everyone had a drinking partner. Proposing toasts and making conversation with the partner was mandatory. Drinking alone was anathema, socially unacceptable.

Read the book to learn more about the Soviet culinary culture and history through the decades, and even see some authentic recipes.

Red Notice

The Book of the Week is “Red Notice, A True Story of High Finance, Murder and One Man’s Fight For Justice” by Bill Browder, published in 2015. This suspenseful, emotional saga should be made into a motion picture, as it is not only entertaining and engaging, but is a comprehensive picture of the extremes of human nature.

Rebelling against his left wing intellectual family, Browder became a capitalist. During his career, he worked under two big bosses who died under mysterious, suspicious circumstances– Bob Maxwell and Edmond Safra. As a young whippersnapper, he longed to do investment consulting in Eastern Europe, but had to settle for London. Browder got in on the ground floor when the Russian securities industry was in its infancy in the early 1990’s.

In early 2000, the power of Russian Federation president Vladimir Putin, was actually held by “… oligarchs, regional governors, and organized-crime groups.” Browder started a hedge fund called Hermitage. What with complex economic and political goings-on, his hedge fund became the victim of the Russian mentality. In 2006, Hermitage had to “… sell billions of dollars worth of Russian securities without anyone knowing.” That was just one of many traumatic episodes in Browder’s career.

The author had the brains and skills to become not only a successful financial consultant and investor, but a muckraker; however, this made him a “Darwin Award” candidate. He became involved in a true thriller with intrigue, greed, power hunger, human rights abuses and karma. Russia struck at his attorney, Sergei Magnitsky. Numerous Russians in positions of authority– in the government, prisons, the police– all lied to the world about what happened to Magnitsky. Under Putin’s rule, Russia had reverted to the Stalinism of the 1920’s, with thousands of dissidents tortured and killed.

The few people whose eyes were open, who were raising the alarm– were risking their own lives. The rest of the world didn’t want to get involved because they were of the mentality that the violence was confined to Russia, and it wouldn’t spread to them. And they might end up like those dissidents if they rocked the boat. Besides, in the 2000’s, people have become desensitized to human rights abuses due to the widespread, propagandized publicizing of them (like video clips arousing viewers’ morbid curiosity, of the alleged beheadings of journalists by Middle Easterners on YouTube).

(Please excuse the legalese in this paragraph- but it is the briefest way of explanation) Some people would say that Browder had “unclean hands” and there was “contributory negligence” on his part, so his story should not have deserved the special attention it got. Admittedly, he was out for revenge, not because he truly wanted to stem uncivil behavior in the world. He made his living in an industry full of greedy people whose scruples are less than stellar– securities. He made a ton of money by engaging in “self-dealing” and insider trading, which would be considered violations of American securities laws. He was from America, the country that gave rise to the corrupt economic system in Russia in the first place. It might be recalled that Harvard economist Jeffrey Sachs gave bad advice to Boris Yeltsin (to put it generously), convincing him to adopt “shock capitalism” — a ruinous financial plan. Lastly, Browder had “constructive knowledge” that doing business in Russia was especially risky (not just financially), compared to other countries. Arguably, he was trying to apply American morals and laws to get justice in a situation in which he had profited from Russian morals and lawlessness. Some people would say, “Pox on everyone’s house.”

Browder wrote, “There was something almost biblical about Sergei’s story, and even though I am not a religious man, as I sat there watching history unfold, I couldn’t help but feel that God had intervened in this case.” This blogger thinks that, but for Browder’s powerful professional and political contacts who intervened in this case, it would be just another infuriating, depressing, suppressed, and eventually forgotten human rights abuse story.

Read the book to learn the details of the story, including the actions taken against the morally bankrupt, brazen Russian criminals, and learn whether justice was done.

Silvio Berlusconi

The Book of the Week is “Silvio Berlusconi” by Paul Ginsborg, published in 2004. This is an extended essay on the media mogul/powerful politician in Italy. It examines the issue of whether Berlusconi practiced Fascism, not necessarily through creating an atmosphere of fear and intimidation, but through monopolistically broadcasting propaganda in the guise of education, to the masses. He combined his business dealings with politics to amass a staggering amount of power, with the usual conflicts of interest that come with the territory.

Over the course of three decades starting in the 1970’s, operating out of Milan, Berlusconi, a construction contractor, founded an ad agency and purchased TV stations that accounted for the bulk of Italy’s visual information sources. Later, he entered politics and bought a professional European football team. He was accused of racketeering, bribery and money laundering, among other crimes.

Berlusconi proved to be teflon, escaping punishment in the 1990’s. Not only that, he made a comeback– legally, economically and politically. As of 2004, he was still dragging his feet on answering the legal charges against him, in order to invoke the statute of limitations to weasel out of going to jail.

Read the book to get the details, and the author’s take on whether Berlusconi’s political career would survive much longer, given his outrageous exaggerations when recounting his endeavors for the people of Italy in 2004. The nation’s cost of living had soared and real wages had fallen significantly beginning in 2002.

The following video of Al Franken’s speech on America’s fiscal deficit is well worth watching in its entirety; he mentions a few recent American presidents’ economic policies (starting just after 23:00)– some of which can be compared to Berlusconi’s:

https://youtu.be/hHUDPU7_2qA

Lastly, Berlusconi’s reputation for alleged extensive law-breaking had been a “thing” for a long time.

The Antidote

The Book of the Week is “The Antidote” by Barry Werth, published in 2014. This suspenseful saga is about the public drug company, Vertex.

Vertex has created the core substances in drugs that treat niche diseases, such as hepatitis C and cystic fibrosis. It has partnered with various other drug companies to use their resources.

Unconventionally, in the 1990’s, Vertex’s employees were organized into teams working on protein targets rather than those working on different diseases. The company’s teams were demoralized when they failed month after month to come up with a successful molecule.

The cost of American drugs is so high not just because the drugmakers are greedy, but because their employees feel entitled to a large reward for creating an effective product that does minimal harm to patients. They take tremendous risks– acquire pricey, extensive educations in organic chemistry and such, working long daily hours, suffer loads of stress from dealing with grant applications, patent disputes, licensing issues, doctor-insurer issues, undergoing the rigorous process of seeking FDA approval after laboring months or years on a drug substance– possibly applying for approval at the same time as another company with a competing product, and face the possibility of being laid off anytime. This is why life-saving, life-prolonging medicines are astronomically expensive. However, the drugs would not exist, but for the necessary evil of a greed machine that raises the funds to pay for the price of creating them.

Vertex posted a “profit” of more than $2 million in the fourth quarter of 1993, even though it had yet to sell even one pill. Its financial arrangements with its partners allowed it to claim that its income exceeded its expenses. By the end of the 1990’s, however, there were still no actual drugs produced, and the company was likely many years and hundreds of millions of dollars from the market. It was thus a likely takeover target. Some of Vertex’s scientists and lawyers became avid day-traders of the company’s stock in the autumn of 2000, after a deal with Novartis.

Trading rumors fly all the time, and one influential analyst at a big-name investment bank might downgrade a drug company’s stock, causing a selloff. In the early 2000’s, there was an SEC accusation of insider trading against Vertex’s house counsel. Ironically, it is common practice for panel members of the FDA to receive financial support in research-funding from many pharmaceutical companies.

Those companies that are public must answer to Wall Street. Unsurprisingly, at numerous medical conferences, their executives spout cliches such as “…We believe it’s a matter of time before we break this disease wide open and make a really big difference for a lot of people.”

Read the book to learn about actions Vertex took in research, development and finance in order to stay in business twenty years while accumulating losses of more than $1.5 billion; the causes of its high turnover of executives; how it became more geared toward finding commercial applications with its research results, and how it had fared product-wise and financially by autumn 2013.

My Crazy Century

The Book of the Week is “My Crazy Century” by Ivan Klima, published in 2010. This ebook discusses the life of a Czech writer from the 1930’s to the tail end of the 1980’s.

Luck was a major factor in why Klima survived WWII. His family was sent to the forced-labor camp in Terezin because his father, all-around handyman and mechanical engineer, was reputed to be an expert who proved useful to the Nazis. His father believed in socialism because “… he realized our society was corrupt, that it bred inequality, injustice, poverty, millions of unemployed, who then put their faith in a madman.”

After the war, there was momentary joy for the winners, but in Europe, people also possessed “… hatred and a longing for revenge.” The author, a teenager, had been conditioned to think of the Red Army as virtuous and the Germans as evil. In high school, he watched weekly newsreels of Comrades Stalin, Gottwald, Slansky, and Zapotocky; plus black marketeers, who were blamed for the consumer-goods shortages in Czechoslovakia. People who were considered war criminals– members of the old regime, traitors and collaborationists– were brought to justice through summary executions.

The author’s family had their house raided several times for subversive materials. Klima got a job with a construction crew, where he got his first taste of socialism in action. “No one could earn more than was necessary for daily subsistence.” The government was stealing the economic surplus from the people. That was why corruption came into play. He was pressured into joining, surprise, surprise, the Communist Party. He said, “I was stunned by how the environment bubbled over with rancor, continual suspicion, malicious gossip, and personnel screening.”

Housing in Czechoslovakia, as in other countries under Soviet influence, was hard to come by. The author, his wife and three-year-old son lived in his mother-in-law’s house for years. There was an average fifteen-year wait for better accommodations (a tiny apartment), unless one was prepared to spend about two years’ salary and join a co-op, or engage in a housing swap with strangers.

Read the book to learn the details of how Klima became a dissident reporter, novelist and playwright, how he: came to be invited to teach in the United States, and became disillusioned with the kibbutzniks in Israel and with the Communist Party; how he “… had been kicked out of all organizations and deprived of the possibility of working anywhere [he] might be able to employ [his] knowledge and skills.”

Siberia Bound

The Book of the Week is “Siberia Bound” by Alexander Blakely, published in 2002. This is the personal account of a recent college graduate who decided life in the United States was too easy.

In the early 1990’s, the author moved to Novosibirsk, Siberia to see, with a business partner, whether he, fluent in Russian, could help a region of the former Soviet Union make the transition from Communism to capitalism. He and his partner borrowed money to buy cocoa beans and sold them to chocolate factories on credit.

Blakely wrote about Siberian culture. One amusing passage told of the detergent brand “Barf” imported from Iran. “Things got dirty all the time: In summer, it was dust and car exhaust. In winter, it was coal soot and body odor trapped by layers of insulation.” The relationship between Blakely’s business partner’s wife and her mother-in-law was less than friendly. This was partly because the wife spoiled her young daughter, and the mother-in-law was strict with her– the opposite behavior of mothers and grandmothers in American culture.

Sadly, the moral of the author’s story became “Be careful what you wish for.” He realized that the major cultural, political and economic changes taking place in his community meant that Siberians had become like Americans. They started riding in cars instead of walking. They ate fatty foods for lunch and the men stopped exercising. The women started going to aerobics classes at the gym.

Blakely thought that bringing capitalism to them would be a good thing. However, they soon developed an insatiable appetite for consumer goods. Once they were made of aware of their severe deprivation by the media and increased their connections with the rest of the world, they became depressed. Previously, they had been happy due to their ignorance of how materially poor they were.

Read the book to learn of the sea changes taking place at the author’s business, which sold not just chocolate, but surgical gloves, potatoes and other products; and the formerly Communist community, over the next four years.

Webs of Power… – Bonus Post

This blogger “clicked” through the ebook, “Webs of Power: Notes from the Global Uprising” by Starhawk, published in 2002.

The ebook is the author’s description of what her activism is about. She explains that the way globalization is currently occurring is wrong because big corporations are favoring money over people. Greedy corporations (and governments) are destroying the earth and life on earth.

One specific way governments are allowing this, is through the World Trade Organization. The United States joined the Organization and signed the trade agreement called GATT. That agreement lets the Organization, whose member-countries’ representatives, appointed via cronyism, make laws whose disclosure is denied to the world. No hearings of their proceedings are permitted. The actions taken by this secret society affect workers and human rights worldwide and of course, the environment.

The negative consequences have included, for example, allowing poisons to permeate the world food supply, endangering species and keeping drug prices high, all to the benefit of global corporations. What is not a secret is that those companies have, in recent decades, increased their profitability by moving their production facilities to nations where they can get labor at minimal cost while avoiding pesky health, safety and environmental laws. The author argues that this has also resulted in significantly increased income inequality the world over.

Read the book to learn of additional ways greed and power hunger are wrecking the world, and the role the author has played, through planning and organizing protests, training protesters, protesting and writing in trying to prevent further harm; and of her various proposals for governance and allocating resources in ways that do the greatest good for the greatest number.

Jeffrey Sachs

The Book of the Week is “Jeffrey Sachs: The Strange Case of Dr. Shock and Mr. Aid” by Japhy Wilson, published in 2014. This ebook emphatically argues that the highly influential Ivy League economist Jeffrey Sachs has wreaked havoc on at least three nations’ economies in the last thirty years with his non-stop publishing, lecturing and implementation on and of, (in the author’s opinion) delusional, elitist, anti-communist, anti-union schemes; he is, arguably, an economics criminal, so to speak (the counterpart to a war criminal) in that the implementation of his policies caused deaths. As an aside, this blogger disagrees with the author’s spelling of “publically” rather than “publicly.”

Sachs has refused to acknowledge that his “shock therapy” method employed in Bolivia, Russia and Poland was a dismal failure. It was supposed to help them make the transition to capitalism through conferring responsibility for previously government-led distribution of goods and services, to private citizens without warning them of extreme measures to be imposed in accomplishing this. The countries were forced to adopt a model at the far opposite end of the spectrum of the welfare state.

Sachs’ first victim, Bolivia, was experiencing 60,000% inflation and 20% unemployment in the summer of 1985. By 1987, pursuant to Sachs’ plan, a free market had been created, but the costs included a 50% higher unemployment rate and a 40% lower real-wage level. Over the next five years, the mining and industry sectors lost jobs by the tens of thousands.

In Russia, a few powerful wealth owners were already experienced in “managing” assets, so their receiving additional private property– with no laws requiring them to treat their workers in a humane manner– made them even more exploitative. In the early 1990’s, leader Boris Yeltsin became a convert of Sachs. The result was mass corruption. On the other hand, this has helped the United States and other nations with already evolved capitalist systems to maintain their economic dominance in the world. This blogger is not saying such a goal is right or wrong, but merely suggesting that this might have been Sachs’ goal.

Sachs also helped the rich get richer in Uganda, by providing specially chosen farming families with certain resources, such as fertilizer and seeds, in a few villages. The goal was to have those politically connected farmers “… magically combine entrepreneurial self-interest with community spirit, based on a patronizing representation of the deserving poor.” This smacks of a similar kind of mentality in the New York City schools under former Mayor Michael Bloomberg in the early 2000’s, based on the mistaken notion that all students were bound for college. Sachs’ program started charging money for conferring some of its resources, “… which inevitably privileges those with the ability to pay.” Bloomberg imposed various policies (still in effect as of this writing), that inevitably privilege those students who have the ability to pay for private school, and testing and tutoring services. That is just the tip of the iceberg in both cases.

A World Trade Organization conference in Seattle in 2000 was discontinued because “… Suddenly, this orderly world of billionaire philanthropy and elite policymaking was overturned by massive street protests involving unions, NGOs, and activist groups, demanding an end to the global neoliberal agenda of free trade, privatization, and corporate power.”

Read the book to learn of additional outrages associated with Jeffrey Sachs.

The Why Axis – Bonus Post

This blogger skimmed the ebook, “The Why Axis” by Uri Gneezy and John A. List, published in 2013. The co-authors discuss their experiments in behavioral economics– the decisions and actions people make and take when they must allocate limited resources in their professional and personal lives.

The authors concluded from their research that gender-related competitiveness is learned– taught by society, rather than inherited. They write that many studies have also shown that when men appoint a leader, they choose someone who resembles them.

Read the book to learn about other interesting findings, such as the risk factors for teenagers’ getting shot, the fastest way to: meet fundraising goals; modify behavior in marketing products; and increase factory-worker productivity by using incentives, punishment or a combination of both.