Paroli

Years ago, riding my bike down Utrechtestraat in Amsterdam, I came to halt having heard something I did not expect to hear. Something I hadn’t heard in a while and did not expect to encounter in Rembrandtplein. It was unmistakable and instantly recognisable; a language I and only a mere half million other people can speak. It was Maltese.

Maltese tourists in Amsterdam are hardly remarkable, but when one comes from such a small country, the sound of your countrymen tends to fill you with excitement rather than dismay. My serendipitous encounter made me feel happy to be part of such an exclusive club, a speaker of a linguistic gem of a language.

Maltese is itself unexpected. A semitic language that survived the 11th century Christian reconquest of southern Europe. For most of nine centuries, the language was not taught in schools, used in courts or even written down. Not the Norman French of the reconquerors, the Spanish that presided over the islands for centuries, the various Romance languages of the crusaders or even English was able to defeat Maltese. Unlike other non-sovereign languages in Europe like Welsh, Irish, Basque, Catalan, Occitan, Frisian and Swabian to name just a few, Maltese did not substantially decline and retained its semitic character.

However, since Maltese became a sovereign language, substantial concerns for its survival have emerged. Unfounded concerns, as the language’s ability to survive is clear, and these concerns have resulted in damaging policy actions by the government. Resources have been diverted to this culture war to rename streets and change road signs, with foreigners unsure how to get to Valletta and Gozo (now labeled Il-Belt and Għawdex) and locals not needing the signage in the first place.

Another salvo in the war against Maltese is the founding of the Maltese Language Council. This shows the conceited ignorance of the state. Here you have language, a beautiful, self-organising, bottom-up phenomenon that thrives if left unregulated. To then impose a top-down order from an all-knowing council is totally ignorant of linguistics and language history and is mired in the conceited belief that they can better steer the language then the speakers themselves. As the French and Germans can tell you, these language councils are at best, a waste of resources and at worst a danger to the vitality of a language. Ask an English speaker, and he might wonder what such a poorly-conceived council even was.

This culture war in favour of Maltese has in its crosshairs our other language, English. English has been so daemonised and marginalised that the level of English in Malta is actually deteriorating. Often, one can find old women who speak English more fluently than their granddaughters. In Spain, Germany, France and Italy, where the inhabitants traditionally speak very poor English, the situation is reversed. Levels of fluency are improving rapidly. In losing our claim to being a native English speaking country, we do great damage to our economy and culture.

English, after all, is not just another language. It just so happens to be the lingua franca of the world. When a Pole and a Portuguese person want to communicate, they will do so in English. There was a time when it would have been French and a time when it would have been Latin, but today it is English. Our ability to speak and write in native English is a coveted prize in this environment. The wealth of resources written in the English language dwarfs not just Maltese, but any other language on the planet. Indeed, more people speak English than any other language.

Will this always be the case? Probably not, but the regional lingua franca shifts only very slowly, and this is the first time in history that there is a global lingua franca. So as the culture war continues and politicians add fuel to the fire to benefit from misplaced nationalism, English is further neglected in favour of Maltese and this economic and cultural advantage over our neighbours further subsides. Losing native access to the that incredible wealth of knowledge will leave us poorer, culturally and fiscally.

Add to this an erroneous fetish of Maltese language purity. Maltese, being cut off from the Semitic world for 900 years lacks a myriad of vocabulary that has been lost or was not needed at the time of our severance. Luckily, the language was able to thrive by co-opting romance words and remarkably even semiticising them. Luckily, no language council was able to prevent this from happening. The turn of the 19th century saw us leave the orbit of the Kingdom of Naples and lose direct contact with Sicilian and Neopolitan speakers. These next 200 years, representing almost a quarter of the time Maltese split from Siculo-Arabic are just as important for the development of the language as the previous 600. English words entering the language and being semiticised are scorned as illegitimate by the purist fetishists. In reality, these words are just as legitimate as the Italian loan words and artificially re-borrowed Arabic inkhorn words that they insist on.

This tendency to reject English borrowings (even if they are 200 years old), championed by the ridiculous council, and to favour Italianate and Semitic words that have never been part of the language, or have fallen entirely out of use, will do Maltese a lot of harm. By insisting that Maltese is written in a specific way, using specific words, the council (if successful) will eventually create two distinct languages. A written language that is as defunct as Latin and written Arabic and hopefully a still living vibrant spoken language outside of their control. These attempts to plow the sea, at taxpayer’s expense, showcase the ignorance and conceit of government intellectuals.

This linguistic nationalism also marginalises the native English speaking minority. These people are 100% Maltese, who happen to have English as their native tongue. Proponents of the culture war tar them as snobs and traitors. While I’m sure, some members of this minority might be guilty of snobbery, even treason, it is still shameful to marginalise the whole lot of them and treat them as foreigners in their own country, despite our constitution.

All this wasted effort in trying to protect a vibrant, living language in no real danger (apart from that posed by bureaucrats) at the expense of a valuable asset that is slipping through our fingers defies belief. Yes, one can be Maltese, and a native English speaker without being a snob. Yes, one can celebrate the amazing linguistic gem that is Maltese without trying to cage the bird and make it sing.

Siġġiewi, 27th August 2018

Building a wall around a language will not make it great

TLDR: Government efforts to favour Maltese over English will harm both languages

Government Inc.

Ever since Prussia put the welfare state into practice for the first time in 1883, the paternalistic facet of government has been actively running aspects of the economy like a monopoly corporation. This, the birth of the first socialist state, told the world that central direction is superior to the whims of the market and dared it to disagree. But when the jury came in, the facts spoke very disparagingly of Berlin, and Moscow, and Beijing, Hanoi, Warsaw, Havana, Phnom Penh, Lusaka, Caracas and everywhere else. Central direction didn't work and doesn't work.

Socialism was down, but not out. Everyone agreed, by 1989 that the government was very bad at running the means of production. Socialism had to change its definition, from the confiscation and central management and planning of a nation's resources, to a social safety net based on the confiscation and redistribution of the people's wealth to causes deemed worthy by the administration. This thinner definition of socialism is the one we have today. With the smallest of cursory nods to the undeniable history of the tyranny, murder and misery created by government control, socialism has given up on controlling the means, but clings on to the ends.

Unfortunately this break with the past has left several relics. A number of industries are administered and executed directly by government in a number of countries, including ours. Schools, hospitals, housing, energy, development projects and transportation are just some of the areas were the government competes with the private sector using taxpayer money or monopolises the delivery of a service completely. All of these endeavors are run at a loss and render a service inferior to private sector alternatives. Sometimes it is hard to even see or imagine a private-sector alternative, as it is crowded out by government provision.

The government is really bad at running things. Even something as simple as delivering mail, it used to be said that "my local post office has four counters, unless they're really busy, then they have one". Pooling our resources centrally to then distribute them out again minus the administration fee is inefficient and requires planning. Planning is the ultimate conceit of the bureaucrat who thinks she can create a better outcome than the market. She cannot. With no profit motive and possibility of failure, government-run services ever increase their losses and decrease the quality of their services.This is logically inevitable when the entity's customers are not the tax paying consumers, but other bureaucrats who decide their budgets.

So privatise the lot of it. Sell the government enterprises at auction to the highest bidders and take the tax money that was wasted in their administration and use it to pay for a massive tax cut. As long as people are free to choose and regulation is light, competition and the threat of competition will create better schools, hospitals, power stations and airlines.. just like it does in every other untainted sector of the economy. Can you imagine the disaster that would be a government mobile device? Or supermarket? They can't even run a post office, why would we trust bureaucrats with the education of our children and our health?

The main objection to returning to the situation before the government took over these sectors (these sectors all started out as entirely private concerns) is "what about poor people?" Will a greedy, profit-seeking private interest look after the little guy? Whether this second, weaker definition of socialism, is indeed a good idea is a debate I leave for another occasion. The truth is you can be for providing housing, health-care, education and many other "rights" to unprivileged people without having the government run them. I am talking about the government running services, not providing a safety net.

The problem with poor people is that they don't have a lot of money. This might sound obvious, but the point is entirely lost on the socialists of today. Through government, that is the forceful confiscation and inefficient redistribution of wealth, we provide poor people with education, housing, health-care and a dozen other things. It would be much more logical, efficient and humane to provide them with money, and then allow them to purchase these services in a free market. Instead of relying on the "zipcode lottery" that means your children can go to a better school, or paying twice (once in taxes and once again) to send them to a private school, let us give everyone the same choices.

If we take all the money that is spent on poor people in welfare programs from pensions to schools to housing, and simply gave them the money, they would be among the highest earners in the country. You can be for welfare and against government administration of it. If you take the money spent/wasted on these services and gave it back to the people in the form of vouchers, they could then purchase these services in a relatively uninhibited free market. The resulting competition would increase quality and availability and reduce costs.

I would go one further. Instead of treating poor people like children, children who have the misfortune of having the worst parents in the country; the state, let us treat poor people with respect. A respect that says "you are poor, that may or may not be your fault, but here's some money to help you out". That is far better than saying "you are poor, live here, eat here, learn this, shut up". If you give poor people money instead of services then they are rewarded by their agency. They can make better or worse use of it and they have the constructive incentives that the cradle-to-grave welfare state denies them. This money, instead of the increasingly popular universal basic income, which incentivises leisure can come in the form of a negative income tax, that would at least not disincentivise working.

If we think so little of poor people that we do not trust them to make the right budgetary choices, that we think they will drink and smoke their money instead of spending it to send their children to school. Fine, vouchers will restrict their budget to the “correct” allocations. But please, let us not pretend that they are better served by the government rendering the service instead of them shopping for it with a voucher. It would be better and cheaper for everyone.

But do not give people a false choice! Voucher systems and privatisation have often failed in the past. The failure has been due to an inability for the government to fully let go. If an industry is privatised but still heavily regulated, the markets becomes tainted. If we are to privatize the public schools, they need to be free to experiment and innovate. The national syllabus needs to be scrapped. Why should everyone the same age learn the same Shakespeare play? Different schools could specialise and localise. What is true for schools is true for other industries the government has its tool in. Selling a monopoly to the private sector without opening up the sector to real competition by keeping the monopoly or through licensure will result in even worse outcomes.

Of course, any transition to a better state of affairs, where we abandon this soviet-style government provision in as many sectors as we dare should be gradual. Turbulence has a cost too, after all. A lot of bureaucrats need to lose their jobs and get new ones in the productive part of the economy. In many cases, deregulation, followed by privatisation of state assets and a gradual reduction of state subsidies and an increase in vouchers or a negative income tax can be phased in. Unfortunately, the zeitgeist seems to be dragging us back to an increase in state-run enterprise.



Amsterdam, July 11th 2018

The river Amstel

TLDR: The plight of poor people is not an excuse for government-run enterprises

State of Disunion

I don't vote. I would vote if there was a candidate or a party that didn't want to increase the cost or scope of government, but no such luck for me. My friends and family get upset around elections, were I duly go to the poling station to draw willies on my ballot paper. Choosing between two or more socialist parties that want to take more of our money and spend it on slightly different priorities, for me only validates their mandate. By turning up to vote and invalidating my ballot, I can vote for the electoral system without helping to put any of these pricks in power.

There was one exception, however. I did vote in 2004, saying yes to our country becoming the smallest member state of the European Union. I would also have voted to re-legalise divorce, but I was abroad for that particular referendum. At the time, I was a fan of the European project. I naïvely thought that Brussels could stop Valletta from running amok. The dream of being able to live and work anywhere in Europe, to turn our market of 500,000 people to one of 500,000,000 was intoxicating. Unfortunately, the Euopean project lured me, and so many others, in on false pretenses.

To be clear, I'm not sure I should have voted no. Nor I am sure I would vote to leave if that question were asked of me. EU membership has been good. Personally, it allowed me access to a much larger market for my services and allowed me to live and work in the Netherlands, Germany and the UK. For the country more broadly, it brought legitimacy to our institutions, with which were able to attract massive investment from abroad through a comparative advantage in taxation and regulation. This is possibly the first time we have ever had a comparative advantage in anything, except maybe corsairing in the 17th century. Without membership, our lax rules lose their edge over even friendlier jurisdictions like Panama and the Bahamas, at least to the European customer.

So what has been the price of membership? With project funding and cohesion funds and cushy jobs for our boys in Brussels and Luxembourg, it's hard to see the cost of the European project. But the cost is real and enormous. For starters, there is the price we pay as net contributors to funding the EU, to funding the drug and booze parties in Brussels and the incredible waste and inefficiency of the bloated bureaucracy. To funding massive agricultural subsidies that create (literally) mountains of wasted food. To pay for translating miles of regulation into a myriad of languages, including ours, which no-one, not even our lawyers will ever read in that language.

The waste, white elephants and scandalous expense reports are only the beginning. The regulatory burden is also astounding. Miles and miles of regulation in the name of health, safety, the environment and social 'justice' ensure that in many sectors, the EU will be at a significant competitive disadvantage. All that aside, the main cost is exacted upon us by the second most reckless monetary policy in the world. The Euro was eagerly adopted as the Deutschmark for everyone. unfortunately, we have all been lumped with the Lira. Alas, not the Maltese Lira, but the Italian one. The reckless ZIRP and NIRP policies and bond purchase programs have generated massive inflation. No, not an increase in consumer prices (although that too), but the real and original definition of inflation as evidenced by reflated stock and property markets to bubble levels, record prices at auctions, and most importantly record levels of government debt.

Euro membership has allowed our government to borrow and spend much more than it would have been able to otherwise. And no, there is no surplus. GDP growth that is slightly higher then the current account deficit is not a surplus, the debt is still increasing. ECB and EU policy have incentivised massive government debt growth and deliberately fueled inflation. And despite the marketing campaign, 2% inflation is not price stability and is not good for us.

But again, do these massive costs outweigh the massive benefits of membership that we have successfully reaped? For the moment, no, but the trajectory is very disconcerting. With the British leaving, will that be remembered as it is considered now, as Britain making a fatal mistake, or will the near future make them look prescient? There are dark clouds on Europe's horizon. The EU was supposed to be, as Churchill put it, the "United States of Europe". At the time, the US was highly decentralised, before the war the government accounted for a tiny fraction of GDP and state independence was paramount and celebrated as the laboratory of democracy. Unfortunately, we do not have the United States of Europe, but rather an attempt at the Brussels Hegemony, or a rehash of the 19th Century Frankfurt Parliament. The Frankfurt Parliament is obscure today, as it was an abysmal failure to assimilate the various German, Austrian and Bohemian states into a single country though regulation and inter-state compromise.

Indeed, the focus is shifting away from Britain (who will probably only replace the mistakes in Brussels with problems in London) towards the EU's eastern and southern flanks. The ECB's massive irresponsible gamble has bailed out the PIGS, but should they try to normalise monetary conditions, they will soon discover (if they don't already know) that you cannot solve a problem of over-indebtedness with more debt. And no, they cannot stay this easy forever, as even official 'liar' inflation rates are now close to their mandate and heading much higher in a hurry. Unable to solve the problem of out-of-control inflation and bankrupt governments down south simultaneously, the EU will have a difficult choice; not dealing with inflation will eventually make the Germans (and to a lesser extent the Benelux) throw in the towel, but a rise in rates will force real austerity on the south, which will surely respond with Grexit, Spexit, Portugo and Ciao. In the latter case, the PIGS will find that their old currencies, thought they can be printed, cannot buy prosperity.

The financial apocalypse aside, there is a growing rift between East and West not seen since the rusty curtain. The East is showing signs of independence, unfortunately largely motivated by racism. The exit of Britain (or Brexit, if you will) has upset the balance of power within the union. Allemagne and Frankreich now have only Malta, Ireland, Poland and others (depending on the issue) opposing the Brexit response. This response is massive centralisation. We can expect an increase in the regulatory/litigational clampdown on Ireland's and Malta's taxation and regulatory independence. We might see rules aimed directly at tax and regulatory 'evasion' as the Franco-Germans bring der hammar down. this will negate the main advantages to our membership and leave us with only the costs. This policy might see the exit of some countries in the East but Malta will most likely go along for the ride and then it will be too late for me to vote no.

Dingle, Ireland 26th June 2018

At the edge of Europe on the edge

TLDR: The European project is being betrayed by parastatists 

The Internet of Ideas

Like most people, my inbox has been flooded recently by unsolicited emails explaining why I get unsolicited emails. The GDPR regulation is yet another terrible policy blunder by the EU. The Eurocrats in Brussels have somehow missed one too many parties and actually turned up for work often enough to lay yet another hot steaming pile of paper on the Internet.

I am a technologist. Which is to say I am a programmer. But more than that, I have been working full-time in the internet technology space for well over a decade. As a teenager in the 90s, I was part of a community of geeks, though large in number, an extremely small portion of the eventual Internet user base. We shared files and ideas on IRC, invented emojis, created terrible websites, sent thousands of emails and became the first people to live in cyberspace.

My credentials are provided here for context. They are essentially irrelevant to my argument. After all, the bureaucrats are also extremely well credentialed and have crammed for many long hours to pass the exams and interviews that have rewarded them with their cushy jobs and tremendous power - yet they know next to nothing about technology. The little they know is dangerous, as it informs them about where to strike and gives them an semblance of wisdom.

The politicians and bureaucrats want to save us. They want to save us from what we don’t even know is killing us. In an all-to-familiar pattern of creating a dragon that needs to be slain, the government drums up hysteria about fake news, so-called privacy, social media, computer games, child pornography, identity theft and fraud. Once the stage is set and the public is on edge, they await a crisis and pounce with heavy-handed regulation.

GDPR is only the latest attempt by the EU to fix the Internet. Remember the cookie law? Millions of Euros wasted on what soon became a dead letter. Unfortunately, people are taking GDPR more seriously. The success of the marketing campaign is evident when lay people (non-techies) tell me with glee that they won’t get any more spam, that the SMS alert from their supermarket is now illegal, that Facebook won’t be allowed to “read your mind” anymore and other such nonsense. Indeed, while I was corresponding with a high-level government bureaucrat (on the phone, they prefer not to have an email trail), trying to decipher what the government’s policy was, the official informed me that he cannot tell me, because of GDPR. Yes, pressing the government to state their official policy is now protected by this new law (it’s not). GDPR is totally misunderstood.

The truth is, the Internet is great. It is great because it works, and it works just fine. We do not need these bozos in Brussels or Washington DC to fix it. Since the Internet went mainstream, it has unleashed an incredible flourishing of ideas, opinions, entertainment, art, science, commerce… everything! The reason the Internet was able to bring about this new renaissance is because it is free. Not free in the no-cost sense, but free in the unregulated sense. Anyone can put anything on there and any one else can choose to interact with it, or not. Freedom, and anonymity, are the two magnificent pillars of the Internet. Nothing in recent times has done more to level the playing field in commerce and media and allow small upstart businesses to disrupt large, established dinosauric enterprises.

The Cookie Law, GDPR and it’s ilk are all attempts by establishment interests to restore the old status quo. This law has imposed a massive cost on businesses. I know this firsthand, thousands of man hours just in projects I am involved with have been spent on it already. This law, and others will ensure that Europe will continue to be a relative desert of Internet innovation. The cost of such regulation, which is similar for all businesses big and small, is disproportionately borne by the small and new enterprises, further stifling economic growth and innovation. Hopefully, the EU will continue to have enforcement problems and people can ignore the regulation out of existence.

A man walks into a bar and asks for a pint of beer. He does this every day, all week. On Saturday, he walks in and the barman asks “The usual?”. The man is incensed and calls the police, who arrest the barman and close down the bar. This story is essentially what GDPR brings. We freely volunteer personal information to third parties all the time. This is mostly exploited in order to improve our experience, by giving us a more relevant and tailored visit. Also, all the information is essentially controlled by the client. The “memory” of your visit sits in your browser and is easily deleted. All the information given to a third party is up to you, on the Internet, you can use a fake name, a fake address, a fake gender, anything. Of course, more sensitive information, like billing information is sometimes provided over the internet. But just like the bar in the example above, existing laws against fraud make it illegal for the barman to copy your card and go on a spending spree on your behalf - even if you have provided the information he needs to do this.


This regulation assumes that the consumer is a moron. That she is easily mislead by targeted advertising or ‘fake’ news. Although there are morons out there, it should remain up to us what we do online and what we do with our data. After all we own it. These regulations, intentionally or through sheer ignorance, attempt to break the Internet. The Internet, after all, poses a grave threat to the establishment. Soon, we can expect regulation directed against ‘fake’ news and social media (the groundwork has already been done). Just like the reactionary absolutist governments of the 19th century, officials hold up examples of genuinely fake news as an excuse to institute full press censorship. The public is in a far better position to determine what news is real or not than the government, who will abuse the power to decree what is true and false as soon as they get it. After all, in China, the Tienanmen Square massacre is ‘fake’ news.

The bureaucrats will not stop until the Internet, which they view as a pain in the backside, is thoroughly neutered. But just like in China, they will learn that you cannot kill the Hydra by cutting off heads. The decentralised nature of the Internet will allow it to survive in some form. Indeed, it will always be there for me, and the geeks who made it what it is today. It is non-technical people that will struggle to get back the most global and honest forum in the history of the world. If the bureaucrats finally succeed in breaking the Internet, we will just make another one. This time the bureaucrats might not be invited.

Cambridge USA, 29th May 2018

 

GDPR is not your friend

TLDR: Government isn’t saving us from the Internet, it is attempting to break the tools we need to save ourselves from government

Keynes' Crises

“Let me lay to rest the bugaboo of what is called devaluation… The effect of this action, in other

words, will be to stabilize the dollar.” said Nixon as he ended the dollar’s, and therefore the world’s,

monetary link to gold. Since then, we have left the gold standard, and have been on the PhD standard. 

Has the stewardship of our money by Fed chairpeople and bank governors been a success? Has

the ability of our wise and learned betters to steer the ship of the economy led us to tranquil harbours

or stormy seas? Will the next iceberg finally return us to the “barbarous relic”, or will we remain

anchored in an even older system by which our rulers control and ruin our money?

The Ducat and the Florin are familiar-sounding currency units. These are the renaissance currencies
of Venice and Florence which gained widespread acceptance all over Europe. The reason these
republican currencies became so widespread is that the local currencies in England, France and
various German duchies were being constantly devalued by their sovereigns. This “royal standard”
was the precursor to our modern PhD standard and was just as immoral, corrupt and ineffective.

Once England and the Netherlands adopted the gold standard it was the Pound and Guilder that 

became international units of account, because they were anchored to gold and were not frequently revalued. 

After nearly a century of relative stability and prosperity under the gold standard, Keynes and his

acolytes advocated a great new diet pill that would smooth out the business cycle and deliver high

constant growth and stable prices. These days, Keynes’ playbook is economic orthodoxy and the

policy response to the last crises has shown the effectiveness of his ideas, or rather the ideas of his

school of economics.

The results are clear, Keynesian stimulus doesn’t smooth out the business cycle, it lengthens it and 
makes it more extreme. The dot-com boom and bust, as well as the housing bubble were a direct
result of artificially low interest rate policies. The response each time is to take rates even lower for
even longer, from LIRP to ZIRP to NIRP. Such policy responses cause malinvestments by
desperate yield-hungry would-be savers. Also, it prevents previous malinvestments from being

reallocated creating a fertile breeding ground for unicorns and zombies. 

The ultimate proof that these policies don’t work will be the necessary conclusion of this latest round

of monetary excess: the next crisis. The US stock market, subprime auto lending, cryptocurrencies

and fine art are showing signs of volatility after a prolonged period of inflation far beyond what can be

merited by the fundamentals. This volatility, coming with rising (but still low) real and nominal interest 

rates are a sign that these bubbles are popping. 2018 could well go down as the year of the next

crisis.

The response, predictably, will be a fast return to ZIRP/NIRP as well as massive money printing
poorly disguised by the academic term Quantitative Easing. Will it work this time round? Will they
manage to avert a real recession by inflating an even bigger bubble than the even bigger bubble?
This time they might be out of road, the nominal or real value of these assets will have to return to
their fundamentals, either by a collapse in their price, or by a collapse in the currency they are

denominated in.

 

And when the dust settles will we have learned anything? The socialists and central planners who

are creating this disaster-in-the-making will swiftly blame it on the excesses of capitalism, as if this

current state of affairs can be straight-facedly described as capitalism. In capitalism you don’t fix

prices, least of all the most important price of all: interest. Also, you don’t bail anyone out. Once it is

clear that the current direction has lead us to ruin, will we double-down on socialism or truely change

direction?

Bangalore April 16th 2018

TLDR: Mainstream economics is flawed. The coming crisis will be a catalyst for change for better or worse.

Under socialism, you have 3 cows, and they eat garbage in the street

  

Tit for Tat

“Trade wars are easy to win”, says Trump. Unfortunately for the USA, trade wars are not only not easy 
to win, they are impossible to win, because every ‘victory’ leaves you poorer than before. Free trade is 
under attack, it has been daemonised, not only by leftists and populists, but also by more centrist 
politicians. The sad truth is that truly free trade has been dead for a long long time. One positive outcome 
of Trump’s actions is that is has brought trade back into the spotlight, and his unpopularity is driving people 
into the free trade camp.

Our “propensity to truck and barter” separates us entirely from the animals. Humans are traders, our 
survival depends on it. If left alone to create all the means necessary for our own survival ourselves, we 
barely subsist and then we die. Through specialisation and trade however, hunger is virtually unknown 
and we can devote large portions of our time to leisure.

“In every country it always is and must be the interest of the great body of the people to buy whatever 
they want of those who sell it cheapest.”, those immortal words of Adam Smith explain what is almost 
universally accepted by all economists: trade is a win-win. When two people freely exchange, both 
parties are better off. By allowing the butcher to focus on rearing cattle and the baker on makes loaves 
and allowing them to trade, both will have a greater amount of bread and meat than if they tried to make 
each themselves.

This is true on a national scale also. Some countries have the climates, skills, infrastructure, knowledge 
and natural resources that allow them to specialise in the production of certain goods. Even if one country 
is better at producing everything than another country, the less efficient country still benefits by focusing on 
what it is good at and trading for the rest. This is the rule of comparative advantage.

These admittedly very basic facts about economics, like many basic economic facts escape the vast 
majority of the population. The masses who believe that prosperity is a fixed pie, and that one nation’s gain 
is another’s loss are easily swayed by the arguments of protectionism championed by economic illiterates. 
Indeed, who or what is protected under ‘protectionism’? As Friedman liked to say, it is the people who are 
protected, from low prices.

The main arguments used by protectionists are that a certain industry is being affected by ‘unfair’ trade, 
or that it needs to be boosted to catch up with international competition or that it needs to be helped in 
order to preserve it for cultural or national security reasons.

There is no such thing as ‘unfair’ trade. If a foreign government is so ill-advised as to tax its own subjects 
to send low-price goods to another market, this is actually foreign aid and the citizens in the “dumping” 
market benefit form lower prices and a higher standard of living. After all, the vast majority of us don’t work 
for the sake of it, we want to enjoy the fruits of labour.

Wrong also, is the idea that a protectionist tariff, which is just a tax on the import of specific goods will 
somehow give domestic industry a leg up. Such measures invariably lead to complacency in these 
industries that can just raise their prices almost by the amount of the tariff without having to invest in plant 
and equipment. The measure intended to preserve certain industries end up dooming them to a 
zombie-like fate of irrelevance.

The national security argument is also a cop-out. The idea that, due to a war, a country would no longer 
be able to import steel, aluminium or unobtainium has never borne out. Also, if national security was really 
the concern, there would be much cheaper and more effective ways to guarantee a supply than a stupid 
tariff. For example, steel mills could be mothballed, just like battleships, or steel could be stockpiled. It is 
interesting that those invoking the national security argument never mention alternatives to tariffs or 
subsidies.

The most damning point about the national security argument is that trade wars lead to wars. Or rather, 
trade leads to peace. The more interconnected two countries are when it comes to trade, the more 
expensive it would be and therefore the more reluctant the parties would be to seek a destructive war with 
their trading partners.

We have seen this in Europe. 50 years of peace on a content that had previously scarcely known a year 
without war. The European free trade zone has been instrumental in this security. Interestingly, the 
European Union, the champion of inter-community free trade is on aggregate anti-trade, as highlighted by 
it’s Brexit stance.

Although it has sought to free up trade as much as possible between member states, the EU has started 
and participated in several trade wars. Also, it is in favour of managed trade; encyclopedia-sized trade 
treaties with specific countries that impose massive regulatory tariffs on imports and leave the developing 
world out in the cold.

A real free trade treaty could be written on the back of a business card: unilateral free trade. Everyone can 
buy or sell whatever he or she likes from whoever he or she likes. The citizens of the EU, especially the 
poorest, are not helped by the imposition of one-size-fits-all quality standards. Nor are they helped by 
targeting foreign companies with lawsuits over ‘unfair’ trade practices in courts clearly biased towards 
their home constituents. They aren’t helped either by having cheaper poorer-quality goods from 3rd world 
countries shut out of their markets - and neither are the citizens of those countries. Food for thought the 
next time you pick up a “fair trade” banana.

Pisa, March 9th 2018

TLDR: It's about time we stop hurting ourselves and each other with policies spouted by economic illiterates that we should have left buried in the 18th century

 

Trump's trade war receives a frosty reception

Bitbubble

Bitcoin is arguably the biggest thing in the technology space to catch the public’s imagination since
the smartphone. As a computer scientist, a libertarian and an amateur economist, one would think 
that I’d be massively enthusiastic about cryptocurrencies. After all, isn’t it a private initiative to break
the monopoly on money by a central banking system that cannot be trusted with the value of our money? 
That it is, unfortunately there are a number of reasons I believe that Bitcoin will not replace our fiat 
currencies and will instead go down in history as the 21st century version of Tulip Mania.

To understand why Bitcoin will not work as money, we have to understand where money comes from. 
Before money, goods and services were exchanged for each other in the highly inefficient barter system.
The butcher would give the baker a steak in exchange for two loaves. Within this system, some 
commodity is eventually bartered for that is not directly needed, but because it is highly exchangeable 
for other commodities, this is the birth of money.

Any commodity can be money. Indeed the earliest forms of money where food, especially livestock 
and grain, because of its near-universal acceptability. Different commodities have different qualities that 
can make it better or less well suited for use as money. Wheat spoils and is very bulky to transport and 
store. Cattle is more portable and lasts longer than wheat but must be kept alive and a cow cannot be 
divided without destroying it. It is widely accepted that there are eight properties a commodity should 
have to be ideally suited for use as money. Gold and silver were money for 3,000 years precisely 
because of these qualities.

The commodity should be durable, gold doesn’t expire like wheat and cattle. A Bitcoin too, is permanent. 
It should also be recognisable, gold’s heavy weight and yellow colour make this relatively easy. In this 
area too, Bitcoin has no serious issues. Both gold and Bitcoin are also divisible to very small fractions, 
this allows for very small transactions. At a purity that is easy to assess, one gram of gold is exactly like 
another, just like one Bitcoin is identical to another. This homogeneity is important to prevent people 
paying their debts with their oldest and sickest cattle.

The commodity must also be portable. Gold has a very high value density, so you can carry a large 
amount of value in gold with you. Bitcoin is ethereal, so you could carry it around without issue, however 
transacting in Bitcoin is a computationally intensive process that reduces its portability. Gold can be 
exchanged via an intermediary or receipts, so one can transact in gold or silver without actually moving
it around.

The commodity must also be acceptable, while gold was accepted for goods and services for thousands 
of years until Nixon closed the gold window in 1971, Bitcoin is not accepted. You might disagree there, so 
perhaps I should explain. If you buy something on the Internet using something like BitPay, you are not
exchanging Bitcoin for whatever it is, you are using a service to sell your Bitcoin and use the money for 
the purchase. This can be done with any commodity, this is not the same as the vendors quoting their 
prices in Bitcoin and accepting and holding the currency. That only happens with few small vendors 
whose owners happen to be speculating in Bitcoin. This is not a deal-breaker for Bitcoin, as this might 
still develop, as the proponents insist.

Malleability is another property that will promote a commodity's use as money. If once I turned my gold
into a ring, it was stuck that way forever, this will make it less useful in exchange if the new owner 
couldn't refashion that ring into a tooth filling or a bar. Bitcoin isn’t malleable.

The last property is stability. If I found an ancient gold coin (discounting any historical or numismatic 
value the coin may have), the value of the gold it contains would pay for a remarkably similar amount of 
goods and services today. If you owned a large chest of gold in ancient Rome, you were rich, the owner 
of the same chest today would also be rich. Bitcoin doesn’t have a long history, but so far it has been 
extremely volatile and so it is not possible for people to set prices or wages and sign contracts 
denominated in Bitcoin.

The ultimate issue with Bitcoin, is that there is no inherent value to store. Gold is a real physical 
commodity with use in decoration, medicine, electronics and others. The blockchain might have many 
applications, but Bitcoin is not the blockchain, which leads me to the next big problem: inflation.

Inflation, as classically defined, is an increase in the supply of money. These days it is equated with an 
effect of inflation, which is an increase in prices. Fiat currencies, particularly the Dollar, the Euro and the 
Yen have suffered a lot of inflation in their history, particularly lately. New gold can only be mined out of 
the ground at a slow relatively constant rate. Bitcoin cannot be created easily and there is a fixed limit on 
the number of Bitcoins that can be mined, however there is no limit to the number of cryptocurrencies 
that can be created. If Bitcoin is so valuable, it is too easy to create Fitcoin, Gitcoin, Hitcoin, etc with 
exactly the same properties as Bitcoin, or perhaps improving upon them. Indeed, it wasn’t the first 
photocopier company, Xerox that won out in the end, nor the first major social network MySpace. So 
why should Bitcoin be worth anything in the future?

Bitcoin is not being used as a currency, it is being used as a speculative asset. People are not buying 
Bitcoins to transact in them, they are buying them because they are going up (or at least were going up). 
The massive hunger for speculative assets which has sent cryptocurrencies, stocks, real estate and 
collectables to record levels is fueled by a long period of the most dovish global central bank policies in 
history. Anecdotal evidence that it is a bubble include dodgy ads on Youtube and Facebook and a sudden 
interest in cryptocurrencies by people who have never invested their money before. Even a taxi driver in 
Germany who barely spoke English was trying explain to me why Bitcoin was going even higher.

There are genuine uses for the blockchain. However, tokens that have no intrinsic value, digital fiat, will 
not be used as money. A cryptocurrency backed by come real commodity (and therefore with 3rd party 
risk) would work. A cryptocurrency backed by gold would be ideal. Unfortunately, the crash that seems 
to already have begun in the Crypto bubble will make unregulated non-government money look bad and 
make the flawed, ugly government fiat currencies look good in comparison.

It should be remembered that government action (massive easing) caused the speculative mania in the 
first place. Also, that all fiat money is flawed and that one day we will return to that standard of value we 
used until 1971: gold. An amount of gold is a good measurement for value, just like the meter is a good 
measurement for distance. Having government decree our measure of value makes as much sense as
having them decree the length of a centimeter, a privilege they would abuse by shortening it every year 
and thus making their private parts ‘bigger’.

Boston, February 19th 2018

TLDR: Bitcoin is a bubble, get out while you can.

I can't believe they're still fixing this bridge