- Comparing Bitcoin, Ether, & Other Cryptos
Unless you’ve been hiding under a rock, you’re probably aware that we’re in the middle of a cryptocurrency explosion. In one year, the value of all currencies increased a staggering 1,466% – and newer coins like Ethereum have even joined Bitcoin in gaining some mainstream acceptance.
And while people like Jamie Dimon of J.P. Morgan and famed value investor Howard Marks have been extremely critical of cryptocurrencies as of late, many other investors are continuing to ride the wave. As Visual Capitalist's Jeff Desjardins has noted in the past, the possible effects of the blockchain cannot be understated, and it could even change the backbone of how financial markets work.
However, even with the excitement and action that comes with the space, a major problem still exists for the layman: it’s really challenging to decipher the differences between cryptocurrencies like Bitcoin, Ethereum, Ethereum Classic, Litecoin, Ripple, and Dash.
For this reason, we worked with social trading network eToro to come up with an infographic that breaks down the major differences between these coins all in one place.
(click image for massive legible version)Courtesy of: Visual Capitalist
A DESCRIPTION OF MAJOR COINS
Here are descriptions of the major cryptocurrencies, which make up 84% of the coin universe.
Bitcoin is the original cryptocurrency, and was released as open-source software in 2009. Using a new distributed ledger known as the blockchain, the Bitcoin protocol allows for users to make peer-to-peer transactions using digital currency while avoiding the “double spending” problem.
No central authority or server verifies transactions, and instead the legitimacy of a payment is determined by the decentralized network itself.
Bottom Line: Bitcoin is the original cryptocurrency with the most liquidity and significant network effects. It also has brand name recognition around the world, with an eight-year track record.
Litecoin was launched in 2011 as an early alternative to Bitcoin. Around this time, increasingly specialized and expensive hardware was needed to mine bitcoins, making it hard for regular people to get in on the action. Litecoin’s algorithm was an attempt to even the playing field so that anyone with a regular computer could take part in the network.
Bottom Line: Other altcoins have taken away some of Litecoin’s market share, but it still has an early mover advantage and some strong network effects.
Ripple is considerably different from Bitcoin. That’s because Ripple is essentially a global settlement network for other currencies such as USD, Bitcoin, EUR, GBP, or any other units of value (i.e. frequent flier miles, commodities).
To make any such a settlement, however, a tiny fee must be paid in XRP (Ripple’s native tokens) – and these are what trade on cryptocurrency markets.
Bottom Line: Ripple runs on many of the same principles of Bitcoin, but for a different purpose: to serve as the middleman for all global FX transactions. If it can successfully capture that market, the potential is high.
Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications.
In the Ethereum blockchain, instead of mining for bitcoin, miners work to earn ether, a type of crypto token that fuels the network. Beyond a tradeable cryptocurrency, ether is also used by application developers to pay for transaction fees and services on the Ethereum network.
Bottom Line: Ethereum serves a different purpose than other cryptocurrencies, but it has quickly grown to displace all but Bitcoin in value. Some experts are so bullish on Ethereum that they even see it becoming the world’s top cryptocurrency in just a short span of time – but only time will tell.
In 2016, the Ethereum community faced a difficult decision: The DAO, a venture capital firm built on top of the Ethereum platform, had $50 million in ether stolen from it through a security vulnerability.
The majority of the Ethereum community decided to help The DAO by “hard forking” the currency, and then changing the blockchain to return the stolen proceeds back to The DAO. The minority thought this idea violated the key foundation of immutability that the blockchain was designed around, and kept the original Ethereum blockchain the way it was. Hence, the “Classic” label.
Bottom Line: As time goes on, Ethereum Classic has been carving out a separate identity from its bigger sibling. With similar capabilities and a different set of principles, Ethereum Classic could still have upside.
Dash is an attempt to improve on Bitcoin in two main areas: speed of transactions, and anonymity. To do this, it has a two-tier architecture with miners and also “masternodes” that help the network perform advanced functions such as near-instant transactions and coin-mixing to provide additional privacy.
Bottom Line: The innovations behind Dash are interesting, and could help to make the coin more consumer-friendly than other alternatives.
BONUS: BITCOIN CASH
Although not included in the graphic, we also wanted to add a quick word on Bitcoin Cash. This new currency “hard forked” from Bitcoin about a month ago, as a result of miner disagreements about the future of Bitcoin. Here’s a detailed summary of the announcement.
- State-Sponsored Intimidation, Or When FARA Goes Too Far
The US government is blatantly violating the most basic tenets of its purportedly “sacred” ideology of “human rights” and “free speech” by egregiously overstepping the bounds of FARA to engage in the same type of state-sponsored intimidation that it regularly accuses its geopolitical opponents of for far less.
Yahoo broke the story earlier on Monday that the FBI questioned former Sputnik employee Andrew Feinburg following his public complaints to the media about how the company is supposedly being run, and this reportedly came after another former employee, Joseph John Fionda, allegedly contacted the FBI on his own initiative to share “a big packet” of information accusing Sputnik of breaking the law. The legislation at the center of this scandal is the “Foreign Agents Registration Act” (FARA), a 1938 law originally passed to expose Nazi influence operations inside of the US. It’s since been used for registering anyone who works as a “foreign agent”, which stereotypically refers to Congressional lobbyists hired by foreign governments but is nowadays being proposed by some US voices to apply to Sputnik and RT as well.
The basis for this move is that both companies are publicly funded by the Russian government, and that this therefore supposedly makes them “propaganda” because it’s assumed by the American authorities that all of their employees lack “editorial independence” from the Kremlin. As could have been expected, the same forces pushing for Sputnik and RT to register as “foreign agents” under FARA aren’t interested in equally applying these expanded “standards” to other publicly financed international media outlets such as Al Jazeera and the BBC.
Using the same criteria as is being applied against these two companies, one could rhetorically question the “independence” of US Congressmen and American government-connected “think tanks” to the “deep state”, which is another word for its permanent military, intelligence, and diplomatic bureaucracies that hold disproportionate influence over policymaking decisions.
In any case, what’s important to focus on is the difference between publicly financed institutions and those which are “government-run”. The first one simply means that taxpayers are paying the bills, whereas the second refers to government employees being the final decision makers on all matters. All government employees work for publicly financed institutions, but not all employees at publicly financed institutions are government employees. Sputnik, for example, is a publicly financed media platform where the editors always have the final say as decision makers in what is a globally recognized industry-wide hierarchical standard. This doesn’t indicate “censorship” or a “cover-up” – it’s just plain journalism.
If Washington-funded media platforms happen to accuse Sputnik and RT of being “government-run”, then it might possibly be that they’re falsely projecting their own unstated but widely assumed internal arrangements onto their Russian counterparts.
Moreover, just because two disgruntled employees seem to have experienced communication issues with their superiors and failed to resolve – or in some cases, even address – them prior to continuing with their given assignments doesn’t mean that there’s a “Kremlin conspiracy” because their bosses were displeased with their overall work at the company as a result. Outcomes like that happen in those situations. It’s life – nothing more, nothing less – and should be used as a personal learning experience, not as someone’s “15 minutes of fame” driven by their desire to more easily land a new job elsewhere, whether in the same industry or the “think tank” one. It’s natural for people to have divergent views on any given subject, especially when it’s related to politics, but editors always have the final say when it comes to the journalism industry, and employees are supposed to respect that.
One of the more popular fake news claims going around about Sputnik and RT is that the two outlets were heavily biased in favor of Trump during the 2016 election, but that’s frankly not true, as anyone would know by listening to Sputnik’s radio programs from that time, watching RT’s shows, or reading both of their websites’ archives. Both platforms lean closer to the liberal-progressive side of things as opposed to the conservative one. Simply reporting on the many unfavorable stories surrounding Hillary Clinton and not blindly fawning over her candidacy doesn’t qualify as “institutional bias”, though in largely controlled systems such as the American one where most of the media openly back the Democrats, then the Overton window concept would suggest that Sputnik and RT’s balanced reporting and analyses would understandably stand out as attention-grabbing and exemplary.
In addition, it should never be forgotten that it was the on-the-fence population of the Rust Belt who surprisingly turned the election in Trump’s favor. One would presume that the liberal-progressive masses in the solidly Democratic states on each coast would be Sputnik and RT’s core audiences given how these two outlets’ more leftist-leaning stance on many matters overlap with the prevailing preferences there, so it’s ridiculous to believe that these Russian companies somehow convinced voters to want to “Make America Great Again” in the more stereotypically nationalistic heartland with their liberal-progressive messaging. In fact, it’s uncertain how many people in that part of the US listen to, watch, or read Sputnik and RT in the first place when Fox News, CNN, and Rush Limbaugh dominate those media markets, and whether these Russian companies are even capable of making any difference at all in those swing states.
Another point that’s often brought up in the course of this conversation is that individual writers, analysts, and presenters might be “biased”, but human beings are unique and have their own way of understanding and relaying information, which in the media field leads to them expressing their individual viewpoints and perspectives in their work. There’s nothing wrong with this, and it should be celebrated that people feel comfortable enough in their professional environment to express themselves as they see fit, though provided that they’re not obnoxiously – and perhaps even deliberately – doing something to cross the line of the editorial standards which vary according to the media outlet. The Sputnik and RT employees that are in the public limelight sometimes have opinions that are just as passionate as their counterparts in The Washington Post and The New York Times, though the latter two are rarely – if ever – condemned for their zeal by the US government.
The double standard that’s being applied when it comes to Sputnik and RT should be clear for all to see, and it’s that the American “deep state” doesn’t tolerate foreigners having an opinion about the US unless they present it on a US-based media platform or on one of Washington’s allies’. Otherwise, as the witch-hunting “logic” now goes, they’re “foreign agents” possibly “spreading propaganda”, and their outlets need to be registered as such with the intimidating “scarlet letter(s)” of FARA if they’re foreign-funded. Even worse, the hysterical zeitgeist has now peaked at such a point that Americans are unable to talk about American-related issues (whether domestic or foreign) on non-American international media outlets publicly funded by a foreign government without potentially having to register as a “foreign agent” in their homelands, whether they still live there or emigrated already.
This is nothing less than state-sponsored intimidation, since Washington is implying that the Americans who work for and comment on these platforms might be “national security threats” because of their supposedly undeclared “foreign agent” status.
If Russia implemented the same media version of FARA that the US is seriously considering and decided to decree that its citizens working for publicly funded American information outlets both in the country and abroad are “foreign agents” that are forced to register with the Kremlin, then the US government would instantly condemn it as state-sponsored intimidation and political oppression, possibly even extending political asylum and an expedited path to citizenship for those said nationals who might be working in the US and are too afraid to ever go home again. Frighteningly, however, it’s not Russians who have to fear the long arm of their government in this respect, but Americans, though it’s “politically incorrect” for anyone to say so.
In the Twilight Zone of the New Cold War, Russia could plausibly – and with full ethical and legal backing behind it –contemplate granting its Russian-based American employees political asylum and potential citizenship because of the state-sponsored intimidation that they might become reasonably subjected to back home just because they decided to “Tell The Untold” and “Question More”. If the US government demands that Sputnik and RT employees register as “foreign agents” under FARA but selectively ignores enforcing this new “standard” against other publicly financed international media companies and their employees, then it’s not unrealistic to imagine that Edward Snowden might end up sharing a toast with some fellow American political refugees in Moscow before too long.
- Do 40,000 Lightning Strikes Over SoCal Point To A Mega Quake On The Horizon?
A volatile storm has ignited a slew of 40,000 lightning strike in southwestern California.
The strikes have hit Los Angeles, Santa Barbara, San Luis Obispo, and Ventura counties – all between September 10-11.
The electric storm was most active on Sunday with an amazing 5,000 lightning bolts in the area over a three-hour period. NWS Los Angeles took to Twitter to report the tremendous display. The intense storm brought plenty of lightning to the Golden state’s southern region, but almost no rain. The greatest rain total of .44 inches at Sudden Peak on Sunday. By Monday morning, heavy showers, thunderstorms, and 35-mph winds were reported in eastern Los Angeles County.
— NWS Los Angeles (@NWSLosAngeles) September 11, 2017
But now conspiracy is swirling around this fascinating and unique electric storm. Strange lights and electrons acting oddly seem to have been appearing either before or during major earthquakes – like the recent 8.2 magnitude quake in Mexico. Could these lightning strikes be a sign that California’s mega quake is on the horizon?
Like California, Mexico is a seismically active region that has seen smaller quakes that have caused death and destruction. But Thursday’s temblor is a reminder that even larger quakes — while rare — do occur. Scientists say it’s possible for Southern California to be hit by a magnitude 8.2 earthquake. Such a quake would be far more destructive to the Los Angeles area because the San Andreas fault runs very close to and underneath densely populated areas.
It’s often stated that California is ripe for a devastating mega earthquake and after some noticed the strange lights in the sky above Mexico during its quake, this conspiracy conclusion was an easy one to jump to.
- Visualizing The Side Hustle Economy: 25 Ways To Make Extra Dough
Popularized in recent years by people like Gary Vaynerchuk, the “side hustle” has quickly become a preferred mentality for aspiring entrepreneurs to make additional money on the side.
As Visual Capitlsist's Jeff Desjardins explains, the gist of it is: by working hard outside the traditional hours of a 9-to-5, a side hustle allows you to build a business around what you are truly passionate about. And if that endeavor is successful, it can also help you make the full transition into permanent entrepreneurship later on.
ENTER THE SIDE HUSTLE ECONOMY
Today’s practical infographic from Quid Corner highlights 25 different ways to dip your toes into the side hustle economy.Courtesy of: Visual Capitalist
Some of these side hustles, like building courses or writing eBooks on your area of expertise, are great ways to begin building your personal thought leadership brand.
Meanwhile, other hustles listed here are more appropriate for supplementing your regular income. Getting extra cash in your pocket – and on your own terms – can help give you the confidence to start a business, or invest in further education.
GOING FROM 0 TO 60
If you are ready to make the dive into entrepreneurship, we previously posted 5 Ideas for Online Businesses in 2017.
If you’re still just getting your feet wet, it’s side hustle time. Work on the side for additional capital, get a proof-of-concept for your idea, or find ways to build your personal brand.
Even if your ambitions are huge, start slow, start small, build gradually, build smart.
– Gary Vaynerchuk, Serial Entrepreneur
Side hustling allows you to get a start while still having two feet on the ground. However, that’s not to say that side hustling is easy – it takes lot of work and commitment, and you have to be prepared to spend evenings and weekends to pursue your passion, with no guarantee for immediate results.
- America's Weapons: "The Dollar And The Drone"
It was said that “the guinea and the gallows” were the true instruments of British imperial power.
The guinea represented the coined wealth of Great Britain.
The gallows represented its… constabulary zeal in policing restless natives.
This is the 21st century of course… a time of enlightenment.
Today’s instruments of imperial power are no longer the guinea and the gallows.
No. Today’s instruments of imperial power are “the dollar and the drone.”
The dollar and the drone are America’s weapons.
Like the 19th-century pound (which replaced the guinea), today’s dollar is the world’s reserve currency.
Like the 19th-century pound, the dollar finances some two-thirds of global trade.
And the gallows?
Britain hanged its foreign trouble. America explodes its own in drone attacks.
Here is civilization; here is progress.
The sun eventually sank on the British Empire… the gallows came down… and the pound lost its global reserve status.
The U.S. will have its drones. But is its other weapon, the dollar, close to losing global reserve status?
Recent developments may tell…
The global oil trade has centered on the dollar since 1974, when Saudi Arabia agreed to enthrone the dollar as currency of the oil market.
If it was oil you wanted… it was dollars you needed.
But now China — world’s top oil importer — is preparing to create an oil market that bypasses the dollar entirely.
The plan would let China buy oil from Russia and Iran with its own currency, the yuan.
But the yuan is not a major reserve currency like the dollar.
Under this plan, Russia and Iran would be able to swap yuan for an asset far more desirable than Chinese scraps of paper — gold itself.
Perhaps that explains why China’s been hoarding so much gold in recent years?
Jim Rickards says this system marks the beginning of the end for the petrodollar:
China, Russia and Iran are coordinating a new international monetary order that does not involve U.S. dollars. It has several parts, which together spell dollar doom. The first part is that China will buy oil from Russia and Iran in exchange for yuan.
The yuan is not a major reserve currency, so it’s not an especially attractive asset for Russia or Iran to hold. China solves that problem by offering to convert yuan into gold on a spot basis on the Shanghai Gold Exchange…
This marks the beginning of the end of the petrodollar system that Henry Kissinger worked out with Saudi Arabia in 1974, after Nixon abandoned gold.
But it’s not only China, Russia and Iran that are out to dethrone King Dollar.
They’re joined by the rest of the “BRICS” nations — Brazil, India, South Africa.
Together they represent 25% of global economic output.
At last week’s annual BRICS summit in China, members announced full-throated support for China’s plan.
The message, clear as gin: The dollar’s days of “exorbitant privilege” must end.
And yesterday brought news that could further accelerate China’s de-dollarization plans…
Treasury Secretary Steve Mnuchin announced the U.S. would consider locking China out of the international dollar system if Beijing doesn’t cooperate with new sanctions against North Korea:
If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system. And that’s quite meaningful.
“Meaningful” might be one word for it. “Menacing” would be another.
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a network that facilitates trillions of dollars in international money transfers each year.
It is the oil that lubricates the machinery of the international financial system — or as Jim Rickards styles it, “the oxygen supply that keeps the global financial system alive.”
And to cut off China’s oxygen?
“That is why China buys gold,” Jim Rickards tweeted this morning from London.
Our colleague Dave Gonigam of The 5 Min. Forecast half-jestingly wonders, “Is the Trump administration trying to kill off the U.S. dollar’s status as the globe’s reserve currency?”
Of course, the dollar will not lose reserve status tomorrow, next week, next year.
But the direction of travel seems clear enough.
In 2000, dollar assets were about 70% of global reserves. Today, the comparable figure is about 62%. If this trend continues, one could easily see the dollar fall below 50% in the not-too-distant future.
How does one go bankrupt?
Slowly at first, said Hemingway — then all at once.
That’s how the dollar will likely lose its reserve status… slowly at first… then all at once…
- Former Citi CEO Vikram Pandit: "AI Could Kill 30% Of Back-Office Banking Jobs By 2023"
Just as the development of electronic trading led to mass downsizing on sales desks across Wall Street, advances in artificial intelligence could decimate the ranks of banks’ back-office staff, according to former Citigroup CEO Vikram Pandit. And given the rapid pace of technological advance, jobs in operations and retail banking could begin disappearing in as few as five years.
Pandit, who shared his thoughts about the future of the banking industry during an interview with Bloomberg, said that the industry’s focus on technology as a cost-saving measure – Bank of America Corp.’s Chief Operating Officer Tom Montag said in June that the bank is searching for more ways for technology to replace people – has inspired him to move up his timeline aggressively.
As Bloomberg points out, Pandit’s forecast for job losses is in step with one made by Citigroup last year. In a March 2016 report, the lender estimated a 30% reduction between 2015 and 2025, as banks find more applications for automation in their retail businesses. That could lead to job losses numbering 770,000 in the US, and as much as 1 million in Europe, Citigroup said.
“Everything that happens with artificial intelligence, robotics and natural language – all of that is going to make processes easier,” said Pandit, who was Citigroup’s chief executive officer from 2007 to 2012. “It’s going to change the back office.”
This pressure on employees to prove that they’re more productive than the technology has transformed banking into an “enormously competitive” industry, Pandit said, adding that he expects the shift to produce yet another wave of consolidation in an industry that’s already dangerously concentrated, a flaw that was both exposed and exacerbated by the financial crisis.
Though he also believes advances in technology will lead to the development of “specialist providers,” making the financial system “a bit more decentralized.”
Pandit achieved lasting notoriety after becoming CEO of Citigroup in December 2007 just as the cascading subprime mortgage crisis was driving the US economy into a recession. He had previously led a hedge fund that was acquired by the bank, and, upon taking the top job, was widely criticized in the press for his inexperience in managing many of Citigroup’s core businesses like, for example, banking.
He’s now the CEO of Orogen Group, an investment firm that he co-founded last year, five years after being forced out as Citi’s CEO.
While Pandit’s prediction should be concerning to anyone who works in the financial industry, humanity as a whole would have much more to worry about if another CEO’s dire predictions about AI are eventually realized.
In one of several memorable tweetstorms on the topic, Tesla CEO Elon Musk urged governments to start considering regulation to govern the development and application of AI technology, arguing that the machines pose a greater danger to the US than North Korea.
If you're not concerned about AI safety, you should be. Vastly more risk than North Korea. pic.twitter.com/2z0tiid0lc
— Elon Musk (@elonmusk) August 12, 2017
However, other banking CEOs, including JP Morgan Chase & Co.’s Jamie Dimon, have played down the potential impact of technology in the financial industry, as Bloomberg reminds us. Conversely, automation could create “more opportunities” for employment as the firm hires a bevy of “technology workers.”
“JPMorgan Chase & Co. CEO Jamie Dimon cautioned in June against overreacting to the impact of technology on jobs. While the bank is using technology to reduce costs, that helps create other opportunities, Dimon said in an interview published on LinkedIn. He predicted that employee numbers at his firm will continue to rise — as it hires more technology workers.”
…Of course, Dimon has every reason to expect this: After all, that’s exactly what happened when the adoption of automation by manufacturers began to accelerate. Right?
- Keynes: A Master Of Confused And Confusing Prose
[This article is a selection from Where Keynes Went Wrong]
Paul Samuelson, professor of economics at MIT after World War II and author of a best-selling economics textbook, was one of Keynes’s most ardent American disciples. Here is what he has to say about the latter's General Theory:
It is a badly written book, poorly organized. . . . It is arrogant, bad-tempered, polemical, and not overly generous in its acknowledgements. It abounds in mare’s nests and confusion….
In reading this, one recalls Keynes’s infatuation with paradox. Samuelson, the ardent disciple, is telling us that the master’s book is good because it is bad.
We do not, however, have to take Samuelson’s word about the bad writing, poor organization, and general confusion of The General Theory. Following publication in 1936, many leading economists pointed to the same problems, although some of them hesitated to criticize or quarrel with Keynes and thus chose their words carefully.
Frank H. Knight, a leading American economist, complained that it was “inordinately difficult to tell what the author means. . . . The direct contention of the work [also] seems to me quite unsubstantiated.”
Joseph Schumpeter noted Keynes’s “technique of skirting problems by artificial definitions which, tied up with highly specialized assumptions, produce paradoxical-looking tautologies. . . .”
British economist Hubert Henderson privately stated that: “I have allowed myself to be inhibited for many years . . . by a desire not to quarrel in public with Maynard . . . . But. . . I regard Maynard’s books as a farrago of confused sophistication.”
French economist Etienne Mantoux added that the whole thing simply appeared to be “rationalization of a policy … long known to be . . . dear to him."
In The General Theory itself, Keynes has a good word to say about clarity, consistency, and logic.He is quick to pounce on what he considers the errors of others. But he then leads us down a rabbit hole of convolution, needless and misleading jargon, mis-statement, confusion, contradiction, unfactuality, and general illogic.
It is not that Keynes is entirely opaque. It is quite feasible to make out what he seems to be saying, but it is worth taking a moment to focus on the particular rhetorical devices and obfuscations that Keynes employed.
Device One: Obscurity
A typical sentence from The General Theory:
We have full employment when output has risen to a level at which the marginal return from a representative unit of the factors of production has fallen to the minimum figure at which a quantity of the factors sufficient to produce this output is available.
This means, in essence, that we have not reached full employment until all factors of production are fully employed. We will recall that, per Keynes, only at this point do we have to worry about inflation.
Keynes took exception when other economists wrote in this convoluted way. For example, in a 1931 letter to the editor of The New Statesman and Nation, he charged Lionel Robbins with the same sin, even though Robbins was, on the whole, a very clear writer:
Professor Robbins wants “increased elasticity of local wage costs” . . . which means in plain English, I suppose, a reduction of average wages.
Given this stab at Robbins, can we at least assume that Keynes will avoid the term “elasticity” in The General Theory? No, not at all, he uses (and misuses) it repeatedly.
Device Two: Misuse of Technical Language
In the example above, Lionel Robbins was at least using standard economist’s jargon. Keynes liked to make up his own jargon, or worse, use standard jargon in a non standard way. This led to a scolding by economist Frank H. Knight in the review of The General Theory that we have already cited: “Familiar terms and modes of expression seem to be shunned on principle.”
The only legitimate reason to use technical language is to make a sentence clearer, if not to the average reader, at least to the professional reader. Keynes habitually uses technical language to confuse, and as we shall shortly see, this may have been a deliberate strategy.
Device Three: Shifting Definitions
Keynes tells us in The General Theory that economists have not clearly defined the jargonish term “marginal efficiency of capital” (which roughly means return on capital). He then proceeds throughout the book to use the term in many different ways, at least seven by Henry Hazlitt’s count. Another slippery word in The General Theory is wages, which can mean an hourly rate or total employee pay or something else. Keynes does not seem to notice the difference, which leads him into serious logical errors.
Once again, Keynes criticized the same lapse in others. In a book review early in his career, he took an author to task for
us[ing] the [same] expression some thirty times in some apparently eight different senses.
Device Four: Misuse of Common Terms
In some cases, Keynes stretches the meaning of a commonly used word beyond recognition without explicitly redefining it. For example, he tells us that for every commodity there is an implicit rate of interest, a wheat rate of interest, a copper rate of interest, a steel plant rate of interest, and so on. This confuses commodity options and futures pricing with interest rates, a clear case of mixing apples and bananas. We have already seen that Keynes uses the word equilibrium to describe what is actually disequilibrium.
Device Five: Reversing Cause and Effect
Keynes says that entrepreneurs calculate how much revenue they will earn from x employees. But they do not. They calculate how many employees they can afford from x revenue. Keynes says that prices are low if production is low. In actuality, it is the reverse: production is low if prices are low. Keynes seems to like these reversals, perhaps because they dress up the ordinary with a gloss of novelty, even of profundity. But it is really no more than a parlor trick, and just piles error on error.
Device Six: False Determinism
Keynesian economist Alvin H. Hansen, whose book A Guide to Keynes attempted to de-mystify the master, tells us that “Keynes’s most notable contribution was his consumption function.” The so-called marginal propensity to consume (consumption function) tells us that people tend to save more as their income rises. Stated as such, it is a commonplace, certainly nothing new. But Keynes calls it a “fundamental psychological law,” which it certainly is not. We can neither predict with certainty that people will always save more as their income rises, nor can we work out a forecastable schedule of increased saving, as Keynes assumed.
In the Keynesian model, the marginal propensity to consume is also treated as an independent variable. (It is supposed to determine other variables, not be determined by them.) This is clearly false. As Benjamin Anderson, economist and early Keynes critic, pointed out, “The so-called independent Keynesian variables (1. The marginal propensity to consume, 2. The schedule of the marginal efficiency of capital, and, 3. The rate of interest) are all influenced by each other. They are interdependent, not independent. Keynes even forgets himself and admits at one point that #2 is influenced by #1.”
Device Seven: Slipping Back and Forth between Mutually Inconsistent Categories
Keynes uses the word “wages” to mean either a wage rate or total wages. He is also prone to move back and forth between physical commodities and services and money prices for commodities and services, another case of mixing up apples and bananas.
Device Eight: Unsupported Assertion
In the entirety of The General Theory, there are only two references to statistical studies, one of which Keynes partly dismisses as improbable:
Mr. Kuznet’s method must surely lead to too low an estimate.
Even when he discusses a subject that especially lends itself to statistical analysis, such as a suggested relationship between agricultural harvests and the business cycle, he simply takes a position without bothering to search for relevant data.
Device Nine: Misstatement
Keynes mischaracterizes the purpose of corporate sinking funds. How could he make such an elementary error? Probably because he had said the same thing many times when speaking on his feet, and, being busy, did not take sufficient time to check his written work.
Sometimes Keynes seems too busy even to think. He says that if a lender lends money to a business owner, this doubles the risk of a business owner using his own money, which doubled risk is reflected in the interest rate. This makes no sense, as Henry Hazlitt noted. Risk is not doubled when a lender enters the picture. The lender and the business owner share what is still the same risk of failure.
Device Ten: Macro or Aggregative Economics
Keynes is usually credited with “inventing” macroeconomics, which looks at economy-wide flows rather than the micro-economics of specific firms or industries. This is not entirely accurate. Other economists adopted an economy-wide perspective, although they often extrapolated from the firm or industry to the economy as a whole, which Keynes wrongly criticized. Ironically, Keynes attacked Say’s Law which is, itself, an example of macroeconomics. It is certainly fair to say that Keynes developed his own type of macroeconomics, which his followers developed into the macroeconomics of today. It is also true that a macroeconomic viewpoint makes it easier for a skilled casuist to mislead and confuse, and that Keynes fully exploited this opening.
Device Eleven: Misuse of Math
Keynes refers to sales in one of his equations, but it is expected sales, not actual sales. Expectations by definition are not verifiable and thus do not belong in an equation.
As Henry Hazlitt has pointed out,
A mathematical statement, to be scientifically useful, must, like a verbal statement, at least be verifiable, even when it is not verified. If I say, for example (and am not merely joking), that John’s love of Alice varies in an exact and determinable relationship with Mary’s love of John, I ought to be able to prove that this is so. I do not prove my statement—in fact, I do not make it a whit more plausible or “scientific”—if I write, solemnly,
- let X equal Mary’s love of John,
- and Y equal John’s love of Alice,
- then Y = f (X)
—and go on triumphantly from there. Yet this is the kind of assertion constantly being made by mathematical economists, and especially by Keynes.
Given the Alice in Wonderland quality of The General Theory, it should not surprise us that Keynes interrupts his own misuse of math to tell us that he (apparently) agrees with Hazlitt:
To say that Queen Victoria was a better queen but not a happier woman than Queen Elizabeth [is] a proposition not without meaning and not without interest, but unsuitable as material for the differential calculus. Our precision will be a mock precision if we try to use such partly vague and nonquantitative concepts as the basis of a quantitative analysis.28
He also warns of
symbolic pseudo-mathematical methods . . . of economic analysis.
After some of his own algebra he adds that:
I do not myself attach much value to manipulations of this kind.
It is quite typical of Keynes now to attack, now to disarm, now to shout, now to whisper, now to qualify his mathematical claims, now to ignore, even blatantly ignore, the same qualifications. On occasion, Keynes was even capable of a crude bluff. Writing a private letter to Montagu Norman, Governor of the Bank of England, he said that his theories (the same theories that would later appear in The General Theory) were a
mathematical certainty, [not] open to dispute.
Keynes certainly knew better. Some of his disciples did not. Economist Wilhelm Röpke noted in 1952 that
The [Keynesian] revolutionaries [take a stance of] . . . vehement self-assertion and barely veiled contempt, such as are habitual to the “enlightened” in dealing with those who remain in the dark. They seem to regard themselves as all the more superior in that they can point with obvious pride to the difficulty of their literature and to the use of mathematics, which lifts the “new economics” almost to the lofty heights of physics.
One could go on, almost indefinitely, citing Keynes’s obscurities, convolutions, inconsistencies, factual or logical lapses,and so on, but it is time to ask the obvious question: why did he write The General Theory this way? Keynes could be orderly, organized, consistent, relevant, clear, complete, and factual, in addition to being playful and witty, when he wanted to be. This is apparent from the earlier books and many of the shorter pieces. There are some snippets from The General Theory that also reflect these characteristics. So why is most of The General Theory so different?
There are many possible answers. Historian Paul Johnson has said, unrelated to Keynes, that “In financial matters, the object of complexity is all too often to conceal the truth, to deceive.” The French economist Étienne Mantoux, reviewing The General Theory shortly after publication, quoted an earlier English economist, Samuel Bailey, from 1825: “An author’s reputation for the profundity of his ideas often gains by a small admixture of the unintelligible.”
This may be part of the explanation, that Keynes intended to deceive or impress. But we must bear in mind that Keynes was a salesman. He was trying to sell a particular type of economic policy, and he was prepared to utilize any rhetorical device, from crystal clarity and wit all the way to complete unintelligibility, in order to make the sale.
Why would unintelligibility help to make the sale? Not just because it can be used to impress. Equally important, it can be used to intimidate. Keynes liked to make people feel, as his very intelligent friend Bob Brand said, like “the bottom boy in the class.”
Keynes probably developed obscurity as one of his speaking styles. He obscured, confused, and scrambled the mental “chessboard,” because he felt confident that he could always keep the position of the “chess pieces” in mind, and combine them as he saw fit for an attack in any direction, whereas his opponents could not. This is a very impressive skill indeed, especially when one is speaking extemporaneously. No wonder that Sir Josiah Stamp, a very respected economist who often partnered with Keynes on BBC broadcasts, said on the air that “I can never answer you when you are [verbally] theorizing.”
Whether this was a deliberate style on Keynes’s part, or just a habit, we cannot know. But it was natural for him to fall into the same scrambling, intimidating style when writing The General Theory. The problem is that it does not work as well in print as in conversation or debate. When confined to print, it can be examined, and all the myriad flaws, the errors of fact or reasoning, the rhetorical tricks, the pseudo originality, may be revealed.
A few prominent economists, notably Ludwig von Mises, Friedrich Hayek, Wilhelm Röpke, Jacques Rueff, and Henry Hazlitt, among others, saw through it completely. Others perceived that something was wrong, but hesitated to say so out of fear of Keynes’s position and powers of retaliation. Regrettably, no major economist published an immediate book-length refutation, so that the influence of The General Theory spread and spread, notwithstanding its all too apparent flaws.
Today many people – economists, financiers, investors, business owners, and managers – say that Keynes is their intellectual hero. Have they actually read The General Theory? Have they read more than the few clear and witty passages so widely quoted?
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- Hurricane Irma Released "250 Million Gallons Of Untreated Sewage" Into The Streets Of Florida
One could be forgiven for believing that, with all this talk of the coming “climate catastrophe,” Americans would be scrambling to flee Hurricane-prone states like Texas and Florida. The reality is just the opposite: Thanks to their low cost of living, and minimal taxes, Florida and Texas are among the states in the US where populations are rising via interstate migration. Contrast that with Connecticut, which is far less vulnerable to hurricanes, and where the population drain has accelerated dramatically in recent years.
Both Harvey and Irma impacted some of the fastest-growing counties in the US, exposing a problem that’s probably frustrated city and county officials for years. How to upgrade decades-old sewage and water-treatment systems.
When the storms struck, the ancient systems quickly failed, releasing millions of gallons of raw sewage into city streets and canals, complicating the cleanup effort, according to Bloomberg:
“Millions of gallons of poorly treated wastewater and raw sewage flowed into the bays, canals and city streets of Florida from facilities serving some of the nation’s fastest-growing counties. In fact, 4 of the 10 fastest-growing coastal counties in the eastern U.S. are in Florida. More than 9 million gallons of releases tied to Irma have been reported as of late Tuesday as inundated plants were submerged, forced to bypass treatment or lost power.”
Of course, this problem requires a monumentally expensive fix: The Environmental Protection Agency estimated last year that $271 billion is needed to maintain and improve the nation’s wastewater pipes, treatment plants and associated infrastructure. In fact, many parts of Florida and Texas face infrastructure challenges even when they aren’t deluged by rain because of rapid population growth.
Otherwise, populations risk the spread of pathogens with every overflow.
Estimates for scale of the untreated and poorly treated wastewater that leaked because of both Irma and Harvey are expected to keep climbing. Even Hurricanes Hermine and Matthew, which were modest compared with this year’s storms, released some 250 million gallons of wastewater that hadn’t been fully treated between Aug. 31 and Oct. 15, 2016, according to the Florida Department of Environmental Protection.
A treatment facility in Clearwater, Fla. Leaked 1.6 million gallons of wastewater into a creek, according to filings with the state’s Department of Environmental Protection. And that incident paled in comparison to a 30-million-gallon discharge of raw sewage after Hurricane Hermine caused pumps to fail, according to David Porter, the city’s public utilities director.
Electrical outages throughout the state caused lift station pumps to stop running in St. Petersburg and Orlando, prompting at least 500,000 gallons of spillage. A pipeline broke in Miramar, Florida, sending sewage spilling across a parkway – creating a nasty scene for the contractors who had to hunt for the rupture. And operators of a Miami-area wastewater treatment plant blamed a power outage for 6 million gallons of sewage released into Biscayne Bay.
Of course, this isn’t limited to a regional issue: Hurricane Sandy also unleashed a flood of sewage when it struck New York and New Jersey in 2012:
“After Hurricane Sandy ravaged the northeast US in 2012, damaged treatment plants and pumping stations caused untreated sewage to flow into local waterways for weeks. All told, facilities in the eight states hardest hit by the super storm released 11 billion gallons of untreated and partially treated sewage, according to one assessment.”
And as Bloomberg explains, loose sewage poses lingering public-health and economic risks to a community…
“Sewage discharges carry both health and economic risks, as officials may order the closing of affected beaches and rivers for swimming and boating long after storm clouds have passed. When untreated water or raw sewage is spilled, it can deliver toxic chemicals from roads, E. coli from human waste and other pathogens that have the potential to cause viruses, parasitic infections, rashes and other health conditions.”
…Because the pollution can often be difficult to detect.
"We focus on the water and the flooding and the impacts to homes and everything else, which is super important," said Danielle Droitsch, a program director with the Natural Resources Defense Council. "But understanding environmental contamination issues is more complicated. We don’t necessarily see the pollution, sometimes you can’t smell it and yet it’s there."
And while there’s no such thing as a perfect sewer system…
"There’s no sewer system in the world that can be built that’s completely leak proof," said Nathan Gardner-Andrews, chief advocacy officer for the National Association of Clean Water Agencies. Plants generally are designed to handle twice their normal capacity, but "when you get some of these rain events and you’re talking four to six to eight inches of rain in an hour, the engineering is such that you cannot build a system to hold that capacity."
…Some sewage systems in rapidly growing southern counties, including the Florida counties affected by Irma, are more than 50 years old, and they demand immediate attention.
“Aging infrastructure may not be able to keep up with the demands of a surging southern population. In many cases, such as in south Florida, elements of the sewer system range from 60 to 70 years old, with pipelines that are even older, said Kelly Cox, a staff attorney and program director for the environmental group Miami Waterkeeper.”
“You throw a hurricane on top of that, and you are starting to see a lot more problems," she said.
Talk about a sh—storm…
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