Typography

Charles Ponzi Ethereum is being used as a platform for a bunch of ponzi schemes. Is this an indictment of the system; or is it a sign that it is generally working? For those who aren't familiar with it, Ethereum is often described as a distributed computer. A network of independent and anonymous nodes keep the system running, and on top of it developers can write smart contracts and distributed apps, known as Dapps. If you go to dappRadar , you can see what sort of apps are currently active on Ethereum. There are casino apps, including vDice, Etheroll, EOSbet. There are a bunch of distributed cryptocurrency exchanges, like IDEX and ForkDelta. And a whole range of games, the most famous of which is probably CryptoKitties. There are also a collection of ponzis and pyramids. At the time of writing, PoWH 3D was the largest with around 4,500 ETH committed ($2.3 million). There is a gang of other smaller copycat ponzis including EthPhoenix, Proof of Community, Gandhigi, POWM, Proof of Fa...

Ken Rogoff has famously called for a ban on high denomination banknotes in order to help combat tax evasion and hurt criminals. But rather than banning notes, why not implement a market-based approach such as a tax? Among other advantages, a tax leaves people with flexibility to determine the cheapest way to reduce their usage of the targeted commodity. This is how society is choosing to reduce green house gas emissions. So why not go the tax route for banknotes too? My recent post for the Sound Money Project on pricing financial anonymity delves into this idea. The anonymity provided by banknotes is both a "good" and a "bad". People have a legitimate demand for financial alone time ; a safe zone where neither their friends, family, government, nor any other third-party can watch what they are buying or selling. These days, cash is pretty much the only way to get this alone time. But cash's lack of a paper trail can be abused when it used to evade taxes. The r...

Mavrodi "biletov" In this post I'm going to outline a case for bitcoin. I still think bitcoin is a bad medium of exchange and a rubbish store of value . It's just too volatile and unhinged, and it'll always be that way. But bitcoin still has an important role to play... just not the role that most people assume. Sara Hess and Eugene Soltas recently published a fascinating article on the life of Russian ponzi-scheme architect Sergei Mavrodi, who passed away last month. I found it interesting that in the latter part of his career, Mavrodi openly advertised that his schemes were pyramids, yet people still bought in. Ponzi-schemer Sergei Mavrodi clearly advertised MMM's risks and promised nothing in return, yet still people bought in. If he didn't trick people into joining, maybe society genuinely needed him to manage ponzis? https://t.co/5RAzDFvTgx pic.twitter.com/pUghQJQB00 — JP Koning (@jp_koning) April 26, 2018 This got me thinking. I've always sor...

"Water water everywhere, and not a drop to drink" - Rime of the Ancient Mariner (Gustave Doré woodcut) In a recent paper , John Taylor rhapsodizes about bringing back the good ol' federal funds market: I think the case can be made for such a framework. Peter Fisher ran the trading desk at the New York Fed for many years, and knows well how these markets work. His assessment is that such a framework would work, saying “we could get back and manage it with quantities; it’s not impossible. We could just re-engineer the system and go back to the way we were.” I spent time in the markets for federal funds watching how they operated in those days, and I wrote up an institutional description of how good experienced people traded in these markets, and I developed a model showing how the market worked. The fed funds market is currently moribund , but just a few years ago it was buzzing with activity. Banks that didn't have enough reserves at the end of the day to meet requirem...

Over on the message board we've been discussing the implications of central bank-issued digital currency, otherwise known as CBDC. One view is that a central bank digital currency would lead to increased financial instability, Bank of England governor Mark Carney being a vocal proponent of this idea. There are a lot of criticisms that can be leveled against central bank digital currency, but the Carney critique is the one that worries me the least. Let's see why.  First off, let's establish what we mean by digital currency. Imagine that a central bank has discovered a technology that allows it to create an exact digital replica of the banknote. Like banknotes, these digital tokens are anonymous and untraceable. To make use of them, people don't have to register for an account. Rather, the tokens are held independently on one's device, sort of like how paper money is held in one's wallet without requiring any sort of registration with the issuing central bank. T...

Courtesy of Kerry Taylor's twitter feed , here is a chart which was presented during a recent investing conference in Toronto. Apparently bitcoin has a moneyness score of 22 while cowry shells ring the bell at 15, both of them exceeding the moneyness of U.S. dollars at 13. The presentation that contains the chart was created by angel investor Sean Walsh and is available here . Since my blog is called moneyness, and I've written quite a lot on this topic , I feel somewhat obligated to chime in. Let's start with the good bits about the chart. Instead of classifying items as money-or-not, we can appraise objects by their degree of moneyness. Because every valuable object or instrument is exchangeable, some more easily than others, everything lies somewhere on the money spectrum. The diagram below illustrates this idea. This way of looking at things can provide some insights that we don't normally get when taking the money-or-not approach, and its nice to see that folks ...

The (Great) Tower of Babel , 1563, Bruegel the Elder. "Therefore is the name of it called Babel; because the Lord did there confound the language of all the earth" People bandy the term fiat currency around a lot, but what exactly does it mean? None of us wants to live in a Babel where people use fiat to indicate twenty different thing. So let's try to zero in on what most people mean by playing a game called fiat-or-no t. I will describe a monetary system as it evolves away from a pure commodity arrangement and you will tell me when it has slipped into being a fiat system. (The technique I am using in this post cribs from a classic Nick Rowe post ). So let's start the game. 1) An economy in which gold coins circulate as the medium of exchange. Fiat or not? I think we can all agree that there is nothing fiat at all here. (For simplicity's sake let's assume for the duration of this post that taxes can be paid with anything, and that there is no legal tender.)...