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Bitcoin was invented eleven years ago this month with the release of the famous white paper by Satoshi Nakamoto. The little crypto that could has rocked the world financial order, not only because of its high performing price – with no shortage of volatility – but because its underlying technology has been copied by legacy institutions to create a much better and more secure user experience.
In this time, regulators have found the cryptos to be an annoyance. In the United States, in general, given the radical nature of the project to create a non-government money for the digital age, the response has been surprisingly calm. The regulators hectored but didn’t ban it. They investigated but they mostly didn’t resort to outright violence to stop it.
When Facebook proposed the Libra, however, moral panic swept Washington. Bitcoin is for geeks. Let them have their fun. No normal person understands this stuff anyway. But Facebook? It’s powerful, global, compelling, and easy for everyone to use. A Facebook-style crypto currency? That could be deadly not because it would be bad for consumers but because it would be bad for government!
How can you have a national monetary policy when everyone is using a new global currency that is valued according to the market and not the Fed? How can the money monopoly survive under these conditions? What could it possibly mean for government to give up its control?
Mark Zuckerberg, in Congressional testimony, kept warning that the US is falling behind China in payment innovation. It’s true. The trouble is that if you care mainly about power and control, this is an irrelevant fact. Falling behind is just fine so long as the legacy system is kept on life support, according to this view.
In general, Zuckerberg spoke with passion and conviction but with far too much acquiescence to the regulatory mob attack. No matter what he promises, they will never get on board. Washington can slow it down but can’t stop what’s coming: currency will be privatized.
I explained more in my appearance on Money Talks.
Jeffrey A. Tucker
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The FCC’s Treatment of Huawei Is a Tremendous Embarrassment
It’s said about Baltimore Ravens quarterback Lamar Jackson that he’s a particularly challenging opponent. With Jackson there’s no preparing for the run or pass; rather there’s preparing for the run, pass, along with the horrifying possibility that Jackson himself will run the ball. With only eleven defenders, opposing coaches seem to be implying that they don’t have enough players in position to respond to the myriad things Jackson might do with the football.
The immense challenge that comes with playing against Jackson came to mind while reading some of the latest news about the Trump Administration’s efforts through the FCC to cripple China-based communications giant Huawei. Up front, these actions meant to neuter Huawei are nakedly protectionist, and speak to how far Republicans have slid as the party of “limited government.” It’s truly sad to witness.
Republicans excuse their embarrassing behavior by claiming that “China” is “communist,” and Huawei has close ties to the communist regime. It’s a reminder that modern Republicans are either ignorant to history, willfully blind to simple economics, or both. Simply put, to visit China is to see it’s “communist” in name only. Anyone with even the slimmest memory of the 20th century knows that communism is defined by relentless misery, starvation, murder, and other horrid things. The latter doesn’t much describe modern China. It’s an economically vibrant country that’s thick with American businesses.
After which, state-run companies generally aren’t thriving businesses, and their products generally can’t be found around the world. That’s how we know Huawei is run for profit, as opposed to it being run by China’s “communist” regime. Its wares can be found in 177 different countries, and its technology is very popular with cellular companies in the United States, particularly smaller communications companies in rural parts of the U.S. Since the GOP base is increasingly rural, one would think Republicans in Washington would want to know why Huawei technology is so well-regarded by carriers in red states, and also how cripplingly difficult it would be for rural telecoms to shift to other providers if forced to by “limited government” Republicans.
Of course, all of this would require Republicans to meddle less in the operations of private businesses. Sorry, but that’s your dad’s GOP. The modern and rather paranoid GOP thinks businesses are strengthened by government protection, and as a consequence modern Republicans are using the force that is government to try to neuter Huawei.
The stated reason for federal limits erected to Huawei technology stateside has been “national security.” Try not to laugh, but in an effort to limit Huawei’s prospects so that U.S. communications companies can catch up in the “race” to roll out 5G, federal officials are claiming that broader Huawei market penetration in the U.S. would make it possible for this alleged organ of the state to “spy on Americans.” Where does one begin?
For one, it should be stressed again that if Huawei were a tool of the Chinese state then it wouldn’t have any products and services worth selling to begin with. Republicans used to know this basic truth.
For two, assuming Huawei is a worthy company, which it must be based on its global footprint, its owners wouldn’t risk market stature born of endless hard work by angering a crucial market like the United States. And for those who are willfully ignorant, and who believe Huawei’s “owners” are the Chinese communist party, well, there’s really no hope for you.
Which brings us to basic common sense. Stated rather simply, if you’re spying on everyone you’re spying on no one. As is, overnight China critics in the U.S. want to believe that the communists in China are operating a massive surveillance state there in which they know all and see all, at which point they’ll do the same stateside? If so, fear not because you can’t spy on everyone. Goodness, coaches can’t even figure out Lamar Jackson but pundits want us to believe the Chinese aim to figure out all 330 million of us Americans? And they’d like to learn what? The information would overwhelm them as opposed to making their allegedly devious vision for the future more of a reality. If foreign policy deep thinkers are really looking to trip the Chinese up, they should invite them to bug all of our phones. We’ll know the Chinese aren’t a threat if they actually lunge for the fool’s bait.
At which point it’s got to be remembered that the Chinese aren’t even very good at policing their own people. Indeed, it’s long been pointed out that Facebook, Google and other sites like it are banned in China, but only to the technologically ignorant. As for journalistic types, yours truly has been to China countless times only to see U.S. journalists access the sites mentioned through the use of a VPN. In short, the information blackout only shields those who want to be shielded from information. Kind of like routine watchers of CNN and MSNBC on the left, or Fox on the right.
What about access to real news? Some like to point out that Chinese history is scrubbed of information relating to the Tiananmen Square massacre in 1989. No doubt that’s true on the surface, but as Evan Osnos points out in The Age of Ambition, his spectacular book on modern China, basic computer skills make it simple for readers to find out the much uglier truth online. In China.
Osnos goes on to point out that by the time the censors are made aware of information or statements they don’t like reaching the public, it’s too late. Information, and the technology that spreads the information, is much faster than the government officials who vainly presume to limit its dissemination. In short, technology created in the free market will outrun what government officials might use to limit information flow, or attain it. Repeat yet again, if they’re spying on everyone they’re spying on no one.
Which brings it all back to what’s brought on the federal government’s vicious attack on Huawei. It’s once again protectionism, plain and simple. Federal officials and U.S. businesses fear they can’t win the alleged “race” to 5G supremacy in the marketplace, so they’re resorting to government. It’s the only answer to the Huawei riddle, and it’s sad.
Republicans who used to cheer China’s shedding of its statist past, and who used to venerate free trade, are running from it. The whole world is watching as they embrace the mathematical equivalent of 1+1 equaling a thousand. It seems free markets can really only be free if “America” is winning. Lost on the GOP is that such a strategy is for losers.
This piece originally ran in RealClearMarkets
John Tamny
John Tamny, research fellow of AIER, is editor of RealClearMarkets. His book on current ideological trends is: They Are Both Wrong (AIER, 2019)
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Gas and Apparel Pull Everyday Prices Down in November
AIER’s Everyday Price Index fell 0.1 percent in November after posting a 0.4 percent increase in October. The Everyday Price index has fallen in four of the last six months. The Everyday Price Index measures price changes people see in everyday purchases such as groceries, restaurant meals, gasoline, and utilities. It excludes prices of infrequently purchased, big-ticket items (such as cars, appliances, and furniture) and prices contractually fixed for prolonged periods (such as housing).
The Everyday Price Index including apparel, a broader measure that includes clothing and shoes, decreased 0.3 percent in November after a 0.3 percent rise in October. The Everyday Price Index including Apparel has fallen in three of the past six months. Apparel prices fell 2.5 percent on a not-seasonally-adjusted basis in November and are down 1.6 percent over the past year. Apparel prices tend to be volatile, registering sporadic large gains or declines in between stretches of relatively steady prices.
The Consumer Price Index, which includes everyday purchases as well as infrequently purchased, big-ticket items and contractually fixed items, fell 0.1 percent in November, matching the decline in the Everyday Price Index. The Everyday Price Index is not seasonally adjusted, so we compare it with the unadjusted Consumer Price Index.
Over the past year, the Consumer Price Index is up 2.1 percent. Over the same period, the Everyday Price Index has risen 1.2 percent while the Everyday Price Index including apparel is up 0.9 percent. The modest increases in both indexes over the past year are largely due to weak energy and grocery store prices.
Motor-fuel prices fell 1.1 percent for the month on a not-seasonally-adjusted basis. Over the past year, motor-fuel prices are off 1.3 percent. Motor fuel prices are largely a function of crude oil prices. West Texas Intermediate crude oil prices fluctuated dramatically from mid-2017 through mid-2019, rising to a peak above $75 per barrel in October 2018 before plunging to less than $45 by December 2018. Crude prices have been relatively stable since May, bouncing around in a range of $50 to $60.
Grocery prices fell 0.3 percent in November and are up just 1.0 percent from a year ago. Over the last five years, grocery prices are essentially unchanged.
The components with the largest weights in the Everyday Price Index are food at home (weighted 20.8 percent and declining 0.3 percent in November), food away from home (17.6 percent and a 0.2 percent rise), household fuels and utilities (13.3 percent and a 0.3 percent drop), and motor fuel (11.8 percent with a 1.1 percent decrease). Together, these four categories account for 63.5 percent of the Everyday Price Index.
Overall, net changes in the Everyday Price Index remain modest. Energy prices are the most volatile component and have been, on balance, a negative contributor in recent months. Grocery prices (food at home) have also been rising at a slow pace and stand in sharp contrast to restaurant prices (food away from home) which have been rising more quickly and persistently. Apparel prices also remain volatile but in general have been a negative contributor. Other smaller components have had significant but largely offsetting trends. Notably, gardening and lawncare services prices are up 8.4 percent from a year ago, while tobacco products have risen 5.5 percent, postage and delivery services are up 5.4 percent, recreational reading materials are up 4.9 percent, and pet and pet products are up 3.3 percent. Partially offsetting these were audio discs and tapes, down 2.6 percent and video discs, down 2.5 percent. Several other smaller components have increases close to zero.
Robert Hughes
