Bitcoin mining rig is up!

Picture of my liquid-cooled box of 4 Radeon HD5870 cards, before closing up the case and actually getting it to work. It computes about 1.3 Gigahashes per second. (Click to enlarge.)



The side panel that closes it off (not shown) adds another large fan, which I inverted so it's sucking the hot radiator exhaust air out.

UPDATE 5/24/11: I've switched to the Phoenix miner, which somehow gets more hashes out of your card, so I'm now computing about 1.5 Ghash/sec.

Setting Inflation Straight, Part III (at least)

You ever noticed how inflation seems a lot worse than the official numbers indicate?

Via Yahoo, Fox Business reports on the change in prices for a sample of everyday grocery items. It shows quite a shocking increase over the past year, far more than you might suspect from the "tame" inflation numbers you hear about.

I've reproduced the prices from that article in the table below, showing the current, March 2010, and March 2006 values. (I couldn't find the numbers in the source cited, but will operate on the assumption they all refer to March of that year, even though it suggests they average over 12 months in the previous year; this would mean the results I calculate actually understate inflation.)


Yikes! The average 1-year price increase for this sample is over 8%!

So what is the offical food price increase? The BLS CPI report on page 2 gives their aggregate 1-year food price incease as only 2.9%!!! And if you think 1 year is too short because of volatility, then look at the five-year food inflation numbers, a time period that covers the "massive" price collapse and "deflation" following the 2008 crisis onset: 4.7% per year.

And this is still:

- ignoring all quality debasements, and
- in an environment where banks are holding on to their massive reserves, suppressing price increases!

I've listed the corresponding prices for gold (though they're all relative to the present instead of March of any year), using an ETF (ticker symbol GLD) that tracks it. Looks like it works well (if a bit too well) as a barometer of dollar debasement. Hope you stocked up back then! (By a great coincidence, a financial advisor in April 2006 looked at me like I was insane for suggesting putting any money in gold.)

But don't worry, your iPad holding more memory will make up for this, I'm sure...

Setting CPI silliness straight ... again

Sorry for the long lull in posting, and I'm a bit late on this story too, but it's very telling. We have on our hands a new modern day Marie Antoinette (or at least the popular image of her): William Dudley of the New York Fed deigned to talk to a working-class audience in Queens, New York on March 11.

He tried to promote the tired line about inflation being low, a story this crowd, well, didn't find plausible:

"When was the last time, sir, that you went grocery shopping?" one audience member asked.

Then, for his "Let them eat cake" moment, Dudley brilliantly replied to these concerns of higher grocery prices with,

"Today you can buy an iPad 2 that costs the same as an iPad 1 [sic] that is twice as powerful," he said referring to Apple Inc's latest handheld tablet computer hitting stories on Friday.

*facepalm*

No, Mr. Dudley. An equal-price, technologically-better iPad really doesn't cancel out my more expensive food, energy, tuition, rent, and health care costs. It just doesn't.

Now, some folks have tried sheepish defenses of this line: "Sure, that might not be the best way to say it, but he's ultimately right that you have to look at all prices, and not just narrowly focus on stuff you'd actually buy."

But even saying that much would be wrong. Remember, when central bankers want to promote the idea of how dreadful deflation is, they dismiss that pesky trend of computer hardware getting cheaper, a trend most people, for some reason, regard as a good thing -- not with the rabid hatred they're supposed to hold for deflation.

But central bank acolytes will always trivialize this phenomenon, saying that, no, that's not the kind of inflation we're worried about -- we only want to count the kind that's affected by money supply, money velocity, liquidity preference, that kind of thing -- not these technology-driven improvements!

And in a way, it makes sense. But at the same time, it certainly means you don't get to turn right around, abandoning the long history of deeming cheaper computer hardware irrelevant to inflation, and count higher iPad performance as somehow canceling out the inflation you do care about. It doesn't work that way. If technology-driven hardware performance isn't relevant to measuring inflation for purposes of monetary policy, you don't get to selectively invoke it at the specific times when you "need the numbers to be lower".

It's good to see some people calling the Fed on this.

The monetary mentality strikes again!

They say I'm caricaturing the view of monetary economists to imply that they just want to get people to spend, spend, spend, whether or not that spending is actually accomplishing anything of value, that this nominal GDP has become an end in itself, completely decoupled from whether it actually accomplishes any good by what we really look for in "the economy".

But then along comes famous economist Alan S. Blinder to prove my caricature right ... again:

So the third easing option is to cut the interest rate on reserves in order to induce bankers to disgorge some of them. ... How about minus 25 basis points? ...

Charging 25 basis points for storage should get banks sending money elsewhere. The question is where. ...

... suppose some fraction of the $1 trillion in excess reserves was to find its way into lending. Even if it's only 10%, that would boost bank lending by 3%-4%. Better than nothing.

There, again, you see the mentality: get the money spent. Out there. Somewhere. Anywhere. Doesn't matter if it's destructive, shortsighted loans. Doesn't matter if it just jumpstarts projects that have to unwind and liquidate in a year. Just spend money and we'll all be fine!!!

UPDATE: After posting this, monetary stimulus ringleader Scott Sumner actually endorsed the passage. Yep, get that money lent lent lent! We'll worry if the loans actually went to genuine economic productivity ... um, later.

Intellectual works aren't scarce -- just like money

If you listen to Stephan Kinsella or his acolytes, you're probably well familiar with the argument that "Intellectual property rights should not exist" because "intellectual works aren't scarce", though this is often confusingly shortened to "IP isn't scarce". Here's Kinsella's latest compilation of the anti-IP arguments, that being one of them. (Which led to a very lengthy discussion.)

Well, I've been reading Jaron Lanier's recent book, You Are Not a Gadget, which gives a good reply (p. 102):

It is a common assertion that if you copy a digital music file, you haven't destroyed the original, so nothing was stolen. The same thing could be said if you hacked into a bank and just added money to your online account. ... The problem in each case is not that you stole from a specific person but that you undermined the artificial scarcities that allow the economy to function. In the same way, creative expression on the internet will benefit from a social contract that imposes a modest degree of artificial scarcity on information. [bold added]

I've made a similar point before: Money is information -- specifically, the relative amount that the world (believes that it) owes you. When money is stolen from you, then you can certainly force yourself to think of it in terms of

-a physical item being removed from your possession, or of
-a server having "unauthorized use".

But what's really important is the editing of that information: where before, the world thought it had a remaining balance against you of $X, now it thinks that the thieves are owed that $X. This problem persists even after you are given compensatory paper or the bank gets standard compensation for trespassing, and it's what people care about.

MMORPGs (World of Warcraft, Everquest, etc.) have already assimilated this lesson. In such online games, your money really is nothing but a database entry. It doesn't correspond, even in principle, to a physical object, just the knowledge of a relationship.

Lanier's alternate suggestion, following Ted Nelson, is that we could instead simply have an automated system that charges for each time a given intellectual work is accessed. People could "pirate" these (already freely-accessible) works by only using versions stored outside of where there access would be recorded, just as they do today when pirating works. But so long as the public regards this as wrong, and wrong for the same reason as counterfeiting, they would run into the same problem as counterfeiters. And the relatively low cost with which the works could be accessed under such a system would remove most of the sympathy for them.

I note that one particular snag of this is that people will not want to have to think of the costs each time they want to look at a book again. However, if everyone paid a fixed amount each year, and their choice of what to access only determined which fraction of that payment went to each creator, then choosing to view anything would cost nothing on the margin, further eroding any incentive to pirate.

Setting spending straight: Now, we're getting somewhere

Setting spending straight: Now, we're getting somewhere

As you might have noticed, I'm quite confounded by the arguments for stimulus, especially monetary stimulus.

In discussing the issue on Less Wrong, I've argued that once you expand out what the economics jargon, it's not even clear that stimulus arguments even claim to be accomplishing something good. And that such schemes are justified with reasoning that would just as wellprove it beneficial to do clearly absurd things, showing a misuse of the term "the economy".

This suggested to me a serious case of lost purpose, where one's policy justifications have become completely disconnected from the original reasoning.

Well, now I've found someone willing to engage these issues: John Salvatier of Good Morning, Economics. He's not Scott Sumner, but he does advocate the same things, and knows his way around the topic.

If you're interested, take a look at our ongoing exchange on the basis for stimulus (and this shorter thread).

Sumner Severally Suprises Silas

(The title was going to be "Sumner Surprises Me Again", but I wanted it to be an alliteration.)

Once again, I let loose with another complaint about mainstream monetary economics, and once again Scott Sumner casually agrees that there's a dilemma.

I say,

... considering that dinosaur banks can borrow at 0% by only putting up toxic MBSes as collateral, ...

Why can’t *I* get secured loans from the Fed at 0%? Why should big banks have all the fun?

And Sumner replies

Silas, Good question.

Then, I get keyboard crease marks in my forehead.

Setting monetary stimulus straight

In light of my recent link to Gennady Stolyarov's post about the gloomy future of the economy (especially for young people), I thought it would be a good idea to put it against the backdrop of mainstream economics and the "experts'" solutions.

A characteristic post is this one by the relatively libertarian Scott Sumner. Like pretty much every day, his idea is for the Federal Reserve to do a "monetary stimulus" by injecting money into the economy to prop up nominal GDP. (Yes, nominal GDP -- you know, the one that doesn't mean anything until you adjust it to real GDP and even then commits you to a easily-abused framework.) This, it would do by various mechanisms, all of which aim to "get banks lending". Stop paying interest on reserves, buy more of banks' (junky) securities, rapidly debase the currency ("quantitative easing") so they have to loan or else hold worthless cash, etc.

In frustration at such a stupid policy, I made this sarcastic comment on that post:

Yes, the economy will definitely collapse if the Fed doesn’t print up more money to make shoddy loans for purchases people don’t want, and it’s a shame that folks at the Fed are stopping Bernanke from such a wise action.

And to my utter surprise, Sumner replied:

Silas. I agree. :-)

Note: the smiley was in recognition of my sarcasm, not to indicate he's changed his mind.

So, Sumner realizes exactly what he's asking for, and still thinks it's a good idea. But since it apparently isn't obvious to everyone what's wrong with such a policy, I thought I'd spell it out clearly for once:

Banks aren't lending (in sufficient numbers). Mainstream economists want to prod them into lending. But why won't they lend in the first place? Because they don't expect the future loan payments to justify the loan. Now, when you grip them so tightly that they have to, for some reason or another, make these loans, have you changed the factors causing banks to believe loans won't be paid? No, you haven't. So, the loans will just throw money after wasteful projects, destroying output and making everyone poorer.

Note: even if you -- quite reasonably -- care about unemployed workers, and you dismiss this concern about wastefulness on the grounds that, "hey, at least it will lift off the joblessness albatross for so many families", that still wouldn't make such policies a good idea. The wastefulness means that reality will eventually rear its head and force these projects to be abandoned. Then, all the new skills workers could have developed while working on sustainable projects that satisfy actual demand, instead don't get developed, and whatever they did do has just retooled them for a useless activity, leaving them even worse off. Doesn't sound too compassionate to me ...

But let's say I'm wrong about that. Let's put aside, for the moment, our skepticism about economists' claims that the same policy that forces banks to lend, also causes these loans to work out and get repaid, making them not such stupid loans to begin with. Even then, you're still causing inefficient activities to happen that cause workers and investors to dig themselves deeper on unsustainable activities.

Looking back, one has to wonder how economists ever came to the consensus that making ultra-underpriced loans to clumsy, inflexible banks could ever possibly be a good idea. My suspicion is that it is a kind of Goodhart phenomenon: at the time these economic models were created, the metrics economists cared about did serve as good proxies for general economic health. But as they were targeted by policy, they lost their value as indicators.

Furthermore, economists failed to continually ground their concept of a "good economy" in what is meant by the term in common parlance. They don't keep checking back to see whether their policies would mean that people get the best combination of work, leisure, and consumption (all broadly defined). No: if an improvement doesn't show up as a cash exchange, it doesn't matter. If people aren't spending enough, then obviously that's hurting the economy and they should spend more.

You would almost think the economy is some god that demands sacrifices, given the way economists talk, rather than a characterization of our collective ability to satisfy wants.

So please, understand my anger when I read about how young people have all of their options cut off by the earlier generation, how they can't save or invest because of how much will be taken to make up for the failures of poorly run enterprises, how genuinely productive ventures are quashed by an outdated mentality of how the world should work ... and then Scott Sumner swings in to tell us that the best way to improve "the economy" is with ridiculously underpriced loans from newly-printed money to aging, inefficient companies that just wasted trillions of dollars destroying our productive capacity.

Advice for economists: Ask whether, not why.

-Don't ask, "What can we do to increase aggregate demand?"
Ask, "Why should we increase aggregate demand?"

-Don't ask, "What can we do to keep people from saving so much?"
Ask, "Why does 'the economy' so crucially depend on people not saving, and why do I care about the health of the 'economy' in that sense?"

-Don't ask, "What can we do to get (traditionally measured) output back up?"
Ask, "Why is it necessary for that measure of output to go up? Would it be so terrible for people to produce less, if that's what they really want, based on honest assessments of the future?"

Get the picture?