Sunday, June 26, 2016

Dreadful News Regarding Self Driving Cars

The news regarding self driving cars is turning dreadful. Yes that is right. The technology is limited today, but in the future, it will most likely cause suffering, fear and/or unhappiness. 

So, how could that be? Aren't we taught that technology represents progress? Well, in the case of self driving cars we may be looking at technology that could result in a massive regression. No, I am not talking about the bad movie, either. Before discussing the technology of Baidu (BIDU), Google (GOOGL), and Tesla (TSLA) at the end of this article, two developments must be considered.

This article was first published by me on Talkmarkets:

Perhaps the two most troubling developments are being pressed by Google, Inc, and as we will see later, by Baidu:

1. Google has petitioned the NHTSA for the right to develop driverless cars that cannot be overridden by human judgement. The NHTSA has opened the door to that possibility. Karl Brauer, senior analyst for Kelly Blue Book has said in this Reuters article:

"NHTSA is prepared to name artificial intelligence as a viable alternative to human-controlled vehicles, it could substantially streamline the process of putting autonomous vehicles on the road,"
The NHTSA's letter says:

"NHTSA will interpret 'driver' in the context of Google's described motor vehicle design as referring to the (self-driving system), and not to any of the vehicle occupants,"
This means, of course, that vehicle occupants will not be considered drivers and will not be able to override the system. The Reuters article goes on to reveal an astounding insight:

Google told NHTSA that the real danger is having auto safety features that could tempt humans to try to take control.
This should tell you that Google seeks to develop cars that give drivers no power to brake or to control a steering wheel. In fact, those manual systems will not exist. This of course flies in the face of an action by the State of California, which has passed a law requiring all driverless cars to have steering wheels and the ability of real people to override the system.

Eric Paul Dennis, P.E., Center for Automotive Research, Ann Arbor, MI. 2012.

2. Google wants to be able to communicate directly with the automatic pilot. That means their cars will not be autonomous. These cars will be controlled by centralized computers. The Reuters article cited above offers this as proof:

 If the car's computer is the driver for legal purposes, then it clears the way for Google or automakers to design vehicle systems that communicate directly with the vehicle's artificial pilot.
Google is doing the bidding, in my opinion of the NSA. Forbes Dale Buss agrees. This technology is not a driverless, autonomous car. It is a driverless, centrally controlled car, which will let NSA know where you go and when you go there. This is big brother like few could have predicted.

The government, since the Patriot Act, seems to be hell bent on expanding a spy network to track everyone, whether through cashless payment systems, driverless cars, cellphone interception, through hacking your devises, and on and on. This is becoming a disturbing development and is likely to accompany any development of faux autonomous cars.

And the cars themselves are not beyond being hacked. Some say they could be hacked more easily than manually driven cars! Criminal hacking, as well as foreign government operatives hacking into the system, are just two major concerns. From the Guardian, experts have weighed in:

Human-controlled cars will eventually be forbidden to drive on the road, Hypponen said, except for on racetracks. Matus said the same was certainly true of horses, suggesting yet another future threat to electronically controlled cars that could be harder to detect. “If you wanted to slow US GDP, all you would have to do is increase the commute time in every urban environment by 15 minutes. Just tweak a few cars, or get one to put on the brake … even if these things happen a few times, it will affect the confidence of consumers.”

Of course, we know that Tesla's Elon Musk has called for the ban of manually driven cars once self driving cars are perfected. Here is one example of that and he has actually called for the ban twice.

The argument is made about the danger of manually driven cars. It is somehow more dangerous for humans to make errors of judgement than machines.

But really, the real reason for this major push for self driving cars is control. Big brother wants control. It goes along with empire. The globalists want more control, it is that simple. All other arguments are secondary.

There is no difference here than cashless proponents arguing that a cashless society would reduce crime when in reality the economists want to apply negative interest rates and don't want a run on their banks.

As far as the technology is concerned, there are differences between Tesla's version and the Google version of self driving cars. Tesla appears to be using technology that would allow the autos to be overridden by human drivers, in the event of confusion on the part of the auto technology. Cameras are the eyes of the car.

Google, on the other hand, wants completely autonomous cars with technology that appears to be centralized. Google also uses LIDAR laser technology, which allows cars to drive in the dark.

And of course, the LIDAR technology is expensive, and few will be able to afford it when it is developed.

Elon Musk may want all cars to be self driving, but with the capability of human override, at least for the near future. But Google seems to be developing total big brother control and direct communication with the cars as they are in operation.  And Baidu is aiming for cars that have preset routes for cars! That is a dreadful development, indeed. From the Motley Fool:

Baidu aims to bring fully autonomous shuttles to Chinese roads by the end of 2018. The vehicles would drive a pre-set route that would be expanded over time.
The tech giant is also lobbying both the Chinese and U.S. governments for improved driverless auto regulation. Baidu was part of a U.S. Senate Commerce Committee a few months ago -- along with Google and General Motors -- advocating for looser autonomous vehicle regulations. The company is trying to pave the way for its own driverless car testing in the U.S.
These companies mentioned in this article are likely to ride periods of momentum as they pursue these technologies, at least until mankind rejects the projects as being truly regressive to the human spirit.

Monday, June 13, 2016

Riksbank--Cash Must Be a Protected Legal Right for Good Reason

 This article was first published by me on Talkmarkets:

Sweden's Riksbank says that cash must be a protected legal right. The central bank of Sweden fears that people will be locked out of the banking system, something I have warned could happen. It is nice to hear it from a central bank, though. A discussion of the shadow economy follows at the end of this article. I am sure that the contribution to GDP by the shadow economy, both legal and illegal, is massive. I am sure that this fact is not lost on central bankers.

Now I can point to the Riksbank, as my friends and relatives scoff, and say, see, I told you so. I have been telling them that the existence of cash is important and the talk of banishing it is dangerous and cannot be ignored!

And I have been speaking to the subject of privacy, as all transactions will be tracked in a cashless society. Apparently that is a concern of the Riksbank as well.

Considering that the central bank of Sweden is at the forefront of negative interest on bank reserves, pushing inflation higher for the last three months in a row, it is astounding to me that it wants to protect cash. Most bankers who advocate negative interest on reserves also advocate a cashless society, fearing bank runs. And that could happen if the plunge into negativity is deep enough to be passed on to consumers, and if those consumers believe that those costs are harder to bear than the loss of convenience in maintaining the account.

So, this is a significant political statement on the part of the Riksbank, to seek protection for cash. The bank pointed out that there are parts of the country and situations that require cash. Now, it appears that the bank looks at this as a temporary situation as the development of alternative means of payment become widespread:

This development is positive in itself, but needs to take place at a rate that does not create problems for certain groups or exclude anyone from the payment market, If the banks continue to set the pace, there is a high risk that the possibility of using cash will disappear before alternative means of payment have become widespread and generally accepted. To restrain this development, the Riksdag (the Swedish parliament) should introduce a clear obligation for the banks to provide basic functions that meet customers’ needs.

Obviously, one "situation" that would have to be addressed is the donation of cash to individuals. I am not the only one who gives a small amount to people hurting in this US economy. They are on the street corners of Las Vegas and other cities. If they had a smart phone to transact payments, I am wondering what credibility would that display that they are really that poor? And how would they afford the smart phone in the first place?

The PaymentEye speaks to this issue, while saying regular charities are moving to contactless, or electronic payments:

Last year, a futurologist told PaymentEye that a good way to gauge the convenience/penetration of a payment method was to run a quick thought test: how easy would it be to give a pound to a homeless man on the street using that method? Naturally, giving a £1 coin is the quickest and easiest way. Anything more modern like cards or any form-factor based on the card rails (mobile, wearables) is nigh on impossible.
Obviously, this is by no means a standard test, but it is still quite useful because it reminds us that whilst newer payment methods are incredibly convenient for things like food shopping and travel, a lot of organisations, and more importantly people, rely on cash.
It is interesting that the same futurologist is confident that cash will remain popular, in the UK, as there are record ATM withdrawels, a surprising development with the increase in electronic means of payment!

I live in Nevada. If I go into a casino and watch people putting dollars into the machines, I ask myself would that casino survive if cash was no longer allowed? It is one thing to have the convenience of a paper receipt instead of carrying around a bucket full of change, but people still like to put real cash into the machines they play.

I don't personally care about an individual casino surviving. But the economy of Nevada depends on cash. Digital cash may meet stiff resistance when it comes to gaming.

And of course, in a shadow economy, where transactions are done under the table, so to speak, banning cash would stop that economy in its tracks. But remember, people who make money in the shadow economy spend that money in the real economy. Cut the income of too many people and you cut the GDP.

I am pretty certain that many startup companies and small businesses are in the shadows these days. These could be the "situations" that were mentioned by the Riksbank as a reason to perpetuate cash. While the US government would view this shadow economy negatively, it actually keeps money flowing in the real world, on mainstreet, which has been forgotten by many policy makers. Here is an example of the thinking behind underground economy:  

There are many, many “home grown” businesses popping up, with advertisements on websites like Craigslist, and in local classifieds like Ad Sack, and Pennysaver. They run the gamut from tree trimmers, to gun smiths, to plumbers….. I’ve seen many ads for seamstresses, day care, mechanics, handymen, or virtually anything else you can think of. Even for many proffessional craftsmen and service people, there is an “after hours” price…….. That’s the beauty of free markets, and a free society. When something isn’t working any more, crafty folks will come up with new solutions.

While I would not rely on his views as an economist, nor agree with much of his politics, the Survival blogger makes a case for the freedom to survive.  And think about this. Without cash, there will not exist the freedom to survive if you need to just survive. There are smart, clever people, who survive by moonlighting in a shadow economy.

So, the shadow economy has serious economic benefits. Even the IMF admits this:

Theoretical and empirical studies do not conclusively explain how an increase in the shadow economy or informal sector affects economic growth. According to some, the shadow economy depresses the growth of GDP. They contend that shrinking the shadow economy will increase tax revenues, stimulating a rise in public spending, especially on infrastructure and services that support production expansion, leading to a rise in the overall economic growth rate.
The contrary view is that the informal sector is more competitive and efficient than the formal sector, and thus that an increase in the shadow economy will stimulate overall economic growth.
Certainly empirical studies have shown that at least two thirds of the income earned in the shadow economy is quickly spent in the official economy. And in Germany and Austria, two thirds of the value added produced in the shadow economy would not be produced at all if the shadow economy did not exist. In the United Kingdom during 1960–84, earnings in the hidden economy significantly raised consumer spending, especially on durable goods and services. The positive effects of such expenditures on economic growth and on revenues from indirect taxes certainly bear keeping in mind.
 The IMF says in the above article that even in developed nations, 10 to 30 percent of GDP is represented by the shadow economy and much of that is spent in the official economy:

The growth of the shadow economy can set off a destructive cycle. Transactions in the shadow economy escape taxation, thus keeping tax revenues lower than they otherwise would be. If the tax base or tax compliance is eroded, governments may respond by raising tax rates—encouraging a further flight into the shadow economy that further worsens the budget constraints on the public sector. (On the other hand, at least two-thirds of the income earned in the shadow economy is immediately spent on the official economy, resulting in a considerable positive stimulus effect on the official economy.)
The IMF accepts the existence of the shadow economy although it offers solutions for keeping it from growing at the expense of government revenue. But by accepting its existence, the IMF must also accept the existence of cash for all nations. Cash must be a protected legal right for good reason.

The article cited by the IMF is an old one, 2002. Other, newer publications by the IMF seem to promote cashlessness. That bank would do well to remember what conclusions it came to in this article. Since then, madmen have been writing papers for the IMF.

The madmen advocate the Miles Kimball view of forcing the poor to pay interest on cash by receiving a diminished amount of cash from the bank. So, those who need money the most, who are in survival mode, often in the shadow economy, will be the ones expected to fork over the additional cost of maintaining cash according to this insane idea. And, of course, fewer and fewer people will want to have cash in such a system, and the shadow economy will diminish, along with GDP. Honest work will diminish, not just drug dealing.

When times are tough, clever people will have no longer have recourse to rely on their secondary skills. That is a bad idea.

Isn't diminished GDP the opposite result bankers are hoping for by eliminating cash? We talk about how bad it is for Russia losing 5 percent of GDP. Many nations stand to lose a much higher level of GDP if cash is abolished. I can't see that a little negative rate stimulus would make up for that policy.


Saturday, June 11, 2016

Pros and Cons of Blockchain Digitalization of Dollars

 This article was first published by me on Talkmarkets:

There are pros and cons of blockchain digitalization of dollars. We already learned from Bloomberg and from Michael Snyder about a secret meeting of bankers with the startup, The digitalization of money for purposes of transfers is the goal of the technology and of the meeting which was not so secret that no one could find out about it.

So, let me get right to the point. Currency is fungible. That means a dollar is a dollar, whether it is in one place or another, whether it is digitalized or a physical dollar. Blockchain is a method of transferring dollars.

Dollars can be identified by an asset ID as the Chain's website shows us. In fact, this is what can happen to currency with asset ID affixed to it:

Once issued, units of an Asset ID can be programmatically transacted with smart contracts or retired from circulation. 
So, the question is, is this blockchain technology good or bad? How far can this technology go?  Banks retire dollars everyday, as they wear out. Can they be retired without recourse or physical replacement, forcing the elimination of cash? So far there are bank regulations requiring access to cash. It would be a good thing to trace digital dollars so they won't be stolen from you. But privacy issues remain. 

There are many questions about this blockchain technology. It has some important benefits. For example, it could be used to disperse helicopter money. As we approach the zero lower bound, that could be a good thing.

But before looking at the potential dangers and cons resulting from the misuse of blockchain  technology, here are some reasons it could be a good thing:

Responsibly Expand the Monetary Base Before It Is Too Late 

Eric Lonergan Precisely Defines Helicopter Money

Preserve Capital-The Relentless Slide Toward Deflation and Negative Nominal Rates

 But questions remain about the technology, simply because Larry [retire-the-100-dollar-bill] Summers has been talking about blockchain being more important than the bitcoin created from it. Summers recently said in an article at CNBC that blockchain is more important than the Bitcoin it produces. He has attacked the existence of even medium sized bills, 100's and 50's, in not such an honest way in the past. That alone raises a red flag. It may turn out that the technology will be a good thing, but with thinkers like Summers touting it, could it be used to help eliminate cash? Once you eliminate big bills, you shrink the physical money supply by leaps and bounds.

Summers is rightly concerned about financial inequality, but seems not concerned enough about the demolition of cash. 

After all, the physical money supply is already very small, a little over 1 trillion dollars. Hoarding that money could create shortages. If people won't trust that cash is available, what will their reaction be? Could they just rely on plastic, or would they attempt to rein in spending, destroying the whole purpose of cashlessness, that is, to stimulate the economy through negative rates.

So, to repeat, Summers has called for the elimination of 100 dollar bills, and the implication must be for the elimination of all cash, eventually. That is why, although the digitalization is not bad in and of itself, we have to follow this story as it unfolds. Digitalization could eliminate the need for cash from a banker's point of view!

Besides the Chain startup, there are other companies that are gearing up for global settlements, like Ripple. Bitcoin is scarce, so it would be of little value in expansion of the money supply. And sometimes the money supply must be expanded. So it makes sense that the technology is more important than the bitcoin it produces.

And it is significant that Bloomberg entitled the meeting of bankers and the Chain startup as Inside the Secret Meeting Where Wall Street Tested Digital Cash.

Why did the meeting need to be secret? Michael Snyder thinks that bankers want all of us to be their forced customers. That would happen if ATM machines are scarce, where people are unable to access their dollars in the form of physical dollars.

If we have the choice only of spending our bank account money or keeping it in the bank, Snyder says that is nothing more than a way for banks to make money off of every transaction, as well as being the road to destruction of privacy that cash affords. This very thing is happening in Sweden. 

Once you limit cash transactions, as is being done in many nations, cash becomes so small a commodity that it is no longer in widespread use. That hastens its obsolescence. Your freedom will become obsolete at that point. People fear socialism. But the real socialism to fear is international banking socialism, that puts governments and the people under the thumb of the banking system.

GDP could be hurt by this move against cash, even though bankers believe that forced bank accounts would allow negative interest rates to stimulate the economy. Fear of cashlessness could overcome any minor benefits of negative rate stimulus. That is why helicopter money is a good idea, as it eliminates deflation without using negative rates as stimulus.

But if digitalization proves to be an attack on cash, helicopter money would have to be dispersed some other way. I am sure that could be done.

So, at this point, digitalization could be useful, but it has clear dangers, and governments must make the decisions regarding regulation of the technology, and it cannot be left up to the central banks alone. 

Saturday, June 4, 2016

Here’s Why Tesla Is A Giant Ponzi Scheme $TSLA

Here’s Why Tesla Is A Giant Ponzi Scheme $TSLA Also $VRX $AAPL $GOOG

See the reliability chart showing Tesla's lack of reliability, on this Talkmarkets post by fellow contributor Michael Lewitt. And then he makes an astounding statement about Tesla, that investors should seriously consider:

In order to plug the hole in its finances, the company just sold $1.4
billion in stock (and Musk sold another $600 million to pay taxes on
egregious stock option grants).At the rate the company is running
through cash, this new monty will last only for little more than a
year.The company should have taken the opportunity to sell $5 billion of
stock.Its cult members – excuse me, I mean its investors – would have
happily paid more than $200 per share for that many shares.It is going
to be much more difficult to raise capital when the company really needs
it – after the bottom falls out.

And don't forget to read page 2, 3 and 4!

Friday, June 3, 2016

Donald Trump Threatens Extortion of the PGA: Attacks Capitalism

Donald Trump threatened to extort the PGA of America. He was speaking to the PGA moving the World Golf Championship at Doral (Trump's golf course), to Mexico, because of sponsorship issues. Whether you believe it was over sponsorship issues or not, Trump's response was a generalized threat to carry out extortion once he becomes president. He, in effect, threatened to commit a crime against the PGA of America!

Trump said there would be no more of "that happening", while discussing the move to Mexico City by the PGA and World Golf Championships organization, once he becomes president. He slandered Mexico once again, saying the PGA would need kidnapping insurance. I don't have a problem with that dumb free speech effort. But here is the general definition of extortion:

The practice of obtaining something, especially money, through force or threats.

Of course, the legal definition of extortion is more rigorous, from Findlaw:

Extortion is the crime of obtaining money or property by threat to a victim's property or loved ones, intimidation, or false claim of a right.
So, if Trump was elected and carried through with his threat, and actually benefited from the threat financially, by obtaining property or money from the PGA of America, that would be a crime. That would be extortion.

The president of the United States would not be arrested for such a crime, most likely, until his term was finished. Then he is subject to the laws that govern the rest of us.

However, any real attack by Trump on the PGA would be a threat to capitalism itself. It is one thing to want laws changed to stop certain economic behavior. It is another to engage in extortion, threats and intimidation.

I write criticism of  the Federal Reserve Bank. I write criticism of the Anglo-American empire. I wish laws were changed to control the behavior of the Fed in crisis. I want the Fed to do more in crisis situations. Some want the Fed banished altogether. No one wants a cashless society.

But extorting, or threatening to extort the Fed is not even a thought to be entertained. We know that the Fed and Treasury are attacked in a political way when the credit rating of the United States by certain senators is threatened by adverse budget holdouts. That is perfectly legal, but not wise. I think congress has to do more to look into why the Fed clams up in crisis, but I hope congress does not ruin the credit rating of the United States! 

But attacking companies for making decisions that affect their bottom line is an attack on capitalism itself. I rail against the Fed, but I don't attack capitalism. Many aspects of capitalism should be controlled by laws and regulations, especially as it pertains to the banks. Even some decisions could be made curtailing certain decisions of capitalistic enterprises for security of the nation.

But golf is not essential to the security of the nation. It is a great game that must grow internationally because golf participation is diminishing in the USA. Trump has shown xenophobic qualities that could prove to be at odds with growing the game of golf internationally.

And we have to consider Trump himself. If he became frustrated with Russia or China would he lash out like he has against the PGA? Trump has clearly shown, in my opinion, that he goes to the brink on issues. I am wondering if the means justifies the end with Trump? He likely has, according to a scientist, a Narcissistic Personality Disorder which would make him a dangerous leader.

Helicopter Money Is Being Misrepresented By Bill Gross and Others

This article was first published by me on Talkmarkets:

I am happy that Bill Gross and others are speaking to the issue of helicopter money. It is an important issue if you believe the citizens need a bailout, but more importantly, if you fear negative interest rates for bonds as is happening in Europe. We aren't speaking about negative interest on reserves. That is something different. Negative interest rates on bonds are a function of scarcity of supply and massive demand.

However, helicopter money is being misrepresented by Bill Gross and others as being a form of Quantitative Easing (QE). It is not. That view could very well just be from reading the views of others, creating a snowball effect. And Gross is a bond manager, after all. He thinks bonds. 

Real helicopter money is a payment to people sans the use of treasury bonds. It could be a payment for infrastructure but that is not the proponents' main goal for HM. No, HM is simply a payment of base money, created out of nothing, to people in society in equal measure. It is useful in a deflationary environment. The money stays in circulation but there is a short window where payments are actually made.

QE is not involved in pure helicopter money plans. QE is the taking of bonds out of circulation and trading them to banks for excess reserves. That is not helicopter money. We have not done helicopter money in a QE environment. Bill Gross says we have been doing helicopter money for 6 years in the form of QE.

I assume his view of excess reserves created in QE, after reading his article that appeared at Zero Hedge and elsewhere, would just be funneled to the people or for infrastructure instead of to the banks. But again, real helicopter money has to be given a chance to work. I will explain why QE bond swapping for created money will not give HM a chance at all. Bottom line, we don't want more of this in the HM process:

Also, Bill Gross says that the payment to people would be permanent. But the HM purists like Eric  Lonergan say it would be a payment in a window of 12 to 18 months, or Friedman said, one time, which would cause the money to circulate permanently. This is not what Bill Gross said in the Zero Hedge article.  He wants funding to families to be permanent. That could cause problems from a purist point of view.

I have to add that it is clear that Gross is concerned with negative yields. That is a good start for future discussions.

So, what is the big deal, bonds or no bonds? The big deal is that treasury bonds are already in massive demand, by derivatives clearing houses and other people. The demand is pushing bond yields toward zero. Breaking zero would cause massive problems for insurance companies and others. The whole point of helicopter money is to avoid going to the negative with long bonds. Bill Gross's concept would not prevent the slide toward negative. Bonds would be more scarce than ever. 

The cynic in me says the banks want a piece of this action, and want to couch helicopter money in the guise of QE. I hope they do not control the implementation of the concept! As for Gross and others, it could be that they have simply been reading Kocherlakota and aren't aware of how real helicopter money works since he doesn't know how it works. I wrote about Kocherlakota and real HM:

1. I checked with Mr Lonergan prior to writing this article, and he has confirmed that HM does not involve the issuance of treasury bonds as collateral. Former Fed president Narayana Kocherlakota always speaks of treasury bonds being issued for the purpose of spreading HM. But according to Lonergan, Kocherlakota is simply not correct in his analysis of what HM is. This is not to say there are laws that need to be changed from nation to nation to make this process work. But the issuance of treasury bonds is just QE again, but for the people. Helicopter money is much more powerful than QE! It is an alternative to QE.

I leave it to the economists to figure out whether a pure helicopter money scheme will result in a rise of yield on long bonds, freeing us from the zero bound and even freeing us from potential cashlessness (cashless societies). However, I do know that doing the process as QE, with bonds traded for excess reserves, is a recipe for failure in that regard. The whole purpose of HM is to stop negative bond yields from happening. 

Now, it may be necessary to ban bonds for use as collateral in the derivatives clearing houses, in order to break the massive demand. But I don't hear much about that being proposed. What I do hear is a lot of talk about helicopter money, and we should at least get that discussion correct. When Bill Gross speaks, people listen. I just hope they are listening to something that could help our financial system, not just more of the same which evidences diminishing returns and a greater gulf between the 1 percent and the rest of the nation.