For the sake of the essay, we coined the term “marble columns” to mean the opposite of “broken windows.” Instead of getting arrested for nothing, you never get arrested, as long as you work at a company with marble columns. For more, take a look at the whole piece!
Also, my good friend and bandmate Tom Adams (our band, the Tomtown Ramblers, is named after him) will be covering for me on mathbabe for the next few days while I’m away in Haiti. Please make him feel welcome!
Yesterday at the Alt Banking meeting we had a special speaker and member, Josh Snodgrass (not his real name), come talk to us about Bitcoin, the alternative “cryptocurrency”. I’ll just throw together some fun and provocative observations that came from the meeting.
- First, Josh demonstrated how quickly you can price alternative currencies, by giving out a few of our Alt Banking “52 Shades of Greed” cards and stipulating that the jacks (I had a jack) were worth 1 “occudollar” but the 2’s (I also had a 2) were worthy 1,000,000,000 occudollars. Then he paid me $1 for my jack, which made me a billionaire. After thinking for a minute, I paid him $5 to get my jack back, which made me a multibillionaire. Come to think of it I don’t think I got that $5 back after the meeting.
- There’s a place you can have lunch in the city that accepts Bitcoin. I think it’s called Pita City.
- The idea behind Bitcoin is that you don’t have to have a trustworthy middleman in order to buy stuff with it. But in fact, the “bitcoin wallet” companies are increasingly playing the role of the trusted middlemen, especially considering it takes on average 10 minutes, but sometimes up to 40 minutes, of computing time to finish a transaction. If you want to leave the lunch place after lunch, you’d better have a middleman that the shop owner trusts or you could be sitting there for a while.
- People compare bitcoin to other alternative currencies like the Ithaca Hours, but there are two very important differences.
- First, Ithaca Hours, and other local currencies, are explicitly intended to promote local businesses: you pay for your bread with them, and the bread company you give money to buys ingredients with them, and they need to buy from someone who accepts them, which is by construction a local business.
- Second, local currencies like the Madison East Side Babysitting Coop’s “popsicle currency” are very low tech, used my middle class people to represent labor, whereas Bitcoin is highly technical and used primarily by technologists and other fancy people.
- There is class divide and a sophistication divide here, in other words.
- Speaking of sophistication, we had an interesting discussion about whether it would ever make sense to have bitcoin banks and – yes – fractional reserve bitcoin banking. On the one hand, since there’s a limit to the number of overall bitcoins, you can’t have everyone pretending they can pay a positive interest rate on all the bitcoin every year, but on the other hand a given individual can always write a contract saying they’d accept 100 bitcoins now and pay back 103 in a year, because it might just be a bet on the dollar value of bitcoins in a year. And in the meantime that person can lend out bitcoins to people, knowing full well they won’t all be spent at once. Altogether that looks a lot like fractional reserve bitcoin banking, which would effectively increase the number of bitcoins in circulation.
- Also, what about derivatives based on bitcoins? Do they already exist?
- Remaining question: will bitcoins ever actually be usable and trustworthy for people to send money to their families across the world below the current cost? And below the cost of whatever disruptions are being formulated in the money business by Paypal and Google and whoever else?
Update: there will be a Bitcoin Hackathon at NYU next weekend (hat tip Chris Wiggins). More info here.
Yesterday I finished Jake Halpern’s new book, Bad Paper: Chasing Debt From Wall Street To The Underground.
It’s an interesting series of close-up descriptions of the people who have been buying and selling revolving debt since the credit crisis, as well as the actual business of debt collecting. He talks about the very real problem, for debt collectors, of having no proof of debt, of having other people who have stolen on your debt trying to collect on it at the same time, and of course the fact that some debt collectors resort to illegal threats and misleading statements to get debtors – or possibly ex-debtors, it’s never entirely clear – to pay up or suffer the consequences. An arms race of quasi-legal and illegal cultural practices.
Halpern does a good job explaining the plight of the debt collectors, including the people hired for the call centers. It’s the poor pitted against the poorer here, a dirty fight where information asymmetry is absolutely essential to the profit margin of any given tier of the system.
Halpern outlines those tiers well, as well as the interesting lingo created by this subculture centered, at least until recently, in Buffalo, New York. People at the top are credit card companies themselves or hedge fund buyers from credit card companies; in other words, people who get “fresh debt” lists in the form of excel spreadsheets, where the people listed have recently stopped paying and might have some resources to pull. Then there are people who deal in older debt, which is harder to collect on. After that are people who have yet older debt which may or may not be stolen, so other collectors might simultaneously be picking over the carcasses. At the very bottom of the pile, from Halpern’s perspective, come the lawyers. They bring debtors to court and try to garnish wages.
Somewhat buried at very end of Halpern’s book is some quite useful information for the debtors. So for example, if you ever get dragged to court by a debt collection lawyer,
- definitely show up (or else they will just garnish your wages)
- ask for proof that they own the debt and how you spent it. They will likely not have such documentation and will dismiss your case.
Overall Bad Paper is a good book, and it explains a lot of interesting and useful information, but from my perspective, being firmly on the side of (most of) the debtors, everyone who gets a copy of the book should also get a copy of Strike Debt’s Debt Resistors’ Operation Manual, which has way more useful information, and even form letters, for the debtor.
As far as real solutions, we see the usual problems: underfunded and impotent regulators in the FTC, the CFPB, and the Attorney General’s office, as well as ridiculously small fines when actually caught that amount to fractions of the profit already made by illegal tactics. Everyone is feasting, even when they don’t find much meat on the bones.
Given how big a problem this is, and how many people are being pursued by debt collectors, you’d think they might set up a system of incentives so lawyers can make money by nailing illegal actions instead of just leveraging outdated information and trying to squeeze poor people out of their paychecks.
The bigger problem, once again, is that so many people are flat broke and largely go into debt for things like emergency expenses. And yes, of course there are people who buy a bunch of things they don’t need and then refuse to pay off their debts – Halpern profiles one such person – but the vast majority of the people we’re talking about are the struggling poor. It would be nice to see our country become a place where we don’t need so much damn debt in the first place, then the scavengers wouldn’t have so many rubbish piles to live off of.
Yesterday at the Alt Banking group we discussed the recent Koch brothers article from Rolling Stone Magazine, written by Tim Dickinson. You should read it now if you haven’t already.
There are tons of issues that came up, but one of them in particular was the control of information that the Koch brothers maintain over their activities. If you read the article, you realize that the brothers are die-hard libertarians but at some point realized that saying out loud that they are die-hard libertarians was working against them, specifically in terms of getting into trouble for polluting the environment with their chemical factories, so instead they started talking about how much they love the environment and work to protect it.
It’s not that they stopped polluting, it’s that their rhetoric changed. In fact there’s no reason to think they stopped polluting, since they still had plenty of regulators going after them for various violations. Since their apparent change of heart they’ve also decided to be publicly philanthropic, giving money to hospitals, and Lincoln Center, and even PBS (see how that worked out on Stephen Colbert).
The problem with all this window dressing is that people are actually starting to think the Koch brothers may be good guys after all, and what with the fancy lawyers that the Koch brothers hire to control information about them, the public view is very skewed.
For example, how many economists have they bought and inserted into universities nationwide? We will never really know. There’s no way we can keep a score sheet with “good deeds” on one side and “shitty deeds” on the other. We don’t have enough information for the second side.
The exception to this information control is when they get in trouble with regulators and it becomes a matter of public record. And thank goodness those court documents exist, and thank goodness investigative journalist Tim Dickinson did all the work he did to explain it to us.
A couple of conclusions. First, we complain a lot about the bank settlements for the misdeeds of the big banks. Nobody went to jail, and the system is just as likely to repeat this kind of thing again as it was in 2005. But another problem with this out-of-court settlement process, we now realize, is that we actually don’t know what happened except in big, vague terms. There will be no Tim Dickinson reporting on big banks.
Second, the connection to Detroit. Right now there are 15,000 residents of Detroit whose water has been shut down, basically so they can privatize the water system with the best deal from Wall Street. They owe less than $10 million, on average a measly $540. The United Nations has called this water shutoff a violation of the human rights of the people of Detroit.
If you feel bad about that, you can donate to someone’s water bill directly, which is kind of neat.
Or is it? Shouldn’t Obama be declaring Detroit a state of emergency? Wouldn’t we be doing that in another city that had 15,000 residents without water? Why is this an exception to that rule? Because the victims are poor? Don’t we recognize Detroit as a place where it’s unusually difficult to find work? Are we going to allow people to shut off heat as well, once winter comes?
Once you think about it, the idea of a “private solution” to the Detroit water emergency seems wrong. In fact, you can almost imagine David Koch coming to the rescue here, as part of his “positive optics” campaign, and bailing out the Detroit citizens and then, for good measure, buying up the water system altogether. A hero!
And if you’re in that mode, you can think about the asymptotic limit of that approach, whereby a few very rich people gradually take control of resources, and then there are intermittent famines of various types in different cities, and the rich people swoop in and heroically save the day whilst scooping up even more ownership of what used to be public infrastructure. And we might thank them every time, because it was a dire situation and they didn’t really need to do that with all their money.
It’s frustrating to live in a country that has so many resources but which can’t seem to get it together to meet the basic human needs of its citizens. We need a basic income, at least for the people in Detroit, at least right now.
If you want to join us, come to 79th and Central Park West at 11am, in front of the Natural History Museum. We will have signs and a banner. See you there, I hope!
I am super excited to announce that best-selling British author Nafeez Ahmed will be speaking at the Alt Banking group this Sunday. The title of his talk is Mass Surveillance and the Crisis of Civilization: The inevitable collapse of the old paradigm and the potential for the rise of the new.
Ahmed is an international security scholar and investigative journalist and executive director of the Institute for Policy Research & Development. He writes for The Guardian on the geopolitics of interconnected environmental, energy and economic crises, and is currently on tour in the United States to launch his science fiction novel, Zero Point.
As advance reading for this talk, we recommend browsing through his Guardian articles, including the widely read June 2014 piece, Pentagon preparing for mass civil breakdown. He’s also recently published on occupy.com an article entitled Exposed: Pentagon Funds New Data-Mining Tools To Track and Kill Activists, Part I.
Details: Ahmed will speak from 2-3pm on Sunday, August 24th, in room 409 of the International Affairs Building of Columbia University at W. 118th Street and Amsterdam Ave. After that we will have our regular meeting from 3-5pm in the same room, followed by food and drinks at Amsterdam Tapas. Please join us! And if you can’t this weekend but want to be on our mailing list, please email that request to firstname.lastname@example.org.
I’m excited to announce that Zephyr Teachout, a Fordham Law School professor who is running against Andrew Cuomo for Governor of New York, will be coming to speak to the Alternative Banking group next Sunday, July 13th, from 3pm-5pm in the usual place, Room 409 of the International Affairs Building at 118th and Amsterdam. More about Alt Banking on our website.
Title: Teachout-Wu vs. Cuomo-Hochul in the Democratic Primary in New York!
Description: Come hear candidate Teachout talk about her anti-corruption trust-busting campaign against Governor Cuomo.
Background: Teachout is an antitrust and media expert who served as the Director of Internet organizing for the 2004 Howard Dean Presidential Campaign. She co-founded A New Way Forward, an organization built to break up the power of big banks. Teachout was the first national director of the Sunlight Foundation. More here.
If we have time after talking to Zephyr we will discuss Stiglitz’s article, The Myth Of America’s Golden Age.
Please make time to come hear Zephyr, and please spread the word.