Saturday, April 13, 2013

Bitcoin Bubble?

The exponential rise and sharp drop in the value of the "virtual" currency Bitcoin has made it into the mainstream media this past week. Even the CBC, official voice of the statist media in Canada, had a reasonably (for CBC) unbiased story here.
The value of a Bitcoin has been extremely volatile of late, possibly because of the European monetary crisis and the little wrinkle that Cyprus created.
This commentary in Forbes magazine addresses the volatility. Of course, there has also been considerable volatility in gold lately, but I'm not going to pretend I know why. I think like gold, Bitcoin is not going anywhere, it definitely serves a purpose and has a niche like the Forbes article suggests.
Will Bitcoin become a widely accepted and used currency, something you might use to pay for your dry-cleaning? Who knows?
Below is an interesting interview with an Austrian School business professor that my daughter posted here.

The rise of the Bitcoin: At what point should we take this seriously?
As one of the world’s first online currencies gains momentum and headline counts, Dr. George Bragues, Acting Vice-Provost and Program Head of Business at the University of Guelph-Humber, offers his thoughts on the viability of virtual mining.
We know that these coins are ‘created’ through a series of complicated computer programs through a sort of digital mining process. How does money emerge spontaneously?
This speaks to the idea that there was no great person who consciously decided, let’s have money. Throughout history, money has emerged spontaneously, through an unplanned process. It started when people first specialized in a trade, or made something that they could then use to trade for something else they needed. And eventually, without any central authority’s designation, people came to converge on a class of objects, like precious metals, that everyone was willing to accept in exchanges.
Whatever object that’s agreed on as currency ultimately needs to have a few key features for it to work. It needs to be divisible, it can’t be perishable, it needs to be portable, and it needs to be relatively scarce so that it doesn’t lose value. The Bitcoin ultimately has these key features.
Despite Bitcoin currency having been developed a few years ago, it’s become a sensation in recent weeks as the exchange prices have surged and plummeted, with fingers pointing toward the financial instability in Cyprus as government there has been interfering with peoples’ savings. What’s the significance of this?
The Cyprus situation basically raises questions about the integrity and safety of the fiat currencies of the world. It suggests that if you have all this money in dollars or euros or pounds stashed in banks somewhere – that if and when these banks get into trouble, you could suffer a big financial hit. So against this backdrop lies a demand for another form of currency that would not be subjected to this problem. And that’s the Bitcoin.
The Bitcoin is not managed by a central bank, like the euro or the US dollar. Its supply is also limited to 21 million, with about 11 million currently in circulation. This essentially replicates a gold or commodity-type of money – meaning, the supply is limited by its availability. And just as gold needs to be mined, so, too, does the Bitcoin. The main difference obviously being that with gold, the mining is a physical process, whereas mining a Bitcoin is intellectual where you have evermore complex mathematical problems that need to be solved.
The supply of this currency – instead of being managed by central authority that could potentially lead to Cyprus-like problems – is left to a market process, where people will mine it to the extent that they see profit in it. There’s already been commentary among respectable analysts that Bitcoin currency should be a part of your financial portfolio.
It’s been recently reported that the Winklevoss twins – infamous in their battle against Facebook founder Mark Zuckerberg – have been building up their stock of Bitcoins, adding to the idea that this currency seems to have surpassed the experiment phase and is now accepted by professional investors. Yet it seems despite all the hype, the big question remains: Should this currency be taken seriously?
Perhaps not too seriously. I hate to use the cop out line, ‘only time will tell’, but at this point I find it very intriguing. In order for it to be taken more seriously, we need to see that it can embody the characteristics of a true spontaneously-emerged money. Which means first and foremost, it needs to be more widely accepted.
We need to reach a point where the dry cleaner says, ‘that’ll be three Bitcoins, please’, and we’ll pull out our phones with our Bitcoin app – and ultimately walk away with our dry cleaning. That’s theoretically possible – we’re probably already there from a technology standpoint. But for now, it’s really more of an investment vehicle. In order for it to be really taken seriously, it will need to become a consumer goods vehicle as well.
Are virtual currencies here to stay?
For e-commerce purposes, I think virtual currencies are here to stay; they’ve already proven the test of time. But for them to go into the physical world? Wow. I think governments would have a real problem with that. I think we have to recognize that it’s no accident governments today control the money supply. The major reason for this is because it allows them to influence the economy in politically preferred directions. So to have a virtual currency getting accepted out there would mean a loss of control on the part of the government over a key lever over the economy.
The Bitcoin’s decentralized nature would ultimately be the big problem governments would have; and given what’s going on in the world, the same reason why people seem to be liking it. All that to say – I haven’t mined for any.

University of Guelph Humber Business Program

Wednesday, April 3, 2013

Home Opener 2013 recalls 1977 weather

Yesterday (April 2, 2013), was Opening Day for the Toronto Blue Jays. Lots of hype, it seems the Jays are going to make a run of it this year in the AL East and I wish them luck.

I remember the first home opener, April 7, 1977 - a generation and a half ago. In true Canadian fashion it snowed, the picture here shows a whitening of the field before the game at Exhibition Stadium 36 years ago. The snowed was "squeeged away" during the opening ceremonies.

I mention this because it snowed yesterday too, it was cold and windy, not unusual for early April. Around here that snow is called an off-lake (Lake Huron - likely) snow squall. It whitened the ground, but the strong April sun melted it in just hours - no squeegees required. It didn't make any difference in last nights ball game - the Blue Jays now have the option of playing their games under a roof in a climate controlled stadium, and the roof was closed.

My point is the weather hasn't changed much in 36 years, April is still April, and sometimes it snows.

An article in Forbes Magazine this week, made me think about the weather outside my window. The author of the Forbes article and I are roughly the same vintage. I'm not sure if he is a baseball fan, but we seem to share many memories and a point of view.

He wonders where global warming is because its was the late '70's when the doomsayers (he calls them "warmmongers") first broke into the news headlines trying to save the planet. Here is a quote from his article:
"Climate panic, after all, is fear of dramatic, life-altering climate changes, not about tenths of a degree. We are told that we must “take action right now before it’s Too Late!” That doesn’t mean: before it’s too late to avoid a Spring that comes a week earlier or summer heat records of 103 degrees instead of 102. It was to fend off utter disaster that we needed the Kyoto Treaty, carbon taxes, and Priuses."
Yes, I know weather isn't climate, but I also know that since the climate panic was ignited the political and economic repercussions have had much, much greater impact on humanity (on each of us in Ontario) than either climate change or weather. It's a good article, he asks the right questions.

Oh, the Blue Jays lost last night 4 to 1 to the Indians of Cleveland - where it also snowed. Only 161 games left to try and make the playoffs. Go Jays!

Tuesday, April 2, 2013

Supply and Dental Demand

Maybe the graphic is a bit over the top, but give it time. A story on the front page of the National Post last week - "Too many dentists, too few mouths" highlights an interesting development. The supply of dentists across Canada exceeds the demand. As the article suggests patients will have "more purchasing power than ever." Thats how supply and demand works.

It seems Dental schools are graduating more dentists than ever and "price wars and discount offers" have started in "hyper-competitive markets like Toronto." Good news if you have bad teeth - or just teeth in general.
“Over the next few years, these numbers (dentists and hygienists) will grow. This means that competition within the profession will become more intense and individual dentists are going to try to find ways to attract and retain patients.”
What a shock for those young people - they're going to have to compete for patients on price and quality.

In Ontario, every single health practitioner is regulated in minute detail, right down to who may use what instruments and into which human orifice the instruments can be inserted.

Dentists, however, must also be business people. They fend for themselves mostly, they are self-employed. So when it comes to billing, overhead expenses, and ultimately trying to make a good living they are on their own. Many people have dental plans through employment, and that is a great help to dentists as well as their clientele. Of course thats what the issue is about in the Post story, too many dentists. By-the-way, the private group insurance plans are no doubt pleased that dental prices may come down, or at least not rise because of this competition. Strangely, in Ontario, dental care is not considered vital to one's health, and is NOT covered under the "universal healthcare" plan called OHIP.

While dentists and dental schools have some leeway, physicians are regulated to death. Every physician in Ontario is effectively, by law, an employee of the provincial government through OHIP. All their bills are paid by OHIP through agreements with the Ontario Medical Association. And every physician is granted the right to practice by the College of Physicians and Surgeons of Ontario (CPSO). CPSO and the provincial government together play a role in how many physicians are graduated each year. The supply of physicians is controlled, the prices they are paid are controlled - so it's no wonder that Ontario (and all the other provinces) have shortages of physicians, long line ups at emergency wards, and among the longest wait times for medical care in the world.

Have you ever had to wait for dental work? I once broke a tooth on a Saturday morning, it was repaired by 1 pm that same day without a lengthy wait in a waiting room and I was able to enjoy a dinner meal. One quick phone-call was all that was required.

So lets dream for a moment, lets pretend that medical school graduates were NOT regulated in numbers, so that those who wished to be a physician and had the grades and the money, could enter medical schools. Lets pretend that physicians could be part of OHIP, and they could also accept patients privately if they wished, even charge them the OHIP fee (for residents of Ontario) and more (or less for non-residents). In other words, imagine if the government did not set the price or control the supply of physicians. Don't you think that might be a move in the right direction toward better service? Like my dental experience above.

A tiny move like that, a simple start, could change the whole supply-demand thing for physicians. It's your health.     

Let's Break the BS

An organization called "Let's Break the Gridlock" is advertising in various media with a series of ads inviting people to be part of "The Big Move." This is a $50 BILLION idea to fix the transit and traffic problems in the Greater Toronto Region (GTA). Traffic gridlock problems in the GTA ranks among the worst on the planet. 

Here is what the Beat the Gridlock groups says on Facebook:

"The Toronto Region’s transportation network has failed to keep up with our population growth, putting economic growth, prosperity and quality of life at risk. We must act."

The fix, ie. "we must act," involves new "revenue tools" which is code for new taxes and fees given to various levels of government and to government transit monopolies, on top of what people are paying now.

In other words they want people to give more money to the very same governmental organizations that have been responsible for failing to keep up with growth in the GTA f
or the past six decades and "putting economic growth, prosperity and quality of life at risk."

This is nothing more than a propaganda campaign to soften-up the population so people won't mind, in fact will be eager to support the need for less economic freedom. This is a classic example of the Stockholm Syndrome. Voters and citizens are being held hostage to solutions proposed by the hostage takers. Soon they will be clamouring to tax me some more!

I will be the last person to say that there is a simple fix for this. There is not. Given the entanglements that have happened, the failed opportunities to build an adequate infrastructure of roads and highways for the largest city in Canada, and the single-minded solution that ONLY concerted government action can solve this problem, no it's not going to be simple. What I do know is, that there is a better solution and it's likely one that involves less government action not more.