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John Quiggin 
Is Bitcoin A Waste Of Resources?
This is an important point, but the author kind of left it hanging and moved on. Bitcoin isn’t exactly a scarce asset, despite what its investors believe. There’s 12,600 bitcoins added to the currency every week. Supply is inflating at 4.3% per annum, declining to 3.7% in 2020.
The miners as a whole have short-sightedly overinvested, and need to sell most of those 12,600 bitcoins to recoup costs and have any chance of profiting. At $9k per bitcoin, that works out to $113 million a week. That’s the amount of new investment money bitcoin requires *every week* to maintain a price of $9k. Otherwise, supply exceeds demand and the price falls.
That’s where I think it’s at. Buy volume on the exchanges has been extremely low. To put it simply, there’s no new investors. Too many people got burned, and are probably embarrassed to admit they bought into crypto in the first place – or they simply don’t have any more money to lose. And publicity-wise, bitcoin achieved saturation point, which makes it kind of difficult to find new unwitting investors.
The more the price drops, the more the miners are squeezed, and the more they’re obliged to sell all of the bitcoin they’ve mined. Even worse, any bitcoin they’ve saved in the past, they’re also going to be more inclined to dump on the market, increasing the downward pressure. And it doesn’t matter how low demand goes, they’ll keep pumping out 12,600 a week for the next three years like some insane Barbie doll producing machine that keeps spitting out the very same model long after people stopped buying it.
The hash rate peaked a month ago and has levelled off and is starting to dip lower. It will be interesting to see what happens to that in the next few weeks. Transaction volume on the blockchain is back at early 2016 levels incidentally.
(I’m hoping I’m right on all of this. Bitcoin also has a stubborn resilience about it that can’t be discounted. But the more people who get burned and get out of the building…)
This morning Chris Bowen announced that the ALP has backed away from it’s regressive outrageously unfair dividend imputation tax proposal. Treatment of current full and part pensioners, those soon to be pensioners, and other residents direct owning imputed shares is now to remain as it is. The ALP either went this way with the proposal, or consigned itself to remain in opposition. The real money in this is held at the top end, especially after Howard’s 2006 changes to SMSFs taxation set up a great rort for the rich to indulge in. There’s relatively little money at the bottom end, but that’s where the majority of share owning voters affected by the original proposal are. It was a suicidal proposal put hurriedly forward by idiots. Now the proposal, as I understand Bowen’s comments, will cover SMSFs only. It still ducks tackling much of Howard’s changes advantageous to the rich and a drag on tax revenue, so remains an ALP cop-out. Bowen was deliberately hazy in giving some important large numbers this morning, but it seems the overall revenue to be raised by targeting SMSFs franking credit receipts is hardly diminished. Idiots. Can Bowen be trusted?
@Svante
In the words of Obama “If the pensioners want their rort, they can keep their rort.” Not sure how the modified policy is going to be implemented but grandfathering the current policy for pensioners would seem to be terribly unfair to future generations (as well as grandfathering being a terrible way to implement policy)
The pensioners’ piece of this is relatively quite small in revenue terms, but their numbers are just the opposite. The new proposal doesn’t change much. It hardly lowers tax revenue at all. Less well off pensioners and other less well off direct shareowners will keep on paying the tax they should and not a 30% tax appropriated via an unfair imputation system robbing them but not the rich. Middle income direct share owners and SMSFs will continue to be hit as in the original proposal. Rich direct share owners will not be hit at all. Rich SMSFs holding imputed shares would be hit at first but in due course would arrange their affairs to not be hit at all.
So the change is good for those towards the lower end of the range. Good for projected increased tax revenue as it is hardly affected by now excluding the low enders. That’s good for the ALP. It will mostly fall on the middle income brackets, so is bad for those people. It’s good for those actual rich as they will not be affected. They already would not have been affected by the original proposal, so Bill Shorten will still be most welcome to continue dining at the Pratt’s, and that too is no doubt a good for the ALP.
There’s relatively little money in it, and as predicted it would prove costly in votes to go for the poor, so now still lacking the fortitude and integrity to go after the rich the ALP is going after the middle class. The neoliberal commonwealth Undertaker on 4Corners last night said this was the bracket (Keating said $60k – $130k. (Back then?)) the ALP originally targeted to help in rearranging the personal financial landscape of Australia. So it goes.
Advert for a blog post with recent data suggesting the dematerialisation of growth is happening, though not quite there yet:
*****samefacts.com/2018/03/economics/stuff-and-nonsense/
Lond sideswipe at an absurd paper by James Ward arguing it’s impossible.
Breaking news on the twit-face has it that two members of the victorian liberal party lied about physical illness as a result of the blasphemy of sitting on good friday, asked for and recieved pairs, then snuck back into the chamber after their pairs had gone home leading to a government defeat in the l.council.
Words… I’m just completely gobsmacked that anybody would think this a good idea. It’s… like, there is something medically wrong with these people.
@James Wimberley
De-materialisation of the economy has limits. Humans are material beings and need materials to survive. We need food, water and shelter. We need physical infrastructure. In any case, dematerialisation (so-called) suffers from Jevons paradox under conditions of capitalism.
If certain materials consumption is flat-lining since circa 2008, the cause is more likely due to secular stagnation (long run stagnation) and environmental limits affecting the late stage capitalist economy. As Thomas Piketty demonstrated, if the return on capital is greater than growth then inequality increases. As Joseph Stiglitz demonstrated, greater inequality reduces economic efficiency and hence production. As Marx and Keynes demonstrated, over-accumulation of capital and under-payment of labor lead to recessionary crises. As The Club of Rome report and much subsequent environmental work prove, endless growth in a finite environment is impossible. Yet late stage capitalism attempts to grow endlessly and functions to continually increase inequality.
The saving counter-tendencies, claimed as tending to save us from the nature of capitalism and from environmental limits, are all illusory. They are as illusory as the claims for clean coal have proven to be. All such illusory claims essentially support capitalist business as usual. They are part of the propaganda and mythology which support the illusion of clean, sustainable capitalism. Clean, sustainable capitalism is impossible; a complete contradiction when viewed against internal contradictions and external limits.
@Ikonoclast
Your declaration of faith against my data. Readers decide.
@James Wimberley
No argument with your data, James. But are they the right data? Consumption of metals (and with them, coking coal) is likely in decline. What has replaced much metal is plastics. Given that htese are actually much more likely to end up polluting the soil and food chain, and are often very long-lasting, might be an idea to check whether growth in plastics follows the same path?
Also, the limits as imagined by the Club of Rome put the spotlight on raw materials. The real limits seems to be the absorptive capacity of the earth – for CO2, plastics, nitrogen, complex chemicals, and the load on the biosphere (soil and forest loss, biodiversity, microbials, insects, invertebrates, thence up the food chain)
Not to be a complete pessimist, as all these can be addressed. BUT – if we are to do a Tokugawa (low fertility, draconian environmental protections, rigid enforcement of rules about transfers between ecosystems, extensive resources devoted to clean-up and maintenance) then it’s hard to see the current socio-economic systems adapting gracefully.
Hi James, I’ll read your article in more detail later this evening, but for now your GDP figures don’t look correct (2010?)
Theres been a fair bit of media attention re the ball tampering incident. Fair enough that those involved were penalised but the other issue, where Candice Warner was targetted for past indiscretions, throws the attention back onto the detractors. It is these cricket enthusiasts, including officials, who have brought the game into greater disrepute.
@Peter T
I’ll look at the plastics. But a priori a weight indicator would not be very helpful. A long-lived PVC drainage pipe is much heavier than a thousand plastic bags that do much more damage. The pesticides wiping out bees and other insects, and the birds that feed on insects, weigh practically nothing.
Agree that the true limits to economic growth are those of ecological carrying capacity. Kate Raworth’s doughnut model (kateraworth.com/doughnut/) is very helpful: the inner constraint is set by fundamental human needs, the outer by the environment that supports us. The problem is to maximise welfare while staying within the envelope.
@Nick
I checked and I have correctly transcribed the GDP numbers from the IMF: a small fall in 2009 followed by a bounce in 2010. The Great Financial Crisis was a rich-country problem. Nothing much happened in China and India, which maintain capital controls. The lesson of the Asian financial crisis of 1997, exacerbated by hot capital flows promoted by the Washington consensus, had been learnt.
James, to clarify it appears your GDP calculations were offset by a year. The dip should fall on 2009, as that was the year it happened, not on 2010. The way you’ve done it offsets the dip from the other indices. You can see in your image they all fall on 2009, not 2010.
I haven’t read any of the papers referred to, and I honestly don’t know what the arguments are either way. But wouldn’t a simpler method be to compare global shipping tonnage to GDP?
I tried it quickly. Here you can see the components vs GDP:
http://imgbox.com/0nTrpUcV
And when you put it all together, here’s total shipping tonnage vs GDP:
http://imgbox.com/cScAtASE
Maybe there’s some drawbacks to this method I haven’t considered – but on the surface, it’s hard to conclude they’ve become unlinked.
@Nick
The second chart shows a definite partial decoupling recently, in line with other indicators. It’s only for two years though, so it’s statistically weaker.
@Nick
PS: thanks for the tip. Shipping tonnage is a nice quantitative indicator of stuff-intensity, and it’s available. So I will add it to the basket next time.
@Nick
PPS: Wiedmann confirmed that the apparent bsolute decoupling of material product from GDP in several OECD countries was an illusion created by offshoring to China. It’s big news that global shipping is now decoupling from GDP, as it means that Wiedmann’s offshoring effect has probably come to an end. Not necessarily – there are smokestack silicon factories and lithium mines behind your 130-gramme iPhone. But it’s now the way to bet.
Shipping intensity is correlated with international trade rather than GDP. The offshoring story requires trade to grow faster than GDP, which it hasn’t been doing lately.
@James Wimberley
Dematerialisation (so-called) has limits. Every material need of humans has a lower limit, like the need for water. Water is a good example because we need it not only for drinking but also for growing food, washing, removing wastes, running industry and generating power; for running civilization in other words.
The immense amounts of fresh water needed by modern civilization mandate a vast and difficult to maintain material infrastructure. This cannot be dematerialised. It can be made more efficient but general growth and Jevons Paradaox soak up more than all the gains. In fact, the story in the decaying West, and especially in the USA, is that the water infrastructure is crumbling and becoming less efficient.
Where efficiency gains are made in other arenas, again the out-working of Jevons Paradox under conditions of capitalism ensures we use up remaining resources in an ever faster and more unsustainable manner. You need to look at whole of system data and not just cherry-pick good news data.
If anyone wants to think in a materialist and system-wide manner on matters involving claims about economic “dematerialisation” or “decoupling” they should look at this paper.
Click to access weight_of_nations.pdf
The first key finding illustrates that Jevons Paradox is fully operative in our current system.
“Industrial economies are becoming more efficient in their use of materials, but waste generation continues to increase.”
Also refer to the Monthly Review article “Capitalism and the Curse of Energy Efficiency –
The Return of the Jevons Paradox”. A key passage notes;
“What is neglected, then, in simplistic notions that increased energy efficiency normally leads to increased energy savings overall, is the reality of the Jevons Paradox relationship—through which energy savings are used to promote new capital formation and the proliferation of commodities, demanding ever greater resources. Rather than an anomaly, the rule that (greater) efficiency increases energy and material use is integral to the “regime of capital” itself.”
In my view, the most fundamental flaws in techno-optimist thinking are the lack of respect for the importance of material, energetic, biological and ecological limits and the lack of knowledge of systems science. Along with this goes the misuse of optimism itself. Bad news of critically dangerous system wide tendencies is suppressed in techno-optimist rhetoric in favor of cherry-picked individual trends abstracted from their system context. The cherry-picking of the “dematerialistation” trend is a case in point. What is happening are efficiency gains in material and energetic use which then lead, via the Jevons Paradox embedded in the drive for capital formation under capitalism, to overall higher absolute material and energy use by the complete system as well as leading to an ever larger waste stream.
False optimism in these matters actually needs to be replaced by a rigorous search for bad news, especially in objectively measurable system trends. There is a very real sense in which bad news is good news. If something is going bad and you receive no news of it, no data about it, then you can take no action. The bad situation objectively exists even when you have no news of it. You can do nothing about it having no knowledge of it. When you receive some news or data of the bad situation, the bad situation is not changed as of that moment. It is your knowledge of it which has changed. Once knowledge is acquired you can make plans and take actions of feasible kinds. Bad news, of any situation which you have the capacity to change or the ability to acquire the capacity to change, is good news.
Bad news is good news. We should be seeking more objective bad news to inform remedial plans and actions.
@John Quiggin
Wiedmann offshoring requires trade in *stuff* (iron ore, coking coal, widgets) to grow faster than world GDP. What happens to trade in services doesn’t matter for material footprints. Shipping tonnage tracks trade in stuff rather than all trade. We don’t I think disagree here.
@Ikonoclast
We’ve been here before, several times. I just don’t agree that harping on the bad news and insisting that only radical structural change will save us is remotely effective for most people. What sparks action is hope, not despair.
It is true that the dispassionate scientific searcher for data barely exists. We look for data to confirm our priors. Honest investigators acknowledge when they are wrong, hacks don’t. BTW, do you have actual bad news for us, to counterweight my partial good news?
@James Wimberley
I double checked the GDP numbers and they are still what the IMF says. The time series is “growth rate in year x”. I interpret this to mean “growth rate of total monthly GDP in year x to December compared to total monthly GDP in year (x-1) to December”. What else can it mean? The lag from the quantitative indicators may be explained by delays in a fall in sales feeding through to profits. If you want to take this further, write to the IMF.
James Wimberley,
https://www.esrl.noaa.gov/gmd/ccgg/trends/full.html
Also, look up “Latest Cape Grim Greenhouse Gas data”.
That’s the unvarnished bad news. The net outcome of the whole system is telling us we are making no appreciable progress in dealing with our waste problems and the dangerous feedbacks we may already have initiated. It’s a clear signal that radical change is needed.
With regard to your statement: “I just don’t agree that harping on the bad news and insisting that only radical structural change will save us is remotely effective for most people.”
The truth or otherwise of this statement depends on the extant conditions. When people feel safe and comfortable your statement is true. If or when they begin to feel unsafe and existentially threatened, then insisting we need radical structural change will become not just plausible but patently obvious and indeed a popular demand.
http://www.imf.org/external/datamapper/datasets/WEO/1
No need to write to them, James. Just check the IMF’s own charts.
JQ: “Shipping intensity is correlated with international trade rather than GDP.”
Well, that makes things even easier.
http://imgbox.com/PekpMS17
For a given growth in the quantity of export merchandise, shipping tonnage is tending to grow faster.
Assuming we trust the reliability of the trade volume index, that indicates ‘materialisation’.
Of course, I’m forgetting that many export goods travel by air, as well as trucks and rail within continents. So this doesn’t really prove anything without digging deeper to see if other modes of transport see similar results.
@Collin Street
Liberals contempt of Vic. Parliament by breaching an undertaking to parliament should be likened to misleading it and sanctions applied accordingly.
Apparently Guy[the Mobster’s mate] has admitted his complicity in requesting it. Dope.
All over the CFA dispute the Liberal keep fanning for political reasons promoted by the Murdoch media in Vic.
I would prefer a professional to turn up to fight a fire in my suburban house. For the Liberals to undermine this process is reprehensible and hopefully result in their severe punishment at the Polls.
This contempt should be seen in context of other Liberals from Victoria in Hunt, Tudge and Sukkar and their pathetic attempt to score political points in their blatant contempt of the Victorian Court of Appeal. Despite their belated apology and the bumbling representation of our Federal Solicitor General this Court spared them, unfortunately, a stint in the bin.