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Showing posts with the label financial system

Central Banks and the Bitcoin Experiment

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Money has gone digitalMoney has gone digital.  Less than 3% of currency these days is in the form of cash (coins or paper bills).  I still struggle to understand bitcoin, but I have slowly come to realize that what I don't fully understand are the technological aspects of bitcoin.  To understand bitcoin, you must first understand blockchain. To understand blockchain, you need to know about open-source coding, algorithms and cryptography, then you need to know about hashing and CPUs in order to understand what "mining for bitcoins" means (although I get that "mining" means solving a math puzzle and allowing transactions to use your computer).  However, these lacunae in our technological knowledge notwithstanding, bitcoin is just like any other digital currency (keeping in mind that the US dollar, for example, is already 97% digital) with only one truly significant difference.  Every example of money that we accept without much thought is managed and manipulated…

Why Are the Poor Always with Us? "Moral Hazard."

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The Poor Are Always with Us“The poor are always with us.”  What a discouraging declaration!  More disturbing still, it is attributed to Jesus Christ.  Although the details vary from one gospel to another, Mary of Bethany (some say Mary Magdalene) was pouring expensive oil on Jesus’s feet (in some versions on his head) when his disciples complained  (some say Judas specifically) that the money could have been used to feed the poor.  (The Gospel of Matthew suggests that this incident is what caused Judas to betray Jesus.)



Moral HazardWhy are the poor always with us?  Consider  “moral hazard.”  “Moral hazard,” according to Alan Blinder in After the Music Stopped:  The Financial Crisis, the Response, and the Work Ahead, “has nothing to do with morality.”  The concept originated in the 18th century in the insurance industry and suggests that having insurance might encourage risky (and therefore immoral?) behaviour.  
Today the concept is very much with us as insurers worry aloud  that house …