Essay

Comparing Monetary Supplies, Crypto Currencies and Trust

INTRODUCTION

I was surprised to discover no readily available list of worldwide monetary supplies denominated in a common unit like dollars or ounces of gold but such a list is easily calculable from publically available data. Here, I use M2 data from the World Bank and the United Nations’ list of exchange rates. I repeated the calculation using M1 data from the Trading Economics data service.

A spreadsheet containing this analysis is available here.

So what do the numbers reveal and how do crypto currencies compare?

MOST VALUABLE M2 MONETARY SUPPLIES (in trillions of dollars)

1. All Euros $21.69 Trillion
2. China 15.89
3. United States 14.10
4. Japan 11.68
5. Germany 6.13
6. France 4.25
7. United Kingdom 3.87
8. Italy 3.43
9. Spain 2.65
10. Canada (2008 data) 1.97
11. Netherlands 1.90
12. Korea, Rep. 1.65
13. Brazil 1.56
14. Australia 1.38
15. India 1.26
16. Switzerland 1.20
17. Russian Fed. 0.98
18. Hong Kong SAR 0.88
19. Austria 0.72
20. Belgium 0.68

 
 

MOST VALUABLE M1 MONETARY SUPPLES

1. Euro Total $7.03 Trillion
2. Japan 5.73
3. China 5.07
4. United States 2.55
5. United Kingdom 1.86
6. Germany 1.84
7. France 1.07
8. Italy 1.04
9. Spain 0.70
10. Canada 0.68
11. Switzerland 0.59
12. Netherlands 0.46
13. Korea, Rep. 0.44
14. Russian Fed. 0.42
15. India 0.32
16. Saudi Arabia 0.26
17. Australia 0.25
18. Luxembourg 0.21
19. Austria 0.19
20. Hong Kong SAR 0.18

 
 
One surprise (for my American mentality) is that dollars are not the biggest, nor second biggest monetary supply in terms of value. They are third or fourth biggest depending on whether one considers M2 or M1.

Please note, the data is imperfect: the M1 data is newer than the M2 data, but the difference in M2 versus M1 ranking also speaks to great differences in banking structure and practices in various countries.

The main difference between M2 and M1 is that M2 includes savings and money market accounts. The proportion of M2 to M1 varies widely between countries. Though the ratios may be off because some data is older than other data, in the United States, M2 is more than five times bigger than M1. In Luxembourg, it’s only 1.3 times bigger. In Saudi Arabia, it’s 1.5 times bigger.

COMPARING M2 WITH CYPTO CURRENCIES

As of the time of this writing (September 7th, 2013), all the Bitcoins in the world are worth about $1.39 Billion. That makes their supply slightly less valuable than the M2 monetary supplies of Chad, Guyana, Montenegro, but slightly more valuable than the M2 monetary supplies of Mauritania, the Maldives, Belize, El Salvador, Malawi and Tajikistan. Bitcoins are on the map!

All the Litecoins in the world are worth about $59 million dollars, which is a little better than half the value of the smallest M2 monetary supply reported by the World Bank, that of Sao Tome and Principe.

MEASURING VALUE PER NOTE

The methodology behind this last analysis is speculative, but interesting nonetheless. What if we measured the value-per-note of all mediums of exchange? What if we counted all the notes in the world (Dollars, Euros, Litecoins, Vietnamese Dongs, Yen, Rubles, Lira, etc), and then counted the value of all the notes. For any currency, we could then compare their percentage of world-wide notes to their percentage of value of all the monies.

For example, imagine a world in which only two mediums of exchange were used: Roman’s Rubles and Mises’s Marks. Imagine that a million of each circulated, but Mises’s Marks were three times as valuable as the Rubles.

It’s easy to quantify the difference. Mises’s Marks represent three quarters of the value and only half of the notes. This can be described by a factor of 1.5. Roman’s Rubles also represent half the notes, but only one quarter of the value. They can be given a factor of 0.5.

A real-world example would be comparing Vietnam’s money, the Dong to the Euro. Taken note for note, the Dong represents a quarter of all the money in circulation, but only 0.15% of the value (when considering M2). The Euro is almost the exact converse. Euros represent 0.15% of the notes, but a quarter of value of all mediums of exchange in this analysis.

What conclusions be gleaned from this data? Most interestingly, is this factor (percent of value divided by percent of notes) in any way measure trust?

Several methodological concerns come to mind:

1) Aggregating all mediums of exchange, including Tide, gold and pig tusks (used as a medium of exchange on Pentecost Island in Vanuatu) seems like the best approach. In this analysis, only M2 data and the two most valuable crypto currencies, Bitcoin and Litecoin, are considered.

2) How would gold be incorporated into this analysis, since there is no single obvious unit to represent a note? People trade in grams, ounces, bars, tonnes.

3) Should crypto currencies be compared with M2, M1, or not at all? The ranking of trust factors was similar for M2 data and M1 data.

4) Can value per note be a meaningful measure of trust or anything else? Perhaps monetary discipline? What correlations can be found with this ratio?

With these concerns in mind, here is a list of the most and least trust monies using M2 data:

MOST TRUSTED

1. Bitcoin 15,589
2. Kuwaiti Dinar 456
3. Litecoin 370
4. Bahraini Dinar 345
5. Oman Rial 337
6. Latvian Lats 245
7. U.K. Pound 198
8. Jordanian Dinar 183
9. Euro 172
10. Azerbaijan Manat 166
11. Swiss Franc 140
12. US Dollar/Bahamian Dollar/Panama Balboa 130
13. Australian Dollar 118
14. New Zealand Dollar 104
15. Singapore/Brunei Dollar/Libyan Dinar 102

 
China’s Renminbi: 21.2
Japanese Yen: 1.3

CLOSEST TO PROPORTIONAL TRUST

(% money supply = % value of money supply)

Sri Lankan Rupee 0.987
Icelandic Krona 1.090

LEAST TRUSTED

1. Iran 0.0052
2. Vietnam 0.0061
3. Sao Tome Principe 0.0070
4. Indonesia 0.013
5. Belarus 0.015
6. Laos 0.017
7. Paraguay 0.029
8. Sierra Leone 0.030
9. Cambodia 0.032
10. Uganda 0.050

 

CONCLUSION

Though the Bitcoin economy may still be small, the fact of it being larger than many national monetary supplies — after only five years, no less — makes its dismissal by lingering critics downright silly. (Not that the “honey badger of money” cares much about its critics.) The value-per-note analysis is even more surprising. If indeed the relative trust of various currencies can be measured by comparing value-per-note, then Bitcoin is already the champion (precious metals not considered), and Litecoin is threatening to take second place.

The Bus from Przemysl

posted on RomanInUkriane and on NH Novella:

I.

Yogurt. Juice. Mandarins. A bicycle chain repair machine. Coffee creamer. Goods tightly bound in plastic bags, or placed individually in the overhead compartment.

Constant, frantic noise of middle-aged women, like walking into a chicken coop. rows full of boxes. seats piled high. windows blocked. boxes and bags.

The business of clearing seats, of ladies reminding each other what belongs to whom.

Diapers.

The doors close. The driver climbs over some bags to find his seat. A woman calls for the man sitting in front. He pulls a roll of packing tape from his coat pocket, steps over bags. he seals a torn-open box, returns to his seat, resigned to the duty of his labor, completely silent, unlike the women. A woman hands him a bag of vacuum sealed sausages. Some tumble to the floor. He kneels to retrieve them from under a seat. He will hold them in his lap for the rest of the trip. Another bag of sausages goes to the lady across the aisle from him.

The driver insisting the under compartment is full, unpacking a bag of thermoses — each is boxed, ready to be shelved in some store — and placing them individually in the overhead.

Boxes of powdered milk under the seats.

Slowly, things settle to private conversations. There are big snowy fields and villages in the distant forested hills.

What a vulgar, vile idea it was to reduce all this to the brutality and ignorance of a post office.

II.

I see the traffic before I see the border. Three lanes of vans and cars. All still. People stand among in their coats. So many. Later, I’m told they will mostly be crossing on foot.

I’m happy to see the bus steer into the lane for opposing traffic. We skip almost the entire line, then the driver stops and cuts the engine. We wait. There’s a 100 zloty note prominent on the dashboard.

One of the women speaks to the driver. 150 zloty. A quiet conversation. Another 40 zloty. I am a bystander to this world. (my ticket cost only 25.) A shuffling of documents.

We wait beside a flatbed trailer with two cars chained in place. I think they have no tires, but then see the tires laid flat. The frames rest upon the tires. Perhaps these aren’t cars at all. Perhaps in this moment they are merely scrap metal. A different thing entirely.

I watch my travel companions. Fascinated by their world. They know this trip well. I imagine their lives, look into their bags: Kiwi. Mushrooms. Butter. Seeds.

The Polish guard collects passports, looks, each of us carefully in the face. No smiling. Soon they’re returned.

More waiting.

The Ukrainian guard does the same and then (rejoice!) we are through! Breathe again.

At a gas station, the flurry of activity, the frantic clucking crescendos. One woman can’t find her bag. Two men carry crates of juice to the gas station. A woman exits the bus and six bags are unloaded onto the curb beside her. The two come running back from the gas station, arms swinging. The driver yells hurry. Boxes go into the trunk of a waiting car.

Such intricate chaos. God bless it, I think. God bless these people, this system.

At the next stop, numbers — forty yogurts, no sixty. Counting. Such hustle and precision! Nothing like US Army logistics. Ha.

A box of yogurt and a box of butter become two boxes, half-full of each.

Now, there are hryvni on the dashboard.

A lady unloading the overhead places a large box of chocolate snacks in my lap without asking permission or speaking to me. She clears a space on the seat across the aisle and moves the box there. I feel . . . accepted.

Boots, crackers. Someone needs something from beneath the seat adjacent to me. I begin to help. The boxes of butter are heavy.

Men await our arrival beside one grocery. The women hand them boxes through the door. They stack them in the alley in the spots where snow had melted away.

Now, the hryvni are gone.

A microwave gets passed from the from to the back of the bus. They yell at the driver to open the rear door. They call him by his first name.

Four bags go beside the traffic circle where a taxi waits.

The stops get quieter, less frantic now with fewer people and fewer goods. It is dark when we finally reach L’viv. I am one of only three passengers when the bus parks beside the train station. I exit with my suitcase and walk home.

Snow is falling lightly. Everything is calm. Freshly returned from the west, Lâ vivâ poverty is clear. I carry the suitcase because its little wheels can’t handle the disastrous sidewalks, the snow and slush, the trolley tracks buckling the cobblestone streets. Yes, Ukraine is poorer that the west — run down in many ways. The roads and sidewalks, a disaster. But still, it’s very beautiful. Everywhere, under dustings of snow, in the shadows cast by electric lights, there are hidden treasures of architecture, history, religion, faith.

Libertarianism is a First World Problem

. . . Despite the promise of such havens, an important difference should not be taken for granted.

First-world governments gain legitimacy from the illusion that they actually do good. As has been observed many times,[4] no government can survive without at least passive consent from the governed. The political class is aware of this, intuitively if not explicitly. When they want to exercise their considerable capacity for violence against a threat, say, against the threat Bitcoin poses to their money monopoly, they weigh it against the risk of revealing their true malevolent selves to the public. They must tell a good story or else rely solely on covert violence which bears its own risks.

By contrast, second and third-world governments gain legitimacy from their imitation of first-world institutions. Their publics admire first-world wealth and give passive or explicit consent in exchange for their government’s albeit imperfect imitation its first-world counterparts. Secular democracy is the correct system as evidenced by the wealth of the first world, and the main question among the politically conscientious is how to best achieve it, or more precisely, how to elect politicians who will bring it about.

For those of us who’ve lived in what are sometimes called “emerging economies,” the spectacle is pathetic indeed: bad ideas imitated poorly. Economic actors don’t know whether to celebrate the alternate avenues to commerce offered by the corruption rampant in such societies, or mourn the stagnant, fetid, cesspools of bureaucracy and predatory legal systems from which there is absolutely no “clean” escape. . . .

(Read more on dailyanarchist.com)

Bitcoin is a jailbreak

Not only are the advantages of Bitcoin over gold accentuated by the restrictions which entrench the world’s fiat systems, it is likely that Bitcoin’s emergence is a reaction to those restrictions.

It is hard to imagine their development in a completely free market where successful banking is based on service and competition instead of the political privilege which licenses select institutions to counterfeit, where regulatory burdens would be very low and tending toward increased efficiency, where, rather than restricting the flow of commerce across borders, major institutions would be dedicated to enabling it, where we could instantly transfer fractions of a commodity money to anyone in the world.

In such a free market, there would simply be no need for a crypto-currency without a commodity backing.

So what is Bitcoin’s value? It is a means of escaping the enforcement of the world’s currency monopolies, a jailbreak. It is a service, like Western Union, only cheaper, easier and faster. Bitcoin is a vehicle. Bitcoin HAS an intrinsic value as a wealth delivery service with the peculiar feature that wealth needs to transform into Bitcoin before it can be exchanged.

In an environment of extreme Bitcoin skepticism, a transaction would look as follows: wealth transforms into Bitcoin, zips instantly to anyone in the world (or beyond, so long as they have internet access), and then transforms out of Bitcoin.

People would be willing to thus transform their wealth so long as they are saving money, time or convenience over rival money transfer systems like conventional bank-wires, credit card purchases, or Western Union.

In the skeptical environment, the amount of wealth people leave in the form of Bitcoin would reflect the fees associated with changing wealth into and out of Bitcoin (for example, the fees charged by btc-e.com or mtgox.com).

Read the Whole Thing

Warrior Culture and Women in Ranger School

I dream about the military almost every other night, about Afghanistan more often than Iraq, sometimes about training. The dreams are usually tense, but not disturbing. I think my training prepared me for combat. Amazingly, the most troubling dream involves my returning to Ranger School. A bureaucratic error requires me to go again. It’s recurred more times than I can count.

Ranger School was effective because it was so God-damned hard — a 40% graduation rate when I attended. I’ve never stopped being proud of having earned the Ranger Tab, not when Ron Paul and Chuck Hagel convinced me our foreign policy was misguided, nor when the Constitution convinced me the state threatened my liberty far more than any external enemies. Even after Rothbard and Hoppe and the impossibility of a monopoly on violence, I remained proud.

The warrior ethic has likely been a virtue ever since primordial men banded together to bring down game too difficult or dangerous for lone hunters. Libertarians shouldn’t discard it because of its co-opting by the state.

Perhaps state stewardship of warrior culture makes it a lost cause and its scrutiny a moot point. Fair enough. If so, then chalk this up to sheer sentimentalism:

(Read more at dailyanarchist.com)

Train Stations and Supermarkets in Ukraine

First published in the Ukrainian Weekly, July 1, 2012:

L’viv-born economist, Ludwig Von Mises made the case that capitalism forces people, even enemies, to cooperate and serve one another. This is so evident, we often fail to see it.

Consider buying something at a store. It is typical for both customer and cashier to say “thank you.” This mutual expression of gratitude reflects how both parties benefit. The customer receives his product, and the cashier, on behalf of the owner, the customer’s money. They are both happier and the world becomes a better place.

The mutual benefit only occurs for businesses relying on voluntary patronage. It doesn’t exist where people profit from tax dollars — for example, at the train station. This brings me to my personal experience buying tickets in Kyiv’s “Vokzal.”

I was been told you can buy tickets online in Ukraine, but the website looks confusing. You must register. Also, after you buy them online, you go to the train station and cut in front of the many exhausted travelers waiting on long lines just to receive online-purchased train ticket. I can’t imagine doing that. So, for my stay in Ukraine, I’ve resorted to standing on lines at train stations to purchase tickets.

For my non-Ukrainian readers, let me clarify how horrible this experience is: The station is perpetually crowded and smells like body odor. By my estimate, the average wait in Kyiv is thirty minutes. You have to demonstrate your capitulation to the system by stooping to speak through a little portal to the impatient clerk. You have no idea what train tickets are available or how much they cost until you get there. A decision must be made the instant you get the information and there doesn’t seem to be any way to get an overview of what’s available.

You ask for Thursday night, they tell you, very rapidly what’s leaving on Thursday night, which types of cabins, times of travel and cost. It’s an awfully large amount of information to process quickly, especially for non-native speakers and especially if you’re a nice person sensitive to the impatience of the people behind you.

It gets worse.

On a recent visit to the train station a young man asked to cut in front of me, just as I reached the front of the line. Perhaps he had bought a ticket online. “Thirty seconds,” he said. I nodded. Good manners are only a weakness in a bureaucratically managed enterprise.

He was indeed finished in thirty seconds, but a lady sensed her opportunity and asserted her place behind the young man. I told her she couldn’t cut, and even posted my arm, but she snuck around my other side as soon as he finished.

She jumped straight into a heated argument with the clerk. The clerk refused something but she wouldn’t accept it and kept arguing. Eventually, the clerk put a cardboard sign in the window that read “Technical break,” dropped the venetian blinds, and left her booth, switching off the light.

This shouldn’t have caught me by surprise.

Various times are printed on the glass of the booth. Though they weren’t labeled, I’ve since learned these were the technical breaks. Each booth has five or six technical breaks during the day and they range from ten to sixty minutes in duration. This one was supposed to be twenty minutes long, and I decided to wait it out rather than move to a different line. She returned on time, but then spent five minutes counting money with another lady. When I finally had her attention, she told me that nothing was available on the day I wanted to travel, or the day after that. I couldn’t make an immediate decision about what to do, so I left empty handed.

Most Ukrainians would probably think: “Of course, that it how it works at the train station. That is how it always worked, and that is how it will always be until the end of time. There is no alternative.”

One must be able to imagine progress before achieving it. Imagine a supermarket. I shop at the Mega Market near Olympiski Stadium metro station. In fact, I went there just to cheer myself up after my failure at the train station. I like choices. I like polite people.

At Mega Market, I don’t have to ask which products are available. They are advertised with beautiful pictures and sometimes, attractive people hand me leaflets as I wander the aisles at my own leisurely pace. I get free samples. I can touch, hold and even smell things before I buy them. The biggest miracle of all, however, may be the checkout.

There is no glass between me and clerk. I don’t have to stoop. They smile and demonstrate good manners. They never take technical breaks. A girl only leaves her station when her replacement arrives. Even if they did take breaks, it wouldn’t matter because the lines are always short. Do train station bureaucrats stumble through supermarkets in utter awe? Do they consider the managers there to be super-human geniuses?

Economist Frederick Hayek distinguished between two economies in every society. There is the voluntary economy, where exchanges rely on voluntary patronage, and there is the coercive economy — so called because it runs on taxes which are collected coercively. For the sake of good manners, peace, and making the most of the little time each of has on this Earth, we should remember how we are treated by each.

Alien vs. Predator, and the hypocrisy of Allen West

Originally published on Ad Libertad:

The battle lines are forming in Washington DC. Barring any tricks which the embattled (racist, redneck, kooky, backward, radical, unelectable) libertarian wing of the Republican Party may still have up its sleeve, it seems to be another contest between Marxist-Leninist Socialists who will take everything we have in the name of social welfare, and National Socialists who will take everything we have in the name of national security. Much like in Alien vs. Predator, whoever wins, we lose.

I think we’ve crossed the Rubicon toward tyranny and fiscal ruin long ago, and the important thing now is to brace for calamity. A fiscally conservative friend of mine is appalled by my cynicism. He invokes America’s greatness and my veteran status in an attempt to bring me back to the noble cause of shutting up and blindly supporting the Republican Party. He recently encouraged me to watch Allen West’s speech at CPAC 2012. He wants, presumably, for me to give people like Allen West my time, money, attention and respect, because nothing is more important that defeating Obama (. . . says the Predator about the Alien).

In the speech, Allen West goes on at length about the virtues of the Constitution. He said, “[The founders] laid out in no uncertain terms the types of things government would have the right to do, and the types of things it wouldn’t.” I’d love to hear him reconcile this with his discussion of “a Chamberlin-Churchill moment,” and “kinetic solutions” to Iran’s nuclear research, and “the precipice of World War Three.” Does he know the Constitution requires presidents to seek congressional declarations of war? Or does he, like most politicians, only believes in the Constitution when it foils his political opponents.

He said, “The founders knew that if government were allowed to restrict the freedom of the people . . . freedom would not long survive,” yet he voted in favor of renewing Patriot Act provisions.

He decries reckless spending: “We’ve allowed the federal bureaucracy to balloon out of control,” yet he voted in raise the debt ceiling. When questioned by Young America’s Foundation’s Ron Meyer, he asked for the thing all politicians have always requested: unity and support. Presumably, Allen West’s rapid betrayal of the principles he invoked in his campaign would be remedied if only I gave him more money, time, attention and respect. . . .

Read more from Ad Libertad