Republicans’ Letter to Bernanke

Republican leadership letter to Fed chair Ben Bernanke today suggesting strongly that he not use monetary policy in service of economic growth. I’m trying to be non-partisan here, but I still this remarkable and verging on thuggish.

Dear Chairman Bernanke,

It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals. We write to express our reservations about any such measures. Respectfully, we submit that the board should resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people.

It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate. To the contrary, there has been significant concern expressed by Federal Reserve Board Members, academics, business leaders, Members of Congress and the public. Although the goal of quantitative easing was, in part, to stabilize the price level against deflationary fears, the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy.

We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers. To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.

Ultimately, the American economy is driven by the confidence of consumers and investors and the innovations of its workers. The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measurable outcomes cannot be demonstrated.

We respectfully request that a copy of this letter be shared with each Member of the Board.


Sen. Mitch McConnell, Rep. John Boehner, Sen. Jon Kyl, Rep. Eric Cantor

Satyajit Das on SocioFinancial Inflections

Good multi-part interview with Satyajit Das over at Naked Capitalism wherein he opines on our sociofinancial inflection point.

Relatedly, I’m seeing Das at dinner tonight, and I’ve been reading his latest book, Extreme Money: Masters of the Universe and the Cult of Risk, and enjoying it immensely.

Reading the Full Tilt Poker “Ponzi” Complaint

From the amended complaint against online poker outfit, Full Tilt Poker, wherein the Feds call FTP a “global ponzi”. Strong stuff.

5.  As described more fully below, one of the PokerCompanies, Full Tilt Poker, not only engaged in the operation ofan unlawful gambling business, bank fraud, wire fraud, and moneylaundering as alleged in the Complaint, but also defrauded itspoker players by misrepresenting to players that funds depositedinto their online player accounts were secure and segregated fromoperating funds, while at the same time using player funds to payout hundreds of millions of dollars to Full Tilt Poker owners.Full Tilt Poker was able to accomplish this massive fraud, inpart, because it illegally conducted business in the UnitedStates but maintained its personnel, operations, assets, andaccounts principally overseas.

6.   As described more fully below, in or about thesummer of 2010, Full Tilt Poker’s payment processing channels were so disrupted that the company faced increasing difficulty attempting to collect funds from players in the United States.Rather than disclose this fact, Full Tilt Poker simply credited players’ online gambling accounts with money that had never actually been collected from the players’ bank accounts.  FullTilt Poker allowed players to gamble with — and lose to other players — this phantom money that Full Tilt Poker never actually collected or possessed.  When other players won these phantomfunds, their accounts were credited with money that Full Tilt Poker did not actually possess, but now nevertheless owed to these players.  As a result, Full Tilt Poker soon developed a massive shortfall between the money owed to United States players and the money actually collected from United States players, with Full Tilt Poker having credited approximately $130 million in phantom money to U.S. players’ online accounts that was never actually collected from players’ bank accounts.  Full Tilt Poker never disclosed this shortfall to the public.

7.   As of March 31, 2011, Full Tilt Poker owedapproximately $390 million to players around the world, includingapproximately $150 million owed to players in the United States.At that time Full Tilt Poker had only approximately $60 millionon deposit in its bank accounts.  As of the filing of this Amended Complaint, Full Tilt Poker still owes players over $300million.

8.   Meanwhile, from approximately April 2007 untilApril 2011, Full Tilt Poker, and its Board of Directors, Bitar,Howard Lederer (“Lederer”), Christopher Ferguson, a/k/a “Jesus”(“Ferguson”), and Rafael Furst (“Furst”), all owners of Full TiltPoker, distributed approximately $443,860,529.89 to themselves and other owners of the company.  Payments to the Full Tilt Pokerowners stopped only after April 15, 2011.

105. Full Tilt Poker’s repeated representations that(1) player funds were held separately from operating accounts,(2) player funds were “safe” and “available,” and (3) it did notallow play on credit but instead allowed play only with “cleared”funds were, in reality, lies.  In truth and in fact, Full TiltPoker provided no protection whatsoever to deposits it receivedfrom players in the United States and other countries, and simplyused the funds it claimed it was holding on account for itsplayers to cover business expenses and to pay hundreds of millionsof dollars in distributions to professional poker playersaffiliated with Full Tilt Poker and others who owned interests inTiltware LLC.  As a result, according to a balance sheet preparedby Full Tilt Poker, as of March 31, 2011, Full Tilt Poker owed players from around the world over approximately $390,695,788 buthad only approximately $59,579,413 in its bank accounts.  FullTilt Poker relied on new deposits from players to ensure itsability to fund withdrawals to players’ accounts.

106. Rather than protect player funds as promised, FullTilt Poker distributed hundreds of millions of dollars to its owners.

More here.

The Case for Ignoring Dan Yergin on Oil Prices

Presented without further comment:

Cera h2

[via drgrist]

The Real Costs of Patent Trolls

New paper on the real costs of patent trolls:

The Private and Social Costs of Patent Trolls



In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives.

via The Private and Social Costs of Patent Trolls by James Bessen, Michael Meurer, Jennifer Ford :: SSRN.

In a related vein, the OECD has a new report out that, among other things, highlights the declining quality of patents in the last decade. Graph follows:

Patent quality


Kasriel: Treason, Friedman, and Credit

Provocative credit-conditions deck from Northern Trust’s Paul Kasriel. Click to read the whole thing.



Rethinking Groceries, South Korea Style

Smells Like Teen Disintegration

On the 20th anniversary of the release of Nirvana’s Nevermind, on the making the Teen Spirit video:

CRAIG MONTGOMERY The “Teen Spirit” director wanted to do all this story, narrative stuff, and Kurt just wanted to have the band playing and kids going nuts. Krist wanted booze and sent me out to liquor stores to get it. Did that cause things to disintegrate? The thing was never integrated enough to disintegrate.

SAMUEL BAYER The kids were recruited from a Nirvana show on the Sunset Strip, and they were egging on the band, so it was kind of me versus them—and I was losing. Kurt absolutely hated me by the end. He didn’t want to lip-synch the song. And I always believed that maybe his anger with me added a whole level of intensity to his performance. I always had a vision for something destructive at the end of the video, but truth be told, I was so beat up by the end of the day I just couldn’t take any more. I was sitting on the dolly and somebody came up to me and said, “Kurt wants to invite the kids down to destroy the set.” And I’m like, “Great. Destroy the set. What do I care?” And the kids came down, and it was this beautiful display of anarchy and destruction; I just flipped the camera on and shot 400 feet of film, and that was the end of the video.

via Everybody Loves Our Town – Full Chapter Excerpt | MTV Hive.


Ferguson: The Six Killer Apps of Prosperity

Niall Ferguson’s TED Global talk from earlier this summer on the “six killer apps” of prosperity. It’s all a little over-trendy for me, but … here you are:

Odd Pudding

“When you stir your rice pudding, Septimus, the spoonful of jam spreads itself round making red trails like the picture of a meteor in my astronomical atlas. But if you stir backwards, the jam will not come together again. Indeed, the pudding does not notice and continues to turn pink just as before. Do you think this is odd?”
– Tom Stoppard, Arcadia