I Fear the Current Thing

I’m suspicious of the corporate embargo on Russia. What does this accomplish, really? If Netflix and OnlyFans block all Russian users, then worker productivity will surely go up. I mean actual productivity; not the bogus ad-driven makework that counts as US GDP these days. Essentially, we are doing Russia a favor.

But. What if we’re not doing this to manipulate Russians? What if the purpose of the embargo is to manipulate Americans?

Fifty years ago, there were no money laundering laws, no concept of clean or “dirty” money. “Currency” meant that cash was considered in its current state, source of funds notwithstanding1.

In the 1970s and 80s, the government manufactured a drug crisis and declared a War on Drugs. At the peak of the Drug war, an odd scandal transpired where the Bank of Boston was criminally prosecuted for failing to adequately report cash transactions to the IRS. This was not a big crime; transaction reporting requirements had been around since the Prohibition Era. Banks regularly ignored them, and regulatory agencies only sporadically prosecuted them.

The Bank of Boston was one such sporadic case. The punishment reflected the unseriousness of the crime – a $500,000 fine, probably less than a banker’s annual meal allowance.

Still, the media jumped on the story. The New York Times revealed that members of the Angiulo mobster family were customers of the bank. Angiulo transactions had nothing to do with the bank’s felony charge, but the papers were in muckraking mode and every bad thing the Angiulos did became the fault of Boston Bank. Murder? Gambling? According to the transitive property, the Bank of Boston was responsible for those things.

Newspapers went from publishing a few dozen money laundering stories per year, to running 228 stories in 1985. The tone changed too. Instead of a minor housekeeping error, the failure to report cash transactions became the equivalent of murdering babies…with drugs.

Other banks wanted to avoid the same hit job and responded accordingly: In 1985, an average of 68,000 currency transaction reports were filed each month. A year later, the number increased to 270,000 reports per month.

Publish enough scary stories about an imaginary stupid thing, and the plebes will freak out and fall in line. Money Laundering is destroying society! People demanded that the government Do Something, so politicians campaigned on promises to solve this imaginary problem.

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And that brings us to today. The Money Laundering Control Act of 1986 didn’t end money laundering, and certainly did nothing for the War on Drugs. It was a bait and switch. The media redirected a reasonable fear of violent crime into a fear of unreported currency transactions, and convinced people that financial privacy is a Bad Thing.

Right now we are all freaked out about Putin, who is going to invade the US by way of Alaska as soon as he’s done with Ukraine. Conveniently, this fear can be redirected towards Russians, Russia sympathizers, and businesses that are failing to keep track of which customers fall into those categories.

Hear that? If you buy from a company that serves Russian customers, you are funding Putin’s war. The Washington Post columnist then likens Ukrainian President Volodymyr Zelensky to Che Guevara, the most noble freedom fighter who ever lived.

It’s a lot of work to summon the outrage mob anytime the government wants control. Much easier to convince the masses that they need more oversight. Social media platforms should be required to submit activity reports to the government any time a user fails to denounce Russia. And internet companies act like they can flip a switch and geofence certain regions. What if Russians circumvent the geofence with a VPN, or Tor? Tech companies might be unknowingly funding Putin’s war! That would be the equivalent of money laundering. Extremism laundering, we’ll call it. Ban VPNs!

1. From Henry Dunning Macleod’s The Theory of Credit:
In Miller v. Race (1 Burr., 452), confirming Anonymous (1 Lord Raymond, 738), the Court of King’s Bench decided that Bank Notes have the Credit and Currency of Money to all intents and purposes. “An action would lie against the finder; that no one disputes, but not after the Note had been paid away in Currency. An action would not lie against the defendant, because he took it in the course of Currency: and, therefore, it could not be followed into his hands. It never shall be followed into the hands of a person who bona fide took it in the course of Currency. A Bank Note is constantly and universally both at home and abroad, treated as Money, as cash: and it is necessary for the purposes of commerce, that their Currency should be established and maintained.”

References:
Lawrence T. Nichols. Social Problems as Landmark Narratives: Bank of Boston, Mass Media and “Money Laundering”, Social Problems, Vol. 44, No. 3 (Aug., 1997), pp. 324-341

The Second Amendment is just in case the First doesn’t work

Last week, Remington paid $73 million to settle a lawsuit with the families of Sandy Hook victims. Remington is a now-bankrupt gun manufacturer that sold the Bushmaster AR-15-style rifle used in a school shooting in 2012.

It’s amazing that anything can ever get done in a country with tort laws as screwy as ours. Can San Francisco crime victims sue District Attorney Chesa Boudin for releasing violent offenders back on the street? Could Yemeni civilians sue Lockheed Martin for making all those bombs we dropped on schoolchildren? Might as well sue the Wright Brothers for their role in 9/11, while we’re at it.

The purpose of the lawsuit was not to buy reparations for the families of Sandy Hook, nor even to punish Remington — the $73 million will be paid out by the company’s insurers. The point was to send a message to banks and insurance companies that, should they choose to do business with gun manufacturers, there will be consequences.

See, that’s the difference between soft power and hard power. Canadians tend to be a bit slow, and the country is now in a pickle because the Trudeau regime was too direct with its power. You’re not supposed to just declare martial law! That gets people freaked out and running to Bitcoin. You’re supposed to do it covertly, like Operation Chokepoint, then hold it up as the epitome of free enterprise. Private companies doing private business on private property!

We’ve talked about this before, but I think the argument that the Second Amendment is a defense against government tyranny is dumb. Remington literally makes military-grade firearms. Why didn’t they stand up for themselves and defend their rights? Why did they so readily bend over and take liability even though they were operating a totally legal line of business?

Because modern warfare is lawfare. In any society, the most desirable traits are elevated to positions of power. Look at the people ruling the world today; they’re not intimidating thugs who have a monopoly on violence. They’re noodle-armed pencil-necks who know how to manipulate and game the system. The Second Amendment is powerless against monopolization of the First.

ARTifacts of Wealth

NFTs, amirite?

*thunderous applause*

Alright alright, settle down.

I’ve never been an art aficionado. My default assumption is that whenever a piece of art trades for a substantial sum, there’s money laundering at play. There’s a Youtube series that explains why historically Great Art is so Great. Michelangelo’s David was carved out of six tons of marble — okay that took some effort. Leonardo Da Vinci dissected a bunch of corpses to figure out face muscles, so the Mona Lisa is either smiling or frowning depending on where you focus. Okay, that’s kind of neat.

These were two-minute explainers, tops. Back in the olden days, a piece of art could convince someone of its value by actually being good. Artwork was purchased for personal consumption, the same way one might buy a houseplant or decorative gourd.

During the 1920s, A.W. Mellon was the US Treasury Secretary and third richest person in the country. When the Soviets needed foreign capital to finance their Five Year Plan, Mellon secretly negotiated a purchase of twenty-three masterpieces from the Hermitage Museum in Leningrad. By selling to the US Secretary of the Treasury, the Soviets secured extra cash as well as favorable trade policy where they had previously faced embargo [1].

Mellon then took the opportunity to establish the A.W. Mellon Educational and Charitable Trust. Later on, whenever he needed an income tax deduction, he “donated” a piece of art to the charitable trust. The paintings never left the walls of his homes, but that didn’t matter: Possession had been decoupled from ownership.

We’ve talked about the decoupling of monetary function here [2]. In early cultures, resource-constrained societies required objects to serve multiple roles. Shell beads were a display of wealth AND a store of value AND a medium of exchange AND a unit of account. As civilization advanced, people and objects gained a higher degree of specialization. Today, the objects that we use to store value (stocks and bonds) are different from the objects that we use as a medium of exchange (credit). And no one uses physical money as a display of wealth except maybe rap musicians.

Over the last century, art ownership has become specialized as a tool for wealth preservation. Nowadays, billionaires don’t even need to donate an entire painting to secure a lump sum deduction; they can donate a fraction of their ownership — just enough to maximize the IRS limit of 60% of adjusted gross income.

Why is modern art so shitty? Because the visual piece is irrelevant to the primary purpose of money laundering. Anything more than splattered paint on canvas is simply wasted effort.

And maybe the shittiness is the point. If art ownership has become specialized as a financial instrument, the physical medium has become specialized as an ideological test to expose wrongthinkers. It’s like an emperors-new-clothes type of ritual. If you don’t bid up the price of a Pollock, maybe you don’t deserve to come to Davos. The test is only effective if the painting is utterly stupid.

Here is a video of an NGO teaching post-Taliban women in Afghanistan about conceptual art. (Your tax dollars paid for this!) It’s important. Once you embrace the belief that a urinal is the epitome of fine art, only then can you be trusted to participate in a liberal democracy.

NFTs are not all that innovative; they’re just more explicit about decoupling the visual display from financial function. It’s no surprise that Christie’s and the Museum of Modern Art have embraced crypto art. Look, you can even set your Twitter avatar to an NFT as a sign of allegiance. You’re not gonna get a term sheet from a16z without one.

References:
1. Noah Feldman. Scorpions, 2010.
2. Bitcoin as a Display of Wealth

Amazon’s Proof of Work

I write a lot of reviews on Amazon. Partly because Amazon reviews is one of the last bastions of unpopular opinion on the internet, but mostly because I get free stuff out of it. I am a huge sucker for free stuff.

If you’ve had an Amazon account for any amount of time, it’s inevitable that you’ve been solicited for reviews by a third party seller. Usually the seller offers to Paypal a purchase refund in exchange for a five-star review. Sometimes the target product is in the $100-$200 range, like a security camera. Sometimes the product is a $10 phone holder, in which case the seller might pay you to search for some keywords, click around, and buy the product without need for a review.

Third-party sellers use tools like JungleScout to find product niches with high demand and low competition. Once a niche is identified, the seller orders a batch of merchandise from China, slaps a custom label on the box, and has the manufacturer drop-ship the lot to an Amazon fulfillment center. Manufacturers don’t form exclusive relationships, so dozens of sellers might hone in on the same product, resulting in page after page of identical listings sold under different brand names.

Amazon ranks the products based on a combination of sales numbers, reviews, and clickthrough:sales ratio; sellers buy reviews and sales in hopes of securing a coveted spot on the first page. No one is really harmed in the process – customers end up with the same product from the same manufacturer either way. In some ways it’s like Proof-of-Work – dumb and wasteful, but fair.

Here’s where I get confused. These are clearly the same product. Why don’t sellers consolidate to increase their margins? One theory is that sellers prefer to stay small, to reduce the downside risk of Amazon canceling their account and seizing the inventory. Another is that Amazon prefers the plausible deniability of using multiple third-party sellers. When issues arise (like a hoverboard spontaneously combusting), Amazon can claim to be a neutral platform and deflect the blame.

And maybe this is ultimately good for consumerism. If I were to search Amazon for a USB cable and get a single result at the best price, I would stop to think about whether I really needed a USB cable at all. Instead, Amazon returns fifty pages of results and my focus is on choosing whether I want the white one or the blue one; three feet or six feet.

We’ve become accustomed to having eighty bajillion options shoved in front of our eyes anytime we want something, because variety is the epitome of free-market capitalism. As long as we get to choose between five million brands of breakfast cereal, no one will ever stop to ask why we need to start the day with oats rolled in high fructose corn syrup.

And that’s my conspiracy theory of the day.

In 1989, Boris Yeltsin visited a Houston supermarket and was blown away by the available options. “31 different flavors of ice cream, зAEбцA!” It was enough to make the Soviets abandon communism.

And That’s Why We’re Fat

I’m behind the curve these days, but here’s Slime Mold Time Mold with an awesome blog series on obesity. The whole thing is worth a read, but the key theory is that the leading cause of obesity is some environmental contaminant that travels through the water.

First of all, we know that populations living at higher elevations have lower obesity rates than populations residing in lowlands:

See this map, where most of Colorado is very very white and the bottom of the Mississippi basin very dark. But race can’t be the only determinant of obesity, because the rest of the Eastern Seaboard is relatively slim too – particularly Massachusetts and New York.

Those who live in Denver get their tap water from pristine snowmelt, which flows downhill and accumulates contaminants before reaching residents at lower altitudes. Those near the mouth of the Mississippi are exposed to all the obesity-inducing pollutants accumulated elsewhere in the country.

What are the problematic contaminants? We have the usual suspects: Livestock antibiotics that damage the gut biome; perfluorinated and polyfluoroalkyl substances that disrupt endocrine function. The prevalence of these pollutants roughly match the parabolic increase in obesity since the 70s. However, the author’s prime suspect is lithium, an industrial additive and battery component. Lithium is also prescribed as a mood stabilizer, with impaired thyroid function and weight gain as known side effects.

What if none of this was an accident? Beginning in 1951, major cities in the US and abroad began adding fluoride to the public water supply. Most of them still do this! The rationale is that fluoride helps prevent tooth decay, which seems like a really niche interest. If something as minor as tooth decay is enough to warrant additives in the public water, why not use the same strategy to address other public health concerns?

When Pfizer comes out with their COVID vaccine pill, are we going to grind that up and add it to public drinking water?

If I was the mayor of a violent city like Chicago, might I not consider adding a pacifier to the municipal water supply? An antidepressant like lithium carbonate, which has been successfully used to treat patients with aggressive conduct disorder? If we can justify fluoride for friggin tooth decay, surely we can justify lithium for public safety?

I don’t think any cities are actually doing this. But! Prison inmates are known to gain a substantial amount of weight during incarceration. This has been observed everywhere from county jails to Guantanamo Bay. Researchers blame poor health care and lack of fresh fruit, but come on – this is prison. Food is bland and delivered in restricted portions. It’s nearly impossible to gain weight on jail food, unless something else is going on. If I were a corrections officer surrounded by potentially dangerous criminals, I would not hesitate to dope the water with sedatives.

Of course, our rulers would never do that to us…right? Well, time to bust out the distiller.