Opinion

The Great Debate

from Felix Salmon:

Can bitcoin capitalize on the death of Mt Gox?

In November, I said that I was waiting for bitcoin to get boring -- and it certainly isn’t boring yet. The death of Mt Gox has created headlines saying things like “Bitcoin future in doubt” and “Mt. Gox Meltdown Spells Doom for Bitcoin”; those, in turn, have sparked their own backlash of people saying that in fact this development is one of the best things that could have happened to the cryptocurrency.

The truth of the matter is that it’s too early to tell. Mt Gox was a unique institution in the bitcoin universe: it was there from the beginning, and people have been moaning about it from the beginning. It was always a badly-run and far too opaque institution; if bitcoin is ever going to really take off -- if Ben Horowitz is going to win his socks -- then the death of Mt Gox was surely necessary sooner or later. At the same time, however, Mt Gox was for many years the cleanest dirty shirt in the bitcoinverse, and historically accounted for the lion’s share of trading in the currency. That’s one of the reasons why it somehow managed to be sitting on such an enormous lode of bitcoins at the time it went belly-up.

The rumor is that 744,408 bitcoins are “missing due to malleability-related theft which went unnoticed for several years”; that’s hundreds of millions of dollars that have been stolen, and it’s almost impossible to believe that Mt Gox was so incompetent as to not be aware, for years, of a nine-figure hole on its balance sheet. Instead, it quietly sold itself not only as a trading venue but also as a wallet service: store your bitcoins with us, they’re safe here. So long as the number of people using Mt Gox as a wallet was greater than the number of bitcoins that had been stolen, the service could continue. But then, when the run started, Mt Gox collapsed -- inevitably -- in a matter of days. It’s a Ponzi scheme, essentially -- just one that looks like it was driven by theft rather than avarice.

The Mt Gox fiasco is literally an order of magnitude larger than the previous largest bitcoin scam, the theft in July 2011 of 78,739 coins from a wallet service called MyBitcoin. The Mt Gox implosion is on a massively larger scale than even the shutdown of Silk Road, where some 171,955 bitcoins disappeared. As a result, it’s fair to say that the end of Mt Gox is also the end of bitcoin as we have known it to date -- a wild-west world of hackers and discussion forums and pseudonyms and Tor accounts and -- as one highly-active page puts it -- numerous “Heists, Thefts, Hacks, Scams, and Losses.”

Now, we enter the world of Bitcoin 2.0: an arena of well-capitalized companies with VC backing; of sober joint statements using terms like “trustworthy and responsible” and “comprehensive consumer protection.” Of course, all these promises have been made before, not least by Mt Gox itself; the big questions are whether (a) this time is different; and whether (b) this time will be seen to be different by a population that has -- quite rationally -- had little faith in bitcoin to date.

Obama’s options for Syria

On Saturday the United Nations Security Council demanded that Syria’s government and its armed opponents end attacks on civilians, allow the delivery of humanitarian aid across borders and battle lines, and protect minorities. The Security Council also called for the lifting of sieges against civilians and said that it would take additional measures if the two parties did not comply.

Even if fully implemented, this welcome push on humanitarian issues will not end the violence in Syria, or resolve a conflict that has left over 120,000 people dead and one-third of the population displaced. More action is needed if a political solution is to be found and a serious peace process initiated. The American people won’t support deployment of U.S. troops. Russia will veto any new U.N. Security Council resolution with teeth. But Washington should consider other diplomatic, assistance, financial and military options.

Diplomatic options now include formally terminating the U.N. negotiating effort, which has so far failed to reach any kind of agreement, even on an agenda. The U.S., a prime mover behind the talks, could announce that it would reopen them only if President Assad agrees to discuss concrete steps towards a democratic transition, which he has so far failed to do.

Making every voter equal

The venture capitalist Tom Perkins recently suggested that he should have a greater voice than others in selecting our government because he’s rich. “You pay a million dollars in taxes,” he told the Commonwealth Club in San Francisco, “you get a million votes. How’s that?”

Perkins later insisted that he had intended to be outrageous. As most Americans understand politics, however, he was just stating the obvious.

Instead of extra votes on Election Day, we who are wealthy enough to give money to politicians get special access before, and influence after, as candidates pursue the cash that is the life’s blood of their election campaigns. The more you give, the more access and influence you have. It’s as simple as that.

When excessive wealth meets dysfunctional politics

The election is months away but figuratively, at least, the billionaires are voting early and often.

Paul Singer and Art Pope, and, of course, the brothers Charles and David Koch are busy punching ballots for the Republicans; George Soros and Tom Steyer, meanwhile, are arranging votes for the Democrats, or at least most of them, since Steyer, an environmental advocate, is focusing of climate change. Their minions are not, however, literally buying votes — the way Gilded Age operatives for George Hearst or Leland Stanford used to do.

That kind of exercise, though arguably more efficient in the “marketplace of ideas,” remains illegal. At least for now. Instead, money is transmuted into “speech.” As long as there is no specified quid pro quo from those elected with their money — and perhaps only electable because of their money — no one has broken the law.

How to fix foreign aid

All war-torn countries, including Iraq and Afghanistan, share a common characteristic — the absence or destruction of economic infrastructure. The lack of opportunity fuels frustration and unrest, giving violent actors an opening to destabilize fragile institutions.

The frustration in Iraq and Afghanistan, as well as in other fragile states, exists despite Washington having spent billions of dollars in military and non-military aid to boost their economic development during the past decade. The lack of progress has fed a growing sense that U.S. foreign aid programs cannot establish economically viable systems.

I know this firsthand. As Deputy Under Secretary of Defense from 2006 to 2011, I led a team of private-sector business leaders, agriculture experts, geologists and engineers in an effort to restore or create economic opportunity in war-torn communities. Our work focused on Iraq and Afghanistan, but it later expanded to Pakistan, Sudan and Rwanda.

Democrats must give Obama trade promotion authority

President Barack Obama declared in his State of the Union speech, “We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment and open new markets to new goods stamped ‘Made in the USA.’ China and Europe aren’t standing on the sidelines. Neither should we.”

Republicans agree. But the president has not followed through on his call for legislative action. Giving him trade promotion authority would put two large trade deals on a fast track to completion.

It appears politics have intruded. The president has given in to members of his party who oppose granting fast-track authority because the trade deals might alienate friendly special-interest groups in an election year. He reportedly did not even mention the issue when speaking to the House Democratic Caucus at its annual retreat. Then Vice President Joe Biden, addressing the same group, said the White House would be backing off the issue in deference to Democrats’ political concerns.

from Reihan Salam:

The ‘grand compromise’ that wasn’t

One of President Obama’s defining convictions is that he is the most reasonable man in our nation’s capitol. He seems to view opposition to his agenda as a reflection of intellectual or moral failures (my opponents don’t understand the underlying issues well enough, or their hearts aren’t big enough), or as a product of naked cynicism (my opponents are dishonest, and they will do anything to defeat me). To prove his point, the president will occasionally tout an idea from the other side of the aisle, or rather an idea he imagines to be from the other side of the aisle. And when his political opponents don’t embrace the idea, well, that means that they are acting in bad faith.

So I was delighted by the news that the Obama administration is changing its tune on Social Security in its forthcoming budget proposal. Last year, the president included a Social Security reform compromise in the budget proposal he presented to Congress. This year he has decided not to do so. But the truth is that the president’s Social Security compromise wasn’t a compromise at all. His decision to jettison it is a refreshing change of pace. And while the reforms aren’t officially part of the 2015 budget proposal, they remain relevant because Obama is treating them as a concession he’ll make if Republicans agree to raise taxes.

According to the president and his allies, the White House was only willing to compromise on Social Security, by cutting benefits, if Republicans were willing to give a little too, by agreeing to higher taxes. The problem is that his idea for cutting Social Security benefits is actually pretty bad, and it would also raise taxes. In other words, the president’s offer to the GOP is, “Hey, why don’t you share the blame for this thing that will make Social Security worse for seniors and raise taxes, and in return for my generosity you’ll let me raise taxes even more?” You will be shocked to learn that Republican lawmakers were not thrilled by this idea.

from Nicholas Wapshott:

Where is Ukraine’s Lech Walesa?

The popular pro-Western revolution in Ukraine that has deposed pro-Russian President Viktor Yanukovich is part of a far wider and longer historical tug-of-love between the West and Russia.

Who is chosen to succeed Yanukovich will decide whether it is possible to forge a permanent Ukrainian settlement that will satisfy both the European Union and Russia. The prospect right now looks bleak.

As candidates start lining up for the elections slated for May, no one has emerged with the suitable stature, political sophistication, public integrity and plain honesty needed to put to rest a lingering dispute about national identity that has cast a long shadow over the politics of Europe. Tensions between Russia and the Western European powers, particularly Germany, France and Britain, have been rumbling for centuries.

from Anatole Kaletsky:

The case against a Chinese financial crisis

A severe slowdown in China is viewed as among the greatest risks facing the world economy this year, and Thursday’s dismal news on Chinese manufacturing output exacerbated these fears. But the really important news from Beijing pointed in the opposite direction: Bank lending in China, instead of slowing dramatically as many economists had expected, accelerated in January to its fastest growth in four years.

This means China is unlikely to act as a brake on the global economy in the months ahead -- despite the recent weak manufacturing figures. It also suggests that predictions of a credit crunch or financial crisis in China will likely prove wrong -- or at least premature.

To welcome stronger bank lending in China is not to deny that credit growing at double the gross domestic product growth is unsustainable and will ultimately have to be curbed. The Chinese authorities themselves clearly believe this. The government and the central bank want to reduce credit growth and to replace the unregulated, opaque “shadow lending” system with properly supervised, well-capitalized modern banks.

At the crossroads for immigration reform

Always uncertain, House of Representatives action on immigration reform now appears definitively on off mode for 2014.

That’s because House Republicans loudly denounced Speaker John Boehner’s most recent effort to chart a way forward by proposing principles for legislation. They saw the specter of divisive infighting when what they want is a united front for their November re-election bids.

In shelving immigration action, the speaker sidestepped the problem of intraparty strife. He argued instead that his caucus could not trust President Barack Obama to implement any new immigration enforcement measures Congress would pass. This claim, however, overlooks the enormity of what successive Congresses and administrations, under both Republicans and Democrats, have accomplished in immigration enforcement — including throughout the Obama presidency.

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