the Blog Papers of Dr. Michael Sakbani; Economics, Finance and Politics

Dr. Michael Sakbani is a professor of economics and Finance at the Geneva campus of Webster-Europe. He is a senior international consultant to the UN system, European Union and Swiss banks. His career began at the State university of NY at Stoney Brook,then the Federal Reserve Bank of New York followed by UNCTAD where he was Director of the divisions of Economic Cooperation, Poverty Alleviation, and UNCTAD`s Special Programs. Published over 100 professional papers.

Monday, January 22, 2018

Michael Wolff`s Book on the Trump White House


Michael Wolff`s Book on the Trump White House

 Michael Wolff’s ‘Book on Trump and his White House.
                       Dr. Michael Sakbani
Michael Wolf `s bombshell of a book, Fire and Fury, is already a best seller. More than two million copies have already been sold The book was criticized by reasonable people for its lack of documentation, for its narrative style of telling what was said as if the author was in the meetings he recounts and for some factual errors here and there. Trump supporters, however,  like Steve Miller, called it  a garbage book by garbage author.
In fact, my impression is that the book is well-written in a journalistic style, certainly lacking in documentation but vivid with details about the chaotic White House and the well etched personalities, in particular, Steve Bannon and the President himself. To be sure it is not a history; the records are still not revealed, but it is in the genre of historical fictions where the characters and events are real but their dialogue is partially made up.
For those following the US bizarre scene, there are no revelations; we all knew the events and the characters. But we did not live with them and experience their daily hustle and bustle. And that is  what Wolff provides to our prisms.
There is, for this economist, no discussion of the Trump programs in the economic, international and domestic arenas. However, that is not evidently what the author wanted to write about.

For the past two week, all of Washington—and, indeed, much of the country, judging by the book sales—had been reading, digesting, and debating Wolff`s book, the ethics and accuracy of Wolff’s journalism, and the horrifying details about the naked-emperor-in-the-Oval Office of-President that he exposes. The book’s scathing portrait of an incompetent, incoherent, “semi-literate” wild man in the White House is largely arresting.
The president is revealed in magnified details: his transnational style, his little informed approach to issues, his unwillingness to read or take advice, his lack of personal discipline and self -control, his insatiable desire to be liked and approved and his tantrums about his perception of the unfairness of his critics.  He certainly is shrewd and street smart but totally incapable of pivoting from the candidate Trump to President Trump and in essence a poor strategist but a capable tactician. A central trait appears to be his emotional bursts expressed by his compulsive tweets, which complicates everything and demeans his office.
His schedule starts early in the morning with his tweets. He usually eats breakfast in his bed room and stay in his living quarters till about 11 O`clock watching three TV screens. About 11 he goes to his office for state matters. After dinner, he starts his phone calling to his friends everywhere, especially, in NYC, while he is watching TV again. These phone calls were the biggest source of leaks from the White House. The rest of the leaks are from the various contending groups in the WH.

Steve Bannon is presented with all his wit, his warts, his right wing hubris and nationalist irrelevance for this age. He is smart, politically cunning but like the President, he is a poor strategist. In his last days in the WH he wanted to continue Trumpism without Trump, a sort of right wing nationalist appeal to Trump supporters. He was hoping to oust the traditional Republican establishment by running right wing candidates in primaries against their candidates. He does not seem to have the continued support from rich Zionists and other right-wing contributors to do that out of Breitpart . It took only a couple of weeks for him to lose his platform.

 The scene around all the characters is rich with the supper rich who control politics and have their own agendas. We are treated to the parade of the Mercers, father and daughter, to Rupert Murduch, the Zionist Addelson with his Israel obsessions, Sam Schwartz, the Koch brothers and other lesser players. We also get a glimpse of the Republican establishment characters, especially the light weight Speaker Paul Rayan and the in house cheer leader Mike Pence, the least impressive Vice President of mod ern times and the hapless Reince Briebas and his nemeses Scaramoushi ((Scaramucci)), the short stop  character pulled out of the minor leagues by the boss `children Ivanca and Jared .
The staff itself rides a roller- coaster with changing riders every turn. 

The big Cabinete meetings have many uncomfortable characters. There are the three Generals who seem to suffer their boss in loud silence. Joining them is the Secretary of the State, an ex-oil man running a half empty State Department who reportedly thinks his boss is a “fucking morao”. Add to them the secretary of health who hates health insurance, the Secretary of Energy who believes in abolishing his department, the billionairess Betsy Vosek of education who does not value public education, the Secretary of the Environment who does not believe in science and environmental regulations, the billionaire secretary of labour, who prefers robots to human labour since they neither go to lunch nor get pregnant, and if that is not enough, the Vice-President who does not miss a chance to hail the chief.
The two bosses ‘kids, Jared and Ivanka, are the progressives among the right-wing assortment of the WH. With little rouge on his face, Jared and Ivanka would look like a Renoir pair in 19th century Paris. They are not however, a tableau on the wall, but rather two persona whose presence is fortified by their silence on most things. When they got activated, they advised the President to fire Comey and bring Scaramouchi from NY. After he was moushed (a new verb), they appeared again in getting Bannon “to suck his own cock”.
We have in addition Kate Walsh, the deputy chief of staff under hapless Briece Breibes, who attempted to organize the access to the big man. After she failed and resigned she was followed by 29-year-old Hope Hicks, the communications director, whom the President carries around as his most trusted aid. Like the President she does not read but she follows the media. She gets her input in the space of the 5-minute attention span of the Big-man as he repeats every half hour what he said before. 

The vernacular of Trump`s WH is inventively vulgar. There is shit and fuck on every tongue. Steve Bannon`s “no kidding” is “ don’t fuck with me” Firing somebody is telling him “to go suck his cock“ We are told that the President estimation of Africa is that it is a bunch of “shit hole countries”.

Several days after the publication of Wolff`s book, Susan B. Glasser of the New Yorker, interviewed him. He told her that Washington DC will bury Trump. Candidate Trump was supposed to drain the swamps of the town. But he is now drowned by its inhabitants.
Wolff told Glasser that he considers himself an outsider. He declared, “I am so not a member of this- Washington -club.”
 A New York author and columnist previously best known for a scathing, insider- takedown of the media mogul Rupert Murdoch, Wolff told her that, for assembling his materials, he had spent little time talking to, or worrying about, “the permanent establishment” of Washington.
He did not go to the Four Seasons for breakfast or to Georgetown cocktail parties for gossip. He said that he came down from New York, checked into the Hay-Adams Hotel, across Lafayette Square from the White House (where rooms, according to the Web site, start at more than three hundred dollars a night), and got to work, which by his account largely consisted of hanging out in the lobby of the West Wing of the White House, acting as a fly on the wall. Occasionally, Wolff allowed, he consulted with Mike Allen, the well-sourced journalist, whose daily e-mail newsletter for the Web site Axios often features leaks from the Trump Administration, as well as a “relatively small group of insiderish people, people who have been helpful to me.”
It’s clear that Wolff used his outsider status as a selling point with the members of the Trump team whom he persuaded to cooperate—and that they did so despite his long-standing willingness to break much crockery, and even basic rules of honesty and fairness, in the pursuit of a story. The Trump White House has seized on mistakes to call into question the book’s damning, and mostly accurate, a larger portrayal of this Presidency. For example, the book’s account of a breakfast at the Four Seasons last February, where Trump’s daughter Ivanka dazzled the wary natives in their natural habitat, mixed up between Mike Berman, a heavy-hitting Democratic lawyer and lobbyist who arrived in Washington, in the nineteen-sixties, as an aide to Walter Mondale and a young national reporter at the Post with the same last name. In the insiders ‘cannon, that is a pretty big deal.
 When she asked Wolff about the book’s factual errors, like the Berman mixup, he was dismissive, saying that he saw them as more or less irrelevant to the larger truths that he had told about Trump. Glasser thinks that Wolff talked like a man who couldn’t help but marvel at his own good fortune: he’d written a book that he thought might just bring down the President—and he was making a killing.
Wolff pointed out to Glasser“I’m going around saying, ‘It’s just a book,’ but it has become something so much larger,” he said, citing Trump’s attacks on the book and his failed attempt to prevent it from being published. “The President seems to think this book is some kind of significant threat, and that changes the context,” Wolff said. “Whereas with a regular book, a Mike Berman for a Mark Berman ... would have been of no consequence whatsoever, now its suddenly a state question.
But, she asked, what about the facts? Wolff’s attitude about them struck her as, well, a bit Trumpian. Would he fix mistakes in the next edition? “Yes, sure, the Bermans will be sorted out,” Wolff promised. But he still seemed to think that she was missing the point. “Fire and Fury” was like a Bob Woodward book, he insisted: a revelatory, scoopy backstage account of the White House with no sourcing or footnotes or explicit attribution. “The reader is basically going to have to trust me on that, or trust his own sense of, does this comport with everything else he knows?” Wolff said. “That’s how you get an inside portrait.”
Besides, Wolff added, all the second-guessing about details like who was at breakfast tended to obscure the fact that the book provides a vivid portrait of Trump based upon on-the-record quotes from formerly close advisers like Bannon and Katie Walsh. Even Wolff’s critics seem to accept that his over-all portrayal of a dispirited, demoralized White House, where many senior aides loathed and feared their boss, was basically correct. 
Glasser asked Wolff if he had started out planning to portray Trump so harshly. “I had no preconception,” he said. “I was perfectly willing to write a ‘Trump can be successful’ kind of thing, a contrarian view that is reasonably up my alley. Then I just started to listen to these guys, and they started to talk to me, and it was like, ‘Oh, God!’ These senior people say, ‘Do you have any idea what it is like to work for this man?’ ”
Wolff acknowledged that Bannon had belatedly apologized to Trump, but that he did not deny any of the quotes that Wolff attributed to him. “He hasn’t disavowed anything,” Wolff said. “He can’t, and he’s not going to.” As Wolff sees it, Bannon’s gradually rising dismay is the real theme of the book: “I saw Steve grow more disillusioned and angrier about what was happening in the White House—about the kids, about the fact that Trump really had no allegiance to Trumpism, or Bannonism, or whatever you want to call it.”
In the end, Wolff said, he had concluded that Trump’s big failure was to keep thinking that what worked for him in New York would work in a very different sort of city. “Washington is an institutional town. Those institutions are going to rise up, and, in the end, they are going to crush this guy, or they are certainly not going to give way to this guy,” Wolff added “He plays a New York game, and the New York game is, I can sell you anything—all I have to do is get attention. He’s a real-estate hustler, and that works in New York.”
Wolff may have Trump’s number, as one New Yorker of another. His reporting certainly comports with many of the accounts of the President that we all have heard and read in the last year. It’s a unique subculture with world-class champions in self-serving, name-dropping, and other political sports; Wolff didn’t need to join the club to capture it better.
So, yes, a few more facts might have made Michael Wolff’s mind-blowing revelation of a book at least a bit better. And all he needed to do in this case was Google them. 
All in all, we are entertained but frightened that a superpower that decides a principal part of the fate of the World can be led by such an assortment of operators. The President himself is too caught up in his ego and he seems to lack what George Washington was most concerned about: a civic virtue. Around him, there is nobody that he trusts enough to straighten out his unhinged behavior. He sets a new norm by behaving like the real estate hustler he was in New York. It seems that his new norm is greatly lesser than the old norm; one wonders how a great country can be led democratically by its uninformed mediocrities. 


Saturday, January 13, 2018

Is Bitcoin the Currency of the Future

      BITCOIN : a CURRENCY for the FUTURE ?                                                                                             By                   

                         Dr. Michael Sakbani

In the past few years since the 2008 financial crisis, Bitcoins have been mined, i.e. created, by using Blockchain technology. Twenty-one million Bitcoins were created by unverifiable digital technology master or masters. We know of a pamphlet authored by Satoshi Nakamoto from Japan entitled "Bitcoin: a Peer to Peer Electronic Cash System". but we have no definite knowledge about the original creator. The creation of Bitcoin involves elaborate and advanced computer use known as "mining" to assure its safety and to avoid double payment. It should be added that Bitcoins are only one of the numerous potential applications of Blockchain technology. 
This technology programs and disseminates programmable data on the internet to all relevant users.

The Process of Bitcoins.

The process has two phases. In the first phase, the initial purchaser has to validate his offering on the internet. This is called encryption. It starts by the account holder, i.e. the initial purchaser, who has his own digital key, making his validation. This verified entry on the ledger must now be validated by those who run the computers, which are called the miners The miners in this second phase must now validate the entry by trying to guess the algorithmically generated number between zero and 4,294,967,296 (with the correct number of zeros preceding it), which was assigned to the initial offer. This validation, called "proof of work", involves a lot of iterations reaching into millions of guesses.  Once the number is guessed, the transaction is entered into the Blockchain ledger. Up to six such validations are required by the Nakamoto software. This in effect, establishes several blocks deep. confirmed ledger for all the transactions between the parties. The approval process takes time and because of its digital requirements is slow. The more is the approval depth, i.e., the number of approvals, and the larger is the number of participants, the slower and more computing time is required by the process. According to digital experts, the amount of computing power in the case of Bitcoins involves the use of a great deal of electricity by scores of computers running 24 hours a day, which implies a big energy footprint.  Some experts place the consumed electricity at more than a country like Denmark uses over the same period.  This is naturally, both economically costly and environmentally harmful.

It is clear from the above that the process is not a simple exchange between transactors. Parties to transactions often resort to using facilitators. However, facilitators and companies involved in the Blockchain processing in effect intermediate and charge fees for their services,. So, Bitcoins according to traders, run on the average $400 of such costs. The deeper is the level of approval, the costlier are Bitcoins and the more electric power they run. That is why the mining of Bitcoins is asymptotically fixed.
After the invention of Bitcoin, many speculators bought into this invention in the expectation that it will be the future currency of the World. A speculative bubble similar to the Tulip bubble and other such bubbles was seen in 2016 and 2017. The value of the Bitcoin was initially zero but reached the  astronomical height $20,000 in the fall of 2017 and then recoiled to $7,000 by the time of writing. Market traders expect it to go down considerably further.  The great fluctuation in the market value of the Bitcoin reflects two factors: its speculative nature and its lack of intrinsic value. Fiat money shares the latter attribute of the Bitcoin. But because it is issued by the Government as a legal tender, and backed up by the Central Bank as a lender of last resort, it does not have the speculative nature of the Bitcoin.
Like gold, Bitcoin has a costly and limited supply. So, scarcity, a necessary attribute of money, is satisfied. Like gold also, its stock is not- destructible and is cumulatively considerably larger than its flow mining thus its monetization generates large market swings. It is portable, divisible without losing value and is durable. Thus, the important characteristics of money are in evidence in Bitcoin. However, all of these desirable attributes are balanced off by the inflexibility of its supply and its costly mining in energy..

The currency of the Future?

The question arises whether Bitcoin will be the currency of the future nationally and internationally. The answer is at present, affirmatively negative for economically well run countries. But as bankers like Jamie Dimon, the CEO of Morgan -Chase acknowledged that in countries whose inflation is high and thus credibility is low, such as Venezuela now, or in places where there are no banks, Bitcoins are very good invention.

The supply of Bitcoin is asymptotically fixed. Hence, if it must keep up with the growth of the world economy, or any economy for that matter, its value in terms of goods and services should increase. That leads to deflation as a permanent state of economic being. Deflationary economies are harmful to the spirit of risk-taking in capitalism. Entrepreneurs will postpone taking risk and capital investments by corporations will be postponed and interrupted in a deflationary economy. If monetary authorities decide to have somehow a steady supply of Bitcoins, that would not solve the problem because the market value of the Bitcoin depends on excess supply or excess demand in the marketplace and not on supply alone. Thus, a steady supply of money a la Friedman would not foreclose ups and downs in the market values and in the cyclical macroeconomic conditions. During such cyclical ups and downs, if there is no bank of last resort for Bitcoins, there would be a flight to liquidity, i.e. to fiat money supported by the Central Banks. Thus, while Bitcoin can be theoretically capable of being a medium of exchange in normal times, their general acceptance, would not be there in times of crisis if there is no bank of last resort behind them.
There are more grave problems in so far as the function of money as an asset is concerned. Because Bitcoins have no intrinsic value, their own rate of return can only obtain from their increase in value. But this is practically impossible to be stable given the relationship between changes in the stock of Bitcoins and their flow quanta. Like gold, the relationship between the stock and the flow is volatile and essentially unpredictable. Moreover, the financial markets would not assign a rate of return unless financial instruments are denominated in Bitcoin. That would imply generalized international acceptance and functioning secondary markets. Without that, the Bitcoin would lack liquidity and very fast becomes non- negotiable.
These same factors cause ebbs and tides in the value of Bitcoin over time. Consequently, the unit of account and instrument of deferred payment function of money would be nearly missing in Bitcoins. In this respect, if banks were to lend in Bitcoins, their risk of asset default would be so large that they would have to be deeply capitalized as their capital- asset ratios would be multiplied by a large standard deviation. That obviously renders banks' profitability and commercial viability very much in question.

Is Bitcoin a Protection Against Inflationary Monetary Policies?

The cheering for Bitcoin comes from quarters who object to the observed misbehavior of states in issuing fiat money. That economic issue has not found a satisfactory answer yet. It is obvious that we do not face the simple quantity theory of money in reality and thus, the money supply function is not steady, and empirically predictable  Changes in velocity and interest rates as well as financial innovations affect the money supply function. And, it is its relationship to demand that determines inflation. The experience of the US federal reserve from 1981 till 1985 when it sought to target monetary aggregates is a case in point. The money supply function has the same problems if Bitcoins were involved.

International Political Economy Issues

Bitcoin holding seems to be highly concentrated in South Korea and Japan. Its acceptance elsewhere is yet not wide-spread. It is a very attractive instrument to have for holding illegal money, for terrorist financing and for tax evasion. Moreover, it results in loss of seignorage for states. Thus, Governments and their Central Banks will not be among the willing backers of Bitcoin.  
The rise in the economic power and trading ability of China as well as the importance of the European Union economically and commercially is bound to challenge the position of the US dollar as the dominant international reserve currency. China is on record seeking an acceptable replacement of the US dollar in the international monetary system. China holds several trillion US dollars whose track record is becoming suspect. This will receive greater impetus as the Current US Administration withdraws from many international fora. 
The subject of replacing the US dollar with an international reserve currency goes back to the time of the C.20 in early 1972-74. But it has been on the back-burner ever since. Neither the SDR nor the advent of the Euro has dethroned the US dollar from its position as the key world currency. Today, 75% of international reserves are in US dollars while the US economy is only 19% of the global economy. To move on making the Bitcoin an international key currency would require finding a way of controlling theirs and the dollar quanta, establishing an agreed substitution account and securing rules for unlimited acceptability by surplus countries. Neither the US nor the holders of the surplus will agree to have a doubtful, speculative asset as an international reserve currency in the foreseeable future. The advocates of the Bitcoin have intimated that it might be the black horse in the waiting. The above discussion clearly demonstrates how misplaced are such hopes.