Thought for today:

“To the biologist the problem of socialism appears largely as a problem of size. “

To the biologist the problem of socialism appears largely as a problem of size. The extreme socialists desire to run every nation as a single business concern. I do not suppose that Henry Ford would find much difficulty in running Andorra or Luxembourg on a socialistic basis. He has already more men on his pay-roll than their population. It is conceivable that a syndicate of Fords, if we could find them, would make Belgium Ltd. or Denmark Inc. pay their way. But while nationalization of certain industries is an obvious possibility in the largest of states, I find it no easier to picture a completely socialized British Empire or United States than an elephant turning somersaults or a hippopotamus jumping a hedge.

- J.B.S. Haldane
“On Being the Right Size” in the (1928) book “Possible Worlds”
Link @ Wikiquote

“John Burdon Sanderson Haldane FRS (November 5, 1892 – December 1, 1964), known as Jack (but who used ‘J.B.S.’ in his printed works), was a British geneticist and evolutionary biologist. He was one of the founders (along with Ronald Fisher and Sewall Wright) of population genetics.”

- Wikipedia: Link.

Thought for today ….

Under capitalism, man exploits man. Under communism, it’s just the opposite.

- John Kenneth Galbraith

“This recession is going to be a bad one.”
- Gary North

Mises’ theory of the business cycle:

The central bank inflates. This creates a boom. This creates sectoral bubbles. Then the central bank ceases to inflate. The bubbles will pop. The economy will go into a recession.

… This recession is going to be a bad one …. I think your first line of self-defense is your job. If you lose your job, you are in big trouble. You will have to sell your assets in a fire sale economy.

You need to do whatever it takes to increase your value to your employer.


- Gary North @ LewRockwell.com: March 22, 2008: Link.

Thanks, EB.

“Backing paper money with mortgages is nothing new. The French tried it in the late 18th Century, and it lead to hyperinflation.”
- Peter Schiff


Peter Schiff makes some interesting — and alarming — observations about the mortgage crisis in America:

This week, as the financial sector began to give way under the unbearable weight of bad mortgage debt, the Federal Reserve stepped in to save the day. At least that’s what it says in the script.

In a surprise move, the Federal Reserve announced its intention to swap $200 billion of treasury debt for $200 billion of potentially worthless mortgage-backed securities. The Fed may have been partially spurred to take the step as a result of the rapid collapse of Carlyle Capital Corp. a publicly traded private equity firm that is a subsidiary of the Carlyle Group. The Dutch firm could not meet margin calls on its depreciating collateral of AAA-rated mortgaged-backed securities guaranteed by Fannie Mae and Freddie Mac. On Friday, the Fed then took the unusual step of providing emergency “non-recourse” funding to Bear Stearns, collateralized by that firm’s similarly worthless mortgage debt. Apparently the Fed now stands willing to assume any mortgage-related risk that no other private entity would touch.

… According to the Fed, its new plan does not amount to buying mortgages but simply accepting them as collateral for 28-day loans. However, will the Fed really return these ticking time bombs to their true owners in 28 days, inciting the very collapse its actions were originally designed to postpone? Why does the Fed believe that the mortgages will be marketable next month; or the month after that?

… The problem with these mortgages (other than the borrowers lacking any means or desire to repay them) is that the underlying collateral is worth a fraction of the face amount. With recent foreclosure recovery rates amounting to less than 50 cents on the dollar, it is no wonder that no one wants them. The real estate bubble allowed borrowers to leverage themselves to the hilt using inflated home values as collateral. However, now that the bubble has burst, mortgage balances far exceed current property values. It is a trillion dollar time bomb that no one can possible defuse.

Paper dollars are technically Federal Reserve Notes, which means they are liabilities of the Fed. When it puts newly minted notes into circulation it does so by buying assets, usually U.S. treasuries, which it then holds on its balance sheet to offset that liability. By swapping treasuries for mortgages, the Fed effectively alters the compilation of its balance sheet and the backing of its notes.

… Backing paper money with mortgages is nothing new. The French tried it in the late 18th Century, and it lead to hyperinflation. Assignats, which were first issued in 1790 to help finance the French revolution, were backed by mortgages on confiscated church properties. Although the stolen underlying collateral did have some value, the revolutionaries saw no reason to limit how many Assignats were printed, which resulted in massive depreciation. Within three years, price controls were introduced and failure to accept Assignats, initially an offence subject to six years in prison, was made a capital crime. By 1799 the currency was completely worthless.

- Peter Schiff @ For Sou 15 Mar 2008: Link.

- Prise de la Bastille by Jean-Pierre Houël: Link.

Global markets are “a voting machine. And they vote whether or not they believe in the value of this currency.”

“Think of the dollar as another commodity,” said [Chris] Farrell. “It’s worth less. Therefore you’re gonna try and charge more to make up for the decline of its value.”

… The global markets are operating on the fundamentals of the economy, but according to Farrell, they also operate on a psychological level.

“They’re a voting machine. And they vote whether or not they believe in the value of this currency. What we’re dealing with right now is we’re right on the edge where the international capital markets are saying, ‘We don’t trust this currency anymore, we don’t think it should be the world’s currency,’” said Farrell.

- Jason DeRusha @ wcco.com: Link.

Free market economy? Level playing field? I don’t think so:

• The US Trade Representative makes trade concessions to the European Union, related to internet gambling.
• The deal is not subject to Congressional scrutiny or approval.
• A US Congressman requests that the USTR disclose the concessions.
• USTR rejects the request, “claiming the agreement was classified for national security reasons.”

Congressman Calls for U.S. Trade Representative to Provide Details of WTO Internet Gambling Settlement

Congressman Peter DeFazio (D-OR) has requested the U.S. Trade Representative (USTR) disclose trade concessions made to foreign trading partners without Congressional approval. DeFazio’s inquiry raises the possibility of Congressional intervention to void new market access commitments granted by USTR to the European Union and other complainants as compensation for a United States trade violation regarding Internet gambling.

In a letter circulated to all members of Congress last week, DeFazio encouraged his colleagues to join him in calling for the USTR to provide a copy of the concession agreement between the United States and the European Union. The USTR had recently rejected a Freedom of Information Act request for the same document, claiming the agreement was classified for national security reasons. “There is a concern that the USTR may have been ambitious in its use of a ‘national security’ classification to avoid any publicity of which new business sectors are to be subject to the GATS (General Agreement on Trade in Services) treaty,” said DeFazio’s March 6 letter.

… The DeFazio request comes following a contentious trade dispute over Internet gambling, in which the Caribbean nation of Antigua successfully challenged the regulation of Internet gambling in the United States. The European Union announced earlier this week that it will open an investigation into a possible international trade violation by the US on this issue. The investigation is the result of a Trade Barriers Regulation complaint filed by the Remote Gambling Association (RGA), which represents the largest remote gambling companies in Europe. The RGA claims the US is in violation of international trade law by threatening and pursuing criminal prosecutions, forfeitures and other enforcement actions against foreign Internet gaming operators, while allowing domestic U.S. online gaming operators, primarily horse betting, to flourish.

- @ Eye on Gambling: Link.

Office of the United States Trade Representative @ Wikipedia: Link.

The $2 Trillion Nightmare

Because the administration actually cut taxes as we went to war, when we were already running huge deficits, this war has, effectively, been entirely financed by deficits. The national debt has increased by some $2.5 trillion since the beginning of the war, and of this, almost $1 trillion is due directly to the war itself … By 2017, we estimate that the national debt will have increased, just because of the war, by some $2 trillion.

- Joseph Stiglitz @ New York Times: March 4, 2008: Link.

Via Cassandra @ Newsvine: Link.

“What Iran plans to do in the long run is quite daring: to confront head-on Anglo-American energy/corporate banking domination of the international oil trade. “

The Iranian oil bourse — the first oil, gas and petrochemical exchange in the Islamic Republic, and the first within the Organization of Petroleum Exporting Countries (OPEC) — was launched on Sunday by Iran’s Oil Minister Gholam-Hossein Nozari, flanked by Minister of Economy and Financial Affairs Davoud Danesh Ja’fari, the man who will head the exchange.

… Transactions at this early stage will be in Iran’s currency, the rial, according to Nozari, ending worldwide speculation that the bourse would start trading in euros. The Iranian ambassador to Russia, Gholam-Reza Ansari, has said that “in the future, we’ll be able to use the ruble, Russia’s national currency, in our operations”. He added that “Russia and Iran, two major producers of the world’s energy, should encourage oil and gas transactions in various non-dollar currencies, releasing the world from being a slave of the dollar.”

Russia’s First Deputy Prime Minister Dmitry Medvedev said last week that “the ruble will de facto become one of the regional reserve currencies”.

The opening of the exchange is just what the Iranians are calling the first phase. Ultimately, it is intended that it will compete directly against London’s International Petroleum Exchange (IPE) and the New York Mercantile Exchange (NYMEX), both owned by US corporations (since 2001, NYMEX has been owned by a consortium that includes BP, Goldman Sachs and Morgan Stanley). What Iran plans to do in the long run is quite daring: to confront head-on Anglo-American energy/corporate banking domination of the international oil trade.

- Pepe Escobar, Asia Times Online: Link.

[Image: “About 20 brokers are already active in Iran’s newly-established oil stock market.” Via Alalam News: Link.]

Iranian Oil Bourse @ Wikipedia

“Contemporary art auction houses can barely keep up with each other as they continue to set and then break price records for contemporary artists … “

Streetscape makes some interesting observations about the contemporary art market:

Even as worldwide economic markets face the reality of a potential downturn, one market has continued to flourish at a mind-boggling pace: the contemporary art market. In New York and London, the three major contemporary art auction houses can barely keep up with each other as they continue to set and then break price records for contemporary artists — approximately one billion dollars of contemporary art was exchanged at the most recent New York auctions alone.

- Streetscape, Accessibility: Link.

Via Art Crimes .

Iran plays a strong hand in the global petroleum market:

Iran Opens Its 1st Oil Products Bourse

TEHRAN, Iran (AP) — Iran established its first oil products bourse Sunday [February 17, 2008] in a free trade zone on the Persian Gulf Island of Kish, the country’s oil ministry said.

… Oil and petrochemical products will be traded in Iranian Rials, as well as all other hard currencies, the statement quoted Iranian Oil Minister Gholam Hossein Nozari as saying. About 20 brokers are already active in the market, it said.

… Iran has already registered for another oil bourse, in which it has said it hopes to trade oil in Euros instead of dollars ….

- Associated Press @ Google: Iran Opens Its 1st Oil Products Bourse.

See also:

Iran: Goodbye Dollar, Hello Euro

Interview with Chris Cook, inventor of the Iran Oil Bourse

“In short, the money in this networked economy does not follow the path of the copies. Rather it follows the path of attention, and attention has its own circuits.”

Kevin Kelly has posted some interesting thoughts about technology and wealth in the twenty-first century:

The instant reduplication of data, ideas, and media underpins all the major economic sectors in our economy, particularly those involved with exports — that is, those industries where the US has a competitive advantage. Our wealth sits upon a very large device that copies promiscuously and constantly.

Yet the previous round of wealth in this economy was built on selling precious copies, so the free flow of free copies tends to undermine the established order. If reproductions of our best efforts are free, how can we keep going? To put it simply, how does one make money selling free copies?

I have an answer. The simplest way I can put it is thus:

When copies are super abundant, they become worthless.
When copies are super abundant, stuff which can’t be copied becomes scarce and valuable.

When copies are free, you need to sell things which can not be copied.

- Kevin Kelly, Edge: Link.

Via Slashdot: What Makes Something “Better Than Free”?

Go read the entire essay. But first, I’ll spill the beans:

(more…)

Iranian oil no longer available for U.S. dollars

Iran has decided to abandon oil export settlements in U.S. dollars.

Our current policy is to sell crude oil for any currency but U.S. dollars, Iran’s Oil Minister Gholam Hossein Nozari said in a statement, adding that all settlements in the U.S. currency had been ruled out.

Iran has been considering this move for a long time, consistently limiting the inflow of petrodollars in the past two years. Iranian officials claim that the reason behind their decision is the devaluation of the dollar. An Iranian source said that the dollar’s decline was greatly harming the oil exporting nations’ economies and that they had no more trust in the U.S. currency.

… Incidentally, on November 30, Gazprom’s Deputy CEO Alexander Medvedev said in New York that the Russian gas monopoly was considering a possibility of selling gas for rubles instead of dollars or euros. The gas giant was compelled to change its currency policy by the current situation on the global financial markets. Although he did not specify the date, Andrei Kruglov, head of Gazprom’s Finance and Economics Department, said the decision would be made soon enough.

… The U.S. dollar has certainly lost much of its attractiveness worldwide, unlike the euro which is gaining popularity, even if not in all countries.

… Other monetary units are being added to the pool of the main reserve currencies. The Gulf Cooperation Council (GCC), which includes the key Middle East oil and gas exporters, has said it was planning to set up a single regional currency, the Gulf Dinar, which would be put in circulation in three years and would be as important as the dollar and the euro. The GCC includes the United Arab Emirates, Saudi Arabia, Bahrain, Kuwait, Qatar and Oman.

… Xu Jian, a vice director of the People’s Bank of China, said last week that the dollar was “losing its status as the world currency,” adding that it was likely to continue weakening in 2008 due to the growing U.S. trade deficit.

- Dr Igor Tomberg, economist, senior research associate at the Energy Research Center of the Russian Academy of Sciences’ Institute of World Economy and International Relations. Russian News and Information Agency, 11/ 12/ 2007: link.

Iran Drops Dollar From Oil Deals

Major crude producer Iran has completely stopped carrying out its oil transactions in dollars, Oil Minister Gholam Hossein Nozari said on Saturday, labelling the greenback an “unreliable” currency.

… Nozari did not specify in which currencies Iran was now being paid. In the past, officials have said most oil income was in euros, with a significant percentage in yen.

Japan, which purchases 20 percent of Iran’s crude oil, has recently agreed to pay for the crude oil in yen, officials have said. The UAE dirham has also been mooted as a possible payment currency.

… The United States has in recent months successfully encouraged major European and Asian banks to cut their dealings with Iran in a bid to make the Islamic republic give way on its controversial nuclear programme.

AFP, 11 December, 2007: link.

Iran stops selling oil in US dollars

… OPEC giant Iran has completely stopped selling any of its oil for US dollars.

… Iran says the weak US currency is eroding its purchasing power. At the latest November summit of OPEC, Iran suggested oil should be sold in a basket of currencies rather than dollars, but failed to win over other members except Venezuela.

- South African Broadcasting Corporation: December 08, 2007, 13:45: link.

Iran ‘euro-based’ oil bourse underway

An official said that the managing director of Iran’s first petroleum exchange “Iran Oil Bourse” is expected to be appointed soon, bringing the oil-rich nation a step closer to opening its first ‘oil bourse’. Majid Shayesteh, managing director of Kish Free Trade Zone Organization, said that President Mahmud Ahmadinejad has directed Iran’s ministers of oil, economic affairs and finance to appoint the board of directors of the oil exchange and its managing director. He did not specify when exactly the exchange would open.

He also said the building which will house Iran’s first oil exchange has been constructed on the Persian Gulf island of Kish and that the required technical equipment has been installed.

Shayesteh added that three major organizations are involved in the groundbreaking project, saying that coordinating efforts between the various groups initially delayed the project.

According to the official, the articles of association for the oil exchange have since been approved. Last month, a separate official announced that the petroleum exchange would begin operation “in the near future.”

Mahmud Salahi, secretary of the High Council for Free Trade and Industrial Zones, had said that Iran decided to establish the euro-based oil exchange on Kish because “there was no such oil trading body in the region.” The oil exchange will transact petroleum, petrochemicals and gas in various non-dollar currencies, primarily the euro. It would also establish a euro-based pricing mechanism for oil trading, or ‘oil marker’ as it is commonly called by traders.

Oil Minister Kazem Vaziri Hamaneh said earlier that a stock market for trade in shares of oil companies will be established in Iran’s southern of Kish in the near future. While touring of a local gas transfer operation, the minister said the stock market will be set up in cooperation with the oil and finance ministries.

Last month, after a year of speculation, Iran changed its oil bourse from petrodollars to petroeuros.

- Persian Journal: Mar 11, 2007: link.

Iran turns from dollar to euro in oil sales

The world’s fourth-biggest oil exporter has inserted a clause in its oil contracts allowing it to request payment in alternative currencies.

… Iran announced plans in 2004 to develop an Iranian oil bourse, a commodity exchange that would become a Middle Eastern rival to the major exchanges in New York, London and Singapore, which set benchmark oil prices.

The Iranian bourse would also challenge the petrodollar by setting oil prices in euros. However, there has been little progress in establishing the bourse, which failed to launch as planned last March.

… The fall in the dollar against major currencies has had a dramatic impact on the revenues of oil exporters and has exacerbated the rumbling anti- American feeling in the Gulf.

Although Gulf Arab states are predominantly dollar export earners, they mainly purchase in euros and yen, buying food, consumer goods and manufactured products from Europe and the Far East.

In March the United Arab Emirates said that it would switch 10 per cent of its currency reserves from dollars to euros, a decision that closely followed the attempt by the US Congress to block the acquisition by Dubai Ports World of a number of ports in the United States.

Times Online, December 22, 2006: link.

Iran to replace dollar with euro
Iran also indicated that it will calculate its budget revenues in euros

The Iranian central bank is to convert the state’s foreign dollar assets into euros and use the euro for foreign transactions.

“The government has ordered the central bank to replace the dollar with the euro to limit the problems of the executive organs in commercial transactions,” Gholam Hossein Elham, a government spokesman, said on Monday.

“We will also employ this change for Iranian assets [in dollars] held abroad.”

Elham said that Iran’s budget would in future be calculated in euros.

“Until now the budget has been calculated according to revenues in dollars but this calculation will now change,” he said.

- Aljazeera, December 18, 2006: link.

The Emerging Euro-denominated International Oil Marker

In 2005-2006, The Tehran government has a developed a plan to begin competing with New York’s NYMEX and London’s IPE with respect to international oil trades - using a euro-denominated international oil-trading mechanism. This means that without some form of US intervention, the euro is going to establish a firm foothold in the international oil trade. Given U.S. debt levels and the stated neoconservative project for U.S. global domination, Tehran’s objective constitutes an obvious encroachment on U.S. dollar supremacy in the international oil market

… ‘Operation Iraqi Freedom’ was a war designed to install a pro-U.S. puppet in Iraq, establish multiple U.S military bases before the onset of Peak Oil, and to reconvert Iraq back to petrodollars while hoping to thwart further OPEC momentum towards the euro as an alternative oil transaction currency.

… [A] Financial Times article dated June 5th, 2003, … confirmed Iraqi oil sales returning to the international markets were once again denominated in US dollars, not euros. Not surprisingly, this detail was never mentioned in the five US major media conglomerates who appear to censor this type of information ….

“The tender, for which bids are due by June 10, switches the transaction back to dollars — the international currency of oil sales - despite the greenback’s recent fall in value. Saddam Hussein in 2000 insisted Iraq’s oil be sold for euros, a political move, but one that improved Iraq’s recent earnings thanks to the rise in the value of the euro against the dollar.”

… To date, one of the more difficult technical obstacles concerning a euro-based oil transaction trading system is the lack of a euro-denominated oil pricing standard, or oil ‘marker’ as it is referred to in the industry. The three current oil markers are U.S. dollar denominated, which include the West Texas Intermediate crude (WTI), Norway Brent crude, and the UAE Dubai crude. However, since the spring of 2003, Iran has required payments in the euro currency for its European and Asian/ACU exports - although the oil pricing for trades are still denominated in the dollar.

Therefore, a potentially significant news development was reported in June 2004 announcing Iran’s intentions to create of an Iranian oil Bourse. (The word “bourse” refers to a stock exchange for securities trading, and is derived from the French stock exchange in Paris, the Federation Internationale des Bourses de Valeurs.) This announcement portended competition would arise between the Iranian oil bourse and London’s International Petroleum Exchange (IPE), as well as the New York Mercantile Exchange (NYMEX). It should be noted that both the IPE and NYMEX are owned by U.S. corporations.

The macroeconomic implications of a successful Iranian Bourse are noteworthy. Considering that Iran has switched to the euro for its oil payments from E.U. and ACU customers, it would be logical to assume the proposed Iranian Bourse will usher in a fourth crude oil marker – denominated in the euro currency.

The IPE, bought in 2001 by a consortium that includes BP, Goldman Sachs and Morgan Stanley, was unwilling to discuss the Iranian move yesterday. “We would not have any comment to make on it at this stage,” said an IPE spokeswoman. ”

… Additionally … Saudi investors may be interested in participating in the Iranian oil exchange market, further illustrating why petrodollar hegemony is becoming unsustainable.

“…Along with several other members of OPEC, Iranian oil officials believe crude trading on the New York Mercantile Exchange and the IPE is controlled by the oil majors and big financial companies, who benefit from market volatility.”

… A successful Iranian bourse would solidify the petroeuro as an alternative oil transaction currency, and thereby end the petrodollar’s hegemonic status as the monopoly oil currency. Therefore, a graduated approach is needed to avoid precipitous U.S. economic dislocations. Multilateral compromise with the EU and OPEC regarding oil currency is certainly preferable to an ‘Operation Iranian Freedom,’ or perhaps an attempted CIA-sponsored repeat of the 1953 Iranian coup – operation “Ajax” part II.

- William Clark @ Global Research, 27 October 2004: link.

Wikipedia: Petroeuro.

Lottery game flop stirs school fund concerns
10:27 AM CDT on Wednesday, June 20, 2007
Brad Watson / WFAA-TV

As the Texas Lottery game the Texas Two Step appears to be going broke, some are concerned that may ultimately lead to dipping into school funds to pay the jackpots …. Not enough people are buying tickets to support the guaranteed jackpot of the Texas Two Step.

For the first time since 2002, the sales and reserve fund couldn’t cover Monday’s $225,000 jackpot, which had two winners.

One North Texas lottery watchdog, Dawn Nettles of Garland, said she calculates low Two Step sales will lead the state to look to school funds to dole out the winnings. Her numbers have been right before. Nettles tracks lottery games and money in an online newsletter called www.LottoReport.com.

“Well, somebody is going to be shorted, the schools in this case,” she said. “It’s just that simple.”

But officials at the Texas Lottery says winners still get their payouts and the school fund is never touched until reserves and an emergency lottery account are tapped out.

“We hope that it doesn’t happen,” said Bobby Heath, Texas Lottery, about any risk directed towards school funds. “And we hope that we can generate enough sales through making the games, fun and exciting.”

Nettles shook up the Texas Lottery in 2005 when she revealed it advertised Lotto Texas jackpots higher than ticket sales. She said she believes the lottery should scrap guaranteed jackpots since the Texas Two Step’s number is up.

[Link]

Via Fark.

“… Despite strict rules against the practice in the most popular online games, there have always been players willing to sell.”

… At his workstation in a small, fluorescent-lighted office space in Nanjing, China, Li Qiwen sat shirtless and chain-smoking, gazing purposefully at the online computer game in front of him. The screen showed a lightly wooded mountain terrain, studded with castle ruins and grazing deer, in which warrior monks milled about. Li, or rather his staff-wielding wizard character, had been slaying the enemy monks since 8 p.m., mouse-clicking on one corpse after another, each time gathering a few dozen virtual coins — and maybe a magic weapon or two — into an increasingly laden backpack.

Twelve hours a night, seven nights a week, with only two or three nights off per month, this is what Li does — for a living. On this summer night in 2006, the game on his screen was, as always, World of Warcraft, an online fantasy title in which players, in the guise of self-created avatars — night-elf wizards, warrior orcs and other Tolkienesque characters — battle their way through the mythical realm of Azeroth, earning points for every monster slain and rising, over many months, from the game’s lowest level of death-dealing power (1) to the highest (70).

… At the end of each shift, Li reports the night’s haul to his supervisor, and at the end of the week, he, like his nine co-workers, will be paid in full. For every 100 gold coins he gathers, Li makes 10 yuan, or about $1.25, earning an effective wage of 30 cents an hour, more or less. The boss, in turn, receives $3 or more when he sells those same coins to an online retailer, who will sell them to the final customer (an American or European player) for as much as $20. The small commercial space Li and his colleagues work in — two rooms, one for the workers and another for the supervisor — along with a rudimentary workers’ dorm, a half-hour’s bus ride away, are the entire physical plant of this modest $80,000-a-year business. It is estimated that there are thousands of businesses like it all over China, neither owned nor operated by the game companies from which they make their money. Collectively they employ an estimated 100,000 workers, who produce the bulk of all the goods in what has become a $1.8 billion worldwide trade in virtual items. The polite name for these operations is youxi gongzuoshi, or gaming workshops, but to gamers throughout the world, they are better known as gold farms. While the Internet has produced some strange new job descriptions over the years, it is hard to think of any more surreal than that of the Chinese gold farmer.

The market for massively multiplayer online role-playing games, known as M.M.O.’s, is a fast-growing one, with no fewer than 80 current titles and many more under development, all targeted at a player population that totals around 30 million worldwide. World of Warcraft, produced in Irvine, Calif., by Blizzard Entertainment, is one of the most profitable computer games in history, earning close to $1 billion a year in monthly subscriptions and other revenue.

By Julian Dibbell: June 17, 2007: New York Times]

Via SlashDot.

See Also

Documentary film: Chinese Gold Farmers Preview

Is the US economy based on gambling? Observations by Einar Stefferud:

The double taxing of dividends makes it stupid for any company to pay dividends to shareholders, because up to 60% of dividend money goes to the US Govt as income taxes. This provides a strong incentive for companies to not pay dividends. It hurts their stockholder inventors and it hurts their stock price too.

But, long term, since stocks do not pay dividends because doing so is stupid, how can anyone ever get any return on any stock investment. Any per share money payment is classed as a dividend in any case! And taxed both before and after disbursement.

Now, I ask: What is the incentive for buying any stock that does not pay a dividend?

Right! You got it! Buy low, sell high!

You have to sell it to get your return, and to get your capital back! You just bought a pseudo .com or tulip bulb lottery ticket.

This creates the Investment Rule that is called the “Greater Fool Theory“! “Buy at some price and later sell it to some fool who thinks it is worth more than you paid for it! This is the only way anyone can gain any return on non-dividend stocks. Some buyer has to buy it later AT A HIGHER price.

Now, this reminds me of an old basic idea from Economics. No one (in their right mind) ever pays more for anything than they believe it is worth at the time of buying. Buy High, Sell Low is a well known bad idea.

So, this is now the foundation of our stock market. Shades of the Tulip Bubble. The entire game is just an extension of Las Vegas and Atlantic City or our state lotteries or our vast array of Indian Casinos.

And this is the capital investment foundation of our economy! Who would have thought we could collectively be so stupid?

From: Einar Stefferud
Date: Fri, 07 Mar 2003 14:46:43 -0800

[Interesting People mailing list]

Stock Market as Big Con: “Enron even had show-rooms filled with fake traders that they staffed when the press came on tours” –

In traditional “Big Con” grifts, the roper and the inside man work to convince the mark that by participating in some bit of harmless larceny, he will become immensely wealthy. The mark gets sucked into the scam and is eventually fleeced of every cent he can lay hands on.

… Analysts, bankers, VCs and snake-oil salesmen created an enormous con — Enron even had show-rooms filled with fake traders that they staffed when the press came on tours — that led millions to believe that there really was money to be had in playing the markets. And there was — their money. They got had, and the grifters did the having.

[Boing Boing]