Explaining Southern California's economy

Meet Mark Spitznagel, Ron Paul's L.A. hedge-fund guy

Ron Paul Continues Iowa Campaign Tour

Justin Sullivan/Getty Images

LE MARS, IA - DECEMBER 30: Republican presidential hopeful U.S. Rep Ron Paul (R-TX) speaks during a town hall meeting at the Le Mars Convention Center on December 30, 2011 in Le Mars, Iowa.

Ron Paul — Republican presidential candidate, GOP congressman from Texas, father of Sen. Rand Paul, libertarian, and dogged foe of the Federal Reserve — is touching down in Los Angeles on March 20 for a fundraiser. If you think Paul, with his desire to return the U.S. to the gold standard (bimetalism, actually, using gold and silver) and his tendency to subject Fed Chairman Ben Bernanke to lengthy disquisitions on inflation, is a litle bit different, just wait until you get a dose of the guy who's hosting this Bel Air shindig, at the former residence of Jennifer Lopez.

He's Mark Spitznagel, a very successful hedge-fund manager whose Universa Investments is based in Santa Monica. There are hedge-fund managers and there are hedge fund managers. Spitznagel is definitely in the latter category. He plies his trade in an exotic corner of the industry, making huge bets on statistically improbable events, now colloquially known as "black swans," after the 2007 book of the that title by Nassim Taleb.

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Bitcoin Beat: Is it time to privatize money?

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Attila Kisbenedek/AFP/Getty Images

An employee changes the numbers of the currency information board in front of an exchange office on Aug. 8th in Budapest. The Swiss franc remained at its highs against the dollar, changing hands at 0.7594 to the dollar.

I've written several posts about Bitcoin and have used the feedback I've received from commenters to undertake a deeper dive into crypto-currencies. This led me to a recent op-ed in the Cypress Times by David Barker, tackling the idea that a "private" currency like Bitcoin could displace or at least compete with government-backed money.

Here's a salient paragraph, laying out the historical/academic case:

Nobel Prize winning economist Fredrick Hayek advocated privatization of the money supply as early as 1978. Barry Eichengreen, a respected, mainstream scholar of international finance recently wrote that “maybe the Tea Party should look for monetary salvation not to the gold standard but to private monies like Bitcoin.” Former Federal Reserve Governor Randall Kroszner and widely read blogger Tyler Cowen wrote a book in 1994 that discussed “the potential consequences of a complete deregulation of money and banking.” An article in the ultra-establishment Journal of Economic Literature by George Selgin was titled “How Would the Invisible Hand Handle Money?” Other economists study historical episodes where money was privately produced, often with favorable results.

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Econ 474: Say hello to 'stuckflation'

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Mark Ralston/AFP/Getty Images

Americans hold up 'I want to work' placards as they join a protest of several thousand people demanding jobs outside City Hall in Los Angeles on August 13, 2010. A Labor Department report showed 131,000 jobs were lost in July and the unemployment rate remained stuck at 9.5 percent.

Here's what we know: unemployment nationally is stuck at 9.1 percent; job "creation" is stuck at less than 100,000 per month; applications for unemployment benefits are stuck above 400,000 per month; and GDP growth is stuck below 3 percent.

And that's just four "stucks." Add in numerous other datapoints and you get a Big Stuck — the story of the American economy.

It's far worse in California, where we're stuck on everything that the nation is stuck on, but because of our thousands of unemployed construction workers have an jobless rate of 12 percent.

There are exactly two sets of ideas about how we can get out of this quagmire. On the right, the argument is to cut taxes, reduce government spending, and eliminate regulations that encumber business activity. On the left, the argument is to raise taxes on the wealthy while cutting them for the poor and middle-class, spend more on economic stimulus, and more rigorously regulate high-risk financial and business activity. 

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