Bitcoin, Inflation, Deflation and Extraneous subjects

I've seen a couple of posts about Bitcoin recently and one that even made the Linkin Pulse.
This got me to thinking.  I could give my couple of cents worth of information and opinions on the subject and include deflation/inflation, money supply and the like too.

The article referenced above goes in to the idea of production and money supply.  It talks about how creating money that is pumped into the supply can effect things.  I naturally agree that when things become unbalanced you will have problems sooner then later.


We should all know about the simple principle of supply and demand from the economics classes we took back in high school or college.  It's on most required classes lists for general education. 

As the diagram shows as the demand for a product goes up the price has to go up if the supply does not match the increased demand.  Conversely, as the supply raises with little or no change in the demand the price is going to have to go down (this can be seen as dumping product; more on this later).

http://www.english-online.at/economy/capitalism/capitalism-market-economy.htm

Basically the price is effected by the amount of demand and supply.  The recent decline in gas prices can be seen as a good example of this in the real world.  The supply of gas/oil continued to increase while the demand for the product (gas/oil) stayed more or less flat.  With the glut on the market people begin to sell the product for less hoping to move their inventory quicker then the competition.  This can create a price war, much as what happens at an auction when 2 people get into a bidding war.

Now you might ask why did I title this "Bitcoin, Inflation, Deflation and Extraneous subjects" if I'm talking a lot about supply and demand.  It all plays together like one big merry-go-round.
You see nothing lives in a vacuum.  When the price of gas and oil plummeted in some peoples views their outlook on the economy was effected.  Also you have companies that have to decide if they can break even with the new prices going into effect.  A $10-$20 drop in the price of oil might not rise to many eyebrows if the price is $150 a barrel.  It sure turns heads if it is sitting around $50.


Planning, forecasting, and reality all help to influence the price over the long haul.  It appears that as the price of oil stayed well above $100 per barrel, lots of people found it economical to get into the oil business and pump more oil (especially alternative forms and sources).  This increases the supply, a natural reaction.  Sometimes, depending on the industry you may have a lag of several years or maybe just days for that supply to increase.  Agriculture is a prime example.  You can put more land under cultivation, however, you have at least a year to see any results.  Wheat is high so more is planted.  Some time next year you might see some increase.  Even longer if you have fruit trees that have to mature or live stock that have to reach adult size.  It's not an over night fix.  Little different with say water.  You likely have someone that can bring some in from out of area.  A day or two and your supply issue is effected.


Now we need to talk about modern economies and the money supply.  As of right now we pay for things in a couple of ways.  Most places will take some government backed paper money or coin.  Many places in the modern age will also take an electronic payment or check relating to a bank or credit card company.  Someone (financial institution) backs the transaction and they are backed by the government sponsored money on deposit.  In some areas around the world (usually rural) people may still be doing barter.  I'll give you my 12 eggs for say 9 cups of your wheat.  There is a recognized value of the one good being traded for the other.  People realize that a cow or pig has more value then a single egg due to the fact it takes more to produce one over the other.

We technically do the same thing every time we go to the store.  If you have the exact same T-shirt available at say Target, Wal-Mart and Macy's and each charges a different prices where will you buy that shirt?   If Wal-Mart is cheaper you'd go there, unless you want to brag about how much you paid even if it is $5 more for the exact same thing.  Some times the difference is not enough to make it worth our time to go out of our way for just one item.   We decide that the amount of money we spend is an acceptable value for what we are getting in return.  If we don't think the value is acceptable for what they want to charge we don't buy.  When we find out they are the only one in town with the item we need we then go pay the price or reevaluated if we need the item in the first place.  Though others might get into the market seeing a profit can be made and over time effect the supply.  As specified above the change maybe gradual or fairly quick.
Ever wonder why they have a clearance section?  It's a bunch of items that people did not have enough interest in at the price attached.  As the price is reduced more and more of the items are sold.  The consumer begins to see value at the new price.

Paper or Plastic? Understanding Money (audio presentation on money)

Now let us begin talking about the money supply.  Remember how I specified the Government backed  paper or coins.  Well what does that really mean.  If your using US Dollars you have a piece of paper with an attached value, and the government is the one that prints the money or mints the coins.  They have a recognized value by people around the world as having value per the good faith of the United States Government.  The same holds true for locations like Brazil.  The government is behind the real.  Those colorful notes in all shades of the rainbow.  They control the printing and destruction of old and new notes.  John Doe is not involved in determining the total amounts of notes in circulation and  the like.   For a period of time following the conversion of the Brazilian Cruzeiros Reais to the new Reais in the mid 1990's till around say 2005 each Real was backed by a US Dollar in the bank.  If they had 25 Billion in circulation they had $25 billion US in the bank.   This provided confidence in the money.  As of right now I don't think they have a 1 for 1 ratio of Dollars in the bank.
One way or the other the basis for most of the currency in the world today is in some form related to a government that is in charge of the creation of the money.  Changes in government can at times have a major effect on the money.  Very rarely is the money backed by anything more then good faith, let alone a commodity.
In the case of the Brazilian Real.  What would have happened in 1996 if the US government was overthrown by some right wing extremist or an Islamic backed group.   The full faith and trust of the government no longer applies.  Thus the value will decline in short order.  Some people will stop accepting the "Money" and things will begin to go into disarray.  This ripple throughout the world economy as various currencies are back by that of another admired or respected stable government.
Having an actual commodity backing the "Money" can help to retain perceived value.


In the past the most common method to back currency was Gold (or another precious metal).  Gold has had a fairly stable value over time and is perceived as safe.  However, it becomes hard to increase the money supply when you have to acquire some more gold to make more "Money".    Thus governments went on to create "Fiat Money".  This is money that derives it value from governmental intervention, law etc.   Thus it is not money that has a commodity backing it.  It is laissez faire money.... money that is just out there.  People assign their own value or worth to it.  It becomes just a common form of exchange.  Not something you can go to the government and ask for your 9 oz of oil in exchange.  They don't have a repository for exchange of that type; either at the local bank or governmental office.  This can over time allow the  government to manipulate the supply or quantity of money.  They can simple create money where none previously existed by printing more.
It's easy to see how the government by overzealous intervention or printing of money can turn the "Money" into "toilet paper money" as Nick Jones calls it in his article Fiat Currency: Using the Past to See into the Future.   Sometimes the government simply prints more money to help cover expenses.  This pumps money into the supply and then causes havoc in the long term.  More money with no increase in supply or demand throws things out of balance.  This tends to cause inflation.  So the governments task their treasury department that prints the money to help make sure they don't over load the money supply so much that inflation gets out of control while at the same time spurring on growth.
Few people that were not born before 1970 will remember the hyper inflation that occurred around the end of the 70's in the United States.  Things got really bad.
I was too small to remember the bad times here but, I saw things in Brazil where inflation was 300% or more per year before they changed over to the new currency.
When I first got there a 1.5 litter of Coca Cola cost 50 Cruzeiros Reais.  3 months later it was up to 150 for the same product.  Talk about inflation.  Unfortunately, some of that inflation was built in.  People just got accustom to increasing prices.  To counter this the conversion to the new money had a fixed rate that was broadcast for several month on the nightly news.  A new set of values was set in the mind of the consumer and common citizen.  We ran into a situation where a particular store was increasing the prices about 5% each week after the money conversion went into effect.  We gave him some time as we assumed they were working out the new appropriate level to price things.  However, after 1 month of consistent increases we stopped going there.  The price increases were no long justified.

That leads us to the notion that as inflation sets in things get bad but, what about deflation.
Is it such a bad thing to have prices go down.  Is it such a bad thing that the price of a gallon of milk goes down from $3.50 to say $3.00?  I guess in the long term this would not be such a good thing.
If a whole sample of items in the economy were to go down together it would be less likely to effect things as much.  Just the price of milk going down and everything going up is not good.  Over time a free market will correct itself by the laws and principles of supply and demand.
Invariably governments get worried with deflation, not sure exactly why, though if deflation is sustained I guess you could get the depression that occurred in the 1930's.  Eventually, this helped start World War II and all of the ramifications that came with it.  I'm not saying deflation causes wars but, I guess policy makers see it as a primer to the pump of an already aggravated situation.

The worse part is the way central banks try to correct deflation - "
In a deflationary environment, local demand for goods and services is weak, and prices fall with spending and consumption.
Buying government bonds increases the amount of money circulating in the region. By keeping interest rates low, the ECB hopes to encourage spending and borrowing, instead of saving. Many central banks across the world have also cut rates in the last few months."

Read more: http://www.businessinsider.com/no-deflation-in-the-eurozone-or-g-20-countries-2015-3#ixzz3UCL6lL6a

Thus the solution is to mess with the money supply.  Instead of the market taking care of things and correcting as necessary.... the government or central bank does what they think best.  But, is it always the best?

So where does the Bitcoin revolution come in?  Imagine a form of currency that is not controlled by a central bank in some country.  A currency that can't be created Willy Nilly.  That the supplier does not or can not pump up the supply when ever they want.  It's like having to transact in gold nuggets.  Not some coin that over time might come to be just gold plated, but the actual pure product or commodity. 
Only problem is how do you transact with a person in Japan when dealing with something like gold nuggets.   Only due to the Internet and our now globally interconnectedness can something like Bitcoin work.  It's all digital.  Technically, it is all in cyber space.  They have no physical commodity at all.  The difference is the lack of supply or the control on the supply.   The capping of total supply. Now realistically, to get the whole world on bit coin would not work.  There is simply not enough in the supply to have that work all that well.  Physical commodities have their limits but, it is a local limit.  You have to exchange something for that wheat, or shirt and it is usually done in person.
So could bitcoin be the solution to inflation/deflation or at least the unintended manipulation of the money supply.  I am firmly of the belief that most of the trouble we get into is from to much or to little intervention from the government.  Take the recent housing bubble.  The government was promoting giving loans to just about anyone..... they kind of told the bank to make it happen any which way possible.  That lead to no verification of income, and other risky practices.  Basically, because the central bank backed the bad loans they kept on coming.  And what started the whole boom.... easy money after the dot com bust.  The central bank dropped the interest rate to next to nothing.    That helped grease the wheels of commerce.  Then as they saw things heating up a little to much they started to slowly raise the rate.  1/4 percent at a time.  The guys on adjustable rate mortgage began to die.  A little increase became painful and as this happened 1/4 percent per quarter or half percent per year the pain really set in.  Many who had been told oh just refinance every couple of years could not do so as easily.  So the sell motivator set in..... or in the long haul foreclosures as people attempted to survive paying at the new higher rate.

You see the consequences of messing with the money supply in the various ways the government does can be horrible.  They don't come along very quickly at times.  A year or two after  something is started the consequences show. Also think of the "to big to fail" problem with the banks.  The government say oh if these banks fail we are dust.  Even though you helped feed the problem (with our support) we will bail you out.
Do you think many of those bank would have stopped asking for income verification if they had to hold all the risky loans in the bag?  I am going to assume not.  NO bank wants to take a large gamble and those sub-prime loans became hot potatoes..... they just knew in the back of their minds that some of the hot potatoes would be handled by the government.....  so the risk was determined to be less the it really was.  No decided to put the breaks on the process...... keep the water flowing, and then the blockage in the line came.   All hell broke loose.
So in this case a true laissez faire situation would have helped to limit the issues.  I can't say for sure there would not have been a bit of a bubble or price run up if the banks all could have failed and no bail outs were in site.

You see the government made things a little too easy and greased the wheel with low interest rates, pumping of the supply and promotion of lack loan standards.  Several years later things over heated and blew up.  This type of things have happened in the past.  It's happening right now to some level.  Maybe not in the loan standards (some are jumping through ridiculous hoops).

One over reaction is followed by another over reaction in the other direction.  So if you can cut out the manipulation of the money supply by something like bitcoin.  Governments are concerned with things like bitcoin and other cyber or virtual currencies.
"No one knows what will become of bitcoin. It is mostly unregulated, but that could change. Governments are concerned about taxation and their lack of control over the currency."
What is Bitcoin? - CNN Money

That's the part I am worried about.  The lack of control the governments worry about is what might make bitcoins so wonderful.  It might promote things like money laundering and other illegal activities.  It does help cut out the "Middle-Man", the manipulators.  I'm not sure how much this will effect the over global economy in say 30 years.   Will this cause some revolution?  Hard to say.
It will cause people to look at their options and hopefully, cause governments to control more their "Fiat Currency".

Buiadh - NO - Bas

Consequences of Data Quality or Lack there of!

Over the last few years more and more has been brought up about data quality.  And now as they talk about big data it's coming up again and again.

Data quality is a bit hard to define as I've found from some posts in Linkedin Groups.  I means different things to different people.  Sometimes to the downfall of the people involved.
It really depends on the objective of the data in question.  Are they sales figures, contacts/customers or employee information, general information on response times, or something else of equal  importance?

Each of these has a different level of said "QUALITY".   Imagine if you have input some sales figures and they are off by a factor of 10 or seem to be replicated.  That would cause a lot of havoc in sales projection and other strategies.  You might even go off and order extra product that later becomes a front page listing at overstock.com.


I think though this ever excessive quantity of data could be causing some other unintended consequences.  We already know about the issues with a wrong phone or address and other typos.  We know about the wrong information being entered on what a customer is interested in or has bought.  Bad scans on products because the one in his hand did not come up in the system properly etc.
All those things people understand and can understand in general terms.  Sometimes these issues are hard to find in the system.  They can come up at a multitude of points along the process.




But, there is a bigger problem.  To much data and lack of coordination of that large amount of data.

Let me give two examples that will help to illustrate the problem.

One person related the story of how they received multiple phone calls from the same company on the same day but, from different offices.  You might say what the heck does this have to do with data quality.  It is rather simpler then you might think.  In this case there may not be duplication in the data (IE. the person entered twice in the database), there is duplication in the access to the data and the use of the data.
It is very apparent that this company does not have their people cross checking to make sure they are not selling to the same person from multiple offices.  Goes back to the old rule of sales regions.  If you have the "South" region here in the united states you'd be contacting only people in states like Florida, Georgia, Tennessee, Mississippi, etc.  You'd not be selling to a company based in Seattle Washington because it is out of your region.  Things can get complicated with multiple locations or offices though you'd technically not have the same guy listed for Seattle and Atlanta.  Also maybe the sales force is small for said company and guys in different offices sell all over the place.  However, proper protocol should have them at least entering some kind of contact date or sales information such that other sales reps know they are being contacted.
It did not sound like the reporter of the story has all that common of a name so it should be easy to figure out your going to contact the same person or maybe not.  And there in lies the problem.

See more on this story at Data Quality & Daily Life.

Bottom line in this situation is that multiple people had access to the data and had no clue anyone else was using it or how they were using it..   So that can be labeled a data quality issue just as much as anything else.  The data wasn't quality since no one knew how to use it properly or did not not have proper information associated to the record.

The second example happened to me.  I'm a member of an auto club that provides roadside assistant and related services.  I've been a member of this group for over 15 years.  I've also been at my current location for over 4 years.  I've also requested auto insurance quotes from them in the past.  No big deal.  The sad part was when an offer to become a member was sent in the mail to me.  As I stated previously I've been a member for a long time.  Now you'd think that what ever data bases they have they'd at least check to see if there is some overlap in the system (dedup) or at least try and verify if a person they want to send membership information to is not already a member.  You'd think they would want to at least review before taking further action anything that came up as a potential duplicate or current member.

This could in reality highlight one of the problems we now find ourselves in.  We have no much data on hand.  Could Big Data be causing us problems.  Do we have to much information to accurately and appropriately deal with?

I know from experience with the data I deal with there are what seem like a million pieces of information available or that has been compiled on people.  Routinely, we append consumer enhancements in a bundled form that includes things like credit cards, owner/renter, presence of child and related items.  However, we did do some work for the Obama campaign the first go around for the state of South Carolina.  You can append information on gun ownership, hunting, RVs, newly weds, or new parents, cellphone owner, and related tech topics, buying habits, ethnic information, age, income and housing information, and any number of interests.  Imagine how targeted your advertising can become if you have this information.  Also imagine how cumbersome your database may become if you included information on all these areas for each and every records or household in your system?

The great thing about a database you can split it into smaller chunks and still centrally link everything via your primary key.




This still does not justify the need for 300 different fields of data on 1 individual in all circumstances.
When we start to talk about big data we start to need to discuss these issues.  Have we due to so much data being available at our finger tips gotten away from doing due diligence in our sales endeavors, or customer service.  Have we justified the need for something or just taken things for granted since we have what seems like unlimited storage space due to the cloud?



So as we are deluged with extreme quantities of data we may very well need to say "is this information really necessary for our operations".  Those who have the responsibilities of designing databases, or maintaining them should be asking that question all the time.  Is this information adding value to what we are doing on a regular basis.?  Is there a better way to deal with this Big Data?

"And big data is really, really big. According to industry think tank IDC, the world now generates more data in 24 hours than existed in the history of planet earth up to the year 2000. If you want to put a figure on it, it was 2.5 quintillionbytes daily."

"Clearly this amount of data can be used as a goldmine of information for businesses around the world. But in its raw, unprocessed state, data can be more of a hindrance than a help, and the single customer view is no use if it doesn’t assist each department in achieving its objectives."
How Big Data Can Help You Close the Deal

Because as we get to the point of having terabytes of data being archived on a regular basis we need to consider the amount of space that takes, the amount of energy consumed moving it around and maintaining it, and the amount of time wasted as we do said actions.
We have to consider data corruption, and other related information along with the usual things related to data input errors.

We really need to change our way of thinking.  Bigger may not be better, but it can be if we use what we are given in an intellectual and prudent way.




So let us not fall into the trap of claiming - data is knowledge or power.  Unless, we put the resources at hand to proper use we may just end up with a bunch of offended customer and a soon to be "out of business" company.

"The success of its [Dell's] big data experiment proves that information is power, but that information on its own is useless. In order to harness the power of data – whether it’s big data, or data from your own CRM –  the data needs to be processed, cleansed, merged and combined.
But more importantly, it needs to be used selectively so that each department gains useful insight and can benefit from the single customer view."
How Big Data Can Help You Close the Deal




Here are couple of additional pages you can check out on data quality I think are worth the read

Big Data Can Tell Big Lies Through Fifth Normal Form (5NF)
“We hold these truths to be self-evident” (or do you trust your data?) 
How Big Data Can Help You Close the Deal
Data Quality & Daily Life 
Data Quality and the Blemishing Effect 


So now you have a few more things to think about in the data quality realm.  Are we doing ourselves a disservice as we head for the holy grail and embrace big data at full warp speed?

So look for the not so obvious as you work to ensure the data you are using is of the quality you want and need..... anything else would be yourself and others a disservice.  But it might just help out godd old overstock.com!

Buaidh - NO - Bas

Pioneer Day

July 24th is celebrated all over Utah and some neighboring area as Pioneer Day.  The day celebrated as that which marked the arrive of Brigham Young and company to the Salt Lake Valley.
Likely a few others got there a little earlier and started to plant some crops as it was very late in the season already.

Though in reality there were "Pioneers" settling the west for year prior to the Saints coming to the Salt Lake Valley in 1847.  Many had been heading to Oregon previous to this for over 10 years and some even to California and other locations along the coast.
You could say that when the saints came into the Salt Lake Valley things really heated up.  That was the beginning of the larger western exodus.

Within the Church of Jesus Christ of Latter-Day Saints the Pioneers embody the struggles of the early saints.
Many current members can trace their ancestors back to someone that came over in a covered wagon or used a handcart.

I'd like to expand on this Pioneer spirit and the idea presented by President Thomas S Monson in his article "The World Needs Pioneers Today".

Excellent Audio Clip on Pioneers and their spirit
To them of the Last Wagon - President J Reuben Clark Jr.


You see the pioneers embody a certain spirit that a precious few have.  A vision that in some cases is rare among people.
Take the person that had the vision to create the Internet, or the personal computer, or the automobile, etc.

But, that term relating to that vision comes from the people that trekked thousands of miles across the American continent to places unknown purely on faith that they could have a better life.
After a while those heading to Oregon went off the stories of those that preceded them.  They went of the stories, and not direct knowledge of the landscape or a guarantee that things would be better.  But, as the areas they lived began to be less productive they took the chance for land and with faith headed out.

But, this vision or faith in a better future can it be applied to those that are not creating new technologies or changing the way we live our life.  Assembly line manufacturing did that, computers did that, automobiles and airplanes did that......  but, can it be applied to other things.  Can it be applied to habits or religious beliefs.

I say yes!
President Monson says yes in his article as well.
And we need these modern pioneers.  Not just the people looking to make a better widget.  We need pioneers that don't accept past behaviors necessarily OK.  People like Mandela that fought against apartheid, like those  that worked to abolish slavery or segregation anywhere in the world.  Those that have fought and continue to fight for freedom, both politically and religiously.  We need it in the modern day person that say no to the trash being labeled as "entertainment", that stands up for morals in public and private life, for ethics, and proper treatment of our fellow beings.



"The passage of time dims our memories and diminishes our appreciation for those who walked the path of pain, leaving behind a tear-marked trail of nameless graves. But what of today’s challenges? Are there no rocky roads to travel, no rugged mountains to climb, no chasms to cross, no trails to blaze, no rivers to ford? Or is there a very present need for that pioneer spirit to guide us away from the dangers that threaten to engulf us and to lead us to a Zion of safety?" Thomas S Monson - The World Needs Modern Pioneers

There are many issues that still need to be dealt with today.  We have the wave of Gay Marriage, voting rights, rights to bare arms and the consequences of miss us.  We have right to education, or self expression, and even genocide in some parts of the world.
So as we celebrate Pioneer Day and those that came before us we need to look to the future.  What legacy do we want to leave in our little corner of the earth.  Do we want to be know as the one that sat idly by as these things happened?  Do we want to be the one that just turned a blind eye and gave up?


We are in need of people that look for the truth and take the high road in moral matters.  That go against the societal wave that seems to think many of these things are OK.  People that don't let "it's not hurting me or directly effecting me" take over when they really know it is the opposite.

"A dictionary defines a pioneer as “one who goes before to prepare or open up the way for others to follow.”³ Can we somehow muster the courage and steadfastness of purpose that characterized the pioneers of a former generation? Can you and I, in actual fact, be pioneers?

I know we can be. Oh, how the world needs pioneers today!" Thomas S Monson

Buaidh - NO - Bas