"Look at games like World of Warcraft, Diablo, Dungeons and Dragons, or the original Final Fantasy. In those games, gold is the money, and you often get gold not by doing an honest day's work, but by running around and beating people up and taking their gold. In other words, the entire world of modern fantasy role-playing is a subtle joke on gold's unsuitability as a medium of exchange.
" -Noah Smith
(via Making Light
On Popehat, Ken details the astounding story of Katie Barnett, whose home was burglarized by agents of the First National Bank of Wellston, Ohio, who mistook her house for one that they were foreclosing upon. The bank broke into her house, changed the locks, and got rid of many of Barnett's possessions.
The local police refuse to get involved, and the bank's CEO, Anthony S. Thorne, is refusing to reimburse her in full for her possessions, which were stolen and destroyed by his company. Thorne says that because Barnett can't produce receipts for all of her goods (because who does that?) (and also, even if she had, they'd have been in her burglarized house), and because her recollection of her stuff doesn't match the "inventory" of the bungling bank employees who stole everything she owned, he will not pay her full compensation.
Read the rest
The Consumer Finance Protection Bureau has released a set of templates for letters to send to harassing debt collectors. These letters contain the binding language required by fair debt collection laws and should cause debt collectors to back off. What's more, they remind debt collectors of the penalties for ignoring such a letter and let them know that you know your rights and are willing to enforce them against the hounds.
New ways to combat harmful debt collection practices
(Image: Chopping off my little finger, a Creative Commons Attribution (2.0) image from nihonbunka's photostream)
OpenCorporates has a data-visualization tool for peering into the corporate tax-evasion structures of big corporations -- subsidiaries nested like Russian dolls made from Klein bottles:
In Hong Kong, there's a company called Goldman Sachs Structured Products (Asia) Limited. It's controlled by another company called Goldman Sachs (Asia) Finance, registered in Mauritius.
That's controlled by a company in Hong Kong, which is controlled by a company in New York, which is controlled by a company in Delaware, and that company is controlled by another company in Delaware called GS Holdings (Delaware) L.L.C. II.
...Which itself is a subsidiary of the only Goldman you're likely to have heard of, The Goldman Sachs Group in New York City.
That's only one of hundreds of such chains. All told, Goldman Sachs consists of more than 4000 separate corporate entities all over the world, some of which are around ten layers of control below the New York HQ.
Of those companies approximately a third are registered in nations that might be described as tax havens.Indeed, in the world of Goldman Sachs, the Cayman Islands are bigger than South America, and Mauritius is bigger than Africa.
Tim Harford's 2011 book Adapt proposes an ingenious regulatory solution to this problem, explaining how it might have been applied to companies like Lehman, whose complex structures drew out the post-bankruptcy mess for years and years. He suggested that if banks were stress-tested to determine how long they'd take to sort out after a bankruptcy, and then required to keep reserve capital necessary to run all operations through that whole period, they would be strongly incentivized to have the most simple, transparent corporate structures. Otherwise, they'd have to tie up billions of dollars in escrow to keep the doors open in the event that it all collapsed.
OpenCorporates | How complex are corporate structures?
Mark Blyth, a delightfully sweary Scottish economist, talks for about an hour to Googlers about the stupidity of austerity as a means of recovering from recession, describing it in colorful, easy-to-grasp language. This is brilliant, accessible and important economics:
Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer.
That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment. As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we recognize austerity for what it is, and what it costs us.
Mark Blyth: Austerity - The History of a Dangerous Idea
(via Memex 1.1)
The folks at Dollar Shave Club have a new product out: One Wipe Charlies, a peppermint-scented toilet wipe they claim is better than normal toilet tissue. Their video sure is flashy, but how much more will it cost me? Is this worth the cost?
One Wipe Charlies are selling for $4 for 40 wipes. That's a dime a wipe, and I'll buy the claim that it only takes one. At my house we order our TP in bulk from Amazon: Ultra Plush 3-ply double rolls from Quilted Northern for $25.94 per 48 pack. Shipping included. It's surprising how convenient it is to just have this show up at the door.
Each roll has 176 sheets, and with 48 rolls that comes to about $0.0031 per sheet. If you're allowing a dime a dump, you can run all the way up to 32.5 sheets before you match the cost of a One Wipe Charlie. That's a fifth of a roll! You're probably managing to get the job done in 10-12 sheets, around 3 cents per.
Sorry, Charlie. No fancy marketing is going to get me to triple my budget in this department.
Quilted Northern Ultra Plush 3-ply double rolls, 48 pack at Amazon
Brian Krebs offers an in-depth look at a "cashout" service used by ransomware crooks to get money from their victims. Ransomware is malicious software that encrypts your personal files and demands that you pay a ransom for the key to decrypt them; the crooks who run the attacks demand that their victims buy prepaid MoneyPak cards and send the numbers for them by way of payment. But converting MoneyPaks to cash is tricky -- one laundry, which pipes the money through a horse/dog-track betting service -- charges a 60% premium.
* The ransomware victims who agree to purchase MoneyPak vouchers to regain control over their PCs.
* The guys operating the botnets that are pushing ransomware, locking up victim PCs, and extracting MoneyPak voucher codes from victims.
* The guy(s) running this cashout service.
* The “cashiers” or “cashers” on the back end who are taking the Moneypak codes submitted to the cashing service, linking those codes to fraudulently-obtained prepaid debit cards, and then withdrawing the funds via ATMs and wiring the proceeds back to the cashing service, minus their commission. The cashing service then credits a percentage of the MoneyPak voucher code values to the ransomware peddler’s account.
How much does the cashout service charge for all this work? More than half of the value of the MoneyPaks, it would seem. When a user logs in to the criminal service, he is greeted with the following message:
“Dear clients, due to decrease of infection rate on exploits we are forced to lift the price. The price is now 0.6. And also, I explained the rules for returns many times, we return only cheques which return on my side if you cash them out after then we lock the account! There are many clients who don’t return anything, and I will work only with these people now. I warn you.”
Cashout Service for Ransomware Scammers
Britain's harsh austerity measures have produced a sharp decline in real income and quality of life for the majority of the country; but the number of people earning £1M+ has doubled and is at an all-time high.
Official figures reveal that 18,000 people now earn at least £1m – the highest number recorded by HM Revenue & Customs. In 2010-11, 10,000 earned more than £1m, and in 1999-2000 there were only 4,000 earning such a salary.
There is also growth further down the salary brackets, with 5,000 more earning £500,000 to £1m in 2012-13 compared with 2010-11, an extra 31,000 earning £200,000 to £500,000, and 7,000 more earning £150,000 to £200,000.
The figures will increase concerns that the trends of the 1990s and early 2000s are continuing, with a growing disparity between the top-earning 1%, many of whom work in finance, and the rest of the workforce. In sectors such as manufacturing, construction and hospitality salaries have been squeezed in recent years. A recent report showed that if low to middle earnings were to rise by the 1.1% a year above inflation achieved in the past, average annual household incomes in this group would take until 2023 to reach £22,000 – the equivalent of where they stood in 2008.
Super-rich on rise as number of £1m-plus earners doubles [Daniel Boffey/The Observer]
Here's a press-release describing a paywalled paper in Science magazine, written by a pair of University of Bonn Economists. They conducted an experiment that showed how markets diffused responsibility for actions that ended up violating individual moral codes, so that people did things in market contexts that they had previously described as immoral when done individually.
"To study immoral outcomes, we studied whether people are willing to harm a third party in exchange to receiving money. Harming others in an intentional and unjustified way is typically considered unethical," says Prof. Falk. The animals involved in the study were so-called "surplus mice", raised in laboratories outside Germany. These mice are no longer needed for research purposes. Without the experiment, they would have all been killed. As a consequence of the study many hundreds of young mice that would otherwise all have died were saved. If a subject decided to save a mouse, the experimenters bought the animal. The saved mice are perfectly healthy and live under best possible lab conditions and medical care.
A subgroup of subjects decided between life and money in a non-market decision context (individual condition). This condition allows for eliciting moral standards held by individuals. The condition was compared to two market conditions in which either only one buyer and one seller (bilateral market) or a larger number of buyers and sellers (multilateral market) could trade with each other. If a market offer was accepted a trade was completed, resulting in the death of a mouse. Compared to the individual condition, a significantly higher number of subjects were willing to accept the killing of a mouse in both market conditions. This is the main result of the study. Thus markets result in an erosion of moral values. "In markets, people face several mechanisms that may lower their feelings of guilt and responsibility," explains Nora Szech. In market situations, people focus on competition and profits rather than on moral concerns. Guilt can be shared with other traders. In addition, people see that others violate moral norms as well.
"If I don't buy or sell, someone else will."
Markets Erode Moral Values
A UK Parliamentary committee blasted the Office of Fair Trading -- a consumer watchdog agency that is supposed to regulate moneylenders -- for doing effectively nothing to curb the growth of usurious, predatory moneylenders who attack poor and vulnerable people. There are 72,000 consumer credit firms in the UK, some chargin annual interest rates of 4,000%, but the OFT has never fined a single firm for breaking lending rules. On some rare occasions, it did shut down firms, but did nothing to stop them from reopening immediately under another name.
This week the charity Citizens Advice said it knew of cases where loans had been given to under-18s, to people with mental health issues, and to people who were drunk at the time of securing the loan. One client who took out a £50 loan was targeted with emails and texts offering more cash and ended up with debts of £800.
"Some of these lenders use predatory techniques to target vulnerable people on low incomes, encouraging them to take out loans which when rolled over with extra interest rapidly become out of control debts," the committee's chair, Margaret Hodge, said. "Meanwhile, the OFT has been ineffective and timid in the extreme. It passively waits for complaints from consumers before acting."
PAC's report said the OFT lacked information on how much lending was being done by each firm, and about how different people used consumer credit. A study commissioned from the National Audit Office suggested the scale of consumer harm was at least £450m a year, but the OFT was accused of lacking detailed information on the types of harm suffered by different groups of borrowers.
OFT criticised over 'ineffectual' payday loans policing [Hilary Osborne/The Guardian]
(Image: La Danse macabre, Guy Marchant/Wikimedia Commons)
In The Atlantic, Jordan Weissmann does a very good job of summing up the New America Foundation's important new report, Undermining Pell:
How Colleges Compete for Wealthy Students
and Leave the Low-Income Behind [PDF], by Stephen Burd. The report documents how private universities in America have raised the cost of tuition to incredible heights, and reserve their "merit scholarships" (paid for with government grants) for wealthy students whose parents can pay the rest in cash, while poor students have to take out punishing loans, effectively subsidizing the rich students' education and career opportunities.
Sometimes, colleges (and states) really are just competing to outbid each other on star students. But there are also economic incentives at play, particularly for small, endowment-poor institutions. "After all," Burd writes, "it's more profitable for schools to provide four scholarships of $5,000 each to induce affluent students who will be able to pay the balance than it is to provide a single $20,000 grant to one low-income student." The study notes that, according to the Department of Education's most recent study, 19 percent of undergrads at four-year colleges received merit aid despite scoring under 700 on the SAT. Their only merit, in some cases, might well have been mom and dad's bank account.
There's nothing inherently wrong with handing out tuition breaks to the middle class, or even the rich. The problem is that it seems to be happening at the expense of the poor. At 89 percent of the 479 private colleges Burd examined, students from families earning less than $30,000 a year were charged an average "net price" of more than $10,000 annually -- "net price" being the full annual cost of attendance minus all institutional and government aid. Less technically, it's what students can actually expect to pay. At 60 percent of private colleges, that net price was more than $15,000.
In other words, low-income families are routinely being asked to fork over more than half of their annual income for the privilege of sending their child off to campus for a year.
How Colleges Are Selling Out the Poor to Court the Rich
sez, "Apparently they do it by clogging the court system with dubious - and allegedly fradulent
- claims against people for credit card debt. Let's see... massive numbers of lawsuits, hasty filings, breakneck pace, questionable and incomplete records. I wonder if JPMC is taking a page from the Cartel's playbook?"
The US District Attorney for the Eastern District of New York has indicted eight residents of Yonkers for allegedly participating in a global ATM heist that involved removing the withdrawal limits on prepaid debit cards, cloning them, and then getting confederates all over the world to hit ATMs at the same time and clean them out. The DA says that the scam netted $45M worldwide; $400K in NYC alone. One of the indicted defendants was murdered in the Dominican Republic last month.
The first heist, which occurred on December 22 and targeted debit cards issued by the UAE bank, dispatched carders in about 20 countries that rapidly withdrew funds in more than 4,500 ATM transactions. In New York City alone, prosecutors said, the defendants and their co-conspirators withdrew almost $400,000 in some 750 fraudulent transactions from more than 140 different ATM locations. It took just two hours and 25 minutes for the New York cell to complete, prosecutors said. A second operation commenced on February 19 withdrew about $40 million in 36,000 transactions worldwide. In just 10 hours, the New York group allegedly withdrew about $2.4 million in almost 3,000 ATM transactions.
The operation exploited weaknesses in the way banks and payment processors handle prepaid debit cards, which usually are loaded with a finite amount of funds. These cards are often used by employers in place of paychecks and by charitable organizations to distribute disaster assistance. Once the accounts were hacked and the limits removed from accounts, cards were cloned and sent to cell groups throughout the world to make fraudulent withdrawals. Additional details of the operation are available in a press release outlining the charges.
A similar heist in 2011 got $13M in one night.
How hackers allegedly stole “unlimited” amounts of cash from banks in just hours [Ars Technica/Dan Goodin]
Bitcoins? Pah. Warren Ellis and Diesel Sweeties have teamed up to offer a limited edition Baconcoin tee -- available until May 14 -- that finally proposes a currency based on fat, nitrites, and salt, as nature intended.
Baconcoin Shirt from Warren Ellis
The Financial Times analyzed the stock picks of the presenters at this week's Ira Sohn Investment conference in NYC and found that, on average, following a hedge fund manager was a much worse bet than buying passive index funds (though a couple hedgies did do pretty well last year, they were dragged down by the spectacularly wrong advice from the majority):
But a Financial Times analysis of last year's tips shows decidedly mixed results. An investor who followed every top idea from the 12 speakers last year would have made 19 per cent, less than the 22 per cent gain available from a passive index fund tracking the US stock market.
Many of the ideas have proved woefully miscued, including some from the most high-profile managers who will return to the stage on Wednesday: David Einhorn of Greenlight Capital and Bill Ackman of Pershing Square.
Tips From Wall Street Hedge Fund Gurus Fail to Reward Faithful