Don’t let the crypto circus in congress fool you – Michael Casey

Michael Casey, Senior Lecturer, Global Economics and Management

Michael Casey, Senior Lecturer, Global Economics and Management

From Coindesk

Progress?

Judging from the most eye-catching headlines from two separate hearings on Capitol Hill Wednesday, it’s tempting to conclude there has been little of it from U.S. regulators and legislators in their comprehension of cryptocurrencies these past five years.

In fact, Rep. Brad Sherman’s laughable suggestion during a House Financial Services Committee hearing in the house that the U.S. ban mining and purchases of bitcoin could suggest we’ve gone backward since bitcoin was first discussed in Congress in the fall of 2013.

At that time, the sight of Jennifer Shasky Calvery, then-director of the Financial Crimes Enforcement Network (FinCEN), telling bitcoin exchanges and wallets they needed to register with FinCEN, was ultimately viewed positively by crypto enthusiasts. In showing that regulators like her weren’t inherently hostile to cryptocurrencies, Calvery’s comments led to a doubling in bitcoin’s price over the following two weeks to more than $1,100 in early December.

Now, five years on, some officials do sound a bit hostile.

At a separate hearing the same day as Sherman’s grandstanding, Federal Reserve Chairman Jerome Powell said cryptocurrencies are “great if you’re trying to hide or launder money.” Had he noticed how the FBI had traced the bitcoin transactions of the 12 Russians indicted last week for trying to tamper with U.S. elections?

The folly of his position was indirectly identified over at the other hearing, where Chairman of the House Agriculture Committee Michael Conaway — who presumably did not intend to take a dig at the Fed Chairman — joked, “As long as the stupid criminals keep using bitcoin, it’ll be great.”

It’s best to look beyond the eye-catching headlines, however. In the wider context, it’s clear that we have actually come some way forward in regulatory comprehension of this technology. And that’s a good thing. Read More »

Millennials don’t save for enough retirement, but Congress can help – Robert Pozen

MIT Sloan Senior Lecturer Robert Pozen

MIT Sloan Senior Lecturer Robert Pozen

From The Hill

“Young people are not saving enough.”

“They will have to double their savings to retire at a reasonable age.”

These quotes represent the conventional wisdom about our nation’s millennials, the more than 80 million Americans between the ages of 20 and 36. However, the savings picture for millennials has become more complex, according to recent data. This cohort of young people is saving more, though for short-term goals instead of retirement.

To promote retirement savings, Congress should pass the Automatic Individual Retirement Account (IRA) Act, legislation that was introduced in the House in 2015, for millennials and other Americans without a retirement plan at their workplace.

Millennials, especially the younger ones, are now building up their savings to cover emergencies for the first time since the financial crisis. More than 30 percent of Americans ages 18 to 26 have saved enough to cover three to five months of living expenses, according to a survey conducted earlier this year by Princeton Survey Research Associates International.

A spokesman for Bankrate.com, the survey’s sponsor, explained, “Millennials have a savings discipline that the preceding generations lacked.” Despite much lower levels of earnings, millennials save on average 19 percent of their annual income, compared to 14 percent for both generation X (those in their late 30s to early 50s) and baby boomers (those in their late 50s to late 60s).

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How to fix the corporate tax system – Robert Pozen

MIT Sloan Senior Lecturer Robert Pozen

MIT Sloan Senior Lecturer Robert Pozen

From The Boston Globe

With Europe in disarray after Brexit, US lawmakers should fix the nation’s broken system for taxing foreign profits of US corporations.

In theory, foreign profits of US corporations are subject to a US tax of 35 percent. But in practice, these profits are not taxed at all by the United States — unless they are brought back to the states. Because of this rule, US multinationals have kept abroad over $2.5 trillion of their foreign profits.

This huge sum could be a growth engine for the American economy. The money could be used to build factories, modernize infrastructure, or pay dividends in the United States. Instead, it is deposited in bank accounts or invested in foreign countries.

We clearly need to reform this system, but responses in the past have not had much success.

Most Republicans argue for a territorial tax system in which foreign profits would be taxed only where they are earned. But this unfortunately won’t work. US multinationals have become very adept at shifting their earnings to tax havens, such as Bermuda, and other low-tax jurisdictions, such as Singapore.

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Preaching to the choir? Beyond the People’s Climate March — Christopher Knittel

MIT Sloan Prof. Christopher Knittel

From WBUR Cognoscenti

Huge crowds recently descended on New York City to demand action on climate change. While it was an important event, I’m not sure what the march accomplished, beyond calling more attention to this critical issue. But there is a way to harness this kind of people power in a way that can have a real impact: Organize a string of high-profile marches and other activities right in the congressional districts of politicians who continue to deny undeniable science.

True political change doesn’t necessarily happen by marching in front of world leaders and others who already largely agree with you. But there can be a real impact if some of these same marchers would be willing to demonstrate in less friendly political territory to directly take on some powerful people who stand in the way of meaningful efforts to combat climate change.

Take, for example, the U. S. House of Representatives Committee on Science, Space and Technology. Shockingly, some members of the panel bearing that prestigious title are among Washington’s biggest science deniers. Jon Stewart recently pilloriedsome of those congressmen on The Daily Show, including Larry Bucshon, Steve Stockman and Dana Rohrabacher.

Read the full post at WBUR Cognoscenti. 

Christopher Knittel is the William Barton Rogers Professor of Energy and a Professor of Applied Economics at the MIT Sloan School of Management.

The importance of being boring — Simon Johnson

MIT Sloan Prof. Simon Johnson

From Business Day

The International Monetary Fund is an immensely useful organization, able to deliver substantial amounts of financial and technical assistance at short notice to almost any place in the world. It also has the great advantage of almost always being perceived as incredibly boring.

Unfortunately for the IMF, it now needs a slightly higher public profile to convince the US Congress to agree to some important reforms. The Ukrainian crisis may prove helpful, though that appears less likely now – which may be a good thing to the extent that one unintended consequence could be a loan to Ukraine that is larger than it really needs.

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