Clampdown on cocaine in Mexico yields violence in Canada

The LA Times gets it:

Authorities trace the violence to the recent government crackdown on cocaine traffickers in Mexico, which has squeezed profit margins for cocaine north of the U.S. border.

Canada's outlaw retailers are fighting to the death over market share, police say, a situation exacerbated by personal vendettas and power vacuums left by the arrests of gang leaders.

"The war in Mexico directly impacts on the drug trade in Canada. . . . There's a complete disruption of the flow of cocaine into Canada, and we are seeing the result," said Pat Fogarty, operations officer for the Combined Forces Special Enforcement Unit, British Columbia's main law enforcement agency targeting organized crime.

Ron Paul's economic adviser Peter Schiff probably running for Chris Dodd's Senate seat

Learned this one on the Daily Show last night, confirmed by the Wikipedia article. Peter Schiff, Ron Paul's former economic adviser, is leaning towards running for Chris Dodd's Senate seat.

Schiff is probably best known for his prescience about the state of the American housing sector and economy, and for having enabled a cottage industry of Peter Schiff-was-right best-of YouTube videos of him getting laughed at on cable news shows as far back as 2002 for calling out the housing bubble.

Chris Dodd and his eyebrows, on the other hand, have made every possible mistake regarding the financial crisis. He's got a pretty long rap sheet, being fingered by his copiously cited Wikipedia article in multiple different scandals related to Country Wide, Fannie Mae and Freddie Mac, AIG, and Bear Sterns. Back in 2003 he was among the Congressional Democrats who blocked Bush's proposed reforms of Freddie and Fannie, and in 2007 he blew off his job as chairman of the Senate Banking Committee to pursue a hopeless presidential campaign.

The attack ads just about write themselves. Dodd's been blathering on camera for decades, and there's no shortage of 5-second pithy clips of Schiff being right. Peter Schiff's probably got deep pockets – he is, after all, the investor who got it right – so I expect a fierce campaign from him. I'm not sure that voters are going to look that deeply, but he'll be in a much stronger position if the dollar drops by November 2010, since he's been predicting it for years.

Unfortunately for Schiff, he's not the only one who wants the Republican nomination. He'll be up against Rob Simmons, member of the US House from Connecticut who narrowly lost his seat in 2006, and Sam Galigiuri, a state senator. But if elected, I'm pretty sure Peter Schiff would be the only believer in Austrian economics in the Senate.

Why Russia supports Iran's nuclear program

This is exactly why Russia is helping Iran develop nuclear weapons - so that Tehran and Washington will never normalize relations, and Russia will maintain its grip on natural gas flows westwards from the Caspian:

Iran can participate in the EU backed gas Nabucco pipeline if Washington normalises relations with Tehran, the US Secretary of State's Special Envoy for Eurasian Energy said today.

Bits on patents

From the Southeast Texas Record the notoriously patent plaintiff-friendly court, venue the US Eastern Texas District of Texas, has long some of its fangs:

The country's most active patent docket, the U.S. Eastern District of Texas, took a swing toward defendants when The United States Court of Appeals for the Federal Circuit issued a powerful writ of mandamus against the East Texas court for its lack of consideration for forum convenience.

The ruling, according to legal experts across the country, has already changed the pace of patent case filings in East Texas, a small legal outpost known for its expertise in patent legislation, but also known for its plaintiff-friendly juries and courts.

"The rocket docket engine has either slowed down or shut off completely," Strand said. The East Texas court was a famed "rocket docket" for the rapid pace that it processed cases, most favorably for plaintiffs.

Though patent experts don't think a court as powerful as the Eastern Texas District will reemerge, the author notes that Delaware is pretty friendly towards plaintiffs in patent cases. Interestingly enough, it looks like the Delaware Attorney General's office is a Biden property, and the Bidens sure love cramming intellectual property down people's throats:

Delaware has emerged in recent years as a very popular venue for plaintiffs' attorneys in a variety of civil cases, particularly since Democratic Attorney General Beau Biden took office.

A USA Today story in 2008 noted Biden worked for a large plaintiff firm before becoming attorney general. His father, now Vice President Joe Biden, has a long history of backing plaintiffs' rights to try their case, often working to kill tort reform legislation.

The Bidens' campaign accounts have both benefited from large donations by trial lawyers and their related political action committees. According to the Center for Responsive Politics, employees at three law firms that specialize in asbestos litigation were among Beau Biden's top 10 all-time contributors.

In other not-so-unrelated patent news, the Supreme Court has agreed to hear the Bilski case, which would revisit the question of whether software and business methods are patentable. Likely future Supreme Court justice Sonia Sotomayor has a largely pro-intellectual property rights history, and her decisions seem to lean towards favoring IP rights holders. And there's this disturbingly idiotic conclusion that she once reached:

As a federal trial judge in New York in 1997, Judge Sotomayor sided with producers of the "Seinfeld" TV show, ruling that a book of trivia based on the show effectively stole the show's material.

" 'The Seinfeld Aptitude Test' seizes upon the notion which lies at the very heart of 'Seinfeld' that there is humor in the mundane, seemingly trivial aspects of everyday life," Judge Sotomayor wrote. "Simply put, without 'Seinfeld' there can be no 'Seinfeld Aptitude Test.' "

I'm not sure of the source on this, but I remember hearing that the perennial Patent Reform Act of [current year] might be put on the back burner pending a Supreme Court ruling. I'm not sure which would be a more pro-reform venue – the Supreme Court or Congress – though the movement does seem to have a bit more momentum this year than I remember it having, so we'll see.

Belarus' quiet economic liberalization

...but political liberalization is still off the table. Radio Free Europe reports:

Lukashenka said, "We have done a lot in this direction [of liberalizing the economy]. We have lessened the tax pressure."

But he warned that people must be aware "liberalization is not a one-time act," and said "some charlatans and boneheads" understand it as allowing them to do anything they want.

Lukashenka said that is "a road to chaos."

As for political liberalization, he said "we have had enough of it."

The World Bank's business regulation survey "Doing Business" named Belarus among the top 10 reformers worldwide. This really long Euromoney article says that the regime is liberalizing the banking sector at a pretty fast clip. Investors include foreigners (excluding foreign managers has been a big mistake of the Russian privatization schemes), but unfortunately this includes Russian investors along with West European banks like Austria's Raiffiisen. The fear with Russian banks is that rather than profit-seeking rational actors, they will act as a Russian foreign policy apparatus, much like what happens every winter for Belarus and/or Ukraine when Gazprom finds a pretext to shut off gas for a couple of days.

The Twitter Revolution

So I got an article about Moldova's would-be "Twitter Revolution" published on Splice Today. You can read it here in its entirety.

How farm subsidies led to swine flu

Though scientists have not found the "smoking pig," as one person put it, Wired reports that at least some scientists seem reasonably sure that its fast mutation was the result of factory farming practices:

Scientists have traced the genetic lineage of the new H1N1 swine flu to a strain that emerged in 1998 in U.S. factory farms, where it spread and mutated at an alarming rate. Experts warned then that a pocket of the virus would someday evolve to infect humans, perhaps setting off a global pandemic.

The new findings challenge recent protests by pork industry leaders and U.S., Mexican and United Nations agriculture officials that industrial farms shouldn’t be implicated in the new swine flu, which has killed 176 people and on Thursday was formally declared a pandemic by the World Health Organization.

“Industrial farms are super-incubators for viruses,” said Bob Martin, former executive director of the Pew Commission on Industrial Animal Farm Production, and a long-time critic of the so-called “contained animal feeding operations.”

It's worth mentioning that factory farming gets a huge boost from US crop subsidies [pdf], since the largest input in raising animals is the food necessary to feed them. Obama has claimed to be against farm subsidies, but in reality his call to end $100 million worth of them is nothing compared to the tens of billions that the federal government spends every year to subsidize big agriculture, the meat industry, and fast food restaurants. When you think about it that way, swine flu is actually one of the more benign outcomes of farm subsidies.

Dubai as a giant bubble

The Toronto Star has an interesting article on Dubai called Dubai: How not to build a city. It's interesting throughout, but something that stuck out was this part:

It's Abu Dhabi, back down the road, that has the vast bulk of the U.A.E.'s oil reserves – 95 per cent. Dubai has less than five per cent, and it is not expected to last more than a decade. The economy relies on real estate, tourism and Abu Dhabi, the emirate that is reported to have invested upwards of $10 billion (U.S.) in Dubai's economy.

You always hear that Dubai's wealth is a sort of anti-Dutch disease (this idiot was saying it last year), whereby the oil ran out and the rulers had to get smart, and they turned their economy into a wealthy trading state. But is it possible that the entire city and economy of Dubai was just an Abu Dhabi-inflated bubble?

The myth of American guns in Mexico: debunked

Radley Balko at Reason's blog offers a corrective to the myth circulating recently that the vast majority of weapons used by drug cartels in Mexico come from America. Apparently not only is that not true, but it seems that a similar number of guns leak out of the Mexican police force itself (which is increasingly funded by...yep, you guessed it, the US government!).

From Hillary Clinton to Diane Feinstein to Bob Schieffer to the New York Times, gun control opponents keep repeating the claim that 90 percent of the guns recovered in Mexico's drug war were sold in the United States.

William La Jeunesse and Maxim Lott say it just isn't true. As it turns out, the 90 percent statistic actually concerns only those guns Mexican authorities sent to the U.S. for tracing. [...]

But that's not what gun control proponents have been saying. They've been saying nine of 10 guns used in all Mexican drug crimes came from the U.S. That number, La Jeunesse and Lott report, is closer to 17 percent. [...]

The report explains that most of the weapons used by Mexico's drug cartels are actually illegal in the U.S. Even if they weren't, it makes little sense to suggest drug cartels are going through the hassle of sending thousands of "straw buyers" across the border to legally purchase guns in America when more powerful black market weapons are available from Russia, South America, China, and Guatemala without the bureaucracy and risk of registration.

Regulatory capture in P2P lending

Via The Browser, this article from some Slate affiliate has an excellent example of regulatory capture in action in the peer-to-peer lending industry.

For those of you unfamiliar with the concept, essentially it's a broker who facilitates loans between regular people over the internet. There's also a sort of charity version of this – Kiva – but the difference between P2P lending and Kiva is that Kiva doesn't return a profit for lenders whereas P2P lending generally does, and also P2P lending is often from people in rich countries to people in rich countries, whereas Kiva has people in rich countries lending to those in poorer ones.

But anyway, it looks like these P2P sites like Prosper and Lending Club return relatively high profits to lenders (7-9% are the quoted figures) with very low (>1%) delinquency rates. One forward-looking company, Lending Club, realized that regulation was imminent, so they did what any prudent firm does faced with the incentives of imminent-yet-malleable regulation: they tried to co-opt them for their own benefit, and it looks like they succeeded:

With venture capital money behind it and a high-powered team of former executives from American Express, Goldman Sachs, MasterCard, and E*Trade, [Lending Company] decided to be proactive and hired lawyers who reached out to the SEC in early 2008. "We wanted to help define the space, to participate in the dialogue about how our industry would work, and how it would be regulated," CEO Renaud Laplanche says. "Because we really expect this business to grow huge in coming years, and we wanted to be sure everything was done right." [...]

In April of 2008, Lending Club registered with the SEC and accepted the somewhat daunting task of filing every single loan with the SEC as a security. Starting in October—just in time for the global economic meltdown—Lending Club went online with full federal approval and all paperwork duly filed. Laplanche told TBM that the process has now been mostly automated; the same technology that enables his company to replace a traditional bank or collection agency allows it to make regular automatic filings through the SEC's EDGAR filing system. While there was some initial pain and expense, he thinks they are far outweighed by the potential of the business.

So now Lending Club is quickly gaining ground on the hogtied Prosper and Loanio. While its main competitors twiddle their thumbs waiting to get back into business, the company has facilitated more than 3,000 loans for $30 million.

So basically, because they were the first ones to ask about the rules, they were the only ones not blind sighted by them, and so they get to do $30 million in competition-free business. Now, some could say that that's their reward for being good corporate citizens and proactively seeking out regulation, but then again, I don't think it's a coincidence that they also happen to have "venture capital money behind it and a high-powered team of former executives from American Express, Goldman Sachs, MasterCard, and E*Trade." I'm not sure that stacking the game in favor of incumbents with deep pockets is really the best way to encourage innovation.