Investigative Profile: Joseph Lhota, Mayoral Candidate

Mr. Joseph Lhota (photo credit: Wikipedia)

(I conducted an investigative profile on Mr. Joseph Lhota, one of New York City’s mayoral candidates. This was part of an assignment for a course in Investigative Reporting. I primarily made use of original sources, publicly available archival material and news articles from the early 2000′s in my reporting.)

In the summer of 1999, the Chairman of Cattaraugus County, sent the then Deputy Mayor of New York City, Joseph Lhota, a strongly worded letter. The city was in the process of shutting down the gargantuan Fresh Kills landfill, and then Mayor Rudy Guiliani had decided to take out the trash by signing ‘host community agreements’ with communities near-by that would agree to accept the City’s garbage, which in 2001, amounted to nearly 650 tons a day.

Mr. Fitzpatrick was not pleased. Not only were these “communities” vaguely defined- they could mean anything from a town to a county to simply a “neighborhood”- other counties neighboring these “host” communities would find themselves besieged with thousands of dump trucks ferrying trash to and fro from New York. In his letter, Mr. Fitzpatrick asked Mayor Rudy Guiliani whether New York City would keep its promise “not to send New York City solid waste to any community that does not want it.”

A week later, Joe Lhota, then First Deputy Mayor of the city, replied curtly, stating, “The disposal of municipal waste is a business. It is an enterprise which creates numerous jobs, valuable economic activity and, when conducted in an environmentally sound manner, is profitable to both the private sector companies and local communities involved.”

This view of governance, which views good management and healthy profits as its epitome runs through Mr. Lhota’s campaign to be mayor of New York City, and is evidenced in his background. Mr. Lhota makes no bones about his strong belief in this MBA-style view of governance; when asked what he believed the role of the mayor of New York City to be, Mr. Lhota replied, “New York City is like a company, and the mayor is its CEO. The CEO’s job is to ensure the education, employment and well-being of his share-holders, the residents of New York. “

Mr. Lhota believes his experience in the private sector sets him apart from the other candidates, and makes him uniquely positioned for the position of “CEO” of New York City. His image as a “regular Joe” from the Bronx, along with his admittedly impressive resume certainly make him a threat. But the question remains- do these translate into votes?

Mr. Lhota certainly believes they would. “I’ve had a career where I’ve managed millions in money and had thousands of people reporting to me. I definitely think this works in my favor as a candidate,” he said.

However, Mr. Lhota’s views on governing may not make the most convincing argument in the current political climate. Over the last 5 years, private corporations have certainly taken a beating to their image; the trope of the greedy corporate CEO was especially strong even in the latest presidential election, where candidate Mitt Romney was unable to shake off the bad publicity his stint at Bain Capital brought with it. Current Mayor Bloomberg, a billionaire several times over, is criticized with being too out-of-touch with the reality of most New Yorkers. While Mr. Lhota escapes Romney and Bloomberg’s curse of being “too rich,” his career as an investment banker and business-friendly bureaucrat could end up being a double-edged sword.

Big Business And City Hall

One segment of the population Mr. Lhota has convinced, however, is big business, and his business-friendly rhetoric has certainly not harmed his campaign donations. His campaign, led by his wife Tamra Lhota who was also campaign fundraiser for Mayor Guiliani’s campaign, managed to raise $730,000 over the first two months of campaigning, giving Mr. Lhota an early lead in funds raised.

And Lhota’s contributors look like a list of the who’s who of the business world- James Dolan, President and CEO of Cablevision (where Lhota was executive vice president for several years), Mitchell Modell, CEO and President of Modell’s Sporting Goods, Home Depot founder Ken Langone; sports-equipment magnate Mitchell Modell, former Citigroup and Time Warner CEO Richard Parsons; Jeff Wilpon, the son of Mets owner Fred Wilpon as well as current Mayor Bloomberg’s daughter, Emma Bloomberg have donated to his campaign.

Yet, Mr. Lhota is wary of declaring himself big businesses’ man. “I wish I was their man, but the fact is, I’m not. You can’t believe everything you read in the papers,” he says. “My rivals, especially Christine Quinn have raised far more money than I have.”

Another group whose support Mr. Lhota seems to count on are his old friends from City Hall, the “inner circle” of the Guiliani administration. Former Mayor Guiliani has publicly supported Mr. Lhota and campaigned for him, but other ex-members of the Guiliani administration, such as former Deputy Mayors Peter Powers and Randy Mastro, as well as their family members, have also donated to his campaign.

Since Mr. Guiliani draws polarizing reactions from New Yorkers today, would his constant presence on the campaign trail harm more than hurt Mr. Lhota’s chances? Mr. Lhota himself emphatically disagrees. “He was a great mayor, and he changed the city for the better, he cleaned up crime, created jobs… he did a lot of good for the city. His presence can only help me,” he says.

With his biggest supporters being big-business luminaries and former high-level government officials and his public as well as private sector experience, Mr. Lhota certainly believes in a cozy relationship between business and government. “The two are inextricably linked,” he says. “Business provides the jobs, and it is government’s role to provide the right environment for this.”

However, not all of Mr. Lhota’s former City Hall colleagues have come out in his support. His one- time chief-of-staff Vincent La Padula, who left that position to work with Mayor Bloomberg on his campaign, has refrained from contributing to Lhota’s campaign, instead donating $1500 to Christine Quinn, Lhota’s closest rival and the Democratic candidate, despite himself being a Republican. Mr. La Padula refused to provide a comment.

Working Class Roots

Another aspect of his background that Mr. Lhota has played up is his roots as a regular guy who grew up in a working class family in the Bronx. His narrative is certainly one that is built on the classic “American dream,”- born into a family of Catholic cops and firefighters, Mr. Lhota became the first one in his family to attend college, graduating from Georgetown University to go on to business school at Harvard and a successful career in investment banking and public affairs after.

According to George Fransiscovich, currently a Vice President at the Nielsen Company in New York and a friend of Mr. Lhota’s from the Catholic high school they both attended, St. John The Baptist in West Islip, NY, no one was particularly surprised by Mr. Lhota’s climb to power.

“I’d known Joe since middle school, and he was just an ordinary guy. We’d listen to John Hill in the break and do normal stuff like other teenage guys,” he says, “but we all knew Joe was going to do something.”

However, unlike most other teenage boys, Mr. Lhota’s love of politics began early, when at the age of sixteen, he was involved in campaigning for James Buckley of the Conservative Party’s bid for Senator of New York in 1970.

“One night we travelled to Washington to go to James Buckley’s victory party when he became senator. Joe had been active in the campaign and got us all in to the party,” says Mr. Fransiscovich, “We were all only sixteen back then.”

Mr. Lhota was also involved in local government while in high school. “We went to Catholic school and there was a legislation pending that was going to make government aid available to Catholic schools,” says Fransiscovich. “Joe took the lead and organized a campaign to get it passed and we would all go up to the legislature in Albany for that.”

While the legislation finally did not get passed, Mr. Lhota’s involvement in public affairs had only begun.

Metropolitan Transit Authority

Apart from his experience in investment banks and companies, Mr. Lhota’s last job before his mayoral bid was at the Metropolitan Transit Authority, a quintessentially public-private body. While his stint at the MTA lasted only a year and a half, Mr. Lhota received substantial positive publicity in the aftermath of Hurricane Sandy, when the MTA worked tirelessly to resume service to New York after the storm flooded subway stations and tracks.

While the MTA’s workers’ union, the heavily Democrat-leaning TWU Local 100 is almost certainly not going to endorse Mr. Lhota in the upcoming election, the group’s spokesperson, Jim Gannon, is grudgingly complimentary of Mr. Lhota’s work at the MTA.

“He was certainly a very able man and was respectful of the union and the work we do,” said Jim Gannon, a Local 100 spokesperson.

However, Mr. Gannon believes that Mr. Lhota himself had little to do with the post-Sandy cleanup. “The MTA has extensive systems in place to handle these situations. If anyone is to be credited, it is Mr. Lhota’s top management team, people like Penderghast and Bianchi who have had years of experience and have been involved in developing these systems for many years, as well as the workers on the ground who spent months on the cleanup,” he says.

Another aspect of Mr. Lhota’s tenure at the head of the MTA was the unpopular fare hikes that went into place soon after he announced his mayoralty, which if associated with him, would do little to endear him to the nearly $5.5 million straphangers that use the city’s subway systems daily

Although incremental hikes have been occurring on almost an annual basis over the last five years, Mr. Gannon believes that Mr. Lhota could have done more to prevent them from happening.

“Lhota made no attempt to minimize, the hikes while he was here, although he did delay the increase for 3 months,” he says. This delay ensured that the hikes would only go into effect once Mr. Lhota had left the MTA. “He could have done more, but he was walking out the door and transitioning to a politician’s role, so it probably wasn’t wise for him to do anything about it at that point.

While Mr. Lhota could have done little during his short stint as Chairman of the MTA, his earlier role as Deputy Mayor may have played a role in the MTA’s finances being the way they are. While presiding over a budgetary recovery in the 1990’s and early 2000’s, Mr. Lhota and the Guiliani administration he represented share some of the blame for Mr. Lhota pushed through several expensive capital expenditure plans including the Second Avenue Subway line, which is yet to be completed. The MTA is now several hundreds of million dollars in debt, and with no tax revenue to pay for it.

Fiscal Issues

As head of the Office of Management and Budget prior to becoming Deputy Mayor of Operations in 2004, Mr. Lhota made his mark on the city’s finances as well. In 1997, while Lhota was city budget director, New York City was approaching its debt limit and did not have the ability to issue any more general-obligation bonds. He was instrumental in creating the New York City Transitional Finance Authority, which would, as a proxy, finance New York’s infrastructure projects. A few months later, the Authority and Lhota came out in favor of future-tax bonds, which were loans secured on the future income tax revenues of the city. These bonds have consistently retained a high rating and have enabled the city to borrow at low cost by lowering its credit rating.

According to Mr. Lhota, these bonds were required to build up the city’s infrastructure. “We needed the money to improve facilities,” he says.

Yet, mortgaging the city’s future revenues (to the tune of $497 million as of 2007), may not have been the most fiscally responsible move. According to Maria Doulis, a spokesperson of budget watchdog the Citizens Budget Commission, future revenues should not be mortgaged to pay for on-going costs. “Doing that is only responsible when there is an emergency, like 9/11 or Hurricane Sandy,” she says.

Social Issues

On social issues, Mr. Lhota has described himself as a “classic Northeastern politician” and has come out in favor of same-sex marriage and marijuana legalization. However, he will have to escape Mayor Guiliani’s long shadow on civil rights. In 1999, Guiliani put in place a law that removed homeless people from the streets, arresting them if they refused to cooperate. Lhota defended this action in a letter to the Reverend Thomas V. Daily, stating that he believed the policy was in accordance with “the Holy Father’s encyclical,” and that “it is compassion that is driving our policies.”

Another incident that indicates a degree of insincerity in Mr. Lhota’s new-found liberalism is his participation in the joint outrage displayed by the Guiliani administration when a painting of the Virgin Mary, executed in elephant dung, was displayed at the Brooklyn Museum of Art as part of an exhibit called ‘Sensation,’ which displayed the works of wealthy private art collector Charles Saatchi. Mr. Lhota took on the role of moral guardian of the Guiliani administration while controversy around the exhibit raged and threatened the Museum, a public institution, with cuts in funding.

While Mr. Lhota has recently distanced himself from his actions during the controversy, it does bring into question his commitment to liberal values which is all-important New York City.

However, Mr. Lhota clearly believes him and his values represent New York City. “Blue as New York City is, it has voted a Republican as mayor for the last 20 years,” he says. “Being a Republican doesn’t hurt my chances, the challenge lies in convincing the city you’re the best man for the job.”

Did The Fed Just Sneakily Change the Inflation Target?

From the Fed’s December 12th press release:

“To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”

Earlier this year, the Fed (finally) moved to a policy of inflation targeting, under which a publicly-stated inflation target of 2% was set, in line with the targets of the central banks of other developed countries. The move was expected to bring greater transparency to the Fed’s dealings.

So has the inflation target now shifted to 2.5%, as the press release suggests? And what does this say about the Fed’s inflation targeting policy?

Also, if the US is stuck in a liquidity trap, a situation where injecting money into the economy stops working because nominal interest rates can’t go below zero, pushing the Fed funds rate lower and lower may not have any effect. This situation usually arises when confidence in the economy is low, and mediocre Consumer Confidence numbers suggest that this may be the case.

Portrait Of A Shattered Community: Breezy Point

As the Q35 bus to Rockaway Boulevard approaches the Riis Park area, a mountain of debris, circled by gulls, pulls into view. Grapple trucks industriously trundle to and from the monstrosity, carrying agglomerated masses of burnt houses, splintered storefronts, dead trees; the remnants of a once-thriving community. “Would you look at that,” gapes a fellow passenger on the bus, but the other passengers, perhaps one-time residents of the area, look away.

Hurricane Sandy devastated many neighborhoods in New York City, but little over a week after, most neighborhoods had shrugged off its effects. Power and gas were back, waterlogged walls were stripped and the city’s inhabitants were back at their jobs, universities or schools. However, not all communities were able to pick themselves up and dust themselves off in the same way. Staten Island, Red Hook and Coney Island are a few that are still struggling back to normalcy. But Breezy Point, a small neighborhood in Queens is perhaps, the embodiment of the storm’s destruction.

Breezy Point. Source: http://www.nabewise.com

Located on the far end of the Rockaway Peninsula, Breezy Point is a small, insular community close to Long Island.  While Breezy Point is officially a New York City neighborhood, calling it one is, for many reasons, something of a stretch. Notoriously disconnected from the rest of the city and lacking the city’s urbane, cosmopolitan air, Breezy Point is less “neighborhood” and more “gated community”. It is, in fact, one large co-operative society, made up mostly by people of Irish Catholic descent and retired firefighters and policemen. Outsiders are often unwelcome; large sections of the beach are marked private, it is almost impossible to buy a house without a “connection,” and summer renters have to be vouched for by a cooperator and “approved” by the co-op board before they are allowed to take up residence.

Its geographic location between the Rockaway Inlet and Jamaica Bay made Breezy Point especially susceptible to the storm’s destruction, as water from both sides of the island engulfed the neighborhood. But the flooding ended up being less destructive than a three-alarm fire that broke out the night of the storm, reducing over a hundred homes to cinder.

A Neighborhood Abandoned

While Breezy Points’ inhabitants make regular, anxious trips back to the neighborhood to visit the FEMA centre and oversee their homes’ reconstruction, almost none have been able to move back. Bernadette Fallon, a lifelong resident of the area says, “You can’t [live here], there’s no power, there’s no water… nobody’s really living here.” Fallon does not foresee moving back into her home for the next six months, despite being unaffected by the fire and seeing flooding only in the basement of her house. “You have to get an inspector in to make sure [utilities are] ok to be turned on… Once everything’s back on is when you have to get a contractor and start rebuilding,” she says. Fallon is currently living with her daughter in Long Island.

The winter, too, comes with its own set of problems. Thom McCarthy, a resident of the neighborhood for the past 35 years says, “If we don’t get gas back in two weeks, we’ll have to drain the pipes or they’ll freeze. That’s the next problem.” McCarthy’s family owns sixteen homes in Breezy Point, and one of his family members’ homes was destroyed in the fire. “Their house is now 18 inches high,” he says. McCarthy’s home was flooded with nearly three feet of water on the first floor, but he considers himself to have gotten off easy. He is currently living with friends in Marine Park in Brooklyn.

Others have not been as lucky. Abby Walsh, a resident, says, “My first floor is flooded, everything I have is gone.” While Walsh had home insurance, she does not have flood insurance. She does not know when she will be able to move back or how she will pay for the damage to her home, but is hoping for FEMA assistance. She is also currently residing in Marine Park.

The Recovery Economy

Breezy Points’ inhabitants were pushed out by the storm, but the neighborhood is bustling with activity. While the bulk of the clean-up is being carried out by government sub-contractors, the volunteers have been invaluable in helping affected homes. While some volunteers are individuals and small groups that come for a day, providing people with food and moral support, there are larger volunteer groups that have been in the neighborhood almost since Day 1. These groups have carved up Breezy Point into sections that each group works on, working with the government agencies and helping families clear debris, get rid of mold and clear water-logging

Based out of the city hall and makeshift tents, there is a sense of camaraderie and good spirits at these volunteer camps. Abundant food and beer is available for those who come in after a hard day’s work and the brightly lit tents are warm despite the gloom outside. Breezy Points’ Sandy victims come in and out, asking for assistance in helping clear their backyards and homes. A woman comes in looking for help clearing debris from her backyard; when asked what the debris is, she replies, “My neighbor’s shed.”

One of the volunteer groups is the Southwest Conservation Corps, which has a contract with Americorps for volunteers. Tom Vrabel, a member of this group from Minnesota, has been at Breezy Point for nearly a month, arriving less than a week after the storm hit. His crew has been living in the town hall while they are in the neighborhood. Until FEMA provided his group and the other volunteers with a generator, the group had been braving the winter armed only with thick blankets and sleeping bags.

“The situation was a little stressful,” he says, “but you just have to deal with it.”

FEMA and the OEM have also provided these groups with the equipment they require to go about recovering and rebuilding homes. “Most of the equipment is donated or loaned,” says Vrabel. “We haven’t paid to rent any of it.”

Governmental Role

FEMA and other governmental organizations are also working non-stop to get the beleaguered neighborhood back on its feet. Hired by the American Corps of Engineers, out-of-state private contractors like as the Environmental Chemical Corp. (ECC) based out of California and New Jersey, have had a strong presence in Breezy Point.

However, with Mayor Bloomberg’s announcement of the Rapid Repair program, contractors unions with higher wages seem set to get a larger slice of the pie. The Rapid Repair Program is a free-of-cost program that certain neighborhoods, including Breezy Point, are eligible for whose aim is to perform emergency repairs to get heat, power and hot water to get people back in their homes until more permanent repairs can be made.  The Building Trade Employer’s Association (BTEA), one of the largest union of contractors in the city, is involved in carrying out the program.

According to Lou Colletti, Executive Director of the BTEA, the rapid repair program will involve dividing the city into six quadrants, each of which will be covered by 6 contractors that it represents. The contractors will then hire subcontractors, who will be chosen based on the capacity of the firm to marshal as many workers and material in as short a time as possible. For the first two weeks, the financial terms are based on time and material spent, but once the two weeks are over, the contractors will be paid based on unit cost, which will determine how much will be paid for each activity.

“The operation is still in its first two weeks,” says Colletti, “The estimates for the amount of time, labor and material spent are still unclear.”

One Man’s Bust Is Another’s Boom

While nearly all of Breezy Point and Far Rockaway’s small businesses are closed and almost 60% are seeking government assistance[1], its surrounding areas may be profiting from its misery. Many of the full-time inhabitants of the neighborhood have moved to the neighboring Brooklyn neighborhoods of Marine Park and Bensonhurst as well as Long Island.

Thom McCarthy says, “Many of the people who own summer homes in the neighborhood live in these close-by areas. We all know each other so we go live with them. The population of Marine Park has probably gone up by 30% after the storm.”

The influx of volunteers and construction workers from different parts of the country may also be contributing to small businesses in neighboring areas that have been affected by the storm. According to Ann Vigliarolo, manager at the Harbor Motor Inn in Bensonhurst, Brooklyn, a constant stream of FEMA inspectors, construction crews and people from Breezy Point that work in Bensonhurst have been living at her inn for the last month.

“There’s a lot more people than there usually are around this time of year. We barely have anyone in the winter, and now we’re completely booked up,” she says.

However, the community’s bank, pharmacy and one of its general stores have recently reopened after getting back their utilities, which bodes well for its residents and other small, local businesses based there.

Despite its tiny size, isolated location and lack of a good connection to public transport, Breezy Point is receiving all the help it can get and more. While the neighborhood is still nowhere close to a full recovery and the hurricane could push real estate values of waterfront neighborhoods like Breezy Point down, its residents seem too attached to their familiar, tight-knit community to give up on it. While small, this strong community will probably make it through.

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[1] Unofficial figure by a Small Business Association official

The Changing Paths to Cheap Labour

This Economix blog post about wages rising in traditionally “cheap labour” countries analyses wage increases across the major geographies and argues that rising wages in emerging markets (and concomitant stagnation of wages in developed countries) could further drive insourcing back to the US.

In my opinion, this misses the point to a great extent. Some issues with the table published in the post:

1. Did they really just aggregate wage levels across Asia? The continent that contains over a third of humanity? In India, a country with a billion people, the government recently contemplatied lowering the poverty line to Rs. 10 (approximately 10 cents) a day, despite inflation of nearly 8%. The minimum wage is still just over a dollar a day. Most of Asia’s growth in wages is probably being driven by high-growth East Asian countries like China and South Korea.

2. While a growth rate of nearly a 100% sounds impressive, it is misleading. The table ignores the base wage from which these countries began. Despite a 100% growth in wages, emerging economy wages are still much, much lower relative to those in developed countries.

3. Growth in wages in other low-income regions has not kept up with growth in Asia and Eastern Europe. Africa and Latin America have only grown 17 and 15% respectively. Even if the wages in emerging economies were to grow faster, there are enough untapped pools of cheap labor for corporations to exploit.

With regard to point 3: an interesting question that arises is- why aren’t most US manufacturing jobs outsourced to Latin America? The proximity to the US in itself would be a good enough reason to move jobs there. Unfriendly left-wing governments probably have a large role to play.

NYU Entrepreneur’s Challenge Coverage- An Interview With SunCulture

What does it take to leave your entire life in a country you love, pack your bags and move to Africa? According to SunCulture co-founder Samir Ibrahim, a good idea, a network of friends and colleagues and passion for what you’re doing is all it needs.

Read more about SunCulture, last year’s Audience Choice Award winners at the NYU Entrepreneur’s Challenge on Forbes. 

Variation in Bond Yields Slowly Returning To Normal

The variance in bond yields is what explains their inherent risk as well as what drives their returns. There are several factors that cause this variance, and a large part of managing risk involves managing exposure to these factors. Portfolio managers can use several methods to find these factors and minimize their exposure to them. One way is to find the fundamental factors, or the underlying real variables that cause the variance. Another way is to find the factors statistically.

Principal component analysis is one such statistical method.  The analysis uses a linear combination of the factors that cause variation in order to find what causes it. Below is a graph that looks at the movement of the factor that causes nearly 85% of variation in US government bond yields between September 2002 and September 2011.

What I found interesting about this was the huge change in the structure of the components during the credit crisis. Debtors became more risk-averse, which led to short term rates driving variance (and hence risk and returns) on yield. No one wanted to be holding long-term debt anymore, which led to a decline in their importance in determining returns.

The graph also shows the components drifting back to normal, possibly because of Fed operations. QE2 involved the Fed buying up long-dated securities, which could have driven prices and yields on these securities back to pre-crisis levels.

Bitcoins and The Free Market

After a meeting with Andy Greenberg from Forbes, the writer of this excellent series of articles on Bitcoins, I got to wondering about the nature of Bitcoins and what they demonstrate about free markets. The parts of the internet I frequent treat bitcoins as a running joke, so I was surprised to learn that they continue to thrive and are even growing in use.

The internet has disrupted business models of industries across the board, but state functions are still rigidly monopolistic, which most would agree is the way it should be. Could the internet and bitcoins be the first foray of the private sector into what has alwaysbeen a state mandate?

Bitcoins currently have a market capitalization of nearly $140 million. They are issued by bitcoin “miners” through a lottery system, and their rate of issuance is tightly controlled. A large market for bitcoins comes from the purchase of contraband online, which bitcoins are perfectly suited for due to their anonymity.

According to Gavin Andresen, a bitcoin developer and a guy that Forbes describes as “the closest thing the [Bitcoin] project has to a director,” a major attraction of Bitcoins is that they aren’t “subject to the inflationary whim of whatever Federal Reserve chief decides to print more money.”

In theory, fiat currency has value due to the legal value imputed on it by the government. Yet, despite having no legal authority, bitcoins are still being used as a means of exchange. Austrian economic theory (notoriously anti fiat currency) states that money gains its value from intrinsic value, which makes gold or gold-backed currency a valid medium of exchange. Bitcoins are neither legally backed, nor do they have intrinsic value. Their only value comes from the fact that there exists a demand for them, which is being met with supply, just like any other good.

What they do have, however, is a dedicated base of users and vendors that recognize their validity. And perhaps that’s all it needs. Before the internet, no group had the global reach and computing power required to build a project like bitcoin. As the reach of the internet increases, could demand for completely separate economies, unencumbered by the government and complete with their own media of exchange become increasingly common?