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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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  • Another Preemptive Withdrawal From The Fed Chair Race 30 comments
    Sep 16, 2013 12:46 PM

    September 16, 2013

    President Barack Obama

    1600 Pennsylvania Avenue

    Washington, DC 20500

    Dear Mr. President,

    I'm also writing to reluctantly withdraw my name from consideration to be Chairman of the Federal Reserve. For a lefty state sponsor of anything you can get your hands on to even consider (or at least not publicly disavow) a cranky gold bug hard money advocate has been a welcome sign for the dying causes of liberty and economic prudence.

    It has been a privilege to work in the remaining remnant of the private sector as you led the nation through a recession into a tepid economic recovery built on policies of command-and-control central planning.

    Indeed this is a complex moment in our national life. I have reluctantly concluded that any possible confirmation process for me would be acrimonious due to my deeply held and oft stated dislike of the vast majority of US Senators, puffed up windbags that blow vast quantities of other people's money and then consider it a mark of their own virtue. All subsequent efforts at prostrating before them could therefore fall flat.

    I look forward to continuing to hope for the best for your efforts to strengthen our national economy by defeating human nature - by ignoring or overcoming the evidence that humanity tends towards rational, self-seeking economic activity and that such behavior causes people to react to your collectivist policies, and that such reactions often lead to outcomes different from or opposite to the stated intents of state control. So that when you 1) pay people to do undesirable things while 2) punishing people for doing desirable things, the consequences are unintended and often downright perverse. So far, throughout history such efforts have failed expensively, often violently, whenever and wherever tried. You are standing up for the view that incentives do not matter. I say, why not have one more go at it?

    In terms of our financial system, it has been exciting to watch as we double down on all of the public policies that led to the last financial crisis. With more moral hazard than ever, with an even more concentrated banking sector, and only a reshuffling but little deleveraging of our debt, it should make for an even more exciting financial crisis the next time around. I will be here to arbitrage any mispricing and market inefficiencies; thank you for all that you do every day to create more and more of them.

    Sincerely yours,

    Chris DeMuth Jr

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Comments (30)
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  • Ted Barac
    , contributor
    Comments (463) | Send Message
     
    Thanks for the biased political demagoguery....just what a financial site like S.A. needs.
    16 Sep 2013, 12:54 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4040) | Send Message
     
    Author’s reply » Jeesh sorry. Just thought it was funny to withdraw so publicly before formally being asked. That's all. No bias or misleading intended.
    16 Sep 2013, 12:58 PM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2271) | Send Message
     
    Ted Barac: Chris adds life and color to the website with the occasional political/financial commentary and links on various other topics. Seeking Alpha brims with mundane bean counting articles, high-risk casino-type speculation articles, & media-exploiting stock-promotions by fund managers with little or no skill. Whether you like the politics in the post or not, it is a rare example of creativity on the site--unless you consider speculating on the latest iPhone success a form of creativity. This website needs more creativity and diversion, not less.
    16 Sep 2013, 01:24 PM Reply Like
  • weed
    , contributor
    Comments (46) | Send Message
     
    Ted Barac, if this were an "official" S.A. article I would agree with your objection to the political content. Instablogs are more freewheeling, and I'm grateful that S.A. provides such a forum.
    16 Sep 2013, 01:38 PM Reply Like
  • Ted Barac
    , contributor
    Comments (463) | Send Message
     
    No worries and that part was funny. I just get annoyed at partisan political posts on a financial website, but I do value your input and am an avid follower of your postings.
    16 Sep 2013, 01:03 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4040) | Send Message
     
    Author’s reply » Thanks. For what it is worth, I am certain that there are many searing insults that I well deserve, but that demagoguery is quite imprecise. It serves as an insult in as far as calling someone a "poopy head" serves, but it is not the correct word. A demagogue is a political leader who appeals to the emotions, prejudices, and ignorance of poorly educated citizens so that he can attain power. For better or for worse, I can assure you that there are few people who care less about or for the emotions, prejudices, and ignorance of poorly educated citizens.
    16 Sep 2013, 01:11 PM Reply Like
  • Ted Barac
    , contributor
    Comments (463) | Send Message
     
    Well, I'm not going to get into a debate on semantics, or politics for that matter, but I will just saying that there's a broader definition which means speaking in the manner of a demagogue (which your post/political rant does).
    16 Sep 2013, 01:28 PM Reply Like
  • toddro
    , contributor
    Comments (165) | Send Message
     
    "All subsequent efforts at prostrating before them could therefore fall flat." - hahaha! I love it! Great stuff!
    16 Sep 2013, 01:29 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I hate to break this to you but financial markets and politics are joined at the hip always have been and always will be.

     

    Chris, I noticed that markets rallied after your withdrawal. With you and Larry out is Janny a shoe in or you think maybe Billy or Timmy are in the cards?
    16 Sep 2013, 01:44 PM Reply Like
  • jhooper
    , contributor
    Comments (5328) | Send Message
     
    " financial markets and politics are joined at the hip "

     

    Indeed. All this separating politics from the economy is just a bunch of semantics by people wanting to use the political process to separate people from the benefits of their labor (income). Its an old bromide that goes way back in an attempt to use semantics to make people think politics should be separated from finances. Well what good is freedom of speech, if all your speaking can't stop others from taking your property. What point would there be in speaking out in such a scenario?

     

    Make no mistake, finance is politics and politics is finance. Its all about the money, and all the semantics about the public good are just head fakes to make people think its not.
    16 Sep 2013, 02:23 PM Reply Like
  • connellybarnes
    , contributor
    Comments (306) | Send Message
     
    The well-established existence of the public good in economics was what convinced me that the a priori arguments of the Austrian economists were foolish. The argument is: "empirical data doesn't matter; instead, we'll just revert to one magical axiom of non-aggression."

     

    My ideal political outcome is the opposite. I would like to quantify absolutely everything, and then reduce irrational religious decisions to very specific logical and computational problems regarding empirical evidence.

     

    The opinions people express in politics invariably have little or no basis in fact. It's kind of a proto-science.
    16 Sep 2013, 06:35 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4040) | Send Message
     
    Author’s reply » I don't know if an empiricist can say this, but "amen".
    16 Sep 2013, 06:39 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I should of qualified by saying not necessarily joined at the hip but maybe spooning would be more descriptive. I am not sure whos on top maybe they trade places once in awhile. Whatever they're doing somebody should throw some cold water on them.
    16 Sep 2013, 07:00 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4040) | Send Message
     
    Author’s reply » Good question. They have to look to their #3 choice or below at this point. I would think that it is Janny... But it looks so cowed to go with the backup's backup and pick a third stringer. So, I should just say that I am out of the running and am moving on to other issues.
    16 Sep 2013, 07:20 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I hear one qualification is you have to like oatmeal and limo rides.
    16 Sep 2013, 07:27 PM Reply Like
  • jhooper
    , contributor
    Comments (5328) | Send Message
     
    "well-established existence of the public good "

     

    Well established? Talk about your lack of empirical evidence, or even basic logic and reason.

     

    Oh wait, its probably the same "well-established" evidence of a rock that keeps away tigers. The empirical evidence shows the rock works because we don't see any tigers. Kudos to anyone that recognizes the off beat reference.
    16 Sep 2013, 08:30 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4040) | Send Message
     
    Author’s reply » “Lisa, I’d like to buy your rock.”
    16 Sep 2013, 08:32 PM Reply Like
  • connellybarnes
    , contributor
    Comments (306) | Send Message
     
    @jhooper: I'd be happy to discuss if you refrain from ad hominems and apologize for your rudeness.
    16 Sep 2013, 08:55 PM Reply Like
  • jhooper
    , contributor
    Comments (5328) | Send Message
     
    My hat is off to Chris.
    17 Sep 2013, 06:00 AM Reply Like
  • jhooper
    , contributor
    Comments (5328) | Send Message
     
    Ad hominem and rudeness? It's funny how people that support coercion, suddenly feel insulted when their lack of reason is exposed. It's also interesting how they think others control how they feel, which is why they are so concerned with rudeness.
    17 Sep 2013, 06:04 AM Reply Like
  • connellybarnes
    , contributor
    Comments (306) | Send Message
     
    @jhooper
    I've read von Mises, Bastiat, Ayn Rand, Hazlitt, often read Lew Rockwell and converted at least two people to the "faith" of libertarianism. In fact Ayn Rand's works were an inspiration for me to do investing because I figured I could use capital to reinforce my values of science and technology (eventually liquidating whatever capital I accumulated and turning it back into science + tech).

     

    However it's just that, a faith. It relies on the axiom of non-aggression which is very rarely shared by most people. It's shared by a few people, predominately men, who tend to be rather independent. For example, when women gained the right to vote in each state, public expenditures immediately increased:

     

    http://bit.lyOq0o42~iversen/PDFf...

     

    Also this axiom allows one to derive all sorts of nutty consequences such as supporting the ability of businesses to be racist, and disagreeing with mainstream economics about the public good, which exists primarily because businesses have no reason to take externalities into their accounting. As another example of a weird outcome that could be reached by the "rational" non-aggression axiom, in any of those thousand page software EULAs that libertarians no doubt click through like everyone else, well that's a contract, so I could hide in there small text that gives me all of your assets and you would have no legal recourse.

     

    I do personally support "coercion" in libertarian language, meaning, I do support public funding of science, highways, laws mandating protection of the environment, and some of the safety nets. Maybe that makes me "irrational" again in libertarian language. More generally, I think most all of politics can actually be understood empirically, in terms of measured data about the real world, instead of starting with a prior belief and then denouncing everyone who doesn't keep the faith of "rationality." So actually I have little faith in my personal opinions, but much more faith in empirical science as a means of discovering optimal policy.

     

    Obviously I do care a lot about economics, science, and empirical evidence, so I did find your statement offensive. I was having a bad day so I also over-reacted. But you can go to almost any econ department and say that you don't believe in the public good, and professors there will be able to explain in great detail why you're in error. So I don't consider being informed of such knowledge an irrationality.

     

    I learned a lot about economics from reading those guys, and am thankful for that, but they're also relegated to this small fringe element of politics because most people don't find this non-aggression axiom reasonable. Also many people are not that political like myself and are more concerned with modeling the real world. And again, while the real world frequently is rational and does follow this model, there are entire branches of economics such as behavioral econ, public choice theory, and welfare economics, that disagree with such a simple model of rationality.

     

    And naturally it would impossible to beat the market if actors in the securities markets were rational :-)

     

    Libertarianism makes you stupid:
    http://bit.ly/1aSfDyd

     

    Why Libertarians should Reject the Non-Aggression Axiom:
    http://bit.ly/1aSfDyg
    20 Sep 2013, 08:54 PM Reply Like
  • jhooper
    , contributor
    Comments (5328) | Send Message
     
    Econ professors are like catholic priests in 16 th century Spain, they advocate for tyranny, not all of course, but more often than not, because that's what they get paid for.

     

    Tryants always need advocates, and the advocates lie with terms like the public good. See Bossuet.

     

    In the end coercion can either be used for theft or a defense against theft. Either way it's a waste compared to capital creation activities and voluntary cooperation.

     

    If you believe in coercion, then you believe in slavery. Since you are not volunteering to be someone's slave, you clearly are demonstrating a conflict, which is the hallmark of a lack of logic.
    20 Sep 2013, 10:10 PM Reply Like
  • connellybarnes
    , contributor
    Comments (306) | Send Message
     
    Well obviously we disagree. You've made some pretty absolutist statements which are what Seth addressed in his essay. Failing to use one single axiom to explain and dominate all of the world doesn't mean I endorse slavery or Satanism or black dragons, it just means I use a number of different axioms or models situationally depending on context.

     

    For example, if I were a judge for a case where you clicked through a EULA that said you give all your future earnings to some Nigerian prince, I would think that is wrong based on a personal judgement rather than pure logic, and not enforce it.

     

    But more fundamentally, I see being human as inherently contradictory, since we tend to believe things such as free will that appear from neuroscience to be false. And we frequently use creativity in ways that disagree with existing facts to come up with either eventual improvements or retrogressions. Many of our legal and social codes have grey areas all over them precisely to allow for this kind of creativity. If Google makes a self driving car and laws were all followed to the letter then such a car could never be driven. The human mind is subject to all sorts of biases and illusions because it processes data non-logically. As a computer scientist I am glad for this because pure logic often isn't that creative.

     

    Essentially, I have a Bayesian rather than logical understanding of the world and like empiricism.
    20 Sep 2013, 10:40 PM Reply Like
  • jhooper
    , contributor
    Comments (5328) | Send Message
     
    "Essentially, I have a Bayesian rather than logical understanding of the world and like empiricism. "

     

    No, you don't. That's just semantics. You are just rehashing the well refuted "binary" argument. It goes like this, "there is no binary thinking, there are only shades of gray". Well, such a statement is a binary statement, thus if your very thesis refutes your thesis, what you have is an oxymoron. Its like saying, "its true, there is no truth", or, "if we know one thing for sure, its that we don't know anything". Well if you say is TRUE that there is no truth, then you have just established that there is truth, and if you say we don't know anything for sure, well, then you've just established that you know ONE thing for sure.

     

    The world is fact. Granted we don't know all of the facts, but that's why a noncoercive approach is critical to nature's laws of learning. Learning is how we better utilize our environment for consumption, and for improved consumption. This is our goal, and to achieve that goal, we will either produce or steal to survive.

     

    As such, all economies exist between two extremes. One extreme is a completely coercion free society. Such a society would perpetually operate on the outer most limits of the production possibilities frontier. That means they have the highest standard of living possible given their current state of learning. In such a society people realize that other people are assets, and as such, fraud and theft are antithetical to improving the standard of living. From this we derive the free market. That is a market free of coercion, so as to maximize everyone's standard of living.

     

    The other end of the spectrum is a completely coerced economy. This is the dog-eat-dog society, like communism or socialism, since the both rely on force to so other people can attempt to confiscate the benefits of another person's labor. A purely coerced economy would result in everyone murdering everyone else, with the result being only a single survivor. At that point, the result the economy automatically reverts back to a free market, since there is no one left to coerce. A single person economy is a very poor economy, with a very low standard of living. Even though a single person owns all the wealth, all the resources, and all the land, a single person can only do so much in a day. There aren't many hands to make light work.

     

    Now we come to the important part. Seeking Alpha is an investment website, and you have to rely on empirical facts and not blind ideologies to analyze the realities of the world. The laws of nature that govern investing don't care about good intentions or semantics. The laws of nature require you obey them to improve your standard of living or be punished. So, to the extent you see coercion in the markets, is the extent to which you will see wealth transfer. Wealth transfer means asset inflation for one class of assets, and deflation for others. It also means one person inflates, while another person deflates. In other words, one person gets richer and another person gets poorer.

     

    It is this coercion, particularly from gov that causes credit expansionary periods (asset inflation) followed by a bust (deflation) which "conventional wisdom" economists have erroneously labeled the business cycle. Once you understand this empirical evidence from nature, you can then start to determine the direction of equities and interest rates from a macro level. But, in order to do this, you will have to leave behind any specious arguments for unreasonable ideologies.
    20 Sep 2013, 11:24 PM Reply Like
  • connellybarnes
    , contributor
    Comments (306) | Send Message
     
    By saying I have a "Bayesian" interpretation of the world, this means I do not care particularly strongly about propositional or categorical logic since it doesn't describe humans. Artificial intelligence research in the 1960s-1980s tried this approach and it did not make much progress.

     

    My reasoning is from the set of models which are scientifically accepted, including naturally, mainstream economics. But there is a huge corpus of scientific information in this set. These are all probabilistic in nature since some of them may be false (e.g. publication bias in pharmaceutical drug trials), or more likely, true with just some probability or in some subset of cases. I certainly don't see any compelling reason to reject most of economic science as being wrong, because I don't see any strong evidence for doing so.

     

    Some statements I view as true directly from logical inference, for example, A => B, B => C, indicates A => C. But I view this as somewhat rare. A few political philosophies could be summarized in this manner, such as the libertarian non-aggression axiom, or the divine right of Kings (assumption: everyone must do what the King tell us). Mathematics, such as the Zermelo-Fraenkel axiom set is also characterized this way. Most of these statements do not describe the real world, and even if they do, such as quantum physics, they often can be impossible to use in practice for inferring decisions in the real world efficiently and under uncertainty. Finally, depending on one's assumptions, such types of reasoning can result in numerous contradictions to what we consider as basic and reasonable behavior in society, such as the ones I identified previously for the libertarian ideology.

     

    I explicitly reject what I see as oversimplifications of empirical science, such as libertarianism, or communism, or divine right of Kings, to very few logical statements. Although they can be accurate when their assumptions are valid. For example, I see the libertarian economists statements as often true in the absence of externalities. The communist economists were right in a few cases, if the assumption is that you want to maximize human happiness, by providing some safety nets. Or the divine right of Kings is probably more efficient if you need to win a war than the endless bickering that takes place in democratic republics. The key questions to ask about any factual claim would be how much scientific evidence is there, and how reasonable are the assumptions at describing the real world?

     

    I believe that by acquiring scientific knowledge especially about economics and science we might more accurately describe many situations we might find ourselves in. And that by using robust and well-verified knowledge about how the real world behaves, we can remove many political debates, and instead reduce them to specific problems about scientific studies.

     

    Of course none of this works if you prefer to reject science and describe the world using one assumption.

     

    Interestingly, we do agree that investment should be done purely on the basis of empirical facts and not blind ideologies. Although I believe there is little edge in interest rates or macro investing, since such pricing is going to be approximately correct at any given time.
    22 Sep 2013, 07:01 PM Reply Like
  • jhooper
    , contributor
    Comments (5328) | Send Message
     
    You need to reject mainstream economics because it's incentives makes it bias just like the catholic church would advocate for the king (did you read Bossuet?) and taxes and the way the king would mandate a tithe.

     

    For you to underrstand the next advancement in human reasoning you will need to understand the nlightenement of noncompulsory gov. For you to understand that, you need to leave behind your primitive affinity for a dog eat dog world. I know that's tough considering that requires logic, but it is in you. You just need to let your higher functions have a chance.

     

    Here's some help. If everyone adopted mainstream economocics, the result would be a bloodbath and extreme austerity over seen by a minority of rich ruling elite. The poor would get poorer, and the rich would get richer. You may want that, but I don't, so I will have to resist the tyranny you are proposing.
    22 Sep 2013, 08:52 PM Reply Like
  • connellybarnes
    , contributor
    Comments (306) | Send Message
     
    OK well we don't seem to have gotten so far in learning from each other. However, I will say that I enjoyed reading the Austrian/Chicago economists and learning about economics in general even if I when I don't agree with their policy proposals or approach. I am well aware of the economic problems of communism, for example, my wife's dad survived Mao's famine only by eating tree bark. She is more fiscally conservative than I, haha, although again, I would describe my position as not faith in politics, but faith in science.

     

    Did you recommend any writing of Bossuet in particular?

     

    Best luck with investing!
    26 Sep 2013, 05:34 PM Reply Like
  • jhooper
    , contributor
    Comments (5328) | Send Message
     
    Read his treatise on Absolutism. You will find he is basically arguing your points. The result was the French descent into poverty which led to the French evolution.

     

    You are not following science. You are confusing specious reasoning with deductive reasoning. Part of the problem with our culture is not training children to learn the difference,so people grow up never learning to know the difference. The result will lead to a rich ruling elite and a peasant class.

     

    Your best hope is to become part of the ruling elite, like a Fed chair.
    27 Sep 2013, 06:26 AM Reply Like
  • connellybarnes
    , contributor
    Comments (306) | Send Message
     
    @jhooper: Cite a science publication you have and I will concede that you understand science.
    28 Sep 2013, 01:22 AM Reply Like
  • jhooper
    , contributor
    Comments (5328) | Send Message
     
    I would ask the same of you. You are about as far away from science as you can get. What's ironic is that you think your arguments are cutting edge, but they are as old as the hills. You can go back 1000s of years and see people making the same coercive arguments you are making, and the results every time was austerity, slavery, and bloodshed. Of course, you want to observe all of these observations in favor of your proffered dogma.

     

    Again, SA is an investing site. You have to deal in facts, not ideology.
    28 Sep 2013, 07:14 AM Reply Like
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