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  • Banks Increase The Total Amount Of Debt - What Of It?  [View article]
    "Without new debt; i.e., money creation, the economy cannot grow."

    How about investment based on productivity surplus and real savings? That's how the economy used to grow before debt became so cheap.

    The problem, to which you alluded, is that the government and FED puts create moral hazard making the debt less sustainable.
    Jan 27, 2016. 10:37 PM | Likes Like |Link to Comment
  • What Is Really Scary Is Not China's Economy, But Its Currency  [View article]
    China is an export based economy, if the peg slips they will just export more stuff to the rest of the world and monetize their debt more quickly. Their dollar reserves will be more valuable relative to the Renmimbi, allowing them to pay their debt as well. I don't see why the dollar peg would necessitate an equities crash in China or necessarily export deflation to the rest of the world. This may however have the effect of speeding up the global fiat currency race to the bottom.
    Jan 27, 2016. 09:59 PM | 3 Likes Like |Link to Comment
  • The Keynesian Crash?  [View article]
    Look at figure 11-2. "In this graph we show the impact of a reduction in the money supply. The money supply curve shifts to the left, the quantity of money decreases and interest rates rise, assuming that the money demand curve does not shift."
    Remember money supply = Mb x multiplier
    Jan 27, 2016. 09:40 PM | Likes Like |Link to Comment
  • Federal Reserve Not Only Creates Volatility, But Also Adds To It  [View article]
    When you have a debt-fueled economy, and the money multiplier becomes negative, the FED has to lower interest rates and do QE or else...the dreaded deflation!!! We could use a nice dose of market liquidating, creative destruction and deflation right about now, it's called the business cycle and it's time to cycle down for a while. The best thing the FED can do right now is nothing, even if we see a bit of deflation for a few years. Cash is king right now.
    Jan 27, 2016. 09:19 PM | Likes Like |Link to Comment
  • The Keynesian Crash?  [View article]
    How in the world do you not understand these basic principles? This is not rocket science.

    Jan 27, 2016. 08:42 PM | 1 Like Like |Link to Comment
  • The Fed Refuses To Fold Its Hand  [View article]
    Lawrence, I really agree completely with you analysis. The FED can't back down now (raise rates) or they'd loose face. They can't raise rates either because the "recovery" really isn't a bone fide recovery at all. They will have to keep the 25 basis point for now and for the foreseeable future.
    Jan 27, 2016. 05:22 PM | Likes Like |Link to Comment
  • Austrians Insist The Sky Is Falling - It's Not  [View article]
    Austrian vs Keynesian economics is like the 2 blind men and the elephant. Both are using tools to describe an incredibly complex field. The Austrians use Praxeology to describe Human Action and how individuals act in an economy, they use axiomatic deduction and come through with some very compelling conclusions. Human Action by Ludwig von Mises is on the top 5 of my favorite thinkers of all time. The Keynesians use empiric data to come to conclusions such as the Phillips curve ect.
    In my experience as a scientist and physician, I have learned of the value of axiomatic reasoning and empiric data. Both are very important for learning about complex systems such as the human body. To dismiss one way of looking at economics is foolish.
    Jan 27, 2016. 04:43 PM | 1 Like Like |Link to Comment
  • The Keynesian Crash?  [View article]
    Yes! The two strongest forces are MB (the base, high powered money), almost exclusively controlled by the FED, and M2. The money multiplier effect strongly influences M2 (demand deposits, savings, money mkt, etc). The FED has little control on intrabank lending, rehypothication, debt repayment, or destruction of M2. The reason for low inflation in light of unprecedented FED stimulus and low interest rates is because of a deflationary contraction in the economy and a strong dollar, deleveraging, ect. The FED has been countering that
    Jan 27, 2016. 04:35 PM | Likes Like |Link to Comment
  • The Keynesian Crash?  [View article]
    On what do you think banks base their loan rates? If the overnight rate was 14% today, as it was during Paul Volcker's time at the head of the FED in the 1970s, do you think the free market would allow interest rates of 3% in any situation? Not a chance. The 21 Primary Dealers are an oligopoly and they are strongly incentivized to keep their privileged position, they have to bid on OMOs. I have a 30yr fixed home loan from Sunburst at 4% which was repackaged and sold to Fannie; no way in hell banks are lending at 3 or 4% over 30 yrs without GSEs and a FED put. I have a construction loan for "prime plus." Just the fact that banks are giving "prime plus" loans should tell you something. This is not a free market in money.
    Jan 27, 2016. 02:46 PM | 1 Like Like |Link to Comment
  • Austrians Insist The Sky Is Falling - It's Not  [View article]
    Wow! The entire Austrian school of economic thought is entirely bogus and their economists are wasting their time...we have to let them know!!!!!
    Jan 27, 2016. 02:34 PM | 2 Likes Like |Link to Comment
  • The Keynesian Crash?  [View article]
    The 21 Primary Dealers purchase govt securities via the FEDs OMC. If the target federal funds rate is not achieved by OMC operations then the Fed goes into action by changing reserve requirements or via open market operations.
    Jan 25, 2016. 05:42 PM | 1 Like Like |Link to Comment
  • The Keynesian Crash?  [View article]
    My point was that an Austrian prospective is very useful for viewing the market in it's "natural sate", what I believe you would call my fantasy world. We live in fiat currency, central banker-controlled economic worlds, so the Keynesian paradigm is very useful. My only point of my comment was to point out the Austrian perspective which adds much depth to the current problem.
    1. the "interest rate" that would occur in in specific situations in response to risk, demand, opportunity cost. Prices, including the price of debt carries a lot of information that signals risk, ect.
    2. The 1930s of course is another long and very complicated debate. I like the Austrian view here as espoused by Robert Higgs in Depression, War, and Cold war where he shows that govt spending can suppress private investment. The roaring 1920s were in part due to the creation of the FED's easy money policies starting in 1913. Hoover and Roosevelt did not let the markets clear, endless govt spending that was used actually prolonged the Great Depression. Again, I realize am in the minority on this view but it is very well supported (albeit controversial) by contemporary Austrian economists, writers, and thinkers.
    3. My "fantasy world" very efficiently sorted out risky assets when the Suffolk clearing house was in business 1818-58. Risky assets went bust quickly rather than being repackaged and sold to Fannie Mae ect. You know where Im going with this.
    4. Sovereign countries with central banks and fiat currencies are always going to manipulate their currency/lower bond yields ect. This is the reality of things, although many (including me) believe it is unethical (financial repression). How much can you exploit your taxpayers and savers with inflation?
    5. I do believe that markets are efficient, at least more efficient than Keynesian-controlled central banks, even in regard to prime rates.
    6. 60% of consolidated debt obligations were packaged by the banks and sold to GSEs. Remember the Community Reinvestment Act?

    Anyway, very interesting debate thank you for your article
    Jan 25, 2016. 05:05 PM | 3 Likes Like |Link to Comment
  • The Keynesian Crash?  [View article]
    Excellent article! I enjoyed it. The Austrian point which was made so eloquently by nobel prize winning Fredrick Hayek is that the cost of debt should be determined by price discovery, not central bank fiat. Hayek's whole point was that Central banks lack sufficient knowledge to appropriately control the interest rate (pretense of knowledge problem). The "boom-bust" cycles that inevitably occur from (Wicksellian interest rate changes) would be short lived. The cost of debt is tightly controlled by supply and demand in a natural free market economy, think US in 1880s, so that illiquid or over leveraged individuals or firms will quickly go bankrupt and assets will quickly re-allocate via competitive destruction. We live in fiat currency times, and thus John Maynard Kaynes theories still rule the day. However, the Austrians will eventually triumph (it may be many, many years) as all free market forces eventually do under sufficient debt and financial repression.
    Jan 25, 2016. 11:12 AM | 4 Likes Like |Link to Comment
  • 3 Reasons Why You Should Buy Gold In 2016  [View article]
    Something will inevitably take the place of inflated fiat currency in the global free market; wether that will be precious metals as history has shown to be the preferred currency, or something else (eg electronic currency?). Governments can only engage in so much financial repression before the market finds better ways to store liquid wealth.
    Jan 25, 2016. 10:47 AM | 4 Likes Like |Link to Comment
  • The Catalyst Of Catastrophe  [View article]
    Mr. Wilson,
    Thank you for this article, I agree with your Austrian world view.
    Jan 20, 2016. 04:54 PM | 2 Likes Like |Link to Comment