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  • Taxes Don't Lie [View article]
    Interesting. Which means that before that, there was no minimum wage. What was the minimum wage in the UK during the time when Germany had no minimum wage?
    Aug 14 05:49 PM | Likes Like |Link to Comment
  • Taxes Don't Lie [View article]
    Can anyone guess what the official minimum wage is in Germany?
    Aug 14 05:27 PM | Likes Like |Link to Comment
  • Taxes Don't Lie [View article]
    "Apparently you don't dispute the fact of a 6.9% GDP growth rate for 1934-1939."

    Yeah, and you can live like a king for one day if you spend all your savings in that one day. After, that your life is going to be pretty hard.

    That's the flaw of GDP. It can be inflated by gov programs that clandestinely spend savings without allowing for the new technology to support that new level of consumption going forward. Its the classic boom bust cycle. So, if you had been paying attention, you would have seen from my post, that you get GDP growth even when not doing what you prescribe, but instead you get GDP growth that can be sustained and GDP growth that generates lots of wealth for lots of people instead of concentrating wealth in the hands of few at the expense of everyone else.

    Here's a fun fact. Carter Glass of Glass-Steagall fame (you know the guy we are all supposed to worship) called the New Deal, Hitlerism. I guess we need to call Godwin's Law on ole Glass.

    That's the difference between specious assumptions based on "facts" that a child does vs the grown-up analysis that uses those same "facts" to arrive at a conclusion based on logic and reason.

    In other words, just because you don't see plants growing out of a toilet, does not mean you say you can't use water to grow plants, even though its a fact that you don't see plants growing out of a toilet.
    Aug 14 05:24 PM | 2 Likes Like |Link to Comment
  • Taxes Don't Lie [View article]

    I suggest people read Jacques-Bénigne Bossuet's treatise on Absolutism. The so called "public good" argument he makes, makes it sound as if he is writing on Bloomberg today.
    Aug 14 02:50 PM | 3 Likes Like |Link to Comment
  • Taxes Don't Lie [View article]
    "which is to feed the voter class that keeps them in office"

    Or, you could say the are the new slave class that exist to allow for political power for those upon whom they are dependent. The larger a slave class that can be created, the more votes they get, and the more power they get to control business. That kind of control is extremely valuable, and as such it is sold for large sums of money.

    Thus, the "player" businesses purchase their respective politicians who have gained power by buying the votes of the slave class (who must vote for them for their dependency subsidies) to sway their opinions on legislation that favors them and hurts their competition.

    The result is fewer larger businesses that can charge more and reduce supply. If you find these businesses and purchase their stocks, you can partake in a piece of this wealth transfer, but be warned, politics is fickle, so you may have to switch from company to company, from time to time.

    Either way, we get the same outcome that Absolutism produced, a small, elite, rich ruling class, and everyone else.
    Aug 14 02:08 PM | 2 Likes Like |Link to Comment
  • Taxes Don't Lie [View article]
    "Government has a crucial role in boosting productivity by spending on infrastructure and innovation with use of labor"

    This is another specious assumption. This assumes that the "infrastructure" will lead to more productivity of things that make people's lives betters. The gov could certainly subsidize "bleeder" medicine, and you would get a boost in GDP, but since no one wants to use leeches for medicine, as soon as the subsidies stopped, the result would be a collapse of the "bleeder" assets. The gov subsidized consumption inflates assets in that class, and the end of the subsidies collapses the assets, presto, boom and bust.

    The same is true for roads and trains. Roads and trains cost way more to build than what they return when the political process has them built in the wrong places and at inflated prices and take way longer than they should. The result is the same. The gov subsidized consumption inflates asset prices and GDP, but when the subsidies end, the assets deflate and spending falls. The result is a recession, just like when the Fed pulls in the subsidies and causes a recession.

    The trick is to learn the pattern. Ride the risk-on wave up. Watch for the end of the subsidies. Then bail to bonds or cash, and then get ready to get back in when the next round of subsidies seem ready to come into play (like an infrastructure project).

    Remember, the main goal of gov spending and regulation is to make the rich richer and the poor poorer. If you understand this, then you can be part of those getting richer.
    Aug 14 12:40 PM | 2 Likes Like |Link to Comment
  • Taxes Don't Lie [View article]
    "GDP grew at a 6.9% rate in the six years 1934-1939. "

    The implication here is that all the gov control, spending, and taxes of the New Deal led to GDP growth, and as such if the opposite ever happened you would not see high GDP growth. However, the data doesn't support this at all.

    There was quite a bit of growth.

    Now, you did have spikes during the Korean War, but war spending is like any other gov spending. It basically a consumption binge. GDP is a measure of spending, so consumption binges boost GDP. However, since gov spending is price blind, it becomes an erosion of capital. Its like spending your savings, enjoying the extra spending, and then saying, I must be richer.

    From the article...

    "The economy grow strongly in the mid-50s, but slowed down in 1956-1957. Notice there were three quarters of shallow contraction in 1956 and 1957. In August 1957, the second recession of the 1950s started which lasted until April 1958. This was followed by four quarters of incredibly strong growth."

    Now take a look at the discount rate in those periods.

    Notice how the Fed raising the dicount rate precedes the recession. What's going on here is the expansion and contraction of gov sponsored consumption binges swerving around an economies natural tendency to grow.

    If you can get past the childish logic and specious reasoning of statements like...

    "GDP grew at a 6.9% rate in the six years 1934-1939."

    You can make a step into the grown-up world of adult financial analysis.
    Aug 14 10:52 AM | 4 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments!! THE CHALLENGE ,PART 2 [View instapost]
    We are at 2.39 this morning, and the German 10 yr has broke 1% for the first time in history, I believe.

    Europe economic data is disappointing, and the geopolitical turmoil seems to have some staying power.

    There may not be a chance for a spike up. Fear is a great herbicide.
    Aug 14 10:28 AM | Likes Like |Link to Comment
  • Tremors, And the U.S. Government's Tragic Comedy [View article]
    War is just the ultimate manifestation of gov regulation. The same frustating results you get from the military regulatory apparatus is the same you get from all the other gov regulatory apparatuses.
    Aug 14 08:25 AM | Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments!! THE CHALLENGE ,PART 2 [View instapost]
    As long as the Fed continues with taper, the equities markets will have wobbly knees. As soon as taper is complete and the latest round of QE is officially over, that's when a pullback can be expected. It won't fall out of bed, but I can see settling out in the 1800s or maybe the high 1700s.

    Next year, 2015, lots of people can expect to see their healthcare premiums go up 30% to 40% as the insurance companies (who had to guess this year) finally have some hard new costs to utilize to factor in for how much they are going to raise premiums. This will act like a tax, and thus lower incomes and thus lower earnings for equities and the available Fed notes which can be used to purchase equities.

    Also, Dodd Frank is still rolling out. Dodd Frank is bascially a tax on credit. Whatever you tax you get less of, so DF will result in less credit. Less credit is the same thing as the Fed raising the discount rate or shrinking its balance sheet. Again, this means less Fed notes that eventually find their way into earnings and/or are available to bid up equities.

    As equities struggle, the fear trade will get stronger, and yields will fall. In short, the basic risk-off is shaping up. In theory, the Fed would want to reinflate by another round of QE, so the trick would be to buy a few months before that, and then ride the next wave up. How long this will take will be the real question.
    Aug 12 08:44 AM | 1 Like Like |Link to Comment
  • Why Is The Yield Curve Flattening? [View article]
    "independent of the best models are indeed market driven and therefore ultimately tied to demand"

    This is an overlooked point. There appears to be a common misperception that a central bank controls interest rates. Heck, you even hear Austrians says this. Interest rates are a force of nature. You can no more control them, than you can control gravity via the gov Central Gravity Control Office.

    Maybe the reason people think a CB controls interest rates is because we often hear things like, "The Fed has set the discount rate to X". This seems to imply the Fed has control over rates because it has set this implied "market discount rate".

    Another assumption is that because a CB can buy notes out of the market is that it can control rates that way. The idea is that more buying of notes means more demand for notes and thus lower rates. However, if the Fed bellies up to the bar, and everyone else leaves, then the net effect was less demand and not more. As such, we can see the "extra demand" notion is specious.

    The only thing a CB controls is how many notes it creates. A discount rate is just a tool it uses to create those notes, and buying securities in the market is another. A CB only hopes these actions will result in the outcome it desires with regards to rates, but even the CB (like any gov) is totally at the mercy of the market. Like that line from the Jurassic Park movie, the control they dream of is an illusion.

    A reasonable person recognizes these inherent realities and plans their life accordingly.
    Aug 11 01:18 PM | Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments!! THE CHALLENGE ,PART 1. [View instapost]
    "Now tell me again, why is it we keep hearing it said that interest rates "have' to go higher?"

    Its an infectious notion. I remember talking to a bank regulator in Nov of 2013 about the risks to banks when interest rates started going up. I asked why she thought rates were going to go up and she said because they are currently low.

    Now this person isn't a policy maker, she was just parroting what she had been told by the bank regulator policy makers. In fact, IRR is currently all the rage in regulator literature.

    Its a reminder of how the mob mentality can set in, and if you aren't rooted in reasoned principle and fundamentals, you can get sucked in to.

    There are REASONS interest rates go up, and the fact that they are currently low isn't one of the reasons.

    Interest rates are simply the intersection for the supply and demand of capital. Understanding the REASONS driving the supply and the demand is how you get a better picture for the direction of interest rates.

    Basically, interest rates go up for two reasons.

    1 - The sudden demand for capital dramatically outstrips the supply. This is typically noted in a sudden economic expansion.

    2 - Credit risk. People don't trust you, so they want a lot if you want to use their capital.

    The economic data is great, but it isn't horrible either. So there doesn't appear to be a massive economic expansion on the horizon. So reason 1 is not met.

    However, even though the economic data isn't great, it still isn't horrible. So all the people that have demand for dollars (Asian mercantilists, capital flight from Europe, banks with 0 risk weighting for US treasuries, etc) are still there. The US, Japan, and some European nations aren't acting like genisus, but at least they aren't acting like some of the other fools in the world. As such, they are the highest decks on the sinking Titanic. So, reason 2 isn't fullfilled either.

    Rates are going to stay low, and probably go lower as the Fed continues to taper.
    Aug 11 12:42 PM | 3 Likes Like |Link to Comment
  • What Is Austrian Business Cycle Theory? [View article]
    no one owes anything to anybody

    That's another way of saying a hunter/gatherer society.

    Think about a balance sheet for a moment. The top side is assets, and the bottom half is liabilities. Assets are real things that people consume. An individual balance sheet shows cash, but cash is just a note. A liability is just a note. The point of cash is that it can be converted to a consumable asset. So if you take an entire economy and consolidate it, cash (Fed Res notes) would wind up on the liability side.

    In essence what this says is that a balance sheet is just real things on top with ownership rights on the bottom. The ownership rights are symbolized by the notes. The better your assets, the better your notes because people value things that make their lives better. So, stocks, bonds, Treas, and Fed notes are all just different classes of ownership rights.

    This is why the US debt is not really the problem. So policies aimed at shrinking the debt for the debt's sake are missing the point. The real point is, "does any group of people have policies that allow them to create valuable assets that give their notes value?"

    So, when I see tax policy aimed at lowering the debt for the debt's sake, I interpret that as risk-off. It takes Fed notes out of the system. Less notes, means less notes to bid up asset prices. Asset prices fall, people feel poorer, they spend less, GDP is a measure of spending, and if GDP goes down enough, presto you get a recession.

    There is a way the world ought to be, but it is not that way and it will never be that way. All there is, is the reality that exist now. I have to protect myself in that reality, and the way I do that is to figure reality out on my own and ignore the rhetoric.
    Aug 8 12:41 PM | 1 Like Like |Link to Comment
  • Who Is John Galt And What Stocks Would He Buy? Part I [View article]
    Also notice how the elitists claim that they believe in sharing and redistribution, but then they turn around and brag about how rich they are. Then they also claim how compassionate and pacifist they are, then say, "Stop driving for free on our roads" all the while using a gun to collect the fees they say they aren't collecting.

    All they can do is demogogue. The refuse to practice what they preach. The only time they will have any sort of credibility is when they are all redistributing THEIR income. If they really cared about the poor and the downtrodden they way they say they do, then there would be no poor and downtrodden.
    Aug 8 12:24 PM | Likes Like |Link to Comment
  • What Is Austrian Business Cycle Theory? [View article]
    I just saw 2.37 on the 10 yr. What's really ironic, is I am on my way to the same eye doctor I went to back when LTRO was coming to an end. I can remember sitting in the doctor's office staring at they eye chart placing orders for bonds on my phone because the 10yr was peaking out at 2.39. I say peaking because LTRO was coming to an end, and the way I look at things, the less central bank notes in this environment (subsidy mix), then the less risk-on there is. So, when the ECB was going to bring LTRO to an end, then risk-off was going to return. I bought about $25 million in that round, and took gains when the 10 yr went back down to around 1.40. At that point, all we had was Twist, and Twist didn't grow the balance sheet, so that wasn't risk-on, since there wasn't new Fed notes.

    Taper is not eliminating notes, its just a reduction in the amount of new notes being created. Combine that with air strikes, trade sanctions because of Russia, etc, and that subsidy mix overrides the muted risk-on of taper. The result is a net risk-off, so rates down and equities down.

    If all the air strikes etc continue and QE3/4 ends in the fall, then that will be major risk-off, and thus we could fall below 1800 and 2%.
    Aug 8 11:40 AM | Likes Like |Link to Comment