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  • Debt Is No Salvation [View article]
    "If I give you a a piece of radium today, it will have value, based on its radioactive activity."

    How does one put this politely? Try and think.

    A piece of radium for its given purposes has value. Just because it is depreciating does not mean it has value. However, some assets, like a claim on a currently productive factory, appreciate in value, but even over time that factory will depreciate. Either way they all have value to the extent they make our lives better.

    You were trying to claim that money is not a repository of value, which means it has no value, not even a depreciating value. Then you claimed you never said it didn't have value, which you clearly did.

    Besides, I thought you said you were done with me. If I can't believe you on that issue, how can I believe you on the others?

    "what's the point of all the protestation and brow beating on the subject, anyway. Perhaps, it would be more productive to figure out how to make a buck in the system we have. "

    Well that's exactly what I am doing. I am trying to get people to push pass all the false advertising about what the Fed and gov regulation can do, and get people to understand the reality of what is going on so they can protect themselves. Your cliches about the system based on what someone has told you it is instead of what it really is simply provide me a great platform for doing so.

    People need to understand that subsidies are simply wealth transfer tools, so to protect themselves, they need to figure out where that wealth is being transferred to so they can be there when it gets there.

    Then of course is the secondary concern, which also has the biggest impact for improving all of our lives, which is reforming the system to eventually get rid of the subsidies by having more and more people learn the truth and then help me advocate for enligthenment. I realize that given our culture of nonthinkers that this is highly unlikely, but I haven't given up hope on a better way of life for all us just yet. Maybe you have, but not me.
    Sep 10 12:15 PM | Likes Like |Link to Comment
  • Debt Is No Salvation [View article]
    "I didn't say it never had any value"

    "It's not a repository of value"

    When something doesn't hold value, it has no value. Money holds value because of what people perceive it can be converted into. That's its value in the market as a product. In a free market, money would appreciate, thus giving people the luxury of just sitting in a currency and watching it appreciate as innovation drove down prices for every day consumables. That extra option for the manifestation of your capital increases your standard of living, because you don't have to sit in front of computer everyday underwriting equities and bonds. You get to use that time to go out and enjoy life.

    The fact that you have to dump your Fed notes for stock notes shows that a central bank with a monopolized bank note is a subsidy for financial markets. Its a way of coercing people into a demand for equities and bonds, which drives up their prices. This is a dangerous strategy as it leads to bubbles and busts which leads to panics, but it is what it is. We would all be wealthier without it, but since it does it exist, the best you can do is utilize to protect yourself.

    You definitely want to abandon the poorly managed Fed bank notes for notes that are much better managed.

    "be cause growth is ad infinitum "

    But the growth will be limited and slowed due to gov regulation including central bank regulation. The process of forcing people to abandon their Fed notes for stock notes as fast as possible distorts the evaluation process for individual stock notes. Such decisions should be made after time has been taken for careful consideration. If the Fed is forcing people to dump their Fed notes as quick as possible, the less efficient players are subsidized and so are less efficient production methods. As such, the growth is retarded, since increased production knowledge is what creates growth. In a free market, growth is not limited, but under gov intervention there are great limitations.
    Sep 10 11:53 AM | Likes Like |Link to Comment
  • Debt Is No Salvation [View article]
    "my out of work employees "

    Unemployment is a gov intervention phenomenon. In Capitalism everyone that wants to work can work. Of course, keep in mind that a job is not the goal, a high standard of living is. In Capitalism with production always being maximized via ever increasing innovation, people will work less and have more. Gov regulators result in people working less and having less.

    People forget that the reason there were so many people in steerage on the Titanic is that they were fleeing the highly regulated economies of Europe with their ubiquitous central banks. The US had a high demand for labor, and labor and capital just want to be loved, so they go where they are appreciated.

    As John Allison said, "the problem with gov regulation is not that it causes mal investment, but that it causes everyone to make the exact same malinvestment at the exact same time".

    Of course, what also fascinates me is all this supposed compassion for all these suffering malinvestment people, but yet the people who claim to care aren't equally sharing their property with them. If this compassion really exists, all these people who claim to care, can equally redistribute what they possess, right now. Why is it we don't see this happening? I thought sharing was going to solve all the suffering. So, if the people who claim to care don't seem to believe in redistribution, I don't see why anybody else should.
    Sep 10 11:11 AM | Likes Like |Link to Comment
  • What Causes Recessions? [View article]
    "through expanding supply of money and lowering interest rates"

    When the Fed has engaged in QE buying, rates have gone up, not down.
    Sep 10 10:55 AM | 1 Like Like |Link to Comment
  • What Causes Recessions? [View article]
    "have consequences that are not immediate"

    Yes, that is an excellent point. Its sort of like a politician demanding to a demand to a subsidy for heat and light, and they respond by lighting a fuse to a bomb. They then say, "see I have provided you with heat and light" and then reasonable people say, "but you have done so by lighting the fuse to a bomb" to which the politicians says "you just don't understand modern economics". Then one day when the bomb explodes the politician says, "see, I told you we can't have free markets, because they blow up".

    Another important aspect to mention is volume. When the Fed raises the discount rate, that is risk-off, but if the raise is only 10bps as opposed to 500bps, the effect won't be as apparent.
    Sep 10 10:53 AM | 2 Likes Like |Link to Comment
  • Debt Is No Salvation [View article]
    "capitalism fails from time to time"

    Actually it doesn't. Capitalism is just a system of property rights, wherein those rights are protected to achieve maximum production given current technology levels. That's all it promises, and no more. The only failure is when people fail to employ capitalism in order to achieve maximum production.

    If your expectation is that it will deliver post scarcity, then your expectations are unreasonable.

    Regulators promise to deliver performance above what the laws of physics will allow for maximum productivity under capitalism. Given that, they will always fail and capitalism never will.

    "The Fed simply evaluated the need for liquidity"

    I always find it interesting how people who advocate for the Fed forget the failure they made for these need in 2004 to 2007, when they got their evaluations for this need wrong and create the asset collapses in the following years and which we are still suffering from today.

    "What was lacking was diverting some of that pool of cash back"

    Which is another admission of their failure. Again, they are trying to deliver results that are superior to the laws of physics and they have failed yet again.

    So, under Capitalism what you would have is no failure of the market to deliver what is possible at any given moment, but you will constantly have failure of gov regulators to deliver what is more than possible at any given moment. One thing you can count on is excuses for them and from them when they do fail.

    Think about the logic of that. If gov regulators could deliver more productivity that what the laws of physics would allow, then regulators would not need to point guns at people to make them accept their assumptions. If gov regulators had knowledge markets did not have, that knowledge would be worth trillions. Gov regulators would give up their million dollar jobs for billion dollar jobs in the markets, and all the market participants would be replaced by gov regulators without any guns at all. The presence of the guns confirms they do not have superior market knowledge. So we must plan on their failure.
    Sep 10 10:22 AM | 1 Like Like |Link to Comment
  • Debt Is No Salvation [View article]
    "You are correct, Zimbabwe did destroy it's own means of production through land reform"

    One of the constants in the universe is that you can always count on regulatory failure. A blind worship of their omniscience is an unrealistic position. As such, since this is an investing website, and we all want to protect our wealth, you have to factor in the certainy of regulatory failure. Since central banks are just gov regulators, we know they will fail too.

    So, what you have to do is look for signals of that failure, and position yourself accordingly.
    Sep 10 09:46 AM | Likes Like |Link to Comment
  • What Causes Recessions? [View article]
    You have two choices.

    1. You can market time

    2. You can stay in equities and ride out the dips, or buy at the bottoms

    Option 1 depends on how much time you are willing to invest. For some people, managing their investments is their hobby. As such, they enjoy doing it and have no problem allocating a lot of time to managing their portfolio. Under this scenario what you would want to do is watch the subsidy mix and plan on gov regulators making mistakes. What you are looking for are policies that either lead to what I call Net Fed Note Creation or Net Fed Note Destruction. For instance if the Fed became accommodative at the same time all marginal income taxes were made 5%, that would lead to Net Fed Note Creation. Those notes would be available to bid up asset prices. That leads to risk-on, equities up and yields up. So, your goal would be to buy equities before the run up, and ride it up. Then let's say the risk-on prompted 4% inflation, and the Fed announced it was going to take the discount rate from 1% to 6% in order to fight inflation. At the same time, it was announced all marginal income tax rates would be raised to 40%. That means Net Fed Note Destruction. Without those notes to bid up asset prices, asset prices will fall. That leads to selling and the flight to safety. That means risk-off. Equities down and rates down. So what you would do, is sell your equities, take your gains, and buy LT bullets. When rates fall, then you will have gains in the bonds. Then you look for the Fed, who has to "do something", to act. They will reverse policy, such as bringing the discount rate back down from 6% to 1%, and that will mean Net Fed Note Creation again. That is risk-on, because notes will become available to bid up asset prices again, so you would have to time that so you can sell your bonds for a gain. Then you use that cash to buy equities in the dip before the Fed reinflates them. What you have done by this strategy is to utilize the Fed's ability to transfer wealth, to have that wealth transferred your way. Of course, you can see how complicated this approach is, so it requires almost full time attention.

    Option 2 is more manageable, but not as lucrative. Within option 2, there are two sub options. The first one is just purchase an index fund and keep adding to it regardless of ups and downs. The second option is to only time via buying on dips, which requires some of the market timing techniques from above. Option 2 is predicated on the reality that, contrary to the propoganda, a central bank is not good for the general economy. It is a subsidy for financial markets. Inflation is a tax that transfers wealth from the general populace to the financial markets. That means inflating equity and bond prices. The job of the central bank is to go to the mattresses for the financial markets. So, by knowing this, you know where the wealth is going to be transferred to, and then you can be there when it gets there. So, in general, by staying in equities, you have the greatest chance of protecting yourself.

    In general its important to note that a central bank will on the long-term debase the notes it creates. It has no price signals to make its notes valuable. However, a private company is punished severly when it debases its notes (stocks). So, you generally want to get rid of your Fed notes because those notes are so much more poorly mismanaged than private notes. Its the greater sucker paradigm. You want to hand your Fed notes off to some other sucker for something that is better managed.

    The way to look at the yield curve is to watch for flattening or inversion. That is often a signal the Fed is engaged in Net Fed Note Destruction, which means there will be less Fed notes to bid up asset prices, and thus the risk-off scenario is forming. If you are engaged in option 2, you would be looking for another recession caused by the Fed to buy equities on the cheap. What you are counting on, is what the Fed often does, which is to say, "Whoops, I need to reverse policy", and when they do, they will reinflate equities and you along with them.
    Sep 10 09:07 AM | 2 Likes Like |Link to Comment
  • Debt Is No Salvation [View article]
    Well it sounds like you still don't understand it. You have some contrived theories about what it is, but your theories just don't comport with reality. If you really understood fiat, you would understand that its not fiat, and that for hundreds of years it has never delivered on its promises. Its not really fiat, because it is backed up by something. Its backed up by the productive capacity of the populace behind it. That's why Zimbabwe couldn't print its way to wealth, because the regulatory regime so damaged their ability to create assets that their notes to assets ratio showed up in rampant inflation. The same could happen to the US. We are not immune to the laws of physics. If we keep increasing our gov regulation on productivity or increased it at a faster pace, and the Fed kept printing, eventually the we would see similar results. It would just be a matter of time. The US would follow the path of Britain and become a shadow of its former self and the world would move on to a new reserve currency.

    Gov monopolization of money is just gov regulation of prices for money. Its no different than monopolizing hotels.

    I guess what makes these theories so discreditable, is that they are so wrong, so many times. They provide no predictive power for the direction of interest rates and equities, and as such hold no value for me in terms of making my life better. That's why I don't like them, not because I don't understand them, but because I understand them better than even the people that advocate for them. I prefer a world where people aren't pointing guns at each other to make them accept each other's price preferences. I guess I will just have to accept the fact that my sensibilities are several hundred years more advanced than the typical Fed advocate.
    Sep 9 09:31 PM | Likes Like |Link to Comment
  • What Causes Recessions? [View article]
    You can imagine a world of widgets just like icahn imagine a genie. However, both are equally impossible and as such, irrelevant for examining economic theory. A world without coercion is theoretical possible as opposed to a world where there is only one product.

    You guys are just rationalizing your position now that it has been destroyed by logic. This explains why your theories alway prove to be wrong and provide no predictive value for investing.
    Sep 9 09:02 PM | 2 Likes Like |Link to Comment
  • What Causes Recessions? [View article]
    "Government does not exist in this imaginary world but a business cycle can still exist because capital formation creates demand separate from and on top of ordinary"

    Well, if you had no gov, you would have a world where all property rights for all eternity had been identified. The only such world where you had that, would be a world with only one person. In that case, there would be no gov. Gov is the security product in the economy that establishes property rights and protects them. However, since gov is just another product in the economy, it needs to be price sensitive as well. So, your first mistake is contriving a fantasy world. We can only do thought experiments with what is possible.

    "Everything in this world is based on widgets."

    This is your second mistake. Again such a world is not even conceivable. The world we have is a world full of a variety of resources and experiences. People all have different preferences because they all exist in different scenarios affected by an ever changing interaction of environments.

    One other thing that you might learn from Rothbard is that he said you can typically tell a failed theory within the first few sentences. In the scenario you created above, this is precisely true. By creating a world of uniformity that will never exist, you have created the unreal circumstances that will allow your theory to play out.

    You might as well have said, "let's ASSUME we have a genie in a bottle that can grant all of our wishes". Once you have made that assumption, you can then reason out why you now can live in a post scarcity world. However, the flaw of such reasoning lies in the initial impossible assumption, just as your example did above.

    The reality is we don't have a world of complete uniformity. If we did, then yes, everyone could make the exact same mistake at the exact same time. However, since we in exist in world that is driven by the laws of physics, such assumptions about uniformity only serve to show us that we do not have uniformity. As such, the dynamic, wildly diverse world we have, has billions of people making billions of calculations of every second of every day all from the perspective of what and what does not improve their standard of living. That is based on their feelings, which is completely internalized, and thus will always and only be known to them.

    In other words, nature has built into humans a human nature that is designed to keep them alive. Markets are a force of nature. Human reason is a force of nature, and our reason allows us to figure out how to utilize markets to satisfy our human goal of making our lives better. Reason then allows us to determine that free markets (markets free of coercion) allow us to utilize the reality of diversity to find the actions that allow us to continually improve our actions that better turn resources into assets. It is those laws of physics expressed to us through prices that prevent us from all making the exact same mistake at the exact same time. It is only the use of coercion that can drive us past price signals that signal bad actions to continue in those bad actions until our pain becomes so great that it forces a correction (like a war or a bloody revolt). The point of our reasoning out free markets its to avoid those bloody corrections and have only peaceful ones.
    Sep 9 05:41 PM | 3 Likes Like |Link to Comment
  • What Causes Recessions? [View article]
    Au (that way is like saying Hey You!)

    Anyway, joking aside.

    In a pure theoretical market, there would be no coercion in any transaction. That would mean the gov product is mostly idle and price sensitive, only existing to further refine property rights as technology advanced. In that theoretical scenario, you might have localized cycles, such as over investment in an emerging technology, but market price sensitivity would correct it very quickly. The likelihood that every industry makes the exact same mistake at the exact same time, may be possible, but highly improbable.

    As such, the overall direction of a free market is to grow, with perhaps periods of plateaus as new technology that will spur the next leap forward is developed, but in general, you would not have a massive system wide expansionary period followed by a system wide massive contractionary period. The system wide expansion/contraction is the cause of gov coercion inducing consumption binges that erode capital because the coercion allows people to ignore the signals a free market would give them with respect to their incomes. In other words, they would be able to use prices to calculate what actions were or were not improving their standard of living and adjust before a system wide bubble built. Prices are really an estimate of how people value their time, so as prices rose, the indication would be that those actions are a waste of time, so people would redirect their efforts. The gov coercion erodes that sensitivity. Its the same reason a thief uses a gun. In the theft transaction, instead of paying a little inflation where you get less for a little more, you pay the ultimate inflation, where you give up all you have for nothing in return.

    Now, granted, whenever the free market is explained, the Coercives won't argue the merits and the logic, what they will do is say, "You are an idiot, your free market utopia has never existed. Show me one place on the planet where such a free market exists". Of course they say this to justify or rationalize the gov coercion that is being used to steal, but to this I say, "You are exactly right that a free market has never existed, which is exactly why you cannot contribute the booms and busts to that which has never existed to justify eliminating that which you just admitted does not exist".

    So again, my point in all this, is to recognize that what we have are markets polluted by coercion. A big source of this coercion is the gov itself. That means wealth transfer, so what you have to do is minimize the wealth that is being transferred from you and then figure out where the wealth is being transferred to and be there when it gets there. That's how you protect yourself from booms and busts, which are really gov induced waves of wealth transfer. You will need your surfboard.
    Sep 9 03:54 PM | 2 Likes Like |Link to Comment
  • What Causes Recessions? [View article]
    "Business cycles and bank crises go together like a horse and cart and central banks are completely unnecessary to make either happen"

    How many times do I have to say, a central bank is not the only cause? The real source is gov interention, and a CB is just one manifestation of that intervention. Is that you just want to avoid the argument I am making so you can create a straw man that you think will be easier to agrue against?

    Now, a central bank could be the only cause given the right set of circumstances like the collapse of asset prices in 2007, 2008, 2009 time frame when the Fed dried up Fed notes via raising the discount rate to 6% and holding it there until 2007. This changed the subsidy mix where housing was inflating due to gov subsidies for housing from a plethora of sources. However, when you have the gov price fixing money via a central bank, often it is the interplay of fiscal and monetary policy that you have to watch for the boom and bust cycle.

    Now, absent a central bank, gov subsidies can cause the same distortions and lead to a boom and bust. 1873 is another great example. You may not know this, but the US had a civil war in the 1860s. So, like the Napoleonic war you noted above, a war leads to an inflationary period followed by a bust. Instead of a central bank like France, where Napoleon awarded the monopoly issue of bank notes to bank cronies that helped him come to power, the US had the 1860s banking acts. Add to this railroad subsidies on a national and local level, and yet again, we find gov intervention right before a bust. The 1890s saw local banks utilizing the inflationary power of the 1860s banking acts, and we also saw state deposit insurance. Of course not to forget Europe had its central banks as well during this period. 1907 we saw Shaw engaged in QE type behavior, so yet again, we see gov intervention, which has been my point from the beginning. Its not just central banks, but gov interference (which really boils down to gov price controls which really boils down to wage control).

    But even ignoring all of the above, the reality of tax and discount policy in the late 19 teens and 1920s and 1930s did exist during a period when the US had recently created the Fed and the Income Tax.

    Knowing all this helps you predict the risk-on and risk-off scenarios. Under your method, we are just slaves to some mysterious force that causes everyone to make the exact same mistake at the exact same time. A dubious position at best. To make your point, you need to point to a period in time when gov was only protecting property and not interfering in markets with regard to price in any way and then demonstrate booms and busts that were worse then than now, when we do have gov interventions and we still have booms and busts.

    With regards to subsidies for railroads, do you know who the brother of John Sherman (for whom the Sherman Antitrust Act was named) was?
    Sep 9 02:41 PM | 3 Likes Like |Link to Comment
  • Debt Is No Salvation [View article]
    I just don't share you dogma, and I know its dogma, because whenever you start to lose the debate you say something like "I am going to conclude this silly debate..."

    I appreciate you have views of what you BELIEVE money is, but reality doesn't support your position. What I would is for everyone that would like to, to open a bank that issues notes and is free from the Fed and other gov price regulatory controls. So, the fact that people can't do that shows people are confined. If you want to live in a fantasy world of denial that is up to you. My aim is to alert the "unbrainwashed" to the damage the "brainwashed" can do to them. By doing so, they too can learn to protect themselves from dogmatic fundamentalism.
    Sep 9 01:05 PM | 1 Like Like |Link to Comment
  • What Causes Recessions? [View article]
    Well, you are not providing data that helps people understand the direction of equities and interest rates. Here, let me help you out. A better tool for that is looking at that is what I call the subsidy mix. If you look at the interaction between monetary and fiscal policy that either supports the risk-on or risk-off, you can then begin to get an understanding of the direction of interest rates and equities.

    For example, raising the discount rate often precedes a recession.

    You can also see this right before the 1920s. The Fed raised the discount rate up over 6% and tax policy raised top marginal income taxes up towards 80%. The result was a depression from Jan 1920 to July of 21. Policy was reversed after this, and top marginal rates were lowered in the 20s down near 20%. The discount rate was then lowered after 1921 back down to 4%. The result was the roaring 20s. Then Strong dies and Young takes over, and in the fall of 1929 the discount was raised to 6% again. You might not know this, but in Oct of 1929 there was a stock market crash. Following this crash top marginal income tax rates were taken back up to 90% which offset the discount rate being lowered to 2%. After the Fed induced stock market crash (they actually wrote they were trying to pop the stock market) followed the Great Depression. Of course along with this protracted economic downturn, you had all sorts of other gov interventions, so the result was gov intervention leading to booms and busts.

    What's going on here is gov mismanagement of prices and the money supply. The create a bunch of Fed notes that inflates asset prices, induce consumption binges with war and subsidies, then they panic, destroy a bunch of Fed notes, and that brings on a massive asset deflation. That causes people to go into survival, saving mode, they stop spending on readily consumables, and presto you get a recession.

    Using this knowledge you can then watch the subsidy mix and determine if the risk-on is shaping up or if the risk-off is shaping up. However, you ability to do that is going to be extremely limited if you are adhering to dogma about what people WISH a central bank and gov intervention can do, as opposed to what reality will allow them to do.
    Sep 9 12:59 PM | 3 Likes Like |Link to Comment