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  • 4 Fed Blunders: Can You Spot Them? [View article]
    If gov spending created multiples of wealth, no country would ever lose a war. The gov spending would allow for more wealth, which would allow for more gov spending, which would create more wealth, etc, etc. The wars would go on forever, with each warring nation getting richer and richer.

    Economics is uncontestable as long as you just assume a ladder.
    Jul 28, 2012. 06:25 PM | 1 Like Like |Link to Comment
  • GDP Vs. Bernanke [View article]
    Do some more googling of the references to which I have alluded. You will find the names combined together with a boolean operator in the search engine, will help you understand them.

    At this point, I am thinking Napoleon may be more appropriate, considering what happened to Snowball.
    Jul 28, 2012. 05:09 PM | 1 Like Like |Link to Comment
  • QuickChat #238, July 24, 2012 [View instapost]
    Bubbles aren't caused by greed, they are caused by a lack of free markets. Free markets are markets free of coercion. The point of gov is to keep people free, that is free of coercion. When gov regulates voluntary transactions, it becomes the very thing it was supposed to protect us from. It is coercion that creates inflation, bubbles, that ripple through the economy like a storm. Without proper controls from the people, a central bank can be part of this coercion that effects wealth transfer. This is what we have now.

    Cb policy now is to create a wealth effect by inflating equities. Ben has said so. For the short term the bubble is in equities. Then it will be bond. Watch for cb policy and monitor the size of cb balance sheets. This is part of how you time your moves. You have to time the sloshing of liquidity among asset classes based on gov coercion to protect yourself.
    Jul 28, 2012. 11:58 AM | 5 Likes Like |Link to Comment
  • GDP Vs. Bernanke [View article]
    Wow, that's pretty scary Napoleon, or are you Snowball. Same old clichés.
    Jul 28, 2012. 11:25 AM | Likes Like |Link to Comment
  • 4 Fed Blunders: Can You Spot Them? [View article]
    Boy, they are really coming apart at the seams now.
    Jul 27, 2012. 08:14 PM | 2 Likes Like |Link to Comment
  • GDP Vs. Bernanke [View article]
    "In 1999 we repealed Glass-Steagall and promptly ended the most prolific period of growth in any countries economy just 10 years later"

    Specious reasoning is the basis for all fraud.
    Jul 27, 2012. 04:31 PM | 2 Likes Like |Link to Comment
  • QuickChat #238, July 24, 2012 [View instapost]
    I won't have to. You will know when the rules change. Just look for the end to austerity.
    Jul 27, 2012. 12:08 PM | 3 Likes Like |Link to Comment
  • QuickChat #238, July 24, 2012 [View instapost]
    From an email blurb I get. This is the sort of thing that makes me think this gets slowly dragged out till December, unless someone says something that makes me think otherwise. I make money when BB does QE, so I watch for signs of it closely. If someone else can make a better prediction than me, then I really value those comments.

    "If there’s an opposite to the sweet spot, this GDP report hit it, at least as far as the markets are concerned. Growth of 1.5% is lousy, but not lousy enough to significantly alter the Fed’s understanding of current conditions or the outlook for future growth. As a result, the FOMC next week has pretty much the same information to work with as yesterday. Another month of weakness has accumulated since the June 20 meeting, but Bernanke said he wanted several months. Looks like the verdict on QE3 will have to wait until September unless the Chairman can change a few minds."
    Jul 27, 2012. 10:36 AM | 6 Likes Like |Link to Comment
  • 4 Fed Blunders: Can You Spot Them? [View article]
    In one sense the Fed has only one bullet. The Fed monetizes assets. It issues notes that are basically a claim on the value of US labor. The value of US labor is dependent on its ability to create useful assets, thus Fed notes are a claim on US assets. They derive their value from the value of those assets.

    In another sense the Fed has unlimited bullets. It can continually issue notes irrespective at the rate at which assets are created, so much so that the notes lose value so quickly via dilution that people lose faith in value of the claim the note has (a hyperinflationary environment). Don't say this can't happen for the US. It could. Its just that it would take some really, really heavy monetizing (say 10x what BB is doing) in the current environment.

    The other way it has unlimited bullets would be in its accomodation for banks to pledge assets. The Fed has cut off a lot of banks from pledging collateral at the Fed. It could ease these restrictions, and allow banks to pledge their assets for long periods at low rates.

    So the Fed only has one bullet (monetizing), but it has unlimited bullets in the sense that it can manufacture bullets and fire them where ever it pleases via how accomodative it chooses to be. Of course, what it doesn't have bullets for, is for the creation of valuable assets. It only has bullets that people can use for trading of these valuable assets, after they have been created. The bullets don't cause the creation of the assets, only gains of human knowledge can do that.

    In the end though, the Fed is just the finance division of a company. It issues stock. It is up to the operating divisions to create products that make the stock valuable for trading. The problem the Fed has (and BB has said this) is that it is now up to the operating division to do its part.

    The problem is that too many people (including BB it seems) believe this is job of the other branches of gov to create these assets. The problem is gov is price blind, and markets are price sensitive So a bunch of roads and bridges or whatever else from gov won't create the assets needed to make our Fed notes valuable. Gov wastes labor because it is price blind, thus the assets it creates are a net drag. Gov needs to stop regulating voluntary transactions, which are the only ones that are price sensitive, and the result would be a jump forward in the creation of valuable assets, that would give Fed notes real value for trading.

    Until this happens, given the current gov subsidy mix, we will be stuck in a low growth malaise.
    Jul 27, 2012. 10:26 AM | 8 Likes Like |Link to Comment
  • QuickChat #238, July 24, 2012 [View instapost]
    There will still be revisions.
    Jul 27, 2012. 08:48 AM | 5 Likes Like |Link to Comment
  • Wall Street Breakfast: Must-Know News [View article]
    Which millionaires had 0 taxes? This would mean there is no gov consumption at all, thus you are implying the US had no gov between 1981-88. If you are only thinking in terms of expropriation taxes, then you clearly have no understanding at all of how gov taxation works.

    One thing that did happen during the 80s was the creation of about 18 million jobs per the BLS. Of course they could have been estimating conservatively.
    Jul 27, 2012. 08:47 AM | 1 Like Like |Link to Comment
  • QuickChat #238, July 24, 2012 [View instapost]
    An austerity of gov action that waste human labor always leads to prosperity.

    Part of the reasons for Thomas Culpeper and Josiah Childs desire to have gov manipulate interest rates was their observation of the Dutch and their wealth with low interest rates. However, they failed to understand the cause and effect. It was not low interest rates that were low because of gov coercion, they were low because a lack of gov coercion led to high levels of productivity (in a country with very few natural resources) that created lots of capital. Additional capital is the real way to lower interest rates, because the supply of capital actually increases. When govs lower interest rates, they don't increase the supply of capital, they simply coerce people through coercion (legislation) to invest in banks when the people would prefer not to. No new wealth has been created. It has only been transferred (a fancy way of saying theft).
    Jul 27, 2012. 08:13 AM | 4 Likes Like |Link to Comment
  • Initial Jobless Claims: 353K vs. 380K consensus (prior week revised to 388K from 386K).  [View news story]
    First consider the theft transaction. I walk out of a store, and someone hits me on the head. Then they take my walet. A transaction took place, but I did not volunteer for it.

    Second consider a transaction where I am willing to work for $1/hr, but the law says I have to be paid $10/hr. Granted, I would take the higher wage, but the employer cannot afford $10/hr. Thus the employer would voluntarily pay $1 and I would voluntarily work for $1, but the law sets a fixed costs that the employer does not have the technology to overcome. Thus the employer does the work, and I go without the job. Both of our standards of living have been reduced, even though we would have VOLUNTARILY engaged in a transaction.

    Gov can be granted force by the populace, thus gov can regulate involuntary transactions. Gov cannot be granted special market knowledge by the populace and voluntary transactions make a market. Therefore gov can regulate involuntary transactions, but it cannot regulate voluntary transactions. It has no special technological knowledge about production to offset the additional fixed costs it imposes based on political sentiment.
    Jul 26, 2012. 06:13 PM | Likes Like |Link to Comment
  • Do Low Interest Rates Make Stock PEs Cheap? [View article]
    Capital is just an abstract. Look at a balance sheet. It is Assets = Capital. Capital is just the abstract of the ownership right in assets. To create more capital you need to create more assets.

    So, are you saying assets can be created out of thin air? If so, then no one ever needs to work again.
    Jul 26, 2012. 06:05 PM | 1 Like Like |Link to Comment
  • Will QE3 Be Announced In August? [View article]
    The two scenarios need to be differentiated.

    The ideal would be constantly deflating consumable assets (like laptops) as a result of technological advancements, but assets that make the deflating consumables possible would be inflating (innovative laptop factories, patents, etc). This is what leads to the maximizing of living standards for any given environment.

    The other issue is overall deflation/inflation of fast consumables (laptops) and longer consumables (factories) because the supply of money mediums that allow for the optimal supply of money contracts is contracting or expanding at a rate that is inconsistent with capital creation via technological advancements.

    Money mediums (Fed Res notes) are just like any other product in society. Their production is optimal when that production is price sensitive. This is the dilema for govs. Govs are price blind. Thus when they mandate that the only money medium should be gold, the arbitrary selection of this commodity puts an arbitrary strain on the economy. Also, when it is not a commodity, and it is just a piece of paper or electronic bit that is monopolized by the gov, the result is fiddling with the hot and cold, as Friedman used to say.

    If you recognize the realities of what gov price blindness can do, you recognize that wealth transfer is created when money mediums are over-produced or under-produced. Finding a way to be where the wealth will be transferred to, is one way to protect yourself from the inevitable bungling of govs that try to manage price sensitive issues with their price blindness.
    Jul 26, 2012. 03:57 PM | 1 Like Like |Link to Comment