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  • Deep Dive: Surplus Capital Revisited [View article]
    The theory is fun to contemplate, but it is also useful. You can boil it down to the "Cantillon Method", and do what Richard Cantillon did to John Law during the Mississippi bubble. Cantillon recognized the inflationary practices of Law, and actually used that knowledge to have the inflationary/wealth transferance policies of Law to have wealth transferred to Cantillon.

    That's what we have to do in all this in order to protect yourself. Understand that inflation is inflation of any asset class, not just what gov officials tell us inflation is. Then study the subsidy mix that causes the inflation, and then look for the signals of policy reversal that will end the inflation. Ride the bubble up, and then get out.
    Jul 24 01:26 PM | 2 Likes Like |Link to Comment
  • Deep Dive: Surplus Capital Revisited [View article]
    "imbalances and unsustainable practices"

    This assumes that someone in the society knows what "balance" and "unsustainable" is. What this is describing is an omniscient person. Such a person would have perfect production knowledge, and as such would not need to demand to be in charge, the populace would voluntarily put that person in charge.

    So beware the person that claims to know what these supposed "imbalances" and "unsustainable" conditions are and that by virtue of that claim, they should be put in charge of making sure only "balanced" and "sustainable" conditions will exist. In other words, such a person is a conartist.

    The only condition that we have control over is coercion. Purging coercion from the society will result in the most price sensitive society possible. Then you can forget "trickle down" or "bottom up". What you will get is exponential prosperity, wherein people only need to work a few hours a day and a person's capital (their ownership rights to assets) will do most of the heavy lifting for them. Choice will be boundless and a standard of living will exist that we never thought possible. If you define utopia as an exponential growing of the standard of living, then indeed you will have utopia.

    The next great leap in human society will not be one single coercive state for the whole world, who, through compulsion, will have monopolized all human action, but rather noncompulsory gov, wherein all associations are free of compulsion, and at some point gov will cease to be a product necessary for the market, like a cure for a disease that has gone extinct.
    Jul 24 12:51 PM | Likes Like |Link to Comment
  • Deep Dive: Surplus Capital Revisited [View article]
    "So - if there's so much capacity - we've probably learned more about production - than we can currently consume."

    Not all capacity is created equal. When a gov monopolize a money medium, the discipline of prices is muted. The result is a constant inflation of some degree. The incentive is then to run out and spend before the value of the medium deteriorates and your power to consume is reduced (a tax is essentially the reduction of the consumptive power of your income).

    So think about the distorted incentives for people as producers. Without the spending subsidy from a monopolized money medium, the incentive is to lower the cost of the product. This is done via innovations that save time and thus result in a better quality, a lower price, or both. So to attract the buyer, the producer must find ways to ever improve the product, part of that incentive would be to not have "excess" capacity which is another term for waste (hence just-in-time inventories).

    However, when the gov can use its coercive power to issue notes irrespective of changes in productive capacity, people line up to buy because of the fear of being taxed. The incentive to innovate for the producer is diminished or eliminated. So the tendency is to just keep producing the same thing at its current technological state. Producers are also smart enough to be wary of the subsidized demand, and thus they tend not to expand and hire. Instead, since technology hasn't changed, all that's happened is that they are working longer for the same margins, so since they want a life like everybody else, the way to do this is to raise prices.

    Eventually the higher prices catch up with the subsidy the monopolized money medium allowed, equilibrium is reached with people's real income (producers are consumers and consumers are producers), people then become wary of buying more, purchases slow down, the producer needs to cut costs, people are laid off, the fear factor grows even more, which means a bias towards savings and not spending, and presto, you have "excess" capacity, and that excess capacity is old technology that the gov monopolized notes incentivized.

    This system is as far away from capitalism as Greece is from utopia.
    Jul 24 08:31 AM | Likes Like |Link to Comment
  • Deep Dive: Surplus Capital Revisited [View article]
    "Economists recognize three factors of production: land, labor and capital. "

    Like reading Marx, Engels, or Keynes, you can usually tell if you are dealing with fantasy and assumptions in the first few pages. This author manages to do it in the first sentence.

    Labor is everything. Land means nothing without labor, and capital is just stored labor. In the end, all that matters is each individuals own perceptions about how good their labor or someone else's labor is at creating consumable assets that increase the standard of living. The ability of labor to create that assumption is based on that labor's learned ability to do so. As such, only knowledge grows an economy, and knowledge only comes from learning. Learning comes from trial and error, and error requires learning from mistakes. To learn from mistakes, an individual must bear the pain of the mistakes. Measuring pain is done so on an inverse measure based on how much people value pleasure. This measure is known as prices.

    To have your society operating at the peak of productive capacity in order to have the highest standard of living for any given point in time requires that society to be as sensitive prices as they possibly can be, which means they are as sensitive to prices as they possibly can be.

    So, the economists have it wrong, at least the ones the author was referring to, that is. If the initial assumption is wrong, all the subsequent conclusions resulting from the initial failed assumption should be viewed with skepticism.
    Jul 23 04:07 PM | 1 Like Like |Link to Comment
  • Stability Of The European Union (20) July 6, 2013 To August 28, 2013 [View instapost]
    Another similar analogy is gov insurance of bank deposits. The reason the FDIC came about, was because states used to attempt to insure bank deposits. So the states would regulate their banks with the promise of having no more bank failures and guessed what happened? The state deposit insurance funds kept going bankrupt. So the logic was, let's just move this to the national level, and get it away from the podunk states. At the national level, with national regulators, bank failures will finally go away. Well, we can see what happened.

    The reason for this is all very simple, gov regulations are simply gov sanctioned manipulation by politicians to use bank deposits to buy votes. So the regulators are just really an arm of politicians to inflate, and the result is the inflation creates bubbles in the asset classes being subsidized, and since inflation via gov is really just another term for stealing, then what you have are asset values that aren't really supported by real income levels of production.

    Something in the market will pop the bubble, and the ironic thing is that it is usually gov policy in another branch of gov. We saw this very thing in 2006 when BB inverted the yield curve and popped the real estate bubble that had occured via fiscal inflationary policies (subsidies) for real estate.

    Europe has a long history of gov manipulated markets (they call it gov regulation - as if no regulation would exist without gov as typified by the likes of John Kenneth Galbraith), and the result is bubbles and crashes and ever grinding austerity.

    So when their attention turns from the royal baby news, they start whining about deriviates, because the problem is not their faulty economic model of a gov coerced (price fixed) economy, its always some nebulous outside force that is causing all their woes. So what we are going to forever see out of Europe will be booms and busts because they just aren't wired culturally for anything else.

    The Bavarians need to seceed, like the wealthy did from Detroit (they went Galt), and leave these people to the realities of what happens when you think rhetoric can replace the economic laws of nature.
    Jul 23 10:43 AM | 6 Likes Like |Link to Comment
  • Stability Of The European Union (20) July 6, 2013 To August 28, 2013 [View instapost]
    Here's what happen without free markets.
    Jul 23 08:33 AM | 4 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments!! Chapter 24............  [View instapost]
    Interesting comment from the Q&A

    "Warren Buffett has described our stock markets as waiting, quote, "on a hair-trigger from the Fed." Dallas Fed President Richard Fisher described stock markets as, "hooked on the drug," of easy money.

    So can you comment on your guidance? And can you comment on Mr. Buffett's and President Fisher's comments?

    I think not speaking about these issues would have risked a dislocation, a moving of market expectations away from the expectations of the committee. It would have risked increased build- up of leverage or excessively risky positions in the market, which I believe the unwinding of that is part of the reason for some of the volatility that we've seen."

    I've been wondering if the recent tapering talk has been about testing the waters. BB seems to be confirming that it is.
    Jul 22 10:39 AM | Likes Like |Link to Comment
  • DreamWorks (DWA) -4.6% after Turbo bombs at the box office: the $135M film pulled in just $21.5M during its open week, making it a distant #3 behind The Conjuring and Despicable Me 2 (out for 3 weeks). Cowen thinks a write-down for the animated racing film could lower its 2013 EPS estimate for DreamWorks to $0.25 from a current $0.72 (consensus is at $0.83). A children's series based on Turbo is set to arrive on Netflix (NFLX) later this year. [View news story]
    Its time for these movies to be regulated by the Fed gov to make sure only winners will be produced.
    Jul 22 10:18 AM | Likes Like |Link to Comment
  • QC#259 [View instapost]
    "Aren't unregulated "free" markets just about the best'est things ever?"

    A free market is a market free of coercion. Thus, the alternative to a market free of coercion is a market full of coercion. What someone is really claiming by being opposed to a free market (regardless of what they hear on Dancing With the Stars) is they want a market where people are shot by other people that figure out how to use the coercion first.
    Jul 22 09:52 AM | 3 Likes Like |Link to Comment
  • Stability Of The European Union (20) July 6, 2013 To August 28, 2013 [View instapost]
    Yes. Its basically a sales tax that will lower economic growth and asset prices. It will make people poorer, with the exception of politicians who are the new aristocracy.
    Jul 22 09:49 AM | 5 Likes Like |Link to Comment
  • Stability Of The European Union (20) July 6, 2013 To August 28, 2013 [View instapost]
    "They have to have revenue to offset the currency drop that is happening and coming. No other way."

    Talk about a fundamental misunderstanding of how a monopolized monetary system works. First, in a monopolized monetary regime, taxes don't "fund" the gov. Only when a PM is the money medium must a gov collect the medium in order to spend it. When the gov owns the medium, it just prints and then spends.

    Collecting the mediums, especially under some irrational predujice against corporations because Dancing With the Stars has told you to hate corporations, simply eliminates the mediums from the economy wherein they are being used to bid up asset prices.

    So, when you remove the mediums from the economy, they no longer exist to bid up asset prices. When that happens, asset prices will fall, people will see their wealth eroding, they will reign in their spending, and since we measure GDP in terms of spending, you set up the conditions for a recession.

    This PM mentality that still hangs around from Obama to Ryan to Krugman to Bernanke to many of the commentators here on SA is what blinds people to the mechanics of what is really causing what we have come to believe is the business cycle. What's really happening is this false belief by people that the gov must "manage" the economy.

    This leads to a perpetual fiddling with the hot and the cold of the monetary medium spigots and the results is policy that leads to creation or destruction of the mediums which leads to booms and busts of asset prices. If you can learn to understand this, then you can become Richard Cantillon in the struggle between Cantillon and John Law with regards to the Mississippi Bubble.
    Jul 22 09:47 AM | 4 Likes Like |Link to Comment
  • The Economy Is Contracting: Real GDP Is Now Likely Negative And No Taper Coming [View article]
    Also, think about this. If UPS had managed to become politically favored, then it could get the regulations written in such a way that UPS could have its competitors put out of business. So, even in an economic downturn or weak economy, if one business were concentrating all the remaining trade unto itself via its ability to wield political power, then even though the economy was softening, the individual fortunes of UPS would be going up.

    If UPS were typically looked at as a baramoter for the economy, then the crony socialism of UPS and its purchased politicians could say, "See we are doing better, and since we are a proxy for the economy, then our crony socialism is good for the economy".

    You can see a similar effect in an equities market. It is definitely true that a vibrant growing economy will swell an equities market, and because of this, an equities market is presumed to be a proxy for the economy. However, an equities market can be inflated by an accommodative central bank and/or fiscal policy that issues lots of gov regulations that lead bigger companies swallowing up smaller companies (like UPS becoming the sole player remaining).

    So the equity index reflects the dwindling number of companies that get larger and larger because their competition is going away and a central bank that is producing additional CB notes that can be used to bid up the equity price of the remaining companies, and presto, since the index is really just an average of what remains and if what remains is the result of monetary and fiscal policy inflating the value of what is left, then you have a rising equities markets that the crony socialists can point to and say, "see, the equities markets are going up, and since equities markets are a proxy for the economy, then your crony socialists policies are justified".

    The trick here is not to fall for the head fake. What you want to do is realize the inflationary trend for assets, and pull a Richard Cantillon vs John Law, where you take advantage of the bubble, and find ways to get out when the signs arise that the policy is about to shift (like QE tapering talk).
    Jul 18 11:04 AM | 1 Like Like |Link to Comment
  • Stability Of The European Union (20) July 6, 2013 To August 28, 2013 [View instapost]
    "Samaras said the cut would help curb tax evasion"

    When a gov has become an agent of theft, one of the telling signs is tax evasion. In fact, one of the most honorable things a people can do when a gov becomes an agent of theft is engage in tax evasion. While it may be dangerous to do so, it is certainly not immoral. Is finding a way to avoid giving a thief your wallet immoral?
    Jul 18 08:22 AM | 5 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments!! Chapter 24............  [View instapost]
    Not me.

    I see no choice for the Fed but to continue with QE (jawboning to the contrary aside). The employer mandate for Ocare has been delayed, that means less taxation via regulation, and that means less price fixing, which means less shortages, which is better for employment (not good enough to stop QE, but enough to keep fear abated and risk-on going). Finally, the rules for Dodd Frank were announced to be finalized by the end of the year. That means they won't get implemented until later in 2014 and the effects won't really kick-in until 2015.

    So, just from a 30k foot level, I see the conditions for risk-on to continue, thus equities up and yields up. We could see 1800 by the end of the year and 3% on the 10yr. The only thing that may slow the rise in treasury yields, could be capital flight from Europe, and I can see more storm clouds gathering around Greece but mostly France. If the cameras get turned back on in Europe, we could get some capital flight that lowers treas yields.
    Jul 12 09:20 AM | 1 Like Like |Link to Comment
  • Interesting Times For All Commodities And Investments!! Chapter 24............  [View instapost]
    I don't ever remember the Q&A's being posted. You can google "Chairman Bernanke's Q&A on the Economic Outlook" and sometimes find the transcript.

    You can find copious amounts of things the Fed posts here.

    Click on "Testimony" up on the left to find the actual "Economic Outlook" that BB does the Q&A on.

    At the end of a FedDigest email for the Q&A, you will find this...

    "This material is intended for authorized users only. No unauthorized distribution"

    So I don't know if the Q&A is published.
    Jul 11 03:08 PM | 1 Like Like |Link to Comment