Friday, April 30, 2010

Friday Morning Ramble: The ‘Attacked’ Edition

It’s been a week of it.  On Monday, they attacked cannabis gardeners; on Tuesday they attacked drinkers; on Wednesday, they attacked smokers.  And yesterday, they rested.  Well, apart from reaffirming that power and petrol taxes will go up from July 1st (thanks to the mentally ill Nick Smith), announcing that they intend to introduce an Electoral Finance Act that looks remarkably like the last Electoral Finance Act that they pledged to throw out, and letting slip plans for a “super-regulator” to get in the way of finance markets.  Just another week in paradise, really.PIC BY JOHN ANSELL Oh, and ACT is still part of this government of utter emptiness. . .
On with this week’s ramble:
  • Will de Cleene muses on the week’s bust of Switched On Gardener and arrest of 250 people--and the censorship, propaganda, and forthcoming assaults on their assets and liberty.  Oh, and the enormous profits which other growers will now be looking forward to.
    Harm maximisation
    The Crown v. Switched On Gardener
    More thoughts on Switched on Gardener
  • "The anti-cannabis raids termed Operation Lime have struck a firm blow against freedom," says Luke Howison. "Coming so close together with Geoffrey Palmer's anti-alcohol Law Commission report [and its “extremely urgent” raid on the wallets of low-income smokers), these raids and arrests remind New Zealanders that our government simply does not trust us."
    Operation Lime - An Attack on Freedom
  • Green Cross spokesperson Billy McKee today said that this week's raids by police targeting hydroponic supply shops must be ‘good news’ for gangs, but is very bad news for medical cannabis users.  “The organised criminal groups which control New Zealand’s 'tinny house' networks are going to come out the winners here”, Mr McKee said. “By making it harder for your average person to buy hydroponic growing systems, the police have just given the black market more customers.”
    Raids On Hydroponic Shops Good News For Gangs
  • Nothing brings young politicians together like the freedom to party. “That was the message Thursday as the youth wings of Young Labour, Young Nationals, Young Greens and ACT On Campus banded together to protest raising the drinking age from 18 to 20.” Head here to listen in to their combined press conference:
    Scoop Audio: Keep It 18 Convenes
  • Still, I bet you didn’t know that “Prohibition—and the speakeasy—invented modern New York nightlfe.”
      Our Wet Debt
  • Live fast, die young and leave a good-looking corpse?  Well, one out of three wasn’t bad.
    What Motley Crue can teach us about drug legalisation
  • The confusion, inept organisation and utter emptiness of the Queens Wharf ‘Party Central’ fiasco is truly representative of our present government—a collection of individuals bereft of any direction, or any principles.  The failure of Queens Wharf is a metaphor for the Key Government: the rule of expensive empty gestures.
    The people's wharf is deepest tosh
  • More on the signing of the UN Wish List for Indigenous Peoples, which apologists whisper will have no legal effect.  Says Owen McShane, “it seems probable that the first evidence of the signing of the UN Treaty on the Rights of Indigenous People will surface in RMA planning documents, largely because the people who write the "Maori Issues" chapters are frequently imbued with faith in the animist principles and beliefs of Deep Environmentalism and find the animist beliefs of Polynesia a useful means of forcing their own attitudes to the gods of nature and the Earth Mother on everyone, Maori and Pakeha alike.  We shall see.”
    Owen’s NBR column, foreshadows these developments:
    No other Gods Before Them?
  • Who would have thought you’d see the Greens speaking up for small business.
    The GST hike means a rough ride ahead for small businesses
  • And who would have thought?
    After 40 years of Earth Day, we're still surviving!
  • It’s not bad stuff this CO2 . . .
    [Hat tip Phil Sage]
  • And just so you know, Al Gore has bought a new house in Santa Barbara—it has five bedrooms, nine bathrooms, a large entertainment/game room, a guest house, full length loggia, a wine cellar—and “six fireplaces are running in reverse, consuming CO2 and creating wood.”  Well,maybe not.  But it is in the top-ten most expensive houses in the ocean-watching suburb.
    Al Gore's new villa in California
  • And in entirely unrelated news, “twenty-one authors affiliated with official U.S. government institutions argue that global warming leads to the increase of cancer, mental and neurological illnesses, impotence, asthma, allergies, foodborne diseases, nutrition disorders, human development dysfunctions, heat-related and weather-related morbidity and mortality, vectorborne, zoonotic, and waterborne diseases, as well as all other diseases.
    ”The only problem [says physicis Lubos Motl] is that global warming hasn't so far managed to kill the breathtaking parasitic imbeciles who are writing this kind of garbage.”
    US government: AGW causes cancer, insanity, all other diseases
  • The financial crisis is "far from over," according to Peter Schiff of Euro Pacific Capital, as detailed here. Along with his brother Andrew, Schiff has written a new book, How an Economy Grows and Why It Crashes, which he says is "for anyone who wants to understand the government, the economy, how it works and why we're in such a mess."
    Schiff was one of the few to see the last crash coming, and he uses here what he used then to explain the basics of economic activity.  "The whole idea is to present economics in very simple terms," he says. "It's so simple even Congressmen can understand it."
    Economics 101: Peter Schiff Explains "Why We're in Such a Mess"
  • See here’s something so simple even most economists don’t understand it:
    Can Prices Go Down during Inflation? A Critical Lesson
  • And remember Peter Schiff in 2006/6 being laughed at by the talking heads as he predicted the coming crash?  JK Galbraith’s son James Galbraith shows he’s as dim as his father, and those other talking heads, as he fails to see the problem with ever-rising government debt.  You’d think he’d been advising the Greek government . . .
  • Who else likes to write in their books? ( I confess, I can’t help myself.) Art Carden offers three reasons to write in books—three reasons why books are better than Kindles, whatever Tyler Cowen might think.
    Writing in Books
  • "While reading and reviewing Robert Nelson's The New Holy Wars, I downloaded "Sinners in the Hands of an Angry God" [says Brendan O'Neill] and did a find-and-replace where "God" was replaced with "Earth" to see how it reads (not well enough for illustrative purposes).” [Hat tip DoL]
    Sinners in the Hands of an Angry Gaia
  • Why would you be interested in “sewing machine blogging”?  Simple: 1) because the invention of the sewing machine in the late-nineteenth century was an achievement “on par with the latest high-tech or pharmaceutical discovery today.” 2) because its invention, patenting and commercialisation tell us an awful lot about who patent law works, and works (or worked)well.  And, 3) because author Adam Mossoff knows all about patent law.
  • And while we’re talking about such apparent heresies,
    "Who Cares What Thomas Jefferson Thought about Patents? Reevaluating the Patent 'Privilege' in Historical Context"
  • Obama’s making $100 million worth of budget cuts?  Then check this out [hat tip Noodle Food].
  • Still, at least he’s not adding new spending, like some Finance Ministers we could mention.
    Farrar’s trial balloon shot down
  • “Some Obama supporters are already bragging about how the 'recovery' will ensure him a second term and therefore save his statist counter-revolution. Not so fast. These people are making the same mistake that many conservative commentators have made in that they are assuming recessions to be indeed cyclical. This means any downturn is eventually reversed and that this is now the case. It also means that these people have learnt nothing from economic history, particularly the policy disasters that the Hoover/Roosevelt administrations inflicted on the country.”
    Is the U.S. Economy Really Recovering from Recession? 
  • Chris Dodd dreams up a way to make it harder for start-up businesses to raise seed capital. How long before John Key copies?
    Death of Angel Capital
  • How maths helped cause the economic collapse.
        “It was a brilliant simplification of an intractable problem. And Li didn’t just radically dumb down the difficulty of working out correlations; he decided not to even bother trying to map and calculate all the nearly infinite relationships between the various loans that made up a pool. What happens when the number of pool members increases or when you mix negative correlations with positive ones? Never mind all that, he said. The only thing that matters is the final correlation number — one clean, simple, all-sufficient figure that sums up everything …
    Read the whole thing. This has got to be the most powerful illustration yet of the fallacy of mistaking a math function for real phenomena in the market.
    Recipe for disaster: The formula that cratered Wall Street
  • I’m a bit late coming to this one, but Steve Horvitz updates Bastiat’s Broken Window Fallacy in the shadow of Iceland’s volcano.
    The Parable of the Sooty Window
  • A related thought:
    We should make up a new game called "Spot the Broken Window!"
  • As the Euro turns itself slowly into the drachma (providing a new addendum to Gresham’s Law) Larry White talks to George Mason Uni about
    Sound Money, Free Banking, Rule of Law
  • And as Goldman Sachs executives face Senate hearings to explain why their short-term business plan involved screwing their customers, John Allison, the chairman of BB&T bank explains why such short-term thinking is self-destructive, and why principled leadership is self-interested.  Timely advice.
  • [UPDATE: Mark and Robert Tracinski argue that "screwing their customers" is not actually what Goldman Sachs were doing.]
  • “The annual report by the Competitive Enterprise Institute (CEI) on the state of federal regulations called Ten Thousand Commandments for 2010, written by Clyde Wayne Crews Jr. notes that:
    • The Code of Federal Regulations is now over 157,000 pages long
    • 3,503 new rules went into effect in 2009
    • That is a new regulation every 2.5 hours every day, all 365 days of the year
    For the last decade, the number of pages in the Federal Registry, where new regulations are published, has averaged 73,018 per year.  This would suggest the Code of Federal Regulations should have grown by 730,177 pages in the last decade…”  Remembering that ignorance of the law is no defence… Did you do your required federal reading today?
  • “Evidently,” says The Rational Capitalist, “the garbled mess of a PowerPoint slide at right was created by the US military to demonstrate the situation in Afghanistan and fittingly, is openly being mocked.”
    ”We do not need to understand the actual content of the slide,” he says. “We need to understand why the military would feel the need to create such a slide... If we understand that, we will indeed have won the war.”
    PowerPoint is not the Cause of Powerlessness
  • Another from the overflowing “anarchy makes no sense” file.
        ”We started off asking what society would provide the least coercion. We then noted that the power to coerce is a monopoly of the State. So, by confining the State, we confine coercion. The more we confine the State, the less coercion there is; it is as if coercive power is some violent beast, and we put it in a cage of constitutional limitations. But the anarcho-capitalist isn’t asking that question any more. They are now asking the question-How can the private sector provide what the State previously provided?
        “
    And the product that the State was providing was coercion itself! We started off asking how to rid ourselves, as much as possible, of the whole panoply of arbitrary laws, and courts and police to enforce those arbitrary laws and so on, and the answer the anarcho-capitalist has come back with is, ‘don’t worry, under my system there will be arbitrary laws and courts and police in abundance!’”
    The fatal error of anarcho-capitalism
  • Time to repost this beautifully evocative video construction of Frank Lloyd Wright’s ‘Fallingwater’—his  house over the Bear Run stream.  Architecture by Wright; music by Smetana.
  • There are people about who still don’t understand that the role of morality is not to teach you how to suffer and die, but to enjoy yourself and live. For the latter group, here’s some valuable advice on living “a value-dense life.” [Hat tip Thrutch]
    Value-dense life
  • As the latest Pope passes the five year milestone, rather than take the time to pardon the Beatles, he could do worse than reflect on advice from an American columnist”
    The Pope loves the Beatles, but who loves Il Papa?
  • And now a word from Charles Darwin (courtesy of John Cox Art):
    darwin
  • Protect your children from the hands of errant clergy…
  • There are no contradictions in the Bible. None at all.
  • No, there really are no contradictions in the Bible.
    PROJECT REASON: Contradictions in the Bible
    SKEPTICS ANNOTATED BIBLE: Contradictions in the Bible
  • Watch the sham act of a psychic fraudster collapse in an embarrassing heap on live television.
    Watch the stage death of a Psychic Fraudster
  • Yes, the threats against South Park by 20-year-old Muslim covert "Abu Talhah Al-Amrikee" do constitute a fatwa.
    Muslims Threaten South Park
  • Is anyone else sick of hearing that ad for Cat Stevens “riding on the Peace Train,” knowing that he’s a supporter of global jihad?  Anyway, as we’re warming up for Draw Mohammed Day here, here’s a few pics to get you started, including a new release from Lego  . .  .

    LEGO Mohammed Ahmed Your women
  • Turns out I’m fully 54% Bogan.   Take the Quiz and find out how much Bogan you are.
    Are you a bogan? Take the test!
  • Graham Reid goes all uncool over Justin Bieber.
        “I heard him on radio dismissed with the self-damning line from a commentator, "I'd never heard of him until the other day".
    Well, isn't that true of everything? You have to hear about something a first time.
        “But the subtext here is, He can't be any good because I haven't heard of him.’
    ”Hmmm.”
    Police. Security. Screams. A singer comes to town.
  • Just for the record, NOT PC enjoyed 17,268 visits since this time last week.  The most popular posts in that time were:
  • 29th May is/was the incomparable Duke Ellington’s birthday.  Time to celebrate.


    Enjoy your weekend!
    PC

Labels:

20 Comments:

Blogger Mark said...

PC said: "•And as Goldman Sachs executives face Senate hearings to explain why their short-term business plan involved screwing their customers...."

Actually, I'm not sure "screwing their customers" is actually what happened. Some commentary from Robert Tracinksi on this:

"Among the left—and the left-leaning mainstream media—the big Goldman Sachs scandal is a rather ordinary trade Goldman organized in 2007. At the request of hedge fund investor John Paulson, Goldman organized a package of securities that would go up in value if the housing market collapsed, which Paulson believed (correctly) was going to happen. Goldman then sought out a group of other investors—the majority of the market, at the time—who had come to an opposite conclusion and were willing to bet that the housing market would rebound. They were wrong, of course, but they were all big boys, and in every market trade one side is proved right and the other is proved wrong

In short, this is a non-scandal, and there is no real evidence there was anything fraudulent about the transaction. The SEC's accusation boils down to complaining that investors who bet on a real estate rebound were not told that the guy on the other end of the transaction was betting that real estate would go down. This is like buying shares of stock in the expectation that they will go up—then complaining that you didn't realize somebody else was actually selling those shares to you. Goldman Sachs is being accused of fraud for failing to state the obvious: that there are two sides to every trade. It is an absurdity."

4/30/2010 12:07:00 pm  
Anonymous Falafulu Fisi said...

I like Peter Schiff’s' analysis regarding the financial crisis especially this YouTube interview here on Tech Ticker Yahoo Finance (2009).

Now, I have asked this question before on this blog but no one wanted to answer or perhaps just trying to avoid giving an answer. Considering that Mr Schiff has his own fund management company, the question is, with his ability to anticipate the impending financial crisis before it actually happened, did he make a killing for his company's trading in the financial markets prior to the crisis? If he didn't make a huge profit then why the fuck that he preached to the public after it happened? Again if that was the case (i.e., he didn't even move in for the killing), then it showed that he was unsure of what he was preaching about whether it was going to happen or not.

See, technical traders such as Wall St, darling Renaissance Technology, don't announce to the public of what they think about the future likelihood of the markets movements. Any knowledge about the future likelihood of market movements are secretly guarded by them for their own advantage. Their rewards come in, when they manage to beat the market more often and making huge profits. They don't go on TV and tell the public, hey, we anticipated this or that and we changed/shifted our strategies accordingly so we could still come out ahead of everyone else.

Any analyst, who foresaw the impending financial crisis before it happened but he/she didn’t do anything to take advantage of it, was nothing more than acting like a psychic telling a retro-fitting story, i.e., trying to fit the current observed facts against a previous speculation that was made public. Example, a psychic claimed that a missing child, is somewhere around a place with a body of water. If the missing child's body is found near a river, a beach, a swimming pool, storm water drain, etc,..., then the psychic will step in and confirmed that his/her prediction was right on the mark after all.

So, I am interested to know if Peter Schiff made huge profits before, during or after the crisis. Anyone here can fill us in on that, please?

4/30/2010 12:51:00 pm  
Blogger PC said...

"Now, I have asked this question before on this blog but no one wanted to answer or perhaps just trying to avoid giving an answer."

Or perhaps just don't the answer.

No need to create conspiracies where there are none.

Why don't you just ask him whether or not his company made huge profits? His website and contact details are easy enough to find.

As are the many on-screen interviews with him warning of what was to come.

4/30/2010 01:08:00 pm  
Anonymous Mo said...

Every senator and representative should know that a broker-dealer such as Goldman has several divisions, some of which buy and sell to investment clients, and some of which make markets and others which trade for the house. As a result Goldman could at any time be selling CDOs to one client, and buying CDOs from another, plus being the market-maker in some securities, but also selling and shorting for Goldman's own portfolio to enhance its profits.

It is idiotic to imply that GS should try to convince A that the CDOs are worth less than a million, and to make this an ethical standard. Neither should A state that they have good reason to believe the CDOs are worth two million, and that GS is foolish to sell them for a mere million.

In this particular instance GS and A are both negotiating what went into the CDO package, and it is known that GS is using the services of another party, P who will take the other side of the deal, selling them. GS is known to be a broker-dealer, almost like a book-maker, calculating odds or risks and taking bets. For each bet in one direction another bet must be made in the opposite direction.

4/30/2010 01:12:00 pm  
Anonymous Falafulu Fisi said...

PC said...
Why don't you just ask him whether or not his company made huge profits?

Ok, I'll try to dig around to find out if Shiff's fund management made huge profits.

On a related note, Wall St darling, Renaissance Technology hedge fund made huge profits last year (2009).

With 117% returns in 2009, Appaloosa tops Bloomberg Markets' list of the best performing hedge funds, Renaissance Technologies' Medallion fund tops the list of most profitable hedge funds with over $1 billion in profits

No one beats the financial markets all the time (ie, 100%), but I think Renaissance Technology (RT) have managed to beat the markets more often over the years. RT is expected by analysts and market commentators to grow over the next few years to become the largest fund management company ever to exist (~ more than 100 billions of assets under management).

Not bad for a company that about a 3rd of its employees (~ 70) are PhD dudes in physics, mathematics, statistics, computer science and astro-physics.

Oh, I speculate that it must be the sophisticated math that they adopt. Fucking 1 billion dollar profits, must be have come from what? As a result of using,..., umm,..., well,..., fancy math, I guess.

4/30/2010 01:42:00 pm  
Anonymous Falafulu Fisi said...

Quote:
How maths helped cause the economic collapse.

Actually, the math used, Gaussian copula function was inappropriate & wrong math. The use of Gaussian probability distribution (a.k.a bell/normal curve from high school math) is based on market equilibrium which in fact, market equilibrium doesn't exist at all (or stable to stay long enough in that equilibrium state). It's always moving. Keynesian framework is based on equilibrium, which we know today that it doesn't work (i.e., its bullshit).

A quote from Professor of financial engineering, Paul Wilmot on that same page:

The damage was foreseeable and, in fact, foreseen. In 1998, before Li had even invented his copula function, Paul Wilmott wrote that "the correlations between financial quantities are notoriously unstable."

To translate what Wilmott is saying here, "unstable" means "non-equilibrium".

Financial risk analysis and pricing of financial assets in today’s modern analytics use the power law probability distributions. Actually, it has now been well established that market data exhibits power law distribution (i.e., a characteristic of any non-equilibrium system such as financial markets for instance).

There are lots of people that I see on blogosphere and on internet that made uninformed comments about mathematical finance/economics. Math played a role in the financial crisis. Yes, that’s true, but using bad math, doesn’t mean that all mathematical finance/economics is bad. Some people still manage to gain huge profits in the financial markets from using appropriate math and those who still cling to or use inappropriate math still lose money. Win or lose depends on the appropriateness of the use of math, not that all math are bad.

I had a meeting with the head of ASB Treasury Department last year (2009), because I was trying to sell him a software solution (not full suites) and I was surprised to find out that they still use all these equilibrium-based models available in their current software (i.e., off-the-shelf licensed software). I knew that I would have a hard time of trying to convince him a solution that's better than what's already available to them in their current software. He even admitted that the banks (he meant the majority of the banks in NZ) are lazy in updating their knowledge in modern financial theories & technology development. They have some big projects on the line and I may contact them again in the next few weeks or so and see if these sorts of developments can be outsourced or be delegated to an outside company to provide the software solution rather than them doing it. They're pushing hard because other local banks are becoming more competitive.

4/30/2010 02:42:00 pm  
Anonymous Brian Scurfield said...

"We then noted that the power to coerce is a monopoly of the State. So, by confining the State, we confine coercion. The more we confine the State, the less coercion there is ..."

Even now, the State doesn't hold a monopoly on the power to coerce. Look at the way most children are treated and you can see this. Confining the state won't solve this - the problem is deeper and requires a more widespread understanding of philosophy.

"They are now asking the question-

How can the private sector provide what the State previously provided?"

They are also asking what is the best way to set up our institutions so that errors can be quickly discovered and corrected. This, I think, is a more interesting question.

4/30/2010 07:33:00 pm  
Blogger diesel said...

Galbraith has a point though that the US and Greece are different.

Greece's debt is denominated in a currency that they do not control i.e. the Euro. They have to fund themselves via the bond market if they want to run fiscal deficits.

The US doesn't have that problem, they are sovereign in there own currency. They can print to fund the deficit if they want to walk away from the bond market.

4/30/2010 08:28:00 pm  
Anonymous Anonymous said...

Now when the cops auction off all the hydroponics equipment they confiscate, they can visit those that purchase it after three months and do it all again.

Warwick

4/30/2010 08:46:00 pm  
Anonymous LGM said...

Diesel

Galbraith is an idiot (breath-takingly foolish!).

Sure, the US can print more fiat money notes exactly as it has been doing (since the beginning of its fiscal crisis the Fed has more than doubled the amount of money in circulation by wishing it out of thin air- "printing" billions and billions). This activity is known as inflation (as in "inflating the money supply") , but it is no way to avoid the fate of Greece. There are necessary consequences which the US is about to experience.

Creating new unbacked fiat money results in the erosion of the spending power of the money already in circulation. What cost a certain amount in real terms soon costs multiples of that amount. People on fixed incomes, wages and salaries find their spending power sharply reduced. The value of savings is progressively destroyed. Businesses struggle and soon find they are unable to fund expansion, machinery replacement, staff training, lesser skilled staff etc. Some can't survive. Economic dislocation grows. Social dislocation follows. Standard of living is reduced.

"Printing" unbacked fiat money eventually results in what is knwn as a "crak-up boom" followed immediately by certain economic collapse. People lose respect for the currency and refuse to use it. Bartering and the black market grows in magnitude. Times become very tough indeed.

That is what the USA faces should its government and central banking system continue as at present. The problem is that by trying to "print" a way out of its fiscal wrecklessness, all the US Fed are really doing is writing an open cheque- one that the citizens of the US are called to pay. It's a silent theft which is steadily and surely destroying their wealth and, worse, their ability to produce.

The important point to understand is that the activities of government consume all other people's resources. The means available for it to acquire those resources are limited to what it can get away with. Presently the means are:

1/. tax

2/. fees charged for "services"

3/. borrowing

4/. inflation of the money supply

All of these are approaching limits. When they arrive, no amount of excuse making or rationalisations by the likes of Galbraith will avoid the suffering.

Bills must be paid. The overheads imposed by a huge government rortfest must be satisfied, one way or another, at least until they are so immense they destroy the society's ability to bear them.

Galbriath is trying to excuse a fraud by rationalising his way around the necessary consequences of fraud. There is no honest way out for him. He knows it and he knows that Schiff is aware of it as well.

LGM

5/01/2010 08:00:00 am  
Blogger diesel said...

Hi LGM,

The FEDs printing of money is not going into circulation as it is sitting in the banks as excess reserves i.e. the banks are not lending. If it isn't circulating there cant be any inflationary consequences.

Regards,

5/01/2010 10:39:00 am  
Blogger Ruth said...

So, I am interested to know if Peter Schiff made huge profits before, during or after the crisis. Anyone here can fill us in on that, please?

No he didn't make huge profits - in fact the folk who followed his advice made significant losses. I have lost the link, but it is out there somewhere.

One might think that a little humility from permabears might be in order given the resilience and strength of the market, but no, the roosters are still flapping and crowing.


Economists are crap capitalists I'm afraid. And you are trying to sweep water up-hill Fisi. Helping Mum and Dad invest wisely is not Schiff's game.

Even the most elementary trend follower would have made money during the last 12 months.

5/01/2010 02:38:00 pm  
Anonymous Falafulu Fisi said...

Ruth said...

No he didn't make huge profits - in fact the folk who followed his advice made significant losses.


Thanks for filling us there Ruth. I had read about a guy who made almost a billion dollar profit himself, because he foresaw what was coming. He didn't appear on TV for interviews or made that premonition opinion of his published in newspaper articles. He was knocking on doors of other high worth investors to come up with the money. Some of those high worth investors dismissed him as no more than chicken little and a few went along with him. Those who took the bet and went along with this guy were laughing all the way to the bank. I think that I read it on the NZ Herald or perhaps I saw it on a news clip on TV. I'll try and dig around for this story.

The reason, I brought it up here, is that the majority (or all) of Austrian Economics followers seemed to foresee/anticipate all impending economic problems/crises in advanced, but failed to capitalize on those market premonitions of theirs.

5/01/2010 03:36:00 pm  
Blogger PC said...

@FF: Like I've said before, I have no idea about the investment performance of Peter Schiff's crowd, or of any other crowd generally following Austrian lines.

But of the Austrian economists you might have heard in the media, few would have been investors as such, most were simply economists. The primary goal of most of those Austrians for being in the media (the likes of Bob Murphy, Tom Woods, Frank Shostak Mark Thornton etc.) was to point out the explanatory power of Austrian business cycle theory, not to tout for business.

And the primary goal of the likes of Peter Schiff, Jim Rogers etc. being in the media was to try to arrest the egregious government interventions made on the back of bad theory.

And remember that Austrian economics makes no more claim for itself in being able to predict the future to three significant figures--or to a crash on a significant date--than it does for those schools it criticises. All it can do is suggest a trend, an eventual effect based on the economic causes it sees.

That said, and in answer to Ruth's panegyrics to a rising market, even a blind seagull can make money off a rising stock market (as it's done for the last year). The thing to do is make money when it's crashing (as it did and as it will do). Much harder.

5/01/2010 04:18:00 pm  
Anonymous LGM said...

Diesel

"The FEDs printing of money is not going into circulation as it is sitting in the banks as excess reserves i.e. the banks are not lending."

In other words this means "the Fed's printing of money is not going into circulation YET." Or rather it is the formal expression of the hope that it won't be going into circulation. Somehow all that fiat slush is supposed to affect the economy without having an effect on the economy. Somehow the incredibly expensive pay-off to rescue an uneconomic loss-making & corrupt banking system is supposedly made without cost...
Think on the contradictions for a moment.

Actually, in reality the slush already IS in circulation. For example, take a look at the financial markets (equities, derivatives etc). That's where a significant portion of the "excess reserves" are presently parked. The distortions are all present and are undoing productive wealth exactly as Schiff, Rogers, Shostak et al have warned. The Fed's big inflations have already occurred (and the practice is on-going). The consequences necessarily follow in due course (many in the US are experiencing them right now).

This inflation activity is analogous to pulling the pin on a grenade and letting the handle fly free. You know the grenade is going to explode with destructive consequences in seven seconds- better get well clear of it! In the case of the economy the time delay is not known with anything like that precision. All that is understood is the destructive consequence will come to pass soon enough.

LGM

5/01/2010 05:39:00 pm  
Anonymous LGM said...

Ruth

Interesting. I got on the gold and commodities in the early 2000s at the time Schiff was advising to so do. Results have surpassed the equities market by a significant margin.

LGM

5/01/2010 05:47:00 pm  
Anonymous LGM said...

FF

You are referring to Michael Burry. He started out with a debt of something like US$40k and in a little over two years was able to make a fortune (thought to be ~US$100 million for himself and over US$700 million for those who invested in him).

Among other things he is well read in game theory (thought you might like that) and......... Ayn Rand. His economic approach is broadly Austrian.

LGM

5/01/2010 05:58:00 pm  
Blogger Ruth said...

Well done LGM. Commodities are historically very bad investments. I have made 400% on financial paper over 12 months - not bad going.

The market does not care who is in the White House - I have no doubt many conservatives would be waving little US flags and going on about the wonders of capitalism if Republicans were in power as the DJI reaches these highs.

I support Fisi and his math - it takes all emotion out of trading. The market is morally neutral.

And I wonder how is Schiff's USD currency crisis going?

5/01/2010 06:12:00 pm  
Anonymous LGM said...

Ruth

It's reasonably easy to make money on a rising market, but much more difficult to make, let alone keep, money when the market slips. Be wary then, for it is near impossible to get out intact and recover when the paper you hold lacks underlying asset.

--

Republicans, Democrats, two sides of the same coin. Rorters all. Both are destructive of everyone else's wealth. Pox on their orifices!

--

Taking all the emotion out of trading? That would mean you experience no value to it. No emotion, no value, no care, don't matter. Why bother? May as well do something better with the time.

On the other hand, you did mentioned you were 400% up. Surely an emotion or two was experienced during that journey?

--

An unfettered, capitalist free market is moral. That's one reason why rorts and Ponzi schemes eventually come apart. And capitalism is, after all, the ultimate participatory democracy.

Ludwig von Mises,
"What vitiates entirely the socialists economic critique of capitalism is their failure to grasp the sovereignty of the consumers in the market economy."
- Liberty & Property

Soverignty of consumers is another way of saying that individuals are soverign- they have Individual Rights. That is a moral issue. The market economy concerns itself with conditions of morality.


LGM

5/01/2010 10:41:00 pm  
Blogger Sturminator said...

I wonder why Schiff didn't point out that the interest on government bonds is low because the Fed is buying the bulk of new Treasury issuances?

There's no market error, the government is simply not paying market rates because the debt is already being monetised.

5/02/2010 08:33:00 pm  

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