“Housing is one of the largest ways things are going wrong for young people. And people blame that on capitalism, because that's the status quo. But, in fact, housing is one of the sectors of our economy that is least exposed to the free market."
~ Emma Camp, from the pilot episode for Breaking Containment ‘Is Gen Z Okay?’
 |
| Paul Krugman: "He builds elaborate Keynesian models that treat consumer spending as the engine of prosperity, ignores the capital structure of the economy, and then acts surprised when manipulating aggregate demand produces distortions in real production. |
"Paul Krugman has spent three decades telling you that government spending cures recessions, that deficits don't matter when interest rates are low, and that anyone who warns about inflation is a crank.*"Then 2021 happened."The Biden administration pumped $1.9 trillion through the American Rescue Plan in March 2021. Krugman called inflation fears overblown. By June 2022, CPI hit 9.1 percent, the highest since 1981. Krugman's response was to move the goalposts and call it a soft landing when the Fed started hiking rates. [Similarly, here in New Zealand, CPI hit 7.3% in June 2022, a 32-year high, after Grant Robertson's own 'rescue plan' pumped $70 billion into our own small pond.]"This is the pattern. He builds elaborate Keynesian models that treat consumer spending as the engine of prosperity, ignores the capital structure of the economy, and then acts surprised when manipulating aggregate demand produces distortions in real production."The villain is IS-LM thinking that strips out time, entrepreneurship, and the price signals that actually coordinate economic activity. When you flatten the economy into aggregate demand curves, you produce policy advice that consistently mis-prices risk and encourages central banks to suppress interest rates well below what voluntary savers would accept.
"Krugman won a Nobel in 2008 for trade theory work that genuinely mattered. But he abandoned rigorous analysis for political performance years before that prize arrived. His New York Times column became a vehicle for justifying whatever the Democratic Party needed justified, with the academic credentials attached as decoration."Ludwig von Mises and Friedrich Hayek built their entire framework on the impossibility of central planners processing dispersed local knowledge. Krugman's worldview requires exactly that kind of central management. The [central bank] sets the price of credit for the entire economy, guided in part by intellectual cover that Krugman provides."You pay for that cover every time your purchasing power erodes. But the man with the Nobel told you it was fine."
~ Handre
* Bernard Hickey put on a similar performance here, but without even the pretence of economic acumen. At least people have the excuse of a Nobel Prize and good work in the past for taking Krugman seriously. Galt knows what Hickey has done to deserve attention.
 |
| Alan Greenspan, dubbed by Ayn Rand as "The Undertaker." Ultimately, he took the job that John Galt refused: economic dictator |
"Alan Greenspan died [earlier this week], and the man who spent two decades inflating bubbles will be eulogised as a maestro. Fitting, because he understood exactly what he was doing."In 1966 a younger Greenspan wrote an essay called 'Gold and Economic Freedom.' [In it, he states that the gold standard is essential for economic freedom.] He laid out the case with precision. The gold standard protected savers from confiscation by inflation. Welfare statists hated gold because it stood in the way of their deficits. He wrote that the abandonment of gold made deficit spending a "scheme for the hidden confiscation of wealth." He was right. He knew it. Then he took the job running the printing press.
"From August 1987 to January 2006 Greenspan sat atop the Federal Reserve and did the opposite of everything that essay defended. After the 1987 crash he flooded the banks with liquidity and taught a generation of traders that the central bank would catch them every time they fell. They named the reflex after him: the 'Greenspan put.' He cut the federal funds rate to 1 percent by June 2003 and held it there, and you watched housing prices detach from any sane relationship to income. Mortgage credit gushed. He went on television in February 2004 and suggested Americans consider adjustable-rate mortgages, roughly eighteen months before he started hiking rates into those very borrowers. The man who warned in 1966 about the hidden confiscation of wealth engineered the largest credit distortion in postwar history."Then came the apology that wasn't one. In October 2008, sitting before Congress as the wreckage smoked, Greenspan confessed he had found 'a flaw' in his model of how the world worked. He was 'shocked' that lenders [licensed to print money] had not policed themselves. You don't get to spend twenty years pricing risk at zero and then act surprised when men respond to the incentives you built. Any committee of economists cannot set the price of money better than a market can."Greenspan knew the answer at 40 and spent the next half century pretending he'd forgotten it. The savers he warned about in 1966 paid for that performance. ..."
"Every Fed chair since Greenspan has discovered this truth the hard way. Bernanke cranked rates to zero after 2008, then Yellen kept them pinned there, then Powell printed $4 trillion more during COVID. Each crisis demanded bigger interventions than the last."
~ Handre
"Greenspan was the Dr. Robert Stadler of our age: the brilliant man who knew the right principles and betrayed them, certain his own genius could control the evil he agreed to serve."He was a member of Rand's inner circle. His essay "Gold and Economic Freedom" appeared in Capitalism: The Unknown Ideal. He argued, correctly, that the gold standard protected savers from confiscation, that statists hated gold because it blocked their deficits, and that abandoning it turned deficit spending into a scheme for the hidden confiscation of wealth."He even understood that Social Security was a Ponzi fraud that would help bankrupt the nation. He knew all of it. Then he took command of the Federal Reserve and did the opposite of everything he had written."The 'Greenspan put,' rates held at one percent, the housing bubble, the very confiscation he had warned of, engineered by his own hand."Here is the irony. Greenspan knew 'Atlas Shrugged' intimately. He watched Rand create Stadler, the genius who lent his mind to the looters' Institute believing he could outwit them, and who lived to see his knowledge weaponised as Project X. Greenspan studied that warning at the source, from the author herself. He understood the character completely. Then he walked the identical road and became the man the novel was written to expose."When the wreckage came in 2008, he told Congress he had found 'a flaw' in his model. There was no flaw in the model. The flaw was in the choice to abandon what he knew. Some men meet the virus and are consumed by it. Greenspan had the answer at forty and spent the next fifty years pretending he had forgotten."~ The Rational Animal
"Q: Alan Greenspan passed away [this week]. Alan Greenspan was a close associate of Ayn Rand for a while, and the Chairman of the Federal Reserve … these things did not overlap, as people familiar with Ayn Rand’s ideas wouldn’t be surprised to hear. So, Keith, I’m sure you’ve read [Greenspan’s essay] ‘Gold & Economic Freedom’ many times; so let’s get your thoughts on Greenspan’s passing…
"A: For anyone who’s read that essay, which was published in 1966 as part of [Ayn Rand’s] book 'Capitalism: The Unknown Ideal,' and therefore endorsed by Ayn Rand, he had to evade everything he knew in 1966 in order to take the job at the Fed. And ultimately, he took the job that John Galt refused, which was economic dictator.
"Now … everybody is confused about capitalism … but … there is no greater area of confusion than the concepts around money. Both the critics of capitalism and of gold, and the FANS of capitalism and gold will tell you that he was 'a Maestro' — and if you ask “a master of what?’ you’ll be told he was a master of central planning of our economy, and of managing our little lives for us. …
"They’ll say ... ‘he managed a sound money regime’— and the problem with the concept of sound money they use is an anti-concept, that is, [it’s a notion] that destroys and obliterates a legitimate concept in order to smuggle something else in. And what they mean by ’sound money’ is an irredeemable fiat currency jammed down our throats by the government forcing us to use it as if it WERE money, but ‘sound’ because it’s somehow managed to avoid consumer prices going up [by no too much].
"So I’d like people to think about a simple fact, that in every industry seeking greater efficiency, that is, they want to produce more with less — with less cost, with fewer inputs, with less labour, land, physical commodities etc. — and of course that’s happening relentlessly across the entire economy in every sector (unless regulation prevents it…).
"So suppose the average across the entire [economy] is a 2 percent gain in efficiency every year, all else being equal, you’d expect consumer prices therefore to be falling comparatively across industries, as costs are falling. SO your expect consumer prices tl be falling roughly 2 percent per year.
"So imagine it it were possible as the manager of the currency to debase the currency at a matching rate. Now, this is pure fantasy [hoho!]; this is only interesting as a thought experiment … but suppose it were possible to debase the currency at a matching rate so that every company from Intel to US Steel to Rolls Royce making aircraft engines is cutting costs at 2 percent, [while] you are debasing the currency at a matching 2 percent, and the nett result is CPI = zero. Would anybody call that SOUND?
"I wrote an article called ‘Sound Money is Not What You Think It Is,’ and I had a picture that I took from Norman Rockwell [above, with customer and butcher both cheating] … and I asked if that would be considered a sound measurement of the weight of the chicken, and therefore a sound price to pay … And at best, that’s what Greenspan did."~ Keith Weiner from Monetary Metals, interviewed on the 'Daily Objective'
"Of course you can 'speak ill of the dead' ... After all, wrote Shakespeare, 'The evil that men do lives after them; / The good is oft interred with their bones.'"Alan Greenspan, former chairman of the Federal Reserve System, just died at age 100. The general public wants to blame the United States president for the health of the U.S. economy, but the Fed chairman has much more influence over economic conditions."Greenspan spent some time early in his career as an Ayn Rand acolyte, and in fact three chapters of Rand's book Capitalism: The Unknown Ideal, were written by the future Fed chairman.... Greenspan's opponents on the left therefore interpreted his whole career through a Randian lens, which serves to remind us how stubbornly they refuse to understand the world."Had Greenspan wanted to run the Federal Reserve in such a way as to approximate a gold standard as much as possible, he could certainly have done so. Instead, he used it as an instrument for central planning, with disastrous results."Initially, Greenspan could do no wrong. He became known as 'The Maestro' .... Meanwhile, Greenspan's contempt for the public was legendary: he confessed to Lesley Stahl of CBS that before congressional committees he would speak gibberish -- a tactic he called 'syntax destruction.' The next day the headlines would report two different things about what he had said, and for Greenspan that meant he had succeeded. Greenspan's policy moves (like arranging for a bailout of Long Term Capital Management in 1998) gave rise to the belief in a 'Greenspan put,' according to which investors could be assured that the Fed chairman was prepared to use the tools at his disposal to backstop the market if it should ever fall below a certain level."And of course his monetary stimulus after the dot-com bust in 2000-2001, which looked to some observers at the time as a brilliant move, only delayed the reckoning, and transformed that bust into a real estate bubble (and eventual bust). When the lights of the economy should have turned red, Greenspan made them all green. That was the only recession on record in which housing starts rose rather than fell."The Federal Reserve, like the government itself, has no real goods at its disposal, so while its various tricks can redistribute resources and simulate prosperity, it cannot generate real wealth. It simply arranges the economy into an unsustainable configuration that has to come apart."Because of Greenspan's earlier association with Ayn Rand, and because the general public knows so little about the Fed, when the 2008 crash occurred, people generally went along with blaming 'capitalism' -- even though the Federal Reserve is a non-market institution created by act of Congress and enjoying a government-granted monopoly, and even though Greenspan's manipulations overrode what the market was trying to say."Greenspan's legacy is 2008, and the undeserved reputational damage that the market economy suffered as a result."
"The [US] Federal Reserve created $4 trillion in new money [in the GFC, and another $4 trillion over Covid] yet your grocery bill barely budges while Nvidia stock doubles in six months. [Over Covid, from March 2020 to mid-2021] the NZ Reserve Bank created NZD $50 billion in new money, and here again groceries barely budged over that period compared to bonds, shares and housing.]
"Welcome to the most insidious form of inflation: when newly printed dollars bypass consumer prices and flow directly into financial assets."You won't see this wealth transfer reflected in the Consumer Price Index. The CPI measures bread and gasoline, not Bitcoin and Berkshire Hathaway. Meanwhile, the [central banks'] money printing operation sends fresh liquidity straight to primary dealers, who park those dollars in stocks, bonds, and real estate. Asset owners get richer. Wage earners watch their purchasing power erode in real terms, even as official inflation statistics claim everything is fine."This creates a vicious feedback loop that sound-money advocates have warned about for decades. Cheap credit inflates asset bubbles, which [govts and central banks] then feels compelled to support with even more money printing. Each cycle makes the wealth gap wider. The Tesla shareholder benefits from artificially suppressed interest rates. The school teacher saving in a current account gets destroyed by financial repression. ..."Expanding the money supply faster than real economic growth means that new money has to go somewhere. Since 2008, it has systematically flowed into assets that wealthy people own rather than goods that working people buy."Your [portfolio] might look healthy, but you're watching monetary debasement in real time. The stock market is booming because dollars are dramatically less scarce, not because companies are dramatically more productive."If you can, buy stocks, bitcoin, property, or gold. This makes you a beneficiary of this phenomenon, not a victim."~ Handre
Q: Governments and central banks have inflated asset prices for decades—making housing, education, and healthcare unaffordable for many.
Is the 'system' designed to turn Millennials and Gen Z into lifelong renters and debt-serfs? Is there a way out?
Doug Casey: It’s a natural consequence of Statism.
First of all, taxes are high and have been increasing for decades. After taxes, you have less money left over to save. And if you do try to save, inflation eats away at the dollars that you put in banks or investments. Worse than that, welfare and government benefits make saving feel unnecessary for many people. They feel they don’t need as much because the cradle-to-grave welfare state will cover them. There’s a reason why Klaus Schwab famously said, 'You’ll own nothing and be happy.'
A lot of people believe it. This feeling is abetted by schooling, where everyone is inculcated with this collectivist meme. On top of that, the rich are viewed as parasites. And who wants to be a parasite?
This is all caused by State intervention in the economy. Schools almost always teach students that the State is their friend. It’s not; it’s their enemy. ....
Q: We’re seeing a collision between AI/automation and a credential-heavy job market. Which parts of today’s white-collar economy do you think are most fragile?
Doug Casey: .... The bright side is that while AI and robotics will destroy huge numbers of jobs—starting now—they’ll also level the playing field. A person of less than average intelligence can have AI do things for him that he might otherwise be unable to do. A further benefit is that the world doesn’t need paper pushers and cubicle dwellers who are sitting around doing marginally productive labor. Very much like the world no longer needed people working like drones in textile mills 200 years ago, at the start of the Industrial Revolution.
While AI is going to create some major problems in the short run, it’s going to be a very good thing after those bumps in the road. Just like the Industrial Revolution itself created problems while vastly improving the world. ....Q: What should a 25-year-old do to build real, durable earning power in the next 5–10 years?
Doug Casey: Ayn Rand answered that question in a speech I heard 40 years ago. When asked, she said: 'The best way to help the poor is not to be one of them.'
I confronted this problem with my friend Matt Smith when we wrote 'The Preparation.' The book explains why young people should avoid college. In fact, it urges them to treat college like the poison that it now is, showing how college has become a serious detriment in almost every way. More importantly, we describe what young men should do instead during the four years between 18 and 22, a time which is critically important, but generally wasted.
We demonstrate—exactly—how a young man can qualify himself with the equivalent of a BA, a BS, and elements of an MBA. That’s in addition to learning practical things in a hands-on way. We divide the four years into 16 quarters. The student will learn everything from flying a plane to sailing a boat around Cape Horn to operating heavy equipment. He’ll qualify in welding and metalwork in Canada. Cooking at a professional level in Italy. He’ll be farming in one quarter and building a house in the next. He’ll learn martial arts skills in Thailand, as well as shooting and scuba. You get the idea. It’s a productive and busy four years.
The critical thing, since we don’t know how the world is going to evolve because of AI, is to become a Renaissance man, enabling students to do anything and go anywhere. To avoid trying to climb a greasy corporate ladder, but build a web where you can reach out in any direction. That’s necessary in the world of AI. It’s training to be an entrepreneur, and an employer—not an employee."~ from an interview with investor 'Doug Casey on Why Millennials and Gen Z are Trapped by Debt, Inflation, and Broken Promises
"Ninety-nine percent of boomer 'success' was just interest rates falling for [forty] years because they destroyed the real economy."
"How can stock market valuations be at or near historical highs while the average [person] is about as pessimistic as they’ve ever been?
"This contradiction is a perfect illustration of the financial fun house — and the extreme distortions that relentless money printing has pumped into the system.
"If fiat currency is a dishonest measuring stick — and it is — then how do we accurately measure the stock market?
"The best option is to measure value in gold, honest money that no politician can arbitrarily debase.
"If measuring in fiat is like looking into a fun-house mirror, then gold is a mirror of truth. And when we measure the stock market in gold, that truth becomes clear. Below is a chart of the S&P 500 measured in gold going back to 1950.
"Viewed through the lens of gold, the stock market tells a very different story than it does in fiat terms — and this chart makes that unmistakably clear.
"The most striking feature of the chart is what isn’t there: a sustained upward trend. The S&P 500 today is worth the same amount of gold it was in 1995.
"Despite decades of nominal gains, the stock market has repeatedly given back those gains when measured against gold. In other words, the rising stock market was more a reflection of currency debasement than of real wealth creation.
"This helps explain the disconnection at the heart of today’s market. In fiat terms, stock prices appear to be at record highs. But in gold terms — a unit that cannot be printed — the market looks far less extraordinary."
~ Nick Giambruno from his post 'The Melt-Up Trap: Why Stocks Must Rise Until the Dollar Breaks'
"Independence isn’t an absolute virtue. Our constitutional order doesn’t include completely independent officials who can print money and regulate banks as they wish. ...
"The [central bank] has vastly expanded its scope of operations, propping up asset prices, monetising debt, channeling credit, directing banks how to invest, straying into climate and inequality, and denying whole business models such as narrow banks and segregated accounts. These actions are political and cross over into fiscal policy and credit allocation. It has had no reckoning with its great institutional failures, including [high] inflation and repeated bailouts.
"It is reasonable to discuss reform. Either the [central bank] must be more 'democratically accountable,' which is the same thing as 'politically influenced' when the other party is in power, or it must be reformed to a narrow, enforced and accountable mandate so it can remain independent."~ John Cochrane from his WSJ op-ed 'Trump and monetary policy'
"To repeat one of my consistent lines, human beings are fallible, they make mistakes. Central banks – here and abroad – are made up of humans, so they make mistakes. Really serious ones, of the sort seen in the last few years, shouldn’t happen but they do. One might even offer perspectives in mitigation: the pandemic was something quite extraordinary, and many people (here and abroad) misread the macroeconomics of it for too long. But those responsible need to take responsibility for the mistakes that were made."~ Michael Reddell from his post 'Still avoiding responsibility'
