On Capitalism

     

 

 

Operation 'Perfect Hedge' – the Criminalization of 'Greed'

As most of our readers are probably aware, the ongoing FBI investigations into insider trading at prominent hedge and mutual funds has just yielded another  batch of arrests and indictments. This seems to be still the same investigation  that ensnared the founder of Galleon, Raj Rajaratnam, a little while ago. Apparently the investigation has been going on for four years running.

Read the rest of this entry »

     

 

 

Revisiting the Squid

Back when we wrote a brief critique of Matt Taibbi's latest populist jeremiad against 'God's workers', a.k.a. Goldman Sachs, we were of course aware that the topic would be controversial. Quite a few people seem to have misread that piece as an apologia for Goldman Sachs (judging from some comments on the Seeking Alpha reproduction of the post and e-mails we received), so perhaps we didn't express our point clearly enough. Yesterday, another writer dared to speak up in Goldman's defense, specifically with regards to the questions surrounding its trades and Taibbi's allegation that GS executives are guilty of perjury. Just as we suspected, the case is not as clear-cut as Taibbi makes it out to be – not by a long shot.

 

Read the rest of this entry »

A recent poll suggests that public support for the free market has markedly declined all over the world. The question is though, what do people consider the \'free market\' to be? Most associate the modern-day state-capitalistic system with the term free market, but obviously that is not what it is. Meanwhile, the political establishment and the mainstream media have pawned off the crisis as an alleged \'market failure\' - even a superficial examination of this claim should reveal it as nonsense, but many people apparently believe it to be true. Ironically, Germany is the country where support for the free market is currently deemed the highest. Color us suitable baffled by this revelation. In France, disdain for the market is by now a well-worn tradition. Alas, no French refugees from evil capitalism have as of yet shown up at the border of Stalinist North Korea, so maybe they\'re not really serious about it. However, the French government - nominally \'conservative\' - attempted to introduce price controls for agricultural commodities earlier this year. It had to be lectured by Brazil and Argentina on the merits of such interventions, which inter alia brought down the Roman Empire\'s economy. We would term the French plan the \'Road to Famine\'. Oil market manipulators get \'caught\' - really? Apparently two oil futures traders managed to do what OPEC - a cartel controllig 40% of global oil output - has failed to achieve in many decades - namely manipulate the biggest commoditiy market in the world. The accused traders are rather perplexed by the suit. They bought and sold oil, which is what everybody in the oil market does. So what? According to the CFTC, the bureaucrats have detected that their actions were \'economically irrational\'. It would be laugh-out-loud funny if it didn\'t represnt a serious assault on economic freedom. Contrary to the story the witch-hunting political class is trying to sell, countless studies confirm what we already know from economic theory: the activities of speculators are beneficial. Without them, there would not be a market economy. Read the rest of this entry »
     

 

 

An Empire In Disarray – Russia Prior To The Bolshevik Revolution

Just as the Marxian theory and ideology must be understood as a product of its time – it was conceived in a time of upheaval that marked the beginning of the end of the monarchies of old Europe, and made use of the statist philosophy of one of these monarchies to establish its scientific credentials – so must the actual Bolshevik revolution be seen in the context of its time and place.


Read the rest of this entry »

     

 


Marx and Engels and the Theory of Dialectic Materialism


„A socialist advocates socialism because he is fully convinced that the supreme dictator of the socialist commonwealth will be reasonable from his–the individual socialist's–point of view, that he will aim at those ends of which he–the individual socialist–fully approves, and that he will try to attain these ends by choosing means which he–the individual socialist–would also choose. Every socialist calls only that system a genuinely socialist system in which these conditions are completely fulfilled; all other brands claiming the name of socialism are counterfeit systems entirely different from true socialism. Every socialist is a disguised dictator. Woe to all dissenters! They have forfeited their right to live and must be "liquidated."

The market economy makes peaceful cooperation among people possible in spite of the fact that they disagree with regard to their value judgments. In the plans of the socialists there is no room left for dissenting views. Their principle is Gleichschaltung, perfect uniformity enforced by the police.“

Ludwig von Mises, Human Action, Ch. XXV., The Imaginary Construction Of A Socialist Society


Read the rest of this entry »

     

 

A Theory of Capital

Time, savings and economic progress

The economics of Keynes and the Chicago monetarist school are historical outgrowths of a school of economic thought that has remained curiously untouched by the revolution of subjectivist economics that began with the publication of ‘Grundsätze der Volkwirtschaftslehre’ (‘Priniciples of Economics‘) by Carl Menger in 1871.

 

Carl Menger: Author of ‘Principles of Economics’ and founder of the Austrian school.

Read the rest of this entry »

     

 

 

The money multiplier

The practice of creating new bank deposits from thin air has large economic effects. It is important to recognize that from a practical standpoint, deposit money in demand deposits at banks is part of the money supply. It matters not if money circulates in the form of banknotes and coins or is deposited in demand deposits – demand deposits are a perfect money substitute, which is to say, they are money. We have previously commented on measures of the money supply and provided links to the various methodologies attempting to measure it in ‘Monetary conditions in the US‘, but for this article it is enough to state, money is the medium of exchange, and every form of money or money substitute that performs this function from the viewpoint of the individual actors in the economy is ipso facto money.

  moneymultyImage via Pennsylvania Lottery

 

Read the rest of this entry »

     

 

 

Part One: Legal and Ethical Questions – the debate over fractional reserves

We recently came across an article by Robert Murphy, ‘The Fractional Reserve Banking Question‘, in which he briefly comments on a controversy within the Austrian School, between what could be termed the ‘neo-Currency’ and ‘neo-Banking’ schools, a terminology introduced by Joseph Salerno, harkening back to the ‘currency’ and ‘banking’ school debate of the early 19th century.

 

bankrun

 

Read the rest of this entry »

     

 

 

Get me a Job, Ben!

So the demand uttered in a recent article on Slate. The author Daniel Gross refers to the many things the Federal Reserve is responsible for according to its mandate. Plaintively Gross asks:

 

“Fed Chairman Bernanke does not seem to care about high unemployment. Why?”

 

Read the rest of this entry »

     

 

 

A crisis for the Establishment – the One Party State comes under attack

We have speculated for a long time that the day was probably drawing near when the US political establishment would be seriously challenged. Our pet idea has always been that this challenge  could take the shape of the eventual formation  of a viable third political party, or alternatively an independent political movement. You might of course just as well say 'a second political party'.

 

Read the rest of this entry »

     

 

 

Ruminations on the effects of monetary policy in the context of short term and secular cycles: Money supply growth, asset prices and capital over different time frames

Once the growth momentum of money supply wanes, asset prices – specifically stock prices – that have been buoyed by an excess of free liquidity tend to either come under pressure or see their rallies stall out. Normally an economy emerging from a cyclical recession experiences an increase in private sector credit demand. In the early stages of recovery, the Fed’s easy money policy tends to egg this credit demand and credit growth on. Investments in higher order production stages appears more profitable, as low interest rates suggest low time preferences and an abundance of available savings.

 

Read the rest of this entry »

     

 

 

The high priest of interventionist economics

From his perch at the New York Times, Professor Krugman has been dispensing economic and political advice for many years. Unfortunately, he is to economics somewhat similar as Ben ('you have to buy financials here') Stein is to investments, in short, he is potentially capable of causing a lot of damage. For this reason alone, his views must be challenged from time to time, even though we poor bloggers do certainly not have his reach. My fellow blogger and friend Mish has recently done so,  in a blog entitled 'Krugman still wrong after all these years'. He certainly is, and I want to take the opportunity to add a few complementary thoughts to Mish's ruminations on the topic. First of all, I would recommend this paper (pdf) by Daniel Klein and Harika Bartlett, in which Krugman's editorials have been analyzed statistically and then interpreted by the authors.

 

Read the rest of this entry »

Most read in the last 20 days:

  • How to Survive the Winter
      A Flawless Flock of Scoundrels One of the fringe benefits of living in a country that’s in dire need of a political, financial, and cultural reset, is the twisted amusement that comes with bearing witness to its unraveling.  Day by day we’re greeted with escalating madness.  Indeed, the great fiasco must be taken lightly, so as not to be demoralized by its enormity.   Symphony grotesque in Washington [PT]   Of particular note is the present cast of characters. ...
  • The Strange Behavior of Gold Investors from Monday to Thursday
      Known and Unknown Anomalies Readers are undoubtedly aware of one or another stock market anomaly, such as e.g. the frequently observed weakness in stock markets in the summer months, which the well-known saying “sell in May and go away” refers to. Apart from such widely known anomalies, there are many others though, which most investors have never heard of. These anomalies can be particularly interesting and profitable for investors – and there are several in the precious metals...
  • Business Cycles and Inflation – Part I
      Incrementum Advisory Board Meeting Q4 2017 -  Special Guest Ben Hunt, Author and Editor of Epsilon Theory The quarterly meeting of the Incrementum Fund's Advisory Board took place on October 10 and we had the great pleasure to be joined by special guest Ben Hunt this time, who is probably known to many of our readers as the main author and editor of Epsilon Theory. He is also chief risk officer at investment management firm Salient Partners. As always, a transcript of the discussion is...
  • What President Trump and the West Can Learn from China
      Expensive Politics Instead of a demonstration of its overwhelming military might intended to intimidate tiny North Korea and pressure China to lean on its defiant communist neighbor, President Trump and the West should try to learn a few things from China.   President Trump meets President Xi. The POTUS reportedly had a very good time in China. [PT] Photo credit: AP   The President’s trip to the Far East came on the heels of the completion of China’s...
  • Business Cycles and Inflation, Part II
      Early Warning Signals in a Fragile System [ed note: here is Part 1; if you have missed it, best go there and start reading from the beginning] We recently received the following charts via email with a query whether they should worry stock market investors. They show two short term interest rates, namely the 2-year t-note yield and 3 month t-bill discount rate. Evidently the moves in short term rates over the past ~18 - 24 months were quite large, even if their absolute levels remain...
  • Is Fed Chair Nominee Jay Powell, Count Dracula?
      A Date with Dracula The gray hue of dawn quickly slipped to a bright clear sky as we set out last Saturday morning.  The season’s autumn tinge abounded around us as the distant mountain peaks, and their mighty rifts, grew closer.  The nighttime chill stubbornly lingered in the crisp air.   “Who lives in yonder castle?” Harker asked. “Pardon, Sire?” Up front in the driver's seat it was evidently hard to understand what was said over the racket made by the team of...
  • A Different Powelling - Precious Metals Supply and Demand Report
      New Chief Monetary Bureaucrat Goes from Good to Bad for Silver The prices of the metals ended all but unchanged last week, though they hit spike highs on Thursday. Particularly silver his $17.24 before falling back 43 cents, to close at $16.82.   Never drop silver carelessly, since it might land on your toes. If you are at loggerheads with gravity for some reason, only try to handle smaller-sized bars than the ones depicted above. The snapshot to the right shows the governor...
  • Heat Death of the Economic Universe
      Big Crunch or Big Chill Physicists say that the universe is expanding. However, they hotly debate (OK, pun intended as a foreshadowing device) if the rate of expansion is sufficient to overcome gravity—called escape velocity. It may seem like an arcane topic, but the consequences are dire either way.   OT – a little cosmology excursion from your editor: Observations so far suggest that the expansion of the universe is indeed accelerating – the “big crunch”, in...
  • Claudio Grass Interviews Mark Thornton
      Introduction Mark Thornton of the Mises Institute and our good friend Claudio Grass recently discussed a number of key issues, sharing their perspectives on important economic and geopolitical developments that are currently on the minds of many US and European citizens. A video of the interview can be found at the end of this post. Claudio provided us with a written summary of the interview which we present below – we have added a few remarks in brackets (we strongly recommend...
  • Inflation and Gold - Precious Metals Supply and Demand
      Reasons to Buy Gold The price of gold went up $19, and the price of silver 42 cents. The price action occurred on Monday, Wednesday and Friday though so far, only the first two price jumps reversed. We promise to take a look at the intraday action on Friday.   File under “reasons to buy gold”: A famous photograph by Henri Cartier-Bresson of a rather unruly queue in front of a bank in Shanghai in 1949 in the final days of Kuomintang rule. When it dawned on people that the...
  • Precious Metals Supply and Demand
      A Different Vantage Point The prices of the metals were up slightly this week. But in between, there was some exciting price action. Monday morning (as reckoned in Arizona), the prices of the metals spiked up, taking silver from under $16.90 to over $17.25. Then, in a series of waves, the price came back down to within pennies of last Friday’s close. The biggest occurred on Friday.   Silver ended slightly up on the week after a somewhat bigger rally was rudely interrupted...
  • How Uncle Sam Inflates Away Your Life
      Economic Nirvana “Inflation is always and everywhere a monetary phenomenon,” economist and Nobel Prize recipient Milton Friedman once remarked.  He likely meant that inflation is the more rapid increase in the supply of money relative to the output of goods and services which money is traded for.   Famous Monetarist School representative Milton Friedman thought the US should adopt a constitutional amendment limiting monetary inflation to 3% – 5% per year, putting...

Support Acting Man

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com