On Politics

     

 

Historical Evidence

The world grows increasingly at odds with itself, with each passing day.  Divided special elections.  Speech censorship by Silicon Valley social media companies.  Increased shrieking from Anderson Cooper.  You name it, a great pileup is upon us.

 

It was probably Putin’s fault (just a wild guess) [PT]

 

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Incrementum Advisory Board Discussion Q3 2018 with Special Guest Kevin Duffy

“From a marketing perspective it pays to be overconfident, especially in the short term. The higher your conviction the easier it will be to market your investment ideas. I think the Austrian School is at a disadvantage here because it’s more difficult to be confident about your qualitative predictions and even in terms of investment advice it is particularly difficult to be confident in these times because we don’t really have any historical precedents we can analyze and draw conclusions from.

Rahim Taghizadegan

 

Kevin Duffy, co-founder of Bearing Asset Management was the special guest at the Q3 Incrementum Advisory Board discussion.

 

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Mud Wrestling: Trump vs. Xi

About 6,940 miles west of Washington DC, and at roughly the same latitude, sits Beijing.  Within China’s massive capital city, sits the country’s paramount leader, Xi Jinping.  According to Forbes, Xi is currently the most powerful and influential person in the world.

 

Papa Xi, the new emperor of China. [PT]

 

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Chest Bumps

One of the more extraordinary things that investors have seen in living memory is unfolding at this precise moment. This goes for business leaders, money managers, veteran Wall Streeters, value investors, 401(k) holders, momentum traders, FX guys, gold bugs, technical gurus, chartists, pork belly speculators, quants, astrologists, Larry Summers, put option sellers, dweebs and geeks, millennial index fund enthusiasts, and everyone in between.

 

Pork belly speculators were among those waking up to a nasty surprise as China retaliated by imposing its own list of tariff duties. Soybean traders were also forced to rapidly adjust to an unexpected change in export fortunes (see further below). Farmers are presumably none too happy at this point. [PT]

 

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Bombs Away!

Two recent articles* have again demonstrated that the greatest “terrorist” entity on earth are not the bogymen – Russia, China, Iran, North Korea – so often portrayed by Western presstitutes and the American government, but the United States itself!

 

This is an old cartoon, but still a good one. It perfectly describes the trigger-happy Western political class and the depth of its “thinking”. By happenstance we recently reviewed the Libya intervention (Libya is the failed state in the Maghreb that used to be one of the most prosperous countries in Africa). The eccentric tinpot dictator Gadaffi was not necessarily likable, although he was certainly entertaining from afar. But everything we were told by the press about his actions and plans during the “Arab Spring” that was used by Western politicians as a justification for  bombing the country back into the stone age and making it a safe haven for jihadists and crazed warlords in which inter alia slave markets are thriving openly these days, was a lie. It was really nothing but lies from A to Z, essentially a repetition of the pre-Iraq war playbook. After a UK parliamentary report pointed all of this out after a comprehensive post mortem investigation (it included the evidence that was deliberately withheld in the run-up to the intervention), some apologists tried to argue that political leaders at the time were perhaps not sufficiently informed and made a few small but ultimately excusable “mistakes” in their eagerness to save innocent lives. Right – after all, they only had the most sophisticated surveillance and espionage systems in all of history at their disposal. Anyone interested in a bridge in Brooklyn? [PT]

 

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Of No Real Use

A young man might go to business school believing he is obtaining some sort of academic training that will enable him to make a comfortable living.  His degree may gain him entry into a large corporation, where he can work his way up to a good income.  This may even put him on the fast track to what he envisions as success.

 

Don’t knock it: Being useless can lead to unexpected career opportunities… [PT]

 

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Futility with Purpose

Plebeians generally ignore the tact of their economic central planners.  They care more that their meatloaf is hot and their suds are cold, than about any plans being hatched in the capital city.  Nonetheless, the central planners know an angry mob, with torches and pitchforks, are only a few empty bellies away.  Hence, they must always stay on point.

 

Watch for those pitchfork bearers – they can get real nasty and then heads often roll quite literally. [PT]

 

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Friends and Enemies

Do citizens of the United States trust their government will do what’s right?  It depends who you ask. By and large, the esteem the American populace holds its government in is likely a small fraction of what it was roughly 65 years ago.  That was when Lieutenant General William Kelly Harrison Jr. signed the Korean Armistice Agreement.  Certainly, in days gone by representatives of other nations held the U.S. government in higher regard.

 

The most austere signing ceremony ever: Lieut. Gen. William K. Harrison, Jr. (seated left), and Korean People’s Army and Chinese People’s Volunteers delegate Gen. Nam Il (seated right) sign the Korean War armistice agreement at P’anmunjŏm, Korea, July 27, 1953. No-one seems really happy – presumably, no-one was. [PT]

 

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Voting with their Feet

A couple of recent articles have once more made the case, at least implicitly, for political decentralization as the only viable path which will begin to solve the seemingly insurmountable political, economic, and social crises which the Western world now faces.

 

Fracture lines – tax and regulatory competition allows people to “vote with their feet” – and they certainly do. [PT]

 

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A Useful Public Service

There are nooks and corners in every city where talk is cheap and scandal is honorable.  The Alley, in Downtown Los Angeles, is a magical place where shrewd entrepreneurs, shameless salesmen, and downright hucksters coexist in symbiotic disharmony.  Fakes, fugazis, and knock-offs galore, pack the roll-up storefronts with sparkle and shimmer.

 


The Alley in LA – in places such as this, consumers are as a rule well served by applying a little bit of common sense when pondering purchases. In fact, common sense is a multi-purpose weapon that reportedly comes in handy in many situations and is widely considered a valuable addition to one’s personal armory.  [PT]

Photo credit: Navymailman

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Effects of Monetary Pumping on the Real World

As long time readers know, we are looking at the economy through the lens of Austrian capital and monetary theory (see here for a backgrounder on capital theory and the production structure). In a nutshell: Monetary pumping falsifies interest rate signals by pushing gross market rates below the rate that reflects society-wide time preferences; this distorts relative prices in the economy and sets a boom into motion – which is characterized by widespread malinvestment of scarce capital and over-consumption; eventually, the distorted capital structure proves unsustainable – interest rates begin to rise, and boom turns to bust. Many businessmen belatedly realize that the accounting profits of the boom were an illusion – in reality, capital was consumed. Many as yet unfinished investment projects have to be abandoned, as they either turn out to be unprofitable at higher rates and/or the resources needed to complete them are lacking.

 

When capital runs short: several of countless housing developments in Spain which had to be abandoned when the bust of 2007-2009 started. The image on the right hand side shows a Spanish construction machinery graveyard in 2010. Money supply growth in the US and the euro area exploded after the turn of the millennium, as central banks pumped heavily to combat the demise of the tech boom. In the process they egged on an even more dangerous bubble in real estate. In their great wisdom they have now replaced the expired real estate boom with an even larger, more comprehensive bubble in everything.

 

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Meandering Prices

Prices rise and prices fall.  So, too, they fall and rise.  This is how the supply and demand sweet spot is continually discovered – and rediscovered. When supply exceeds demand for a good or service, prices fall. Conversely, when demand exceeds supply, prices rise.

 

Supply and demand (the curves usually shown in such charts are unrealistic, as bids and offers in the market are arranged in discrete steps). [PT]

 

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