On Politics

     

 

 

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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Relative Performance of Gold Stocks

The quarterly meeting of the Incrementum Fund’s Advisory Board took place earlier this month (April 12), and as usual, a special guest was invited to participate. This time we were joined by well-known fund manager John Hathaway (Toqueville Gold Fund). It was a very wide-ranging discussion of the financial markets and the economy, and we hope you will agree with us that it was quite interesting (as always, a PDF containing the transcript is available for download below).

 

Fund manager John Hathaway, special guest at the Incrementum Advisory Board Meeting this quarter.

 

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Paradise in LA LA Land

More is revealed with each passing day.  You can count on it.  But what exactly the ‘more is of’ requires careful discrimination.  Is the ‘more’ merely more noise?  Or is it something of actual substance?  Today we endeavor to pass judgment, on your behalf.

 

Normally, judgment would be passed on a Thursday, but we are making an exception. [PT]

 

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Turn on, Tune in, Drop out

Back in the drug-soaked, if not halcyon, days known at the sexual and drug revolution—the 1960’s—many people were on a quest for the “perfect trip”, and the “perfect hit of acid” (the drug lysergic acid diethylamide, LSD).

 

Dr. Albert Hoffman and his famous bicycle ride through Basel after he ingested a few drops of LSD-25 by mistake. The photograph in the middle was taken at the Woodstock festival and inter alia serves as a reminder that monetary inflation has a considerable effect on the purchasing power of the US dollar over time. [PT]

 

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Interesting Times Arrive

“Things sure are getting exciting again, ain’t they?”  The remark was made by a colleague on Tuesday morning, as we stepped off the elevator to grab a cup of coffee.

 

Ancient Chinese curse alert… [PT]

 

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Dubious Picks

Unless this is part of another cunning negotiation tactic, the Donald’s recent cabinet nominations have to be considered highly dubious, to say the least. First he promoted Mike Pompeo from his CIA post to the position of Secretary of State – removing the eminently reasonable, and as we believe widely underappreciated Rex Tillerson. Pompeo is mainly known for sharing Trump’s irrational dislike of the  nuclear deal with Iran, which was pretty much the only laudable policy measure Obama implemented in his otherwise disastrous 8-year reign.

 

“Trump-Whisperer” (h/t Economist magazine) Mike Pompeo. To his hawkishness on Iran we would note the following: invading or bombing the country is pretty much an insane pipe dream (and it would achieve nothing but even more regional chaos); reimposing sanctions only fortifies the regime’s position, which can then blame all economic troubles on foreign enemies – besides, it is well-known that the population rallies to support the mullahs whenever they can credibly point the finger at foreign interference. Iran’s citizens are definitely hurt by economic sanctions, but they won’t blame their own government – instead they will increasingly come to hate the West. What else does Pompeo support? Here’s a brief list of things he has reportedly said in recent years: he is for “military action in Syria to remove Assad” (brilliant, get rid of one of the few remaining secular political leaders in the region – who does he think will take over from Assad? Peaceful professional head-choppers?); he’s perfectly fine with NSA mass surveillance (as we have often pointed out, there is no reason whatsoever to trust that this is not misused, and even if one naively assumes so, it paves the way for a future tyranny); along similar lines he demanded the “death sentence for Edward Snowden” (who we think is a hero for informing the world at a huge cost to himself about the unlawful mass surveillance Pompeo loves so much); and lastly, he thinks the Guantanamo Bay torture station should definitely remain in operation (of course Obama failed to close it down as promised). The guy is a neo-con warmonger/ Deep State swamp creature. Trump was allegedly impressed by his swagger.

 

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One and the Same

 

“God gave me my money.”

– John D. Rockefeller

 

Today we step away from the economy and markets and endeavor down the path less traveled.  For fun and for free, we wade out into a smelly peat bog.  There we scratch away the surface muck in search of what lies below.

 

One should actually be careful about quotes like the one attributed to Rockefeller above, even if it of course sounds good and is very suitable for the topic at hand. In reality he probably said something like it, but it is almost certain he didn’t say it verbatim (contrary to Mr. Blankfein, who is indeed on record for stating that Goldman Sachs was “doing God’s work”). We mention this because we have long noticed that the best-known quotes attributed to all sorts of long dead famous people – the ones one immediately finds on the first page that pops up when googling their names – are more often than not either garbled beyond recognition, or misattributed, or at times even completely made up. A genuine quote is a rare find indeed; at a minimum the most famous quotes have almost always gone through the Chinese horse-whisperer treatment (known as “telephone” in the US). What Mr. Dunne said about Rockefeller is rather more certain, since he put it in writing in the Chicago Evening Post in 1895 – albeit in his “Mr Dooley” voice, imitating an Irish accent. Dooley was a figure Dunne had invented for his satirical columns, the fictional owner of a fictional Irish pub located on the South Side of Chicago (so the quote actually read: “He’s kind iv a society f’r the previntion of croolty to money…”, etc.).  [PT]

 

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