Author: admin

Posted on

Cafe Hayek: Chicken or the egg?

Cafe Hayek: What’s a function of what?

MD: I just quickly scanned this article to see what it was about. I couldn’t believe what I was reading. Let’s pick out the Money Delusions … and logic delusions as well.

(Don Boudreaux)

… is from page 83 of my late colleague Jim Buchanan‘s pioneering August 1954 Journal of Political Economy article, “Individual Choice in Voting and the Market,” as this article is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:

While it is no doubt true that both the individual’s earning and expenditure patterns are conditioned to a large degree by the average patterns of his social group,

MD: What? What came first, the chicken or the egg? Hint: Indisputably, the individual came before the group.

the distinction between this indirectly coercive effect involved in the social urge to conform and the direct and unavoidable coercion involved in collective decision seems an extremely important one.

MD: It’s easy to see “social urges” are largely (totally?) the purposeful result of “propaganda”. Polls are a “measure of the effectiveness of the propaganda”!

DBx: The collective decisions that Jim had in mind here are, of course, ones made through, and enforced by, the state.

MD: The state is the product of the money changers. The state is propagandized every bit as much as the people it claims to “govern” and openly propagandizes!

For an individual to sense an urge to conform to the expectations of others – and almost always (more than you think!) to give in to that urge – is common and natural.  This urge is part of human nature.  We are social animals.

MD: Some of us are way less social than others. Many among us are totally valueless … they are just manipulative busybodies.

(The fact that Buchanan mentioned this reality in 1954 – and did so with an “of course” – is itself evidence against the straw-man ‘free-market’ economist who allegedly believes that each real-world individual is immune to social pressures – that is, believes that each individual is neither formed by, nor is part of, society.)

MD: I repeat. Propaganda (and brain washing) plays the predominant role now. This is easy to see after a long life span (70+ years). We are a product of our teaching … and almost none of that comes from our family … as it did in more sane times. It all now comes from government and media … both instituted by money changers.

But, as Jim says, this universal urge of A to largely conform to the expectations of B and C (who are part of A’s social group) is categorically different from A being threatened with violence by B and C if A does not do as B and C command.

MD: … assured by forcing A, B, and C to share the same space … in the interest of diversity!

This difference grows even greater in those many cases in modern, legislation-using societies when B and C command A not simply to conform to the evolved expectations of the group but, instead, to obey the arbitrary will of B and C (as when, for example, B and C use threats of violence to prevent A from driving a car for hire, or when B and C command A to pay to them a punitive fee if A insists on purchasing goods from a foreign seller).

MD: We are a society of laws … 40,000+ new ones each year. If we were a society, not of laws, not of the people, but of principles (the first being the golden rule), many problems would not exist … and those that surface would be easily addressed. And we would be far better off if we had many separate spaces … instead of uniting! Read the Anti-Federalist Papers. Those people got it … and the founding “children” did not!

Iterative secession!

 

Bonus Quotation of the Day…

Posted: 09 Aug 2017 11:57 AM PDT

(Don Boudreaux)

… is from page 55 of my late Nobel laureate colleague Jim Buchanan‘s insightful 1979 article “Politics Without Romance,” as it is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:

Once we so much as move beyond the simple committee or town-meeting setting, however, something other than the passive response of suppliers [of public goods] must be reckoned with in any theory of politics that can pretend to model reality.  Even if we take only the single step from town-meeting democracy to representative democracy, we must introduce the possible divergence between the interests of the representative or agent who is elected or appointed to act for the group and the interests of the group members themselves.

MD: Town-meetings are not even representative democracy. Democracy doesn’t work when more than 50 people are involved. WIth towns, hundreds to thousands of people are involved. If we were individuals of principles, any issue needing group attention would first be addressed by a group of 50 or less people. If the problem was beyond that scope, those 50 people would select a representative to go to the next lower group to address the issue with representatives from 50 other adjacent groups. With just six such layers, the entire population many times over can address all issues in a truly democratic fashion. In actuality, it would be rare indeed when an issue  would progress to the sixth (and bottom) group.

DBx: I understand that my training as an economist ‘biases’ me.  (Can someone point to a discipline the training in which does not then ‘bias’ its practitioners?)

MD: I am biased by “engineering training” .. and rejection of religious indoctrination. I can’t think of a single one of those biases that has proved to be untrue. Of what I have seen of economics, I don’t see a single one that “is” true … beginning with their concept of what money is! And what could be more important to their focus than that?

I understand also that my bias might be especially strong given that I began reading Jim Buchanan’s works while still an undergraduate – that I later was a colleague of Buchanan’s and Tullock’s – and, indeed, that I served for several years as the Director of the Center for Study of Public Choice.  I plead guilty to being “biased.”

MD: Those who immerse themselves in religion also have such a strong … and misguided bias. Put on blinders and you “will” be blinded.

But I’ve also another plea – this one, for a clear-eyed, objective, unbiased person – say, Nancy MacLean – to tell me what is objectionable about Buchanan’s above-quoted statement?

MD: And I have one for DB … and have confronted him with it directly. He declared me to be “unorthodox” when I asked him to disprove the reality (which I prove) that “money is an in-process promise to complete a trade over time and space and is only created by traders … like you and me” and that gold “is not money” … and that “all” money is fiat (because all promises are fiat).

Why is it objectionable to do political theory with the understanding that, with representative democracy, there is a “possible divergence between the interests of the representative or agent who is elected or appointed to act for the group and the interests of the group members themselves”?  What is the better alternative to recognizing this possibility?

MD: Has it occurred to DB that democracy cannot be representative … and thus cannot be democracy … with more than 50 people involved? To have a democratic discourse and decision, “all” participants must have the exact same grasp of the details of the issue … not spoon fed to them by propagandists.

If Nancy MacLean were to write a book on principal-agent law, would she dismiss as uncharitable those legal scholars who refuse to assume that agents always and naturally represent the interests of their principals perfectly?

MD: These days, anytime I see the words “scholar” and “theory” I know I’ve waded into the swamp! This is the most inbred collection of people you will ever want to see.

More practically, if MacLean were to hire a real-estate agent to sell her house, would she simply give – or has she simply given? – that agent carte blanche to act on MacLean’s behalf however that agent chooses?  I ask these questions because I’m still amazed – no doubt due to my bias – that on page 58 of Democracy in Chains MacLean, seemingly in all seriousness, writes:

And, in their assumption that individuals always acted to advance their personal economic self-interest rather than collective goals or the common good, Buchanan’s school went further, projecting unseemly motives onto strangers about whom they knew nothing.

MD: I know not of a single instance where I acted in the interest of a collective goal in violation of a personal self-interest … economic or otherwise. And I don’t need the word “voluntarily” as a qualifier. When I am “forced” to do something (like pay taxes), I act in my self-interest by doing so … the force sees to it that it is in my self-interest that I do. They take away my stuff if I don’t.

The allegedly “unseemly motives” are nothing more than the self-interest that nearly all lawyers and all sound economists assume when doing their work.

MD: “Sound” economists? Do we see the kettle calling the pot black here again?

Indeed, these motives are identical to the motives that each of us assumes is operative in the actions of all people with whom we interact commercially.

MD: Right … they correctly call it price fixing don’t they!

All contracts that specify more than price and quantity – and perhaps even these – are written by people who MacLean would describe (were she consistent) as “projecting unseemly motives” onto others (some of whom they have met, but many of whom are “strangers about whom they know nothing”).

MD: If we were principled we wouldn’t have problems with contracts. Anyone who has created money to buy a house over time and space and used an FHA contract has consented to maintain “replacement value insurance” until the balance is paid in full. And such contracts are not modifiable … i.e. negotiable. Take it or leave it!

What is the principle? Support the insurance industry?

What should the principle be? Deliver on your trading promises. If there is any risk you won’t, insure yourself against that risk… i.e. pay an actuarially determined premium that addresses the risk of failing to deliver … not of failing to put the property back into some state already delivered on.

In my case I pay $2,000+ per year insurance on property improvements of about $130 replacement cost. Over a 30 year record of delivering on my money creation promise (i.e. returning the money I created), this actuarially suggest 1 in 2 properties within 1/2 mile of mine will be totally destroyed (fully 500 out of 1000 houses).

In my 70+ year lifetime not a single property has met this calamity. Further, when I confronted the bank and refused to buy the insurance (my balance being below the value of the underlying land that could not be destroyed), they purchased insurance … at my expense (from themselves) to meet the terms of the contract. The provisions for that are clearly laid out in the contract … violating any reasonable principle.

I then kept my own set of books and have now (by my accounting) completely delivered on my money creating promise. Yet the bank says I must continue to pay them for 3 more years … including paying for insurance for a risk they no longer even have an interest in

Over the time I have confronted them with this issue (a little over two years), 27 houses should have been destroyed. Predictably, none have been destroyed. Now, do you want to talk to me about contracts … especially those that you can’t negotiate … like an FHA contract?

I am having to sue the bank (Wells Fargo … whom I bailed out when they defaulted on their trading promises) for release of the lien … and if the jury says the contract is clear (like judges tell them to decide according to “clear” law) … the banks will prevail.

I’m counting on the jury observing that they are not only evaluating compliance with the contract … they are evaluating the validity (principles) of the contract … i.e. jury nullification. You can’t hand out leaflets on courthouse steps to tell them about this … but for darn sure “I” can inform them about it when I do this case “pro-se”.

If I engaged a lawyer, that lawyer would be disbarred for bringing forth such an argument … yet it is the first  and most obvious valid argument.

If such prudent assumptions about other people’s motives are accepted readily when we do legal analysis – and when lawyers actually practice law – what is so objectionable about using such assumptions when doing political theory?

MD: A false choice! The law is flawed on it’s face. 40,000+ new ones each year are blatant proof.

Laws can’t work when there are more of them than anyone can know … and all of them have multiple decisions (decided meanings) in conflict with each other.

Posted on

‘BitCoen’ to become first electronic currency specifically for Jews

Bitcoin

Bitcoin, the world’s most famous cryptocurrency. (photo credit:BENOIT TESSIER /REUTERS)

Coming soon to your community may be the first ever international Jewish currency, dreamed up by a Russian entrepreneur.

MD: Now what in the world would a “Jewish currency” be? Does it only allow trade between Jews? Can you imagine a currency that prohibited trade with Jews? They would go shrill beyond belief. What’s up with this?

BitCoen, an electronic crytopcurrency based off of the idea of BitCoin, is set to launch in September. Businessman Viacheslav Semenchuk, the brains behind the operation, told Russian media outlet RT that he and his partners are in talks with almost 100 trading platforms, discussing the prospects of the currency’s ability to be used for purchasing.

MD: What is an example of one of these trading platforms? I presume my local supermarket is not included.

The currency will be based on the value of the US dollar, with each BitCoen token available for one dollar. The plan is to initially issue 100 million BitCoens.The company hopes that they will be able to circulate up to $1.5 billion in the first two years.

MD: What’s the point of that? The dollar is a known “improper” MOE media. What is to be gained by linking to it? When someone turns over a dollar in exchange for a BitCoen, does it just sit in a box somewhere until someone comes by and asks to do the opposite?

While anyone can purchase tokens, the company will be managed by a ‘Council of Six’ made up solely of Jewish representatives. The representatives will likely be prominent leaders in both public and private sectors, though there is no word yet as to the planned demography of the leaders.

As the currency is aimed specifically at Jewish communities, there will be an automation option so that trading operations may take place on Shabbat, when the handling of money is prohibited by Jewish law.

Semenchuk told reporters that the initial ‘bit book’ for investments has been filled, meaning that the project is viable.

MD: This scheme is “beyond delusional”! Do you suppose god made them do it? They are her chosen people you know!

 

Posted on

What role does money play in secession initiatives?

MD: Control of money is a real big deal in all things political. An “uncontrollable” money is therefore anathema to all things political … especially governments. But it is wonderful for traders … like you and me.

As you read this article, consider how it would read if the Catalans were to first institute a competitive “proper” MOE process before attempting secession. Virtually all of the issues this article cites vanish when a “proper” MOE process is in place.

Remember, such a process is immune to political interference. If you want to affect it, you have to use force. And if it’s in general use, you probably can’t come up with that much force. Traders are far more powerful than the populace in general … which is peculiar because traders “are” the populace in general … there are just no borders when it comes to traders.

Catalans Think Twice About Risks of Rupture as Jobs Return

By

Esteban Duarte
  • Support for independence falls to 35% from 49% in 2013
  • Threats to their interests give separatists pause for thought
Carles PuigdemontPhotographer: Pau Barrena/Bloomberg

Joan Boix has been attending separatist demonstrations in Catalonia for at least five years and he contributes to the campaign for a split from Spain.

But as the regional government in Barcelona girds its supporters for a final push that it hopes will deliver independence, the 62-year-old executive is hesitating. Hardliners talk of setting up a rogue Catalan tax agency or a general strike in order to force the issue. But Boix has a company to worry about.

MD: Set up a “competitive” proper MOE process. Let people gravitate to it. If you set up a tax agency, you are just playing into the hands of a “replacing” government … predictably made up of people ultimately unfriendly to traders and general trade.

“Most of the businessmen I know have to make debt repayments so an indefinite strike is a hard sell,’’ he said.

MD: Ah … but what if that debt was promised in HULs rather than your competitor’s controlled money? Then this would not be an issue at all. And you would not be talking about a strike … let alone an indefinite one. You would already have the existing government and its money changers on the ropes.

Regional President Carles Puigdemont is trying to increase his leverage as officials in Madrid vow to block his plans for a referendum in October. But the potential costs of a collision with the Spanish state are become clearer for Puigdemont and his supporters.

Two of Puigdemont’s senior aides were interrogated by Spain’s Guardia Civil last month and Prime Minister Mariano Rajoy has warned Catalan officials they could face criminal charges if they use public funds to facilitate the vote. Even the Catalan police, who Puigdemont wants to use to oversee the vote, may think twice — most of their salaries are paid from Madrid.

Rajoy on Wednesday called for Catalans to show “common sense” and “isolate the extremists and radicals who are today influencing the regional government.”

MD: Extremists and radicals … i.e those who “are not us”.

In the end, money worries may tip the balance against dramatic action for many Catalans.

MD: And there you have it. If a proper and competitive MOE process is in place, money worries are already dealt with. Nothing dramatic can happen with the money.

Spain on the Mend

Despite its distinct traditions and language, the idea of breaking away from Spain had little mainstream traction until the economic crisis — and the corruption it uncovered — hurt Catalans’ finances and undermined their confidence in the Spanish state.

MD: Said as if that won’t happen again. Government “is” the problem. Institute a competitive and “proper” MOE process, and let the government do the scrambling for survival.

Support for independence peaked at 49 percent in 2013, as the Spanish economy was contracting for a third straight year and unemployment reached a record 26 percent.

But Spain is on the mend now. Joblessness is down to 17 percent and the economy is growing at a pace of more than 3 percent. After a decade of turmoil, Catalan moderates are nervous about putting the recovery at risk.

MD: Oh really? What caused the economic collapse in the first place? What caused it to go away? You can be sure government manipulation played a role in both cases … and the sense of both is probably more related to propaganda than to reality.

Just 35 percent say Catalonia should be independent, according to the Catalan government’s polling agency. That’s the lowest in five years.

Investors are largely discounting the risk of a split. The spread between Spanish 10-year government debt and German bonds is close to its narrowest in seven years, though the yield on the Catalan government’s thinly traded 2020 bonds has jumped by about 50 basis points since the start of July.

MD: What are the “Catalan government’s” bonds? If they can create and sell bonds, they can institute and support a “proper” MOE process.

Puigdemont said in an interview last month that anyone who thinks an uptick in the economy will dampen the separatist movement is making a mistake, and warned investors that the movement may roil Spanish debt markets this fall. Others argue that Spain’s attempts at intimidation, including a smear campaign against Catalan leaders, will ultimately backfire.

MD: If you remove government from the equation, what are you separating from? The issue “is” government. As long as it is there, you will have an issue.

“If they were winning the political battle they wouldn’t need such tactics,’’ said Manel Escobet, 63, a member of the national secretariat at the Catalan National Assembly, a separatist campaign group. “The dirty war being conducted by the Spanish state is just helping us to broaden the support for us’’

MD: If you’re in an “all out war”, finess is not employed. You deploy all your weaponry. And such tactics are probably the most important weapon in the arsenal. People are putty in propagandists hands.

Corporate Concerns

But even some of those who would be willing to strike accept that their chances of achieving their goals remain remote. Pere Gendrau, 36, runs a pub in Berga, just over an hour north of Barcelona and in the late 1990s he was active with the fringe groups that went on to form the anarchist group CUP, which Puigdemont’s mainstream alliance relies on for a majority in the regional assembly.

Gendrau says that he and his employees would find a way to support a general strike, an idea raised by Regional Vice President Oriol Junqueras as far back as 2013. But, like Boix, he can see the problem for those managing larger operations.

MD: What are they striking against? Themselves? Institute a “proper” money. Set up a minimal organization to deal with customary public issues … i.e. potholes … and then quit paying taxes to Barcelona.

“It could be the way to move forward, but we probably won’t reach that point,” he said. “I’m not so sure what the bigger companies’ reaction would be.’’

Boix’s company produces about 2 million wooden pallets a year for Catalan exporters and employs 130 people in the Bergueda region, where separatist parties got almost 80 percent of votes in 2015’s regional election.

The family history illustrates the sharp divisions that still lie beneath the surface of Spanish society. Boix’s grandfather, a Catalan mayor, died in a Nazi concentration camp at Mauthausen after fleeing to France during the Spanish Civil War. The French government has apologized to the family for the failings of the Vichy regime, but in Spain it’s more complicated, since Prime Minister Mariano Rajoy’s party was founded by a former minister from the Franco regime which governed for almost 40 years.

Historic Divisions

“In Spain it’s as if nothing ever happened,” he said. “Just in my family, 10 people fled across the French border, and only my mother and two others returned.’’

So the friction between Catalonia and Madrid may be as good as permanent. There are pockets of the region where almost everyone backs separatist parties. But the success of modern Spain since the dictatorship may be enough to keep the country together, and the economy growing, despite their differences.

MD: He who controls the money controls the playing field. Remove all control of the money and the playing field is level. Let the games begin.

Boix is happy to support a strike in favor of independence. But only so long as it doesn’t hurt his bottom line.

“If it’s being asked to stop for a day or two, that’s fine,” he said. “We’ll find a way to compensate by working through a public holiday.”

That’s probably not enough to force Rajoy into any dramatic concessions.

— With assistance by Charles Penty

Posted on

Deviant Investor: The Luster of Gold Returns Due to Economic Uncertainity

Deviant Investor: The Luster of Gold Returns Due to Economic Uncertainity

MD: It’s always fun to examine the articles written by gold bugs who are clueless about what money is. The landscape is always rich with delusions. Let’s see.

The Luster of Gold Returns Due to Economic Uncertainity

Guest post from Paul Somerfield

The role of gold as a safe-haven investment is one of the fundamental principles of modern markets and it seems as if recent movements have once again confirmed this fact.

MD: That being true … and it probably is, gold is “precluded” from ever being money. Of course, if you know what money is, among its very few attributes is: real money has “no intrinsic value.” Anything having intrinsic value disqualifies itself from being money … it is a promise to deliver that has already been delivered. Money is an “in-process” promise to deliver on a trade.

The price of December gold futures rose to $1,279.40 dollars per ounce; the highest level since early June. During this same time, the cash value of gold has likewise increased by 6.2 per cent. Both of these observations could be great news for medium-term investors and these rates may very well be indicators of a more bullish gold market. What are some of the underlying factors which have caused such gains?

MD: A proper MOE “never” changes the value it stands for. That’s why the HUL (Hour of Unskilled Labor) is the ideal unit for money. HULs have never changed what they trade for over all time. They have always traded for the same size hole in the ground that they trade for today. The fact that  gold price is changing like this proves it is “not” money. Either the value of gold is changing, the value of the dollar is changing, or both.

Tepid Consumer Spending

 

One of the most important influencing factors in regards to the price of gold involves consumer sentiment and spending.

MD: … again proving it is not money. Real money doesn’t care about consumer sentiment and spending. It is strictly valued as a pair of traders value it at an instant in time. Once valued that way, the trader creating it is obligated to reclaim it and destroy it as promised. If he mis-valued it, he has to adjust his behavior accordingly (work harder than planned or bask in his brilliance). None existed before his trading promise (for that promise), and none must exist after delivery (or default mitigated by interest collection). Inflation of the money itself is thereby guaranteed to be zero. What else can it be?

This is generally seen as a broad snapshot of how an economy is performing. It should also come as no surprise that spending within the United States will have a decidedly profound impact upon the valuation of this yellow metal. Recent figures have shown that spending only increased by 0.1 per cent in June. This is actually the smallest increase witnessed so far during 2017. Thus, some market makers are wary about the medium-term status of the domestic economy.

MD: Spending tells you nothing about money. It could be coming from traders creating new money (which they later will destroy), or from money traders have acquired and accumulated in their previous trades. As soon as they spend it, it is available for other traders to claim and return if they have in-process trading promises to deliver. Regardless,, spending is of no import whatever. Neither is saving.

The Question of Federal Reserve Interest Rate Hikes

 

There has been a fair amount of speculation as to whether or not the United States Federal Reserve will enact an interest rate hike.

MD: This is the biggest delusion and “hand-tipper” of all … i.e. the notion that the Federal Reserve sets interest rates. The operative relation for “any” money … proper or improper … is: INFLATION = DEFAULT – INTEREST.

Defaults are being perpetually made by counterfeiting governments … they make trading promises and never deliver … they just roll them over. This is far and away the largest supplier of defaults … and if inflation is to be zero, they must be met with interest collections of like amount. Since the whole “improper” process we have to use is open-ended, with no direct negative feedback loop (like defaults being immediately met by interest collections), the unmeasurable INFLATION can be anything governments say it is … until it is so out of wack their improper MOE collapses … and they reset and start the con all  over again.

Any such hike is normally closely tied into inflationary figures. However, softer inflation has pointed to the well-founded observation that the Federal Reserve may postpone any rate increases for the time being.

MD: Inflation is “not” measurable … it can only be estimated … and is thus always a fiction. Only a “proper” MOE process can know what inflation is. And such a process knows what it is in real time … all the time. It is zero. The inflation  being referred to here is a strictly a made up number. And until the inevitable money calamity, it will be predictably very low. If they report it as it really is, the Social Security payments have to be automatically adjusted (COLAs). And that blows the whole Ponzi scheme. None of this could be happening with a proper MOE process.

A slower pace of rate increases has historically tended to support the value of precious metals and there is no doubt that these latest observations have played an important role.

MD: All rates of increase (or decrease) are very small and slow. It is a death of a thousand cuts … and then the camel collapses under the addition of a single straw (to mix metaphors).

A Rising VIX?

MD: This VIX thing is amazing … just in the fact that it exists. They invented the options trading model (Black-Scholes) which was very sensitive to the underlying “distribution”. So what do they do? They game the distribution. They invented the VIX and now bet on that. You can’t make this up.

 

One of the most recent news stories involves the Dow Jones closing above 22,000 points for the first time in history.

MD: Right. All companies are increasing in value simultaneously and continuously … but inflation is near zero? Bet me!

Although this is supposedly good news and a sign of a relatively strong domestic economy, some are concerned that the CBOE Volatility Index may be in for a reversal in the near future.

MD: CBOE  Volatility Index … another VIX like measure … without a knob. They have made this thing so complicated and attached so many knobs, there is never any hope they can know how to turn all those knobs. When it blows up I hope someone has a camera on as they all violently turn  the knobs … like kids in the car arcade ride, going in a circle and turning the steering wheels … connected to nothing … violently, as if they’re having effect.

It is important to point out the inverse relationship between the VIX and index values. Still, any sudden increases in the VIX index will likely cause some investors to pull their money out of the open markets and to place their funds into safer havens.

 MD: Important to point out? To whom … fiction writers?

The Trump Dilemma

 

One point that cannot be stressed enough is the instability associated with the White House. As the Trump administration continues to flounder and as officials seem to be replaced on an almost daily basis, some are questioning whether or not the president can deliver on many of his other promises put forth during the election campaign.

MD: Since a “proper” MOE process has no “social” linkage or dependency whatever, “real” money does not have this instability.

It is also important to point out that politics could also play a role in the price of gold; particularly if tensions continue to rise between the United States and Russia.

MD: I’m surprised he says it this way. Politics plays a role in the value of the dollar. As such, it plays a role in the price of everything in the same way. If gold was money this wouldn’t matter. But “mining” and amount of trade play a role in the value of gold … and that makes it unsuitable as money.

Rumors of a so-called “trade war” may further exacerbate this situation. Although more rhetoric than reality at the present, the possibility of protracted political instability may help to support gold prices.

MD: Again, “real” money is not affected by trade wars. The traders with in-process trades still have to reclaim the money they created …. trade war or not. If the war causes many to fail (i.e. defaults), what do we know will instantly happen? Of course, interest collections will increase by like amount and the warring parties will have their playing field instantly impacted … in a negative feedback fashion. No manipulation necessary.

The Other Side of the Coin

 

Not all analysts believe that gold will remain bullish indefinitely. The traditional overhead resistance of $1,280 dollars is approaching and there could be a reversal soon. Regardless, the long term trend is strongly upward due to continually devalued fiat currencies.

MD: Again proving … it is not and cannot be money.

The coming days will be interesting in terms of gold prices. Those who hope to keep abreast of the latest news should employ reliable online resources such as CMC Markets. Gold may indeed have regained its luster to the average trader.

 

Thanks to Paul Somerfield

 

Gary Christenson

The Deviant Investor

MD: Remember folks … .these people are “gold dealers”. They want to keep people buying and selling gold so they have to keep making up and telling new stories.

Posted on

Cafe Hayek: Economic Inquiry and its Logic

MD: Cafe Hayek (i.e. Don Boudreaux) doesn’t know what money is. If we have a reset, he and other Mises Monks want to be on the front lines imposing “gold is money” on us. That will strangle trade. It’s hard to think of anything worse than the Keynesian inflation oriented nonsense we have had my whole lifetime (> 70 years) but they want to show us something worse.

I review their articles because they “are” the enemy … and are their own enemy … they just don’t see it!

>Quotation of the Day…

Posted: 08 Aug 2017 03:45 AM PDT

(Don Boudreaux)

… is from page 27 of my late colleague Jim Buchanan’s 1979 paper “General Implications of Subjectivism in Economics,” as this paper is reprinted in Economic Inquiry and Its Logic (2000), which is volume 12 of the Collected Works of James M. Buchanan:

Indirectly, however, and in opportunity-cost terms, the empirical-nonempirical debate is of importance.  The young and aspiring economist who becomes the expert empiricist has necessarily sacrificed training time in learning more about the process to which his highly polished technical tools are to be applied.  These gaps in the training of modern economists are beginning to show up in many forms, not the least of which is the deadly dullness that dominates whole departments in many universities and colleges.

MD: And the pot characteristically calls the kettle black.

DBx: Someone can possess nearly god-like mastery of econometric techniques and still be a poor economist (or worse).

MD: When someone plays the “god” card they are tipping their hand revealing their irrationality. It’s always scary,

At the heart of economics, done correctly and productively, are habits and patterns of thought – namely, the economic way of thinking.

MD: Actually economics is just traders and trading. The co-option of money by the money changers and the governments they institute has added a significant “manipulation” factor that swamps anything rational traders do. A “proper” Medium of Exchange (MOE) process has “no” monetary policy.

There lies, for example, the professional instinct incessantly to ask probing questions (above all, “As compared to what?”); the recognition that reality is always far more complex in its details than even the most detailed ‘model’ can possibly capture (and yet the understanding that that reality is comprehensible only through the lenses of well-crafted models or theories);

MD: How about the reality that “zero is the only right value for inflation of money itself”. That’s provable. It’s not theory. And the Keynesians and the Mises Monks don’t get it at all!

and the stubborn insistence on consistency (such as the sound economist’s refusal to regard human and institutional imperfections as infecting only human interactions that occur in non-political settings – such imperfections also infect human interactions that occur in political settings).

MD: But the insistence on “sound” money (i.e. “gold is money”)? That’s ok according to the Mises Monks … even though it predictably “strangles” traders and trade.

Wow me all you want with your econometric wizardry and prodigiousness at digging up, assembling, and processing data.

MD: You mean data processing like INFLATION = DEFAULT – INTEREST = zero? … that’s not heavy math Don!

If you fail to exhibit the economic way of thinking, you are no economist in my book.

MD: Irrational thought should not be tolerated either!

Unless they are filtered through, and assessed according to, the economic way of thinking, all of your numbers and correlations, no matter how high those correlations might be, tell neither you nor anyone else anything of value.

MD: He says … without defining “economic way of thinking”. Economic way of thinking has always been trivial. As Yakov Smirnoff, the Russian comedian, said “business is simple:  buy low, sell high.”

Posted on

Managing cash flow

Cash Flow Metrics Entrepreneurs Need to Keep in Mind

by

accountfully-brad
MD: Traders have always been the only creators of money. Because the money changers and the governments they institute have taken control over trader’s money creation, this has turned into “credit”, and “loans”, and “monetary policy”, and “interest rate setting by LIBOR” … and on and on.

If we ever get a “proper” Medium of Exchange (MOE) process, all this nonsense will be federated to retail “certifiers of trading promises”. Certification means authenticating the trader, documenting the trading promise, monitoring the trading promise for delivery, and mitigating defaults experienced with interest collections of like amount. And it means doing this all “transparently”. There are no secrets at this level … none. A trader is always a unique entity (i.e. person) and no aliases are allowed. Note: Once this money is created, the use of it is “totally anonymous”, whether it’s a ledger entry, currency, or coin.

The retailers will apply costs and employ various actuarial techniques and collateral requirements to accomplish this.

To be a retailer, they must prove “transparently” for all to see that they are maintaining a perpetual perfect balance between the defaults they experience and the interest they collect. And they must show all costs they are applying. The only other requirement is that they impose no interest on responsible traders … i.e. those who don’t default. They may impose interest during the in-process trade, but if the trader doesn’t default, they “must” return those interest payments to the trader. Further, the costs they charge the trader must be part of the certification and must not be changed over the delivery process.

For responsible traders, this will result in free money creation at any time with near zero associated cost. For irresponsible traders who occasionally default, this will result in a fair cost and interest load. For deadbeats this will result in high costs and prohibitive interest loads  … they will still have to resort to pawn shops and pay day loans.

Contrasting with the “improper” process we have today, deadbeats and irresponsible traders can move themselves into the responsible category at any time by simply paying back their default. And also in contrast, they cannot, over any period of time, become responsible traders any other way (i.e. there are no “bankruptcy” provisions when it comes to creating money).

Since a “proper” MOE process guarantees zero inflation, it also supplies an exchange media which has no “time” value. The “i” in (1+i)^n is zero so the compounding is 1.00000 for all “n”. This is going to drive the speculators out of business … along with the so-called investors, who are also just speculators and gamblers.

With that thumbnail sketch in mind, let’s see what pearls this article brings to the subject of “personal money management”. I have a friend who is a gambler … loves poker. She says the key to success is cash management. That applies to all of us. Life is a gamble.

Cash is king, they say.

MD: That’s because of the money changers. Drive them out with a “proper” MOE process and responsible trading is once again king.

As a bootstrapped entrepreneur, managing your cash flow effectively is key to staying afloat while you scale your product. However, many entrepreneurs don’t dedicate time to good accounting practices, sometimes even letting their startup’s money share real estate with personal cash. There’s no surer recipe for disaster.

“A big problem with small businesses that we have that come to us, that have never had a professional accountant, or bookkeeper, or advisor help them with, is that they manage their business out of their bank account,” says CPA Brad Ebenhoeh.

MD: I’ve seen this in friends who have small businesses. When a sale turns into cash, they put a chunk of it in their wallet. They’re always carrying a “wad of cash” … unless they’re dead broke. To me this is a direct indication that they don’t know what they’re doing. When the bills come in they don’t have the cash to pay them. They are soon driven out of business and once again working for someone else.

A “proper” MOE process won’t allow them to bail themselves out by creating new money. This would be a rollover, and if allowed would result in irresponsible traders competing with responsible traders. This is exactly what we have with “all” governments. They never deliver … they just rollover their trading promises. A competing “proper” MOE process will drive the money changers and the governments they institute out of business.

Ebenhoeh, managing partner at startup-focused South Carolina firm Accountfully, explains that the biggest misconceptions behind cash flow is looking at the money coming in as “ready to spend.” For example, if you brought in $20K in sales, it does not mean that you have $20K of immediate, spendable profit.

MD: Confirmation.

“The biggest thing that we do is that we transition them from managing their books out of their bank account, in the business side of the bank account, to actually managing their business from an accrual-based profitability standpoint,” says Ebenhoeh.

MD: In terms our parents gave us … they put them on an “allowance”. It’s amazing how many traders there are out there that can’t impose this self-discipline … really really amazing.

This means switching companies to accrual-based accounting, the process used by most startups. Accrual-based accounting is essentially jotting down revenue when it’s earned versus when the payment is made. “This means that you look at profits and expenses on a period over period basis, which is like month over month basis. And it doesn’t necessarily have to reflect when the money comes in or money goes out,” explains Ebenhoeh.

MD: All accrual based accounting does is remove epochs. It just makes common sense. It should be the “only” kind of accounting anyone would use. When you run your business with monthly, quarterly, or annual statements (which is what our governments do), you get way behind the 8-ball before you know it. This isn’t rocket science.

I’ve been using Quicken since it was created in the late 80’s. I have known my net worth in real time ever since. It’s fun. Actually I knew it before Quicken by using programs I wrote myself for an 8085 micro-computer (Processor Technology SOL … with a whopping 4K of memory) in 1977 … but Quicken was better in many ways and I had other things to do.

MD: We’ve now gotten what we’re going to get out of this article. Read on if you have time or still don’t get it.

That means that if you hired a subcontractor in July for $5K and you don’t pay them until September, the expense goes on the books in July versus when it happen versus in September, says Ebenhoeh. “Migrating a client over to that perspective of reviewing their books on an accrual basis and profitability standpoint is step one in having that business become mature.”

Ebenhoeh dives into three cash flow metrics you need to keep in mind as you grow your startup.

Operating Cash Flow

This is money that comes in from day-to-day operations. Basically it’s taking your profit losses on a normal recurring basis and including cash that you may have received from accounts receivable, or past invoices, or paid out in bills or accounts payable. Then you can say, during the month you made X amount of money in operating cash flow. That’s key because those core operations are actually going to sustain your business.

Free Cash Flow

Free cash flow is the operating cash flow minus any investment you made in fixed assets or capital expenditures. That includes investing in equipment, computers, furniture, leasehold improvements on a building, building out a space, rent, or buying a vehicle for the business, if that makes sense for your business model.

Capital expenditures are not recurring or not part of your operations; they’re just assets that you buy for your business to help you support the operations of your business. They are typically one-time in nature or very periodic, so that’s why it’s not included in the operating cash flow.

Net Cash Flow

Your Net Cash Flow is the free cash flow minus or in addition of any money flowing out to investors, money flowing in from investors, as well as money flowing in or out from a long-term liability.

You want to subtract any distribution payments you make to the owners of your business, or dividends, outflows of payments to owners of the business, or inflows of money that you’ve received when you’ve raised capital.

So for example, when a tech startup is operating with $500K in seed capital, that $500K is an increase in net cash flow. It is anything that you receive or pay to owners or stockholders of the company, as well as any long-term liability, or long-term debts that you’ve paid out on receipt.

When tech startups are in the early stages when they’re raising money, often instead of getting common stock or preferred stock, money comes in. A convertible note is long-term liability. That inflow of money that they receive would be within the net cash flow section.

Do you know your startup’s Key Performance Indicators (KPIs)? Here are some to keep in mind during those early stages when impressing investors is top priority.

Posted on

Free State Bitcoin Shoppe: Interview With Co-Owner Derrick J. Freeman

EXCLUSIVE INTERVIEW
Free State Bitcoin Shoppe: Interview With Co-Owner Derrick J. Freeman
By Joe Jarvis – August 06, 2017

MD: Knowing what money really is, you know this Bitcoin nonsense was ridiculous from the get-go. But it just keeps getting up and going … just like Charles Ponzi’s stamp arbitrage scheme got up … and predictably finally went … ending not so nicely for lots of people. Let’s review this article and see what Money Delusions it contains.

This guy looks intelligent and thoughtful doesn’t he. Go figure!

Can you give me the rundown on your shop?

Derrick J: Free State Bitcoin Shoppe is a place for people to level up on their cryptocurrency knowledge and trade their digital cash for unique tech and freedom-themed souvenirs. Our mission is to help people use better money.

MD: BitCoins are going up so fast against the dollar, only money launderers and drug dealers can afford to use it (i.e. to spend them). Just think about it. If you have a choice of buying a hamburger today with Bitcoins worth $6.00, but next month the hamburger still costs $6.00 but the Bitcoin trades for $8.00, what are you going to use to buy the burger … dollars or BitCoins?

We’re a long way from the day people use BitCoins in trade. In fact they never will. Just an instant after it quits rising it will drop like a rock. And only the people pulling the strings know when that instant will be … as it will be when “they choose it to be”.

If we instituted a “proper” MOE process, we could at least give them a better alternative than the dollar with it’s 4% inflation leak. They would enjoy a 0% inflation leak. “Real” money does “not” appreciate or depreciate!

And “freedom-themed”? Perhaps he should be doing something about the 3/4ths of the fruits of his labor that is taken routinely by government. That only leaves him with 1/4th of his original freedom! Perhaps he should have some T-Shirts that depict the stupidity in buying government lottery tickets. Perhaps he should have some T-Shirts revealing the government steals 3/4ths of the fruits of everyone’s labor. That would be constructive.

To a backdrop of dance-punk and electronic music, we offer one-on-one assistance to the bit-curious to help spread the crypto-economy in New Hampshire. It’s packed with seditious propaganda like libertarian art and literature, books on programming, and freedom tech like hardware wallets and USB thumb drives with TAILS Linux loaded on them (the operating system Edward Snowden uses to protect his privacy online).

MD: Maybe Snowden needs to be concerned about his on-line privacy. After all, he did poke the NSA in the eye and they don’t take that lightly. But if most people are doing something on-line, they’re probably not that vulnerable. If they are, you can be sure they’re not doing their nefarious deeds on-line.

When we’re not busy teaching tourists and passers by about Bitcoin, the shoppe is an office for [co-owner] Zyler and me: where we do coding, writing, and video production. The Shoppe is right on the edge of New Hampshire at 56 State St in Portsmouth — so close that both the water and Maine’s coast are visible from our front door.

MD: Do they still call it “teaching” when it is known what they are conveying is absolute nonsense and provably a scam. At least with the Charles Ponzi, there was an identifiable scammer to put in jail. When this thing blows up there is nobody to blame. The winners won without being a party to the scam. And the losers will have no-one to blame but themselves. And neither have any control over whether and when they will win or lose.

What do you sell at the shop? Is there specific merchandise you hope to add?

Derrick J: We sell things you won’t find anywhere else: Doge curtains and pillows, 3D-printed combination locks to protect USB keys, Tesla T-Shirts, laser-cut wood boxes with secret compartments, BipCot Licenses, Bitcoin clocks, an Aztec calendar, build-it-yourself 3D-printer kits, and various New Hampshire-themed gifts. Next week, a unique Bitcoin vending machine will arrive at our store, offering the opportunity for people to trade in their Federal Reserve Notes for Bitcoin, Dash, and Monero.

MD: Ah … the modern version of the slot machine is coming to this store. They can do this at any convenience store right now … anywhere in the country. It’s called the government lottery … and supposedly supports education, but can’t even un-stupid the students enough not to buy a lottery ticket. People who buy lottery tickets are stupid because it’s a 50% instant loss … and even more if you win. But then these same people work an hour for their wage … and that’s a 75% instant loss to the government. So I guess you could say the lottery looks like a better deal than working for a wage. What’s not to love about government and its scams?

Besides Bitcoin, what forms of payment do you accept?

Derrick J: Monero is preferred. We take all forms of cryptocurrency and offer 20% if you pay for the merchandise with that currency. Yesterday, a customer bought $85 of doge-themed merchandise with Doge-coin.

We don’t take Federal Reserve Notes, credit cards, or metals. (Sorry, silver bugs. Time to realize the silver thing is never going to happen.)

MD: Offers “20% if you pay with cryptocurrency. ” Now what does that tell you? My local convenience store offers me 10% if I pay with cash for my gas instead of using a credit card. The merchants are using the same logic for their behavior. With the credit card, the merchant is being gouged 10% by the credit card company. With the cryptocurrency, the merchant is guaranteed a 20% gain … unless he’s holding it on the day it explodes. In the case with the gas, the merchant is smart. In the case of this shop … he’s a stupid gambler.

And regarding the silver? I was there in 1965 when they took the silver out of the coins. It proved the value of the coins in trade was never about the silver being a precious metal and of intrinsic value. With or without the silver, a quarter still traded for a gallon of gasoline. Today it takes 8 or so quarters to trade for a gallon of gas … again, whether they contain silver or not.

Since the value of Bitcoin fluctuates, how do you set the prices?

Derrick J: It’s easy. We set prices in Bitcoin. The bitcoin wallet on your phone will convert instantly so you can see how much things cost in terms of dollars or any other currency.

MD: You have to have a computer to use Bitcoins. When the exchange rate for dollars for Bitcoins is exponentially increasing noise you have no idea what to pay for anything … ever. Only the computer knows.

How did you choose the location for your shop?

Derrick J: We had been scouting locations for a retail shop for a month or two. While walking downtown in the Portsmouth Pride Parade this June, we passed some empty windows where a small boutique had been.

We said “This would be perfect!!” It’s 100 feet from the biggest park in town, where musical theater and concerts play daily and nightly, visible by the water, plenty of parking across the street, and adorable tourist-trap stores nearby that attract lots of foot traffic from international guests. It’s one of the busiest corners in one of the wealthiest and most happening places in the Shire. It’s the perfect location to draw in people to learn about Bitcoin.

MD: You’re also likely to find people there with their stupidity magnified by mind altering substances.

(go to link to see a picture of the shop)

You have long been a liberty activist. You have committed acts of civil disobedience (Derrick J’s Victimless Crime Spree), challenged unjust laws in court, and even spent some time in jail. Does this shop mark a shift in tactics for gaining individual freedom?

Derrick J: Yes, totally. I’ve learned through trial and error what works and what doesn’t.

Civil disobedience may be moral and make me feel good, but it is ineffective at achieving more freedom unless others participate en masse. Good luck with that — most people aren’t courageous enough to take any risks and would prefer comfortable slavery to dangerous freedom.

MD: If you can’t beat them, join them. Governments only steal 3/4ths of the fruits of your labor. Returns on Bitcoin will exceed 75% annually … until they crash. Heck, Ponzi’s scheme earned 100% … in just two months. Make hay while the sun shines.

Instead, I am taking the entrepreneurial route: offering political art and freedom-enhancing tools in exchange for cryptocurrency. The mission isn’t as much to “make money selling merchandise” as it is to grow the value of my cryptocurrency holdings by growing the network. As more and more people use bitcoin, the value of the crypto-economy grows, and the power of the central banks shrinks.

MD: Proving once more, Bitcoins are not money. The value of money never grows. And you don’t refer to it as a money-economy, so you can’t refer to it as a  crypto-economy. It’s a trading economy … and with the dollar your trading with something that shrinks 4% per year. With the Bitcoin your not trading at all. It is so deflationary, you can’t afford to give them up. I wonder if they’re going to ask this guy if “he” would trade in his own store. By his very statements, he would be foolish to do so.

This is the best way I’ve discovered to empower myself and others, by taking a small, low-risk baby step toward more financial independence (which is the most important type).

MD: … as he creeps over the cliff. Surely he’s not that stupid. He knows exactly what he’s doing. But then again, many religious people look just like him. Stupidity can be hard to recognize by looking at someones face..

Do you consider Bitcoin and other cryptocurrencies the best hope for freeing individuals from the unjust power of the state?

Derrick J: Oh, lord no. Philosophy is the best hope for freeing individuals from the power of the state, because the power and the state only exists in their heads. Without philosophy, people are doomed to continue on whatever path their ancestors’ trajectory put them on.

MD: Philosophy? How about logic? The whole power of the state comes from philosophy. It is that philosophy (brain washing) that has put people on the pied piper’s path in the first place. You just can’t make this stuff up can you!

Fortunately for New Englanders, our ancestors placed us on a slow vector toward ever-increasing respect for property rights, which continues today (in New Hampshire especially).

MD: Massachusetts is in New England isn’t it? It was the first state to cave to the money changers. John Adams (of Salem) was the greatest proponent of making the USA into the image of Great Britain … with himself as king. True, New Hampshire was one of the last to sign on … but they signed on. And now people are migrating there to form critical mass to effect secession from the union.  It is small and has a port.  See the Free State Project.

Bitcoin is packed with philosophy, whether users are aware of it or not. Bitcoin empowers the individual with privacy over their money (if they want it), reduces the power of international central banking cartels with every dollar that exits into the crypto-economy, and ultimately helps end wars as people quickly become accustomed to a deflationary currency (rather than the inflationary currencies used to finance the wars of the 20th century).

MD: A proper MOE process has absolute privacy for everyone who “uses” it. It has absolute transparency to everyone who “creates” it. And that’s as good as you can do.

Would you say a “proper” MOE process is backed by philosophy … logic … or plain ole’ common sense (we have to say ole’ because there doesn’t seem to be any common sense these days … it’s been government educated out of us). A proper MOE process guarantees zero inflation. You can’t do better than that. It guarantees free supply of money (and thus no restriction to trade). You can’t do better than that. Responsible traders enjoy zero interest load. You can’t do better than that.

A proper MOE removes “all” the power of central bank cartels by employing simple competition … which destroys their criminal business model. Crypto currency really doesn’t offer any competition at all. It’s trying to solve the wrong problem … the problem of privacy. The problem with the dollar is inflation. Crypto currency swerves in the other direction by guaranteeing trade killing deflation. It does this because of the nonsensical belief that “sound and honest” money is “rare”. It is not!

A mug depicting Bitcoin smashing the Fed.

Do you have any advice for people who want to be free, but feel it is impossible? What can people do to free themselves in your opinion?

Derrick J: Read books that inspire you. Fill your brain with ideas that energize you. Pursue happiness through a virtuous life. Challenge yourself. No matter my current situation, behind bars or on a deserted island, my journey to freedom has been one of personal growth.

MD: I wonder if I filled Derrick’s brain with the simple truth of a proper MOE process he would change his opinion. I predict he would not. Just like showing people the mysterious collapse of WTC7 does not make them question the government’s 9/11 fairy tale about the 19 cavemen with box cutters flying 767’s like they were fighter planes when they couldn’t even land a Cessna. Cognitive dissonance is a tough nut to crack.

So far, what is your favorite part of running the shop?

Derrick J: My favorite part of running the shop is seeing libertarians walk in and watching their faces light up as they realize what the store is. They see Ayn Rand, Ron Paul, and Ludvig Von Mises, a Bitcoin symbol, Gandhi, Thomas Jefferson, and “Live Free Or Die” signs plastered everywhere, and they all say some variation of “I’ve never seen a store like this before!”

MD: But they can’t (won’t) be buying his goods. He’s only accepting crypto-currency. Only really stupid people would be giving up the perpetually deflating crypto for his goods. It won’t be long before he’ll have to resort to accepting dollars and credit cards … just to liquidate his inventory. Mark my words.

Those interactions make my day.

MD: Pretty soon he’s going to realize interactions don’t make his day … trade makes his day. There aren’t enough stupid people to make his day. He has to change his model. He’s trapped, because when he changes his model, he abandons his philosophy. You just can’t make this stuff up!

Thanks so much for sharing your experience!

Derrick J: Thank you for asking!

MD: I’ll bet the interviewer didn’t trade for anything in his shop. What do you think?
Posted on

Amazon over valued (draft)

https://seekingalpha.com/article/4092561-amazons-stock-looks-headed-waterfall#alt1

The Amazon Con: Bulls May Be Crying A River One Of These Days

|

126 comments

|

About: Amazon.com, Inc. (AMZN), COST, HD, TGT

DoctoRx

Special situations, growth at reasonable price, value, micro-cap

Summary

AMZN is a stock one has to believe in to justify its price, yet current quarter results are improbably bad once again.

MD: Anyone who has used Amazon’s services is likely to be a believer. What the richest person in the world is a big holder in the company, doesn’t that say something about “his” belief in the company?

Its acquisition of Whole Foods is a case of a 200X P/E stock buying a 30X P/E stock, showing the former stock is overvalued.

The entire move from mail order (or e-mail order) delivery to stores was done 90 years ago, but there is no first-mover advantage now for AMZN.

MD: Now that is abject nonsense. Amazon began by making it easier and more efficient for buyers to find sellers and vice versa. It was just a “classified advertising” implementation on the WWW … and it wasn’t the only one. Bezos sees business as three days: day one it develops; day two it rides the wave; day three it dies. Bezos will never leave day one if he can help it.

As competition ramps in e-commerce, with big box chains with the advantage of pick up in store, AMZN may see worsening losses in its core retail division.

MD: Pretty amazing someone can see the big box chains with the advantage. “Pick up in store” is no enticement for me. Save me the trip is my enticement. I think there is a middle ground. Deliver to my nearby convenience store and I’ll pick up there … and enjoy lower shipping cost of course.

Thus, while timing is impossible and there are no certainties, risk-reward for AMZN looks poor, while many other stocks trade normally and are therefore priced for positive returns.

MD: This guy would have thought Standard Oil looked poor … and of course Microsoft and Apple and Oracle (both of which were on the ropes at one time) and Google.

Introduction – rationale for another bearish article

When the facts change, I change my mind (per Keynes). But when the facts get stronger, I carry on with a bullish or bearish thesis, and that’s the case in my humble opinion with Amazon.com’s (AMZN) stock price. This article happens to propound a bearish hypothesis, but as an example of sticking with a bullish hypothesis that is not working, on September 15, 2015, Seeking Alpha published my final Apple (AAPL) article. The stock was going nowhere, hanging around a pitiful $100, yet the title of the article was a straightforward:

Mr. Market Errs: Apple Is Unlikely To Be Stopped In Its Rise To Further Heights

In the bullet points, I argued that:

  • … facts suggest that the iPhone (and therefore Apple) may in fact be on the verge of a major, historic victory.
  • Even if that does not occur, AAPL remains an undervalued stock with strong total return potential for patient investors.”

As it happened, 8 months later, AAPL was down another 10%, and as late as July, it was below $100: but look at it now. So – I was early but (so far) basically correct.

MD: I wouldn’t touch Apple with a long stick. How in the world can they compete with a Linux based system? How can they compete with Open Source? They have to keep innovating … or they are killed by commodity providers.

I look at AMZN that way, in reverse. Timing things like this even to the year is impossible. (And, of course, sometimes I am simply wrong.)

MD: I wonder what he thinks about BitCoin. That who concept is laughably wrong on its face … the the price of a BitCoin continues to go up exponentially.

Next, a few introductory clarifications. First, the “con” referred to in the article is about the stock price, more specifically the resurrection of the 1997-2000 con game that eyeballs, or in AMZN’s case, eyeballs plus sales at near-zero profit margins, mattered to the exclusion of earnings.

MD: If you pour all your earnings into building infrastructure, are you creating a worthless company? If you expense everything instead of capitalizing it, are you creating a worthless company? If you only had to look at earnings, a financial statement would be just one line instead of may pages and many many lines.

I’ll end my comments here. This guy is going nowhere! You can read the rest of the article by going to the link at the top … repeated here.

https://seekingalpha.com/article/4092561-amazons-stock-looks-headed-waterfall#alt1

Posted on

What is money?

WHAT IS MONEY?

Definition: Money is an “in-process promise to complete a trade over time and space”

Proof:

Examine trade: (1) Negotiation; (2) Promise to deliver; (3) Delivery.

In simple barter exchange in the “here-and-now”, (2) and (3) happen simultaneously, on the spot. Any exchange of “value for value” (e.g.corn for piglets;  gold or gold backed exchange for other stuff; etc.) is in this category and does not involve money.

Money enables simple barter exchange over time and space. Thus, money is obviously “a promise to deliver”. It can be nothing else. It doesn’t exist before the promise is made nor after delivery is made”.

Money is only created by traders (like you and me buying things over time). It is not created by banks nor the governments they institute. In fact, “all” governments are just traders. But unlike you and me, they never deliver on their trading promises which create money. They just roll them over. And that is DEFAULT. And purposeful DEFAULT is COUNTERFEITING.

Banks sustain themselves on tribute collections (and all your tax payments go to the banks as tribute collections). Governments sustain themselves on counterfeiting. You give them sustenance through the INFLATION their counterfeiting generates.

We have never had a proper Medium of Exchange (MOE) process. But it is trivial to institute one. And anyone, or any group of traders, can create a “proper” MOE process. And multiple processes can co-exist and compete (by minimizing costs).

DESCRIPTION OF A PROPER Medium of Exchange (MOE) PROCESS:

The trader sees clear to make a trade over time and space and chooses to create “money” to effect the trade. For example, you or I choose to trade 360 monthly payments for a house, which we can take possession of and live in now and over the whole term of the promise and beyond.

The trader gets his promise “certified” (now bankers make you come hat-in-hand begging for what they fictitiously call a loan “of their capital” … that’s the scam). “Certification” means the trader’s identity and the terms of his promise are recorded and performance on the promise are transparently displayed to all lookers.

The certificates … first in the form of a simple ledger entry that creates the money and then transfers it to the seller … then circulate as the most common object in “virtually” every simple barter exchange. We know it as money (it may be a ledger entry; coin; or currency … but only one at a time).

The dollars we use everyday come from a “nearly proper” MOE process run by the banks and their “association”, the Federal Reserve. It has a leakage goal (i.e. INFLATION) of 2% and delivers 4% INFLATION on average. It gives its members privilege to create 10x as much money as they have … earning 4%x10 or 40% annual return … doubling “their” money in less than two years. Thus “a capitalist is simply two years”.

“A proper” process monitors performance on the promise (e.g.: did the trader make his monthly payment). If he did, all is well in paradise. If he didn’t, the process “immediately” makes an INTEREST collection of an amount equal to his DEFAULT … reclaiming the money as if he paid it back.  This guarantees perpetual perfect balance of the supply and demand for the money … it guarantees perpetual zero INFLATION.

The operative relation is: INFLATION = DEFAULT – INTEREST = zero.

Who pays the interest? Non-responsible traders do.  An existing well known model is the Mutual Casualty Insurance Company. Here INCOME = PREMIUMS – CLAIMS = zero. The money is made on the investment income and works to reduce premiums actuarially. Another distinction with the money process is that “all” members of the insurance group pay PREMIUMS. With a proper MOE process, responsible traders  (i.e. traders like you and me who never DEFAULT) experience zero INTEREST load over the duration of their promise.

Note: For any given money creating trade, no money exists “before” the trading promise is certified, nor “after” final delivery (delivery returning the money which is then destroyed). And since “all” money is created in this way, “all” money in circulation is an “in-process promise to complete a trade over time and space”.

With a “proper” MOE process, banks are “competed” out of existence. A “proper” MOE process could be instituted right now (unless the governments they institute outlaw it) and banks would have to change or go out of business. And since INFLATION is perpetually zero, the governments “must” sustain themselves only on tax and fee collections. They cannot counterfeit. Irresponsible traders are drummed out of the marketplace.

What could be simpler and more obvious?

What hoax could be larger than that leveled on virtually all of us by the banks and the governments they institute?

Why did WTC7 fall down?