Category: MisesMonks

Mises Monks are a term we associate with those who worship Ludwig Von Mises … and his disciples. They think gold is money … and “sound money” to boot. They are clueless about money … but well funded and noisy … and dangerous.

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Cafe Hayek: An Odd Tic

An Odd Tic

by Don Boudreaux on September 12, 2017

MD: I really don’t have much to add to embrace the concept being discussed here. It is right on. Anyone who has read the Federalist Papers and particularly the Anti-Federalist papers will know the Federalists had two principle reasons for forming a union: (1) To use the union to bully the merchants’ competition. (2) To use the union to protect the merchants’ practices. It was all about what was good for the merchants … not for the people. The only thing they needed the people for was to pay for it.

Government is “never” the solution to such issues. Governments create the problem in the first place and government  applied to the solution just exacerbates the problem … and leads to wars.

One of oddest tics exhibited by protectionists who otherwise have pro-free-market sympathies is to insist that the government of their country (say, the United States) use punitive tariffs and other trade restrictions in order to countervail the market-distorting effects of the policies of foreign governments.  There are many problems with this specific argument for protectionism (again, not least that, in practice, it is aimed only at those policies of foreign governments that are believed to artificially lower the prices of those countries’ exports; it is never aimed at those policies of foreign governments that make the prices of those countries’ exports higher).

But here I note only that it is especially odd for people who allegedly understand and celebrate the virtues of free markets to justify protectionist restrictions on the grounds that these restrictions will allegedly countervail or “adjust for” whatever market distortions are (or are asserted to be) unleashed by the economic interventions of foreign governments.  It is odd because these particular protectionists – in the U.S., many conservatives – generally distrust their government to act wisely, prudently, skillfully, knowledgeably, and apolitically when meddling in the economy.  And yet as soon as the stated particular reason for intervention is foreign-government misdeeds that allegedly distort the American market, these free-market types – these free-market conservatives – lose all of their skepticism of their own governments’ abilities to intervene wisely, prudently, skillfully, knowledgeably, and apoloticially.

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Cafe Hayek: Should There Also Be “Queue Controls”?

MD: What Cafe Hayek says in this article is so obviously true it is scary that they even have to say it. But then Cafe Hayek doesn’t know what “real” money is either … and that is scary too.

Should There Also Be “Queue Controls”?

by Don Boudreaux on September 7, 2017

in Prices, Reality Is Not Optional, Seen and Unseen

Here’s a letter to another person who caught a radio interview with me this morning:

Mr. Kasim Wagner

Mr. Wagner:

Thanks for your e-mail.

You write that “it plainly is wrong for anyone to force people to pay higher prices for supplies in disaster areas” and, therefore, “government’s duty is to protect people from this greed.”

First, I agree that it’s wrong to force people to pay higher prices.  But we’re not talking about forcing people to pay higher prices.  Every buyer is free not to pay higher prices.  Of course, those people who don’t pay higher prices don’t get the goods.  Yet people are no more forced to pay whatever prices they pay because of natural disasters than they were forced to pay whatever prices they paid before any natural disaster became a reality.  All of those prices are paid voluntarily – a fact that is both economically and ethically relevant.

Second, if you truly believe that it’s unethical for anyone self-interestedly to cause consumers’ costs of acquiring much-needed goods to rise significantly, then you must believe that it’s unethical for people to rush into, and to stand in, the long lines that occur whenever there are shortages of goods.  Every person standing in front of Jones in a line of consumers hoping to buy, say, bottled water self-interestedly puts his or her own welfare ahead of that of Jones.  Each of those persons standing in front of Jones – both by increasing the chance that the store will run out of bottled water by the time Jones reaches the front of the line, and by increasing the amount of time that Jones waits in line – raises Jones’s cost of acquiring bottled water.

Do you believe that the individuals standing in line in front of Jones are unethical?  Should government, in addition to imposing a ceiling on the monetary price that people pay for bottled water, also impose a “queue ceiling” on the number of people who stand in line to buy bottled water?  If, as I suspect, your answer to each of these questions is “no,” why do you believe that government should prohibit only those increases in the costs of acquiring a good that take the form of increases in the monetary price of the good?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

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Deviant Investor: War on Cash Backfires

War on Cash Backfires

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Guest Post from Clint Siegner, Money Metals Exchange

Indian Prime Minister Narendra Modi launched a surprise attack on cash in late 2016. He gave Indians a few days to convert the two largest denomination bills then circulating to bank deposits, after which point any undeposited notes would become worthless. The move was intensely controversial. Transactions completed using cash represented the vast majority of economic activity in the country.  [Editor: See note below!]

MD: When looking at individual transactions, cash represents the majority of economic activity in any country. When you’re talking about “real” money, “all” transactions are in cash. And all cash transactions are totally anonymous. This is different than saying “money creation” is anonymous. With “real” money, “all” money creation is transparent. This means anyone can see who is creating the money and under what terms and how they are performing on delivering on those terms. And they can see this is real time.

In order to sell the program Modi employed a familiar strategy. He vilified the users of cash as tax cheats and criminals. He promised the measure would punish black marketeers, boost the Indian economy, and increase tax revenues. The latter may be true – forcing transactions onto the grid is good for nosy bureaucrats trying to impose taxes and controls.

But it now appears Modi’s claims about the amount of criminal activity tied to cash and promises of economic growth were nonsense.

 

The official argument was that cash is an indispensable tool for black marketeers. The reform would catch many of these “criminals” with piles of cash they would be unwilling to declare and deposit. That argument fell apart last week when the Indian central bank reported that 99% of the outlawed bills were converted to deposits. Turns out very few “criminals” were punished.

MD: So, did they reverse the policy?

Meanwhile the Indian economy is paying the price. Growth has slowed significantly and some estimate as many as 5 million jobs have been destroyed by the demonetization of cash. More and more Indians are angry.

MD: Why would that be? What transactions that were being done in large denominations quit being done altogether?

They didn’t enjoy the upside promised by Modi. Instead, they suffered massive economic disruption and loss of privacy. Perhaps India’s experience will provide an object lesson elsewhere in the world where bankers and the political elite are waging a similar war on cash.

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

Thanks to Clint Siegner, Money Metals Exchange

Note: Voltaire understood the process over two centuries ago. He said, “Paper money eventually returns to its intrinsic value – zero.” (Voltaire, 1694-1778)

MD: And that is correct. It’s only money when the promised delivery is in process. On delivery, the money is returned and destroyed.  And during the delivery process, the money itself never has intrinsic value. It doesn’t need it … just like 1965 when we proved that coins didn’t need silver content to be useful to traders. So what?

Unbacked debt based fiat currencies (dollars, euros, pounds and most others) that possess no intrinsic value are devalued by central bankers and governments.

MD: This is nonsense. When you know what money is, you know “all” money is “fiat” … and that is no issue at all. Governments counterfeit money. They don’t create it with a trading promise on which they intend to deliver. And counterfeit money is obviously not real money and is not tolerated at all in a proper MOE process.

And with “real” money there is no such thing as a central bank. There is no need for one. And with “real” money, the value of the money itself never changes. That is guaranteed by the process itself … a process that maintains perpetual perfect balance between supply and demand for the money itself.

With “real” money, the ideal unit of measure is the HUL (Hour of Unskilled Labor). This unit (like the ounce … and unlike the ounce of gold) has never changed over all time. It has always traded for the same size hole in the ground.

They do it because it benefits the political and financial elite and appears beneficial in the short-term. History shows the supposed benefits of devaluation are nonsense, but they keep trying…..

MD: And they couldn’t keep trying with a “proper” MOE process and “real” money. The process would exclude them from the playing field with its natural negative feedback system … i.e. mitigating defaults immediately with interest collections of like amount.

Fiat paper money and political power do not mix well. The people — not the political or financial elite — pay the price.

MD: Counterfeiting and political power are a “natural” mix. And it is correct: counterfeiting results in inflation … and that hurts responsible traders. The problem is not in the “fiat”ness of the money … it’s in the counterfeiting by the governments.

It has happened before and will happen again. Gold and silver are good alternatives to devaluations by governments and central bankers.

MD: Gold and silver are only good for a very short time when counterfeiting finally results in a reset. In the normal operation of a “real” MOE process, gold and silver play no role whatever. They are just clumsy inefficient stand-ins for real money. They can’t compete with real money except at reset time … which never occurs with a “proper” MOE process … because counterfeiting is not tolerated by a proper MOE process. With our current process (and all historical MOE processes), counterfeiting is not only tolerated, it is required. Governments need the inflation to sustain themselves and the money changers, that institute those governments for their protection, need the fictional “time value of money” to demand tribute and run their farming operation (i.e. business cycle).

Gary Christenson

The Deviant Investor

MD: Gary Christenson and the Deviant Investor need to “get a clue” … but they won’t because they’re in the gold selling business.

 

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Cafe Hayek: in Complexity & Emergence, Economics, Hayek, Philosophy of Freedom

 

MD: This article illustrates how poorly the Mises Monks write. It also illustrates how they analyze a problem to death … totally failing to recognize that the problem they are analyzing is totally irrelevant.

Quotation of the Day…

by Don Boudreaux on September 4, 2017

in Complexity & Emergence, Economics, Hayek, Philosophy of Freedom

… is from page 60 of one of F.A. Hayek’s greatest essays, his 1945 lecture “Individualism: True and False,” as this essay is reprinted in Studies on the Abuse & Decline of Reason, Bruce Caldwell, ed. (2010), which is volume 13 of the Collected Works of F.A. Hayek (original emphases):

To the accepted Christian tradition that man must be free to follow his conscience in moral matters if his actions are to be of any merit, the economists added the further argument that he should be free to make full use of his knowledge and skill, that he must be allowed to be guided by his concern for the particular things of which he knows and for which he cares, if he is to make as great a contribution to the common purposes of society as he is capable of making.  

MD: One sentence … 91 words … no concepts … no coherent thesis … and he mixes two fictions … religion and economics. What’s not to love about the Mises Monks. What it does seem to properly say is: A society must be very advanced for an economist to be perceived of value. No society can get large enough for an economist to “really” be of value.

Their main problem was how these limited concerns, which did in fact determine people’s actions, could be made effective inducements to cause them voluntarily to contribute as much as possible to needs which lay outside the range of their vision.  

MD: See what I mean about analyzing a problem to death … a problem that is irrelevant? I guarantee you, in the olden days before anyone could even say “economist” or “christian”, someone struggling with a tree branch too large for them to place would immediately get help from another human standing by. No instruction manual, advanced inbred degree, or analysis required.

What the economists understood for the first time was that the market as it had grown up was an effective way of making man take part in a process more complex and extended than he could comprehend and that it was through the market that he was made to contribute ‘to ends which were no part of his purpose’.

MD: I wonder if the Mises Monks ever stand back and realize: It takes a very very large society indeed to find anything about the Mises Monks to be of redeeming value. If you need sand poured out of a boot, you’re sure not going to go to a Mises Monk … even in an advanced society.

DBx: Here’s Sheldon Richman on “Individualism: True and False.“

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Cafe Hayek: How much government … how much force.

 

Quotation of the day …

by Don Boudreaux on September 3, 2017

in Reality Is Not Optional

MD: To the “gold is money” folks, reality sure seems to be optional.

… is from page 719 of the 2007 Liberty Fund edition (Bettina Bien Greaves, ed.) of Ludwig von Mises’s 1949 treatise, Human Action:

MD: Mises Monks quoting from their bible.

The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning.  Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.

DBx: You might believe, as Mises himself believed, that a peaceful and prosperous society requires some minimum amount of government.

MD: And you might believe that the camel requires some minimum amount of his head under the tent.

Or you might believe, as most people believe, that a peaceful and prosperous society requires a great deal of government.  Or you might be a comrade who longs for complete and detailed government design of, and control over, all of our economic activities.  Wherever you stand on the spectrum of “minimum, nightwatchman government to Soviet-style state control,” you must never forget that the ultimate distinguishing feature of the state is its ability to issue dictates that are enforced with coercion.  And this reality does not disappear when state decisions are made democratically.

Every state erects statues to its most successful operatives, flies its flags gloriously high in the sky, conducts its business in imposing buildings, adorns its officials with impressive titles and honorifics, and – above all – assures its subjects that it possesses a superhuman capacity to know and to care, and that it uses this capacity always and only in ways that make the state an indispensable boon to everyone over whom it reigns.  Yet behind all this pomp and fine display are iron fists and spiked boots.

MD: … and money that is not real.

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Deviant Investor: Gold: New 2017 High

Gold: New 2017 High

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Guest Post from Stefan Gleason, Originally Published on Money Metals Exchange

Gold’s naysayers and doubters came out in full force earlier this summer as sentiment reached its nadir. The mid-year pullback in prices did, too.

There can be no doubt about it now – gold has broken out of its summer doldrums. On Monday, the yellow metal finally broke through the longstanding $1,300/oz resistance zone to make a new high for the year at $1,316.

MD: Can you imagine how boring this would all be if we had “real” money? “There can be no doubt about it now — real money has broken out of it summer doldrums of 1.000 HULs. On Monday, the ideal media finally broke through the longstanding 1.000 HULs resistance zone to make a new high for the year … and the decade … and the century  … at 1.000 HULS.

Assuming the breakout holds, the next upside target is $1,375/oz, the high point for 2016.

MD: “Assuming the breakout holds, the next upside target is 1.000 HULs, the high point for the millennium.

There are plenty of bullish factors behind gold’s recent upside momentum to continue pushing prices higher in the days and weeks ahead. The gold mining stocks are starting to show relative strength again. And the U.S. Dollar Index appears to have begun another new down leg this week, falling Monday to a two-and-a-half-year low.

MD: Now really. How can these twerps think gold is money?

Another bullish factor is geopolitics. Gold gained a few more dollars in early trading Tuesday morning in Asia after North Korea launched a missile over Japan. Japanese Prime Minister Shinzo Abe said, “Their outrageous act of firing a missile over our country is an unprecedented, serious and grave threat and greatly damages regional peace and security.”

MD: Real money is “never” affected by geopolitics … or any other kind of politics for that matter.

On any ordinary news day, this dangerous provocation from North Korea would be the top story on all the cable news channels. Hawks would be calling on the U.S. to retaliate, and doves would be warning of the potential for millions of deaths in the event war breaks out in the densely populated region.

For now, though, the unprecedented flooding caused by Hurricane Harvey is the Trump administration’s top priority. Early estimates are that the storm has caused $40 billion in damage. Water levels are still rising in Houston, and surrounding areas extending to Louisiana, so the scale of the catastrophic losses stemming from 11 trillion gallons of water will continue to grow in the days ahead.

MD: Real money is never affected by weather calamities … or earth shaking calamities … or run away fires. In fact, that’s when it really shines. Traders will create money (i.e. make trading promises spanning time and space) immediately and begin repairs and rebuilding. They will be unconstrained in creating this money. And they can make promises spanning 5 or 10 years with periodic payments to prove performance and maintain the negative feedback loop. Responsible traders will enjoy zero interest load. And all traders will enjoy zero inflation. Life is good.

Several major oil refineries have been shut down by the storm. However, crude oil production is little affected. Oil inventories are expected to build even as gasoline prices rise (gasoline futures jumped 3% on Monday).

MD: You really have to wonder about this reporting. They reported that the refineries would be shut down for as much as a month. And they reported they’re tapping the strategic oil reserve for crude oil. Now what in the world is that crude oil supposed to do without refineries?

The disaster is bringing Americans from disparate backgrounds and worldviews together, united in a common purpose to help provide relief to those in need. Perhaps Congress will set aside some of its partisan acrimony when it goes back into session next week. Unfortunately for taxpayers, though, outbreaks of bipartisanship are usually associated with emergencies that cause both sides to agree on even more spending.

MD: Somebody (this writer) needs to ask themselves “what is the purpose of congress?”

The political pressure to make sure federal agencies are equipped to handle Harvey relief efforts (which will be ongoing for months) figures to be overwhelming. Conservatives who had aimed to force concessions in an upcoming budget fight may conclude that they now have no leverage to do so.

MD: With real money, the agencies couldn’t do this. They couldn’t create the money to do it because they are deadbeats. They never return the money they create. But with real money the agencies wouldn’t be needed to do this in the first place.

President Donald Trump so far hasn’t backed off his vow to pursue border wall funding even if Congress refuses and a government shutdown occurs. But a government shutdown in the aftermath of a major natural disaster could be a political disaster for whoever gets blamed for it.

MD: The only thing bad about a government shutdown is that we continue to pay the government workers for overtly doing nothing rather than covertly doing nothing. A permanent government shutdown would be oh-so-refreshing.

With so many risks hitting investors this week, it’s no surprise that the gold market is benefiting from safe-haven inflows.

MD: Now reconcile that with your “gold is money” meme!

Silver is benefiting as well. Although the silver market has not yet hit a new high for the year, prices advanced nearly 2.5% Monday to close above the 200-day moving average.

If silver can now start showing leadership, that would be bullish for the entire precious metals complex. The gold:silver ratio currently stands at about 75:1. Gold is still trading at a high price historically relative to silver.

The ratio can move rapidly to the downside when silver prices are surging. That was the case from late 2010 to early 2011, when the ratio dropped from the high 60s to the low 30s. An even bigger move could be in store for those who buy silver now, while the gold:silver ratio is still in the 70s.

MD: I can just picture this writer sitting on the beach and giving us a play by play of the waves coming in. I wonder if he would even move to claiming the waves are money.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

 

Thanks to:  Stefan Gleason, Originally Published on Money Metals Exchange

 

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Deviant Investor: Eight Days to Destruction

MD: We here at MD central, are at ground zero +1 from Harvey. We were disturbed very little by the calamity. We were above the flood and could divert the rain. And having gold would not have changed that. Lets observe again why we don’t need the likes of Christenson in our space.

Eight Days to Destruction

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Harvey made landfall as a Category 4 Hurricane on August 25. The wind and flooding caused massive destruction. The news mentioned one hundred billion dollars as a preliminary estimate of the damage.

WD: That’s $25,000 per person (using 4 million population). The population actually affected was probably  1/1000th that. So you would have $25,000,000 per person actually affected physically. When the bullet hits your heart, the damage can be viewed as infinite. This too will pass … and frankly, it will show that Bastiats broken window fallacy gets it wrong. I know many many contractors who were sitting on the sidelines that are now being called into service. And that money they will be earning was not doing anything in the economy before this calamity. When such a small percentage of us really have to work … “make work” becomes a strategy. We need a way to keep score when robots do all the work. We need to create work robots can’t do. Lawyers have been doing it for years … but are now being crowed out by word processors (boiler plate) and artificial intelligence … plus the proof that laws don’t work. First, West Law will show you every statute has been decided every way possible. And with 40,000+ new ones each year, there is no knowing what the law is.

At MD we know it is all about principles … not men … not laws. We start with the golden rule and really don’t have to go beyond that.

Eight days before on August 17 Harvey became a named storm. There was no apparent cause for alarm on August 17.

Two days later it was upgraded to a tropical depression. Harvey reached hurricane strength on August 24. Much can happen in eight days.

MD: Much can happen in 8 seconds … witness the mysterious collapse of WTC7.

  • August 17: Harvey is named
  • August 21: Total eclipse of the sun. The path crossed the contiguous 48 states. Read “Total Eclipse of Sense.”

MD: Don’t bother to read it. It’s nonsense.

  • August 21: President Trump announces a revised and renewed war effort in Afghanistan.

MD: Which changes nothing. Just another lie confirmed … as anticipated. Trump has still not mentioned WTC7. He “is” one of them.

  • August 25: Category 4 Harvey makes landfall, destroys buildings and dumps trillions of gallons of water on Texas. Houston, the 4th largest city in the U.S. flooded in many areas.

MD: Luckily, it hit ground zero at Rockport … which if you ever visited it was a dead community … because of previous hurricanes. The first port in Texas was originally Indianola … which no longer exists. It lasted until the first hurricane after its creation. You don’t build your nest on a highway.

MUCH CAN CHANGE IN 8 DAYS!

SO WHAT?

 

  • Are you prepared for drastic changes in your physical environment? Harvey, Katrina, Rita, and 9-11 show that our world changes, sometimes in deadly ways.

MD: If you are dependent on government or PM (precious metals), the answer is an emphatic “no!”.

  • Are you prepared financially?

MD: Yes. By minimizing finances. Everything is bought and paid for. My toughest task is protecting my real property … which is un-protectable as is evidenced by the IRS putting a lien on its free-and-clear state in just 19 days … with no due-process whatever … after I  told them I couldn’t pay their demands if I wanted to. The RICO statues prohibit my financial support of criminal enterprises. Thank you very much USA Constitution and the rule of law!

  • What will a stock or bond market crash do to your life style and retirement plans?

MD: Nothing. It will make that store of wealth disappear for me … just like it did when the IRS paid a visit. You can only remove your self from the trading field to every extent possible … or you have to be all in and subject to any government encroachment government chooses to employ.

  • Given their extreme valuations, a crash is possible.

MD: Their value is to the gamblers and the duped. Buy raw land. Learn to live on it and from it. Learn to protect it from encroachment (which means invite others of like mind to join you on it and help you expand it … and to arm themselves for “self” defense). Iterative secession will grease that skid.

  • In 2008 we experienced a credit crunch, a destructive event because the economic world depends upon credit. It could happen again.

MD: Wrong. “All” money is credit … because all money represents a promise … and promises are credit.

The destructive event was leverage and failure to mitigate defaults with immediate interest collections. The process was infested with highly leveraged gamblers. An “improper” MOE process is always a house of cards. One card tumbles and the problem cascades.

A “proper” MOE process doesn’t suffer this contagion. If one trader fails to deliver, no other trader (defective processes call them “counter parties”) is affected at all. It only affects new trading promises creating money … and only those by irresponsible traders. It is far far  more stable than any other process.

  • The U.S. dollar is the world’s reserve currency. The U.S. military and the petrodollar support that status. Change is coming.

MD: A proper MOE process has no reserves … let alone a reserve currency. Once instituted, all the worlds currencies will copy it … or disappear from lack of users.

CONSIDER PAST CHANGES IN 8 DAYS

 

Gold Market: From January 21, 1980 to January 28, 1980, (seven days) the price of gold dropped from a high of $873 to a low of $607. Down 30%!

MD: Seems it had a similar dip in 1987 … and took 15 or 20 years to recover. I knew people who bought that really good $800 gold then.

DOW Index: From October 12, 1987 to October 20, 1987, the DOW dropped from a high of 2,505 to a low of 1,616. Down 36%!

MD: That index is totally worthless. Institute a proper MOE process and that index might be of some value. Now …  it’s just a measure of speculation … measured with a rubber ruler.

NASDAQ 100 Index: From March 27, 2000 to April 4, 2000, the NASDAQ 100 dropped from a high of 4,781 to a low of 3,525. Down 26%!

9-11 Attack: Three buildings collapsed at “free-fall” speeds after being hit by two airliners. An official story was created, but let’s not quibble about details. The United States was a different environment eight days after 9-11.

MD: 9-11 false flag … not attack. And the USA government didn’t change. It was just more obviously revealed to be the occupied government it was the day before the false flag. But to this day, a full 94% of the USA population still don’t get it.

S&P 500 Index: From October 2, 2008 to October 10, 2008, the S&P 500 Index dropped from a high of 1,160 to a low of 840. Down 27%!

Hurricane Harvey: A category 4 hurricane was a tiny storm only eight days earlier. Houston will recover and rebuild for eight months, or perhaps eight years following the incredible flooding. Houston, you have a problem!

MD: We had a different model in New Orleans. The areas cleaned out were infested by poor people dependent on government. Normal society would have pushed them away long ago … probably to higher ground. Those areas are now being repopulated by the wealthy … with little better, but far from perfect, resistance to a returning calamity.

In Houston, we earlier had a mayor who was a real estate guy. He was able to dismantle most of the obstacles to improvements of the inner city (and displacement of the riff raff to the periphery … as was the norm before we became over civilized by those who now call themselves “progressives”). Further, insurance specifically excludes “rising water” from covered damage. So those with loses will just plain lose.

But now in Houston they are wealthy … and just as the poor are able to go to wealthy (after winning the lottery or making it as a professional basketball player) and back to poor very quickly, the wealthy have a way of doing the opposite.

Houston will have no trouble like New Orleans had. And Bastiats observation will be proven to be wrong in this era of more people than work (caused by robotics).

Have you noticed, the slums in Rio de Janeiro live up on the hillsides away from the city center. A flood would bother neither the rich nor the poor there … but for different reasons.

Yes, much can happen in only eight days.

 

According to Charles Hugh Smith, “Next Stop, Recession: The Financial Meteor Storm is Headed Our Way”

“The next recession – which I suggested yesterday has just begun – will be more than a business-cycle downturn; it will be a devastating meteor storm that destroys huge chunks of the economy while leaving other sectors virtually untouched.”

MD: “All” recessions are business cycle downturns. Business cycles are purposely caused by money changers. It is their farming operation. Remove their control of the MOE process and the problem goes away instantly … poof. Money is properly in perpetual free supply with a proper MOE process. The money changers farming operation can’t work with a proper MOE process.

His description of coming economic destruction parallels the devastation in Houston. If you live in the flood zones, you’ll see vast destruction. Higher areas will get rained on but could be virtually untouched by the massive destruction.

MD: And higher means 50′ higher! Give you a clue why coastal houses are built on piers? Why they have blow away walls underneath the living quarters?

 

WHAT CAN WE DO TO PREPARE FOR FINANCIAL STORMS?

 

  • Self-reliance. Find your own answers.
  • Possess real money. Don’t depend entirely upon the debt based digital and paper stuff that can vanish as quickly as a Cadillac in a Houston flood.

 

MD: He says without defining real money … and being clueless about what real money is, always has been, and always will be. He thinks precious metals are real money. This was disproved conclusively in 1965 when they removed silver from the coins. Nothing changed. The quarter dollar coins without silver traded for the same gallon of gas as those containing 90% silver. The silver wasn’t involved in the trade at all! It proved that the money represented a trading promise … not something of intrinsic value. But these PM bugs still pedal their lore … as do all religions which are continually crowded by reality.

  • Minimize counter-party risk and off-load assets that will be destroyed in a credit crunch, debt reset, dollar devaluation, or crash in the purchasing power of the dollar.

MD: There is no counter-party risk with a “proper” MOE process. Is that minimal enough?

  • Possess assets that will be less affected by counter-party risk, a credit crunch, and massive inflation in the supply of dollars. Gold and silver come to mind.

MD: Yeh … and cinder blocks are an even better idea. You can’t build anything with PM. And when people are not accustomed to trading with it … and they certainly aren’t now … your education (indoctrination) problem will extend far beyond the calamity.

MD: Anyone who has carried a bag of dog food knows that isn’t a bag of dog food.

  • Otis (the dog) relied upon himself, knew what he needed, and did what was necessary. A bag of food was his “gold” in the storm.

MD: Anyone who has fed a dog knows they will eat all you put out there for them. They will eat until they can eat no more … which is two or three times what they should regularly eat. Left to themselves, you can give them 60 days of open food and they will live 15 days and die of starvation in their own dung.

Gary Christenson
The Deviant Investor

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Cafe Hayek: insurance against exploitation,

MD: I wonder if Boudreaux and Buchanan have read the Anti-Federalist Papers.  Let’s see if they have clue.

Quotation of the Day…

by Don Boudreaux on August 28, 2017

in Myths and Fallacies, Virginia Political Economy

… is from pages 171-172 of my late Nobel-laureate colleague Jim Buchanan‘s 1987 paper “Man and the State,” as this paper is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan:

The monumental folly of the past two centuries has been the presumption that so long as the state operates in accordance with democratic procedures (free and periodic elections; open franchise; open entry for parties, candidates, and interests; majority or plurality voting rules) the individual does, indeed, have quite apart from any viable exit option.  

MD: That is a badly constructed … long sentence. It ends “individual does have”. Does have “what”?  And then adds “quite apart from any viable exit option” has nothing to refer to. If it means the individual has a viable exit option to leave the government, he certainly doesn’t. Neither does a state. The Constitution is obviously flawed with its failure to include a buy/sell clause.

Modern states have been allowed to invade increasing areas of “private space” under the pretense of democratic process.

MD: We here at MD of course know that democracy … and thus the democratic process … has no chance of working with more than 50 people involved. And our USA process has 500,000 people involved at our “most” representative level.

From Anti-Federalist Papers #17: Federalist Power Will Ultimately Subvert State Authority:

DBx: People whose understanding of democracy is no more advanced than what they learned in fifth grade believe that the democratic procedures listed above by Buchanan are both necessary and sufficient to ensure a free, open, vibrant, and prosperous society.  And when such people – people such as Duke historian Nancy MacLean – encounter serious discussions of the need for constraints on majoritarian rule, these people leap to the conclusion that those who counsel such restraints are undemocratic enemies of the People.  Whatever you think of democracy, such leaping is a sign of terrific ignorance of both intellectual and political history.  And yet displays today of such ignorance are unthinkingly celebrated in “Progressive” circles as signs of deep wisdom and moral superiority.

MD: Boy is this the pot calling the kettle black. DBx seems to be clueless about democracy too. Earth to DBx! Democracy can’t work with more than 50 people involved!

For democracy to work, the voters must be intimately familiar with the issues on which they are voting. For democracy to function in a republic, those choosing the representative for the next lower level must personally know the person they choose … and that person must personally know them to represent them (the individual being at the top level and himself dealing himself with all issues under his control … like his own welfare) .

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Cafe Hayek: Prosecuting price gougers

MD: Every once in a while, even the Mises Monks get it right.

An Open Letter to the Attorney General of Texas

by Don Boudreaux on August 26, 2017

in Prices, Reality Is Not Optional, Seen and Unseen

 

Mr. Ken Paxton, Attorney General
State of Texas
Austin, TX

Mr. Paxton:

You boasted today on Fox News that your office, in the wake of hurricane Harvey, will prosecute so-called “price gougers” – that is, merchants who charge prices deemed to be too high by Texas politicians.  I urge you to quit your witch hunt.

MD: Hear hear!!

Because each ‘gouging’ price paid for any item is paid voluntarily by a consumer spending his or her own money – and because that consumer cannot conveniently find that item elsewhere at a lower price – the consumer clearly doesn’t deem the price to be too high.  That is, while the consumer would, as always, prefer to pay a lower than a higher price, the consumer prefers to pay the high price and actually get the item than to save money by going without the item.  Formal legalities asides, why should the judgment of politicians about what prices in the aftermath of natural disasters ‘should’ be override the judgments of on-the-spot consumers about the appropriateness of prices?

Government intervention is often justified as a means of correcting “market failure.”

MD: Government itself is a “sanity” failure. No government at any level, even at the bottom (the individual being at the top) should do anything the level above it cannot do itself. Big government is for wide cooperation … not wide control. The individual clearly is able to make their own decision here … and implement it.

But by enforcing prohibitions on “price gouging” your office causes market failure.  Penalizing merchants who raise the prices of goods and services prevents markets from truthfully conveying an unfortunate but undeniable truth – namely, the natural disaster caused available supplies of goods and services to fall significantly relative to the demand for those goods and services.  By forcibly keeping ‘legal’ prices lower than their actual market values, you not only encourage black markets and other corrupt and corrupting processes, you obstruct the information and incentives that are necessary both to encourage consumers to now use those goods and services more sparingly, and to encourage suppliers from around the world to rush to the devastated areas additional supplies of those goods and services.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

MD: Congratulations Cafe Hayek. Even the blind squirrel sometimes finds a nut.

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Cafe Hayek: Degrees of Explanation

Quotation of the Day…

by Don Boudreaux on August 25, 2017

in Curious Task, Economics, Hayek, Scientism, Seen and Unseen

Degrees of Explanation

… is from page 201 of the 2014 collection, The Market and Other Orders (Bruce Caldwell, ed.), of some of F.A. Hayek’s essays on spontaneous-ordering forces; specifically, it’s from Hayek’s deep 1995 article “Degrees of Explanation,” which first appeared in the British Journal for the Philosophy of Science:

In ordinary usage we are inclined to admit as predictions only statements which narrow down the admitted phenomena fairly closely, and to draw a distinction between ‘positive’ predictions such as “the moon will be full at 5h 22′ 16″ tomorrow”, and merely negative predictions such as “the moon will not be full tomorrow.”  But this is no more than a distinction of degree.  Any statement about what we will find or not find within a stated temporal and spatial interval is a prediction and may be exceedingly useful: the information that I will find no water on a certain journey may indeed be more important than most positive statements about what I will find.  Even statements which specify no single specific property of what we will find but which merely tell us disjunctively that we will find either x or y or z must be admitted as predictions, and may be important predictions.  A statement which excludes only one of all conceivable events from the range of those which may occur is no less a prediction and as such may prove false [and, because it can be proven false, is ‘scientific’].

MD: Ok. We have a pretty straight forward assertion of the obvious. But we don’t know anything yet about what this assertion is supporting. Let’s see if that comes out in DBx treatment. Hint: No it doesn’t

DBx: I have always found “Degrees of Explanation” to be Hayek’s most challenging article, yet one that repays close study handsomely.  No summary statement by me can do this article justice, but it’s one of Hayek’s attempts to explain (!) why the method of the social sciences must differ from the method of the physical sciences (especially from physics) and why social scientists must be more modest in their claims about what they can explain or predict.

MD: The first thing that should be ruled out is that “social” can ever be “science”. We see empirical evidence that it cannot be science on a daily … hourly basis.

Applying the insight in the passage above to economics, we rediscover the most important practical role for the economist – namely, to warn the general public that much of what they suppose government action can achieve is, in fact, not achievable (or, at least, not achievable at the zero, low, or finely targeted costs that the general public supposes).

MD: Wait? The role of the economist is to “warn”? This leaves me wondering what we have to warn us of the nonsense that economists bring to the table? How can you trust a collection of people to warn you about anything, when down to last member of that collection, there is disagreement … major major disagreement? There is no science. There is not even a trace of a scientific method. There is just incestuous circular references in footnotes.

The economist is much like someone who follows a quack doctor around to warn the quack-doctor’s gullible audiences that none of the quack’s miracle cures will work and that many, or even most, of them will actually result in greater illness and injury.

MD: Actually, it’s more about “my quack doctor is better than your quack doctor.” I have yet to engage a single economist who knows what money is. And when presented with the obvious definition and proof, they will not embrace the obvious fact. If they were scientists, they would accept and support the obvious. Or they would easily prove the fallacy. They do neither. They are all going in different directions and cannot agree on anything.

The quack, of course, denies the ‘negativity’ while his gullible audiences, eager to believe in miracle cures, discount the economist as an unimaginative or mercenary naysayer.  And the real world, being far more complex than either the quack or his audiences realize, easily find reasons to reject the economist’s counsel.

MD: Gullible … yeh …. like gold-is-money, even though there is only 1oz per person on Earth and miners are willing to create new ounces for about $2,000 …. and to be money, that $2,000 per person on Earth has to be used for “all” in-process trading promises … plus all savings (i.e. trading processes that will be in process for an indeterminate period of time). And knowing an average person making just $50,000 /year (3/4ths of which is taken from them by governments without their ever seeing it)  … they will go through that $2,000 in less than a month … and never have it again. It will forever after, be held by the money changers to restrict trade over time and space … and it will always be in the wrong place at the wrong time.

And when these people (a faction of so called economists) are confronted with the obvious proof that gold has never been money, that it is just a hopeless, inefficient, expensive, insufficiently supplied clumsy stand-in for real money (real money which they use the slur “fiat” to dispel), they resort to religion: gold has been money for 5,000 years.

You gotta love them. They all live in very nice houses and drive very nice cars. Quack quack quack.