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Goldmoney: Shakespeare on Finance

MD: I am a Goldmoney sucker. Rather than go to the pawn shops and gold shops to get my gold, I went to Goldmoney. That was back in the day when I was sure the “train was finally leaving the station”.  Gold against the dollar was going up very quickly … as was silver.

To test the wisdom of what I had done, I tried to get physical gold from them. The process was slow and expensive. My turn-around costs exceeded 10% … and that’s not including the import duty I had to pay. So all but one ounce still rests with them. I really don’t ever expect to see it again. When we have a reset, there will be all kinds of reasons why I can’t get to that gold.

As it turns out, I was even stupider than I thought. Gold went down against the dollar … and is still down. Go figure.  So let’s see what wisdom Turk, the gold salesman, is putting out now. Here at MD we “know” gold is not money.

And look at the title: Here at MD we know there is no such thing as finance when you have access to a “proper” MOE process. This is because inflation is guaranteed to be perpetually zero … the time value of money is zero and it is in perpetual free supply to responsible traders. When (1+i)^n is perpetually 1.000, there is nothing for finance to do. They’re all out of work.

Shakespeare on Finance

By James Turk

Goldmoney Insights August 08, 2017

We are told by Shakespeare: “Neither a borrower nor a lender be.” Is it good advice?

Like so many things in life, the answer is – it depends.

Individuals are different, and what is right for one person may not be suitable for another. What’s more, everyone’s circumstances are different, which may require different decisions that result in a myriad of outcomes.

Consider too what has happened to money in the four centuries that have passed since Shakespeare penned those immortal words. The Bard himself lived during a time of sound money, with commerce conducted using gold and silver coins.

MD: The obligatory “sound money” nonsense. We at MD can blow those arguments out of the water very simply by blasting their claimed attributes of money … one after the other.

But sound money ended in Britain and pretty much the rest of the world with the outbreak of war in 1914, though the last remnants survived until 1971.

MD: Gold as money never ever existed. If it ever got close, it was just as an expensive, inefficient, risky, trade restricting stand-in for money … that was always in the wrong place and in the wrong hands.

We now live in a world of fiat currency, where money-substitutes called dollars, pounds, euros and yen circulate rather than money itself. So what would Shakespeare be saying today?

MD: Boy does he need a good dose of reality. Fiat money “is” real money. The instances he enumerates are just from improper MOE processes. This is very familiar territory here at MD.

It’s an interesting question. Unfortunately The Bard is not around to answer it. But here’s how I see it.

MD: Actually, we should probably be looking for Francis Bacon. It’s not likely Shakespeare wrote a single line attributed to him. And I’m sure any of us who could have known him contemporaneously would find that obvious.

Let’s look at lending first. The interest rate one can earn on a savings account or other bank deposit is near zero. Even though the Bank of England and other central banks are talking about raising rates – and the Federal Reserve recently bumped up interest rates slightly – central bank policy across the globe is aimed at keeping interest rates low.

MD: Here at MD we recognize the term “lending” for what it is … a corruption of the traders invention and creation of money … by the money changers who co-opted the process. And the “proper” value of interest is zero … as is the proper value of inflation. Interest rates aren’t arbitrary. Interest is the immediate mitigation of defaults on money creating trading promises. These articles are always such painful reading. We here at MD see them for what they are: erudition founded on false premises. I’ll scan ahead now to see if there is anything in here even tangentially worth reading … and not purposeful self serving disinformation.

More importantly, interest rates on bank deposits are generally lower than the rising cost of living. What this means is that money put on deposit in a bank loses more purchasing power from inflation than it gains from the interest income earned on the deposit. It is in effect a tax on your wealth – your purchasing power. So Shakespeare’s advice could apply to making bank deposits, but borrowing is a trickier proposition.

Borrowing is always a two-edged sword. There are always risks when borrowing money, but there can be benefits too.

For example, it often makes sense to obtain a mortgage to purchase a house, given that having a shelter is a basic human need. But even here there is a risk. If mortgage payments are not paid on schedule, one risks losing their house, and perhaps even the equity they have built up in it.

MD: Only under an “improper” MOE process. In a “proper” MOE process, the only risk anyone takes is making a bad trade. All the risks you see enumerated here are money changer imposed risks … and they’re not risks … they’re purposeful predatory traps.

Borrowing for whatever purpose requires a lot of thought, but so does lending because it has risks too. These realities lead to an important question that tests Shakespeare’s admonition. Should one borrow or lend in today’s fiat currency world?

MD: What a stupid false choice! The real choice is: Should a trader trade over time and space today … or just in the here and now. The question only comes into play when you trade in the face of money changer predation and the manipulation by the governments they institute. They call it the “business cycle”. It is more properly their “farming operation.”

To help answer this question, I’ve created Lend & Borrow Trust Company Limited (“LBT”), and am pleased to say that Goldmoney is one of its investors. In fact, it is Goldmoney’s customers who I believe will understand the potential that LBT offers, as I explain in the following FAQs.

MD: Right out of the money changers playbook. I wonder what he would create if he had a clue what money really is. Frankly, having the where-with-all to create Goldmoney, he does have the where-with-all to institute a proper MOE process. But the problem is, there is no money to be made doing that. Unlike a Mutual Insurance Fund where money is made on investment income and otherwise premiums equal claims, with a “proper” MOE process, defaults equal interest collections … but there is no investment income … there is nothing to invest.

And this LBT is a little too close to LGBT for my comfort, thank you very much!

What is LBT?

LBT is an online peer-to-peer platform where lenders and borrowers interact to lend and borrow British pounds, Canadian dollars, euros, US dollars and Swiss francs. LBT is unique because it is the first P2P platform where all loans are secured by the borrower’s investment-grade gold and silver.

MD: I wonder if I could use this to get rid of my Goldmoney with no transaction cost.

What does LBT offer to lenders?

LBT provides an alternative to bank deposits. It enables lenders to earn interest income outside the banking system with five major national currencies. Through LBT’s online auctions, lenders:

  • may earn interest income at a rate above the inflation rate, and
  • are secured by the borrower’s gold/silver, which is sold to repay the lender if the borrower defaults.

MD: See how they must sustain the money changers “improper” MOE process to make a living. Do we really think people like Turk are our salvation? Do we really think the Harlem Globe Trotters and the Washington Generals are competing? … that they don’t report to the same management?

What does LBT offer to borrowers?

LBT enables borrowers to monetise their precious metals. Through LBT’s online auctions, borrowers:

    • may borrow at interest rates lower than available from banks,
    • use their investment-grade gold and silver bars as collateral to borrow, and
    • borrow in any of five currencies: GBP, USD, CAD, EUR and CHF.

MD: But can I do it without this fiction of borrowing. Can I just sell my “records of gold” for dollars and use it to pay off the money changers … who are overtly fleecing me right now at 8.25%?

How much can I lend?

There is no maximum, and the minimum is £5,000 or currency equivalent.

How much can I borrow?

You can borrow up to 65% of the value of your gold and silver that you pledge as collateral at loan commencement. LBT actively monitors this loan-to-value and makes a margin call if it rises to 75%, requiring the borrower to pledge more collateral and/or partially repay the loan to reduce it back to 65%. If the margin call is not met, LBT sells enough metal to meet the 65% benchmark.

Is LBT regulated?

Yes, LBT is based in the England and regulated by the Financial Conduct Authority to operate an electronic system in relation to lending. LBT does this through online auctions in which its customers participate.

MD: This is starting to look real humorous … like other religions. You’ve gotta love words like “authority” and “financial conduct”.

How are auctions started?

Online auctions are started by either the borrower or lender. Through these auctions lenders and borrowers compete with each other to seek an interest rate at which they are prepared to lend or borrow.

Can I borrow using my gold and silver in Goldmoney?

Yes, you choose how much and which metal or both you would like to pledge as collateral. At this time, only gold and silver stored in England and Hong Kong can be used.

How do I get started?

Click here to visit the LBT website and open an account.

Is there risk to lending or borrowing?

Yes, there is risk with everything in finance. Therefore, each individual needs to weigh the benefits LBT offers relative to the risks of lending and borrowing. If you are uncomfortable in making financial decisions, we recommend that you seek advice from a professional advisor. View LBT’s Risk Disclosure.

Did Shakespeare have any other financial advice?

There are many, and here’s my selection. “Money is a good soldier,” meaning it should be working for you because “Gold that’s put to use more gold begets”, provided of course it is done wisely.

MD: The trouble is “gold is not money” Turk! Would you refer to a “promise” as a soldier? Of course not! So why would you be comfortable referring to “money” as a soldier. Promises don’t “work for you”. You “work to deliver on them”. Big difference to the responsible trader. Not so much to the deadbeat.

 

This financial promotion has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by Lend & Borrow Trust Company Limited, which is authorised and regulated by the Financial Conduct Authority (“FCA”).

The views and opinions expressed in this article are those of the author(s) and do not reflect those of Goldmoney, unless expressly stated. The article is for general information purposes only and does not constitute either Goldmoney or the author(s) providing you with legal, financial, tax, investment, or accounting advice. You should not act or rely on any information contained in the article without first seeking independent professional advice. Care has been taken to ensure that the information in the article is reliable; however, Goldmoney does not represent that it is accurate, complete, up-to-date and/or to be taken as an indication of future results and it should not be relied upon as such. Goldmoney will not be held responsible for any claim, loss, damage, or inconvenience caused as a result of any information or opinion contained in this article and any action taken as a result of the opinions and information contained in this article is at your own risk.

MD: Anyone ever seen an instance of someone claiming “gold is money” and not finding them to be a gold salesman … or someone who has been deluded by a gold salesman?

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The Daily Bell: Did you see this unbelievable front page news?

MD: It’s hard to imagine an article with more fodder for exposing money delusions than this article published through The Daily Bail. This should be fun … and as usual, exasperating.
STAFF NEWS & ANALYSIS
Did you see this unbelievable front page news?
By Simon Black – August 17, 2017

 

Via Sovereignman.com

Sovereign Valley Farm, Chile

A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning: Social Security is running out of money.

MD: As in future tense? The Social Security scam (like Ponzi’s scam) was out of money the day it was put in place … not “running out of money” but “flat out of money”.

Given that tens of millions of Americans depend on this public pension program as their sole source of retirement income, you’d think this would have been front page news…

MD: I’m one of those. I knew this was a government scam from the moment I learned it existed. I prepared for my retirement as all should  do… by myself. Not by my employer. Not by my government. And yet, not even counting this scam, I have given to government over fully 3/4ths of the fruits of my labor in my now ending life (70+ years). But it gets worse. When it came to deploying those funds towards my sustainable retirement, the government said I did it wrong. And so they took those funds … all of them … as a penalty. Reached right into my bank and took them. And then put a lien on my free and clear property. And I guarantee you, anyone who has resisted the money changer instituted government have the same story to tell.

Abolish government and maybe I would consider doing life again. Otherwise, not no! but HELL NO!!!

Regarding the news: You mean the constant stream of money changer propaganda emanating from the governments they create and the media they institute to effect the public brain washing … is that the news you speak of?

… and that every newspaper in the country would have reprinted this ominous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone.

MD: Dreamer! What’s in it for the government to direct the media to do that? What’s in it for the money changers that instituted that government strictly to protect their perpetual scam?

But that didn’t happen.

The story was hardly picked up.

It’s astonishing how little attention this issue receives considering it will end up being one of the biggest financial crises in US history.

MD: Now really! It would have been astonishing if the report had made it into the news. Whoever wrote it is obviously off the reservation and probably being disciplined as I write.

That’s not hyperbole either– the numbers are very clear.

The US government itself calculates that the long-term Social Security shortfall exceeds $46 TRILLION.

MD: Why do they bother to calculate it? They have no intention nor means of paying it. It will continue until the reset. If it is a government reset like the Weimar case (and the soon to be the Venezuela case), many people will just be screwed, the numbers will be reset to zero on their accounts, and it will all just start up again. Read “When Money Dies” by Ferguson.

If the reset is like the case of the French Revolution, the sale of guillotine kits will spike … and a mere 20,000 or so of these criminals will be quickly eradicated and fed to the chickens and hogs, leaving the handful who are actually the culprits totally unscathed. If you wanted to put your hands on a Rothschild, do you realistically think you could? Just as an exercise, try to just pinpoint the position of one right now. Some one should start a website to do that … like they do for keeping track of tail numbers on airplanes … that prove the government’s 911 conspiracy is a total fabrication … as if the mysterious collapse of WTC7 didn’t also do that … in simpler and more convincing fashion.

In other words, in order to be able to pay the benefits they’ve promised, Social Security needs a $46 trillion bailout.

Fat chance.

That amount is over TWICE the national debt, and nearly THREE times the size of the entire US economy.

Moreover, it’s nearly SIXTY times the size of the bailout that the banking system received back in 2008.

So this is a pretty big deal.

MD: No it’s not. If it was, you wouldn’t be voluntarily giving over 3/4ths of the fruits of your labor to governments. You and your neighbors would just stop paying. Not doing that are you! It’s the “one” thing “you” can do … and you’re not doing it! You’re just crying in your beer here!

I presume you were not created as a farmer residing in Chili. So you just personally decided to give the fruits of your labor to some other government. It would be interesting to look at your historical financial records. I’ll be I’d find at an earlier point in your life you were an “active” part of the problem … if you aren’t still and “active part of the problem.”

More importantly, even though the Social Security Trustees acknowledge that the fund is running out of money, their projections are still wildly optimistic.

In order to build their long-term financial models, Social Security’s administrators have to make certain assumptions about the future.

What will interest rates be in the future?
What will the population growth rate be?
How high (or low) will inflation be?

MD: … as he leaves off the actuarial analysis completely! What’s up with that? You have to do that … because there is “no” actuarial analysis. You don’t need one when you don’t recognize or accept any risk. You just counterfeit money and traders pay in the form of inflation.

These variables can dramatically impact the outcome for Social Security.

For example, Social Security assumes that productivity growth in the US economy will average between 1.7% and 2% per year.

MD: With a “proper” MOE process that number would be 0%. As it is, it is just 1/2 the 4% leak the money changers stick us with … as their “tribute”. Demand a competitive “proper” MOE process and institute it … and then let’s see how they do. Hint: They wilt on the vine. They are deprived of their total source of nourishment.

This is an important assumption: the faster US productivity grows, the faster the economy will grow. And this ultimately means more tax revenue (and more income) for the program.

MD: A proper MOE process doesn’t care about growth at all. It behaves exactly the same regardless of whether there are more or fewer traders and the  traders are more or less active. This is because it “guarantees” perpetual perfect balance between the supply and demand for the exchange media itself. It never has to grow into or out of anything.

But -actual- US productivity growth is WAY below their assumption.

Over the past ten years productivity growth has been about 25% below their expectations.

And in 2016 US productivity growth was actually NEGATIVE.

Here’s another one: Social Security is hoping for a fertility rate in the US of 2.2 children per woman.

This is important, because a higher population growth means more people entering the work force and paying in to the Social Security system.

MD: So you are openly acknowledging it is a Ponzi scheme … and “you” voluntarily paid in to it and promoted and supported it, didn’t you!

But the actual fertility rate is nearly 20% lower than what they project.

And if course, the most important assumption for Social Security is interest rates.

MD: With a “proper” MOE process there is no such thing as an interest rate. Defaults are detected and immediately mitigated by interest collections of like amount. Divide it by what you want for a rate. It is meaningless when viewed as a rate.

100% of Social Security’s investment income is from their ownership of US government bonds.

MD: Which are “never” repaid … they are just perpetually rolled over … that is default … that is counterfeiting. And worse … the interest paid goes straight to the money changers. Why? Beats me? Just because they say it does!

So if interest rates are high, the program makes more money. If interest rates are low, the program doesn’t make money.

Where are interest rates now? Very low.

In fact, interest rates are still near the lowest levels they’ve been in US history.

Social Security hopes that ‘real’ interest rates, i.e. inflation-adjusted interest rates, will be at least 3.2%.

MD: Funny. “inflation-adjusted interest rates”. That’s like saying “inflation-adjusted inflation rates”.

This means that they need interest rates to be 3.2% ABOVE the rate of inflation.

This is where their projections are WAY OFF… because real interest rates in the US are actually negative.

MD: Really? I’m paying 8.24% for money that is over collateralized … by a factor of 5. And I can’t replace it with something else because the money changers are the only game in town. If we had a proper MOE process, I would have been paying 0% and would have completed by delivery promise long ago.

The 12-month US government bond currently yields 1.2%. Yet the official inflation rate in the Land of the Free is 1.7%.

MD: If government taking 3/4ths of the fruits of your labor is free, what is slavery?


In other words, the interest rate is LOWER than inflation, i.e. the ‘real’ interest rate is MINUS 0.5%.

Social Security is depending on +3.2%.

MD: Yet they claim inflation is zero. My social security went up 0.3% last year.

So their assumptions are totally wrong.

And it’s not just Social Security either.

According to the Center for Retirement Research at Boston College, US public pension funds at the state and local level are also underfunded by an average of 67.9%.

MD: Which is a good thing. Because the government just confiscates that funding anyway!

Additionally, most pension funds target an investment return of between 7.5% to 8% in order to stay solvent.

Yet in 2015 the average pension fund’s investment return was just 3.2%. And last year a pitiful 0.6%.

MD: With a “proper” MOE process, the analysis would be totally actuarial. Things get much much simpler when inflation is guaranteed to be zero. So do investment decisions. With (1+i)^n perpetually yielding 1.000 for all “n”, everyone who has “finance” anywhere in his job title is out of work.

This is a nationwide problem. Social Security is running out of money. State and local pension funds are running out of money.

And even still their assumptions are wildly optimistic. So the problem is much worse than their already dismal forecasts.

Understandably everyone is preoccupied right now with whether or not World War III breaks out in Guam.

(I would respectfully admit that this is one of those times I am grateful to be living on a farm in the southern hemisphere.)

MD: Grateful? It was a conscious choice for you wasn’t it? Happy with the government imposed on you there? Same money changers instituted it as did the government we have here. If we don’t neuter the money changers we don’t phase any of these issues.

But long-term, these pension shortfalls are truly going to create an epic financial and social crisis. 

It’s a ticking time bomb, and one with so much certainty that we can practically circle a date on a calendar for when it will hit.

There are solutions.

MD: So let’s see if he poses the obvious correct treatment … i.e. institute a “proper” MOE process in competition with “their improper” MOE process. Looking ahead … nope he doesn’t. He just says save. Saving is “safety stock”. It’s an inventory control concept. We should need almost no safety stock at all without a predatory government to plan for.

Waiting on politicians to fix the problem is not one of them.

The government does not have a spare $45 trillion lying around to re-fund Social Security.

MD: It has never needed it? Have you also noticed that government never has trouble finding people to staff all the commissions they create to crank out and regulate their nonsense?

So anyone who expects to retire with comfort and dignity is going to have to take matters into their own hands and start saving now.

MD: Saving isn’t enough. The government will go right into your bank and take your savings … any time it chooses … legally. What does that tell you about the “rule of law”? If you have surplus, you better give attention to hiding it.

Consider options like  SEP IRAs and 401(k) plans that have MUCH higher contribution limits, as well as self-directed structures which give you greater influence over how your retirement savings are invested.

MD: He says, as if there is any legitimacy in those limits. Remember, those incentives are just to make you think you can beat the government in their taking of 3/4ths of the fruits of your labor. You can’t. Anything you put in those plans, they can and will confiscate.

These flexible structures also allow investments in alternative asset classAes like private equity, cashflowing royalties, secured lending, cryptocurrency, etc.

MD: “Allow”??? !!!!! See how easily he buys into their scam and supports it? Every alternative he enumerates is just another money changer scam.

Education is also critical.

Learning how to be a better investor can increase your investment returns and (most importantly) reduce losses.

MD: Actually, learning that you are in no way, shape, or form an investor is the education you should have. Investing is an illusion, brought to you by the money changers. Think about it. They run a system with a 4% leak … and then they say that gives money “time value”. Then they use that time-value concept to get you to part with the 1/4th of the fruits of your labor they haven’t already taken. And you write about it like it was legitimate!

And increasing the long-term average investment return of your IRA or 401(k) by just 1% per year can have a PROFOUND (six figure) impact on your retirement.

MD: Wrong. The best thing you can do for your retirement is to buy land in a low tax, low services county and find a way to sustain yourself with a minimum of outside help … and with zero help from the money changers and the governments they institute.

These solutions make sense: there is ZERO downside in saving more money for retirement.

MD: I have direct evidence to the contrary. If they can “see that money”, the can and will “take that money”. True, you must put resources aside … but saving is not the proper term. Hiding is the proper term.

But it’s critical to start now. A little bit of effort and planning right now will pay enormous dividends in the future.

MD: Relax. You are already toast. What you can do … support iterative secession and institute a proper MOE process, you will not do … nor will anyone you know.

So as a failed politician once said: “If rape is inevitable, relax and enjoy it”.

Until tomorrow,

MD: Boy, aren’t you the optimist!

Simon Black

Founder,  SovereignMan.com

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Cafe Hayek: in Economics, Politics, Seen and Unseen

MD: Here at MD we are aware of far more delusions that cripple society than just the money delusion. Some are related. Some are not. Other delusions are about democracy … and about the rule of law. In commenting here, I think I’m going to be getting into delusions about law. Let’s see.

by Don Boudreaux on August 17, 2017

in Economics, Politics, Seen and Unseen

… is from page 110 of my late Nobel laureate colleague Jim Buchanan‘s 1980 paper “Rent Seeking and Profit Seeking,” as it is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:

MD: Laws just plain don’t work … witness the 40,000+ new ones we get every single year. Further, take a gander at how those laws are made. To further show the falacy of laws, consider how many you must write just to embrace the simple “principle” of the golden rule. Hint: There are fewer grains of sand on all the worlds beaches. When we deal with things in a societal manner, we should deal in principles and not laws. And we shouldn’t bring things to a societal forum that can be handled in a more constrained forum. The individual is the ideal forum for addressing issues … most can be dealt with right there when you are guided by principles …. not laws.

But economists have concentrated far too much attention on efficiency and far too little on the political role of markets.

MD: Any discovery of political role reveals a flawed process. Politics has no place in trading … no place in economics. All issues in trading and economics are easily handled by the traders involved … and adherence to principles … starting with the golden rule. When you tolerate cheating, you’re going to be dealing with lots of cheating. When you classify cheating as gamesmanship you are deluding yourself.

To the extent that markets are allowed to allocated resources among uses, political allocation is not required.

MD: Bingo … even without the “allowed” qualification.

Markets minimize resort to politics.  Once markets are not allowed to work, however, or once they are interfered with in their allocative functioning, politics must enter.  And political allocation, like market allocation, involves profit seeking as a dynamic activating force.

MD: I’m perplexed how we can be in violent agreement here … and how Cafe Hayek can be so clueless about trade, traders, and money.

DBx: Many opponents of markets find the open quest for profits in market economies to be unethical or unaesthetic, and they blame markets.

MD: There is no substitute for “markets”. To attempt a substitute is just to impose another market … i.e. another playing field … with a set of rules that favors one set of traders over another. Let the traders be free to choose their own playing field … and others who claim they should not be allowed to do that can just go pound sand.

What these opponents miss is the fact that the self-interest that is typically – and even the greed that is sometimes – on display in markets is not created by commercial markets.

MD: Self interest is personal and totally natural. Anyone who claims they are not first in every question of pecking order is deluding themselves. Greed, in the final analysis, is a person’s confusion about what their self interest really is. In the end it accomplishes a goal they don’t want to attain. There is very little of use in the bible … but at least they  there tell of a guy named Ecclesiastes as “getting this concept” … in the end

Commercial markets are merely a forum in which individuals act on these motivations.

MD: Why the “commercial” qualification?

One of most profound errors committed by market opponents is to suppose that when activities are transferred from commercial markets into the realm of politics human imperfections and self-interest are replaced by superhuman perfection and altruism.

MD: Pretty peculiar isn’t it, when you stand back and observe “all” politics is sub-human, not close to perfection, and arises out of advanced selfishness … in violation of the golden rule for those practicing and imposing it. In fact, they openly oppose and refuse to comply with their own rules and those they impose on others.

But as Buchanan argues, it’s naive to suppose that the mere shifting of activities from one resource-allocation forum to another changes the underlying human motivations.  (And such shifting certainly does not change the underlying human cognitive limitations.)

MD: It changes the playing field. That’s it. But worse, it disallows others from leaving the field … just taking their ball and going home. The USA Constitution does not have the “obligatory” buy/sell agreement. You “will not” secede.

So profit seeking occurs in political settings no less than in market settings.  But the kinds of information and constraints in political settings differ greatly from those in market settings.

MD: Remember, democracy only works with less than 50 people involved. And the political setting being addressed in the case of the USA has 500,000 involved … in the “most representative” case. Ridiculous! We are tolerating a process that was DOA … and the writers of the Anti-Federalist Papers were totally aware of it. But the money changers, as always, prevailed. They’re the ones who called the meeting in the first place.

Therefore, the kinds of actions taken in one setting, and the consequences of those actions, differ from the actions and consequences in the other setting.

MD: That’s not a “therefore” qualification. You see those differences and consequences between just two traders on the same playing field negotiating the same issues … just at a different point in time. That’s called trading. It has, at most, three steps: (1) Negotiation; (2) Promise to Deliver; (3) Delivery. In many cases it doesn’t pass the first step. In the case of simple barter exchange in the here and now, steps (2) and (3) happen simultaneously on the spot. Under political influences, step (3) happens under manipulated time and space and step (2) never is used at all! It is just lied about.

One important difference is that in markets, profits are earned only through voluntary payments while in politics profits are typically extracted by forcibly transferring property from the politically weak to the politically strong.  The fact that such transfers are not overtly called “profit seeking” – and the fact that political activities are camouflaged with public-interest rhetoric – doesn’t change the underlying reality.

MD: But it’s worse. The money changers control the “improper” MOE process we all use. That is really where the problems begin and end. Allowing a “proper” MOE process to compete makes all these issues go away. There is “no political economy” in such a case.

In summary, in the market Smith profits only by building a better mousetrap or by devising a process that reduces the amount of resources used to build a familiar mousetrap.

MD: Wrong. The process allows one trader to convince another that that is the case. More trades take place under delusions than under rational choice. If that wasn’t the case, advertising would be very much different.

(Smith might do so directly, as a mousetrap producer, or indirectly, as someone who secures the financing for a mousetrap producer.)

MD: With a “proper” MOE process, the “financing” qualification is totally unnecessary. Any responsible trader can make a promise spanning time and space and create the money to carry it out in the domain of a “proper” MOE process. Deadbeat traders can too, but the more irresponsible they prove to be, the more interest load they must bear in reclaiming the defaults the make. At the limit, they preclude “themselves” from money creation privileges in the domain. They can use all the money they want … anonymously. They just can’t effectively  create it. What they create immediately is taken back by interest collections. There is nothing left to do anything with.

In politics, Jones typically profits by confiscating mousetraps from Smith or from Smith’s customers, or by confiscating the inputs that Smith would otherwise use to make mousetraps.

MD: This also happens in normal trade without politics. If Jones can manipulate Smith’s perception in the (1) Negotiation phase, Smith is putty in Jones’ hands. And if you don’t allow the (1) Negotiation phase, you have different issues entirely. Don’t make this more complicated than it needs to be.

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Cafe Hayek: In Economics, Virginia Political Economy

Quotation of the Day…

by Don Boudreaux on August 16, 2017

in Economics, Virginia Political Economy

… is from pages 48-49 of my late Nobel-laureate colleague Jim Buchanan’s 1996 paper “Economics as a Public Science,” as this paper is reprinted in Economic Inquiry and Its Logic (2000), which is volume 12 of the Collected Works of James M. Buchanan (footnote deleted):

MB: Again, I call attentions to all Mises Monks trait of genuflecting to their Saints. They can’t just say “the late economist Jim Buchanan”. They say “Nobel-laureate colleague Jim Buchanan.” They put their Saint on his pedestal and then link themselves to it … like any loyal acolyte is want to do..

Economists often complain about the observed fact that “everyone is his own economist,” in an expression of the view that scientific counsel fails to command the deference it seems to warrant.

MD: Economics is not a science. In fact, it is an open insult to science. And show me any real science where its scholars don’t agree with each other at all … where they all have there own pet theories … and where there are no natural principles and facts … only disputed ones. There are lots of examples out there (e.g. cosmology, psychiatry, numerology, politics) … but they just expose themselves as junk science. Yet they command high salaries … and if they can concoct the right stories, they influence things … usually in a really bad way.

In the absence of an effective exit option, however, everyone will continue to be, and should be, his own economist, at least to the extent of participating in the selection of constraints that are to be imposed collectively, constraints that affect the actions of everyone simultaneously.

MD: The only “real” economists are the traders. And we are all traders. Some traders, in addition to trading, analyze the trading process to death … yet somehow escape an obvious definition of money … and then failing to embrace  this obvious and provable definition, spread absolute nonsense!

The effective scientific community in economics is, therefore, necessarily inclusive in a sense that is not applicable in natural science.

MD: There is no “scientific” community in “economics” … effective or otherwise. There isn’t even common sense! What does this statement say? Economics is “not” natural science (which all “real” science is by the way), and therefore the oxymoron “scientific community in economics” is “inclusive”. Well, I guess if I have properly parsed the assertion … all economists are “not” scientists. Here’s one saying it directly while pretending to be a scientist.

“Doing economics,” as the specialized activity of economists, should reflect a different emphasis on the transmission of basic knowledge relative to the discovery of new knowledge at the scientific frontiers.

MD: Do we ever hear of someone “doing” chemistry … or physics … or geology? It’s not something you do. And “transmission of basic knowledge”? Economics has no such “basic knowledge” … but every economist is a transmitter just the same. And they’re not going to discover new knowledge by ignoring the obvious … beginning with what money obviously and provably is.

Because of the public features of economics noted, the activity of “doing economics” must be more akin to that observed in the behaviour of the ordinary scientist who rarely makes discoveries.

MD: … unless they are “real” scientists … who make discoveries in a very disciplined fashion … using what they call a scientific method. If economists had any similar discipline, they would know what money is by now. And when told, and given the proof, they would not respond “that is unorthodox”. Remember, a flat Earth was once orthodox. And the Earth being the center of everything was dispelled by a scientist … using the scientific method. And it still took over 200 years for the pretend scientists (religious orthodoxy) to get it! In fact they never did. They just changed their stories to reflect that they never said it was the center of everything in the first place. That’s what took 200 years! In the process, Bruno lost his head … because they were still in the process of rewriting and re-endoctrinating … i.e. re-deluding.

In modern practice, too much talented intellectual capital is used up in searches for the solutions to stylized puzzles with little or no relevance for the ongoing, necessarily receptive and sometimes boring, activity of “teaching” the long-accepted principles of the science.

MD: “The intellect” is not capital … especially when it is in an economist’s skull. Capital is the thing that can be exchanged for labor to achieve a certain productive goal. But what is properly being described here is Ludwig von Mises’ books. They are of no relevance to the extreme. He spends tome after tome after tome trying to explain why traders trade … but is totally clueless about what money is … as are his disciples, the Mises Monks.

DBx: Yes. Buchanan here – as in countless other parts of his vast writings – explicitly rejects the rule of experts.

MD: But clothed and fed himself with his so-called expertise. It takes a very advanced society indeed to tolerate such nonsense.

He explicitly affirms the moral and political right of everyone to participate equally in the making of collective decisions.

MD: There’s another universally misunderstood term … a “right”. A “right” is just a “defended claim”. Make no claim, you have no right. Make a claim and fail to defend it, you have no right. Throwing the word around in every conceivable context does not change that.

No technocracy, plutocracy, or autocracy for Buchanan. Democracy. Whether Buchanan was correct or incorrect in the details of his assessment of the workability of democracy is a separate question.

MD: … he says … without elaboration. Those of us here at MD know, democracy involving more than 50 people does not work. It can’t. With larger numbers, it just becomes a propaganda exercise and an “ugly” contest.

But either way, for someone such as Nancy MacLean to interpret Buchanan as being an enemy of democracy reveals that she (1) did not read Buchanan’s works carefully, or (2) hasn’t the mental acuity to understand Buchanan’s writings, or (3) intentionally misrepresents Buchanan.

MD: How long has Boudreaux been thrashing this MacLean horse? And look at him take her apart. No facts. No illustrations. Simple name calling. The Mises Monk Saints must command respect at all cost. It is truly straight out religion.

(I strongly suspect that it’s a combination of (1) and (2), for the stunning ignorance on display throughout Democracy in Chains – and in MacLean’s subsequent ad homimen-filled “defenses” of her work – seems to be both sincere and deeply rooted.)

MD: Kettle … you are black. Live with it! … said the pot.

Note also Buchanan’s plea that we professional economists spend less time solving clever puzzles and more time teaching the eternal verities of our discipline.

MD: Note: “professional economists” is “not” an oxymoron … but “economic scientist” obviously  is. There is no science in the way economics is done. But it is a profession. These people are paid … and paid handsomely … for this nonsense … and it’s pay that makes someone a professional.

He’s wise to issue this plea. Again and again and again and again conveying to students and the general public the basics of economics – for example, the reality of unintended consequences,

MD: What we have is the reality of “intended” consequences. “Inflation” is the intended consequence of the money changers … most of whom profess to be economists. With a “proper” MOE process, there “is” no inflation. It’s not an “intended” consequence. It’s a result of simple addition, subtraction, and objective discipline.

the universality of the law of demand,

MD: Which of course doesn’t apply to any economic thinking … both the Mises Monks and the Keynesians completely ignore the requirement that money maintain perpetual and perfect supply/demand balance … it’s the nature of every trade, so for sure it is the nature of a trade spanning time and space.

and the importance of the fact that nearly all decisions are made ‘at the margin’

MD: If that’s the same as saying … at the next “instance”, this is just stating the obvious … and is totally immaterial. Economists love to put out this drivel.

– is not sexy and it carries with it almost no professional rewards.

MD: Nor does eating an apple. Both are equally complicated.

Yet performing this duty successfully is the highest and finest service that a good economist can perform for humanity.

MD: What a joke! Economists performing a service for humanity? You call “improper” MOE process manipulation performing a service. You call ignorance of the obvious performing a service?

 

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Deviant Investor: Debt, Dollars, DOW, War, Silver and Shirts

MD: The Deviant Investor is a gold salesman. He will do whatever it takes to make a market for his gold. It is easy to find the delusions in his articles. In fact, he “knows” the truth … he just has too big a stake in the delusion to admit it. He won’t pass my comments through his moderation. That was one of my principal motivations for creating this site. It gives me a chance of mitigating the blocks “all” the Mises Monks throw up against me. If you’re dealing in the truth, you don’t have to block anything. The truth always prevails.

Let’s see what kind of delusions … and propaganda … this article contains. It’s always fun.

Debt, Dollars, DOW, War, Silver and Shirts

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Yes, they are connected.

Dollars are created as debt. More dollars in circulation = more debt.

MD: He gets it right. Notice, he hasn’t said dollars are money. They obviously “are” money … but from an “improper” MOE process. They obviously do represent “in-process promises to complete trades over time and space”. And all of them created by government promises are counterfeit … and indistinguishable from all others in circulation. That’s why we have inflation … 4% per year compounding.

More debt means consumption is “pulled forward” from the future so consumption can occur now. This usually ends badly.

MD: Fallacy number 1: A trading promise spanning time and space says nothing about consumption. If I create money to build a house and engage a contractor, I cannot consume that house until the contractor completes it. The contract can be written so I give him a certain amount of money when the contract is agreed to; a certain amount along the way; a certain amount when he delivers the house; a certain amount sometime after that when I confirm he has met the terms of the contract in his delivery … none of which assumes consumption. And it hardly ever ends badly.

But he says consumption “can” occur now. That too does not end badly. Most people buy a house that already exists. They move in and make monthly payments. It is far and away the minority that default on this trading promise spanning time.

Commercial banks and central banks have created trillions of new dollars. Each new dollar devalues every other dollar currently in circulation, in savings, and in pension accounts. Prices rise!

MD: No bank of any kind has “ever” created money. In “all” case, it is a trader who creates the money. The banks have just reserved for themselves the privilege of certifying that money … and the privilege of collecting tribute on that certification … to the tune of 10x the amount of their “so-called” stake in the creation … which after two years is provably zero.

Wars are costly, kill people and produce little. Governments like wars because they create demand for production of war materials.

MD: Governments do not profit from production of war materials … only the money changers do. Governments are instituted by the money changers … not by the people. They “protect” the money changers privileges … first by laws … then by force. They also use this force to expand the money changers privileges … by empire-building wars. The money changers retain hold on the reins at all times All but two of the central banks in the world are controlled by a single family … the Rothschields.

Further, governments are sustained by inflation. “All” taxes collected go directly to the money changers in the form of tribute. Neither governments nor money changers can function without inflation. They need their cherished (1+i)^n to give them a value greater than the 1.00000 a proper MOE process guarantees. They call it the “time value of money”. And they get away with it.

More production means a higher GDP (even if the concept means little). Politicians point to higher GDP and claim it is good. More production creates employment. Everyone wins, unless the bomb fell on you. Unless the drone targeted you. Unless you live on a fixed income and prices continue to rise. Unless you are a soldier and were injured or killed.

MD: GDP is unmeasurable … as is inflation. A “proper” MOE process cares nothing about GDP … and it “guarantees” zero inflation of the exchange media itself … it doesn’t have to measure it.  It cares nothing about employment. It cares nothing about prices but the zero inflation guarantee assures any price changes are strictly associated with the supply/demand balance of the object of the exchange … not the supply/demand of the money itself … which is always perfect at 1.0000.

As dollars are devalued, prices rise for most goods and services. Yes, televisions are less expensive, but have you checked the price of beer, medical care, cigarettes, cars, Whisky, college tuition, food, and 101 other items we need?

MD: Irrelevant to a proper MOE process. Further, a proper MOE media would ideally be in units of HULs (Hours of Unskilled Labor). The value of a HUL has never changed. Today it trades for the same size hole in the ground as it ever did or ever will. And we have all been HULs at one point in our lives, so we can all identify with them and hold them in perpetual perspective. This certainly isn’t true of an ounce of anything.

As dollars are devalued, the price of silver rises. Each dollar buys a smaller piece of silver. Wars burn many dollars, many ounces of silver, and consume other commodities, which rise in price. Demand for silver increases, dollars buy less, and supply increases slowly, if at all. Prices for silver rise because of supply, demand, and devaluation.

MD: Which is a straw man red herring argument when it comes to a “proper” MOE process … and “real” money.

The DOW is higher because each dollar buys less. Central bank “printing” of many extra dollars supports the DOW. Wall Street hype helps also. Regardless of the hype, a good crash occurs every decade or so, and after the crash the stock market rises again. Most people buy high, watch it crash, and sell low. How many people will take profits near the top in this market? BUY SILVER!

MD: When you take measurements with a rubber band … that constantly stretches like our inflating money … or constantly contracts like gold and its foolish copier Bitcoin, you add a degree of freedom that just makes life difficult for traders. But we have always seen this variable added … because it enables the “controllers” to take their pound of flesh from the traders. DI wants that pound of flesh … and so do the money changers. But then again, DI is just a money changer. It just needs to stir the pot.

As prices rise, shirts cost more.

MD: Ok. For what follows, DI is going to describe what to it is “rocket science”. To we here at MD, we know it is just the obvious result of “improper” MOE process practices … and thus irrelevant to a “proper” MOE process. Read it and smirk. Scan down to my next comment if you don’t need a dose of this levity.

Debt, dollars, DOW, war, silver, and shirts are connected. They rise and will continue to rise, two steps higher and one lower, as long as we use debt based fiat dollars.

Examples:

Money supply and debt increase. Look at official national debt since 1913. Can you think of a single reason why it will reverse a century-long exponential trend (debt doubles every 8 to 9 years) and turn lower?

Wars will continue and prices will rise. The helmet for an F-35 will cost $400,000. The price for a World War II P-51 aircraft was $52,000.

Silver prices have increased for 90 years and will continue to increase.

The price for shirts is higher, much higher. Dollar devaluation increases prices.

This dress shirt is currently available from Nordstrom for $175.00

Debt, dollars, DOW, war, silver, and shirts are connected.

MD: Ok, I’ll break back in here. One thing I failed to note was another obvious attribute that a “proper” MOE process cares nothing about … that being the “money supply” … and that being the associated manipulation they call “monetary policy”. Everyone here already knows that nonsense for what it is … irrelevant nonsense. “All” money in circulation (created by traders … not supplied) represents “in-process trading promises”. It doesn’t exist before the trading promise is made nor after delivery is achieved as promised … unless there is defaulting and counterfeiting not mitigated immediately by interest collections of like amount. The “unless” results in INFLATION … and that’s what little Gary is describing. It need not exist. But if he has his way we will have DEFLATION (with his gold-is-money by edict nonsense). And that will strangle trade. You’re not going to part with any of your money today when tomorrow it will trade for much more stuff. Zero is obviously the only right value for inflation … and gold can never deliver that value, let alone perpetually guarantee it.

Option One:

Reduce Federal government expenditures, declare peace, balance the budget, let it crash … and DREAM ON!

MD: Institute a “competitive and proper MOE process” in competition with the current money changer instituted “improper” process … and watch money changers and governments wilt. No dreaming and no legislation required. The process is totally transparent so no regulation is required. The process is totally decentralized and can have any number of participants … just like Mutual Casualty Insurance Companies. The most competitive ones giving the best service to traders prevail.

Option Two:

More of the same. More debt, dollars in circulation, continuing wars, and higher silver prices. Shirts will cost $500 instead of $1.00 in 1934 and $175.00 today.

Option Two – so what?

Taxes increase as dollar devaluation continues. Can you afford higher taxes? Will your income rise enough to meet your increased expenses and higher taxes? Will Social Security and your pension pay you in mini-dollars, or micro-dollars? Can you live on pension payments denominated in micro-dollars?

MD: Did you ever stop to think that 3/4ths of the fruits of your labor already go to taxes … and that of the 1/4th that remains, most goes to money changer tribute and insurance companies.

You retain almost none of the fruits of your labor … right now! It goes like this: You start with things like 8% sales tax; then add federal tax … then state tax … then taxes and fees on things like gasoline and your phone and your beer and the lottery (if you’re stupid enough to play it) and everything else you touch. It is not a difficult exercise at all to see that you pay 50% in these “sort of” overt taxes.

But then look at every product and service you buy. The entity producing it is paying over 50% too … and they’re passing that on to you. So of the 50% you have left after paying your taxes, you’re buying products that have 50% taxes in their price. That takes you to 75% (i.e. 3/4ths).

And remember that 100% of these taxes go to the money changers in the form of tribute (they call it interest). “All” the services you think these taxes are buying are actually coming from INFLATION (a designed in leak which the money changers feign targeted at 2% and deliver at 4%).

That’s what “all” government lives off of … inflation. They make trading promises (create money) just like you and I. But they never deliver. They just roll them over. That is counterfeiting. And all money, defaults or counterfeits, that is not reclaimed by “legitimate interest collections” … not by money changer tribute … causes inflation by the operative relation: INFLATION = DEFAULT – INTEREST.

DI cannot dispute anything I have just presented … so they don’t even try. My comments don’t even make it through their moderation.

CONCLUSIONS:

 

  • Debt, dollars, DOW, war, silver, and shirts are connected.
  • Prices for food, housing, transportation, clothing and most other items will increase. Believe the “low” consumer price inflation myth at your own peril.
  • The future may look like the 1930s – where debt killed. Or, more likely, it will look like the 1970s – continual price increases, stagflation, weak economy, rapidly rising gold and silver prices, and increased global stress.
  • My bet is 1970s inflation and worse. Do you own due diligence but remember dollars will be devalued further and higher prices are inevitable.

  • Do you own enough silver?

MD: If you own any gold and silver and you’re not a jeweler or dentist or electronics manufacturer, you are a fool. And “I” admit to being a fool. I drank the coolade and bought quite a bit of the stuff before I realized the truth. I can’t sell it because it’s doesn’t even trade for the dollars I gave up for it … let alone the dollars I need to cover the inflation. Luckily, I also bought land in a low tax, low services county in Texas, which gives me a sustainable retirement.

What I really hope we achieve is “iterative secession”. But it’s not going to happen in my lifetime … and it’s not going to happen with people like Gary Christenson spreading confusion and delusion like this.

Gary Christenson

The Deviant Investor

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More Borrowers Are Defaulting on Their ‘Green’ PACE Loans

MD: Here at Money Delusions we know that money is not a “social tool”. Ithaca Hours and Baltimore BNotes are obvious instances of social money … that just plain doesn’t work. Every attempt to use it as such will be counterproductive. It is unfair to all concerned … especially traders. It enables interlopers to manipulate economies and to favor one class of trader over another.

With that in mind, let’s see what delusions this article contains and observe and predict the impact.

More Borrowers Are Defaulting on Their ‘Green’ PACE Loans

One of America’s fastest-growing loan types was designed to help homeowners make eco-friendly upgrades.

MD: Why would it be so fast growing? Offer these traders zero interest loans in a zero inflation environment and they will love you for it. This is just social manipulation through money … money “creation” in this instance. It is banished from any proper MOE process … through plain old common sense. We have to say “old” because there doesn’t seem to be any common sense in these newer times.

Property Assessed Clean Energy, or PACE, loans are issued by private companies, but the balances are attached to homeowners’ property tax bills.
Property Assessed Clean Energy, or PACE, loans are issued by private companies, but the balances are attached to homeowners’ property tax bills.
MD: What does it mean to attach a balance to a property tax bill? Using taxes to manipulate the economy is also a no-no … unfair especially to traders.
Photo: Michael Nagle/Bloomberg News

By

Kirsten Grind

82 COMMENTS

Loan defaults in a popular program meant to finance energy-saving home upgrades have increased substantially, despite lenders’ claims that few borrowers have missed payments.

MD: If money creators … i.e. traders making trading promises spanning time and space (and borrowing is just the money changer term to mischaracterize what is really going on) are not missing payments, they are obviously “not” defaulting!

The small, high-interest-rate loans were made as part of the Property Assessed Clean Energy program, or PACE, a nationwide initiative designed to help people afford solar panels, energy-efficient air-conditioners and other “green” appliances. PACE loans are among the fastest-growing types of loans in the U.S.

MD: Small loans? High interest loans? What’s up with that!!! In these overwhelming corrupt times, it appears traders will do virtually anything to escape the money creation controls of the money changers … even when they play right into the money changers hands as described here.

Private lenders in the PACE program have told Wall Street investors, as well as local and federal government officials, that borrower defaults are rare and that no homeowners have gone into foreclosure as a result of the program, according to investors and public officials.

MD: They write … in direct conflict with the title of their article?

But a Wall Street Journal analysis of tax data in 40 counties in California—by far the biggest market for PACE loans—shows that defaults have jumped over the last year. Roughly 1,100 borrowers have missed two consecutive payments this year through the tax year that ended June 30, compared with 245 over the previous year. That means they are in default, and could potentially have their homes auctioned off by local governments within five years.

MD: That says nothing if the number of traders involved has increased four-fold as well. In all their wisdom, have they increased interest collections accordingly to recover these defaulted trading promises?

The lenders, including Renovate America Inc., Ygrene Energy Fund and Renew Financial Inc., say the overall default rate of less than 2% provided by the Journal’s analysis is in line with the average percentage of people who miss property-tax payments.

MD: 2% of what?

A spokeswoman for Renovate America said the partial data gathered by the Journal is more negative than what the company is seeing.

MD: “The company” should be seeing instances of defaults instantly. And with a proper MOE process they would be making immediate interest collections of like amount from new traders with a similar propensity to default. It has a negative feedback, self stabilizing, bubble containing effect.

Rocco Fabiano, the chief executive of Ygrene, said in a statement that “Ygrene’s PACE delinquency rate remains far below that of average property tax delinquencies in California.” A spokesman for Renew Financial said property owners in its CaliforniaFIRST PACE program “have similar delinquency and default rates as all other property owners.”

MD: So this is a property tax?

In the PACE program, private companies make the loans and the balances are placed on a homeowner’s property tax bill. Local governments are responsible for collecting the payments and, in the event of a default, potentially seizing the home to recoup the loan amount.

MD: Right… government collecting using their unique tools of force (i.e. by taking the trader’s property … and usually turning it over to the money changers for a song). While private companies get the interest … right? Right out of the money changers playbook isn’t it!

The average PACE loan is about $25,000. But unpaid balances get bigger quickly; they accrue additional interest at the rate of 18% annually. Under California law, homes can be auctioned off in a tax sale in up to five years if the homeowners don’t pay the balance.

MD: 18% annual interest? That suggests that over the term of the average trading promise, nearly one in five will fail to make any repayment at all! Money changers? What’s not to love about that? Nothing like raising interest rates to get people to stop being deadbeats. Note, this is imposed on people who have already committed to their trading promise. Not to new ones making new trading promises. This is exactly the wrong way for an MOE process to operate!

“For us to be the heavy hand and make [borrowers] go through the tax sale process is onerous on us,” says Jon Christensen, the tax collector in Riverside County, where 227 PACE borrowers are in default.

MD: Who designed this system? They should be hanged. If we had a proper MOE process, this nonsense wouldn’t even get started … there would be no need for it!

Wall Street is hungry for bonds made from PACE loans. In July, asset managers and pension funds piled into a $205 million deal from the largest PACE lender, Renovate America. It was the company’s 11th securitization since its 2008 founding.

Investors are attracted to the bonds’ relatively high yield of about 4% and the loans’ priority structure. If a borrower defaults, PACE lenders are paid back before mortgage lenders. The deals have received high marks from rating agencies, which have said the program is too new to predict future defaults.

Still, some investors are getting nervous.

“If we can’t get more data, it’s going to limit our ability to take the risk,” says Dave Goodson, the head of securitized products at Voya Financial Inc., noting that monthly updates on the PACE bond deal he has invested in don’t include default rates. Mr. Goodson said he has shared his concern about lack of delinquency data in the PACE program to lenders.

MD: Take what risk? The money changers “never” take a risk.

Indeed, such performance data are hard to come by. It is up to local tax collectors to track default rates. “No one is even collecting all the data,” said John Rao, an attorney with the nonprofit National Consumer Law Center.

MD: Such performance data hard to come by? With a proper MOE process it is totally transparent. Anyone can view it … in real time!

The Journal analyzed data from the California Association of County Treasurers and Tax Collectors, which collected the information from local tax collectors and from counties. The association is advocating state legislation to increase consumer protections in the PACE program.

MD: Boy … talk about checking the barn door months after the horse has left!

The data, which only offer a limited view of overall PACE loan performance, show that the average default rate has climbed to 1.6% from 0.9% last year.

MD: If it is just 1.6%, how do they justify charging 18% interest. In a proper MOE process, interest collections are exactly equal to defaults experienced. They are made by new traders … not existing traders. It is a natural negative feedback system … resisting new traders when existing traders are experiencing problems. Throw the penalty on existing traders and you make their plight worse … plus you don’t restrict new traders that just inflates the bubble. How stupid can they be?

The default rate is lower than the average credit card default rate of roughly 3.5%, and higher than the first mortgage default rate of .6%, according to the S&P Dow Jones Indices.

But the PACE default rate doesn’t capture borrowers whose missed payments are covered by mortgage escrow accounts, which appears to be a common occurrence, according to borrowers, banks, real estate agents and attorneys.

MD: In other words, the instrumentation sucks … by design I’m sure.

Last year, California tax collectors reported that roughly 1.1% of homeowners missed property-tax payments, according to the tax collectors association.

MD: How can they miss property tax-payments when they are required by the government to escrow those payments? It can only be because the money changers are grabbing their tribute first.

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Amazon instant pick-up points

MD:  The cost of the “last mile” of delivery is a significant portion of the whole cost of the delivery. This is normally executed by the USPS carrier, the UPS driver, or the FedEx driver. This is one driver, one vehicle, delivering one  package to one purchaser at a time. Even in downtown locations, the delivery can’t be made door to door (like mail) because of the size of the packages.

But what if Amazon … or UPS or USPS or FedEx partnered with gas stations (and/or convenience stores). They could drop off dozens of packages at these points  in a single delivery (eliminating dozens of last mile deliveries). The purchaser would be likely passing the convenience store on a regular basis anyway and would just stop in and pick up their package (they would do the last mile themselves at no additional cost). Further, they would likely make some other impulse purchase.

Companies like Dollar General could trump what Amazon is doing by offering this service to their own customers. They already have very many conveniently located outlets … especially in rural areas.

I think Amazon is barking up the wrong tree here.

Just a thought for greater efficiency and lower cost.

#Technology News
August 15, 2017 / 8:02 AM / an hour ago

Amazon opens ‘Instant Pickup’ points in U.S. brick-and-mortar push

Jeffrey Dastin

3 Min Read

FILE PHOTO: An Amazon pickup location is seen at the University of California in Berkeley, California, U.S. August 14, 2017. Reuters/Jeffrey Dastin/File Photo

BERKELEY, Ca (Reuters) – Amazon.com Inc is rolling out pickup points in the United States where shoppers can retrieve items immediately after ordering them, shortening delivery times from hours to minutes, the company said on Tuesday.

The world’s largest online retailer has launched ‘Instant Pickup’ points around five college campuses, such as the University of California at Berkeley, it said. Amazon has plans to open more sites by the end of the year including one in Chicago’s Lincoln Park neighborhood.

Shoppers on Amazon’s mobile app can select from several hundred fast-selling items at each site, from snacks and drinks to phone chargers. Amazon employees in a back room then load orders into lockers within two minutes, and customers receive bar codes to access them.

The news underscores Amazon’s broader push into brick-and-mortar retail. The e-commerce company, which said in June it would buy Whole Foods Market Inc for $13.7 billion, has come to realize that certain transactions like buying fresh produce are hard to shift online. Its Instant Pickup program targets another laggard: impulse buys.

“I want to buy a can of coke because I’m thirsty,” said Ripley MacDonald, Amazon’s director of student programs. “There’s no chance I’m going to order that on Amazon.com and wait however long it’s going to take for that to ship to me.”

FILE PHOTO: An Amazon pickup location is seen at the University of California in Berkeley, California, U.S. August 14, 2017. Reuters/Jeffrey Dastin/File Photo

“I can provide that kind of service here,” he said of the new program.

FILE PHOTO: An Amazon pickup location is seen at the University of California in Berkeley, California, U.S. August 14, 2017. Reuters/Jeffrey Dastin/File Photo

Instant Pickup puts Amazon in competition with vending machine services. Yet the larger size of the Amazon sites means they are unlikely to pose a threat to those selling snack and drink vending machines to offices and schools. MacDonald said Amazon considered automating the Instant Pickup points but declined to say why the company had not pursued the idea.

Amazon’s ability to shorten delivery times has been a sore point for brick-and-mortar retailers, who have struggled to grow sales as their customers have turned to more convenient online options. Until Instant Pickup, Amazon shoppers could expect to have their orders within an hour at best via the company’s Prime Now program, or within 15 minutes for grocery orders via AmazonFresh Pickup. Amazon has made two-day shipping standard in the United States.

Instant Pickup prices may be cheaper than those on Amazon.com, MacDonald said. He declined to detail how the items are priced, however.

Other locations in the program now open include Los Angeles, Atlanta, Columbus, Ohio and College Park, Maryland.

Reporting by Jeffrey Dastin; Editing by Andrew Hay

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Cafe Hayek: Who’d a Thunk

Who’d a-Thunk It?

by Don Boudreaux on August 14, 2017

in Reality Is Not Optional, Seen and Unseen, Work

We study the effect of minimum wage increases on employment in automatable jobs – jobs in which employers may find it easier to substitute machines for people – focusing on low-skilled workers from whom such substitution may be spurred by minimum wage increases.

MD: If we had a “proper” MOE process, those engaged in conducting these studies would be out of work. Thus, we probably can’t expect them to be supportive of a proper MOE process … and zero inflation … can we!

Based on CPS data from 1980-2015, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become unemployed.

MD: Those who are engaged in compiling CPS data and pondering it would be out of work with a zero inflation proper MOE process. Increasing the minimum wage does not decrease the share of automatable employment … it increases it (but that’s really what he meant to say). Instituting a “proper” MOE process will eliminate a huge number of government jobs … and financial and economics jobs in industry as well. Rather than automating away what they do (which computers continuously do), it eliminates the necessity of their work all together. When inflation is guaranteed to be zero, what is a CPS analyst to do? (1+i)^n is perpetually 1.00000. In that case, it’s not about replacement, it’s about wasted counterproductive effort in the first place. But then what are the scholars of articles like this … who haven’t been able to “get it” in the face of the “obvious” … what are they going to do?

The average effects mask significant heterogeneity by industry and demographic group, including substantive adverse effects for older, low-skilled workers in manufacturing.

MD: Automation has in fact helped “older” low skilled workers. Where they would normally become physically incapable of doing the work, they can continue to do it with hydraulic and electrical assistance … just by pushing buttons. Without the automation, they would have “taken themselves” out of the game earlier. Automation is really a boon for older unskilled … and skilled … workers. But that’s really what he meant to say … right?

The findings imply that groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase.

MD: Well duh!

That’s the abstract of a new paper by Grace Lordan and David Neumark, titled “People Versus Machines: The Impact of Minimum Wages on Automatable Jobs.”  (emphasis added)

Reality is not optional and the law of demand holds for low-skilled labor no less than it holds for kumquats, for yoga instruction, and for high-quality jewelry.

MD: But the mechanism is sticky and has a dead band. Eliminate the relative motion (i.e. inflation) and then the effects of the  coefficient of static friction and deadband don’t come into play at all. The static forces remain constant … they don’t build up to a point of violent release!

Indeed, the law of demand is universal.  Therefore, government diktats requiring all workers to insist on being paid at least some minimum hourly wage from employers will cause the quantities of any given kind of low-skilled labor demanded by employers to be fewer than these quantities would be in the absence of such diktats.

MD: Government cannot survive with zero inflation. That “is” what sustains all government. And that inflation is also what lets the money changers maintain their illusion of the “time value of money” and thus their demand for tribute (for their claim of being the creators of the money). With zero inflation, both money changers and the governments they institute are “high, dry, and looking for a ball player” … i.e. they’re out of business.

Minimum-wage proponents fancy themselves to be champions of the poor, but these fancies are belied by the reality that minimum wages reduce the employment prospects of the very people that well-meaning minimum-wage proponents intend to help.

MD: But when you have a 4% leak in the money, how in the world are you going to keep from grinding the unskilled labor right into the dirt? Remember, we were all unskilled labor at one point in our lives.

(HT Frank Stephenson)

Posted on

Reply to RED

Reply to RED in discussion about a Bitcoin shop.

 

14 hours ago

R: I have been a bit busy, but finally have a little free time to respond.

Dissecting select statements and then sniping at them with what is often presumptuous and self serving rhetoric (as you did with the Bitcoin shop piece and other readers feedback is a “TACTIC”.

MD: Replying without even referencing the issue of focus is worse. That’s typically what I run into. You are correct. It is a TACTIC. I read an article through the frame of what I know. When I come across something that is in violation of what I know and can prove, even if all I see is a symptom, my TACTIC is appropriate for calling attention to it.

R: Apparently you believe that this type of “dialogue” places you in the critics seat or “instructor” role providing “instructive critique”; it does nothing of the kind, and rest assured you do not enjoy that relationship with me.

MD: “Apparently” is the operative word here. Its root is “appear” … and thus it must appear so … to you. I am in the critics seat. And I am an instructor if I can produce evidence that contradicts what I am reading and prove it. And that is true even if my profession is not “instructor”. The root of the word is “instruct” and it means “teach a subject or skill”. And that’s exactly what my comments do … in as unambiguous fashion as possible.

R: Allow me to demonstrate:

TM – Without even knowing what those theories are, I think it is foolish. You don’t fix an “improper” MOE process by resetting it. You don’t fix an “improper” MOE process by switching to another “improper’ process. And if you have a “proper” MOE process in operation it never requires “re-booting”………”

RD – How can you comment upon the efficacy of any theories if you do not read them. You speak of a “proper” MOE but you repeatedly fail to identify it. Your statement indicates that it is not necessary to learn anything about other theories as only your own are of importance.

MD: When I know what is true and can prove it, I don’t need to know what is theorized if the mention of the theory makes it obvious, it goes against what is provably true. Re. Failing to identify a “proper” MOE process: that takes me about 500 words. I have done it at least 4000 times over the 4+ years it has become obvious to me. I can’t begin every comment with those 500 words. If you want to know the “proper” MOE process, just ask (actually, you can now see it in the right panel). I am now using my MoneyDelusions site to annotate these articles. Contained in the right column is the definition of money and the proof. I do need to add the description of the process … but anyone understanding the definition and proof should be able to easily arrive at the process themselves … and quickly see the defects in other “theories”.

TM – [T] Who is “they”. With a “proper” MOE there are no gains! … period! Usually are reset means the create a new name for their money, you redeem the old money for the new money at 1,000,000 to 1 … and it all starts over again

……”

RD – Who to you think “they” are? It is the authors of the piece at the link. If you read the piece you would know this.

MD: Actually, it is not the authors of the piece … even in this instance. That’s why my method of annotating the actual article is my preferred mechanism. It was actually this article that motivated me to do it create the Money Delusions site. I had done it once before sometime back under a different umbrella … but after a while I was banished for breaking some rule … I was never told what. Money Delusions is now on my own host so I don’t have to deal with such nonsense. It’s not pretty yet … and may not ever be. But the points I make are indisputable.

TM – [T] “All” money is fiat … because all promises are fiat … they are made up by the person making the problem. And that’s not a bad thing … though fiat is “always” used as a slur…..”

RD – Of course the dollar and other currencies are Fiat money. The fact that I called the dollar Fiat currency should make it obvious to you that I am well aware all paper currency is Fiat. Bellicose statements are not required.

MD: What is obvious to me is you haven’t thought very deeply on the issue. Whether money is in the form of coin, currency, or simply ledger references is irrelevant. It “always” stands for an “in-process promise to complete a trade”. It is always … and only … created by traders getting their trading promises certified so they can span time and space.  And of course, “all” promises are “fiat” … so “all” money is “fiat”.

As with you, the use of the term “fiat” is to contrast it with “sound” through a slur. “Sound” implicitly means “having intrinsic value” … and the Bitcoin nuts have to extend it … having reference to “work done”. But once money becomes sound … i.e. trades for something of intrinsic value, it ceases to be money. The trade is immediately completed. When you say gold is money, all you’re really saying is that it is an inefficient, expensive, clumsy stand-in for real money. Anyone who takes it as money must somehow exchange it in a future time and space with zero loss of value in the gold itself. And that’s impossible because the supply/demand balance for gold is far from stable. With “real” money it is “perfectly” stable … perpetually … everywhere!

You are correct: Bellicose statements are not required. They just kind of take on that tone after addressing the tone deaf for 4+ years … who, in the final analysis resort to religious arguments when they’re trapped by proof … or run away as soon as they become unhappy with the form.

R: Do you see what I mean? Your style of communication does nothing to advance the discussion let alone your own theories.

MD: My style of communication does more than your style of rebuttal. You haven’t addressed anything of substance which I have asserted. You have only addressed my form. That is “your” TACTIC. It is avoidance. Avoidance is far worse than abrasiveness.

R: I am quite busy and have little time to engage in this level of discourse, let alone time to even read the DB, and I am “done” with this communication thread.

MD: You’re not too busy to make false assertions. You are just too busy to support them and defend them. As usual … the line goes dead … not after rebuttal but after rejection. There are no gloves soft enough for engaging you people.

R: Respond if you must, and if it follows your prior “protocol”, rest assured that it will receive all of the consideration it deserves!

MD: Here’s an article from GoldMoney.com about crypto currency. They don’t get it either … and I prove them wrong. See it at:

Gold Money: Cryptocurrency – its status as money

It’s one of my many new instances of trying to get the “obvious” across to the deluded.

Posted on

FEE: Is buying local even possible

MD: Mises and other thoroughly confused intellectuals and their acolytes spend most of their time studying why traders trade … why they make the trading decisions and choices they do. They then impose what they think they learn on the Medium of Exchange process. Ithaca Hours and Baltimore Green BNote are two examples of how the MOE process (money), being totally misunderstood, is misapplied as a social tool. It looks like this article is in that same class since “Buying Local” shouldn’t be a goal in the first place. It assumes an input into a trader’s decision he may have no intention of employing. Let’s see what Money Delusions this reveals.

Is “Buying Local” Even Possible?

Saturday, August 12, 2017

The residents of my bucolic town of Duvall, situated in the foothills of the Cascade Mountains, love local food. Townsfolk grow a variety of fruits and vegetables, raise cows and sheep, brew beer, and even distill liquor. Farm-to-table gatherings are popular in the area, and signs posted around town urge citizens to “buy local.”

My neighbors are jumping on the bandwagon of a growing trend to urge customers to “go local” in order to keep money in the community and/or reduce “food miles” that supposedly harm the environment.

So imagine my surprise when I encountered a sign promoting a “local” food
product in the bakery aisle of our town’s Safeway (a corporate grocery chain). Was the delicious item a blueberry tart from the local “U-Pick” farm down the road? No! It was a single-serving chocolate cream pie topped with coconut shavings

How fantastic! My neighbors must now be setting up cocoa bean farms and planting palm trees.

MD: And as this shows, all these new rules and concepts just enable new scams, delusions, and cons. Why not just leave things alone!

I quickly inquired on the town’s social media discussion board regarding the whereabouts of these cocoa and coconut farms, only to be told that I was being silly; those foodstuffs do not grow well in the cool, damp climate of western Washington. “So why is this luscious pie labeled local?” I retorted quizzically. Well, the answer was simple: It was baked locally.

MD: And the answer was perfectly valid … because “local” cannot be defined. That’s why we should rely on principles … not laws. That’s why we have 40,000+ new laws each year as the try to squeeze this “wet bar of soap”.

275 Miles Away

Well, then! My next task became to discover the whereabouts of this superb bakery. I figured I could walk over to the establishment and compliment the owners for successfully satisfying my taste buds. Upon investigating the label, however, I was surprised to find out that it was made in Airway Heights, Washington. I had never heard of Airway Heights. Further research indicated that it was near Spokane, WA, just a short 275 miles east of my town.

Wait a minute?! How can something that is roughly a five-hour drive away be “local?” How could we be “keeping money in the local community” if the likelihood of anybody from Airway Heights shopping in Duvall on any given day is close to zero?

MD: There are at least two issues here. Here the article implicitly states one … that “local” means “local trade”. An ancillary one is “local trade” means “local money”. Neither assumption is valid or necessary … or even desirable. This is the work of deluded busybodies.

How can something that is roughly a five-hour drive away be “local?”

Further queries led me to discover that Safeway labels any product made and sold in Washington as “local.” A pie baked just 25 miles further east in Idaho, a mere addition of 30 minutes on a five-hour drive, would not get the “local” label.

MD: Hmmm. Obviously we need another law … one that nails down the precise meaning of “local”. Enter law 40,001 … stage left.

But what about Vancouver, British Columbia? That Canadian city is less than half the distance away (at 130 miles) even though it is in some far-flung “foreign” country. A slab of back bacon from Vancouver purchased in our town’s Safeway would not get the “local” seal of approval, whereas the farther-flung Airway Heights pie would. None of this makes any sense!

MD: It makes perfect sense in the face of “nonsense”. If you want a constraint, state it in the form of a principle. Can you imagine the number of definitions and laws the simple principle of the “golden rule” implies? Hint: Infinite!

If you are as confounded as I was, then you might be suffering from the geographic confusion that comes naturally (and often gluten-free) with the “locavore” movement. Fortunately, basic economic logic provides an effective antidote to this intellectual malady. In essence, economics informs us that “home” is really wherever you want it to be.

MD: And in typical “economics” fashion, it informs you of nothing!

Is Anything Really “Local?”

The operative question is whether any product is truly “local”? If you are familiar with Leonard Read’s famous I, Pencil, then you won’t be surprised to find out that even the simplest things (e.g., pencils) are made from materials and labor all over the world.

MD: How about a cranberry grown in an indigenous cranberry bog? You can get close … but no cigar.

As for my pie, it turns out that Airway Heights, like Duvall, also lacks the cocoa and coconut farms to make the product’s content geographically local. These ingredients most likely come from Africa and/or Southeast Asia, by way of processing plants in Central America. But what about the labor? Granted, we could buy the ingredients from elsewhere and assemble them with “neighborly hands,” making it “local” labor, but does that even matter?

MD: What problem are you trying to solve in the first place?

The only truly “local” thing I could eat here would be the mushrooms that pop up in our backyard.

MD: Oh really? That’s the only food indigenous to your locality? I find that truly hard to believe … like impossible. But here we have an article trying to exercise some kind of authority … and violating its own principles … if any principle can be implicitly extracted from it. So far no “explicit” principle has been put forth.

Consider a food product that has ten ingredients and requires a baker. All ten ingredients come from some “non-local” source (perhaps 400 miles away). However, the pie is baked in ovens just down the street. The baker is a local fellow and we would guess he would spend his profits locally, or so we hope.

Now, consider a pie baked in Idaho by a “non-local” pastry chef, using wheat and milk produced in Duvall, with Duvallian hands. Here we have a situation of “local labor” providing two of the ten ingredients even though the fruits (or grains and dairy products) of their labor were shipped off to Idaho for final assembly. If we refused to buy this delicious tort because it wasn’t baked locally, we would not be helping to “buy local” wheat and milk. Those Duvall farmers would have less revenue to spend locally! Eegads, what have we done?!

MD: Below we see again the word “locavore”. Was it defined? Why does it exist? What problem is it trying to solve. What constraint is it using to solve this problem? Is there anything “natural” about it at all? What is the principle involved … and why would we want it to be involved? Inquiring minds want to know.

From the perspective of “locavores,” does it matter what part of a product (including labor) is local, so long as something is local? If we want to ramp up our requirements and demand that the entire product be locally produced – from the material and labor going into producing the ingredients to the baker who does the final assembly – then we best prepare to really limit our choices or go hungry. To be entirely “local,” the citizens of Duvall would need to end their chocolate-coconut pie habits.

But even local foodstuffs such as carrots quickly fall off the list of things to consume “locally” considering that the farm machinery used to plant and harvest crops rely upon metal, gasoline, and labor sourced from far-off lands (perhaps even … gasp … Montana!). I personally figured the only truly “local” thing I could eat here in western Washington would be the mushrooms that pop up in our backyard in the spring and fall. I’m not sure if I want to risk that.

MD: This is so typical of analyzing to death something that has gone off the tracks. Mises and his monks are totally afflicted with this trait.

Local to My Taste Buds

Of course, there are other objections to the “consume local” movement. The issue of “food miles” often fails to take into account the efficiencies of comparative advantage of producing goods elsewhere in the world, not to mention the rapid decrease in transportation costs over time.

If Airway Heights is “more local” than Vancouver, even though the former is farther away, aren’t we merely playing rhetorical games?

Although my town grows great blueberries in the spring, it is cheaper – when all resources are considered – to get them from Chile in the winter. Thanks to modern transportation technology, Chile is more “local” than it used to be.

And as for “keeping money in the local community,” I have tried to convince local farmers and bakers not to buy Toyotas with the “local” dollars I give them, but that contract is just too difficult to enforce. Apparently, they like Toyotas. (I also notice sometimes that the dollars I use were printed in Philadelphia and Denver!)

My point to all the locavores is that “local” is really a state of mind. If Airway Heights is “more local” than Vancouver, even though the former is physically farther than the latter, aren’t we merely playing rhetorical games? Does it matter that the ingredients from my chocolate pie come from Africa?

MD: And so is “nutritional content” local to someone’s state of mind. But the busybodies have forced packagers to include it on their packaging. If this locavore stuff is nonsense … and it is … so are all these packaging requirements and warnings. The same is also true of all the nonsensical safety warnings we “ignore” on a routine basis. They just cost money … and they never work. They are the work of bureaucrats and regulators. They are counterproductive.

It may be nice to support a neighbor you see face-to-face, but the cocoa farmer in Nigeria or baker in Idaho might be just as wonderful folk and deserving of my gains-from-trade. Since I’m not sure exactly, why not assume the best? For me, “local” isn’t so much where something is produced, so long as it is near to my taste buds. Now, who has a fork?

Anthony Gill

Anthony Gill, Ph.D. is a full professor of political science at the University of Washington, Seattle and author or Rendering unto Caesar: The Catholic Church and the State in Latin America (U of Chicago) and The Political Origins of Religious Liberty(Cambridge).  He lives in Duvall, WA and doesn’t really care where his food comes from.

MD: It takes a very advanced society for academics like this to be of value … as it does for opera singers and ballet dancers to be of value. When the inevitable reset comes, we will see these people are truly inept traders. They don’t create anything of value. In fact, they do the opposite … witness the global warning zealots … vividly exposed if you just read the emails.