Tag: government

Why Paul Krugman Is Wrong on the Austrians

The Austrians on Capital In contrast to mainstream macro models, which either do not possess capital at all or at best denote it as a homogenous stock of size “K,” Austrian theory explicitly treats the capital structure of the economy as a complex assortment of different tools, equipment, machinery, inventories, and other goods in process. Much of the Austrian perspective is dependent on this rich view of the economy’s capital structure, and mainstream economists miss out on many of the Austrian insights when they make the “convenient” assumption that the economy has one good. (Krugman will be glad to know that yes, I can spell all this out in a formal model — and one that referee Paul Samuelson grudgingly signed off on.) Krugman and other Keynesians stress the primacy of demand: they keep pointing out that the owner of an electronics store, say, won’t have the incentive to hire more workers, and buy more inventory, if he doesn’t expect consumers will show up with money to spend on new TVs or laptops. But Austrians point out that demand per se is hardly the whole story: Regardless of how many green pieces of paper the customers have, or how much credit the store can get from the bank, it will be physically impossible for the electronics store to fill the shelves with new TVs and laptops unless the manufacturers of those items have already produced them. And in turn, the manufacturers can’t magically create TVs and laptops merely because the demand for their products picks up; they rely on other sectors in the economy having done the prior preparation as well, such as mining the necessary metals, assembling the proper amount of tractor trailers needed to ship the goods from the factory, and so on. These observations may strike some as trivial, not worthy of the consideration of serious economists. But that’s only because normally, a market economy “spontaneously” solves this tremendous coordination problem through prices and the corresponding signals of profit and loss. If someone had to centrally plan an entire economy from scratch, there would be all sorts of bottlenecks and waste — as actual experience has shown. Without the guidance of market prices, we wouldn’t observe a smoothly functioning economy, where natural resources move down the chain of production — from mining to processing to manufacturing to wholesale to retail — as neatly depicted in macro textbooks. Instead, we would see a chaotic muddle where the various interlocking processes didn’t dovetail. There would be too many hammers and not enough nails, too much perishable food and not enough refrigerated railroad cars to deliver it, and so on. The Austrians on Interest When it comes to explaining the coordinating function of market prices, Austrians assign a very important role to interest rates, for they steer …

Continue Reading »

How to Replace Austerity with Freedom, Independence and Prosperity

The Economic Collapse Blog has this list of examples of how European-style “austerity” is already hitting the U.S., including cities closing schools and fire stations, and states eliminating whole state agencies and raising taxes. That includes the state of Illinois whose legislature has passed a “temporary” 66% personal income tax hike that the Democrat governor will sign. Rest assured, this income tax hike will be as “temporary” as the one in Massachusetts , still in place since 1989. Such austerity measures may lead to the same kind of social unrest Europeans have been experiencing. The Economic Collapse Blog concludes, We are entering a time of extreme financial stress in America.  The federal government is broke.  Most of our state and local governments are broke.  Record numbers of Americans are going bankrupt.  Record numbers of Americans are being kicked out of their homes.  Record numbers of Americans are now living in poverty. The debt-fueled prosperity of the last several decades came at a cost.  We literally mortgaged the future.  Now nothing will ever be the same again. To say that “nothing will ever be the same again” is just pessimistic and unnecessary. We actually can return to the prosperity of the past, by replacing debt and austerity with freedom and independence. There is no need for Americans to suffer through what European countries are suffering, because nearly all the problems we face are caused by governmental intrusions into many aspects of our personal and economic lives — intrusions by federal, state and local governments. Regardless of the good intentions that the welfare and military socialism statists have in justifying their use of compulsory government powers, what America needs is to cut the shackles of State-imposed dependence, restrictions, regulations, taxation, all those policies of moral relativism that involve violations of the Rule of Law: theft, trespass, denial of Due Process, and other acts of State-initiated criminal aggression. Freeing Americans includes repealing all forms of intrusive presumption-of-guilt regulations and restrictions that are in place having nothing to do with whether any individual is suspected of any crimes against others. Regulations are before-the-fact demands by the government that presume the individual and one’s business guilty, in which one must submit one’s private personal or financial information to the government to prove one’s innocence. Government regulations and arbitrary restrictions are literally searches and seizures by the government of information that is none of anyone else’s business, and effect in the stifling of everyday citizens’ growth and prosperity. Ending all personal income taxes , corporate taxes, estate taxes, and capital gains taxes frees people who own or share in the ownership of businesses — i.e. employers and prospective employers — to invest in their own research and development and in the expansion of their businesses, which is the genuine force behind jobs creation, in both blue collar and white collar sectors. Ending all personal income taxes frees people to explore their own ideas and inventions, and to start their own businesses that will employ more people and advance society further. Also…

Continue Reading »

NEWSFLASH: The Meltdown Didn’t Have to Happen

Filed in Alan Greenspan, BP, democrats, Federal Reserve, Gold, Gold Market, lead, Lear, o, Yahoo by on January 28, 2011 0 Comments
NEWSFLASH: The Meltdown Didn’t Have to Happen

Watching the government do practically anything is often akin to watching molasses run down the hill in January. But like that slow running ooze, even the government eventually manages to accomplish its feat. The problem in this case is that they are telling us what we already know. So here’s the newsflash sportfans: the financial meltdown could have been stopped. Gee thanks… From the New York Times by Sewell Chan entitled: Financial Meltdow was ‘Avoidable’, Inquiry Concludes “ The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a Congressional inquiry. The government commission that investigated the financial crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors, and risky bets on securities backed by the loans. “ The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,” the panel wrote in the report’s conclusions. “If we accept this notion, it will happen again.” The commission’s report finds fault with two Fed chairmen: Alan Greenspan, a skeptic of regulation who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but then played a crucial role in the response to it. It criticizes Mr. Greenspan for advocating financial deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as “the prime example” of government negligence. It also criticizes the Bush administration’s “inconsistent response” to the crisis — allowing Lehman Brothers to go bankrupt in September 2008 after earlier bailing out another bank, Bear Stearns, with help from the…

Continue Reading »

Market Wrap-Up for Jan.27 (QCOM, BEN, SWK, PG, CL, T, more)

Glum news out on Social Security this morning as we hear the Social Security system will run at a deficit this year and keep on running in the red until its trust funds are drained by about 2037. Congressional budget experts had expected social security to post surpluses for a few more years before permanently slipping into the red in 2016. I can’t stress enough to our readers that the time to take charge of your retirement, nest egg, or ambitions to build your own wealth — immediately! Depending on the government to provide a comfortable retirement can potentially set up many for some tough times, especially those who have saved little of what they have earned. I can’t stop saying enough that investing in dividend-paying stocks can be a huge source of extra income that you can get started building today. Many of our readers have already been putting the wheels in motion and are not waiting for rude awakening. I wanted to make a quick note regarding the website. We are in the process of upgrading our server for Dividend.com (need to accommodate the larger audience that continues to head our way – it’s a good thing!), so the site could be down sporadically at various times over the next day. We apologize for any inconvenience this may be causing. We’ll be sure to work as hard as ever to make it up with our stock research and recommendations. I also just want to take a minute to thank the thousands of subscribers that continue to believe in our firm and the message we are delivering on a daily basis. We try to differentiate ourselves through our results and also through how we communicate. My personal style of writing is one that I hope can help anyone understand and embrace the markets. We have an amazing audience, from the novice investor to the many wealth/hedge fund managers that use our service. …

Continue Reading »

Vincent McCrudden: Threatens to Kill 47 Regulators

Filed in BP, commodities, Gold Investing, o by on January 14, 2011 0 Comments

A New York money manager with a long history of legal battles with the government has been charged with threatening to kill 47 U.S. officials, including the nation’s top securities and commodities regulators. Vincent McCrudden, 49, last month allegedly…

Continue Reading »

A National Debt That Will Never Be Repaid

As you read this, the U.S. government owes just a sliver under $14 trillion dollars to various suckers who’ve lent it money. And it wants to borrow more. Timothy Geithner warned that a failure to raise the debt limit would mean the government would not be able to make the payments on the current debt in the very near future. Consult the official record and you’ll read that the U.S. has never defaulted on its obligations. That’s technically true…but then what about when France’s prime minister Charles de Gaulle politely asked the U.S. to hand over the gold it promised was backing the U.S. dollars held by France and other nations? “No gold for you!” Nixon was heard to say. That’s because the U.S. had printed a lot of dollars in order to pay for Lyndon Johnson’s social programs and war (among other things). There was no way that the ratio of dollars to gold held by the U.S. was still anywhere near an amount that would support the official $35/oz. What was the real price of gold with all those extra dollars floating around? Who knows? But when they were allowed to own gold again beginning in 1974 Americans bid gold up to over $887/oz in just six years. Nixon knew back in 1971 that there was no way the U.S. could make good on the dollar at the official rate. The official rate was a lie. If every yahoo with $35 U.S. were to show up at the gold window then, only a small percentage of them would get their gold. So Nixon “closed the gold window.” But a default by any other name apparently isn’t really a default. And now Mr. Geithner tells us that in order not to default, the U.S. government has to take on more debt. Remember, there are certain ways government gets purchasing power… Steal it directly by openly taxing its subjects (on income, payrolls, transactions, imports, exports, etc)… Steal it sneakily through currency debasement (inflate paper money supply or clip the coins). Borrow it. Number three really isn’t really income, however. And it often leads to number two. Geithner just admitted that if the U.S. doesn’t borrow more than the current debt ceiling allows, the government wouldn’t be able to meet its obligations. When you can’t pay for your expenses — including the interest on the debt you already owe — is it really a good idea to borrow more? Maybe you should cut up the credit card, move to a smaller apartment, sell the car and take public transportation, stop eating out so much…any of these things in any combination would help. Borrowing more to fund your lifestyle doesn’t make the list. It just guarantees there will be even more pain to reckon with later. Borrowing is what got them in this jam. Raising the debt ceiling at this point is about as healthy …

Continue Reading »

Forget Buying in the Suburbs and Go Rent in the City

Filed in BP, Debt, deflation, inflation, lead, o, silver, Spot Gold, target by on January 5, 2011 0 Comments

It’s getting more expensive to live in Baltimore….at least if you’re a renter. According to a recent article in the Baltimore Sun rents are up more than 6% over what they were last year in the Baltimore metro area. If you count the drop in various concessions — like waived application fees or initial free rent — then the increase is even more. There is a drag on the rental market, however: the regretful buyers who now need to rent out the homes they can’t sell. Lois Foster, a Baltimore real estate agent who helps people find homes to rent and manages properties for owners-turned-landlords, said she’s seeing rents of $200 to $500 less a month than owners could have gotten two or three years ago. There’s just a lot of competition, she said. The gild is off the buying lily. All the credit that oozed out of the banks found its way into the national psyche. There it gave off a funny smelling gas that puffed up hopes and dizzied senses. Stock prices were the first beneficiaries. Fattening 401(k)s danced 1920’s-style energetic jigs with dreams of early retirement. Even as those 401(k)s and those hopes tired and finally dropped dead on the dance floor, the Fed held down interest rates and more funny air kept the nation high. People pinned new hopes on — and sent reams of borrowed new money into — real estate. That’s come to the sort of end you’d expect. While government cheerleading and easy credit drew in increasing numbers of bigger fools, the rental market found itself a lot emptier. All the people who really couldn’t afford to buy and who should have been renting were too busy buying on greater margins and not renting. Some hotspot cities like New York and Boston saw their rental markets surging along with their real estate markets…but third-stringers like Baltimore… “Cohan, with Southern Management, said some competitors were offering as much as three to four months of free rent to get people in the door in 2008 and 2009. Not anymore.” It’s no wonder that they were having such a …

Continue Reading »

The Top 25 Financial Stories of 2010

Filed in Alan Greenspan, BP, ceo, Debt, economy, Gold, GOld juniors, lead, o, recession by on December 23, 2010 0 Comments
The Top 25 Financial Stories of 2010

So long farewell, auf weidersehen good-bye 2010. I can’t say that I will miss you. In the meantime, let’s hope 2011 isn’t the year that all of the chickens come home to roost. Because no matter how many times you try to slap a happy face on it, the economy and the markets are as tenuous as ever. Even still, as crazy as 2010 turned out to be, the year did give us plenty to write about here at The Daily Ration. Go figure. That being said, here are my top 25 blog posts of the year. In no particular order these are the stories that for some reason–in my opinion at least— say the most about who we are and where we are headed. You see, the problems that we really face are all systemic leading me to believe that the status quo cannot possibly be maintained… They include: Stiglitz: “Moral Hazard Everywhere” : Too dangerous to ignore…. Blue States Bleed Red Ink : This is a shocker… The $1 Trillion Pension Gap : The bill has come due…. Taibbi: Goldman is Creating the Conditions for Another Crash : From the vampire squid… Elizabeth Warren Warns on Commercial Real Estate: The voice in the wilderness… NEWSFLASH: Social Security is Now Cash Flow Negative : Charles Ponzi lives…. Rickards: China is “The Greatest Bubble in History” : The pressure is building….. Must See TV: Michael Lewis on 60 Minutes : Inside the doomsday machine….. Baby Boomers Take a Back Seat in The Great Recession : Bummer dude…. China’s 2012 Crisis: Cracks in The Great Wall… Roubini on Greece: The Tip of the Iceberg : Reckoning ahead… The No Spin Zone: Bill Black Calls BS : People need to fry for this….. Epic Fail: Brooksley Born Demolishes Alan Greenspan : Blah, blah, says “the maestro”…. Meredith Whitney Predicts a Housing Double-Dip : Spot on analysis…. The $19.6 Trillion Debt Bomb : Someday the bill will come due… The World According to Bill Gross Part 3 : Flushing money down an economic toilet….. Intel CEO Bodyslams Big Government : Truer words were never spoken… The Debt Slaves Revolt : Maybe it will all just go away…. Notes From Recovery Summer : It’s different this time…… The Middle Class Recession : And they wonder why people are angry….. The “Real” State of Small Business : The Must See Video of 2010 The Student Loan Scam : This is shameful… Gross, Grantham Agree: QE 2 is Troublesome : The last gasp… Hoenig: QE2 May Lead to “future instability” : A voice from the wilderness… Zillow: Another $1.7 Trillion to the Downside in Housing : Sorry Charlie….. So Adieu, Adieu, Adieu, Adieu, to you 2010. All things considered, I suppose it could have been much worse. Two hundred blog posts later that is all there is for the year—unless,of course, something really wacky happens. In the meantime, have a wonderful holiday season and a very Merry Christmas! See you in 2011….. To learn more about

Continue Reading »

China Gold Demand Soars

China Gold Demand Soars

The Chinese saw the writing on the wall over a decade ago. They realized the ultimate fate of the U.S. dollar and the fiat currency system. So in 2003, the government of China began an aggressive campaign to secure resources of gold. They began by increasing the country’s gold reserves. Since that time, the People’s Bank of China has added 21.2 million ounces to the country’s gold holdings. China now has the fifth largest national gold reserve, with over 1,054 tonnes in reserves. While boosting reserves, the Chinese government also began to deregulate the gold mining industry and invite foreign investment for the development of domestic resources. The measures were a runaway success; China is now the world’s largest gold producer with output increasing 70% in the past decade. Chinese government even began encouraging its 1.3 billion citizens to own gold. And today, the country has become the second-largest consumer of gold in the world. The government’s efforts to stimulate and expand the domestic gold market has been highly successful. Chinese citizens have embraced gold as true wealth in all economic seasons. And now new concerns over the future of the U.S. dollar and domestic inflation has prompted the Chinese to recently begin acquiring gold on a epic scale. China’s gold imports to jump 457% this year The Shanghai Gold Exchange recently revealed China’s gold imports jumped almost fivefold in the first 10 months of this year. And even though China is the world’s #1 producer, the country is expected to import 9.2 million ounces of gold this year as inflation concerns lifts investment demand. Consumer prices in China rose 4.4% in October— the fastest pace in two years — and above the government’s full-year target of 3.0%. The People’s Bank…

Continue Reading »

The Omnibus Bond Market Action: What it Means for Investors

Filed in BP, Gold, Gold Prices, o, silver by on December 8, 2010 0 Comments

Could the unthinkable be happening in the U.S. bond market? Yesterday, the U.S. Treasury Department sold just over $30.0 billion in three-year treasury notes and it wasn’t seeing the action it’s used to seeing. There is usually more demand for treasuries than what the government offers. But, yesterday, demand was only 2.9 times the amount

Continue Reading »

Is the Collapsing Empire and Its Police State Worth Fighting For?

Filed in BP, Debt, deflation, lead, noble, o, US Dollar by on December 1, 2010 0 Comments

In 43 BC, over 2,000 years ago, warring consuls Antony, Lepidus, and Octavian were duking it out with each other over control of Rome following Julius Caesar’s assassination the prior March. Each had legions at his disposal, and Rome’s terrified Senate sat on its hands waiting for the outcome. Ultimately, the three men chose to unite their powers and rule Rome together in what became known as the Second Triumvirate. This body was established by a law named Lex Titia on this date (give or take depending on how you convert the Roman calendar) in 43 BC. The foundation of the Second Triumvirate is of tremendous historical importance: As the group wielded dictatorial powers, it represents the final nail in the coffin in Rome’s transition from republic to malignant autocracy. The Second Triumvirate expired after 10 years, upon which Octavian waged war on his partners once again, resulting in Mark Antony’s famed suicide with Cleopatra in 31 BC. Octavian was eventually rewarded with rich title and nearly supreme power, and he is generally regarded as Rome’s first emperor. Things only got worse from there. Tiberius, Octavian’s successor, was a paranoid deviant with a lust for executions. He spent the last decade of his reign completely detached from …

Continue Reading »

Case-Shiller Index Screams Housing Double Dip

Filed in BP, economy, Gold Market, o by on November 30, 2010 0 Comments

Just when you thought the real estate market was showing signs of a recovery, reality rears its ugly head. According to the latest figures from the Case-Shiller Home Price Index, prices have started to slip again pointing to a double dip in home values. Nationally, home prices dropped 1.5% in September. That’s a trend that Case-Shiller expects to continue since earlier this month they forecast a further 7.1% drop in home prices into the second quarter of 2011. In all, 18 of the 20 metropolitan statistical areas that are measured by the S&P/Case Shiller index reported home price decreases for the quarter, although they are still above their low points from the spring of 2009. From the report entitled: Broad-based Declines in Home Prices in the 3 rd Quarter of 2010 According to the S&P/Case-Shiller Home Price Indices “ Another weak report; weaker than last month. The national index is down 1.5% from the third quarter of last year and 15 of 20 cities are down over the last 12 months. Other than Tampa, FL, there are no new lows this month but many analysts will argue that a double dip will be confirmed before Spring. While some of the bad numbers may reflect the end of the government’s tax incentive for first time homebuyers, there are other problems weighing on the housing market.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The national economy is certainly the number one issue for housing. Additionally, there is a large supply of houses on the market and further, hidden, supply due to delinquent mortgages, pending foreclosures or vacant homes. New construction is running at less than half the pace needed to meet normal demand, so a sustained recovery could be a ways off.” From their peak in June/July of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%.” No jobs, no money, no dice. It’s really not that complicated. Related Articles: Meredith Whitney Predicts a Housing Double-Dip Matt Taibbi On ForeclosureGate Crimes Zandi: Expect 8% Home Price Declines Guidelines Tighten Again For FHA Loans To learn more about Wealth Daily click here Advertisement The Video Footage that has Electric Companies Terrified They won’t announce it yet, but your utility company is shaking in its boots… That’s because one tiny engineering firm just demonstrated a technology that could put every last utility out of business— by harnessing your own solar energy at any time, from any window ! Before the first big ticket contract comes through — doubling the share price — click here to see exclusive footage. Case-Shiller Index Screams Housing Double Dip originally appeared in Wealth Daily . Wealth Daily is a free daily newsletter featuring contrarian investment insights and commentary.

Continue Reading »