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Why Can’t We Be More Like Chile?
I just want to pass on some data forwarded to me from my extensive band of Chilean readers in response to my recent piece, “Chile is Looking Hot” (click here for the piece at http://www.madhedgefundtrader.com/august-2-2010.html ).
In 2007, the government dissolved the old Copper Stabilization Fund and rolled windfall profits from sales of the red metal into a sovereign wealth fund called the Economic and Social Stabilization Fund. Today that fund has $11.7 billion, a lot for a small country like Chile, which only has a GDP of $161 billion and a population of 17 million.
The fund will be used to increase government spending during economic downturns, thus eliminating the need for any borrowing during times of distress. This is one of the reasons why the Chilean ETF (ECH) never sold off in the wake of the massive 8.8 magnitude earthquake that struck in February.
I had hoped to use the natural disaster to gain a good entry point to the country, to no avail. Imagine that! Counter cyclical Keynesian spending financed out of savings, instead of debt. Too bad they didn’t think about that here!
If I’ve piqued your fancy, another way to play Chile is to buy the copper industry ETF (CU), which has extensive holdings in this incredible well managed country. Since I recommended Chile only two weeks ago, the ETF has risen by 5% during otherwise dismal global trading conditions.
And my American Chilean readers, who thank the heavens the day they decided to retire there, also recommend long positions in the country’s outstanding wines, including a mature Viña Almaviva, a Carmin de Peumo, and a Viña Concha y Toro.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page
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Keynes was an economic crackpot and was thoroughly refuted by Hazlitt (see Failure of the New Economics).
But Keynes probably has no equal when it comes to creating a tangled clusterf*ck of fallacies.
They are prosperous and smart because they have a homogenous society(among other things) If you have a social make up of a country resembling puke(with all shapes/colors/and patterns) your gonna end up with economical statistics that look like puke too, people of a country need to have the same life philosophy(they dont need the same color of skin or come from the same region) but they need to believe in the same life philosophy to work together. The current pattern of social inclusion (regardless of under which rock you crawled from under) will lead to the weaking of societal bonds and the general sense of not belonging to anywhere and not carring for any thing, and this is what I think they(One World Order) guys want, to split society not only in 2(right and left) but fragment society in 100s of pieces so that no1 will give a damn about anything, kinda like reverse Communism where eveything belongs to everybody and there are no property rights same thing when u mix society with 100 different cultures every1 owns a little piece but does not give a damn about the whole, I know this might sound a little convoluted and there is a better way of explaining this but you should get the idea
If you like Chile so much, MOVE TO THAT COUNTRY!
Ever been there?
I T S U C K S !!!
GO WORK IN THOSE LITHIUM MINES 16 HOURS A DAY AND SEND ME A BATTERY!
Actually, I DID move to Chile—and it's better than the U.S.
GL
Chile is a great country. You even use the Texas flag....almost.
Chile also has an excellent private pension plan, not controlled by either government, unions, or corporations. However, the youth use a lot of Italian words to show how cool they are. Other than that, I expect Chile to weather the coming financial hurricane a lot better than most countries.
It is a lot easier when you are allowed to access your resources.
Why is it that fundamentalism is so in vogue right now? Why is it that when measuring private vs. state, most people will say in 100% of the cases that private is good and state is bad. I'm not advocating for a fundamentalism on the other side, I'm all for balance. Sometimes it's good, sometimes bad. But the myth that private is always better is just plain wrong. Most latin american countries already know that by experience (as they know what it is when the equation is reversed and the state is everything).
Private pension plan doesn't necessarily mean you "are allowed" access, more access or some access to your resources. As far as I understand, in Chile those who went into private pensions are now collecting bread crumbs, not the promised benefits. And can't have more access to what they put in. Wonder if the fall of their quotas was due to financial speculation on part of the pension funds, I'll try to get some of that info next time.
"Why is it that when measuring private vs. state, most people will say in 100% of the cases that private is good and state is bad."
Because good things don't require coercion and force.
And the private sector doesn't coerce... right?
Here's the thing, Achtung. Public pension costs are out of control and as a taxpayer, I get to pay for your pension. I resent that. It makes me want to work less and pop open a Corona instead. I mean, I don't have a pension. Why the fuck should I pay for yours?
I'm not so sure about the "excellence" of such private pension plan as I heard more than enough chileans complain about how it was sold to them as gold and ended up being lead.
Oh, by all means, let's make the United States even more like a third world country.
Great idea.
Quit talking out of your ass. Spend some time in Chile and you quickly realize it's quite different from most of the other South American countries. Is there poverty? Of course, but no worse than what you can see in "first world" Los Angeles or central Mississippi.
Roger: Your comment suggests that somehow Chile is unique in South America. That means you're lumping Brazil into the same basket as Bolivia, and Venezuela into the same basket as Argentina, which is sort of funny to those of us who can see through your bullshit. Then, just in case there was any doubt, you seal the deal by comparing poverty in central Mississippi to LA. Quit talking out of your ass is good advice indeed.
Logic and reasoning skills are not your strong suit, stick with jobs that let you wear a paper hat.
I know it's easy to bash Keynes, he's a dead, limp-wristed, elitist, but I'll play devil's advocate here and state that 1) he was no idiot - his theories are relevant today, and 2) his ideas and economic prescriptions are often distorted and misrepresented by wing nuts on both sides.
Keynes did not believe in running up debt, and he opposed inflationary policies. He firmly believed that governments, like businesses, should live within their means (as in the Chilean stabilization fund example) and not become a burden on future generations. Stabilization =/= bailouts, and I'm sure Keynes would be shocked at the sight of the criminality that pervades government and finance today.
Counter argument:
Keynes believed that investors were inherently prone to making clusters of irrational investment decisions for no particular reason at all, and that these clusters of bad decisions were caused by "animal spirits".
This is ridiculous since we KNOW the cause of these bad decisions is a direct result of price controls on the price of borrowing. "Animal spirits" has nothing do with investors making bad investment choices. When the price of borrowing money is artificially lowered it sends a cue to investors that consumers have more savings than they actually have. This shifts investment to stages of production far removed from consumer markets.
Price controls do not work.
They don't work for commodities, they don't work for services, and they certainly don't work for interest rates.
Anyone arguing otherwise is an idiot.
So people speculate in tulip bulbs and E-Toys because of price controls.
Interesting orthodoxy - um, I mean, "theory".
If you have an economy awash in cheap money, it creates an environment ripe for wild speculation.
Particularly in the case of Tulipmaina, it was predominately wealthy Mennonites in Holland that were enaged in the speculation.
This kind of wild irrational behavior can be seen today in Vegas casinos where ultra-wealthy businessmen gamble on $10,000 hands of baccarat.
I thought people became ultra-wealthy because of "merit" - no?
Is that no longer the orthodoxy?
How do we distinguish rich people who "deserve" to be rich from rich people who only get rich because of their superior access to credit?
Besides playing baccarat, wouldn't a lot of excess cash tend to make people speculate in things like...oh, I don't know...gold??? Or is it not possible to speculate in gold?
A lot of confused people on this blog.
People become ultra-wealthy these days by being the owner of a corporation that gets government contracts, subsidies, or monopolistic protections.
It is rare indeed when someone becomes independently wealthy today based purely on the merits of his performance or entrepreneurship.
That said, I have no problems at all with someone being rich and a rich society has no bearing on my arguments. What matters is the price of borrowing. If the price of borrowing is cheap, it can promote wild speculation.
DOW chart update:
http://stockmarket618.wordpress.com
Wow, it's probably the first time I read here about Keynesianism and it doesn't mean a curse word like what people generally mean when spewing "socialism", "gun control", "regulation", "redistribution". Kudos to you for talking right about concepts and their essence and not falling into the circus of populist catchphrases.
Keynesianism has justifiably earned those popular catch phrases.
Any talk of Keynesianism without calling it dumb, retarded, moronic, etc.. is retarded.
It should be bashed and called out for the crackpottery it is at every opportunity.
This assumes downturns in the business cycle are bad. Fail.
Right on brother.
Downturns are the cure for the disease of government interventionism.
Keynes was an idiot.
Having a government INCREASE spending during a downturn is retarded since it will halt the market correction.
Downturns don't magically occur in stable markets; they only occur if the government has created a bubble. Thus, downturns are a normal process that the market must go through to correct the market imbalances caused by government in the first place.
By having a government inject spending into a correcting economy, the market correction is prevented from occurring, which obviously causes more damage to the economy.
Thus, we can say that Keynes was a idiot and his modern day followers are also idiots.
>Keynes was an idiot.
Did you see Keynes' rap video?
http://www.youtube.com/watch?v=d0nERTFo-Sk
Keynes was an economic crackpot and was thoroughly refuted by Hazlitt (see Failure of the New Economics).
But Keynes probably has no equal when it comes to creating a tangled clusterf*ck of fallacies.
Than it was Keynes today we have Krugman, there just has to alway be a stooge for the borrow big - spend big club
But Krugman is a complete moron and everybody realizes. Keynes was much more subtle and politically skilled.
As much as Krugman would drool over the though, he is just another tool that nobody will remember in the future (like most of the Nobel winners btw).
Totally true.
Keynes was a politician disguised as an economist.
Keynes spent his life creating ex post facto rationales for justifying government's existence.
In other words we could say Keynes spent his life creating ex post facto rationales for justifying his own criminal existence.