Maynard Keynes

It’s amazing what people can trick themselves into believing and even shout about when you tell them exactly what they want to hear. It was disappointing to see Brad DeLong’s latest defense of Fed policy, which was published this past weekend and trumpeted far and wide by like-minded bloggers. If you take DeLong’s word for it, you would think that the only policy risk that concerns hedge fund managers is a return to full employment. He suggests that these managers criticize existing policy only because they’ve made bad bets that are losing money, while they naively expect the Fed’s “political masters” to bail them out. Well, every one of these claims is blatantly false. DeLong’s story is irresponsible and arrogant, really. And since he flouts the truth in his worst articles and ignores half the picture in much of the rest, we’ll take a stab here at a more balanced summary of the pros and cons of the Fed’s current policies. We’ll try to capture the discussion that’s occurring within the investment community that DeLong ridicules. Firstly, the benefits of existing policies are well understood. Monetary stimulus has certainly contributed to the meager growth of recent years. And jobs that are preserved in the near-term have helped to mitigate the rise in long-term unemployment, which can weigh on the economy for years to come. These are the primary benefits of monetary stimulus, and we don’t recall any hedge fund managers disputing them. But the ultimate success or failure of today’s policies won’t be determined by these benefits alone – there are many delayed effects and unintended consequences. Here are seven long-term risks that aren’t mentioned in DeLong’s article...

History never changes. Or, at least it changes very slowly indeed. So here we are, like those before us, warning of our own Great Depression, of our own World War, or of even larger cycles like the fall of the English, Spanish, or Roman empires. And so far as we can tell, few listen and nothing changes. Why? Because it isn’t time. Understanding long-term cycles, and how they shape our spectrum of responses in periods of crisis and transformation is key to comprehending what is to come (and how we will allow it to affect us). Do you really think your ancestors didn’t see the Depression coming in 1921 or in 1929? Of course they did. The Balloon Option-ARM mortgage had just been invented, creating a housing boom larger and even more groundless as our own, immortalized by the Marx Brothers in The Cocoanuts. They warned the world then just as we do now, and no one listened then, just as they don’t now. Why? It wasn’t time.

In the past months and right after implementing Quantitative Easing Unlimited Edition, the Fed began surfacing the idea that an exit strategy is at the door. With the latest releases of weak activity data worldwide, the idea was put back in the closet. However, a few analysts have already discussed the implications of the smoothest of all exit strategies: An exit without asset sales; a buy & hold exit. We have no doubt that as soon as allowed, the idea will resurface again. Underlying all official discussions is the notion that an exit strategy is a “stock”, rather than a flow problem, that the Fed can make decisions independently of the fiscal situation of the US and that international coordination can be ignored. This is logically inconsistent as we address below...

Gold and silver crashed. Here is a sometimes-humorous and often-irreverent and hard-hitting discussion. This is a different perspective and we hope to expand your thinking about gold and silver.

It's time to go in for the kill. Buy as much physical Gold as you can.

The overtly inflationary policy stance of the FOMC is especially significant when you consider that Fed Chairman Ben Bernanke is no longer in control of monetary policy.

In 2013, we are receiving the same banker and mass media propaganda that we heard in 2008. The stock markets are okay, economies are recovering, blah, blah, blah. However, do any of the facts support the propaganda? For example, this “bullish” US stock market has not even recovered to the levels of October, 2007. And even, if more QE, more HFT low-trading volume rigging can rig US and other western markets higher, do rising stock markets even matter if the growth of stock markets are less than

From the management of a global currency war to the 1998 Committee to Save The World, QBAMCO provides an all encompassing escape into the reality our current - and future - monetary (and inflationary) world. While Brodsky and Quaintance do not expect a breakdown in global monetary oversight, they do expect fiat currency debasement to continue to mask the driver of real economic malaise and contraction - global bank deleveraging; and they do expect this process to lead to a popular loss of confidence in today’s major currencies as savings instruments – perhaps beginning in the global capital markets in 2013. What will eventually (or soon) occur will be the rare occasion when return-on-savings trounces return-on-investment, implying precious metals will outperform the great majority of financial assets (except for shares in precious metals miners and natural resource producers).

What does it mean that China is making a lot of noise about the Federal Reserve’s loose monetary policy?

Keynesian economists believe, regardless of logic and data, that economies can be managed from the top down. In their world, economies are little different than machines. Change some inputs here, speed them up over there, add some lubrication, etc. and the machine will respond in the fashion desired. Output can be “managed” to whatever level needed purely by adjusting the parts of the machine. Austrian economists on the other hand do not see a machine. They see millions of individuals all making decisions to improve their own lives. The price system provides the coordination among these separate pieces, performing a function no human, supercomputer or government could ever accomplish. For Austrians, economics is a bottom up approach. To effect change, you must change the incentives and disincentives that individual decision makers are afforded. “Those who cannot remember the past, are condemned to repeat it.” George Santayana. Ideology is powerful, capable of masking unpleasant facts. Whether we recognize it or not, we are all slaves to ideology.

The Christmas Eve classic rinsed, lathered, washed and repeated...just like the real world.

Presenting Dave Collum's now ubiquitous and all-encompassing annual review of markets and much, much more. From Baptists, Bankers, and Bootleggers to Capitalism, Corporate Debt, Government Corruption, and the Constitution, Dave provides a one-stop-shop summary of everything relevant this year (and how it will affect next year and beyond).

We are now approaching the fourth Christmas of the great debate between the benign supporters of Santa Keynes and the walnut-hearted acolytes of the Hayekian Grinch. Or at least that’s how Keynesians seem to see it. Far from being a success, Keynesian policies have retarded recovery and extended the downturn, just as they did in the 1930s and the 1970s. They’re the “moral” policy present that keeps on taking, supported by those who claim that their opponents have hearts “two sizes too small.”

In the fall of 1996, John Cassidy arranged to interview Paul Samuelson in his office at M.I.T. for an article he was writing on the state of economics. He began by asking Samuelson whether he was still a Keynesian: "I call myself a post-Keynesian," Samuelson replied. "The 1936 Model A Keynesianism is passé..." He recalled attending an event that was held in Cambridge, England, in 1986 to mark the one-hundred-and-fiftieth anniversary of Keynes's birth. "Everybody was there. And they all stood up and said, 'I am still a faithful Keynesian. I am still a true believer.' I was a bit rude. I said, 'You remind me of a bunch of Nazis saying, I’m still a good Nazi.' It’s not a theology: it’s a mode of analysis. I think I am a different Keynesian than I was ten years ago."

Isaac Newton, the father of classical mechanics and progenitor of nearly every technology we use today, was easily one of the top 10 most influential minds in all of human history... Yet as accomplished as he was, Newton credited the brilliant scientists and philosophers who came before him, acknowledging that his insights would not have been remotely possible without the foundations laid by great thinkers– Archimedes, da Vinci, Descartes, etc. No doubt, all great ideas flourish by expanding upon the works of others. Unfortunately, so do terrible ones. And one of the worst ideas in history that continues to play out today is the grand experiment of fiat money. The idea is simple. Rather than allowing money to be scarce and have intrinsic value, our fiat system grants power to a tiny elite to conjure money out of thin air. Presumably, if the ones in control are smart, honest guys, then everything should be fine. Fiat was a total failure right from the beginning... and yet the economic engines deep below are steered by people who worship at the cult of bad ideas.