Mises Institute

Heading into the China session, offshore Yuan signaled a 1% devaluation was on the cards. Of course, all media eyes were focused on the disaster in Tianjin but after 3 days of what was supposed to a 'one-off' adjustment, The PBOC has in fact surprised with a modestly stronger fix at 6.3975 from yesterday's 6.4010 Fix. That leaves the CNY Fix devaluation to a 4.60% loss in 4 day. Of course, its a bit hypocritical of Americans or Europeans to regard the Chinese as mean and nasty and currency warriors because they're letting their currency adjust against a constantly-devaluing dollar and euro. The US has been devaluing the dollar for years, but that's a-ok for Western commentators, apparently. It appears - judging by the opening devaluation and closing intervention - that China is as set on crushing the herd of one-way carry traders as any export-enhancing currency debasement.

Asset price inflation, a disease whose source always lies in monetary disorder, is not a new affliction. It was virtually inevitable that the present wild experimentation by the Federal Reserve - joined by the Bank of Japan and ECB - would produce a severe outbreak. And indications from the markets are that the disease is in a late phase, though still short of the final deadly stage characterized by pervasive falls in asset markets, sometimes financial panic, and the onset of recession.

If these sorts of negative consequences arise from a voluntary equal pay scheme, we don’t think we could expect anything better from an involuntary one on a national level.

Too much of the commentary about the Greek crisis has focused on whether or not Greece should drop the euro and not enough on the structural problems arising out of decades of socialism. Meanwhile, the Greek government has borrowed more money than the Greek people can possibly repay, and debased money will not make this fact disappear. On the contrary, more easy money will cause even more harm. The best thing that Europe and Greece can do for itself right now is to confront some of the economic fallacies that have long driven the debate over Greece, the euro, austerity, and debt.

"But an increase in the quantity of money and fiduciary media will not enrich the world... Expansion of circulation credit does lead to a boom at first, it is true, but sooner or later this boom is bound to crash and bring about a new depression. Only apparent and temporary relief can be won by tricks of banking and currency. In the long run they must lead to an all the more profound catastrophe."

"It isn’t for nothing that again and again, countries abandoned the gold standard when they went to war. We rarely pause to consider what that tells us. If they needed to abandon the gold standard to go to war, that means the gold standard was a barrier against war. Of course, the ease with which governments could abandon the gold standard serves to remind us of the need to separate money and state altogether, and that the state cannot be trusted to maintain a sound money standard."

We're regularly told by the Fed and defenders of the current incumbent president that the economy is humming along pretty well. People who write columns for the New York Times and who compile government reports are doing pretty well. Unfortunately for those who don't write columns or enjoy comfortable government jobs, things seem less rosy. In fact, in an economy with a rising cost of living (especially in housing), stagnant real wages, and falling worker productivity, many in the so-called working class are very, very worried about the future. And this is a reason that Donald Trump is doing so well in the polls...

Political attacks on short-termism, and reforms to fix it, are beyond confused. They ignore financial market participants’ clear incentives to take future effects into account. They are clueless about what provides evidence of short-termism. There is little to Clinton’s criticism and alleged solutions beyond misunderstanding and misrepresentation. We should recognize, with Henry Hazlitt, that “today is already the tomorrow which the bad economist yesterday urged us to ignore,” and that expanding government’s power to do more of the same is not in Americans’ interests.

Those possessing the anti-capitalist mentality — so ascendant in our culture today — often critique market actors as being solely motivated by “greed.” Surely economic systems based on nobler motivations, they say, would better promote the long-run interests of the planet. These ideas ran through my head when I read about the new probate court “fees” approved by the Connecticut legislature this month, reinforcing its status as being among the worst states in which to die. The “fees” were justified on an expected budget shortfall of $32 million that the legislature wanted to fill, but I wondered: Where was the outcry from the greed-police?

Presidential hopeful Bernie Sanders recently raised the ire of both progressives and libertarians with his remarks concerning immigration. In just a few sentences, Sanders manages to demonstrate a hodgepodge of nativist, nationalist, protectionist, and socialist sentiments. But for anyone wondering why he wandered off the progressive narrative on immigration, it’s because protectionist labor unions pay him better than, say, La Raza.

US global superiority in military affairs is actually the superiority of a rich kid who thinks he’s really smart but in reality is merely just rich. When the seemingly endless flow of money slows (as it inevitably will), the mask of cleverness will fall. Everyone who resented the kid will be waiting at the edge of the playground for this day of reckoning, and because no one else will have been so dependent on spending-as-strategy, the erstwhile rich kid will find it tough going.

Why are governments suddenly so keen to ban physical cash? The answer appears to be that the banks and government authorities are anticipating bail-ins, steeply negative interest rates and hefty fees on cash, and they want to close any opening regular depositors might have to escape these forms of officially sanctioned theft. The escape mechanism from bail-ins and fees on cash deposits is physical cash, and hence the sudden flurry of calls to eliminate cash as a relic of a bygone age — that is, an age when commoners had some way to safeguard their money from bail-ins and bankers’ control.

When people are hungry and unhappy, the state cannot survive if the people know others are better off. The state uses propaganda, misinformation, and censorship to make an already captive citizenry even more confused and submissive.

For as long as the present economic system lumbers along, Keynesians will control the levers of power and influence. But when at last the system goes down in a heap, and central banks cannot restore the system, there will be a quest for answers. When you live by the Federal Reserve, you die by the Federal Reserve.

Many investors still view gold as a safe-haven investment, but there remains much confusion regarding the extent to which the gold market is vulnerable to manipulation through short-term rigged market trades, and long-arm central bank interventions. First, much of the gold that is being sold as shares, in certificates, or for physical hoarding in dubious "vaults" just isn't there. Second, paper gold can be printed into infinity just like regular currency. Third, new electronic gold pricing — replacing, as of this past February, the traditional five-bank phone-call of the London Gold Fix in place since 1919 — has not necessarily proved a more trustworthy model. Fourth, there looms the specter of the central bank, particularly in the form of volume trading discounts that commodity exchanges offer them.Today, there is no “official” price for gold, nor any “gold-exchange standard” competing with a semi-underground free gold market. There is, however, a material legacy of “real versus pseudo” gold that remains a terrible menace. Buyer beware of the pivotal difference between the two.