Economics is all about making rational decisions given some set of likes and dislikes. It doesn’t presume to tell you what you should like or dislike, and it assumes that you do in fact know what you like or dislike. Or at least that’s what economic theory used to proclaim. Today economic theory is used as the intellectual foundation for a political stratagem that goes something like this: you do not know what you truly like, and in particular you do not know your economic self-interest, but luckily for you we are here to fix that. This is the common strand between QE and Obamacare. The former says that you are wrong to prefer safety to risk in your investments, and so we will fix that misconception of yours by making it extremely painful for you not to take greater investment risks than you would otherwise prefer. The latter says that you are wrong to prefer no health insurance or a certain type of health insurance to another type of health insurance, and so we will make it illegal for you to do anything but purchase a policy that we are certain you would prefer if only you were thinking more clearly about all this.
Pushing the neo-liberal argument further than it wants to go, with interesting results.
The New Deal social insurance philosophers thus struck a Faustian bargain... To get government funded pensions and unemployment benefits for the most needy, they eschewed a means test and, instead, agreed to generous wage replacement on a universal basis. To fund the massive cost of these universal benefits they agreed to a regressive payroll tax by disguising it as an insurance premium. Yet the long run results could not have been more perverse. The payroll tax has become an anti-jobs monster, but under the banner of a universal entitlement organized labor tenaciously defends what should be its nemesis. The puzzling thing is that 75 years later - with all the terrible facts fully known - the doctrinaire conviction abides on the Left that social insurance is the New Deal’s crowning achievement. In fact, it is its costliest mistake.
Whether or not you believe it would have made a difference to 'know' or not, the facts are that over the course of US economic history, you rarely know you're in a recession until long after it starts. Would you still chase day after day? Could you stand to watch the greater fools buying in the belief they are not the patsy? The following six facts might put things into perspective...
Nassim Taleb sits down for a quite extensive interview based around his new book Anti-Fragile. Whether the Black Swan best-seller is philosopher or trader is up to you but the discussion is worth the time as Taleb wonders rigorously from the basic tenets of capitalism - "being more about disincentives that incentives" as failure (he believes) is critical to its success (and is clearly not allowed in our current environment) - to his intellectual influences (and total disdain for the likes of Krugman, Stiglitz, and Friedman - who all espouse grandiose and verbose work with no accountability whatsoever). His fears of large centralized states (such as the US is becoming and Europe is become) being prone to fail along with his libertarianism make for good viewing. However, his fundamental premise that TBTF banks should be nationalized and the critical importance of 'skin in the game' for a functioning financial system are all so crucial for the current 'do no harm' regime in which we live. Grab a beer (or glass of wine, it is Taleb) and watch...
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."
The next time someone has the temerity to tell you you can't spend your way to uber-wealth, first spit in their non-Keynesian face, and then make yourself a little richer by buying the following broken record (or CD): "Deck the halls with Macro follies" featuring the following mega hits "Oh GDP" by Paul Samuelson and "Income Equals Expenditure" By J.M Keynes (as well as their far less known B-siders such as Hayek). So don't delay, and get rich today the moar, moar, moar, moar spending way.
The other day the Huffington Post ran an article by a Bonnie Kavoussi called “11 Lies About the Federal Reserve.” And you’ll never guess: these aren’t lies or myths spread in the financial press by Fed apologists. These are “lies” being told by you and me, opponents of the Fed. Bonnie Kavoussi calls us “Fed-haters.” So she, a Fed-lover, is at pains to correct these alleged misconceptions. She must stop us stupid ingrates from poisoning our countrymen’s minds against this benevolent array of experts innocently pursuing economic stability. Here are the 11 so-called lies (she calls them “myths” in the actual rendering), and Tom Woods and Bob Murphy's responses.
The problem we are going to face at some point as a nation and in fact as a civilization is this: there is no well-developed economic theory inside the corridors of power that will explain to the administrators of a failed system what they should do after the system collapses. This was true in the Eastern bloc in 1991. There was no plan of action, no program of institutional reform. This is true in banking. This is true in politics. This is true in every aspect of the welfare-warfare state. The people at the top are going to be presiding over a complete disaster, and they will not be able to admit to themselves or anybody else that their system is what produced the disaster. So, they will not make fundamental changes. They will not restructure the system, by decentralizing power, and by drastically reducing government spending. They will be forced to decentralize by the collapsed capital markets. The welfare-warfare state, Keynesian economics, and the Council on Foreign Relations are going to suffer major defeats when the economic system finally goes down. The system will go down. It is not clear what will pull the trigger, but it is obvious that the banking system is fragile, and the only thing capable of bailing it out is fiat money. The system is sapping the productivity of the nation, because the Federal Reserve's purchases of debt are siphoning productivity and capital out of the private sector and into those sectors subsidized by the federal government.
It is hard enough to determine what, when and how to invest even with solid data. We live in an unpredictable and chaotic world, and the last thing that investors need is misinformation and distortions. That is why the LIBOR manipulation scandal is so infuriating; as banks skewed the figures, they skewed entire marketplaces. The level of economic distortion is incalculable — as LIBOR is used to price hundreds of trillions of assets, the effects cascaded across the entire financial system and the wider world. An unquantifiable number of good trades were made bad, and vice verse. Yet in truth we should not expect anything else from a self-reported system like LIBOR. Without real checks and balances to make sure that the data is sturdy, data should be treated as completely unreliable.
Unsurprisingly, it is emerging that many more self-reported figures may have been skewed by self-reporting bullshittery.
Explaining why and how the global monetary system is failing, why it is too late to stop, what will come next, and why the crisis is only financial – not commercial.
In this very informative interview between The Browser and Peter Boettke, the professor of economics discusses the contributions made by the Austrian School, and explains the various nuances of the economic school by way of recent books by "Austrians." He also explains what we can learn from Mises and Hayek, and argues that economics is the sexiest subject.
A brief intro into what top funds are doing...
A must read reply to that discredited shaman of voodoonomics, Paul Krugman, by one of the more notable proponents of Austrian theory, Mises Institute's Robert Murphy."As many readers already know, last week Paul Krugman linked to one of my Mises Daily articles explaining the importance of capital theory in any discussion of the business cycle. Although Krugman graciously described my fable about sushi-eating islanders as "the best exposition I've seen yet of the Austrian view that's sweeping the GOP," naturally he derided the approach as a "great leap backward" and a repudiation of 75 years of economic progress since the work of John Maynard Keynes. To bolster his rejection, Krugman listed several problems he saw with the Austrian understanding. In the present article I'll first summarize the Austrian (in the tradition of Ludwig von Mises) positions on capital theory, interest, and the business cycle. With that as a backdrop, I will then answer Krugman's specific objections."
This is an article I did for a local newspaper for which I write a regular column on economics. It was meant for a general audience. Size limitations required the article to be very concise, thus a "deep" philosophical treatise on theory, epistemology, and intellectual trends was not possible. But I think it came out well. What do you think?