Archive for February, 2010

On the Rise and Fall of the Fed on Jekyll Isle

February 28, 2010

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Munger over Buffett: BYD over Blizzard

February 28, 2010

Robert Wenzel on Charlie Munger investing while Warren Buffet munches on Dairy Queen Blizzard’s:

Below, I propose the notion that Charlie Munger is probably a better investor than Warren Buffett. WSJ steps up to the plate to back me up:

Charlie Munger — Berkshire vice chair and Warren Buffett’s longtime partner — knows a good thing when he sees it.

It was Munger who first learned of an obscure Chinese maker of batteries and automobiles called BYD Inc., several years ago and championed an investment in the firm. “BYD was Charlie’s idea,” Buffett told the Journal in a story back in May. “When he encounters genius and sees it operating in a practical way, he gets blown away.”

Judging by the return Berkshire has seen so far on BYD, Munger might not merely be encountering genius. He might be one. In 2008, Berkshire decided to invest $232 million for a 10% stake in BYD.

In his shareholder letter, Buffett reports that it now values that 10% stake at $1.99 billion, putting the value of that investment above other better-known Berkshire common stock holdings such as Johnson & Johnson, ConocoPhillips and U.S. Bancorp…

It should be noted that Munger was 84 years old when he discovered BYD.

Ten Things I Learned While Trading for Victor Niederhoffer

February 28, 2010

By James Altucher

I traded for Victor Niederhoffer for about a year starting in 2003. I was up slightly more than 100% for him, primarily trading futures using a quantitative approach. During that period I had one down month: June 2003.

Victor was a top trader for George Soros before starting his own fund in the ’90s and then writing the classic investment text “Education of a Speculator.” He then suffered one of several blowups in his career when his fund crashed to zero while on the wrong side of a couple of bets during the Asian currency crisis in 1997 (most notably, he was short S&P puts when the market crashed that year).

Despite that, Victor has consistently traded his own portfolio quite successfully and is one of the best traders I’ve seen in action.  He still posts his daily comments on trading and the markets at his site dailyspeculations.com.

Here are 10 things I learned during my time trading for Victor:

1.) Test, test, test. Test everything you can. If someone says to me, “There’s inflation coming so you better short stocks,” I know right away the person doesn’t test and will lose money. Data is available for almost anything you can imagine. (In my talks, I always discuss the “blizzard system” based on data of what the stock market does depending on how many inches of snow have fallen in Central Park that day).  Victor and his crew would spend all day testing ideas: What historically happens to the market on a Fed day? What happens on options expiration day if the two prior days were negative? Do stocks that start with the letter “x” outperform? Nothing was beyond testing.

2.) Optimism. There’s plenty of reasons every day to assume the world is going to end. The media is constantly speculating about imminent financial collapse, hyperinflation, peak oil, pandemics, terrorism, etc. One of Victor’s favorite books, which I highly recommend, is “Triumph of the Optimists,” which shows the success of the U.S. markets over the past century over other markets and asset classes. Yes, the markets take a hit. But invariably buying dips (and being careful not to get wiped out) will be a long-term strategy for success.

3.) Fearlessness. I had a big March 2003 trading for Victor. The market was threatening to go to new lows at the advent of the Iraqi war. I went long and strong and had a great month. Then, for the rest of the year, for fear of destroying a great track record, I would go up a few percentage points at the beginning of each month and then coast for the rest of the month, probably leaving another 100% or so on the table as I passed on trading many high probability situations. I always suspected Victor was very disappointed in me for that. When you have a high probability situation, trade it and trade it big.

4.) Everything Is Connected. Whether you are studying baseball, checkers, trees, wars – all contain patterns similar to the patterns we see every day in trading. Sometimes the best way to get perspective on your trading is to study something seemingly unrelated and to then consider the analogies.

5.) Ayn Rand. There’s a lot of retrospectives right now about Rand, one of Victor’s favorite authors. I don’t care much for the so-called Objectivism or Rand’s views on capitalism, but what struck me about her books was the emphasis on competence. Her novels are about competence and the personal gratification one gets by being good at what you do, whether it’s building railroads, designing a building, trading or cleaning a house. (more…)

What Ron Paul Knows That Ben Bernanke Does Not

February 25, 2010

Ron Paul recently raised questions during Congressional testimony with Fed Chairman Ben Bernanke about possible Federal Reserve misdeeds including allegations of involvement in Watergate payoffs and billion dollar payments to Saddam Hussein.

Bernanke answered smugly: “These specific allegations you’ve made, I think are absolutely bizarre,” while Barney Frank promised to look into the allegations.

Robert Wenzel from EconomicPolicyJournal.com fills out why Mr. Bernanke should apologize to Dr. Paul:

Fed chairman Bernanke simply doesn’t know Fed history as well as Ron Paul (Or the history conveniently slipped his memory). As far as Watergate, I always thought it was pretty common knowledge that the money ended up in the burglars’ hands through some pretty fishy means. Even wikipedia has part of the story:

[Watergate burglar Bernard] Barker had attempted to disguise the origin of the funds by depositing the donors’ checks into bank accounts which (though controlled by him), were located in banks outside of the United States. What Barker, Liddy, and Sloan did not know was that the complete record of all such transactions are held, after the funds cleared, for roughly six months. Barker’s use of foreign banks to deposit checks and withdraw the funds via cashier’s checks and money orders in April and May 1972 guaranteed that the banks would keep the entire transaction record at least until October and November 1972.

Wikipedia, also states:

Investigative examination of the bank records of a Miami company run byWatergate burglar Bernard Barker revealed that an account controlled by him personally had deposited, and had transferred to it (through the Federal Reserve Check Clearing System) the funds from these financial instruments.

Clearly, there were some very, very odd transactions that went down which may, or may not, have been abnormally facilitated by the Fed. Was this a normal Fed wire, or something more convoluted? My sense has always been that there was something a bit extraordinary about the way the funds went through the Fed system. It does smell, for sure, and to ask about it is not bizarre. It should be noted that the Fed chairman at the time was Arthur Burns, who would have sold his own children to a white slave ring if Nixon had asked. (In a recent report by Micahel Labeit, here at EconominPolicyJournal.com, Labeit details the speech of former Columbia University PhD student Walter Block, who during the speech reminisced about his years studying at the school , Block specifically recalled how Arthur Burns in his class, instead of teaching, simply told stories of his dinners with Nixon.) Note, I don’t think Nixon, himself, necessarily asked Burns to help in the transfer of the funds, but Burns would very likely have responded positively to a request from a Nixon lieutenant, given his adoration of Nixon.

Here’s the late investigative reporter Sherman Skolnick reporting on the documents the Fed blocked Congress from seeing about its possible involvement with money sent to Hussein:

….in October, 1990, at the time of the Persian Gulf conflict, there was an unpublicized case in the Chicago Federal District Court (No. 90 C 6863). The Illinois Bank Commissioner sought an injunction against the Federal Reserve Board to stop them from turning over certain bank records to the House Banking Committee. The records were those of the Chicago branch of Italy’s largest [bank], Banca Nazionale del Lavoro, owned in part by the Vatican.

Called BNL, it had records of Iraqi strongman Saddam Hussein and his secret private joint business dealings with his partner, an American. A close crony of the Federal Reserve, Chicago Federal District Judge Brian Barnett Duff, ordered the return of any records from the Banking Committee, then headed by a Democrat,Rep. Henry Gonzalez (D., Texas).

The House Banking Committee was an intervening party-litigant in the controversy. Judge Duff so opposed the House Banking Committee’s efforts to get those records, that the Judge would not listen to the Committee’s attorney; did not want the attorney in the Judge’s courtroom, the Judge calling him an 800 pound gorilla showing no respect for the court.

In May, 1991, right after the War ended in the Persian Gulf, the case ended up in the Federal Appeals Court in Chicago; a court dominated by Judges tied to the major banks and cronies of the Federal Reserve.

From what I understand,the Illinois Bank Commissioner filed against the Fed at the request of the Fed! What were they hiding? Ron Paul’s question wasn’t bizarre, it was Chairman Bernanke’s response that was bizarre, disrespectful and out of order. It’s time for an apology by Chairman Bernanke. And let’s see those Fed records about Hussein, the Chicago branch of BNL and the Fed!

Bernanke’s response of total ignorance reminds me of the time former Assistant Treasury Secretary for Economic Policy, Phil Swagel told me, with a straight face, he didn’t know what a gold swap was.

When it serves them, these guys have very forgetful memories. Thank the heavens there are people like Ron Paul around to remind them.

UPDATE: Here’s more on possible Fed involvment in the Watergate money. From David T. Beito (Via LRC):

Well, it seems that Paul may have been onto something…or at the very least raised legitimate questions that deserve investigation. A few minutes on google news produced this 1982 story from the Milwaukee Sentinel by Richard Bradee of the paper’s Washington Bureau

“Police who searched the room the Watergate burglars used found $4,200 in $100 dollar bills, all numbered in sequence. Proxmire asked the Federal Reserve Board where the money came from. As he explained in a letter to the late Rep. Wright Patman (D-Tex.), chairman of the House Banking Committee: “I got the biggest run-around [from the Federal Reserve] in years. They ducked, misled, lied, and gave me the idiot treatment.”

More on the Federal Reserve Cover-Up of Payoffs to Saddam Hussein:

(more…)

Zbigniew Brzezinski: How Jimmy Carter and I Started the Mujahideen

February 24, 2010

A very fascinating 1998 interview with Zbigniew Brzezinski illustrating the intricacies of realpolitik and the reality of blowback think.

Interview of Zbigniew Brzezinski, Le Nouvel Observateur (France), Jan 15-21, 1998, p. 76*

Q: The former director of the CIA, Robert Gates, stated in his memoirs [“From the Shadows”], that American intelligence services began to aid the Mujahadeen in Afghanistan 6 months before the Soviet intervention. In this period you were the national security adviser to President Carter. You therefore played a role in this affair. Is that correct?

Brzezinski: Yes. According to the official version of history, CIA aid to the Mujahadeen began during 1980, that is to say, after the Soviet army invaded Afghanistan, 24 Dec 1979. But the reality, secretly guarded until now, is completely otherwise: Indeed, it was July 3, 1979 that President Carter signed the first directive for secret aid to the opponents of the pro-Soviet regime in Kabul. And that very day, I wrote a note to the president in which I explained to him that in my opinion this aid was going to induce a Soviet military intervention.

Q: Despite this risk, you were an advocate of this covert action. But perhaps you yourself desired this Soviet entry into war and looked to provoke it?

Brzezinski: It isn’t quite that. We didn’t push the Russians to intervene, but we knowingly increased the probability that they would.

Q: When the Soviets justified their intervention by asserting that they intended to fight against a secret involvement of the United States in Afghanistan, people didn’t believe them. However, there was a basis of truth. You don’t regret anything today?

Brzezinski: Regret what? That secret operation was an excellent idea. It had the effect of drawing the Russians into the Afghan trap and you want me to regret it? The day that the Soviets officially crossed the border, I wrote to President Carter: We now have the opportunity of giving to the USSR its Vietnam war. Indeed, for almost 10 years, Moscow had to carry on a war unsupportable by the government, a conflict that brought about the demoralization and finally the breakup of the Soviet empire.

Q: And neither do you regret having supported the Islamic [integrisme], having given arms and advice to future terrorists?

Brzezinski: What is most important to the history of the world? The Taliban or the collapse of the Soviet empire? Some stirred-up Moslems or the liberation of Central Europe and the end of the cold war?

Q: Some stirred-up Moslems? But it has been said and repeated: Islamic fundamentalism represents a world menace today.

Brzezinski: Nonsense! It is said that the West had a global policy in regard to Islam. That is stupid. There isn’t a global Islam. Look at Islam in a rational manner and without demagoguery or emotion. It is the leading religion of the world with 1.5 billion followers. But what is there in common among Saudi Arabian fundamentalism, moderate Morocco, Pakistan militarism, Egyptian pro-Western or Central Asian secularism? Nothing more than what unites the Christian countries.

* There are at least two editions of this magazine; with the perhaps sole exception of the Library of Congress, the version sent to the United States is shorter than the French version, and the Brzezinski interview was not included in the shorter version.

(via Bob Murphy from Brad DeLong and ultimately Counterpunch.org)

Lew Rockwell on von Mises, Ron Paul, Free-Markets and the Future of Freedom

February 22, 2010

The Daily Bell interview with Lew Rockwell on February 21st, 2010:

Introduction: Lew Rockwell is a seminal proponent of the modern free-market movement and a chief orchestrator of the Austrian economic resurgence in America and abroad. Rockwell was Ludwig von Mises’ own editor in the 1960s and later served as Congressman Ron Paul’s chief of staff. He is founder of the Auburn, Alabama-based Mises Institute and the highly successful blog LewRockwell.com. Together, these entities are among the highest- frequented free-market Internet sites in the world.

Daily Bell: You have almost singlehandedly led a revolution in thought that has changed the world. How does that make you feel?

Rockwell: Well, thank you, but that’s not how ideas work. Without donors, faculty, students, collaborators, distribution media, and the division of labor, we are all just isolated scribblers. That has always been true, from the ancient world and today. We like to say that one person can make a difference, but it is only true to some extent. All forms of production, including in the world of ideas, require as much cooperation with others as possible. And while we were making great progress before 1995, the advent of digital media has made a vast difference precisely because it has dramatically expanded opportunities for communication and cooperation.

Daily Bell: Can you familiarize our readers with the depth and breadth of the organizations you have founded and that offer services – especially on the ‘Net.

Rockwell: I founded the Mises Institute in 1982 to try to make sure that the influence of Mises and other Austrian economists would grow. Today Mises.org is the largest economics website on the planet that is not-for-profit, and a teaching and publishing powerhouse. I founded LewRockwell.com in 1999, mainly because I had lots of information to share with others, and I got tired of using email lists. I figured that I might as well post what I found interesting, in every area, on a public website. Today, it is the best-read libertarian site on the web.

Daily Bell: Did you ever dream of this level of success?

Rockwell: Neither I nor any of my mentors, like Rothbard or influences like Mises, could have imagined such a thing. Of course, reaching minds is what liberty is all about. The default position of the world is despotism. In the sweep of things, liberty is the exception. What makes the exception possible is ideological work, that is, spreading the ideas through every possible means.

Daily Bell: You attribute some of your success to your father. Can you tell our readers about this unique man?

Rockwell: He was a surgeon and a man of great strength of character, a man of the old world of the sort we hardly meet anymore. He wasn’t a complainer, didn’t whine when things didn’t go his way. He was incredibly smart, and he loved liberty in the way that the men of the Enlightenment loved liberty: he didn’t believe that the state could do anything better than people can do for themselves. He was a man of the Old Right who despised FDR, in whose deliberate war my older brother was killed, and an admirer of Robert Taft, not least because of his non-interventionist foreign policy. My father worked hard until the last moment he possibly could. So should we all.

Daily Bell: Can you provide us with a brief history of how you became interested in free-markets and decided to make them your life’s work?

Rockwell: As with most people, it began with the observation that something was profoundly wrong with the conventional wisdom, which even from grade school seemed to presume that wise masters at the top knew more than anyone else and so should be in charge of everyone and everything. That supposition seemed to lack empirical evidence, so far as I could tell. I discovered the literature of freedom hiding in the library and realized that truth was something I would forever have to dig for. It wouldn’t be given to me by network news anchors, politicians, nor the leading lights in establishment academia. When I discovered what was true, I could not resist acting on it, and telling others. It really isn’t any more complicated than that.

Daily Bell: Is the logical outcome of Austrian economics the disappearance of the state?

Rockwell: Mises didn’t think so; neither did Hazlitt. Sudha Shenoy argues that of all the people who entertained the possibility of society without a state in that generation, Hayek comes closest to embodying the anarchistic temperament. In any case, the man who made the real difference in the Austrian School in this regard is Rothbard. It was he who pushed the theoretical apparatus “over the edge,” so to speak. Hardly any modern Austrian today is not an anarchist. This is also thanks to Rothbardians such as Walter Block, Hans-Hermann Hoppe, and David Gordon, of course. At one time Rothbard was denounced for his views, for having allegedly marginalized the School. Now, of course, his anarchism is probably the largest part of the legacy he left for the world. It is very appealing to young people, unlike the statism of regime economists.

Daily Bell: Is it reasonable to believe that the state will ever wither away or does reality instruct us that the best that can be done is to limit its power?

Rockwell: To me, that’s like asking if we can imagine a society without robberies and murders. Maybe it won’t ever happen, but we must have the ideal in mind or else we’ll never get closer to it. Without the ideal, progress stops. To some extent, then, whether reality will finally ever conform is not the critical question. What counts is what we imagine can and should exist. I like to imagine a society without legally sanctioned aggression against person and property…

(more…)

Cash for Gold: Chinese Style

February 20, 2010

Alan Heap @ Citi: The IMF announcement that the fund intends to sell 191t of gold sent a quiver through the market last week. However there was nothing new here. The gold is the residual from the planned sale of 403 tonnes which will partially finance new loans to developing countries…

The bank said that sales would be phased over time. But also kept open the possibility of direct transfers to other central banks…

The PBC [People’s Bank of China] is the most likely central bank buyer. The bank is deeply dissatisfied with the performance of its US treasury holdings and has made clear its intention to diversify including into gold. In November and December the PBC sold USD46bn of treasuries; they must be buying something.

VAT and Socially Insecure Until 91?

February 20, 2010

Obama is creating a “bi-partisan” team to collectively raise taxes and reduce benefits in order to pay for this new age of government expansion. Heading the team is long-time democrat and republican operatives Erskine Bowles and Alan Simpson, respectively.

And since the bloodsuckers are in such dire straights nothing can escape the welfare-warfare statists:

Bowles and Simpson also said they would consider recommending a consumption or value-added tax as a way of stemming federal debt.

“I’m just game for anything” and “we going to have to slay sacred cows,” said Simpson.

“A value-added tax — I’ve looked at lots of them — ought to be something that’s on the table,” said Bowles.

Not only is a VAT on the menu, but:

They said the panel would consider changes to the Social Security retirement system, including possibly raising the age when beneficiaries can begin receiving benefits.

“The thing was set up when the life expectancy was 57 — that’s why they set the retirement at 65,” said Simpson. “Now the average life span is 80, 83 — it can’t work.”

“If we’re going to get to the Promised Land, everything had got to be on the table or there won’t be money for Social Security,” Bowles said. “This debt is like a cancer.”

Following that logic would mean raising the eligibility age for Social Security to 88 or perhaps even 91.

Simpson seems to understand the perilous situation the government  is in as he echoes George H.W. Bush when he said: “If the people knew what we have done, they would hang us from the nearest lamp post.”

Now, Simpson seeks to save his own skin while still serving the state:

“We don’t dare put out a report before Election Day or it’ll be total cremation and we’ll have to move to the top of Mount Somewhere — Erskine and I — somewhere living up there like hermits.”

So let it be.

U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion

February 17, 2010

WASHINGTON—The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct.

What began as a routine report before the Senate Finance Committee Tuesday ended with Bernanke passionately disavowing the entire concept of currency, and negating in an instant the very foundation of the world’s largest economy.

“Though raising interest rates is unlikely at the moment, the Fed will of course act appropriately if we…if we…” said Bernanke, who then paused for a moment, looked down at his prepared statement, and shook his head in utter disbelief. “You know what? It doesn’t matter. None of this—this so-called ‘money’—really matters at all.”

“It’s just an illusion,” a wide-eyed Bernanke added as he removed bills from his wallet and slowly spread them out before him. “Just look at it: Meaningless pieces of paper with numbers printed on them. Worthless.”

Bernanke

Calling it “basically no more than five rectangular strips of paper,” Fed chairman Ben Bernanke illustrates how much “$200” is actually worth.

According to witnesses, Finance Committee members sat in thunderstruck silence for several moments until Sen. Orrin Hatch (R-UT) finally shouted out, “Oh my God, he’s right. It’s all a mirage. All of it—the money, our whole economy—it’s all a lie!”

Screams then filled the Senate Chamber as lawmakers and members of the press ran for the exits, leaving in their wake aisles littered with the remains of torn currency.

As news of the nation’s collectively held delusion spread, the economy ground a halt, with dumbfounded citizens everywhere walking out on their jobs as they contemplated the little green drawings of buildings and dead white men they once used to measure their adequacy and importance as human beings.

At the New York Stock Exchange, Wednesday morning’s opening bell echoed across a silent floor as the few traders who arrived for work out of habit looked up blankly at the meaningless scrolling numbers on the flashing screens above.

“I’ve spent 25 years in this room yelling ‘Buy, buy! Sell, sell!’ and for what?” longtime trader Michael Palermo said. “All I’ve done is move arbitrary designations of wealth from one column to another, wasting my life chasing this unattainable hallucination of wealth.”

“What a cruel cosmic joke,” he added. “I’m going home to hug my daughter.”

Sources at the White House said President Obama was “still trying to get his head around all this” and was in seclusion with his coin collection, muttering “it’s just metal, it’s just metal” over and over again.

“The president will be making a statement very soon,” press secretary Robert Gibbs told reporters. “At the moment, though, his mind is just too blown to comment.”

After Doomsday, What?

February 17, 2010

Dr. Higgs on what comes next after a collapse:

Some doomsayers think the collapse will be triggered by runaway government spending, excessive taxation, oppressive regulation, food shortages, fuel shortages or natural disasters such as deadly pandemics or lethal changes in the world’s climate. I have yet to encounter a claim that we are doomed because of an impending beer shortage, but I’m confident that sooner or later, such a scenario will be bruited about.

Still other doomsayers are anticipating hyperinflation when, as Austrian economist Ludwig von Mises observed in his book “Human Action,” the monetary system breaks down, “all transactions in the money concern cease; [and] a panic makes its purchasing power vanish altogether.” Mises saw such calamity in Austria and Germany after World War I. Similar crackups have occurred elsewhere at various times, including the Confederate States of America during the final year or so of the Civil War.

Even in the worst of times, however, economic calamity doesn’t mark the end of economic life. Austria, Germany and the U.S. South did not disappear as a result of their currencies’ ruin. Although many people suffered, most people found a way to survive, life went on, and economic activity eventually resumed after the adoption of a “reformed” or foreign medium of exchange. Most people survived even the recent hyperinflation in Zimbabwe, notwithstanding the Mugabe government’s best efforts to starve them…

We need to have a modicum of faith in people’s common sense, creativity and will to survive and prosper even in the face of great difficulties and obstacles. If people could keep society running in the aftermath of the Black Death, they could keep it running after the U.S. government defaulted on its debt…

An Even Newer Era of Fiscal Irresponsibility

February 16, 2010

As if that was even possible, yet now comes this where even the New York Times cannot camouflage the burden:

“The troubling feature of Mr. Obama’s budget is that it fails to return the federal government to manageable budget deficits, even as the wars wind down and the economy recovers from the recession. According to the administration’s own numbers, the budget deficit under the president’s proposed policies will never fall below 3.6 percent of G.D.P. By 2020, the end of the planning horizon, it will be 4.2 percent and rising.

“As a result, the government’s debts will grow faster than the economy. The administration projects that the debt-to-G.D.P. ratio will rise in each of the next 10 years. By 2020, the government’s debts will equal 77.2 percent of G.D.P. This level of indebtedness has not been seen since 1950, in the aftermath of the borrowing to finance World War II.

“Making matters worse, these bleak budget projections are based on relatively optimistic economic assumptions. The administration forecasts economic growth of 3.0 percent from the fourth quarter of 2009 to the fourth quarter of 2010, followed by 4.3 percent the next year. By contrast, the Congressional Budget Office predicts growth of 2.1 percent and 2.4 percent for these two years.”

More wars, bailouts, and stimulus projects with “optimistic economic assumptions” and  “bleak budget projections” will only lead to more trouble ahead.

Kling: The Fed is a Piggy Bank

February 16, 2010

Arnold Kling on interpreting Federal Reserve policy:

Rather than try to come up with an economic theory to explain Fed policy, I would suggest a more cynical approach. The goal has been to transfer wealth to banks and to the holders of mortgage securities. The thinking is that those constituents are more important to the economy than taxpayers…

The Fed has changed from a central bank to a piggy bank. Any economist who tries to interpret Fed policy from the standpoint of economic theory is playing a fool’s game.

Commercial Real Estate Trouble Ahead

February 16, 2010

The Congressional Oversight Panel for the Troubled Asset Relief Program, in a report issued yesterday, predicted that banks could see up to $300 billion in losses on their commercial real estate portfolios, and warned the threat this poses to the US financial system was completely overlooked by the Capital Adequacy Program (Cap) stress tests in early 2009.

Between now and 2014, “$1.4 trillion in commercial real estate loans will reach the end of their terms. Nearly half are at present underwater”, the report said.

“Economists Have No Clothes”

February 10, 2010

Nobel Laureate James Buchanan gives his advice for the profession.

“Craignez l’Essor et le Buste”

February 9, 2010

“Fear the Boom and Bust” – un Hymne Rap – Hayek Contre Keynes:

Préparez pour obtenir instruit par cette perspective autrichienne…

Deutsche Bank: Greece, Portugal ‘Dress Rehearsal’ for U.S., U.K.

February 9, 2010

Feb. 5 (Bloomberg) — The cost of insuring against U.S. and U.K. debt defaults may rise in the same way as it has for so- called European peripheral nations including Greece and Portugal, Deutsche Bank AG said.

“The problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road,” Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note today.

The Economics of Football vs. Baseball

February 9, 2010

George Carlin’s post Super Bowl commentary.

Top Ten Free Market Economists

February 6, 2010

Geoff Lawrence, the Fiscal Policy Analyst at the Nevada Policy Research Institute has a top-ten list on the NPRI blog.

Only a few quibbles here and there…

“We Are All Austrians Now”

February 5, 2010

Ed Yardeni, who has spent over 25 years on Wall Street  including time as the Chief Economist of EF Hutton, former Columbia University Graduate School of Business professor, and has held positions at the Federal Reserve Bank in Washington, DC, New York City,  and at the US Treasury Department, writes:

We are all Austrians now. Over the past few weeks, in Los Angeles, San Francisco, Sacramento, New York City, and London, I’ve run into more and more institutional investors whose economic and financial views either knowingly or unknowingly reflect the influence of the Austrian School of Economics. I am in Zurich today and Geneva tomorrow.  … How do you know if you are an Austrian? Here is a simple test. Answer yes or no to the following question: “I believe that this will all end very badly.” If you agree, then you are probably worried that all the government policies that rescued us from a depression in 2008 and 2009 only postponed the coming wipe-out of debt and the collapse of asset prices–and will actually make the inevitable calamity even worse.

Via EconomicPolicyJournal.com via The Ethiopian Review via Dr. Ed Yardeni’s Economics Network

Ludwig von Mises on the Radio

February 4, 2010

A radio broadcast made during the intermission of the U.S. Steel Concert Hour, May 17, 1962.

Ludwig von Mises responding to the question: “Are the interests of the American wage earners in conflict with those of their employers, or are the two in agreement?”

To answer that question we must first look at a little history. In the pre-capitalistic ages a nation’s social order and economic system were based upon the military superiority of an elite. The victorious conqueror appropriated to himself all the country’s utilizable land, retained a part for himself and distributed the rest among his retinue. Some got more, others less, and the great majority nothing. In the England of the early Plantagenets [the line of British kings, descended from French Normans, who reigned from 1154 to 1399], a Saxon was right when he thought: “I am poor because there are Normans to whom more was given than is needed for the support of their families.” In those days the affluence of the rich was the cause of the poverty of the poor.

Conditions in the capitalist society are different. In the market economy the only way left to the more gifted individuals to take advantage of their superior abilities is to serve the masses of their fellowman. Profits go to those who succeed in filling the most urgent of the not-yet-satisfied wants of the consumers in the best possible and cheapest way. The profits saved, accumulated, and plowed back into the plant, benefit the common man twice. First, in his capacity as a wage earner, by raising the marginal productivity of labor and thereby real wage rates for all those eager to find jobs. Then later again, in his capacity as a consumer when the products manufactured with the aid of the additional capital flow into the market and become available at the lowest possible prices…

The transcript is available here.

These Rose Colored Glasses…

February 2, 2010

“The White House budget proposal released Monday assumes the U.S. economy is heading for a six-year run of above-average economic growth with no sign of a worrisome spike in inflation or interest rates.

I don’t know why I  keep on believin’ you need me,
When you prove so many times that it ain’t true,
And I don’t find one good reason for staying,
Maybe by leaving would be the best for you,

But these rose colored glasses, that I’m looking through,
Show only the beauty, cause they hide all the truth,

And they let me hold on to the good times, the good lines,
The ones I used to hear when I held you,
And they keep me from feeling so cheated, defeated,
When reflections in your eyes show me a fool

And, what is it they are smoking? Inflation will rise, interests rates higher, gold prices to greater heights, dollar continues its losses, and meanwhile Freeport McMoRan (FCX) was up over 200% in 2009.