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Let The Counterfeiting Continue! The Fed Is Stuck In Their Feedback Loop!

September 26, 2013
English: The front book cover art for the book...

The Case Against the Fed by the author Murray Rothbard. (Photo credit: Wikipedia)

Peter Schiff does his impression of a salmon swimming against the current in the video below. Of all the “experts” in the video, he is the only one who understands the trap the Fed has snared itself in. Does he have the ability to predict the future? Don’t be awed by his crystal ball gazing because he understands the Austrian Business Cycle Theory (read and watch video here), and the other “experts” probably have never heard of it,or if they have they don’t understand it. The Fed has electronically printed massive amounts of counterfeit money, and has artificially kept interest rates below what they would be in an unhampered market. Scarce resources, labor, and capital, have been misdirected into activities that wouldn’t stand up under normal market conditions. The only thing that keeps these activities viable is the fact that the Fed continues to inject counterfeit money into the market. If the Fed quits electronically printing counterfeit money, there will be a liquidation of these nonproductive activities, similar to what happened in the 08 collapse. The Feds only political solution, which means a solution that saves their skin, is to keep counterfeiting so they don’t get blamed for the collapse. They don’t understand that stopping the counterfeiting is the only cure for the artificial inflationary boom they created when they injected billions of electrically counterfeited money into the economy in the first place.

http://www.youtube.com/watch?v=UCxHBnHAGtI

In this post, Incremental Steps to The New Normal, I say the Fed hopes their taper, no taper, strategy will get them out of the mess of their own making. Here are a couple of quotes by Ludwig von Mises, and Murray Rothbard from an article below.

Ludwig Von Mises: “Credit expansion is the government’s’ foremost tool in their struggle against the free market. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous.”

Murray Rothbard: “What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor, and capital. Multiplying coin will not whisk these resources into being. We may feel rich for the moment, but clearly all we are doing is diluting the money supply.”

Here are some short articles and videos showing what a fine mess the Fed has gotten us into.

The Treasury Secretary On How Unstable US Government Finances Are, at economicpolicyjournal.com

Is Bernanke Looking For A New PR Director? at economicpolicyjournal.com

Albert Edwards Asks You To Spot The Difference, (There Isn’t One) at zerohedge.com

Druckenmiller Blasts, “The Biggest Redistribution of Wealth From The Poor To The Rich Ever“, zerohedge.com

The Fed’s Reflexive Catch 22 In One Sentence, at zerohedge.com

Five Years Of Hard Work By The Federal Reserve, at zerohedge.com

Bill Bonner Announces His Candidacy For The Federal Reserve Chairmanship, at economicpolicyjournal.com

David Stockman Warns ” ‘Calamity Janet’ Yellen Has No Clue” at zerohedge.com.

Baupost Summarizes Today’s “Investment Process” in 50 Words, at zerohedge.com

This is from, “Is Bernanke Looking For A New PR Director?”

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Central Planners Don’t See The Consequences Of Their Actions. Or Do They?

September 16, 2013
Cover of "Truth or Consequences"

Cover of Truth or Consequences

INTERVENTION PRODUCES CONSEQUENCES

When central planners intervene in the economy, they either think their interventions, A) will help, B) know they won’t help but want to look like they’re “doing something”, or C) know what the result of the interventions actually will be and lie about these results to the public. This means they are either, A)  ignorant, B) politically self-interested, C) evil, or D) all of above. Here are some recent examples of intervention that have or will lead to consequences that are either known or unknown by the implementors of these plans. You decide if they are born out of ignorance, political self-interest, or evil. The central planning devil or angel should not be judged by their intentions, they should be judged by the consequences of their actions. The difficulty comes in sifting through all the propaganda, or spin, as they like to call it, and find the actual results of their actions. Understanding economic principles helps pull out the nugget of truth. (more…)

Categories: Econ. 201, Government and Politics
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A Keynesians Dream, Cruise Missile Strikes In Syria.

September 6, 2013
A Raytheon Tomahawk Block IV cruise missile du...

A Raytheon Tomahawk Block IV cruise missile during a U.S. Navy flight test at NAWS China Lake, California (Nov. 10, 2002) (Photo credit: Wikipedia)

THE KEYNESIAN MAGIC OF GOVERNMENT SPENDING

If we believe Keynesian economics, cruise missile strikes will help our economy, and the Syrian economy. First let’s look at how it is supposed to help our economy. By launching a couple hundred cruise missiles at roughly $1 million a pop, the Government will have to spend over $200 million to replace the missiles that are consumed in the attacks. Cruise missile maker Raytheon will be the beneficiary of the spending as they will get paid to produce at least 200 cruise missiles. Raytheon’s employees, stock holders, and the companies who supply parts to Raytheon, for these missiles, will have more money to spend, and as the money circulates through the economy it will stimulate even more consumption. As we all know consumption drives the economy, and if we can stimulate consumption through government spending there will be never-ending economic growth.

The same basic principle is in play as we look at how the Syrian economy will be helped by our cruise missile strikes. What ever our cruise missiles destroy, has to be replaced, whether it is buildings, vehicles, military equipment, and yes even the chemical weapons. Part of the collateral damage will be people, but if you look at it unemotionally, employment will improve because unemployed people will have to take the place of the employed who died. Employment will also improve as people will have to be employed to rebuild what was destroyed by the cruise missile strikes. Since Government only spends on important projects, for the common good, and the private sector spending is for frivolous things that individuals desire, our targeting of Government property will have an optimal stimulative effect for the Syrian economy.

We are consuming missiles when we launch them, and as we know consumption grows the economy. We could be selfish and create a stimulative effect for our economy only, if we launched these missiles into the ocean or a deserted place on the globe, but we are creating a secondary stimulative effect by dropping these missiles on real things. Fortunately for the Syrians we are targeting them, we could have chosen numerous other countries to stimulate with our cruise missile strikes. (more…)

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Thomas Sowell – Obama’s Failed Economic Policies.

September 3, 2013
Fascism Anyone? The 14 Defining Characteristic...

Fascism Anyone? The 14 Defining Characteristics of Fascism by Dr. Lawrence Britt (Photo credit: watchingfrogsboil)

This short video below, from libertypen.blogspot.com, is a 2010 interview of Thomas Sowell  talking about the Presidents economic policies and their consequences. The most interesting thing from the video is when he is asked, “Let’s talk about President Obama, do you think he is a socialist?“, He responds, “Not technically I suppose, because socialist usually means Government ownership of the means of production. The pattern he is following is much more like that of the fascists, where the Government leaves the means of production in private hands and the politicians tell them what to do. And that’s much more politically viable because after the Government forces (more…)

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“Money For Nothing”, by Liberty Street Films. A Documentary Film About The Fed.

August 27, 2013

“Money For Nothing” is a documentary film about the Federal Reserve made by Liberty Films Inc. If it wasn’t for the Mises Institute, and Ron  Paul  hammering the Fed over many years, a film like this would have never been considered, let alone made. I don’t know how much truth, or what angle the documentary will take, but any light that can be shined on the Fed, making people curious about understand it, is a plus for liberty. Here is a trailer for the movie.

Here are some excerpts from the trailer.

“I don’t think that any of us that ever worked at the Fed take any comfort from the fact that somebody screwed up, but its important that we recognize there were some big mistakes made.” – Peter Fisher, Executive V.P. Federal Reserve Bank of N.Y. (94-01)

“Printing money doesn’t produce goods and services, it doesn’t hire people….It may seem like the right short-term medicine, but can the cure be worse than the disease in some cases.” – Charles Plosser, President Federal Reserve Bank of Philadelphia.

The United States has consumed more than it has produced for at least a decade. What country, ask yourself, in history can do that indefinitely forever.” – Tom Hoenig, President Federal Reserve Bank of Kansas City.

When asked in an interview, “You have what degree of confidence in your ability to control this“, Ben Bernanke said, “one hundred percent”.

This comment by the Fed chairman demonstrates what F. A. Hayek called, the “fatal conceit”, which is the idea that “man is able to shape the world around him according to his wishes”. A man, or a group of men, don’t possess enough knowledge to plan an ever-changing world.

As John Maynard Keynes wrote, “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” ,read more in Keynes Was Correct In 1919!

Here is a short clip from the movie.

It is supposed to open in limited markets in September, read more at,  moneyfornothingthefilm.org.

Related Article – Federal Reserve Policy Makers Have An Incestuous Intellectual Relationship With Each Other, at austrianaddict.com

Related Article – Counterfeiting by The Federal Reserve, Although Legal, Still Results In Theft, at austrianaddict.com

Related Article – Thomas Sowell’s Take On The Federal Reserve, at austrianaddict.com

Related Article – Real Savings vs. Counterfeit Savings, at austrianaddict.com

Related Article – A Tornado vs. The Fed, Which Is More Destructive, at austrianaddict.com

Related Article – We Can’t Recreate The Garden Of Eden, at austirnaddict.com.

Related Article, The Role Of Interest Rates In A Market Economy, at austrianaddict.com

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Charles Hugh Smith: When Risk Is Offloaded Or Hidden, It Creates Moral Hazard.

August 23, 2013
Moral hazard

Moral hazard (Photo credit: jcbear2)

Risks have consequences, and when these consequences are divorced from risk, it creates moral hazard. This means the person taking the risk will not be in a position to weigh all the consequences of the risk, before he makes a decision to start, or continue a particular activity. In this article titled, The Source Of Systemic Crisis: Risk And Moral Hazard, Charles Hugh Smith, at oftowminds.com, explains risk and moral hazard as it pertains to how insurance works, as compared to how noninsurance insurance works. There is a big difference between life insurance, fire insurance, car insurance, on the one hand, and Government programs like social security insurance, medicare insurance, medicaid insurance on the other. Here are some excerpts from the article.

“There are all sorts of candidates for the root cause of the systemic global financial crisis, but if we separate the wheat from the chaff we’re left with risk and moral hazard. Pointing to human greed and cupidity as the cause doesn’t identify anything useful about this era’s crisis, as human greed, self-interest and opportunism are default settings.”

“The key to understanding risk is to ask where it is being offloaded. Risk cannot disappear, it can only be transferred or cloaked.” (more…)

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Is The Economy Improving? It Depends On How You Define Improving.

August 20, 2013
Real GDP Contracts Most in 27 Years

Real GDP Contracts Most in 27 Years (Photo credit: inspecie.co.uk)

QUANTITATIVE VS. QUALITATIVE ANALYSIS

We keep hearing  from the administration, and the media, that the economy is slowly improving. They cite unemployment data and GDP data to back this assertion, hoping we won’t dig below the surface in search of the truth hidden in the numbers. How you arrive at the specific numbers, is more important than the numbers themselves. Here’s an example. The environmentalists try to prove global warming by using a vaguely defined  point in the past, and comparing it to this years, or this decades, temperature. If you let me pick the year to be used in the comparison, I could prove global cooling. All I’d have to do is pick a year that was hotter than this year. If you can pick the starting point in a  comparison, you can make the data say whatever you want it to say. This is just one sleight of hand trick that politicians, the elites, and the media use in an attempt to shape our opinion, and move it toward their desired outcome. You have to have a definable standard for a comparison to be made. If the standard can be manipulated, comparisons are meaningless. When they say the economy is improving, we have to ask, “compared to what”. Normally the economy is judged to be improving if (more…)

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Richard Ebeling: “How The Fed Goes Bust”, Interview on RT’s Prime Interest.

August 15, 2013

Economics professor Richard Ebeling is interviewed on a show called Prime Interest, which is produced by RT, formerly known a Russia Today. It is a Russian based television network that is a non-profit organization funded by the federal budget of Russia. It is hard to believe you have to go to Russian television to find an Austrian economist give an outstanding analysis of how the Federal Reserves policy of low-interest rates, and electronically printing counterfeit money, created the artificial economic boom that led to the 08 bust, and how this same policy has them in a box from which there is probably no escape. They have to keep counterfeiting money or their will be a huge correction. Because they injected ever-increasing amounts of counterfeit money, in order to keep the correction from happening in 08, the inevitable correction will be much worse, and more painful, than if they would have let the correction run its course.

The interview starts at 2:48 and ends at 13:50, and is well worth it. He also talks about his interactions whth F. A. Hayek and Murray Rothbard two of the three most well-known Austrian economists, the other being Ludwig von Mises.

http://www.youtube.com/watch?v=yp2Ns4T0cOE

You can’t find this on American television news. Is American television the new Pravda? Pravda, which means “Truth”, was the state news paper of Russia.

Related Article – Federal Reserve Money Injections Since 00 Haven’t Worked As Advertised, at austrianaddict.com.

Related Article – Dallas Fed President Fisher Points To The Feds Real Problem, at austrianaddict.com.

Related Article – Real Savings vs. Counterfeit Savings, at austrianaddict.com.

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Real Savings vs. Counterfeit Savings

July 19, 2013
Savings

Savings (Photo credit: 401(K) 2013)

RESULTS OF COUNTERFEITING

In a previous post titled, Financial Markets Move When The Puppet Master Speaks, we talked about some of the consequences the Fed creates, when it electronically counterfeits money and injects it into the economy. Some of these are 1) the misallocation of scarce resources into activities that can’t be sustained when the counterfeit money injections are halted, and 2) people’s real production is being redistributed to the first receivers of the counterfeit money (which is known in my world as theft). What’s the difference when real savings enter the market as opposed to counterfeit savings? Lets see what happens, but first let’s talk about money.

WHAT IS MONEY? (more…)

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Financial Markets Move When The Puppet Master Speaks.

July 15, 2013
♫Puppet on a String♫

♫Puppet on a String♫ (Photo credit: trawets1)

FINANCIAL MARKET MINIPULATION

The stock and bond markets were sent soaring last week when Fed chairman Ben Bernanke said more Fed stimulus was needed (read here). Three weeks ago Mr. Bernanke hinted that the Fed might start to taper its money injections and the stock and bond markets had a sell off. In an article I wrote on July 1, titled Incremental Steps To The New Normal, I said, “The sell off in the stock and bond market, the week of June 20th, at a hint by Ben Bernanke that he might ease out of Quantitative Easing in the not too distant or distant future, is evidence that the financial markets are a bubble activity blown up by the Fed’s double edge sword of printing counterfeit money and artificially lowering interest rates. We witnessed more evidence the following week when first Quarter GDP numbers were revised down. This started a rally in the stock market because investors know that if there are bad aggregate numbers, the Fed will keep electronically printing money…” . It’s not difficult to predict how investors will react to economic data, because they understand what the Fed will do in response to this data. (more…)

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