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

Posted August 23, 2013 by austrianaddict
Categories: Econ. 201

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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.” Read the rest of this post »

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

Posted August 20, 2013 by austrianaddict
Categories: Econ. 201

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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 Read the rest of this post »

Must Reads For The Week 8/17/13

Posted August 17, 2013 by austrianaddict
Categories: Must Reads For The Week

Tags: , , , , , , , , , , , , ,
The pen is mightier than the sword...

The pen is mightier than the sword… (Photo credit: mbshane)

WE ARE IN THE DEATH THROES OR THE BIRTH PANGS OF LIBERTY OR TYRANNY!

THAT CAN’T HAPPEN HERE!

Harry Reid Says Obamacare Just A Step Toward Single Payer System, by Mark Tapscott, at washingtonexaminer.com. The progressive elites are all about incrementally getting to their real goal of a Government run healthcare system. Many of us said this was their goal, and were told, “your crazy, that can’t happen here”.

IRS Needs AR-15’s For “Standoff Capabilities“. by Joshua Cook, at benswann.com. It’s not just the IRS. The Department of Education, The Social Security Administration, and The EPA are all stockpiling tactical weapons and ammunition. Most people have their head in the sand (or somewhere else), when they say, “IT CAN’T HAPPEN IN AMERICA”.

Warrantless Vaginal Searches Conducted By Texas Police, by Kristin Tate, at benswann.com.  “IT CAN’T HAPPEN IN AMERICA”.  Watch the second video and let me know if  the police woman put on a new pair of latex gloves to search the second women after she searched the first woman?

Government’s Secret Snooping Programs, Video FOX news. I saw this at libertypen.blogspot.com. Quote from Judge Napolitano, “…When and how will this end? Why is there no outrage? Just ten days ago they asked for our passwords, and they were probably turned over. Where does it go from here?”  Oh, by the way, IT CAN’T HAPPEN HERE.

Senate Committee Now Investigating Bitcoin, at economicpolicyjournal.com. Virtual currencies like bitcoin allow individuals to exchange goods and services without the Government extracting their “fair share”. But the main reason Government doesn’t like bitcoin is because they don’t want to give up their monopoly  power of electronically printing counterfeit money, because it is how they fund Government expansion.

The Growing Police State And The Chilling Effect, at econoicpolicyjournal.com. This is what they are hoping to accomplish by targeting people who don’t agree with them. Fear of Government repercussions keeps us from standing up against it.

More Americans Are Going Galt, by Daniel J Mitchell at townhall.com. I found this on libertypen.blogspot.com. People won’t abide by what they think are immoral laws. This is why prohibition didn’t work, this is why the War on Drugs isn’t working, this is why over half the cigarettes sold in NY State are smuggled. It should be no surprise that when the tax code becomes too onerous, people will avoid paying at any cost. The American Revolution was fought over onerous regulations by England. Liberty is still a part of our cultural DNA, and each person has his own level of tolerance before the marginal straw of regulation finally breaks the proverbial camels back. We got into this mess incrementally over a hundred years and we will probably get out of it incrementally (hopefully it takes less time).

ALL IS NOT LOST,  LIBERTY MAY BE WINNING!

Court Slaps Down Michael ‘Napoleon’ Bloomberg’s Soda Ban, at economicpolicyjournal.com. A bit of sanity rears its head.

US Judge Says Bloomberg’s “Stop And Frisk Policy Is Unconstitutional, at zerohedge.com. Another victory for liberty.

Marine Colonel To Town Council: “Your Building A Domestic Army; Are You Blind?”, at economicpolicyjournal.com. Individuals, like this marine, are taking a stand. It all starts at the local level.

Bono Is Now Preaching The Virtues Of Capitalism, by Mark J. Perry, at aei-ideas.org. Maybe many are finally realizing that free market capitalism is what produces the goods and resources that they want to redistribute.

Oil And Gas Extraction Increased To A Record High In July, by Mark J. Perry, at aei-ideas.org. The shale oil and gas boom (fracking), couldn’t be stopped by Government. It is happening on private lands, as Gov. has taken federal land off the table for extraction. The free market, as hampered as it is, always finds a way to thwart Gov. wishes.

Auston Kutcher On Opportunity, at economicjournal.com. He says “Opportunity looks a lot like hard work.” This is a great message for young people.

As Obamacare Deadline Looms, Doctors Are Opting For Cash Only Clinics, by Joshua Cook at benswann.com. A free market answer to the health care situation. If you get rid of third party pays, the price and cost will go down. Republicans follow these leaders and repeat after me, ” We’re going to replace Obamacare with a free market health care system.”

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

Posted August 15, 2013 by austrianaddict
Categories: Econ. 201

Tags: , , , , , , , , ,

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.

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.

Some Humor To Take The Edge Off.

Posted August 13, 2013 by austrianaddict
Categories: Miscellaneous

Tags: , , , , ,

I saw these cartoons on theburningplatform.com.

135802 600 National Security Shark cartoons

Related videoJay Leno, “We wanted a President that listens to all Americans – now we have one.”

135801 600 Congress Obamacare Waiver cartoons

135774 600 Sgt Bales cartoons

Related article – Sgt. Robert Bales Pleads Guilty to Killing Civilians.

Related Video showing drone strikes in Pakistan since 2004.

135756 600 Baseball Drive Thru cartoons

The Ruling Aristocracy Does Not Abide By The Rules They Impose On The Serfs.

Posted August 12, 2013 by austrianaddict
Categories: Government and Politics

Tags: , , , , ,

The rule of law is defined by Thomas Sowell (read here) as, rules known in advance, applied generally, and constraining the rulers as well as the ruled. He defines freedom as, exemptions from the power of the rulers and a corresponding limitation on the scope of all laws, even those of democratically elected Governments. With the recent  Obamacare waiver for congress and their staffs, the incremental erosion of the rule of law continues unabated. You barely hear a whimper from the pusillanimous (yes, it means what you think it means),Republicans. The freedom of the individual that is protected by the constitution, the same constitution these Republican swore to defend and protect from all enemies foreign and domestic, takes second place to what they value most, which is Read the rest of this post »

Must Reads For The Week 8/10/13

Posted August 10, 2013 by austrianaddict
Categories: Must Reads For The Week

Tags: , , , , , , ,
The pen is mightier than the sword...

The pen is mightier than the sword… (Photo credit: mbshane)

D.C. Insider On The Terrorists Alerts, at economicpolicyjourlan.com. People are beginning to have less and less trust in what Government says. This is a good thing for the future of individual liberty.

George Carlin on Arrogance of Mankind, at Kids Prefer Cheese, mungowitzend.blogspot.com. I’ve always loved this routine. I have a question. If we evolved like every other creature, isn’t whatever each of us does, no matter how bad it is judged to be by “environmentalist”, a natural part of the evolutionary process of the planet, and therefore should not be stopped, but accepted as natural?

Declare Detroit A Free City, by Patrick Barron, at mises.org. Lets try free market principles for a change and see what would happen in Detroit.

Obama’s False History Of Public Investment, by Schweikart and Folsom, at wsj.com. Infrastructure spending by Government isn’t the economic boom it’s cracked up to be. Infrastructure used to be built with private money.

Picturing The Plunge In Gun Crimes (As Gun Sales Surge), at zerohedge.com. Not much else needs to be said.

Education Spending Soars, Test Scores Stagnate, by Deroy Murdock, at nationalreview.com. The typical response by the left would be, “just think how much lower test scores would be if we hadn’t spent all that money”.

John Stossel – Currency Devaluation & Bitcoin, video, at libertypenblog.blogspot.com. Governments have destroyed economies by debasing their currencies . Bitcoin is a free market currency that can’t be debased by Government.

Too Big To Fail GM vs. Too Small To Save Hostess

Posted August 8, 2013 by austrianaddict
Categories: Econ. 101, Government and Politics

Tags: , , , , , , , , ,
Box of Twinkies

Box of Twinkies (Photo credit: Wikipedia)

FREE MARKET CAPITALISM OR CRONY CAPITALISM

I noticed Hostess products are back on the shelves again in grocery stores. It leaves me scratching my head about how this could possibly have happened because I thought they went bankrupt. I remember when GM was going to go bankrupt we were told that GM needed to be bailed out to save the company and all the jobs, because we couldn’t see an America without GM. The politicians and the media were banging this drum as loudly as they could, leaving the impression that if Government (using yours and my money) didn’t step in to help, GM would go under and cease to exist. When Hostess declared bankruptcy, the politicians and the  media weren’t beating the same drums, in fact the drums were silent. I guess if GM was “too big to fail”, and Hostess was “too small to save”! Apparently the only thing that saved GM from going extinct, was the rigged crony capitalist bankruptcy set up Read the rest of this post »

Must Reads For The Week 8/3/13

Posted August 2, 2013 by austrianaddict
Categories: Must Reads For The Week

Tags: , , , , , , , , , , , , , , , ,
The pen is mightier than the sword...

The pen is mightier than the sword… (Photo credit: mbshane)

Giving Up Liberty for Security, at reason.com.  This article by Andrew Napolitano is one of the best about trading liberty for security.

The American Surveillance State Is Here:  How You Are Being Tracked, at economicpolicyjournal.com.  A sobering synopsis on some of the ways American citizens are being tracked.  Partnerships between government and business are always bad.

Think Your Password is Secure From the NSA?  Try This, at economicpolicyjournal.com.  I know my passwords aren’t great, but my memory is really bad.  This article includes links to help test your passwords.  (Hint: “password” is not a good password.)

What Is Overcriminalization? at libertypen.com.  This video explains the effects of the Federal government criminalizing so many activities.  Does anyone remember the old saying “Don’t make a Federal case out of this”?

The Government “Revises” 84 Years of Economic History This Week, at zerohedge.com.  The government is reshaping the intellectual battlefield by changing the definitions.  If you don’t like a particular problem, define it out of existence.

Milton Friedman:  Reflections on a Free Society, at libertypen.com.  This video by Milton Friedman is a great review of the uniqueness of the American ideals of liberty and free markets.  (I know, having two videos in “must reads for the week” is a bit of a contradiction.)

Milton Friedman on the Energy Crisis (and ObamaCare to Come), at masterresource.org.  A look at what is ahead for ObamaCare by looking at government intervention during the 70s energy crisis.  We must remember, past is prologue.

35 Facts To Scare A Baby Boomer, at zerohedge.com.  This article is, “Talkin’ ‘Bout My Generation”!  There are some really big and nasty chickens about to come home to roost.

The Entire Developed World Is On A Slippery Slope, at zerohedge.com.  This article is comprehensive (meaning long) and comments on just about everything regarding the state of our economy.  This is well worth the read.

Walter E. Williams Talks About Free Market Morality

Posted August 2, 2013 by austrianaddict
Categories: Econ. 101

Tags: , , , , ,

I saw this video titled Free Market Morality at prageruniversity.com. In it Walter Williams talks about the voluntary action between individuals in the market as opposed to the coercive action used in a centrally planned economy. He also talks about the market being a positive sum game instead of a zero sum game because both sides in an exchange are better off. He explains concepts as only he can. Watch listen and learn.

Related Article-Video,  Walter E. Williams: Voluntary vs. Involuntary Exchange, or Seduction vs. Rape, at ausrtianaddict.com.

Related Article-Video,  Walter E. Williams: Free Market Capitalism Produces A Higher Standard Of Living For Everyone, at austrianaddict.com.

Related ArticleI Love Greed, by Walter E. Williams, at jewishworldreview.com.