Allow me to set partisan politics aside for a moment.
The time has come to honor the man who, more than any other, set into motion the policies that pulled a debt-ridden Canadian government balance sheet out of the red and set us on the road to reducing the national debt.
His policies were responsible for the sustained economic growth we’ve enjoyed and the historically low levels of Canadian unemployment for much of these past 12 years.
He has helped Canadians make Canada prosperous.
As he closes the door to his office for the last time this week, let us all stop and offer a tip ‘o the hat and raise a appreciative glass ,,,,
 |
To US Federal Reserve Chairman, Alan Greenspan.
Sir – may you enjoy a long and healthy retirement! |
I hear he’s married to Diana Krall now…
A fond farewell
Kate at SDA sets aside political differences to wish a fond farewell to the man who . . . [. . .] more than any other, set into motion the policies that pulled a debt-ridden Canadian government balance sheet out…
Richfisher “You’re not still pissed about those forgotten shysters the libs losing are you ?”
I was never pissed off in the first place and have said as much several times. I just find it disingenous to give Mr. Greenspan credit for the health of the Canadian economy for the past 12 years. He was fed chairman for 18 years. Did he only start benefiting the Canadian economy when Mulroney got booted?
Canada has had a pretty good economy for the past 12 years. If you want to put partisan politics aside you should give the Liberals some credit for that. That doesn’t mean you have to *like* them. I for one don’t like everything the Conservatives stand for but when they do something right I do give them credit for it.
For the record I don’t give Liberals complete credit for the robustness of the Canadian economy. They balanced the budget and a rapid upswing in technological advance did the rest.
yadayada, “I’m still waiting for a Liberal somewhere, someday to explain to me exactly which part of Mulroney’s economic program they reformed.”
The massive deficit part.
Jose – that’s my point. What new economic/fiscal reforms were introduced that removed this deficit?
The deficit was eliminated through low interest rates and economic growth (i.e. soaring tax revenues, mainly from the oil patch which has benefited from Free Trade and American capital investment).
So back to my main question? What reforms did the Liberals implement to eliminate the deficit?
– Crown corp privatization?
– eliminating of the manufacturing tax?
– GST?
– Free Trade?
Hmmm, seems to be they campaigned against all those things, kept them, and didn’t introduce any signficant reforms of their own.
They slowed federal spending for a few years, but quickly jacked it up higher than it’s ever been.
yadayada, “Hmmm, seems to be they campaigned against all those things, kept them, and didn’t introduce any signficant reforms of their own.”
I agree with the first part of your statement. Replacing the MST with the GST and NAFTA were both good things. The Liberals were playing a game of bait and switch. I’m fully aware of that and I don’t applaud them for it. But I do give them credit for keeping the budget balanced nevertheless. The Canadian economy hasn’t been coasting on Mulroney’s laurels for the past 12 years.
Jose
“They balanced the budget”
“Balance”… how does anything balance with a nine billion dollar surplus elephant sitting on one end of the scale?
I won’t give the libs credit for the budget they profess to have created.
The libs stole the budget from the Reformers word for word when Preston made the mistake of showing his hand before the previous previous election.
The “libs balanced” budget was nothing to do with liberal fiscal policy (oxymoron) but more of the same old liberal “who do we have to steal from to get elected?”
Besides being soft on crime, destroying our military, eroding our freedom, reducing our trust in government ,harming trade relations with our only trading partner,lowering our standard of living, and enshrining us in a dead end multiculti religion, the libs havn’t done a thing for Canada.
Credit where credit is due.
Kate
Did you at lease read any of them? Or are you as closed mined as the leftist blogs and people!
Steve L
You right, the short term gain has been great, just like France in the 1780’s and 90’s. and just like France, the long term pain and loss of economic power will be forever.
Concrete
you have no idea what you are talking about!
Denis
Denis, anyone that takes as long as you do to say something is obiviously full of S–t.
Wow, bowing down to the money changers giving them credit for the blessings of God.
The moneychangers create money out of thin air, multiply that created money by ten, then lend it out to be repayed with interest that doesn’t exist.
And we’re supposed to be thankful? LOL
Short course in Fractional Reserve Banking.
http://www.lewrockwell.com/rothbard/frb.html
More socialist drivel: Get a Job, Newman (Mad). Up with Adam Smith, canny old Scot. >> http://www.voy.com/178771/129013.html
Ol hoss
Thanks for the link, Rothbard, Mises and all the work from the Austrian school of Economics are required reading for anyone that want a good understanding of what is happening today.
Western canadian
I live in Edmonton, how about we meet and discuss who is full of shit!
“It’s Capitalism Or A Habitable Planet – You Can’t Have Both”
Whoever wrote that has never taken a look at a country that is actually making agressive green initiatives. Japan, Norway, Finland. Not exactly countries with crippled economies.
We’ve got a new solar technology that is cheaper per watt than coal fired plants. Green energy is coming its simply a matter of whether or not Canada becomes an early adopter of it now or an importer of it later.
Denis you got the lingo down pretty good but you don’t understand the system.
Offsets work because of dilution of risk. Even when long term capital failed it only took 3 billion to hold it together. And ultimately their program was sound and paid off handsomely.
Long term capitals mistake was exactly the kind of catastrophe that you described above.
The seven tigers went into recession the russian bond default and Brazil defaulted too I believe.
If you think it’s not going to work then maybe you should look at JP Morgans derivative program.
Morgan alone carried some 54 Trillion yes thats with a T in derivatives positions some 90% offset
yet they survived the Dot.com meltdown and 9/11 and a war. All those incidents are enough to trigger the kind of systemic failure that you allude too.
What essentially you are doing is the chicken little scenario. Because you don’t understand the system you are predisposed to scream the sky is falling.
The risk comes to the system from those positions that are not offset. Where one institution or group of institutions carry more risk than their assets can absorb.
Your theory is a little like saying there is unlimited risk in a short position. In theory any secrurity can climb in price forever. In reality can’t happen.
denis I am a huge fan of Ayn Rand but anyone who has to post articles and can’t paraphrase the ideas put forward in those articles and discuss them on their own has little or no understanding of what is being discussed.
To parrot great thinkers does not make one a great thinker. Although sooner or later some of it is bound to rub off.
No, Denis, as a matter of fact I didn’t read them.
I came very close to deleting large portions, though.
My previous advice to you stands.
“If you think it’s not going to work then maybe you should look at JP Morgans derivative program.
Morgan alone carried some 54 Trillion yes thats with a T in derivatives positions some 90% offset
yet they survived the Dot.com meltdown and 9/11 and a war. All those incidents are enough to trigger the kind of systemic failure that you allude too.”
Jeff
Just because JP Morgan (JPM)has yet to fall does not mean they have no problem. Every event you mention Jeff meant that JPM had to add substantially to is derivative positions to keep offsetting risk that you don’t care about. Eventually there is a tipping point just like a dam can only handle so much water before the dam breaks.
People like you remind me of a someone who jumps off the empire state building. As the jumper falls to the ground, the fact that he has not hit it yet does not mean he doesn’t has a big problem. WHEN, not IF he hits the ground he is still dead! My guess is JPM is passing the 20 floor on its way down to it’s destruction.
Here are Warren Buffet’s view of the derivative market. Sorry Jeff, I’ll listen to the greatest investor of our time who know what is talking about then someone like you.
http://www.fenews.com/fen31/one_time_articles/warren_buffet.html
Kate
To bad, I always find it sad when such a smart person like yourself choose to stay ignorant.
Thanks for the kudos to Greenspan Kate.
The best investments with the lowest risks are obvious despite what “gold bugs” like Denis parrot.
They are as follows,
No-load mutual funds
Mutual fund margin accounts
RRSP accounts
Your own home
Employers pension plan
Residential real estate
Why does Morgan have to keep adding to their positions they have sold the Risk?
Kate
Thanks for not deleting the articles above. I will only post links from now on.
Jeff
Most people have never read any of Ayn Rand’s work. Her views on money and freedom should be required reading for all high school students. Why should I try to paraphrase perfection. As for parroting a great thinker, your right, you are definitely not a great thinker.
Buffett bought a half a dozen companies in 1955 and essentially held. In 1998 BRK.a was worth 90,000 a share in three years it was worth 40,000 ya thats what I call brilliant considering BRK.A is just coming back to $90,000 level now.
As it happens Buffett is a pretty good derivatives trader but he is essentially prone to some massive mistakes that you just don’t hear about.
He carried heavey heavey positions in California municiple debt and with California in trouble with it’s own bonds he had no way out nobody wanted to buy the stuff from him. So he essentially went whinning and crying to the voters to bail him out.
Problem was he didn’t bother to tell anyone that it was him they would be bailing out. Why do you think he took such a personal interest in Arnie election. He was going to get himself out of the bond mess he was in.
A few years back Buffy was quietly accumulating silver. He had bought so much of it that he helped push it from $5 dollars an ounce to $7. Then when he needed to sell out his position he had it leaked to the press that he was buying silver. Well at 7 dollars an ounce the lemmings dutifully marched into the market buying silver. Of course Buffy was selling his position and needed to dump it somewhere.
I can tell you denis where the risk is in the derivatives market. I can also tell what parts of it concern me. It is difficult to have that kind of discussion when someone is flailling away hysterically. Just so you know I gave you a hint earlier.
You paraphrase so one can have a discussion about the topic. Since I know and love Rands work posting her thoughts is pointless. Posting your own thoughts are far more insightful.
“Why does Morgan have to keep adding to their positions they have sold the Risk?”
Jeff
Again you do not understand the derivative market. If you did, you would not make statements like the one above. If you did your homework and educate yourself on how the over the counter market truly functions you would not ask silly question like the one about.
If JPM “sold the risk” then how the hell do they still have a 54 trillion dollar derivative portfolio? My understanding of the word “sold” means that I do not own it anymore. What JPM did is get into a contracts with a counter parties that will assume some obligation in case of certain events. These contract obligation (derivatives) are only as good as the solvency of the counter party. If JPM’s derivative counter parties go bankrupt JPM is left holding the bag. This is what I mean when I say that financial entities like JPM did not diminished of reduce risk, all they did is transfer company specific risk to systematic risk.
The over the counter derivative market is only as strong as it’s weakest link. JPM will go down when the derivative market goes down. The Fed know this so when something bad happens in the derivative market (Refco resent bankrupcy?)the fed will have to choice but to hyperinflate the money supply to protect the JPM of the world from default and bankruptcy.
denis if you want to begin to understand derivative risk look up the Wiener Process and Rare Events in Financial Markets.
What I said denis is they sold the risk.
They have a portfolio because the existing contract stays in force and is not altered after execution. An offsetting transaction is used. Hence the word offset.
If you go long 1 Eur. When you exit the position you do not sell the contract that you just bought but rather you execute a offset or you sell another contract to nullify the long position when the contract period expires then all the contracts are balanced off.
Greenspan was just the frontman and had no real power. He reported to to Congress what he was told to report.
Doubtful he was even allowed into the real meetings of the Fed, being the failure he was in his own business.
http://www.mises.org/freemarket_detail.asp?control=267&sortorder=authorlast
Something Rothbard doesn’t mention in his article is where the money to pay interest comes from.
All money is lent into circulation at interest. Where does the interest to be paid come from?
The whole thing is a complicated pyramid scheme.
Even so, there won’t be a collapse even though reason says there should be one. It’s not written in the Plan. God’s blessings are more powerful than any damage the insignificant moneychangers can do.
Denis the vast majority of Morgans business is with other money center banks, central banks and institutions like pension funds and Insurance re’s.
These are not institutions in the first place that will fall down easily.
There is no question of concerns in the derivatives market but you keep talking like Morgan is doing business with your corner store.
If you want to see a real world example of the risk go rummage around freddie mac or fannie may.
Their duration risk has been a concern although they have been able to mitigate it.
The offsets are not the problem. Those offsets are always done with institutions that have the assets to cover the defaults. This is not the Paul Martin school of finance we are talking about here.
Ol Hoss. The interest to pay on debt comes from a novel place actually, especially in Canada it’s called profit.
Individuals build widgets that cost x they sell those widgets for y. If y exceeds x then hey not only do they get to eat but heck they get to pay interest too. Assuming they borrowed any money in the first place.
Gotta go kids this was really fun today. Keep it going I live for this stuff.
Have a good one Jeff
Denis – von Mises:
I’ve been reading von Mises again. This time his “Socialism” (1922)and a collection of pieces about interventionism; a couple years ago, “Human Action”. Absolutely amazing stuff. He refutes all socialistic premises stone cold dead BUT always with kindness and without vitriol. Honestly, it’s like the VOICE OF GOD. Everybody needs to read von Mises.
Point being: if you read von Mises, you could never wax sentimental about a guy like Greenie.
Kate: Denis DOES have a point about you’re being a little lefty-like in your attack and thanks for deciding not to delete holus bolus.
Denis: a lot of what you say is accurate, but trust me there won’t be a deflationary collapse, but you might end up in the hospital with a nervous breakdown like I did in the early 90s after the stock market crash of ’87 and after reading all those doom-monger tomes like The Great Reckoning, The Great Depression of 1990, Blood in the Streets, etc, etc, etc, shudder, shudder.
Er, I didn’t quite get that The Great Reckoning, er, wuz about counting up all the profits from the great bull market of the 90s.
Ol Hoss. The interest to pay on debt comes from a novel place actually, especially in Canada it’s called profit.
Individuals build widgets that cost x they sell those widgets for y. If y exceeds x then hey not only do they get to eat but heck they get to pay interest too.
The money to pay the interest doesn’t exist. All money is put into circulation as debt bearing interest.
Simple example;
Start economy;
Joe borrows $100 at 10% interest. He makes x and sells x to John for $120. Joe has $10 for his efforts, but John had to borrow $120…and so on.
The money to pay the interest doesn’t exist except by borrowing more money at interest.
It’s an elaborate pyramid scheme.
Jeff seems to think that comodity prices, interest rates, and Currency prices remain constant, otherwise how could you explain his assertion that once you buy a derivative you can simple buy an offset at some particular time to cover the risk and your done. Huh?
Lets take a 20 year contract on Gold for example, you buy when the price of gold is 270$/ounce, but as the price of gold increases as it has done mostly because of the slide in the US Dollar you would have to keep increasing your positions in order to offset the future risk. This isn’t rocket science. Now imagine that these transactions are leveraged to the hilt, lets imagine 100% leverage, you make a bad transaction it can get out of control in a big hurry. When the day comes to pay the piper the system will disintegrate and the bailout that occurred for LTCM will look like a picnic. Especially in todays “lets cook the Books” mentallity no one will see it coming until its too late.
Kate whats your concern with posting articles is it a problem with your disk space. Get real, leave them on so some of your regular bumpkins can get an education.
“Denis DOES have a point about you’re being a little lefty-like in your attack”
Peter: This is my blog. I pay the freight. I choose what stays and what goes. There have been over 50,000 comments made here in two years, and I have very few rules. They are:
A) curb the profanity
B) do not troll and try to stay on topic
C) do not gratuitously insult your hostess
D) do not post lengthy exerpts of articles, or your own self-absorbed diatribes. This is a comments section, not an open subdirectory for your own personal blogging.
Kate:
Of course you’re right, and those are very reasonable rules which I hope I haven’t broken.
However, maybe you could have put it that way first time out with a new (?) visitor. This end you sounded a tad censorious.
Peter thats her point she can censor you if she doesn’t like your opinion.
Jim:
Not sure Kate would agree with that. I mean what kind of discussion would that be containing only opionions she liked. I believe she started out reacting to the Librano$ “Canadian values” meme, so with respect I don’t think a good commentary blog would welcome only opionion held by the hostess.
The real facts about the Fed.
AN EXPOSE ON THE FEDERAL RESERVE
http://www.uhuh.com/worthy/mcfad.htm
Denis:
Just to let you know that I printed out out and read both the Greenie piece of 1966 (Gold and freedom) and the Ayn Rand, and enjoyed both. I was very impressed with the clarity of Greenie’s piece on gold; while I have a great interest in economics I’ve always struggled with the mechanics of the gold standard and central banking in general. I read The Foundtainhead many years ago, but not Atlas Shrugged and really enjoyed this Hymn to Money and have saved it for my articles file.
Peter
I’m very happy that you’ve read and is moved by Ayn Rand and Greenspan’s words. When you read Greenspan’s 1966 article is hard to believe that the man who wrote those word of freedom is the same idiot who’s been the Fed chairman for the last 18 years. Also I was happy to hear that you read Ludwig von Mises Socialism and Human Action. I consider Mises a giant and probably the most brilliant economist in history. It to bad that 99.99% of the population have never heard of the Austrian School of Economics or the Ludwig von Mises Institute.
http://www.mises.org/
It is also a shame that most smart people like Kate and Jeff who say they believe in freedom and free markets don’t understand that true individual freedom and true free markets are impossible within a fiat currency monetary system like we have today in every country on earth. Central banks using a fiat monetary system and free markets are never compatible and these central banks ALWAYS end up destroying free markets. Before anyone here start screaming at me that we had nothing but prosperity for the last 18 years under Greenspan, please understand that this so-called prosperity was built on a foundation of debt that WILL collapse under it’s own weight like all pyramid scams do.
People here should read up about France in the 1700’s when they went through 2 huge Boom, Bust and collapse cycles which eventually led to the rise of Napoleon. In the late 1700’s France was booming and everyone gave credit for this incredible prosperity to France’s central banker named John Law. He created a fiat monetary system based on credit that seem to make everyone rich. Elites and royalty from all over the world traveled far and wide to speak with this genius named John Law. He was the Greenspan of his time, you might even want to call him”Maestro” of the 1700’s. Everyone loved him, that is until the fiat currency monetary system based on debt he created collapse under it’s own weight and sent France and most of Europe into a deep depression which led to John Law being the most hated man in Europe. Since Greenspan has left before the monster debt bubble he created has collapse, people’s hatred will fall on poor Ben Bernanke who believes that the way to stop this debt bubble from bursting is to drop $100.00 bills from helicopters on US cities.
There is not one long term successful fiat monetary system that did not fall into a hyperinflationary collapse in all of human history. Today’s fiat system will be no different then any other in the past. The bubbles in the stock, bond, real estate and derivative markets and the beginning of a bubbles in commodities are all signs that the end game of this debt bubble is near. Another and more important sign that the endgame of this fiat monetary experiment is near is the fact that Gold and Silver are now and have been for 6 months now rising in every currency on earth. Bernanke has no choice but to keep inflation the money supply until we end up in a 1920’s Weimar Republic of German type of hyperinflation scenario. This is the main reason the Fed has decided to stop reporting on M3 money supply figures so he can hid the massive money creation that is coming. Watch the price of gold as a sign when this money creation has gone into over drive. The price of gold will someday soon (anytime in the next few years) rocket to levels that will astonish people and leave the very smart Kate’s and Jeff’s of the world asking “what happened?”
Got Gold
Denis
Here is a couple of paragraphs from the Privateer. If you want to read the rest go to this link.
http://www.the-privateer.com/gold6.html
Denis
“The problem is that the fiat-money based global financial system which is now midway through its fourth decade is an inexorable WEALTH DESTROYING mechanism. It cannot be anything else. The US Dollar has lost 98% of its purchasing power since the Federal Reserve was born in 1913. The vast majority of that loss of purchasing power has come since the Dollar became a totally fiat (backed by nothing but government promises and the printing press) currency in 1971.
Between 1913 (when the Fed was born and the income tax amendment was passed) and 1946 (the year after the end of WW II), the US Treasury’s funded debt increased from $US 3 Billion to $US 270 Billion. The Treasury borrowed $US 24 Billion to fight WW I and $US 228 Billion to fight WW II. Add those figures up and the total for the two World Wars comes to $US 256 Billion. In the years between 1913 and 1946, the total debt increased by $US 267 Billion. Take a look at the numbers, the “peacetime” total was $US 11 Billion. The wartime (declared by Congress and therefore Constitutionally legitimate) total was $US 256 Billion.
When the US Dollar and Gold were severed in 1971, Treasury debt was $US 420 Billion. It is now almost $US 8,200 Billion. Nuff said?
Another point to ponder. When the Fed was born in 1913, total Treasury debt was $US 3 Billion and the population of the US was about 100 million. Today, total Treasury debt is $US 8,190 Billion and the population of the US is (just under) 300 million. The population has increased 200%. the Treasury’s funded debt (there was no unfunded debt in 1913) has increased 272900%. How’s that for an example of an “elastic currency”?
Oh, and by the way, while the population of the US has risen by 200% since 1910, the amount of Gold which has been produced in the world has risen by 300% over the same period. Can you imagine how unimaginably richer the world would be today if the amount of “money” produced since 1910 had equalled the amount of Gold produced? Under a pure Gold standard, it would have. We don’t know of a better way to illustrate the principle that producing economic GOODS makes people richer while producing money makes them poorer.” The privateer
“In his Tuesday farewell comments to Federal Reserve Board staff, chairman Greenspan stated, �We are in charge of the nation�s currency, and the central bank, because of that, is involved in everyone�s daily lives. We are the guardians of their purchasing power.� Similar to much of Greenspan�s tenure, I cannot accept his parting words of inspiration at face value. The Greenspan Fed ceded the keeping of the value of our currency to Wall Street, to the money center banks, to the GSEs, to the hedge funds, to the derivatives markets, to mortgage companies, to subprime lenders, to the securitization marketplace, to the captive finance companies, to foreign central banks – to the Financial Sphere generally. I have in the past referred to Alan Greenspan as the Great Inflationist � a modern day John Law. The Essence of The Greenspan Era is one of unprecedented �money� inflation, Credit inflation, asset inflation, financial wealth inflation, expectations inflation and obfuscation. The Essence of the Ongoing Greenspan Era is one of an historic Credit Bubble. His legacy should be based upon future circumstances and developments with respect to this Bubble and not how things appeared the afternoon he paraded out the door. ” Doug Noland
http://www.prudentbear.com/creditbubblebulletin.asp
Chairman Alan Greenspans tenure at the Federal Reserve Bank will garner him an Honored place in history.
His greatest achievement was to acknowledge and act on the knowledge that the aggregate market is a self correcting mechanism, far more capable of correcting itself than adding regulation or excessive manipulation through open market operations at the Fed.
Millions aurguably hundreds of millions are better off today than when he accepted the Chairmanship
those same folks have not had to weather any but the most minor of recessions during his time.
With a sublte and hand and the Wisdom of the Greatest Market Wizard the world economy is in better shape than it has ever been to withstand the vagaries of Market storms.
My irrational exuberance at getting a cup of coffee and listening to one of his speeches to the Senate Banking commitee et al. was one of my few indulgences during the trading day. Damn I love listening to his speeches. Of course on rare occasions one of them would be good for some added excitement during the day.
So to end my paean I will simply bid farewell and Godspeed.
Denis:
I’m no expert, but my layman’s understanding tells me: most people think inflation means an increase in consumer prices, whereas of course it means a rise in the money supply, which if not reflected in consumer prices will be relfected in real asset prices; not seeing “inflation” in consumer prices people think “it’s different this time” (the 4 most dangerous words in the English language).
BUT if you stand in front of a “tear-down cottage” on a 33′ foot lot in Vancouver selling for $1.3 million (a house you’d be ashamed to show your friends and relatives) you know that while the number might look nice, wealth has been destroyed. You can feel it in your bones.
And a very good point above: to use Bastiat’s phrase, “The what is not seen”, i.e., how much richer we WOULD HAVE BEEN. AND, think about it: $1 million in the bank gives you about $20,000 a year in “risk free” T-Bill interest. A pauper’s income.
Re: “too bad about smart people like Kate, Jeff”, etc., it’s not about “smart” — it’s about a complete lack of exposure to economics, and where there has been it’s still the thoroughly discredited obsolete Keynesian variety of the bank “economists”, [read: government choirboys].
A government education system does not want future citizens exposed to economics education.
Well I’ve been reading real economics now for a few months and I have to agree von Mises is one of the very greatest thinkers I’ve ever encountered. Very sad that almost no one knows him.
Never heard this before, but Reagan said the 10 most dangerous words in the language are: “I’m from the government and I’m here to help you”.
Yup I’m still in shock about Greenie sainted, and strongly feel that in time he will be seen as the anti-christ (on the other hand I don’t think most people know enough to come to that conclusion: if you’re right, it’ll be the fault of evil capitalist exploiters, and then a new round of government salvation).
And talk about economic ignorance even CONRAD BLACK thinks FDR “saved capitalism”. Sigh.
Pedro although I haven’t read von mise in a long while the missing ingrediant in most of this discussion is productivety. Productivety is what has kept wage inflation at bay. Wage inflation is the enemy and because the boomers are retiring it can rear it’s ugly head and that is why you are seeing such a hawkish watch on inflation at the moment.
As for fiat currency frankly there will always be gold bugs. The problem with going to a gold standard is you would bring growth or a governments ability to react to a crisis to a standstill. It would be similar to taking credit out of the system because you have bankruptcys. Basing the the capabilities of an economy on GDP and debt works to make the system far more liquid
enhansing growth. The downside is you will always battle politicians buying elections with public spending that above 30% in total for all levels of
government tends to retard an economy.
What most of the fiat currency types on this type of forum miss is that paper money is no longer the dominant currency and hasn’t been for a number of years. Today money electronic. A simple magnetic spot on a metal disc somewhere.
I will go and re read von mise and we can continue the discussion if you like. I am a free trader but I work in money and markets and so am a realist too. It seperate whats possible from what amounts to wishful thinking.
Pedro
Much of the US economic framework today is built on the doctrine of Milton Friedman at the University of Chicago. Who like Von Mise is a free trader as a matter of fact Friedman is basically a modern version. President Reagon built his economic policy on Friedmans works.
Other Clinton who cherry picked Friedmans doctine most republican presidents attempt to follow pretty closely to what Friedman advocates.
However Presidents being political creatures and human fall into the same trap, a huge treasury and
temptation.
Pedro I am curious about what you liked about Von Mise and what you dislike about Chairman Greenspan.
Jeff:
Actually, yours was a good post I thought. I DO see where you’re coming from. I think if you accept the premise of the Fed, you have to agree that Greenie did a “good job” from that point of view for sure. He had a light touch, I felt. He was no bull in a china shop so to speak, and I do believe he is a friend of free markets philosophically. Let’s face it, it is a comical illusion to call the Fed “independent”; the chairman’s job is to manipulate money to keep the economy moving because as Clinton said, “it’s the eonomcy, stupid”, and you’re dead politically with a bad economy (which makes Martin’s loss so amazing, because he shouldn’t have on that basis).
As mentioned above, I have no pretensions of a strong understanding of the technical apparatus of the Fed, and BTW if I was a trader like yourself, Greenie would be a hero for sure.
von Mises: It’s almost a disservice to call him an “economist” as we understand the term today. He even coined his own word for his discpline, “praxeology” — the study of human behaviour really. He is profoundly learned: a philosopher/sociologist/historian; he actually called himself a sociologist for quite a while I believe. Anyway, his LOGIC. Such precision. He destroys all statist arguments stone cold dead but NEVER with vitriol, often even agreeing that the statists are well-intentioned; his Socialism and especially his magnum opus Human Action are the definitive antidote to marxism, which is still with us under new guises, like environmentalism. BUT — and this is most amazing — he can be read, understood and enjoyed even by an intelligent high school student I feel. His pragmatism; his understanding of incentives; how clearly he demonstrates that capitalism is the common man’s friend; how egoism is the basis of society not its nemesis; the falseness of altruism. I have only barely scratched the surface, and in fact, don’t think I’ve done him justice at all!
I also greatly admire Milton Friedman, but don’t know enough to understand the Chicago school’s rivalry with the Austrians, except I guess the Austrians deal with the mirco and eschew aggregates (but again my tenuous grasp is probably showing, so I’ll pause there …)
If I were starting, I might try Economic Freedom and Inverventionism: an anthology of Articles and Essays, edited by his student Bettina Bien Greaves (FEE – Foundation of Economic Education).
His pupil the great FA Hayek was a socialist UNTIL he read von Mises “Socialism”. He says so in the forward.
Jeff:
I think I’m a realist too, and completely concur that the genie is out of the bottle and ain’t goin’ back in, i.e., there will never, ever again, be a gold standard, and fractional reserve banking is here to stay. I understand the hard money people, and think that they have morality on their side, but as you say, it’s not realistic.
I’m also a seriously confirmed libertarian and have had to train myself to accept the fact that government will never get smaller, that the best one can hope for is some trimming around the edges, and a reduction in the GROWTH of government and some streamlining.
I AGREE: the principal factor separating Canada/Eurozone is the ratio of government to the economy, which I believe is roughly 50% vs. high 30s in the US. Canada, as I’m sure you know, had a higher living standard that the US back in the late 50s and early 60s before PET, when government as a ratio to GDP was in the high 20s – low 30s (I think). I’ve always believed this to be the single most important factor in economic growth. But neither Thatcher nor Reagan made a meaningful dent in that ratio, despite being considered vicious and ruthless cutters.
I don’t know Pedro you sound like you have a pretty good grasp of the subject to me. What I find with these discussions is a lack of historical perspective.
Denis was bound and determined to shove something Greenspan wrote in 1966 down our throats. Well that was 40 years ago. I believe he has also revised it as well to fit into what he knows today.
So much of our current economic fortunes are based on two world wars and the move from Monarchies to Democracies.
Actually if you really have an interest in the subject some of the best perspective I have ever gotten was from a trader. Reminiscences of a Stock Operator. Jesse Livermore is considered the greatest trader who ever lived.
But what becomes abundantly clear is how the economic world worked in the 20’s and 30’s. Probably the two most important decades in modern economic history. Primarily for the securities act of 1933 and 1934. Until that time nobody was required to report anything to anybody so capital tended to be the hands of a few that regualarly manipulated the markets. That’s not to say markets aren’t manipulated today just they can’t do it with impunity.
What the Livermore book does is give real life experiences into the world of markets 80 years ago.
Armed with that kind of information HumphryHawkins testimony makes way more sense.
As for Uncle Alan as I like to call him, is really the enemy of a trader because his ultimate goal is price stability. That means prices should in a perfect world neither move up or down. I’d go broke or die of boredom in that kinda world, probably both. He seems to have managed it in the equities at any rate for the last 2 years. But I believe it is just smaller and smaller fluctuations that we have been seeing over the last 80 years. Where equities have been flat in price the bond market has been up and down like a yo-yo in the medium and long end of the curve. Albeit at smaller and smaller fluctuations.
Something that most people don’t know or are unwilling to admit is 2002 was a pivotal year.
After the collapse of the equity markets, incidentally you can supimpose a chart of NASDAQ index on a 1929 Dow Jones Industials crash chart and they are identical. Anyway at that time the worlds economies were slipping into deflation. It’s why Bush started spending like crazy and why the Fed shoveled $’s off the back of a truck.
Had we gone any further we would have completed the scenerio and gotten another 1930’s style depression. Of course we will never know but every money manager on the planet was freaked about it.
Go back and do some reading if you can find it.
Guys like Bill Gross Bill Mitchell both of whom are manage huge pools of money they were talking and writing and worried. Of course you know it took the spending on WW2 to break the Depression of the 1930’s
Jeff:
A brief mention that in an earlier post answering Denis about “smart people like Kate, Jeff” and not being “exposed to economics”, I merely quoted the phrase without being aware that you were that Jeff. Just in case.
Funnily enough, it HAD occurred to me after that Greenspan was perhaps not a trader’s best friend.
Libertarians like myself are inclinded to think that crises are in fact created by government intervention (but blamed on free market capitalism) and then “corrected” by further interventions, which cause new crises, which are then “corrected” … well you get my point.
As I understand it, the Fed created the 1929 bubble, then compounded the problem with tight money at exactly the wrong time, and that the disaster was compounded further by the Smoot Hawley tarriff bill, which deepened and prolonged the depression. So at least in that era, government created the problem and exacerbated it. But I agree that that was then and this is now, but I’m unsure about the widely-held feeling that “things are different this time” and that “government has learned how to do it right”.
In fact I read Denis’ link to that long piece from 1933 by that US representative, and frankly didn’t really feel I knew enough to form a firm opinion. However, I was struck by the sense that it was anti-trade, and was uneasy with the very frequent reference to “international bankers” which I’ve always read as coded anti-semitism.
I’ve always understood the gold bugs argument about sound money but have always been extremely wary of them too. But according to Denis, Greenspan still stands by his 1966 piece about the gold standard. I am aware of your argument about the barbaric relic and economic liquidity, but again, don’t really know enough to have a really firm opinion. I understand both sides of that argument. That should not read as “false humility”. You spend a lot of time reading folks like Hayek and von Mises and you become acutely aware of the limitations of your own intellect! But that’s good; it means you’re stretching!
I’ll check out that book.