The Failure of Keynesianism

Courtesy of James E Miller @ Mises.com:

It’s hard not to agree with the old aphorism “history doesn’t repeat itself, but it does rhyme.” It’s nice to think we learn from our mistakes; yet we always seem to repeat them at some later date.

Reading the daily news, you would be hard-pressed to find mention that there is still an employment crisis unfolding in many industrialized countries. The New York Times recently reported that employers in the United States hired only 175,000 workers in February. This is apparently a cause for celebration among economists. The unemployment rate in the U.S. still remains at an historic high of 6.7%, and there appears to be no date in sight for a return of full employment, but no matter; the economy is supposedly gaining steam.

The only problem is, nobody seems to care much anymore. High unemployment is a constant reality now. Nearly six years of slagging job creation has created a cloud of apathy for most people. It’s just accepted that not everyone who wants to find work will be able to; or they will wander from low-wage job to low-wage job without any kind of security.

The current economic malaise is reminiscent of what the Great Depression was like. Persistently high unemployment with no conceivable end; massive government intervention in the marketplace; a changing industrial landscape; and even social and cultural transformation. We’re less than a century removed from the biggest economic hardship ever faced in America, and the same mishaps are unfolding in front of our eyes.

Then and now, something has remained perennial: the utter incompetence on government’s part to cure economic stagnation.

Newscasters, state officials, and academic economists all tell us government is capable of spending us into prosperity. No matter how much dough is thrown at the glob known as the “economy,” large numbers of people remain out of work. During the Depression, the glut of joblessness lasted for nearly fifteen years. Uncle Sam spent like a drunken sailor while swallowing up much of the economy in fascist scheme after fascist scheme. Continue reading

Hitler’s Economics & Why You Should Know A Thing Or Two About Them

Courtesy of Chris Rossini, The Mises Economic blog:

Hjalmar Schacht was Hitler’s economic guy. According to Wikipedia, Schacht: ”became a supporter of Adolf Hitler and the Nazi Party, and served in Hitler’s government as President of the Reichsbank and Minister of Economics. As such, Schacht played a key role in implementing the policies attributed to Hitler.”

Now, we all know what happened to Hitler. But what about Schacht?

On June 9, 1947 Henry Hazlitt would write in Newsweek:

Nazism was defeated in war. Hjalmar Schacht, the Nazi economic wizard, is in jail.

So Hitler was dead, and his economic guy went to jail

But what about the economic ideas that the two would implement together? What happened to them?

Hazlitt continues:

But when Schacht and his surviving comrades survey the world today, they must feel consoled. Intellectually Schachtism has conquered Europe. The system of price control, wage control, profit control, interest control, exchange control, foreign-trade control, bilateral treaties, rations, priorities, allocations, quotas, with a special license required for almost every more, and with a mounting currency inflation hidden and repressed by these devices – this is Schachtism. And this is the system which nearly every country in Europe has now embraced. Continue reading

Precious Metals In 2014

Yet another great article by Alisdair Macleod and courtesy of Goldmoney.com:

“Now the New Year reviving old desires
The thoughtful Soul to Solitude retires”
Rubaiyat of Omar Khayyam

It’s that time of year again; when we must turn our thoughts to the dangers and opportunities of the coming year. They are considerable and multi-faceted, but instead of being drawn into the futility of making forecasts I will only offer readers the barest of basics and focus on the corruption of currencies. My conclusion is the overwhelming danger is of currency destruction and that gold is central to their downfall.

As we enter 2014 mainstream economists relying on inaccurate statistics, many of which are not even relevant to a true understanding of our economic condition, seem convinced that the crises of recent years are now laid to rest. They swallow the line that unemployment is dropping to six or seven per cent, and that price inflation is subdued; but a deeper examination, unsubtly exposed by the work of John Williams of Shadowstats.com, shows these statistics to be false.

If we objectively assess the state of the labour markets in most welfare-driven economies the truth conforms to a continuing slump; and if we take a realistic view of price increases, including capital assets, price inflation may even be in double figures. The corruption of price inflation statistics in turn makes a mockery of GDP numbers, which realistically adjusted for price inflation are contracting.

This gloomy conclusion should come as no surprise to thoughtful souls in any era. These conditions are the logical outcome of the corruption of currencies. I have no doubt that if in 1920-23 the Weimar Republic used today’s statistical methodology government economists would be peddling the same conclusions as those of today. The error is to believe that expansion of money quantities is a cure-all for economic ills, and ignore the fact that it is actually a tax on the vast majority of people reducing both their earnings and savings.

This is the effect of unsound money, and with this in mind I devised a new monetary statistic in 2013 to quantify the drift away from sound money towards an increasing possibility of monetary collapse. The Fiat Money Quantity (FMQ) is constructed by taking account of all the steps by which gold, as proxy for sound money, has been absorbed over the last 170 years from private ownership by commercial banks and then subsequently by central banks, all rights of gold ownership being replaced by currency notes and deposits. The result for the US dollar, which as the world’s reserve currency is today’s gold’s substitute, is shown in Chart 1.

image

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A Simple Math Question for Bankers

Courtesy of Ludwig von Mises Institute:

Think back to your high-school math class, and reminisce about this question:

“Train A departs from Union Station at noon travelling eastward to Halifax at a speed of 80km/hr. Train B departs three hours later from the same station travelling in the same direction at a speed of 100 km/hr. When and where will they collide?”

We strained our minds, and most came up with the conclusion that 15 hours and 1,200 kms from where train A set off, the carefree conductors would face a rude awakening.

Most of us were just glad to be done with the question, and probably didn’t think of it much further. But consider what was going on at one minute past midnight in this imagined world.

There were two conductors each told that they could depart Union Station at a certain time and speed towards their destination. Each had done exactly what they were told, with the predictably disastrous results. There was probably a track-side argument, with each side blaming the other. Possibly the conflict spilled back to Union Station, with blame being attributed to whoever was in control of the train schedules that fateful day.

One way to look at this is that there was a conflict. Each conductor was told to do something, and when they did the disaster struck. Laying blame at the end is difficult, as neither side did anything wrong. As outsiders to this problem we can see that if blame does lie somewhere, it is with the Union Station scheduler.

Now take yourself out of your math class and consider reality. We have a similar train wreck brewing in our economy. Continue reading

When reality overthrows imagination

Courtesy of Hugo Salinas Price@Plata.com

Imagination is an exclusively human faculty. Only humans can imagine.
I have on another occasion mentioned Arthur Koestler’s remarkable book, “The Sleepwalkers”. As a child of his time, Koestler accepted the theory of Evolution, but he did have a question (which he did not answer) regarding this theory.

I am not quoting Koestler’s very words, but this is their substance: “If we are evolved creatures, and our bodily constitution reflects the challenges of survival and our ability to evolve to meet those challenges, then – how is it that we are endowed with brains of a capacity for thinking vastly greater than necessary for our survival? All other living creatures have brains only just sufficient for their survival. But we humans have brains whose abilities far exceed the requirements of survival. This is a puzzle.”

At no time in history, surely, has humanity lived in this real, physically tangible world with so enormous a reliance on the human brain’s capacity for imagination. Continue reading

How the Paper Money Experiment Will End

As the monetary system slowly cannibalises itself, an article from the Mises Institute sums up the options for the UK economy. Everything but number 5 is possible. My opinion, a deflationary collapse after a portion of hyperinflation and throw in a splash of war for good measure. Courtesy of The Mises Institute:

A paper currency system contains the seeds of its own destruction. The temptation for the monopolist money producer to increase the money supply is almost irresistible. In such a system with a constantly increasing money supply and, as a consequence, constantly increasing prices, it does not make much sense to save in cash to purchase assets later. A better strategy, given this scenario, is to go into debt to purchase assets and pay back the debts later with a devalued currency. Moreover, it makes sense to purchase assets that can later be pledged as collateral to obtain further bank loans. A paper money system leads to excessive debt.

This is especially true of players that can expect that they will be bailed out with newly produced money such as big businesses, banks, and the government.

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Today’s Wealth Destruction Is Hidden By Government Debt

Currently what people view as wealth; savings, bonds, insurance policies, stocks and welfare entitlements, when they actually need to draw on them in their retirement. The amounts they think they will receive will not secure their longevity. The wealth transfer is well underway, already shifting trillions of private losses onto public balance sheets.

The more I reflect on this, how insidious and underhanded it is, from the banking, corporate and political class, that it is legalised theft. We are the victims and our wealth is being transferred and eroded, how does that make you feel? That people who you will probably never meet are determining your life and ensuring you will not have the protection or the ability to survive long term. We are being harvested for profit and it will ensure that all assets will be owned by a few. Welcome to the neo-feudal age of the corporatocracy…it doesn’t have to be like this.

There is one choice that all of us have to make, accept it or change it. Courtesy of Phil Bagus of The Ludwig von Mises Institute: Continue reading