Is housing a “higher order” good under ABCT?

Austrian Business Cycle Theory applied to the housing bubble.

Interesting.

There’s real ambiguity here.  You could argue housing is “just” a consumption good.  But within the debt-based monetary system, it also possesses strong ”capital good” value as a store of value for households looking for a refuge from relentless monetary debasement.

That “store of value” aspect to the asset makes it a possible target for “bubble-dynamics” from fractional reserve banking’s recursive lending ballooning the pricing structure.

Basically anything that can be used as security for a loan can now be subject to a bubble. 

Call it the new ABCT of the Ponzi-cycle.

Bankers told to do their jobs in Dubai

Good Grief!  It appears that bankers will not be saved in Dubai!

That means they’ll actually have to do their jobs – assess risk, take losses where they’ve lent too much and negotiate with debtors when they default.

It’s been so long since they’ve actually had to do their jobs, rather than being bailed out 100 cents in the dollar by corrupt sycophantic governments, do they even remember how to talk to a debtor? 

How…  inconvenient.

The Brits a basketcase?

As MISH has stated so well with his “watched pot” theory, the next bubble to burst is likely to happen where you least expect it.

Could the Brits be a basketcase?

Dumbo flies!

I stand corrected – Abbott wins over Turnbull, 42 to 41.  And Dumbo did fly in the end.

I feel much less suicidal today.  The ETS “Mark of the Beast” legislation is dead, with a wooden stake through its dead heart.

Wong will have a cry with her girlfriends in the Fabian Cabinet.

I’ll enjoy it while it lasts!

Wikipedia is surprisingly accurate

Taken from the “criticism of fractional reserve banking” article:

Some monetary reformers see the prevalence of the debt-based monetary system ultimately resulting in a political crisis, between the vast majority of dispossessed who have had any accumulated net wealth periodically “stolen” during periods of “credit crunch” (and find themselves in permanent inter-generational debt, being forced to work involuntarily in the money-economy simply to house themselves and survive in the debt-based economy), and a tiny minority of inter-generational, super-rich elites connected close to the font of the money supply (being the private banking sector), who will strongly resist calls for redistributive economic policies by using all of their financial strength and lobbying power in an attempt to entrench and sustain their artificially privileged status. Given that the profession of this privileged minority is to produce nothing other than debt and inflation, and given that they face being rendered impotent if the power to print debt-free money was returned to government, it is to be expected that those associated and aligned with the private banking interests will use any means necessary to preserve their power, as they have no other skill besides the issuance and distribution of debt money.

Two wings of the same bird of prey

So, after all the political “intrigue” over the Liberal split, it looks like the ETS legislation will pass tomorrow no matter whether the Goldman Sachs message boy or the Banker’s Husband is voted in as leader.  Abbott would vote down the legislation, but big ears is as likely to win as Dumbo is to fly.

Libertarians in the US often label the two political parties as “two wings of the same bird of prey,” a term coined by Butler Shaffer. To think the ETS legislation – giving unprecedented power over virtually all economic activity to Canberra – would be voted down by the central government is laughable.  Those “employed” in this game are there to dole out favours to their backers.  This increases that power.  Everyone in Canberra wins.  Only the “community” loses.  So it will pass.  Of course.

But step back and think of the irony, the lunacy of this legislation.  We don’t yet have definitive uncontested factual evidence establishing whether grass absorbs more carbon than trees, whether storing carbon in trees is better than cutting them down and letting them grow again, whether the mouths or the butts of cattle cause more emissions, whether sequestration will work…we don’t know ANYTHING definitive about these and many other questions.

But, in the name of an invisible gas that may or may not be causing climate change, we will be forced to cede unprecedented planning, financial, economic, business, farming power to the central govt.  Property rights will be rendered meaningless because a carbon tax could change the valuation of any asset at any time. 

Two wings of the same bird of prey, flapping away to enslave the working men and women of the world.  This is Mark of the Beast-style control over every transaction in the economy.  I am reminded of Murray Rothbard’s sad, forlorn efforts to hold back the tide of govt oppression in the US.  From the WP on this great man:

Building on the Austrian School’s concept of spontaneous order in markets, support for a free market in money production and condemnation of central planning, Rothbard sought to minimize coercive government control of the economy. He considered the monopoly force of government the greatest danger to liberty and the long-term wellbeing of the populace, labeling the State as nothing but a “gang of thieves writ large” – the locus of the most immoral, grasping and unscrupulous individuals in any society.

Rothbard concluded that virtually all services provided by monopoly governments could be provided more efficiently by the private sector. He viewed many regulations and laws ostensibly promulgated for the “public interest” as self-interested power grabs by scheming government bureaucrats engaging in dangerously unfettered self-aggrandizement, as they were not subject to market disciplines which would quickly eliminate such parasitic inefficiencies if they were to occur in the competitive private sector.

Rothbard was equally condemning of state corporatism. He criticized many instances where business elites co-opted government’s monopoly power so as to influence laws and regulatory policy in a manner benefiting them at the expense of their competitive rivals.

He argued that taxation represents coercive theft on a grand scale, and “a compulsory monopoly of force” prohibiting the more efficient voluntary procurement of defense and judicial services from competing suppliers. He also considered central banking and fractional reserve banking under a monopoly fiat money system a form of state-sponsored, legalized financial fraud, antithetical to libertarian principles and ethics. Rothbard opposed military, political, and economic interventionism in the affairs of other nations.

The locus of the most immoral, grasping and unscrupulous individuals in any society.

Indeed,

We are regressing back to tired ideas about govt being the saviour with this legislation.  Where are the lessons from Eastern Europe, from Chernobyl, from the Aral Sea?  This stealth centralisation of economic decision-making, away from the market-based decentralised approach that has worked in the West for centuries is a guaranteed recipe for disaster.  I stand as a witness to this madness.

What drives this fascist-socialist agenda?  Certainly not genuine policy debate about the environment. 

Madness drives it, the insane zealotry that has driven egotists and madmen for centuries.

And the paranoia of parasites.

Free market environmentalism

The free market and concern for the environment are compatible – indeed symbiotic.  Farmers care about their land and are amongst those most concerned about mining causing problems in our food growing areas of QLD.  The govt is the farmer’s enemy here, possibly siding with the mining companies.

Property rights give families a reason to preserve the environment because they are preserving their livelihoods . That is the most effective incentive because it is the most intimate.

Having govt control environment issues disperses responsibility through many ignorant distant hands – through power-hungry bureaucrats who believe they need to shape the world, through politicians looking to curry favour with the mining industry, through those who have no direct interest in the land itself.

Invariably those with the best knowledge and the greatest interest in local environmental issues are those with the most direct stake – the private owners of land affected by the pollution! 

Tourism is concerned for the Great Barrier Reef.  The boating and fishing industries are concerned about the quality of our waterways. 

The govt and the mining companies are the very agents to be most feared, because they have the least direct stake in the long-term viability of the local ecosystem.  Note that even though mining companies are nominally “private” corporations, they are actually in a sense govt agents, taking temporary leasing rights from the govt to mine.  These concessions from the govt to mine are for a temporary period only and therefore it is more accurate to consider mining companies as quasi-govt authorities in many cases.

Libertarians have long been concerned for the environment.  Please take the time to read this excellent piece from Murray Rothbard.

Please think carefully next time you hear a govt mouthpiece talking about “saving the environment”.  What they are invariably saying is “Give me more power.”

Ben begs for his job back

I haven’t seen a more pathetic appeal from a man to keep his job since I pleaded with a law firm to keep me on in 1999.

The obvious question:  If the Fed is necessary to save the world from the biggest crisis since the Great Depression, what caused the biggest crisis since the Great Depression in the first place?  I mean, the Fed was around when the crisis was being incubated, and had the responsibility to protect the world from economic calamities such as the one just experienced.  And yet it happened anyway.

The Fed exists for just this purpose – to steer us away from dangerous economic calamities.   And yet here we are.

It clearly failed, even on its own terms.

Could someone please explain why we have a Fed again?  Other than to save banks from themselves, at the public’s expense.

Ouch!

Robert Higgs attacks Ben Bernanke and the Fed mercilessly. 

I sense his 401k retirement fund may have been hit very badly this year and he’s looking for revenge.

Gold is God’s money

This piece  is the best “advertisement” for gold written in 2009.

Because every word of it is true.  Even the uncertainty is real and sincerely felt.  I feel it too.

Truth is always the best advertisement.

Deflation then inflation…

I like this piece from Nadeem Walayat, Market Oracle editor.

But how do you pump debt-money into an economy going broke?  To whom are you going to lend this newly created debt-money?  Who is idiotic enough to borrow in this environment (other than the govt, of course)?

I’m still in the deflation camp because I can’t see the mechanism by which Zimbabwe in the West becomes a reality.  Unless the central banks start LITERALLY showering us with fiat paper money from UN black helicopters, I can’t see it happening.  And somehow I don’t think that Ben will order the helicopters to be fired up for anyone but Goldman Sachs.

Yes, I can see isolated “Icelands” occurring on the periphery.  I’ve already stated that some time ago and have recently identified Greece as the next Icelandic candidate.  But I don’t see the US being able to “achieve” inflation even if they wanted to.  Japan tried to inflate for over a decade and it couldn’t.  Will the US be any more “successful?”

When paper money starts being tossed around in the streets like confetti, wake me up and I’ll switch sides and dive into the inflation camp.  Until then, please don’t disturb me.  I’m dreaming of deflation.

Financial Tsunami Warning Alert!

As can be seen from the many entries on this Blog, I am not alarmist.  Pessimistic, yes.  Defeatist, yes.  Alarmist, no. 

Unlike Steve Keen, I did not anticipate a collapse in housing in Oz.  Unlike Steve Keen I did not predict economic calamity for Oz in 2008/09.  I did predict a housing bust in the US and in the UK.  I did predict a long recession/depression in the West (particularly the US).

So far, my record isn’t too bad.

I now issue my first Official Financial Tsunami Warning Alert for 2009: 

If this story is correct, we are in for a wild, wild ride in the first half of 2010.

Please prepare yourselves for a second massive credit crunch in January 2010, extending throughout the first half of 2010, with a second wave of mass defaults and a second round of shock waves through the markets.  I anticipated massively increased volatility in coming months, but this will take it to another level altogether.

Everything will go down in the ”crunchiest” of credit crunches if this story is true.

I recommend hunkering down and saving in real money and fake fiat paper.   Stay as far away from the banks and the sharemarket as possible.  Neither will be a safe place to store your wealth if this story is even 50% accurate.

Take care out there.

Doubts over Dubai

Latest reports indicate the central bank has stated it will support U.A.E banks but has pointedly refused to include Dubai in its magic circle of monetary protection.

So U.A.E. banks get magic carpet treatment, but Dubai may be left to die in the desert.

U.K. banks must be sweating in the heat.

Ha Ha Ha!

A trickle in the Sands of time

Sands China takes a 15% haircut on debut.

Ouch.

A few more days of this and the shares will look as bald as Sheldon’s dome.

Just on the venerable Mr Adelson, I quote directly from Wikipedia, but make no comment regarding the accuracy of any of this material:

During the Suen trial Bill Weidner, the president of Adelson’s Las Vegas Sands company, testified about a telephone conversation between Adelson and his friend then-House Majority Leader Tom DeLay(R) about a bill proposed by Representative Tom Lantos(D) that would have prevented the US Olympic Committee from voting in favor of the Chinese bid to host the 2008 Summer Olympics. A few hours later DeLay called back and told Adelson he could tell the Mayor of Beijing “this bill will never see the light of day.” The resolution did not pass. Adelson testified in court that the demise of the resolution “…resulted from the press of other legislation, (not from) a deliberate move by DeLay to help his benefactor.”

As a Libertarian I’m tolerant of legalised gambling provided everyone is given accurate information regarding the odds of winning (and losing). 

I am NOT OK with political influence giving favours to those in the gambling industry.  Nor would Murray Rothbard.

Greek tragedy

Will Greece be the next shoe to drop?

Brilliance and courage from a government leader

Let it never be said I am irrationally negative about politicians and government employees.

Here is a courageous, correct and fundamentally sound statement from the Swedish Prime Minister, Fredrik Reinfeldt, as reported in today’s Daily Telegraph:

We have been very clear that we do not put taxpayer money intended for healthcare or education into owning car companies or covering losses in car companies.  You cannot save jobs just by pushing in taxpayers’ money if you don’t have the competitiveness to survive in a tough industry with overcapacity.

Wow.

I am in awe. 

He is resisting pleas from the unions and pressure from GM to pour public money into Saab to save it.  He is right.

What the Australian govt did in comparison was shameful.

I note that St Vincent’s Hospital may have to reduce purchases of new equipment because of $24 million in investment losses, I note that millions of dollars have been wasted on shoddy insulation due to the govt meddling in the private market for insulation in Australia, I note that hospitals are (according to the Tele) at overcapacity dealing with the spike in new births taking place, I note that billions and billions have gone to save the local car industry and the banks.  From themselves.

I’m off work because of illness right now.  Losing money.  It wasn’t my fault. 

Where’s my handout?

Once it starts, where does it stop?

The answer is it doesn’t.  Until the whole system collapses and anarchy reigns.

AMP’s Shane Oliver wins this week’s ridiculous precision award

Having just railed against misleading and inherently ridiculous “precision” in economics on several previous occasions already, we get this from Dr Shane Oliver, head of investment strategy at AMP, in today’s AFR: 

He predicts a “55%” probability of the RBA raising interest rates at the next meeting.

55%.  Not 50%.  Not 60%.  Not 65%.  But 55%.  How could you possibly make this kind of precisely quantified prediction for a one-off event?

Basically he’s saying he doesn’t have a clue what they’re going to do, but thinks it’s slightly more likely they’ll raise them.

Why doesn’t he just say that?

Is everyone with a PhD in mainstream economics so defensive about their useless qualifications that they need to hide behind false “precision” in estimating future events?

If so, I think there’s a 94.59% probability of sovereign debt default in at least one of the top 50 economies in the next 4 years.   And if I’m wrong, I’ll blame an unanticipated ”Black Swan” event for the 5.41% event occurring, not my model.  I will (of course) be right, it’s just that a highly unlikely event will have occurred – which I already incorporated into my estimate by providing a probability of less than 100%.

So I can never be wrong.  My model will always be right.  It will be reality that will be wrong, if my prediction does not come true.

That’s mainstream economics for you!

Mainstream economists despise non-linearity

Yet another old, ignored, research paper on business cycles which emphasised the potentially “catastrophic” non-linear dynamic that could arise from a combination of an economic downturn and changed savings patterns arising from the wealth effect.

The reason this stuff is ignored by the mainstream is because the mainstream can’t handle non-linearity.

So they prefer to have models that are “precisely” ridiculous rather than imprecisely realistic.

Fake environmentalists

are easy to spot. 

They are the ones screaming about climate change and an ETS, whilst SIMULTANEOUSLY ignoring the after-effects of the shocking West Atlas oil spill off the WA coast and the culpability of PTTEP and the govt in minimising and covering up the seriousness of these long-term effects; ignoring the seriousness of repeated dust bowls affecting Sydney, which signal the loss of irreplaceable top soil from central and western NSW plains; ignoring dry land salinity, which threatens 12 million hectares of arable land; ignoring toxic landfill which in turn threatens the already-compromised integrity of our exhausted aquifers and poisoned water table.

Some call them “watermelons” (green on the outside, red on the inside).

I just call them government employees.

The Paranoid Mind of a Parasite

According to Austrian School economist and Libertarian thinker, Murray Rothbard, every government employee and government contractor is a parasite living off coercively acquired taxes that should never have been “stolen” from the people.

Leaving aside the accuracy of Murray Rothbard’s description of govt employees and assuming it to be true, what would the mind of these parasites look like?

Well, first and foremost, they would be paranoid about the inherently unnecessary, irrelevant and redundant role they play in society.  They know they sit around doing nothing.  They know they are a negative, parasitic drain on society’s precious resources.  They see the money coming in from “stolen” taxes and they know they are shockingly unproductive and unresponsive when compared to the market.  They fear and resent this fact, like mortals fear and resent death.

So, logically, they will obsess about their own “relevance”, constantly justifying their role in society by creating false “alarms” needing their “vital expertise”, constantly talking up the importance of their work, constantly looking for validation and publicity, constantly trying to deny the essentially irrelevant nature of their existence.

Now, think of the fact that Osama Bin Laden “conveniently” hasn’t been captured for 8 years and yet the US and UK govts scream that this is a vital task of govt for self-defence; think of the ridiculous misinformation regarding climate change and the screaming over the “need” for a govt enforced solution (such as an ETS); think of the SIMULTANEOUS and INCONSISTENT need for “stimulus” spending by govt, with the Treasurer and other govt hacks bleating on about how govt was essential to keep Australia spending money on stuff no one else would buy (if it was necessary it would have been bought without the govt having to step in); think of the countless ways in which govt employees assume they know what they are doing but simply do nothing other than confuse, obstruct, slow down and otherwise frustrate the workings of the market… and then consider the wisdom of Murray Rothbard’s analysis.