I will not post again on this blog until January 2020, for several reasons.
The first is personal: I wrote this blog when I was recuperating from illness and now, having recuperated (well, having recovered as much as I’m ever going to recover) I need to focus on other things. Like getting outside more often.
The second is tactical: I have learned that one should never record over an extended period the failings or errors or corruptions of any entity that survives on intimidation or coercion. Those who have infiltrated and then reported on the Mafia – not a good career move. Those who have infiltrated and then reported on the Federal Reserve in the US – not a good career move. Those who have infiltrated and reported on any powerful government entity – not a good career move.
Keep it short, sweet, to the point and then leave it alone. In other words, run.
The third is strategic: I have made a very intense, focused effort in the time I had available to provide a full-spectrum view from an Austrian perspective of current trends and events. None of the developments I see on the horizon are good developments. They are all bad. Nevertheless, I have tried to record these developments, these dynamics, and predict the inevitable dénouement.
When something is unsustainable it inevitably has to end. That which cannot continue forever will not continue forever. I think the trends recorded here on this blog are so obvious, and the conclusions to be so inevitable that there is no point repeating and repeating the same points over and over. They will repeat themselves again and again this decade. Until something breaks. When and how the “break” occurs I cannot say. Whether it occurs this decade or next I cannot say. But something will “break”, as Robert K Landis has pointed out.
Regular readers will by now be 100% aware of my recommendations to prepare yourself for the inevitable break. There is no need to re-hash this advice here. For those who have not been regular readers to this blog, if you click on the “investment tips” archive on the home page to this blog you will quickly understand my investment perspective to ensure maximum protection during the coming inevitable dénouement.
Bill Bonner could have made his “Trade of Decade” in 2000 and then not said a word for ten years, except to say “I told you so” in January 2010. Instead, his kept his Daily Reckoning site updated for our amusement each weekday throughout the naughties and made great money from his website and his associated businesses. I do not propose to do the same. I have made my predictions, my “Trade of the Decade”, and I now propose to sign off on this blog until January 2020, when we can all reconvene to compare notes and assess the success of this and other “Trades of the Decade”.
I ended up with an average of around 50 regular readers. Nearly 8 years of academic research and work lies behind this blog. And for all this work I reached an average of around 50 people. Those people received some very valuable information, but clearly my message was reaching a very narrow audience and not many people care to hear the message. For those who were regular readers, I trust the information has been valuable to you. I also trust you can see the trends that will play out this year and this decade as clearly as I can.
For those individuals who reach this blog after I sign off, there are over 300 blog posts analysing social and economic and investment trends on this website. I hope each and every one of my posts has as much relevance in 10 years’ time as it does today. You are still welcome to search through the archives of this blog to your heart’s content at any time over the next 10 years.
I am confident the links provided on the right-hand side of my home page will keep you informed and entertained over the next 10 years. Please access these sites if you wish further updates on investment trends.
If I am alive, I will post again in January 2020, to assess the accuracy of my predictions.
Until then, be good to yourself.
Nearly everyone I talk to has no idea (or more precisely doesn’t care) what anarchy means, what an “anarchist” supports. Most associate anarchism with the Sex Pistols song. Bad move.
Anarchy simply means the absence of monopoly government.
Government is defined (even by Statists) as a monopoly provider of law and order services in a given geographic region. There is no appeal process beyond the State. It is defined as the “last appeal entity” in any jurisdiction when a dispute arises.
Anarchists believe in the power of voluntarism, spontaneous order and competition.
Societies can order themselves through co-operation, not coercion. Religions, social groups, charities – they all organise themselves cooperatively. The govt organises society through compulsorily acquired property (theft through taxes) and through the use of monopoly force (via the police).
Spontaneous (not consciously designed) order can occur through the price mechanism. Governments do not use the price mechanism to allocate resources; they use the political process and their own decision-making criteria, divorced from the price mechanism. If a service is already being delivered by the private sector (such as coin production) the govt has to crush that industry in order to control that market.
Competition simply means a number of entities competing to provide the consumer the same product or service. Govts should “compete” to provide law and order. If a citizen doesn’t like a particular brand of “law and order” he should be able to sell up and move freely to a neighbouring state providing better law and order. Hence, states should be as numerous and as small as possible.
My first introduction to anarcho-libertarian ideas was through this book by Robert Ellickson entitled Order Without Law: How Neighbours Settle Disputes. After reading this brilliant book, I (naturally) asked myself “If neighbours can settle disputes efficiently themselves, why can’t all of us – society at large – do the same thing? We are all essentially neighbours, and when we get into disputes all conflicts are essentially analogous to neighbourly disputes. So why are there monopoly providers of so-called ‘law and order’ when we could probably (in the vast majority of disputes) do a much better job ourselves through voluntary arbitration/mediation services, appointed by disputants themselves (and through private insurance and security service providers in the case of protection of property and person)?”
I then went on to read Murray Rothbard, and found that he had posed the same questions. Then I read Hans Hermann Hoppe and the Sun came out, shining brightly. Hulsmann and de Soto simply added to the brilliant sunshine.
I now divide up the world into those ignorant fools who haven’t read these works and those Chosen Few who have.
Murray Rothbard begged for anarchists to be given a country, a region, to try out these ideas, to see whether they would work.
Well, as it happens, an area of the world is trying out these ideas, by default. A “lawless” region of Africa has “fallen” into a state of true anarchy. That region is a secessionist area within the Ivory Coast.
And you know what’s happening?
It is flourishing! Check out what’s happening here.
And, ironically, when the central bank of Zimbabwe completely abandoned its attempts to control the monetary system and allowed “anarchy” to reign, with any currency (foreign or domestic) lawfully being permitted to be used for trade, guess what happened? Trade flourished! See what happened in 2009 here.
If we know for a fact that these ideas work, why don’t governments break up, why don’t they shrink, why don’t they abandon their “plans” for the benefit of the people?
Because they don’t exist for the benefit of the people. They exist for themselves, to suck the lifeblood out of an economy. They exist to expropriate property on behalf of their benefactors.
Remove the thief and the people flourish, just like you’d expect in any safe, civilized area of the city.
Allow the rapists of the State to flourish and what you get is not anarchy, but chaos.
Who can deny that the biggest, most expensive State operations today are occurring in Iraq and Afghanistan? Have you visited these “strong state” regions? Do you know the “benefits” the internationalized State is providing the people in these regions? Note: the Taliban are long gone from govt in Afghanistan and Saddam Hussein was hanged years ago now. These “enterprises” are now run exclusively by Western govts and by the UN.
I ask you: Would you prefer to live as an ordinary person in the secessionist area of the Ivory Coast mentioned above or in Kabul? Both are extreme cases at either ends of the spectrum: one with the complete absence of govt, and one with the greatest concentration of govt agencies (both “domestic” and international) on the planet.
Please think about it. And please never associate anarchy with the Sex Pistols song ever again.
Investors now view Britain as a riskier lending proposition than Italy, with its cost of borrowing rising comfortably above the 4pc mark for the first time this year.
The yield on 10-year gilts rose briefly above the 4.1pc level in intraday trading and spent most of the day higher than the yield on benchmark Italian bonds, as fears over Britain’s fiscal credibility continued to haunt markets. The news came as analysts warned that hedge funds and other “smart money” traders had been largely responsible for leading the exodus out of UK government debt.
The Treasury’s cost of borrowing has risen by more than a percentage point since March, despite the Bank of England spending £200bn on gilts through its quantitative easing (QE) programme. Experts put the increase down to worries that this and future governments will either prove incapable of reducing their deficit or will resort to inflation in order to erode it. The combined effect has been to catapult UK government bond yields above those of Italy and Spain in the past few weeks alone.
Speculation in agricultural commodities may not have reached fever pitch yet but with food shortages expected in 2010, it could.
Jim Rogers, one of the world’s most astute investors has been bullish on commodities in general for several years. On agricultural (or soft) commodities, he says: ‘Food inventories worldwide are at the lowest in decades as the world continues to consume more than it produces. We even have a shortage of farmers now since agriculture has been such a terrible business for three decades. We should all hope prices go higher or there may soon be a time when there will be little or no food at any price.’
Mr Rogers, who created his own commodities indices, has put his name to several index funds. The Elements Jim Rogers International Commodity Index Agriculture Total Return which is listed on the New York Stock Exchange has, for instance, risen by about 6 per cent since the start of 2009.
Interest in soft commodities has had an impact on prices.
‘Whenever there are buyers of anything, it affects the prices. For example, if you live in an apartment or house, you are affecting the price of housing in Singapore,’ adds Mr Rogers.
There are several ways to invest in soft commodities including the futures contracts on commodities exchanges like the Chicago Board of Trade (CBOT).
The index funds alluded to by the FAO include the more rarefied market of exchange traded funds (ETFs) that typically attract institutional investors.
There are more prosaic ways as well.
In China, the bubble people are talking about now is not in real estate but in garlic.
Worries about persistent swine flu prompted a spike in garlic consumption in 2009 and soon, everyone was hoarding it in hopes of making a quick buck. Prices are said to have gone up by 50 per cent in the last few months.
Rice could be next. Barclays Capital Research economist Leong Wai Ho says: ‘The bigger problem for food prices is an old one – physical hoarding that can limit physical availability, unlike derivative trading.
‘Rice prices are now at levels that are likely to induce physical hoarding in Vietnam and Thailand. And also in stricken countries – authorities in Southern Guangdong have introduced anti-hoarding measures in the wake of the ongoing drought.’
And Mr Leong also believes the significance of food prices may not have been factored into inflation either.
For 2010, the Singapore government’s inflation forecast has been revised from 1-2 per cent to 2.5-3.5 per cent. Citing rising Thai fragrant rice prices, the prospect of El Nino weather conditions, higher import demand from Asian countries, Barclays’ 2010 inflation forecast for Singapore is higher at 4 per cent, up from 1.5 per cent previously.
Still, the verdict is out on how this will impact the economic recovery.
‘I don’t think there will be a meaningful impact on growth,’ says Mr Leong. ‘While the monetary policy stance will be tightened from where it was before, the overall policy stance will still be largely accommodative in 2010. The exchange rate will be used to lean into imported inflation, while liquidity will still remain flush and fiscal policy still expansionary,’ he added.
Economists will nevertheless be ‘keeping an eye’ on food prices.
What a great move for the Labor govts in Oz to grant mining rights to the barbarians at BHP and the other Neanderthal low-IQ Big Miners over the most fertile arable land in both NSW and Qld, just at the time when sugar prices are at historic highs and every astute investor is screaming that farmland is a buy. If we had any brains we’d be hoarding our minerals until prices spiked in a decade, and we’d be focusing on innovation in solar power and recycling technologies instead of digging dirty ditches and selling our precious metals for worthless paper.
But no, let’s sell everything we’ve got RIGHT NOW! What forethought, what genius, what planning, what brilliance! Well done, Rudd, well done Bligh, well done what’s-her-name-puppet-of-the-Labor-Right-in-NSW!
This proves conclusively to me that (1) there is no God and (2) the NSW and Cth govts are infested with the dumbest people on this God-forsaken planet.
Because govts can. So they will.
Which is why gold and silver are God’s money, real money, honest money, money to have in a crisis like today, money to hold in your own hands secure in the knowledge no embezzling shyster is going to take it away from you or counterfeit it or overprint it.
As Jeff Clark explains here:
Bottom line: after all the bailout programs, housing initiatives, rescue efforts, stimulus schemes, bank takeovers, wars, unemployment benefit extensions, and numerous other promises, the biggest financial deception of the decade is what the U.S. government is doing to the dollar. Nothing else even comes close.
This reckless activity has spooked our foreign creditors, weakened our global standing, diluted our currency, is punishing savers and retirees, and ultimately sets us up for a level of inflation this country has never seen before.
Yet, what is the guardian of our economy and money telling us now?
“Will the Federal Reserve’s actions to combat the crisis lead to higher inflation down the road? The answer is no; the Federal Reserve is committed to keeping inflation low and will be able to do so. In the near term, elevated unemployment and stable inflation expectations should keep inflation subdued, and indeed, inflation could move lower from here.” (Ben Bernanke, December 7, 2009).
This is pure rubbish. If inflation could be controlled by just thinking stable inflation thoughts, then Ben should be able to grow a full head of hair by just thinking scalp follicle thoughts. This is so ridiculous, it’s insulting.
Government actions make a mockery of their words; what they say and what they do are diametrically opposed. It’s clear that inflation is not a question of if, but when.
Any level-headed individual has to conclude that there will be a steady – and likely accelerating – decline in the dollar’s purchasing power. It’s inevitable.
The great masses don’t quite understand it yet, but they will. There will be no escape from the cold, hard slap in the face citizens will receive when a high level of inflation arrives. And when it does, it will make a mockery of any opposing viewpoint.
So the question before you is simple: Will you be a prepared survivor for what lies ahead, despite what our government leaders tell us, or will you be a complacent victim of the biggest financial deception of the decade?
For me, there’s only one solution. Don’t kid yourself into thinking a man-made asset will protect your purchasing power. This is the time to be overweight gold and silver. I advise letting them serve their purpose for you.
I don’t like the term “man made”. Everything is man made, and valued by man. I prefer this expression: “Don’t kid yourself into thinking an easily debased paper asset will protect your purchasing power.”
Because in the end, it never has. Ever. In the history of paper currencies every single one has eventually ended up worthless. Every. Single. One.
Think about it.
I love this phrase: “All serious economists…”
Are there any “funny” economists?
If so, I’ve never met them. So what does this phrase mean? It means “the narrow set of mainstream economists who agree with my point of view at this time”. The little qualifier “serious” is intended to convey to the reader that there are “serious” economists on the one hand and “wacky” “non-serious” economists on the other whose views should not be treated “seriously”. Like, say, Murray Rothbard or Ron Paul.
The Baseline Scenario quotes a commentator who uses the phrase in the context of regulating the TBTF institutions that privitise profits and socialise losses.
Let me use the phrase in a slightly different context:
All serious economists believed there would be no GFC in 2006. All serious economists were wrong.
All serious economists believed the housing crisis would be confined to sub-prime in 2007. All serious economists were wrong.
All serious economists predicted continued declines in stockmarkets worldwide at the beginning of 2009. All serious economists were wrong.
All serious economists think stimulus spending works to “cure” an economy languishing after years of too-cheap credit and debt. All serious economists are wrong.
All serious economists believe the global economy has turned a corner in 2009 due to the trillions in govt spending. All serious economists are wrong.
All serious economists in the USSR believed only serious economists studied Marxist-Leninist thought. All serious economists in the USSR were wrong.
All serious economists in the UK and Australia believe Keynesian economics holds the answers to the major economics questions today. All serious economists in the UK and Australia are wrong.
All serious economists in the West think paper money backed by nothing can last as real money, instead of gold. All serious economists in the West are wrong.
Amazing. Perhaps I’m not as mad as the doctors say I am? I hope no one is copying my stuff out there in the blogsphere! Give me attribution if you’re going to copy my stuff, please!
James Quinn (he of TheBurningPlatform.com) has some interesting predictions for 2010 here at MarketOracle.
Essentially, he’s predicting a double dip. higher unemployment, broken ARMs blowing up all over America, a massive CRE bust, higher interest rates and a surge in gold and silver as the US dollar tanks. He also predicts the fringes of Europe will be on fire by the end of the year and the big EU banks will start to melt in the heat.
I also predict a Japanese boa-constrictor-style double dip and a CRE bust in Oz and the US, but don’t see a big hike in interest rates coming up in the US, where the bond market is controlled as tightly as the price of milk in the old Soviet Union. I suspect the Marxist central planners at the Fed would prefer to let go of the US dollar rather than kill the economy through a spike in real interest rates. They’ve shown themselves to be completely gutless on controlling growth in the money supply over the past decade. What will give them the requisite courage this year? I doubt they’re going to get religion and allow the market for bonds for fall freely without intervening to save at least the short end of the market.
Let’s see what happens. I thought it couldn’t get any worse than the last two years, but the blindness, the short-termism, the venality, the stupidity, the plain madness of govt can never be underestimated, and it looks like we’re in for another downdraft from the idiot-savant govt’s “good intentions” this year. The only thing this idiot-savant is good at is lying and displaying extraordinary amounts of chutzpah.
There is no God.
To pick up a brilliant point made by Peter Schiff in the video to the previous post below (but not understood by those on the brain-dead panel):
Inflation is simply debasement of the currency, or increases in the money supply. Inflation is occurring, just not where you expect it. It’s occurring in govt pork and govt employee numbers and in govt contractors making big bucks off govt spending.
Banks are lending massive amounts of new money – to governments around the world. They are the only entities the banks can find who will pay them back (even if it has to be in worthless paper currency – ha ha ha!).
Therefore, the “de”-flation that we should have seen occur to “cure” the credit bubble has been deferred – by way of an increase in brain-dead govt employees!
This is unlikely to “cover” for the loss in private sector activity because govt spending is generally unsustainable and therefore has a lower “velocity of money” than genuine private sector investment. However, these ridiculous “heroin stimulus packages” do cover up (temporarily and only to some degree) the deflation we should have had, coming out of the “credit boom” years.
Because of the massive distortions and misallocations caused by (1) the classic ABCT credit-fuelled Ponzi-boom and (2) now the ridiculous unsustainable govt spending, crowding out the private sector’s access to cheap capital for real sustainable projects that the public actually wants, we are now going to get (at the end of the day) much higher unemployment.
Higher unemployment is baked into the cake because of the massive stimulus spending. Take any specific “stimulus” measure, be it “Cash for Clunkers” in the US or the “First Home Buyer’s Grant” or incentives for home insulation or solar panels. Now, simply ask yourself:
What happens when the “stimulus spending” stops?
Most of the “stimulus spending” simply brings forward future consumption patterns - it re-allocates inter-temporal spending patterns, but doesn’t actually increase the total consumption over time.
I explained all of this in much more detail several months ago here. I see the balance of the forces being slight deflation rather than hyperinflation, but the dynamics are the same. I see possible inflation (possible hyperinflation) in 2012-2015, but that’s a long way off – and I mightn’t even be alive then (here’s hoping!).
Only Austrians such as the brilliant Peter Schiff understand that you can have very high inflation and very high unemployment because of preceding bad investments and unsustainable economic activity, leading to an economic dead-end rather than to ongoing economic activity.
When you build on Ponzi-quicksands, you fall into Ponzi-quicksands.
Peter Schiff’s predictions for the U.S. economy in 2010: higher unemployment, higher interest rates, and higher inflation (oil and gold higher, possibly much higher). A dollar crash (a drop of 50-70%) is inevitable and will possibly occur in 2010 rather than 2011.
[Note: You can watch the full video here if the embedded video below doesn't work due to blocking by YouTube.com]
The fact that the best politician in the world is relegated to “kook” status in his own “Land of the Free, Home of the Brave” country proves conclusively to me that there is no God.
Here is his brilliant analysis of the real causes of the Lost Decade:
This past week we celebrated the end of what most people agree was a decade best forgotten. New York Times columnist and leading Keynesian economist Paul Krugman called it the Big Zero in a recent column. He wrote that “there was a whole lot of nothing going on in measures of economic progress or success” which is true. However, Krugman continues to misleadingly blame the free market and supposed lack of regulation for the economic chaos.
It was encouraging that he admitted that blowing economic bubbles is a mistake, especially considering he himself advocated creating a housing bubble as a way to alleviate the hangover from the dotcom bust. But we can no longer afford to give prominent economists like Krugman a pass when they completely ignore the burden of taxation, monetary policy, and excessive regulation.
Afterall, Krugman is still scratching his head as to why “no” economists saw the housing bust coming. How in the world did they miss it? Actually many economists saw it coming a mile away, understood it perfectly, and explained it many times. Policy makers would have been wise to heed the warnings of the Austrian economists, and must start listening to their teachings if they want solid progress in the future. If not, the necessary correction is going to take a very long time.
The Austrian free-market economists use common sense principles. You cannot spend your way out of a recession. You cannot regulate the economy into oblivion and expect it to function. You cannot tax people and businesses to the point of near slavery and expect them to keep producing. You cannot create an abundance of money out of thin air without making all that paper worthless. The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever. You cannot live beyond your means indefinitely. The economy must actually produce something others are willing to buy. Government growth is the opposite of all these things.
Bureaucrats are loathe to face these unpleasant, but obvious realities. It is much more appealing to wave their magic wand of regulation and public spending and divert blame elsewhere. It is time to be honest about our problems.
The tragic reality is that this fatally flawed, but widely accepted, economic school of thought called Keynesianism has made our country more socialist than capitalist. While the private sector in the last ten years has experienced a roller coaster of booms and busts and ended up, nominally, about where we started in 2000, government has been steadily growing, because Keynesians told politicians they could get away with a tax, spend and inflate policy. They even encouraged it! But we cannot survive much longer if government is our only growth industry.
As for a lack of regulation, the last decade saw the enactment of the Sarbanes-Oxley Act, the largest piece of financial regulatory legislation in years. This act failed to prevent abuses like those perpetrated by Bernie Madoff, and it is widely acknowledged that the new regulations contributed heavily not only to the lack of real growth, but also to many businesses going overseas.
Americans have been working hard, and Krugman rightly points out that they are getting nowhere. Government is expanding steadily and keeping us at less than zero growth when inflation is factored in. Krugman seems pretty disappointed with zero, but if we continue to listen to Keynesians in the next decade instead of those who tell us the truth, zero will start to look pretty good. The end result of destroying the currency is the wiping out of the middle class. Preventing that from happening should be our top economic priority.
Shove that up your pipe and smoke it, JQ.
Let me add an addendum to my Trade of the Decade:
Silver, the longtime poor cousin to gold, is $et to $oar!
The shorting of silver by the bullion banks is insane and unprecedented.
Admittedly, the Makian Distribution predicts massive volatility in commodity prices with increased leverage/debt, and that’s exactly what we’ve had in the silver market over the last 50 years.
But something tells me silver is due to switch across to the right hand side of the bifurcating normal distribution very, very soon.
I would love to see a short squeeze in the silver market. It would be like watching fireworks on New Year’s Eve.
When you see a chart like this, you just know gold’s going to US$1,200 in a matter of weeks. You just know it.
When Gerald Celente talks, I listen.
I’ve commented previously that mainstream economists wish Austrian economics was dead, wish Austrian analysts never existed, and wish Austrian predictions on the GFC would be wiped off the face of the earth forever.
Austrians show mainstream economists up for the egocentric little blind bureaucrats they really are – sycophants to the bankers and the Establishment.
No one likes to look in the mirror and see a shallow status-seeking shill staring back at them. To know a small group of economists nailed the GFC and are laughing at Keynesian stupidity day after day (check out the US unemployment figures! Ha Ha Ha!) – this is, understandably both frightening and infuriating.
Still, it is amazing how much the useless academics (publishing useless articles in their obscure journals) obsess about the “influence” of the Austrian School. If it’s so “out-dated” why criticise it at all?
There is NOT ONE working Austrian Professor of economics at ANY prestigious university in either the UK or Australia. Not one. Clearly the academic culling has been as successful as… well… as any govt-backed genocidal operation has been (they’re generally pretty successful judging by history).
The last remnents, the last holdouts against Fabian socialism still annoy the academic Daleks. They still scream “Exterminte! Exterminate! Exterminate!” to try to “cleanse” the academy of any ideological impurities.
So much for academic freedom in academia! You would get more open-minded discussion in a Catholic convent compared to the average economics dept in Australia.
John Quiggin, Australia’s poor attempt to produce a Paul Krugman, reloads and shoots blanks at the Austrian target, yet again.
Why he bothers when no one in Australia actually understands Austrianism is beyond me.
It’s not taught in ANY university in Australia. It’s not even mentioned in any curriculum. I speculate that most economics students in Australia, if pressed, would think ”Austrian School” is a school of anti-Semitic Fascist Nazi propaganda promoted during the Second World War, rather than a school of libertarian thought associated with liberal Jews such as Ludwig von Mises and Murray Rothbard.
This probably says something about both the quality of university education in Australia and the reflexive associations most Anglos still have to the terms “German” or “Austrian” philisophical thought.
Getting back to mainstream zealot JQ, he states the following:
But the Austrians balked at the interventionist implications of their own position, and failed to engage seriously with Keynesian ideas.
The result (like orthodox Marxism) is a research program that was active and progressive a century or so ago but has now become an ossified dogma. Like all such dogmatic orthodoxies, it provides believers with the illusion of a complete explanation but cease to respond in a progressive way to empirical violations of its predictions or to theoretical objections.
Whether he’s being deliberately misleading here or just stupid I don’t know. Austrians scream for a return to the gold standard to stop the mad credit-fuelled misallocation of resources that inevitably leads to financial crises – they do not support “mopping up” the crises afterwards with even cheaper credit or more crazy stimulus spending by govt. What’s inconsistent about that? What’s dogmatic about that? Where’s the Keynesian engagement with Austrians?
To quote WP’s summation of Murray Rothbard’s position on money production:
Rothbard believed the monopoly power of government over the issuance and distribution of money was inherently destructive and unethical. The belief derived from Ludwig von Mises and Friedrich Hayek’s Austrian theory of the business cycle, which holds that undue credit expansion inevitably leads to a gross misallocation of capital resources, triggering unsustainable credit bubbles and, eventually, economic depressions. He therefore strongly opposed central banking and fractional reserve banking under a fiat money system, labeling it as “legalized counterfeiting” or a form of institutionalized embezzlement and therefore inherently fraudulent.
He strongly advocated full reserve banking (“100 percent banking”) and a voluntary, nongovernmental gold standard or, as a second best solution, free banking (which he also called “free market money”).
“Given this dismal monetary and banking situation, given a 39:1 pyramiding of checkable deposits and currency on top of gold, given a Fed unchecked and out of control, given a world of fiat moneys, how can we possibly return to a sound noninflationary market money? The objectives, after the discussion in this work, should be clear: (a) to return to a gold standard, a commodity standard unhampered by government intervention; (b) to abolish the Federal Reserve System and return to a system of free and competitive banking; (c) to separate the government from money; and (d) either to enforce 100 percent reserve banking on the commercial banks, or at least to arrive at a system where any bank, at the slightest hint of nonpayment of its demand liabilities, is forced quickly into bankruptcy and liquidation. While the outlawing of fractional reserve as fraud would be preferable if it could be enforced, the problems of enforcement, especially where banks can continually innovate in forms of credit, make free banking an attractive alternative.”
JQ can’t have it both ways. He can’t say the Austrians are “dogmatists” screaming mindlessly for a return to the gold standard and also that we “want” to scream for paper monetary stimulus at the end of the credit cycle, but for ideological reasons can’t bring ourselves to do so (rubbish).
If pushed, I’d prefer the term gold standard “dogmatist” to “sell out” any day of the week.
He goes on to add, bizarrely, that ”the [Austrian] label has been increasingly associated with gold bugs, critics of fractional reserve banking, neo-Confederates and general fringeness.” In other words, maddies and psychos.
Support for the gold standard is not mindless dogma (unlike Keynesianism which is). To quote again from the WP article on the Austrian School’s view of inflation:
The Austrian School has consistently argued that a “traditionalist” approach to inflation yields the most accurate understanding of the causes (and the cure) for inflation. Austrian economists maintain that inflation is by definition always and everywhere simply an increase in the money supply (i.e. units of currency or means of exchange), which in turn leads to a higher nominal price level for assets (such as housing) and other goods and services in demand, as the real value of each monetary unit is eroded, loses purchasing power and thus buys fewer goods and services.
Given that all major economies currently have a central bank supporting the private banking system, almost all new money is supplied into the economy by way of bank-created credit (or debt). Austrian economists believe that this bank-created credit growth (which forms the bulk of the money supply) sets off and creates volatile business cycles (see Austrian Business Cycle Theory) and maintain that this “wave-like” or “boomerang” effect on economic activity is one of the most damaging effects of monetary inflation.
According to the Austrian Business Cycle Theory, it is the central bank‘s policy of ineffectually attempting to control the complex multi-faceted ever-evolving market economy that creates volatile credit cycles or business cycles, and, as a necessary by-product, inflation (especially in asset markets). By the central bank artificially “stimulating” the economy with artificially low interest rates (thereby permitting excessive increases in the money supply), the government-sponsored central bank itself allows debasement of the means of exchange (inflation), often focused in asset or capital markets, resulting in “false signals” going out to the market place, in turn resulting in clusters of malinvestments, and the artificial lowering of the returns on savings, which eventually causes the malinvestments to be liquidated as they inevitably show their underlying unprofitability and unsustainability.
Austrian School economists therefore regard the state-sponsored central bank as the main cause of inflation, because it is the institution charged with the creation of new currency units, referred to as bank credit. When newly created bank credit is injected into the fractional-reserve banking system, the credit expands, thus enhancing the inflationary effect.
The Austrian School also views the “contemporary” definition of inflation as inherently misleading in that it draws attention only to the effect of inflation (rising prices) and does not address the “true” phenomenon of inflation which they believe is the debasement of the means of exchange. They argue that this semantic difference is important in defining inflation and finding a cure for inflation. Austrian School economists maintain the most effective cure is the strict maintenance of a stable money supply. Ludwig von Mises, the seminal scholar of the Austrian School, asserts that:
“Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation’ to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation.”
Following their definition, Austrian economists measure the inflation by calculating the growth of what they call ‘the true money supply’, i.e. how many new units of money that are available for immediate use in exchange, that have been created over time.
This interpretation of inflation implies that inflation is always a distinct action taken by the central government or its central bank, which permits or allows an increase in the money supply. In addition to state-induced monetary expansion, the Austrian School also maintains that the effects of increasing the money supply are magnified by credit expansion, as a result of the fractional-reserve banking system employed in most economic and financial systems in the world.
Austrian School economists claim that the state uses inflation as one of the three means by which it can fund its activities, the other two being taxing and borrowing. Therefore, they often seek to identify the reasons for why the state needs to create new money and what the new money is used for. Various forms of military spending are often cited as reasons for resorting to inflation and borrowing, as this can be a short term way of acquiring marketable resources and is often favored by desperate, indebted governments. In other cases, the central bank may try avoid or defer the widespread bankruptcies and insolvencies which cause economic recessions or depressions by artificially trying to “stimulate” the economy through “encouraging” money supply growth and further borrowing via artificially low interest rates.
Accordingly, many Austrian School economists support the abolition of the central banks and the fractional-reserve banking system, and advocate instead a return to money based on the gold standard, or less frequently, free banking. Money could only be created by finding and putting into circulation more gold under a gold standard.
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.” 
Advocates argued that the Gold Standard would constrain unsustainable and volatile fractional-reserve banking practices, ensuring that money supply growth (“inflation“) would never spiral out of control. Ludwig von Mises asserted that civil liberties would be better protected:
“It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights. The demand for constitutional guarantees and for bills of rights was a reaction against arbitrary rule and the nonobservance of old customs by kings.”
Notice how nuanced, how detailed, how sensible the arguments are for a return to gold. Austrians sensibly look at history, see the madness of government, the repeated financial crises caused by over-issuance of paper money and conclude that a gold standard (a monetary system that has applied for 99% of human history) is a better alternative than the certainty of destruction caused by govt manipulation of property rights.
Is it ”gold buggerism” to point this out? Is it madness to point out the embezzlement inherent in fractional reserve banking?
Apparently, according to JQ.
JQ is one weird dude. He recognises the success of many Austrians predicting the GFC (and perhaps deeply resents it). He recognises that nearly all mainstream economists failed dismally in predicting anything during this period (including the GFC).
What he doesn’t point out is that (probably) around 70% of practising academic economists in Australia would label themselves as Keynesians, neo-Keynesians or post-Keynesians (or some other variant of quasi-Socialist-Fascist thought), that the other 30% would probably label themselves as mainstream neo-classical economists and that NOT ONE OF THEM would label themselves as “Austrian” and NOT ONE OF THEM would have a clue what Austrianism is all about.
Which is why Australia as a nation is doomed to financial catastophe after financial catastrophe, why JQ’s home state of Queensland is a basket case (despite JQ’s sage socialist advice) and why virtually every state in Australia is headed for a fiscal and/or environmental Armageddon.
And why JQ is not counted amongst the 12 economists in the world who accurately predicted the GFC, but why I did predict the GFC (ha ha ha!) - despite having the burden of a full time non-academic job, despite being ridiculed and rejected for my “gold bug” beliefs in Oz, and despite there being no work for any Austrian economist in the whole of Australia.
JQ, with all his time and academic resources, is essentially a useless redundant fool amongst many useless redundant fools in academia sucking off the teat of the govt’s payroll, whilst screaming at the alleged venalities and corruptions of the private sector – whilst failing in his own job to warn of the precise nature of the GFC and STILL failing to provide accurate predictions regarding GDP, unemployment, stockmarket trends or any other vital piece of economic data needed by the govt and businesses. Talk about useless! Talk about redundant!
Notice how he hasn’t made ONE PREDICTION about 2010 on his own website, but instead issues a steady stream of arrogant “advice” about this policy prescription (ETS please) or that govt policy (no Qld asset sales!). Perhaps making economic predictions is beneath him, but base advocacy of socialism isn’t. Or perhaps he’s too gutless to make them, exposing himself to the reality that his Keynesian theories are useless outside the Dalek-infested world of tenured academia.
For an economist to be afraid (or be incapable) of making real world economic predictions – now that’s true economic Karma!
As quoted from Jim Sinclair’s website:
The Austrian School’s 7 Commandments:
The Austrian free-market economists use common sense principles:
1. You cannot spend your way out of a recession.
2. You cannot regulate the economy into oblivion and expect it to function.
3. You cannot tax people and businesses to the point of near slavery and expect them to keep producing.
4. You cannot create an abundance of money out of thin air without making all that paper worthless.
5. The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever.
6. You cannot live beyond your means indefinitely.
7. The economy must actually produce something others are willing to buy.
I myself would add an additional 3 Commandments, to get to the obligatory 10:
8. Every government bureaucrat should keep the following motto in mind when attempting to influence the economy: “First, do no harm!”
9. Central bank-supported fractional reserve banking is an economically distorting, ethically questionable activity. In particular, no government should ever do anything to save any bank from the full consequences of a bank run, no matter what the short-term consequences.
10. Gold is God’s money.