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At the end of a credit cycle what counts is gold

  • 24 Settembre 2018
  • by Blogger

There have been many negative developments in the ten years following the Lehman crisis. Logically, you would expect the authorities would have been rethinking monetary and fiscal policies to ensure that the errors that led up to the Lehman crisis are not repeated. You would be wrong, both for the current credit cycle and for the next. The problem is one of not knowing who is responsible. And this is an economic theory matter.

Modern economists insist that the state should have primacy over free markets. They argue that free markets have shown a track record of periodic booms and slumps, which can only be alleviated by the state. This belief has evolved from the Keynesians’ original proposition that the state should run a balanced budget over the business cycle, instead of all the time. The original idea was to increase spending by running budget deficits to create money during the slump in the hope of recouping government finances later when the recovery generates surplus tax revenues. The classic economic theory was replaced by a state theory of economic planning.

Price inflation incoming

  • 22 Settembre 2018
  • by Blogger

The following news is none other than the inevitable consequence of fiat money expansionary policies. In fact, if price inflation has been temporarily tamed, in addition to the fact that it has largely remained confined to the financial sector in recent years, it has also been thanks to low-cost goods from China. It should also be remembered that the stock market boom hasn't made the majority of the population rich in spite of what some scoundrels traders impose as truth. In fact, as we read from the following report the wealth of the average family in the US has not gone anywhere despite the huge boom in equities. There is a severe problem with central banks’ fiat money: It affects income and wealth distribution, and it does so in a non-merit-based, anti-free market way. To understand this, we have to consider that if and when the quantity of money increases in an economy, the prices of different goods will be affected at different points in time and to a different degree. In other words: A rise in the quantity of money changes — and necessarily so — peoples' relative income and wealth position.

Governments epitaph: sovereign debt default

  • 19 Settembre 2018
  • by Blogger

The mountain of debt piles up because creditors are convinced that the central banks will not inflate their currency units “too much,” and debtors are convinced that central banks will not allow price deflation. They believe that the existing pile of debt will never be repaid. It cannot be repaid without shrinking the money supply, because the monetary system is based on the monetization of debt, especially government debt, by the central banks. If the government ever paid off their debts, forcing the central banks to sell their debt, the central banks would have to monetize something else as a replacement asset in the monetary base. If the banks don’t monetize debt, then they must monetize equity: stocks, real estate, or (if necessary to prevent monetary deflation) desk chairs.

How bubbles pop and how to hedge against them

  • 15 Settembre 2018
  • by Blogger

Does it make sense that bubbles have nothing to do with central banks? According to popular thinking, an asset bubble is about a large, above historical average, increase in asset prices. A price of a thing is the amount of dollars paid for it. This means that a bubble is about large, above the historical average, payment of dollars for various assets. As a rule for this to occur there must be an increase in the pool of dollars, or the pool of money. Therefore, if one were to accept the popular definition of what a bubble is one must also accept that without the expansion in the pool of money bubbles cannot emerge.

People no more regard gold as money, but fiat currencies will make change their mind

  • 12 Settembre 2018
  • by Blogger

Government manipulation of the monetary system is inefficient. This interference with consumer sovereignty over money through contract law must produce a misallocation of money, meaning capital. The present system will produce booms and busts in the capital markets and the consumer markets. Austrian economists stand on the sidelines and yell “stop” every time the central bank interferes with interest rates by increasing or decreasing the supply of “high-powered money” — mainly its holdings of government debt certificates.

"Engines", economics and free markets

  • 08 Settembre 2018
  • by Blogger

The economy is not an entity or organization with a will of its own. Instead, it is a self-organizing process of individuals and entities interacting with each other that involves constant adjustment by its participants. Individuals are constantly altering their needs and wants and adjusting to changing prices and choices. Entrepreneurs are continually adjusting to consumer preferences, and attempting to anticipate demand, in a world offering near unlimited options and combinations with which to create goods and services, but scarce resources. So why the desire by central planners to reduce the economy to a cold, faceless machine with a purpose of its own?

Why Austrian school economists consider gold as money

  • 01 Settembre 2018
  • by Blogger

Among professional economists, support of a gold coin standard is limited mainly to members of the Austrian School, which has been a tiny minority in the profession. There are a few supply-side economists who call for a government-run monetary system comprised mostly of credit money, which in turn is created by a government-licensed monopoly, the commercial banking system. Behind this monopoly stands another government-licensed monopoly, the central bank. The number of academic economists who believe that there should be laws against fractional reserve banking — that banks should not be allowed to loan out money long term that has been deposited short term, with a guarantee that the depositor can withdraw his money at any time — is probably under fifty, and may be under a dozen.

Exposing fiat money fraud can lead you to jail

  • 28 Agosto 2018
  • by Blogger

Sometimes, Americans get the silly idea that the words “legal tender” on American coins mean legal tender. Then they try this stunt. They pay workers in silver coins at face value. This reduces the workers’ income tax bracket.

Why do people accept paper fiat money?

  • 24 Agosto 2018
  • by Blogger

Originally, paper money was not regarded as money but just as a representative of money, which was gold. Various paper certificates were claims on gold stored with the banks. Holders of paper certificates could convert them into gold whenever it was deemed necessary. Since people found it more convenient to use paper certificates to exchange for goods and services, these certificates come to be regarded as money.

 

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