Some dunderhead writing for Forbes has got it all figured out: Yellen is wrong about the reasons (and therefore the fixes) for our current record levels of wealth inequality. Sy Harding is ready and willing to tell us the real reason for the problems though. According to him, it's because the losers are "not taking the time to learn more about what they’re doing when they invest the money they earn in those careers".
Please give me a second to recover myself. I am literally cringing at the abject stupidity of this talking pie hole and wondering how they ever let him have such a high podium to speak from. A medicinal back hand is mos def required for this fool, not necessarily for his benefit but rather to avoid polluting the minds of a new generation of Marks and Patsies who actually think Forbes has anything of value to offer.
Sy Harding is off base in so many ways that they are difficult to count. He suggests that if people would just take the time to bone up on their basic investing (market timing) skills that they would avoid buying tops and selling bottoms. Everyone, it seems according to Sy, can make money in the markets, the wellspring of perpetual prolific profitability! Yes, says Sy, everyone can become rich if they only take the time to become a better market timer!
Again, the basic disrespect for math, logic and history shown by this asshat just boils my blood because to the unsuspecting reader who is trying to do the right thing, it actually sounds kind of true. After all, hard work should produce rewards, right? This is the American way; work smarter, yeah? But if that is not enough to compete then work harder and smarter! So anyone who lost their @$$es in the pump and dump needs to just buck up and realize that their real problem is them. They have not done enough to learn how to time the ebb and flow of the market.
Well folks, a taller pile of $hit has never been passed off as a 3 course meal so here is the truth of the matter from someone who has studied what is going on not as an investor but rather as someone who debugs deep technical (high tech) problems day in and day out. In order to be successful in the tech debug business you have to be able to comprehend technical details and then to fit all the hard data together into a picture which fits these facts. There is no room for emotion or shotgunning here. Also, true understanding of root cause of most problems can generally be boiled down to a sentence or two. IF you are listing many, many items as being "the cause" then you are in fact listing symptoms, not the root cause.
For example, if someone presents themselves to medical authority with fever, abdominal pain, bleeding from the eyes, vomiting and passing out, the competent medical practitioner does not list these things as root cause. They are symptoms, not root cause. And likewise the doctor does not tell the patient, "your problem is that you vomit too much. Please stop that and everything will be OK". Instead, the medical professional will take all of the symptoms together and then come up with a root cause diagnosis which fits all of the symptoms. Only then can a proper course of treatment be followed.
After many, many years of study I have boiled root cause of the Economic Ebola down to the simple fact that the US is running a global debt Ponzi aided by the fraudulent money supply consisting of fiat currency and more importantly fractional reserve banking. The truth doesn't get any more simple or clear than this. This root cause diagnosis completely covers every symptom we are seeing and many of these symptoms were predicted in these pages well in advance of their occurrence.
A debt Ponzi is a type of pyramid scheme. Sy Harding suggests that it is somehow possible for everyone to get out of a pyramid scheme whole. That would be one thing if Sy would call it a Ponzi scheme. It could help a lot of people stay whole simply by not playing. Simply by storing their long term retirement wealth in gold and silver bullion coins. But Sy does not say this. He wants people to more carefully study the marketing collateral provided for our consumption by the Ponzi operators. Better knowing their message will certainly lead to prolific, perpetual prosperity for all people, right?
WRONG!! "Investing" in paper assets is just gambling. There are winners and there are losers. There is no such thing as "everybody wins" in gambling and the odds will always remain in favor of the house no matter how carefully you study the rules of the games and the Terms and Conditions of the casino. The only winning move is not to play. Work hard, save real money outside of the system (gold and silver in your own hands) and don't worry about the volatility because at the end of the day gold is money and everything else is not.
I have likened the markets and the fraudulent money supply to a casino on many occasions. The history of serial defaulter and casino operator (in that order!) Donald Trump should be instructive in this analogy because his history is the same as that of paper money over time and across cultures. The US has defaulted on its promises several times in only 200 years. And that list is specific to credit defaults such that it failed to list the largest default in the history of man to date which was the default of gold convertibility into the USD back in 1971.
I'm sorry, dear reader. Not everyone can win in the financial markets. For every winner there is a loser or set of losers in the same amount. The markets are a mechanism for wealth transfer from people who think they know something after reading content-free articles like that from Sy Harding to people who actually know what game is being played. Would it have helped everyone who just lost 20% in NFLX literally overnight to have better understood the rules? And even if everyone read my prescient blog post on NFLX, could everyone have won? NO! It is a mathematical impossibility for everyone to win at gambling.
IF gambling is causing social issues, the only real solution is to get rid of institutional support for it. Stop forcing everyone into the casino. The only way to do that is to get rid of the dishonest pump and dump money supply. Stop luring good people into the corrupt casino so that they can instead save for their retirements in something that does not fluctuate in value in locked step with government manipulations.
As Ron Paul says, audit the fed and then end it. Then create an honest money supply which is backed by gold. I like the idea of actually embedding gold into the specie. That is honest money. But don't forget to shut down the fraudulent scam of fractional reserve banking because it is the real scam multiplier on top of a fraudulent money supply.
Captain,
ReplyDeleteMish sometimes confuses me in regards to his thoughts on how banks operate.
In one post he'll agree with folks like Steve Keen who thoroughly debunk the whole Money Multiplier model: (http://globaleconomicanalysis.blogspot.com/2009/12/fictional-reserve-lending-and-myth-of.html)
Then in other posts he'll do a 180 from Keen and agree with folks like Krugman (and the rest of the neoclassicals) in defense of the loanable funds model in which banks are just a pass through of funds from the patient (savers) to the impatient (borrowers). That model had some legs under a fixed exchange rate system, but we haven't been under that system for over 4 decades. He'll use analogies that compare US currency to a commodity.
The banks are required to keep less than %1 of your deposit in the form of reserves for liquidity purposes, not for the purpose of making loans.
Loans create deposits, deposits do not create loans.
Mish says "If I give money to a bank and it promises my money will be available on demand, and the next moment it lends a large portion of it out, my property rights are clearly violated." It doesn't work like that. Your currency would be available on demand. Banks don't need the electric pulses from your deposit to increase the electric pulses that comprise the crediting of the account of the new loan of someone else.
If you have $100,000.00 in a bank checking account, would you ever be denied the ability to do a wire transfer to another bank, or write a check against that balance? If you wanted to make a withdrawal of your $100,000.00 in cash, then you might be delayed if they don't have the vault cash on hand (most don't). But wire transfer, check, or cashiers check? You wouldn't be constrained.
During the 2008 crisis there were dozens of big banks that were not only illiquid, but insolvent as well. Did anyone with a JPM bank account have their checks bounced back (assuming that they had the money in their deposit accounts)? Wire transfer or debit card requests denied? Were there banking holidays for deposit customers?
You know me well enough to know that I don't endorse the current banking system and arrangements (that's putting it lightly), but at the same time I think it's important to discuss/debate on how it really works at an operational level.
And for the record, couldn't agree more that Forbes is consistently horrible and usually full of shit. =)
Cheers! Hope you're having a great weekend.
Chance
I think that terminology is getting in the way of understanding. Mish says "Not only are there no excess reserves, there are essentially no reserves to speak of at all. Indeed, bank reserves are completely "fictional".
ReplyDeleteI agree with this. There used to be reserves when we had a gold standard but all the rules were suspended regarding them because they were bad for "growth" (credit growth that is).
A similar thing was done with the specie. We used to have commodity money but over time it was replaced with counterfeit currency.
So once you understand that point of his, what's the use of talking about money multiplier? There is no money, it's all multiplier, it's all debt.
I think this is Mish's view.
In truth, since federal reserve notes are backed by nothing, Mish is technically correct: there are no reserves at all. All of it is fake.
Reserves are supposed to be a form of restraint on greed and leverage. We are in this mess because there is no real money in the system, thus no reserves, thus no restraints on massive astronomical leverage.
Regarding the the availability of money, mish is correct. But the dollar isn't money, it's debt. So you are correct too. The problem comes when people confuse the two and use language and models which were developed for money when they talk about fiat currency which is clearly not money. It is an IOU. Real money is payment in full on the spot end of story. Fiat currency is a promise to pay, and even that which is promised is undefined. It really is like saying, "come fix my plumbing, mr. plumber and I will give you this paper promise to pay". If he says "pay what?" there is no answer except "I don't know, but in practice (for now) it will be whatever you can trade it for to the next greater fool".
"f you have $100,000.00 in a bank checking account, would you ever be denied the ability to do a wire transfer to another bank, or write a check against that balance?"
YES!! And this is going to happen right here in the good old USA before this collapse is done. It's called capital controls my friend.
"During the 2008 crisis there were..."
Chance, you have to listen to Bernanke brag about what happened in 2008 being larger than any even during the great crash of 29-32 and the great depression. It took a global coordinated central bank effort to spin the plate for a few more years. The US debt nearly doubled in that time frame and the monetary base when from 800bn to 4.3 tn. In other words, they contained the explosion of bad debt onto government balance sheets but it did not go away. It will reappear as a lethal problem in the future and when that happens there will be no saving it. That will not stop them from trying and YES they will stop you from transferring big sums of money and they will limit ATM withdrawals to some small amount each day.
This happens all over the world all the time, we are just a larger model of the same corrupt scam. Our turn will come and when it does it will move with blinding speed, like an Economic Ebola.
I personally believe that it is nothing more than a distraction to talk about the details too much because the tendrils of the scam run deep and wide. The system is kept purposefully complex. So you can talk about it all day long without really ever knowing the truth of the matter. Does anyone really know the mind of the con man so well that each thought can be reviewed and commented upon? Again, the only thing that most people need to know is that fake money is a confidence game and that rising interest rates signal the loss of confidence in the game. It really is as simple as that.
Captain,
ReplyDeleteFirst I just want to say that I really enjoy Mish's blog and agree with most of his views. It's an indispensable resource and I have you to thank for bringing it to my attention.
I do have some criticisms though in that you have someone who studies currency to an extent (me) bringing up some potential discrepancies and then needing someone else to step in with a deep knowledge of currency (you) to say "I think this is what Mish really means..."
For folks that don't really follow currency, the way he presents some of his views might be seen as reinforcing neoclassical fallacies as opposed to tearing those structures/paradigms down.
You're right, for over 4 decades the net US currency that we have in our wallets and in our bank accounts is just currency units that the federal government has spent into the economy and not taxed back yet (government deficit\debt).
Like you said, the reserves are fictional. US currency isn't "real" per se. It's real in the same sense that information is real, because in the end, that's what it boils down to. Information on a complex spreadsheet that the Fed controls.
It's just a pet peeve of mine when I see Austrians arguing to a wide audience the perils of the US currency system, and using inapplicable neoclassical loanable funds models. Their arguments would be so much more relevant and would be so much more salient if they explained how US currency really operated.
An example would be guys like Gary North who a few years ago would throw up the hockey stick chart of the excess reserves (ECRSENS) from FRED and declared that we were at the precipice of massive inflation (not just in assets but also general price levels) because the banks are going to flood the economy with those reserves and of course here comes the money multiplier to ramp that up exponentially.
Hyperinflation calls like that based on a flawed understanding of how the currency system operates functionally, don't help the cause of non-neoclassical economics or the cause of winning a bigger segment of the population over to sound money principles. Plus now you've got a bunch of smug neoclassicals saying things like "It's 5 years later... where is that hyperinflation again?"
As you said, talking about the details too much can be a distraction. I just think that in some situations, knowing some of those details/minutiae can help us in terms of expecting things like hyperinflation at the right time. I don't mind being a couple of years early to the party. I don't want to be 5/10/15 years early to the party... =)
Pleasure as always,
Chance
Captain,
ReplyDeleteFirst I just want to say that I really enjoy Mish's blog and agree with most of his views. It's an indispensable resource and I have you to thank for bringing it to my attention.
I do have some criticisms though in that you have someone who studies currency to an extent (me) bringing up some potential discrepancies and then needing someone else to step in with a deep knowledge of currency (you) to say "I think this is what Mish really means..."
For folks that don't really follow currency, it could come across at times that his views are reinforcing neoclassical fallacies as opposed to tearing those structures/paradigms down.
You're right, for over 4 decades the net US currency that we have in our wallets and in our bank accounts is just currency units that the federal government has spent into the economy and not taxed back yet (government deficit\debt).
Like you said, the reserves are fictional. US currency isn't "real" per se. It's real in the same sense that information is real, because in the end, that's what it boils down to. Information on a complex spreadsheet that the Fed controls.
It's just a pet peeve of mine when I see Austrians arguing to a wide audience the perils of the US currency system, and using inapplicable neoclassical loanable funds models. Their arguments would be so much more relevant and would be so much more salient if they explained how US currency really operated.
An example would be guys like Gary North who a few years ago would throw up the hockey stick chart of the excess reserves (ECRSENS) from FRED and declared that we were at the precipice of massive inflation (not just in assets but also general price levels) because the banks are going to flood the economy with those reserves and of course here comes the money multiplier to ramp that up exponentially.
Hyperinflation calls like that based on a flawed understanding of how the currency system operates functionally, don't help the cause of non-neoclassical economics or the cause of winning a bigger segment of the population over to sound money principles. Plus now you've got a bunch of smug neoclassicals saying things like "It's 5 years later... where is that hyperinflation again?"
As you said, talking about the details too much can be a distraction. I just think that in some situations, knowing some of those details/minutiae can help us in terms of expecting things like hyperinflation at the right time. I don't mind being a couple of years early to the party. I don't want to be 5/10/15 years early to the party... =)
Pleasure as always,
Chance
If you want a proper explanation of Mish's comments you should comment on his blog or email him directly with the challenge. He has a strong ego and generally does take the time to address those who accuse him of flip flopping or talking out of both sides of his mouth.
ReplyDeleteHaving said that, this stuff is made overly complex to the point where small wording nuances can change its meaning significantly. Mish has been right on so many things for years that for me it is like disagreeing with the EWI wave count: I can do it if I want but it is high risk.
I also want to make the point that, since the specie is already of zero intrinsic value, it is not likely just more printing that will cause massive or hyperinflation in the US. It will be some political issue such as an attempted coup or an assassination wherein a power vacuum is formed and not filled properly in the eyes of the herd, etc. But something will eventually happen that the herd takes as the Minsky Moment for the dollar. Just not quite ready for that yet IMO. The working model will be my supernova model: first massive debt deflation and then a reversal into massive or even hyperinflation/crackup boom.
Captain,
ReplyDeleteI've commented on Mish's blog multiple times along with others in regards to clarifying some of his positions. My original post here was in large part a cut and paste of various comments that I've left on his site. I'm not sure if I've emailed him directly, I'll have to check my sent mail archives!
Appreciate your time,
Chance