In an economic reality where those in charge of central
banks around the world are akin to little kids running around a park
frantically blowing bubbles, it is often hard to spot what is real and what
isn’t; what is the true worth of certain assets given today’s scenario. The policy du jour is excess liquidity, i.e.,
unprecedented devaluation, coming from all dams (central banks) emptying out
their seemingly never-ending reservoirs (printing press) of fiat money and
raising the water (price) levels little by little as this river (liquidity, no
pun intended) flows through all towns and cities, with tributaries running into
all sorts of sectors until it dumps out into the great oceans (world markets),
effectively raising global averages.
Enter bitcoin, a ‘cryptocurrency’ developed by someone using
the pseudonym, “Satoshi Nakamoto” got the world’s attention in 2009 as a potential
alternative to the current system of government created fiat currencies. Given the recent extreme rise in popularity,
bitcoins have become the center of attention and the media’s darling as its
valuation soars higher and higher against the dollar, euros, et al. Many ‘experts’ are calling for higher prices,
the very same analysts that predicted markets and housing would continue
upwards unimpeded in 2007.
Other cryptocurrencies such as Litecoin have been created,
spun off from bitcoin itself now serve as a less expensive substitute with an
easier point of entry as many ‘investors’ (speculators) have been effectively
priced out of bitcoins due to their current valuation. This could be analogous to the ratio between
gold and silver, silver being the poor man’s gold; Litecoin may be the poor
digital man’s bitcoin.
This alternative form of exchange is indeed innovative and
offers many a way out of their fiat currency malaise. Cryptocurrencies can be used as vehicles for wealthy
individuals looking to place their holdings elsewhere to evade onerous
government regulations and even taxation.
A fine endeavor indeed as taxation run to its logical end is nothing
more than [legalized] theft. Moreover,
as more outlets accept this form of payment for their products by consumers a
broader market develops encouraging its use and diminishing the need to hold
onto other ‘fiduciary media.’
As an open source peer-to-peer electronic money and payment
network, it uses what is called cryptography to secure its transactions, hence
the title ‘cryptocurrency.’ Below is a
brief description of its process directly from Wikipedia:
“Digitally signed payment messages are broadcast to and
verified by a decentralized network of computers all over the world. Specialized computers use a proof-of-work
system to prevent people from copying and spending the same bitcoin multiple
times, a problem for digital currencies known as double-spending. The operators of these computers, known as
“miners,” are rewarded with transaction fees and newly minted bitcoins.
Bitcoins are stored by associating them with cryptographically
generated addresses. These may be stored
on web services, on local hardware PCs and mobile devices, or on paper print
outs. A collection of bitcoin addresses
is known as a wallet. Thefts of bitcoins
from web services and online wallet services have been covered in the media,
prompting assertions that the safest way to store bitcoins is in a paper wallet
generated by the owner on an uncompromised computer.”
Essentially the system itself differs only in its
decentralization. In today’s system one
could reword the above to say:
“Digitally created currencies are broadcast to and verified
by a centralized network of central banks all over the world. Specialized printers use a proof-of-work
system to prevent counterfeiting, or using the same bills multiple times over
without government sanction. The
operators of this network, known as “commercial banks,” are rewarded with
transaction fees and newly printed fiat.
Fiat is stored within given central and commercial bank
accounts in several different digital or physical addresses. These may be store in digital banking
services, local authorized branches, or on ‘paper’ print outs. A collection of these print outs can be found
in a wallet. Thefts of dollars from
[investment] banks, government taxation, and central bank devaluation have not
been (accurately) covered by the media, prompting assertions that the safest way
to store fiat is in a pillow or under an uncompromised mattress.”
Bitcoin has been blamed for usage in underground markets
involving illegal drugs among other things, also no different than the
immensity of such exchanges conducted in dollars or other currencies. However, as aforementioned, it has slowly
garnered more support by legitimate businesses and its use as a medium of
exchange is increasingly being solidified, although composing only a small
percentage of the global market place.
It is still a ‘vehicle’ relegated to speculators due to its rather still
infant stage of development. Many are
still unaware of its inner workings, much less of how to use it as a mode of
What is really quixotic about this new digital creation is
that it does not require, rather it does not have a central authority
determining its next step or course. In
essence, it retains no driver behind its algorithmic steering wheel as far as
it is known. It has been set on
autopilot by its purported creator and disseminated to the masses of computer
savvy users for its promulgation and ultimately adopted by the sundry businesses
now accepting it. In these days of so
much revolutionary talks and ideas of libertarianism, limited
keeping the tentacles of the bureaucracy out of our daily lives and finances,
this presents a very attractive solution for many. It is the romantic modern ideal of a
classical liberal global free market gold standard.
However, is such a statement too provocative and too soon for
this rather immature ‘currency?’ A
veritable cornucopia of online forums and threads have popped up and are solely
dedicated to tips and tricks, know-hows, and other topics relating to this new
form of currency. Young adults always
easily persuaded by such new ideas and eagerly wanting to be early adopters are
devoting their time into learning more and more and getting involved in this
new wave of ‘money.’ Everyone in the
digital world, the media, and now even Wall St. is apparently talking about
bitcoin. This is reminiscent of the
recent bubbles experienced by all, more recently in the housing market where
even college students were remarking about how they planned to purchase or flip
homes, home depot and its big box competitors popped up along communities
throughout the United States just like the above mentioned dedicated
websites. Could this just be a temporary
rush into something, fueling what can already be alluded to a bubble in its
early stages? Perhaps it is one of the
many channels into which all of this new excess liquidity is being funneled into
at this time. It is hard to tell due to
the intricacies involved.
Considering its nebulous activities, bitcoin could also be a
ruse and turn out to be the 21st century equivalent of the Tulip
Mania in the Dutch golden age. It could
also have been the tool of a central authority looking to thwart markets their
way and establish a new equilibrium favoring their currency, essential a
financial coup d'etat yet to be unmasked.
All distant possibilities aside, this wave could go on as it has not yet
crashed on the nearest reality shore, or so it seems. Bitcoin could continue to rise into
unexpected territories, as analysts have recently said, upwards of $98,500. Much remains to be seen in this still speculation
laden alternative. Should this truly be
the first taste of a free market oriented and provided alternative to the fiat
monetary system in which all are imprisoned with no way out at the moment, then
may it run its course and be a pioneering and turning event in favor of a
re-establishment of freedom of exchange unencumbered by a select few, “a gang
of thieves writ large” (Murray Rothbard) manipulating prices by setting desired
interest rates in accordance with what is necessary to maintain the [statist]
In this vlog I succinctly cover the importance of a pocket square to bring some life into what could otherwise just be another bland jacket lost in a sea of suits in the business world or in any fancy occasion and even a casual event.
Thanks for watching as always and remember to follow me on IG and Twitter @DavidKishere
In a world teeming with state interventions every where one looks, it is amazing to see how the free market continues its march unabated towards creative solutions treading through the heavily canopied forest of government growth. Much like the lowly conifer trying to find uncharted territory where it will not be usurped by the preeminence of angiosperms, the market is always looking for room to flourish into a healthy retreat far away from the intermingled gov't branches which block out the sun of opportunity.
Along comes a company called Kickstarter, Inc. To describe its primary function I will briefly summarize it. Anyone with an idea - entrepreneurial in nature - can apply for a spot in its website by following its guidelines. This enables the individual to formulate a page describing the purpose of their creation or project and providing detailed information on it. People who visit the site are free to look at any of these postings and donate or 'back' a specific project that is to their liking or if they see it as a potential success. Each project usually offers several layers or categories of backers, from the lowest dollar amount to the highest. Depending upon the level of donation by a backer, the project owner provides certain incentives as a thank you. These incentives may range from a simple written appreciation of your support, one of its products to be shipped to you upon launch or even perhaps a stake in the project. Once meeting a certain goal of a particular 'funding amount' the entrepreneur is tasked with putting his plan into motion. Here, he or she is responsible for maintaining timely updates about its progress to backers. In a nutshell, this is Kickstarter.
As great as the service that this website offers is, imagine for a moment how this could be applied in a grander scale. In a society sans central planning, without the involuntary redistribution of money (see taxation) to be allocated for specific projects which must go through loads of bureaucratic filters (see gov't) before it reaches the planning table and is actually put into action, I see the aforementioned as a modern voluntary alternative.
Nowadays, money must be "raised" through taxes and apportioned for a specific budget catered for a particular district in order to see a bridge be built, or a road re-paved. The process offered by Kickstarter would effectively end these boondoggles that end up costing much more than forecasted leaving taxpayers on the hook for even more money.
Sticking to the subject of bridges, instead of them going 'nowhere' as most make-work programs seem to do; bridges would indeed be built based upon the demand of that particular locale. A specific budget would be set aside that must be met prior to construction taking place. Should enough be raised to meet this goal by backers that reside within the surrounding areas, the bridge would be built based upon pure market demand and not artificially and arbitrarily by a congressman or senator looking to be re-elected by 'creating [temporary] jobs' within the local economy. Money would not be wasted ex-ante and backers would only be charged if the amount necessary was achieved, otherwise the quantity donated by each individual would be returned. Likewise, the project could be proposed once more with a smaller budget that may find a more willing audience that would be more likely to help fund it. Such trial and error is the essence of market function, proposals that are not within the needs of a community would certainly be met with failure and those within the right scope would be rewarded with success.
One of the best descriptions and simplistic adaptation of the division of labor is found in one simple essay. In "I, Pencil" Leonard Read captures the dynamism of the market in doing whatever is necessary to meet demands. The coming together of thousands if not millions of individuals to act together freely, unbeknownst to them, each with their own little bit of focused knowledge and expertise, to create a final product that so many superciliously take for granted. Why is it that anything really requires a centralized function known as government in order to operate? Instead of natural flow, this results in an arbitrarily forced congruence with regard to specific processes that may otherwise not have come into being, or perhaps another more efficient version of itself would be in existence sans this consolidated mandate. True harmonious [sans government] collaboration is easily found, all one has to do is look around for the smallest things and realize the amazing voluntary cooperation of free thinking individuals that went into the making of any particular object. The sundry industries participating in the creative force and manifesting the energies necessary to supply the world with what it needs (nature -> commodities -> capital -> labor -> product).
As much as one cannot explain a tree's creation and composition in fine detail - a task relegated only to a supreme intelligence and initial cause of all things - one cannot also explain the process of something as basic as a pencil in detail. Not one mind has the wherewithal to do so. This is the very myopic view that many inherit naturally when attempting to view a world where functions such as defense, first-class mail delivery, road construction and etc is done without governmental edict. One mind cannot grasp the enormity behind these services, however, seeing as if simple objects require the coming together of many individuals, why is it that this same principle cannot be applied as a broad stroke of the brush when it comes to everything provided to us via public entities? I submit that it certainly can. Now go and indulge your brain and read this wonderful essay at Mises.org: http://mises.org/daily/4736
"If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. … There was a Twilight Zoneepisode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time, we don't need it, we need it in order to get some fiscal stimulus."
- Paul Krugman (Nobel Prize Economist) on CNN's "Fareed Zakaria GPS", August 21, 2011
Yes, the above is an actual statement which made its way out of a Nobel Prize winning economist. The Keynesian economic logic or view that in a world wrought with war time policies, economies have no other choice but to ramp themselves up in order to keep up with what seems to be an incessant demand for the war machine as its violent appetite for more resources seems to never be sated.
To put this contemporaneously, let us imagine for a moment that the movie pacific rim transplants its fictional story arc into reality. WARNING: Spoilers. The world is invaded by extra-dimensional creatures of giant proportions (Kaijus) which wreak havoc on large centers of population. Conventional weaponry proved to be ineffective in taking down these beasts due to them lacking the necessary firepower to quickly quell these 'Kaijus.'
As a response to this inefficiency after the first victory and realizing that more of these monstrous beasts would appear intermittently throughout this [unconventional] 'war' the governments of all nations around the world got together and re-purposed several factories, engaged in ubiquitous research and development which required quite a bit of new resources in order to come up with the right weaponry to combat these invaders; thus the 'Jaeger' program came into being.
Giant mechanized units controlled by two pilots connected neurologically to the machine's AI in order to guide it through its battles was the solution presented and proven effective in subsequent Kaiju encounters. However, as the Kaiju grew in strength some of the older generation Jaegers began to be destroyed. This quick global demoralization led to new generations of Jaegers up until all nations decided to once again divert precious resources to the building of sea walls to protect the major coastal cities around the area in the pacific ocean where the extra dimensional rift was found.
In the above briefly described scenario, in Krugman's and many other modern economists' views, this would be a boon for employment and production for economies around the world partaking in the entire division of labor involved in the entire process of manufacturing a Jaeger and its maintenance. Let us quickly put this fallacious argument to rest.
First of all, large cities endured the massive destruction that these encounters often brought. Instead of a boon to the construction industry this put further strain in the economy as more resources had to be once again utilized in rebuilding efforts and repairs. In essence, less resources were available than before. Moreover, factories, business, or homes that were destroyed during these attacks put a halt to whatever productive measures those entities may have been engaged in at that moment. The factory no longer will be producing (less goods available overall), the business stops its service, and the home owner(s) or resident(s) may lose their shirts entirely, thus decreasing the pool of capital that was hitherto in existence.
Secondly, factories were re-tooled and re-purposed to become dedicated manufacturing and maintenance facilities for Jaegers. Ergo, whatever private goods that particular factory was producing before was no longer its final output. Therefore, the amount of available consumer goods diminished causing a strain the the supply line which would result in an increase in prices as demand remained constant and [forced] rationing would more than likely be the most "rational" (pardon the word pun) action that the governments would undertake (as it did during the world wars). The same would be applicable to commodity goods being diverted to these efforts such as metals, fuel, et al. This would indubitably lead to a lower standard of living for all involved.
Thirdly, the precious resources diverted to the war effort were no longer being put towards the betterment of private society and voluntary exchange. Instead it was being sent directly into the line of fire to their potential destruction. This action would erase those carefully acquired resources from existence and what could have otherwise been used for an increase in the standard of living is instead squandered.
Lastly, more people would be employed by the public sector (or indirectly by private contract bidding) to work for these purposes. Again, the labor pool would be constrained and working towards the ultimate resulting destruction of their own efforts. This would be a wasteful job with non productive qualities. These otherwise valuable professions which would certainly be involved in this vast project could have instead been focusing on private research for the betterment of society.
Now under the circumstances presented in this film, the Jaegers were borne out of immediate necessity and perhaps their existence justified. This does not however cause the erroneous axiom that war brings prosperity to be true. Even though humanity may have been able to protect itself and posterity in the movie, the economic consequences would still ring true regardless, but it is after all just a movie and not reality. If such actions were truly beneficiary for sundry economies globally, wouldn't it just make sense economically to create a fake war scenario (or alien invasion) and start engaging in the aforementioned actions en masse in order to jump-start the current economic malaise into full production? The simple answer; no.
Interesting events in Detroit are beginning to take place, the community has been getting together for their own mutual benefit of improving the conditions of their surroundings through charities, church groups, and groups of volunteers sharing their own precious time to mow lawns, keep vacant homes boarded up to bar criminal squatters, private security has become more prevalent in an effort to maintain order in neighborhoods, new police cars and ambulances were purchased by wealthy charities, but unfortunately the latter two items will be provided to the city government who has been progressively decreasing basic services because of a lack of funds.
However, these will also probably end up being driven by volunteers if things continue on their current path. After all, why provide a municipal government that has been an utter failure with fresh resources taken out of private funds voluntarily? Why reward failure? Why give to an entity that has failed to meet its very basic function (protection)? An entity which would rather try and keep its authoritative hand by removing a simple bench voluntarily built by a community at a local bus stop so that commuters would have a place to sit and relax while waiting for their ride because it does not comply with local transportation department standards.
An agency which uses expropriated private property through taxation to fund itself will engage in an action that will remove a simple wooden bench put together by those very tax payers. It is akin to taking money out of my wallet to pay to remove something I have done (paid for privately and voluntarily) that does not meet your expectations. Indeed it is correct to ponder, how can a public protection agency which monopolizes this sector be responsible for private property when in order for it to function is must expropriate from that very property (its owners) which it has been tasked to protect. A bigger contradiction cannot exist.
Global government demonstration premium priced into Oil, devalued units of Dollars chasing less goods.
Oil is the very substance which allows the many gears of the global economy to continue to function. Add a premium to this important element and watch the grinding commence.
As oil reaches higher prices per barrel, it is apparent that there cannot be an economic recovery. This type of price rise is 'bullish' some talking heads on television will say; nay, it isn't. Crude oil being an input cost is crucial for any business operation, manufacturing operation, mining, etc. As its price rises, all labor becomes more expensive and a higher share of capital has to be diverted to this most important factor of production. Investment in other areas will be temporarily put off until the price of oil lowers once again, which it may or it may not. At this juncture any form of prediction is akin to saying the next roll of the dice will land on a specific number combination. Which in all honesty may be easier to do considering the number of variables involved vis-a-vis the current manipulated market, but I digress...
These input costs will eventually work their way down to the consumer level, i.e., lower order goods. However, as oil is a precious commodity for business, so it is for the consumer. After all, transportation is a necessity for most activities in the United States and as it is the case with most, it requires this all too important commodity to make it happen. As more income which would have otherwise been used elsewhere is spent on gasoline (a derivative of oil), less is available for other expenses such as products and goods from the very businesses suffering from increased input costs.
Moreover, just in time inventories which depend upon nation wide logistics of simultaneous truck movements is also powered by this aforementioned derivative of the commodity discussed; oil.
In an almost self fulfilling prophecy that comes full circle, the business sells less goods and therefore fails to meet its revenue targets. Ultimately in a real scenario, which in this [temporarily] centrally planned economy need-not-apply, this would cause a downward pressure in companies' stock prices which would be reflective of the very price rise in oil deemed 'bullish' by some.
There is nothing at all bullish about added pressure on the lives of those in a fragile economy consisting of ever increasing volatility, uncertainty, and a schizophrenic Fed yelling "Polo!" before markets can even say "Marco!"
Detroit files for bankruptcy. In a world where the market could operate freely without being hampered by the tentacle of government, this scenario could present people with an opportunity that has heretofore not been seen in a really long time.
Imagine the city's government itself having to be disbanded in droves and liquidating its assets on the open [international] markets at heavily discounted prices with extremely low to zero tax rates. Depending upon demand, certain areas may be snatched up by corporations and individuals looking to create their own vision of what a revitalized Detroit may look like. This may lead to an overall cleansing of the city's current decrepit condition and make way for new structures, perhaps parks, private natural trails, new company buildings and factories. Those areas not at first snatched up would slowly gain in value and at some point obtain a buyer as its surroundings reawakened and flourished with activity by private demand. The city itself could become a roadmap for how to achieve success and be a competitive city state rivaling entities such as San Marino, Monaco, Hong Kong (Formerly), and Singapore. Since it would be composed of minimal to no public administrative monopolizing entity, it could petition itself to secede from the state and subsequently the union. Granted this is nothing but a silly illusory scenario, but imagine what sort of message and chain reaction would reverberate throughout the rest of these United States and globally. Perhaps a migration of job-seekers and productive entrepreneurial individuals would make their way there and as other locations saw its success, policies would be set in place to emulate it.
Just a quick thought I had concerning the 28 days later like situation going on in Detroit city. This isn't by any means a serious discussion...
Q: Are You Printing Money?
Bernanke: Not Literally
Of course he is not printing money, since he cannot replicate gold with his printers. However, he is indubitably massively digitizing and printing fiat into perpetuity.
If the Fed were to tighten policy, the economy "would tank"
Should they turn the spigots off and seal the continuous flow of liquidity onto an ever filling up sink with a clogged drain (water pun need not apply), it is obvious that this temporary illusory 'recovery' would back track completely as the support levels for the financial markets, real estate, and bonds would be crushed downward and a major [temporary] deflationary correction would take place (a much needed one). This would result in heavier subsequent intervention by the Fed which would ultimately unleash inflationary madness in order to maintain the status quo.
It seems that the true definition of inflation has been
subject to change in recent times when focusing in the economic reaction to its
action. The original meaning of the word
still suffices as a definition that places it in accordance with its monetary
results; “to blow into,” “to puff-up.”
However as stated above, inflation’s true origin is forgotten and it is
conventionally recognized only as a rise in the price of goods in any given
market. Ergo, it is apparent that the
true malicious purpose which inflation serves from time immemorial is seldom
understood and is a subject relegated to esotericism. This is why it is important that inflation’s
point of origin and its subsequent myriad forms be defined and explained.
First of all, one must understand how inflation occurs. Returning to its original definition of to
blow into or puff up; inflation does just that to the monetary supply of a
nation. It expands it typically under
the auspice of some central planning authority, or bank which by has been
granted such rights by government decree.
This decree deems the bank’s notes legal tender for all debts to be paid
and therefore a monopoly on money is effectively created.
Central banks expand the nation’s money supply through a few
methods. Primarily as it is the case
with Federal Reserve today, it purchases assets on the market through
quantitative easing. It currently does
so by its asset buying program to the tune of $85 billion per month. Should an asset be directly purchased from a
bank, then this new money is added to its reserves and the stage is then set
for multiple credit expansion if it is loaned out due to the fractional reserve
banking system. However, the preferred
asset of central banks are typically government securities. This serves as an insurance for government
that demand will continue to exist for its own securities. Ergo, allowing for new expenditures in an
ever growing debt. By issuing new bonds,
governments quickly inflate the money supply.
Since the central bank is ordered to purchase these securities, a new [supported]
price floor is set, thereby causing an influx of treasury bonds into the bank
subsequently leading to [seeming] perpetual inflation, i.e., expansion of the
monetary supply or base.
Via the asset purchasing program effectively called QE,
direct injections of liquidity are made into the open markets leading to a
state of Permanent Open Market Operations (POMO) which is quickly evidenced by
prior bail out programs and other injections such as operation twist and former
quantitative easing(s). When the market attempts to contract and
cleanse itself of malinvestments created by artificial inflationary booms, the
aforementioned action helps to instill a sense of security -although temporary
- in the economy for it is being supported by the central bank. This drives equity markets upwards due to
increased demand as both institutional and retail investors clamor to ride this
wave of easy money into higher returns, effectively chasing ever higher yields
since savings provides zero returns due to extremely low interest rates set by
the central bank. This becomes a vicious
cycle of further buying that may temporarily take the market to new heights
nominally without any real fundamental improvement done to the economy. Consequently, there is a collective sigh of
relief during this illusion known as the wealth effect whereby portfolios, 401k
plans, pension plans rise creating a false sense of security that the economic
scenario has once again restored itself to previous norms.
In what could only be called a financial pincer movement by
central banks to prevent deflationary busts - which are only market corrections
- not only are liquidity injections the remedy du jour, but interest rates are
arbitrarily and artificially lowered to encourage more spending. The lower interest rates signal that there
are more funds readily available for investment than there actually is, this is
an attempt at manipulating the economy back into a ‘boom’ period of frivolity
in spending savings that it does not actually have. This repeated action only exacerbates the
issue concluding in another deeper contraction at a later point in time
requiring further stimuli by central banks.
This pattern has been recently seen in the dotcom bubble of 1999 and the
real estate bubble of the 2000s where by lower rates drove new credit directly
into these sectors of the economy creating anomalies which later needed to be
Moreover, as new currency is artificially created, more
money is chasing the same amount of goods leading to a devaluation in its
purchasing power and an increase in the price of goods. Due to its [current] global reserve status,
the US is in a position to theoretically expand its monetary base without much
visible [immediate] effect to its populace since its inflation is concurrently
exported to other nations needing Dollars to purchase necessary imports for
their own economies, such as oil (petrodollar).
Demand is therefore constant for these new Federal Reserve notes. As the United States continuously inflates
its supply of money so must other nations lest they become less competitive in
the export and import market.
Theoretically, debasing a country’s currency makes its
exports more attractive as they become cheaper in the broader global market
which consequently leads to a temporarily higher trade surplus or narrower
trade deficit depending upon the current account balance the country has with
regard to its imports and exports.
However, this a fallacious theory due to the fact that imports
themselves become more expensive leading to a lowered standard of living
domestically as those goods become gradually less affordable since purchasing
power is diminished. Imported raw
materials from other nations will also rise in price due to debasement leading
to higher input costs which eventually trickle down to the consumer good’s
final price. This action results in an
increased cost of living that progressively chips away at the ability to
maintain current standards within the nation.
However, given the velocity of money the above consequences
may take a long time to be felt throughout the remainder of the domestic
economy. If the banks which received
fresh supplies of reserves do not loan these out and the credit market remains
stagnant and in a contraction, the monetary base has indeed expanded, but since
the money has not been put into circulation there is no resulting price
inflation. Until such time, inflation’s
negative effect is not immediately felt.
When the money does start taking its effect on the economy
and input costs rise they are quickly seen in the supermarket shelves by
consumers. Fortunately for central
planners, these prices have been rather slow to rise and to the untrained eye
they are not as obvious to spot. Another
manner with which producers can conceal inflation is by decreasing the size of
the product’s container or lessen the amount of its contents, e.g., less chips
in a bag, smaller rolls of toilet paper, etc.
This is in fact a form of indirect price inflation.
Furthermore, as the natural interest rate of the market
wants to return itself to a level reflective of daily activity, more pressure
is placed upon the artificially low rates set into place by the central
bank. This result is seen in higher
rates for mortgages and other forms of loans.
Those that suffer specifically are the individuals which are exposed to
adjustable rates which consists of a large portion of households in the United
States. Even a small percentile increase
can be the difference of tens of thousands of dollars in interest over the life
of the loan. This decreases the amount
of monthly disposable income that would otherwise be put to use for home
necessities or savings as the mortgage payment rises. Once again this results in a gradual lower
standard of living since a higher percentage of income is put towards the
payment of the loan.
Although governments release official inflation figures,
these are often fudged statistics that quell public sentiment and quiets those
that do not see the rise in prices of goods reflective of the published
data. Often these figures are also
backward looking statistics of a basket of goods (of the government’s choosing)
to represent the past year or quarter price increases. Taking alternative calculations utilized by
the government in prior decades, percentages for inflation rise when compared
to the current method of data collection and calculation. It is sometimes better to look to commodity
prices as forward looking inflation statistics.
It is important to remember that the prices of these goods aren’t
rising, but rather the value of the currency in which they are denominated is
decreasing leading to the need of more units to acquire the same amount
previously requiring less units.
One consideration and often rare caveat to inflation is the
pace with which technology allows for further improvements in the daily lives
of humans. These can often be of a big
enough positive change which acts as a shield against rising prices. Newer processes which hasten otherwise clumsy
and old manufacturing assembly lines cause input costs to decrease resulting in
a potentially less expensive price for a lower order consumer good. However, should inflation be critical enough
then the aforementioned would not be successful in halting or lowering overall
prices of a specific good whi
ch its process has been marginally improved by
innovative ideas and inventions.
Therefore, it can be rightfully concluded that no matter in
which form inflation arrives it is detrimental to the health of any
economy. It is indeed an additional tax
on the earnings of a nation’s labor force which diminishes their purchasing
power whereby standards of living go down as a result. This fleecing of the populace has been
occurring in grand style since the Federal Reserve Act created the central bank
which further consolidated what was once a decentralized banking system which
kept a better check on inflationary pressure.
With a central bank observing monopoly rights over the creation of
money, it serves as a tool for officials to grant subsidies to their
constituency in exchange for votes and it finances all programs which result in
government largess that would be impossible in a truly free banking system
based upon a commodity standard. Warfare
and welfare would be relegated to exorbitant direct tax increases instead of inflation
on the population and the effects of such policies would be heavily felt upon
citizens resulting in a much more limited legislative body constrained by the
true consent of its people.
Economic depression, the elixir to inflationary expansion. A communal error; recent economic busts It is evident that in a market environment where all participants are free to operate without any intervention from an authority and regulatory monopoly, i.e., government, some entrepreneurs will succeed in their endeavors while others will fail and have to either retire to other ventures or rebuild. Perhaps these failures may directly alert and guide those individuals to a more stable position in the economy with regard to a fixed income and a relative "guarantee" by obtaining employment within an established business, which was of course created by one of these successful entrepreneurs.
A natural separation between the winners and losers, to put it crudely, will be created by self-realization on the part of all involved in an economy. It must be made clear however that being an individual who is gainfully employed does not make him or her a less capable productive member of society. Rather, it asserts the fact that he/she is valued by his peers and even more so by the enterprise which invested (hired) him or her and is remunerating said person for their labor. However, it does also assert that as it was previously mentioned that this is their place in society. They've voluntarily accepted this position whether by past failures in attempting to put their own ideas to work or because they know that they will be best utilized and subconsciously most productive to the economy in this manner.
This is all important when contemplating how it is possible that during recent market busts, so many individuals failed when taking the same path. How is it possible that so many credible and successful business men are suddenly presented with an error in their own forecasting at the same time when up until this certain moment hefty profits were being earned consistently? What have they 'all' missed 'en masse?' Whatever happened to the theory that where one fails others will always succeed, that perhaps some may fail together, but never in tandem and in a large cluster. How is it that so many enterprises can go bust at the same time?
The only way this cohesive failure occurs is when manipulation which masks the true price mechanism of free exchanges is artificially introduced.
"Under conditions of a free competition...the market is...dependent upon supply and demand...there could [not] develop a disproportionality in the production of goods, which could draw in the whole economic system...such a disproportionality can arise only when, at some decisive point, the price structure does not base itself upon the play of only free competition, so that some arbitrary influence becomes possible." - Siegfried Budge, 1925.
In essence, banks (commercial and central banks, e.g., PBOC, ECB, Federal Reserve, BoE, BoJ, et al) create new bank notes (credit expansion) and proceed to loan them out to businesses (or individuals). This fresh supply of funds creates the illusion that the amount of money available for investment has increased and thus lowers the interest rate (this process also occurs naturally when individual's time preferences are lower; preferring later satisfaction to present satisfaction).
Due to this apparent inflation (increase in supply), businessmen believe that there has truly been a significant increase in the supply of funds available for investment. This sends a misleading signal to the market that investments must be made in long term projects or processes of production. This stimulates a shift in investment from the lower order goods (closer to the consumer) to higher order goods (far from the consumer), or from consumer goods to capital goods.
Such a shift would be sustainable had it occurred through the natural mechanism of time preferences, for the funds would be readily available due to real savings. However, in this example the market signaling interest rate was lowered due to direct price manipulation through bank credit expansion (inflation). Eventually this will create a trickle-down effect and factors of production such as rents, wages, and interest will also rise. Consequently, people will rush to spend this new money in the form of higher nominal rates thus bidding up prices. Demand then shifts back to the lower order goods and the above mentioned businessmen will find their investments to have been in vain, what they had thought to be the true demand from their entrepreneurial customers turned to be nothing but a farce. Old proportions (time preferences) will be reestablished and all of this malinvestment has to be liquidated.
In short, this cluster of failures were nothing but a result of the tampering with the free market rate of interest through the aforementioned artificial expansion of credit.
The "boom" which is created by this injection of liquidity or credit into the economy, thus distorting signals is the period where wasteful investments occurs, erroneous ventures are undertaken, and resources misallocated no longer serving consumers properly. What is then termed by the media as the "crisis" is the period when the old more natural proportions return to reestablish themselves. The "recession or depression" is then a necessary event in order to cleanse the market of all these malinvestments and [re]allocate resources to their most efficient means. Some existent ventures which were the product of the boom and subsequently failed, would be broken apart, liquidated and acquired by others to be put to other uses that reflect true demand by the economy (bail outs prevent this and perpetuate failure temporarily).
It is important then to recognize the depression or contraction period as the actual true "recovery" where the economy once again tries to rid itself of misallocations and reasserts its optimum efficiency in servicing consumers. Instead of it being seen as a negative occurrence, depressions are the necessary return of the economy to normal.
"The boom, then, 'requires' a "bust." – Murray N. Rothbard
In this short video I document what transpired during the short severe economic downturn which took place post WWI largess in the United States and what President Harding did to quickly combat it, or rather did not do, which helped hasten a natural recovery sans intervention. Thanks for watching!
Watches can be expensive items and they are usually not bought as often as articles of clothing. They often do not require rotation since one or two timepieces can typically go well with any outfit. However, if you're on a budget or want to enhance your watch game a bit, watch (see what I did here?) my below quick vlog:
Thanks for watching! Feel free to leave a comment below.
Haphazard lacing is never aesthetic. Just because running laces through the holes all the way to the top ad hoc tightens the shoe enough to stay on your foot does not mean it is done correctly. Especially on classic shoes such as long wing tips. Please do yourself a favor and follow the below quick vlog to learn how to properly lace up that dress shoe for a clean result; enjoy:
Thanks for following and watching! Comments are always welcome! You may follow me on twitter or instagram @DavidKishere. Have a great weekend.
Many men don't know how to properly fold their sleeves up on their shirts. They typically follow the generic method of folding one layer over the other at a time. There is another approach that will result in a much more aesthetic look. Please see my quick vlog below; enjoy:
The 800lbs. central Floridian gorilla has entered the room in the form of a gigantic make works project which will re-shape the entire I-4 corridor through the main thoroughfares of Metro Orlando and its core. This concrete splendor, or rather, the great flat wall of Florida (Great Wall of China redux) is an infrastructure project aimed at reducing the heavy congestion which costs hundreds of millions a year to the city's flow. This flow being ultimately one of traffic which leads then to the flow of commerce as well. Call it a metaphorical financial funnel that bottlenecks what would otherwise be an uninterrupted stream of economic activity.
Ergo, this monstrosity will hypothetically help Orlando's ranking as the 19th most heavily congested city in the nation go down a few places. The cost of all of this, a forecasted 2 Billion dollars. This rather obese municipal bill being footed by the FDOT (Florida Department of Transportation; i.e., taxpayers) in conjunction with the FHA (Federal Highway Administration; i.e., taxpayers) will include 56 new bridges, 68 replacements, 13 modifications, 15 major exchanges, and 1 new pedestrian crossing in a span of 21.11 miles.
While impressive in scope and size, this inflated phallic metaphor of a project, is nevertheless a government boondoggle. Orlando's version of the 'Hoover Dam.' Frederic Bastiat's famous essay titled 'That which is seen, and that which is not seen' explains this quite simply.
What is heir apparent to most conventional spectators is that the project will indeed improve the life of Orlandoans, will create new jobs, and potentially revitalize areas surrounding this to-be-improved corridor of I-4. However, what is not entirely known is the future. Since current economic forecasting makes astrology look like a certain science, whatever projected benefits listed may not come to fruition. After all, there are no guarantees in anything.
Moreover, the amount of resources taken from the private sector to be re-directed to this immense public sector vacuum will create a shortage of available hands for any other true demand oriented projects. Funds that could otherwise be reallocated to the local private sector to voluntarily decide on investments based upon business acumen and local experience with regard to return is sequestered temporarily (perhaps indefinitely?) and held up in this blackhol--uhm, project. Furthermore, it is commonly known that any public sector endeavor usually ends up costing much more than the original estimates. This also places further concern on the feasibility regarding the completion and result of such a long lead time project.
This undertaking runs concomitantly with SunRail; another local government initiative to revitalize the town and provide for better public transportation in an otherwise car-oriented city (original municipal planning need not apply of course). Together, these two projects will combine to suck a lot of already dried up funds in the local economy. Do not get lost in the current illusion that things are coming back to 'normal' courtesy of never ending 'quantitative easing(s)' to infinity and beyond by uncle Ben. This again will turn out to be another temporary minor boom resulting in a bust as all previous ones.
It is hard not to get caught up as a member of the local community in the grandiosity of all of this. As a local resident, one wants to see the city shine and become a better version of itself in order to attract more business and people, thus enhancing opportunities for all. However, pragmatic judgment must reign supreme in the nebulous nature of feelings.
Therefore, to return to the original purpose, what is seen is that many jobs will be created, roads will be widened, and the final result will be a tangible product. However, what is not seen is how many other jobs (savings, opportunities, etc.) would have otherwise been created had these funds, capital goods, and resources not been diverted to this public work? How much more of it would not have been available sans such an undertaking? Further, should not the view of demand be considered as well? Absent government monopoly of modes of transportation, wouldn't the need of consumers dictate the necessity of such a project? If there was true demand for these types of products, would the market not already have presented solutions to these problems? I submit that it would have. Then one can only be left to ponder if in the end, these ventures will truly pay off without such real market based (oriented) mechanisms. Or will they be under utilized by residents and consumers? Ergo, leaving the taxpayers to foot the maintenance fees and bills with increased confiscation through higher local taxes or the city will have no option but to sell more bonds (paper) to finance operations.
I'll leave these questions and thoughts to the consideration of the reader. In the meantime, please enjoy the 80s like vibe of the project video posted to youtube:
Although this is typically a blog about fashion related subjects, I figured I'd divert a bit into a different realm. This time I want to talk technology and my great experience thus far with the new Nokia Lumia 920 Windows 8 Phone. First, I should clarify that I am in no way being paid or forced to write this by Bill Gates holding a gun to my head while Steve Ballmer shoots the video, but just felt like it was worth my time.
I originally graduated from a dumb phone to a smart phone a while back when I upgraded to an Apple iPhone 4. I believe this was the climax of AAPL. Steve Jobs was still at the helm with his ridiculous business and marketing acumen attracting the masses to his products. Aside from the initial antenna glitches which made the first batch of the phone famous, it was a sturdy piece of technology that lent much credibility to the prowess and quality of Apple and its designs.
However, with the passing of Jobs an era came to an end. Although, in my opinion the train hasn't halted completely. The steam that kept it chugging at almost 4g speeds was entirely fueled by Job's creative genius. Now that train, although at 4g speeds, is consistently slowing down as its reserve steam left over by the former company's leader wanes. As of late, other trains in adjacent tracks pick up speed and one that is apparently blazing by the Apple train is the Samsung Bullet train. I firmly believe Samsung will soon take over that top spot and sit at the throne of the technology sector for some time. Their products are very resilient and unlike apple, they are always innovating. They are not stuck to a business model of releasing new technology once or twice per year with specifications that are semi-obsolete come launch time. This is clearly being played out right before our eyes via each respective company's individual share prices.
In order to quickly summarize the aforementioned, AAPL's steam is failing with the iPhone 5. Production output from their manufacturers had to be decreased due to lower demand for these units. The phone itself is a solid piece of technology, and this is by no means an article to bash Apple's abilities, but just to point out facts of current market trends. For their sake, I hope that their new phones and models are a bit different than what they have been putting out as of late. Luckily, they still have a lead on the tablet market, but who knows how long this will last. It is a shame that they've had to engage in monopolistic actions with regard to patent acquisitions and other nefarious means, effectively cornering the IP market.
Not only has Samsung been doing very well for itself, other lesser known brands have been reinvigorated and reinventing themselves in this ultra competitive mobile technology market. With the release of the newer and more stable platform of the Windows 8 operating system for cell-phones, a new player has entered the market that carries with it a heavy footprint. Microsoft, even though it is now considered a monolithic entity from the popularization of desktops in the mid to late 90s, is trying to destroy that stigma and advance forth as a big player in this ever more dynamic market.
Nokia partnered with Microsoft and has come out recently with some very respectable options and models. I won't go through the veritable cornucopia of other models and options because I want to focus here on one phone. The Nokia Lumia 920.
I decided to put down the apple cart and pick up the 8-ball and run with it. After being severely disappointed with the specs and upgrades announced for the iPhone 5, I made my decision to switch to something brand new. I had used Android before as well, but wasn't entirely sold on it. After all, each OS has their pros and cons, but I wanted to also be an early adopter. Therefore, I plunged into the small niche percentile of Windows 8 users.
Fast forward to a few months of ownership and I must say that I am very pleased with it. The phone is solid, the hardware is great, the camera is of superb quality, and Windows 8 OS is very respectable. Sure, as any new product has its certain shortcomings, so does this one. I won't outline them for the sake of not turning this into a finely combed technology article, so I'll stick to my exclusive experience and leave the rest for Engadget and Gizmodo, respectively.
The system is smooth, the UI is beautiful, the colors are crisp, the live-tile is still a technology in its youth, but I believe that once it reaches adulthood, it will be a revolutionary way of viewing a listing of applications on your mobile screen and PC as well. This truly gives the phone's screen a hitherto never before seen life. The operating system is showing you current updates without notifications like the others do. Instead of a cemetery with application tombs spread around and arranged in neat folders akin to app-catacombs, Windows 8 with live-tile technology raises those corpses from their dead icon app caskets and allows their spirit to live on by showing what their inner essence is projecting outward. Granted still at its infancy and paradoxically at geriatric speeds, once cemented and coded for ultimate use, this will be an amazing method of losing oneself in a screen that is just teeming with life, looking like an overhead shot of Pudong during business hours with information exchanges just zooming past each tile.
Anyway, I'm done waxing poetic here with regard to its UI. Moving on to the available apps, this is one of the key factors where much is left to be desired. I do miss Pandora, Instagram, and other key applications which have become a staple in almost every smart phone user's screen. However, not to be left behind, many of the big name apps are starting to recognize that Windows 8 is here to stay and is trying to become a big player as well. These application businesses know that the source funding this product is one of behemoth-like proportions. Ergo, they are quickly developing their own versions that support Windows 8.
I will list below some key-apps that come to mind that are fun, educational, and entertaining that I highly recommend be downloaded by new users or those that aren't aware of them yet. Aside from Twitter (which some third party twitter apps actually perform better), Facebook and Foursquare (same issue), there are others that really stand out:
-Metrotube - An amazing app that makes YouTube surfing a great experience. The layout is super user friendly and its features outshine those of the standard YouTube app.
-Bloomberg - For those like me that get their daily high from checking current market prices, this app looks about 10x better than it does on Apple's OS and android. It is extremely dynamic and animated and easy to navigate as well. Live Tile allows for its main headlines to be projected on its icon skin on the main screen.
-Flixter - Also a great version that is better than its other OS counterparts is available for Windows 8. Live Tile allows new releases (movies) to be displayed on the home icon on the main screen. The layout is easy to use and fun to navigate through as well.
-WeatherFlow - Putting the standard weather channel app to shame, this is hands down the best app for weather that I have seen in the Windows 8 market thus far. Accurate forecasts are provided for any location around the globe and can be set as the lock screen background which will also display a picture in accordance with the state that the current weather presents itself, e.g; cloudy - cloudy background, sunny - sunshine as wallpaper, etc...
-Cocktail Flow - A beautiful app for those aspiring mixologists. This displays a large inventory of a variety of drinks that one can make at home, along with colorful pictures of ingredients, and pictures uploaded from users that have tried their hand at putting together some of these tasty concoctions. This app will definitely put a damper on that 6 month AA chip you were aiming for; downloader beware.
-Baconit - If you enjoy the shenanigans at reddit, then this app is for you. A great layout that if it was any more user friendly it would be your BFF. Feeds upload very fast and smoothly, you can navigate through the maze of posts without needing a guide or a map. This is pure entertainment. One down-side is that it has no live tile functionality, but considering some of the NSFW content from reddit, it may make sense to not enable this tool.
-Fantasia Painter - This is like having your own mobile version of photoshop. The learning curve is a bit tight, but once past it, it is a straight road leading to a post-air brushed better looking you.
-StarChart - Another beautiful app that will make anyone want to become a pseudo astronomer. As you calibrate it, the star chart map appears and surrounds you in a virtual space that makes the user feel like a dim white dwarf in the middle of grandiosity. A definite astronogasm.
That about sums up the brief selection of apps I wanted to outline here. The one downside is that most of them are not free, although some have a free option available with ads.
Overall, the Lumia 920 is a great phone and the Windows 8 Mobile platform is going to be a solid player in this market. I could be wrong, but this type of technology is not one to pass up, their live-tile niche is a one leg up on the aesthetics game that tends to speak louder than specs for most users looking for the cosmetic table top appeal instead of what is under the hood.