True Money Supply

http://mises.org/content/nofed/chart.aspx

Ludwig von Mises quote

"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

– Ludwig von Mises

Ludwig von Mises quote

I've reference this quote before, but I just wanted to remind a few folks for emphasis, given recent world currency events.

There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

– Ludwig von Mises

Austrian School of Economics

The Austrian School of Economics is gaining popularity because it accurately predicts market cycles, despite suppression by mainstream Keynesian economists and politicians, who desire political and financial power.

http://www.thenewamerican.com/index.php/economy/economics-mainmenu-44/3323-austrian-economics-rising

Austrian school economists understand the common-sense principle that nations – like people – build wealth from savings and investment and not from borrowing and spending.

Arguing that big-government arguments for intervention in the marketplace would not really replace laissez-faire chaos, von Mises’ logical critique of state planning was withering against socialism and fascism/Keynesianism. Von Mises wrote in Human Action, “The alternative is not plan or no plan. The question is whose planning? Should each member of society plan for himself, or should a benevolent government alone plan for them all? The issue is freedom versus government omnipotence.” Von Mises explains that “laissez faire does not mean: Let soulless mechanical forces operate. It means: Let each individual choose how he wants to cooperate in the social division of labor; let the consumers determine what the entrepreneurs should produce. Planning means: Let the government alone choose and enforce its rulings by the apparatus of coercion and compulsion.”

Ludwig von Mises on credit expansions

Ludwig von Mises from the Austrian School of Economics has the following thesis on credit expansions (and busts):

The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

Economics and health care

Thanks to Dick for finding this analysis on economics, capitalism, socialism, and health care.

http://www.financialsense.com/stormwatch/geo/analysis.html

Sovereign Alchemy Will Fail

http://matterhornassetmanagement.com/2010/02/11/sovereign-alchemy-will-fail/

When we look at the world economy today, wherever we turn we see a wall of risk. And sadly this is an insurmountable wall with risks that are totally unprecedented in history. There has never before been a potentially catastrophic combination of so many virtually bankrupt major sovereign states (US, UK, Spain, Italy Greece, Japan and many more) and a financial system which is bankrupt but is temporarily kept alive with phoney valuations and unlimited money printing. But governments will soon realise that they are not alchemists who can turn printed paper into gold. The consequences of the global financial crisis are potentially catastrophic.

As the Austrian economist von Mises said: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.”

In our view, governments like the US and the UK and many others will not abandon further credit expansion. They are committed to printing increasing amounts of worthless paper money in order to finance the growing deficits and the rotten financial system. Therefore there is no chance of Quantitative Easing ending but instead it will accelerate in 2010 and after. The consequence of this will be a hyperinflationary depression in many countries due to many currencies becoming worthless. No economy in the world, including China, will avoid this severe economic downturn which is likely to have a major impact on the world economy for many, many years to come.

Austrian School of Economics

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

- Ludwig von Mises

Another doomsday prediction

This forecast is from Matterhorn Asset Management, a Swiss-based wealth management firm. Obviously, Egon von Greyerz ia a proponent of the Austrian School of Economics, and a disciple of Ludwig von Mises.

http://matterhornassetmanagement.com/2009/12/07/gold-is-not-going-up-paper-money-is-going-down/

von Mises vs. Keynes

John Maynard Keynes has more followers (inside the US government and its banking cartel), and has an economic theory named after him. Ludwig von Mises is largely forgotten by the mainstream financial press, even though his track record of predictions has been much better. A disciple of the Austrian School of Economics, von Mises was a libertarian who predicted in the 1920's that government intervention created distortions in credit and financial markets, causing asset bubbles that would eventually burst. Does that sound familiar?

In any case, his prediction came true in 1929, yet he was marginalized yet again with the emergence of Keynes in 1936, who espoused printing currency and running deficits in order to escape the throes of a Great Depression. Again, does that sound familiar?

Many from the intelligentsia mistakenly believe we are in the midst of a war of ideaologies, i.e., GOP vs. Democrats, conservatives vs. liberals, etc. In regards to financial policies, it's partially true, but not completely, because Administrations and legislators from both sides of the aisle have run up enormous budget deficits, while resorting to printing currency to fund the deficits. They have borrowed trillions from foreign sovereign funds, and contributed to the insolvency of entitlement programs such as Social Security and Medicare. We are simply a country that spends money we don't have.

In short, our government's fiscal and monetary policies have been reckless and irresponsible. President Obama and Congress are following the wrong playbook.

http://online.wsj.com/article/SB10001424052748704471504574443600711779692.html (you may need a subscription to read this article)

The SEC

This is an excerpt from Chris Wood, of Casey Research:

I would say that rather than worry about it right now, we should first go ahead and abolish the SEC.

Of course this won’t happen until we witness a complete collapse of our current economic system as we know it. But let me briefly lay out part of the case for why Congress should do it. And please note that in the interest of time, I will be borrowing heavily from Graeme B. Littler’s essay titled, of course, “Abolish the SEC.”

* The SEC profits from its blunders. As Ludwig von Mises observed, “government regulation generates unforeseen problems, which excuses more regulation, which causes still more unforeseen problems.” The SEC has a history of growing and profiting from crises. Most recently, a guy by the name of Bernie Madoff comes to mind. Although the SEC missed uncovering Madoff’s $50 billion Ponzi scheme for a decade (despite constant warnings from outsiders), the commission now says it needs more money to prevent schemes like that in the future. In FY 2008, the SEC was authorized to spend $906 million, by the way.

* The SEC erects barriers to competition. Thanks to the SEC, it costs a lot more than it otherwise would to raise capital by issuing stock. The process requires a mountain of paperwork, CPAs, and lawyers. Many small companies, which don’t have the resources to negotiate this bureaucratic maze, can’t raise new money and grow. Large, established firms do just fine, however, and like the lessened competition.

* The SEC is anti-shareholder. By hampering corporate “raiders,” the SEC defends the interests of corporate management over the shareholders’. Raiders seek to make a profit by buying out a firm’s owners, firing inefficient managers, and replacing them with people who will make the company more profitable. The SEC requires “raiders” to file public reports after they acquire a small percentage of a company’s stock. These filings are designed to tip off management about possible tender offers, thus giving them plenty of time to plot a takeover defense to secure their jobs at shareholder expense.

It’s true that the securities industry is not problem-free. And it never will be. But it would function better without the SEC.