You are currently viewing the aggregator for the Distributed Republic reader blogs. You can surf to any author's blog by clicking on the link at the bottom of one of his/her posts. If you wish to participate, feel free to register (at the top of the right sidebar) and start blogging.

The main page of the blog can be found here.

Obama Doesn't Speak Austrian, Only Keynesian.

I don't see why Michelle Malkin is making such a big deal about Obama saying he doesn't speak Austrian. I thought everyone knew he only speaks Keynesian, and not because his father is from Kenya either.


Social Security. It's Insolvent Now.

Tom Blumen writes an article on how Social Security is likely to be insolvent six years earlier than expected.

Are you kidding me? It's insolvent now like any Ponzi scheme. Just because Madoff made payments to investors doesn't mean his operation was solvent at any point. It became insolvent the minute it used new investor money to pay old investors. That's exactly what Social Security does.


The True Meaning of The Pitchfork

Obama is now quoted as saying, "My administration,“is the only thing between you and the pitchforks" to AIG officials giving out bonuses.

Obama, let me clue you into the true meaning of Christmas the pitchfork.

This Pitchforks for You, Politician
Me and My Pitchfork - Feb 28, 2009
Picture taken by Arthur B. with my camera.

My pitchfork was aimed at the politicians and their appointees.

Politicians are the ones that interfered in free markets to cause this economic crisis. They’re the ones throwing my money in the air around their rich friends. They are the ones who attempted central monetary planning with the Fed, and GSEs.

Obama, Bush, Clinton, Paulson, Geithner, Bernarke, Franks, Raines, and most importantly Greenspan, all need the business end of a pitchfork.

Update: I had used a publicly posted picture that had no copyright notice without crediting the photographer, Eugene Gannon. He had intended for his picture to be shared but wanted credit. I hadn't thought he would care and I should have asked first. I added a credit yesterday but apparently he didn't notice and posted another comment where he still seemed upset. So I have now replaced the photo with one taken by my camera. You can see Eugene Gannon's Photo at his site.

While I was at it I'll also add some sexy protest babes who are way better looking than me. My photo but anyone who wants can use it. I don't care. Ask me if you want full resolution. You can crop out the Frankenstein monster that way if you want.

I didn't take many pictures but I had to get a picture of the poster on the left. It was the best one I saw.

Protest Babes


Get With the Program Krugman

Paul Krugman is finally, very late in the game, criticizing just some of the economic madness that has been going on for the past twenty years. He points this out in his article, More on the bank plan. He does so for all the wrong reasons.

Krugman states in his article, “A bank, broadly defined, is any institution that borrows short and lends long.”

Get with the program Krugman. This is the bust phase of an Austrian business cycle. A bust caused by the fact that you can't borrow short and lend long without causing a mismatch between the plans of the lenders and the borrowers.

Eventually the short term plans of the lenders cannot be serviced by the borrowers. The lenders want their money back to spend but it's all tied up. They thought they had more savings than they actually did because fractional reserve acts as a monetary multiplier. There are more short deposits than actual liquidity to serve the accounts.

If your definition of a bank implicitly includes that then you should be against banks. However, banks don't need to do that. They could match maturities. They don't because they can cheat the system that way, with the help of the government. It allows them to leverage on the backs of savers without them being fully aware of the game. It’s implicit fraud.

You know that Austrian Economics is the way to go. This Keynesian/Monetarist Frankenstein hybrid you mainstream economists, yes YOU, have been running the country on is going to end up destroying us.

You don't give a sh_t about the poor unless you are willing to swallow your pride, admit you've been wrong all these years, and join the good guys. Join those who are against the reckless governmental destruction of the past twenty years.

I've known this mess was coming down from at least 1996. My coworkers and I have been speculating on when this sham economy was going to come down around our feet since at least then. Fractional reserve monetary inflation coupled with margin account leverage was not the answer to prosperity during Clinton. Reflating the fractional reserve bubble with absurdly low interest rates was not the answer during Bush. Now printing fiat money will not help correct the fractional reserve monetary deflation problem.

Money is NOT goods. Inflating the money supply is not the way to prosperity. Government spending is consumption not production. This “plan” is idiotic and will fail, as would your plan. You say time for a Swedish solution? Get real. That would just set us on the path to socialism, and further destruction of the economy. Nationalization of industry is NOT the way to go.

People are going to starve if this keeps up. Not just here but all over the world. We've had central monetary planning and it doesn't work just as Austrian Economics predicts. That's science. Nationalized banks aren’t going to help. This whole mess was caused by government sponsored entities in the first place. The Fed, Fannie and Freddy, etc.

Setting interest rates below market is a price control. Like all price controls it causes producers to produce less and consumers to consume more. For interest rates that means low savings (the producers) and high borrowing (the consumers). So that's economics 101 in ANY school of economics. Shame on Alan Greenspan for not following those metrics and shutting down the monetary pumps. Shame on the Fed and Bernarke who was instrumental in helping Greenspan ruin the economy.

Furthermore, with low interest rates, Austrian economics predicts that there will be asset price inflation in goods that are far away from production and companies that produce them. That describes internet companies and housing to a tee. Can anyone say Internet bubble? Can anyone say housing bubble?

It also predicts, according to theory, that commodity prices will skyrocket as the extra money injected into long term goals bids up the prices of those first. They go up highest because interest rates are more important to the costs of production of things that are far away from consumption.

That's exactly what happened confirming the theory.

Furthermore Austrian theory predicts that commodity prices will collapse as fractional reserve monetary inflation contracts at the end of an expansionary period. It happened confirming the theory.

Plus it predicts that there will be trade deficits as the fractional reserve (or fiat) inflation proceeds and other countries still accept the currency. This causes a shift of production to foreign countries according to Austrian theory. This is exactly as it happened. Shame on Greenspan for causing this. Shame on him for adding the additional incentives that caused capital flight. Incentives like the Mexican and the Asian Crisis bailouts.

It also predicts that under a metallic standard such monetary inflation will cause an outflow of the backing assets. In the case of the US during and before Nixon it was gold. We had below market interest rates back then too. Plus a currency pegged above gold. So the gold flowed out. Being the idiot he was Nixon took the final steps to get us off gold and made us have a completely fiat currency.

What is our backing asset now that we are on fiat currency? It's our ability to pay. So taxpayer debt is the backing asset to our currency. Increasing governmental debt is equivalent to the draining of gold now days. This whole time the central bank has been watching as our coffers have been drained. A sure sign that monetary policy was too loose.

Austrian Economics now predicts massive inflation. When that event happens will you finally believe in proper theory?

Austrian Economics also predicts that you can't do the kind of quantitative predictions that other economists are so fond of. You have to do the qualitative types of predictions as I did above. No mainstream economists saw this coming with their physics based mathematical models. Just as Austrian theory predicts.

Every step of the way the Austrians have been right and the Keynesian and Monetarists have been wrong.

Yet after Keynesianism just failed twice, once with the internet bubble, and now with the housing bubble, now Obama is going to try the same stupid “solutions” again. Lower interest rates, print money, and spend. This is Bush and Clinton on steroids. Who the hell is this guy listening too?

If he were smart he'd look me up and fire his entire cabinet.

You know the next government steps. Inflation will harm old people, people who will lose their jobs, orphans, everyone in the US trying to buy foreign trade goods. So the incredibly stupid politicians we have will try price controls which will further cripple the economy.

Krugman, Greenspan, Paulson, Bernarke, you are all economic ignoramuses. Try applying scientific principles to economics. All scientific principles like self consistency. Stop believing the fantasies of Keynesianism a self contradictory system with all its "paradoxes". They are not paradoxes to be accepted they are contradictions that falsify the theory.

You call your column, "The Conscience of a Liberal". How can you live with yourself when you know you've been wrong all these years? Do the right thing and abandon your socialist tendencies and failed economic policies.

Update: I posted this comment at Krugman's blog. It stayed up for a while. Now it is gone. This guy is as honest with his blog as Delong. That is to say totally dishonest. His comment section is a echo chamber.


Another NY Tea Party

There is going to be another NYC Tea Party held on Mar. 13 at 11:00 am near the Wall Street Bull. I work on Fridays and will not be there.


New York Tea Party

Today, Saturday the 28th, there will be a "Tea Party" protest being held in City Hall Park. That's 249 Broadway, New York, from 2:00 pm to 3:00 pm.

There will be socializing afterwards.

If you want to spot me then I'll be the guy with the faux pitchfork.

I'm fed up with these stimulus bills.


Some Republican's Don't Take the Money, or Do They?

On February 16th, Paul Begala, trying to justify the most wasteful spending bill in the history of the US wrote, in perhaps the most face punch worthy hypothetical of all time:

"Gov. Mark Sanford of South Carolina took umbrage at my writing that his approach to the economic crisis is to do nothing. I'll deal with his "ideas" in a moment, but first let me make a modest proposal:

If Republican politicians are so deeply opposed to President Obama's economic recovery plan, they should refuse to take the money. After all, if you think all that federal spending is damaging, there are easy ways to reduce it: Don't take federal money.

Gov. Sanford can lead the way. South Carolina should decline to accept any federal funds for transportation, education, health care, clean energy or any of the other ideas President Obama is advocating to fix the economy. And the rest of the GOP can follow suit."

Yeah, he essentially says, "we are going to spread the slop we expropriate from the taxpayers and if you don't like it then just back off from the trough. Oink. Oink."

His picture is in the article. Fist, smirking face, POW! Print it out. Tape it to a soft object, and punch it.

Well some Republicans have now responded, not that they have been exemplars of fiscal responsibility when in control, they at least have a guilty conscious.:

"If we were to take the unemployment reform package that they have, it would cause us to raise taxes on employment when the money runs out -- and the money will run out in a couple of years," Mississippi Gov. Haley Barbour told CNN's 'State of the Union' on Sunday."

Wow, some sanity at last. Wait a second. I read on ...

Schwarzenegger called it "a terrific package," and said he does not foresee a need for a tax hike in the future to sustain the unemployment provisions.

The fantasy lasted for maybe five seconds.

Oh, Arnie, Whatever happened to the free market, Milton Friedman, stuff? Guess you never truly understood in the first place. I know Friedman didn't. His monetarism got us into this mess, and it wasn't truly free market. Go Austrians! No not the Schwarznegger type. The other kind.

Yeah, some other republicans are mentioned as turning down the unemployment money but they don't seem to be doing so for the rest of it.

Begala was right in his estimation of Republicans that's for sure. I don't however think that makes him or the Democrats look very good. Makes them look like robbers who flung money in the mud to some groveling wino.

Isn't there some movie scene like this with some evil doer throwing change in the dirt for some hard up addict looking for a fix while giving the poor creature a humiliating tongue, or physical thrashing? Some scene where the bad guy humiliates someone also prone to vices?

No, I am not talking about Deliverance, despite the "Oink, oink, squeal like a pig". That scene more about the taxpayer.


Instruction Manual For Life

A reminder that faith based religion is not merely about community. If it were then I wouldn't have a problem with it.


I Call For McCain

Here's my reasoning. Obama has raised so much cash and has run so many ads that the American public will blame him for all the commercial interruptions during their favorite shows. Mark my words.


Poking Around the Friesian Web Site

I was poking around the Friesian web site when I came across this article that jogged my memory. The topic is criticism of Poppers philosophy of science, and in particular falsification.

To put some context to the first sentence please remember that Popper himself had already assumed and explicitly addressed the issue of "explaining away falsifying evidence".

Here we have the interesting case of an actual event that falsifies Kuhn's theory of science. I'd forgotten about it.

"Kuhn's critique contains a considerable element of truth, since people, scientists included, often do just see what they want to see, and it is possible to explain away falsifying evidence. On the other hand, anomalies are often recognized that are inconvenient to a theory, and most scientists are now aware that if the theory cannot ultimately accommodate them, then a new theory will be necessary. And then there is the Great Devonian Controversy. Once all the major geologists recognized that there was no unconformity in the sequence, and that there were plants in the lower strata, there simply was no existing theory that could accommodate the facts. Thus, we had a situation that, in Kuhnian terms, was impossible. The evidence could not be interpreted to sustain any existing theoretical views.

The situation was sometimes discussed by participants in what sound like modern terms. Thus, John Phillips, professor of geology at King's College, in London, wrote to De la Beche that his discovery of certain plant fossils, "is a fact to be introduced into the induction, not an anomaly to be frightened at" [p. 223]. Here "anomaly" would mean just what it means now: Some fact inconsistent with a received or desired theory. As "Baconians," both Phillips and De la Beche think that the appropriate theories will be produced by "induction" from a sufficient catalogue of facts. Neither Kuhn nor Popper could agree with that old "Baconian" view of theories, but Kuhn and deconstructionists cannot allow that an anomaly all by itself could potentially falsify a theory, rather than vice versa. But in the Devonian Controversy, the anomalies overthrew all the theories."


Doing My First Write In Vote

Based on watching the Obama-McCain debate and their absolute ignorance of economics I have decided that both are totally unacceptable candidates.

Ron Paul is the only candidate that is talking sense at this point. I'm writing him in.


LOL, Take That Halo Hardcore Gamers

There is an article over at Gizmodo I thought was funny and seems to have a grain of truth titled, "Scientists Find Gene That Makes You Good at Halo Also Makes You a Premature Ejaculator".

After a study of 200 Dutch men, scientists found that those with a premature ejaculation problem all had a version of a gene that controls the release of serotonin. And, unfortunately for all of you awesome Call of Duty players out there, those affected seem to "have very quick reflexes. They may be excellent at playing tennis or computer games, for example." Oh, cruel fate!

Now I understand why I lose so quickly to some of these guys. Bad news for the South Koreans also? I know, I know, South Korean gamers.


The Dupes of Fractional Reserve Banking

I had a discussion with a commenter called Midwesterner at Samizdata back in March that will give a fairly good idea of my understanding of fractional reserve banking. I thought it was a useful exercise for both Midwesterner and myself, and is one of those rare occasions on the internet where there was a changing of minds.

Midwesterner had posted a comment which included a hypothetical situation and his interpretation of it.

"Let's you and I play Monopoly™ some time and see how it works.

Lets say nine players start with 100 dollars each and all sales are done at open auction (simulates the market). Democratic vote will decide which players may engage in fractional reserve lending (simulates politics). Everybody else can only lend hard currency.

Lets say four players and I collude to engage in preferential treatment of each other. We five can use fractional reserve the other four cannot.

To keep it simple, let's say the other four colluders (in the real world, a couple of dupes would, too) all deposit their money with me and I lend it back to them. We have an initial kitty of 500 dollars (mine and their $100 starting stakes). By practicing fractional reserve lending I can actually loan them by the tenth deposit/loan cycle a total of $1785.25 (5 x $357.05) . This assumes that the player they spend the loan with turns around and deposits the money with me. So the five of us now have $1785.25 to bid against the other four players $400. We could actually have almost $1000 each if we managed to ring every last cent out of the system. By borrowing for all of our expenses and depositing all of our receipts, one can see how quickly the game would shift to the five of us with each lap around the board.

Players not in the lend/borrow/lend/borrow/.../... system have $100 each to spend. People in the system have $357.05 each to spend. Needless to say, a little collusion goes a long way. Separating the players from the dupes in this example makes the racket a little more obvious."

So what would be your answer to this and why? Do you think you would be able to give an explanation that would convence Midwesterner of your position?

Well surprisingly, I was able to convince him that in fact he was wrong, and along the way this exercise lead me to realize some things that were implicit in my beliefs but that I had never explicitly derived.

This was a series of comments exchanged on fractional reserve banking that also touched on anti-empiricism in Austrian Economics.

Turns out the only dupes in the system were those holding the bank accounts and accepting the bank notes and not the non-participants.

Here's my first salvo:

"Midwesterner,

Their are restrictions on who can collude which prevents the collusion from being as easy as you make it out.

First off they have $500 between them. No matter how they lend the money out to each other there is still only $500.

When they borrow they must have access to the possibility of buying an asset with a revenue stream in order to service any loan they may take out to buy that asset. However in your example there are no assets with revenue streams.

Even if there were if any back and forth lending and purchasing occurs betwen the 5 colluders then the net benefit to them is zero.

The non-colluders could always decide to lend to each other also. So there is no asymmetry of fairness there. Nice player a could lend to nice player b who happens to buy a performing asset with the money. He then provides a with part of his revenue stream to service the interest on the loan. Player a no longer has the money he lent to b. He only has a promise to pay it back based on the revenue stream. So a has less cash on hand. As long as a understands this and doesn't think he can just retract the loan at any time then there is no problem.

Any "collusion" that occurs between the five colluders requires one of the colluders to lend and one to borrow with a net gain in cash of zero. Of course colluder c1 is not going to lend to c2 out of the goodness of his heart. He going to want proof that c2 can pay him back with interest.

So your model here is not sufficient to capture the nuances of the issue of fractional reserve banking. It's not merely that every schmoo on the street is harmed by people lending money to each other. There is something more that goes on.

Hint: There is a problem if and only if any player a lends to player b with b buying a long term capital asset that only has a revenue stream sufficent to pay back the loan, while telling a he has the capability to pay him back fully with cash out of hand he doesn't have.

This however is a fraud between a and b and doesn't involve the other people, and gives a no ability to bid up prices in the economy. Player a may overspend on his budget based on his mistaken trust in player b but that's only his problem when he runs out of cash and b can't pay him. That does not effect any person who is not lending to player b.

There's no reason why a bunch of players might cooperate, not collude which is a loaded word, to pool their cash on hand, just in case any one of them has an emergency.

I leave it to you to figure out how banks play a role in this."

BTW, there was another good article on Samizdata on the role of China in this crisis. It's something I recognized more than a decade ago. I've commented in that post also and although it's a rushed comment I think it would be helpful for anyone who doesn't understand why some people oppose loosening credit as a response to the crisis.

Remember these comments in the second article are not polished in a way that makes them easy to understand, unlike the comments to the first article. Repeatedly explaining this will help me understand why people can't grasp the argument and I will improve it.

I understand the causes of this problem, I understand the current situtation, and I understand the proper "solution". Getting anyone else to grasp it is another matter.


College "Speech Code" Lose Out in Court Case

I am behind the curve on this one and not sure if it got much coverage. I just learned that earlier in the month Temple University lost a case in which their speech code was ruled unconstitutional.

Hopefully this ruling will be applied on other campuses.


First Reason to Like One of Them

Well I've found my first reason for liking a presidential candidate this year. Not that I'm trying very hard, being a rational voter. McCain is against bailing out Fannie Mae.

Up to this point I had disliked him due to McCain-Feingold and at least he is not tied to racism like Barack "Trinity Church" Obama , or Ron "Newsletter" Paul was.

I hadn't like Paul for other reasons. His blame terrorism on America stance was a one issue killer for me. The world is more complex than "We'll stay out of everyone's business and they'll be nice".

I still don't have a candidate I like enough to vote for and I don't hate any candidate enough to "vote for the other guy" at this point so it looks like I won't be voting at all. I do think Obama is going to make a mess of the economy but I think that of all the candidates.

This Fannie Mae stance was only a minor sign that McCain gets the economics, but Bush had such "minor signs" before he was elected and he proceeded to screw up the economy more than it already was. He was into bailouts, tariffs and keeping Alan Greenspan around to inflate the currency, for example.

We are in real deep economic trouble and most people don't recognize it. Whoever is president is going to inherit a mess. I wonder how it's going to play out. If it's Obama he might get sainted like FDR did for making things worse. I don't think McCain will get that benefit. Even if he does exactly right things I think he will be blamed for the troubles and may not make a second term.

Note that I think doing exactly the right things is going to make lots of people unhappy, including me. Financially I'm betting they'll do the wrong things because it's the politically expedient thing to do. In fact, I might vote for Obama to increase my odds of being right. Inflation, here she comes.

[Update: When I began writing this post I was thinking about the winning candidates of the Democratic, Republican, and Libertarian parties. I don't particularly like Bob Barr. Yes, it was hyperbole to say "First reason to like one of them". No it doesn't neccesarily apply to Ron Paul, or in fact any of the candidates. In general I was trying to express how jaded I feel about the candidates. Sorry if that lead to any misunderstandings.]