Friday, September 14, 2012

Saturday, May 7, 2011

Chinese Inflation?

Number me among that are skeptics on the long term economic staying power of China. There are a plethora of bulls who think that the world is going to be conquered by China for the next millennium. I doubt it, for reasons I will put in a forthcoming post.

In the meantime, I might not be the only one who thinks that China has problems that the bulls are ignoring. One big one is inflation. The Chinese are orthodox Keynesians and resort to their printing press like any other state with a fiat currency. They continue to print and print, and prices are in a good position to skyrocket in anticipation of the coming inflation being realized by market actors. But if you anticipate inflation and raise your prices, the Chinese state will come after you as Unilever is finding out at the moment.

Some key quotes from this article, with my comments non-italic:

"China has fined consumer products maker Unilever for talking to Chinese media about possible price hikes that triggered a rush to buy while Beijing is trying to rein in surging inflation." 

If the Chinese state was trying to rein in inflation, why would they order producers to lower prices? Have they considered easing back on the printing presses? Inflation is the result in an increase in the supply of money, not a "general rise in prices."

"The British-Dutch company was fined 2 million yuan ($308,000) for "spreading information about price rises and disrupting market pricing order," the Cabinet's planning agency said Friday."

Any good Hayekian knows that planning leads to catastrophe. China has a planning agency. They are a lot farther down the road to serfdom than many other states. Another point here: Obviously Unilever was telling the truth or else it would not be getting fined. 

"Chinese authorities have told companies to hold down price increases to help cool inflation that spiked to a 32-month high of 5.4 percent in March. The government has declared taming inflation its priority and has raised interest four times since October and imposed lending and investment curbs."

Again, stop printing money and allow market freedom. It will never happen in China until the system collapses. I am not a China bull, more on this later.

"Unilever is accused of violating orders to makers of noodles, liquor and hygiene products such as soaps to avoid talking publicly about prices, according to the statement by the National Development and Reform Commission."

If I am the CEO of Unilver, I would highlight this at the annual shareholder meeting, and publicly state that any state that that does not let you discuss prices publicly is a failure waiting to happen. That will never happen but hopefully more people are questioning China's economy with more skepticism than they were before. I will continue to be a skeptic for sure!

Friday, May 6, 2011

The Sequel is Here: Keynes vs. Hayek: Round Two!!!!

The long awaited sequel is finally here! If you enjoy it, share it with someone. It is a great conversation starter!


I have decided that enough is enough, and that it is high time I started blogging again! With so much noise and interference from the powers that be, it is no time to be on the sidelines! Stay tuned! The revolution will not be televised but it will indeed be blogged!

“The present generation suffers every hardship and cost of war, although anticipation pretends that it is covered by future generations. And this delusion is used to involve nations in wars, which they would never commence, if they knew that all the expense would fall upon themselves. It is twice suffered; by the living, who supply all the expenses of war; by the unborn, who supply an equivalent sum, to take up certificates of the expenses paid by the living."--John Taylor of Caroline

Monday, November 8, 2010

QE2 is Coming!

No, not that one..........THIS ONE!

Ron Paul Nails It....Again!

As the rest of Congress is seduced by Keynes, Bernanke, and of all people, Paul Krugman, Ron Paul once again tells us like it really is. Here he is discussing the effects of quantitative easing, aka QE2, on CNBC:

Friday, October 15, 2010

Gary North's "Mises On Money": An Excellent Study Guide!

A study guide that accompanies a treatise can be a valuable tool, particularly when the work is complex and voluminous. Study guides can help make the material of the treatise more vivid and clear. It can simplify the complex and allow for a broader base of readers that understand the points and theory set forth. 
Check out:

Robert Murphy has authored two great study guides on two of the fundamental work in Austrian Economics. Murphy has created study guides for Mises's Human Action, and Rothbard's Man, Economy, and State. These guides serve as map and compass that assist in the navigation of these massive works. 

I often wondered why there was no study guide for Mises's The Theory of Money and Credit. But thanks to a friend and fellow Austrian, I have discovered one! Gary North is the author of Mises On Money.  This guide is a wonderful complement to enhance your understanding of one of the cornerstone books of Austrian Economics. Mises On Money is written in seven sections: An introduction, five chapter, and a conclusion. North does an outstanding job in making Mises's classic more readable and more understandable. North walks you through the entire book by pulling out and explaining the key points in plain language. 

Mises's The Theory of Money and Credit is as important today as it was when Mises wrote it in 1912. Considering the world we live in, and the modern statist economy we are enduring, reading this classic is essential. Gary North's Mises On Money can help you understand Mises's theories to a T! Free people read Mises, and Gary North can help!

And the best part? You can access North's book free online, here:

"Cognition is furthered only by clarity and distinctness, never by compromises." Ludwig von Mises

Monday, October 4, 2010

A Father's Pride!

Occasionally I let my children into my office to play so long as they are quiet. Usually they read a book, draw pictures on a flip-chart, or color pictures. My six year old daughter went to "work" in my office when she got home from school today. I had just finished a conference call when she said, " Daddy, look. I drew Hayek!"

The creativity of a child's mind is priceless!

Saturday, October 2, 2010

Do We Need Conscription to End the Wars?

When you confound a statist Keynesian to the point where he calls you an anarchist, you have given the Austrian arguments effectively. 

The background is this: A close friend that I served in the military with is for conscription, citing a recent remark by Robert Gates. In his mind sending more of our youth to the Bush-Obama Wars of Democratic Aggression will " increase the social costs of going to war." Somehow he thinks that this will bring about a end to the wars such that "If the country collectively thinks the war is worth it, the country will support it. If the war isn't worth it, the country will vote against it and put enormous pressure on politicians to end it."

 I met his backward logic with a long retort in which I stated:

"Why is Gates calling for a draft? Because these wars are unpopular, and no one wants to fight them. He knows that. So his idea is to use the power of government to keep the war going by means of taking our kids out of their lives and into the breach to fight for whatever it is the state is trying to accomplish."

He then sent a longer retort, but I thought that you might enjoy his last paragraph. I am sure you will see it as a compliment rather than a condescending insult, which was the intent, and, that the Austro-libertarian arguments were effective in rattling him! Here it is what he said to me:

"But my argument doesn't make any sense to you because your basically an anarchist. To you, all wars are unnecessary and unacceptable because they are conducted by states. You would never support any war because any state with authority over you is unacceptable - whether its a communist regime like North Korea or the current US government. Thus, a government that requires a registered voter to jury duty is as equally unacceptable as a government that confiscates all of your property and quashes freedom of thought."

To think that I was once of that same mindset gives me the chills! But the persistence of a friend who kept sending me articles from LRC ultimately helped me see the truth! My closing reply to him was:

"You compliment me! You should read Murray Rothbard and too! Give the truth a chance!"

Thursday, September 30, 2010

An Austrian In "Wall Street"

The movies that come out of Hollywood would never overtly be “Austrian in nature.” That being said, every now and then you find an Austrian nugget that seems to redeem a film that would otherwise be an affront to everything Austro-libertarians hold dear. In that light I was re-watching the movie Wall Street, in preparation for the much hyped sequel. In watching it, I re-discovered that the old broker in the office that everyone respected, Lou Mannheim, was an Austrian! When we first see him he says that (emphasis mine):
“..can’t make a buck in this market, country’s going to hell faster than when that son of a bitch Roosevelt was around… too much cheap money sloshing around the world. The biggest mistake we ever made was letting Nixon get off the gold standard…”

A true Austrian could not have said it better! 
Special thanks to Lew for posting this comment on his blog!

Monday, September 13, 2010

Mises Academy: The New Deal, Week 2 - Hoover Was Not A Laissez Faire Capitalist!

The second lecture in Tom Woods’s Mises Academy course on the New Deal revolved around Herbert Hoover. We are often taught to think of Hoover as the champion of capitalism and laissez faire, and that his stalwart defense of these ideals was what led the United States into the depths of depression. Paul Krugman, the NY Times, academia, and other leftist outlets attempt to paint the picture of an arch capitalist Hoover whose failure to intervene in the market destroyed jobs and wages of working Americans. This is complete myth.

Hoover was indeed the destroyer of jobs and incomes as the Great Depression began to take shape. But he was no laissez faire capitalist. In fact he was quite the opposite. Hoover led a government assault to attack economic problems from the very beginning. Some examples that we discussed in class:

1.      High Wage Policy - Hoover did everything he could to ensure that wages were kept artificially high. A poor economist, he confused wage rates with wage income. Like many politicians, to include a great many today, Hoover confused wage rates with wage income. The flawed belief is that high wage rates would end the depression. What was lost on Hoover and the interventionists was that higher rates, especially those mandating wage floors, actually make unemployment worse, and reduce wage income.
2.       Farm Policy – Post WWI there were heavy handed moves of the federal government to prop up and subsidize the agricultural sector. The perception was that the American farmers were hit harder than any other sector as a result of the war. The reality is that the farm sector had done relatively well compared to other sectors. In other words, the crisis was exaggerated to justify the subsidization of the sector. An example of this is the price of wheat being pegged by Congress to $2.26/bushel. This was twice the pre-war price. The higher fixed price led wheat producers to produce considerably more wheat to hope on the gravy train. In the short run wheat producers enjoyed concentrated prosperity relative to the rest of the economy. But as time progressed there was an excess supply of wheat that could not be sold. And then, in the correct anticipation that excess wheat would be dumped, the price of wheat plummeted by more than 50%. Woods points out that the cotton industry had a similar experience.
3.      The Smoot-Hawley Tariff – I recall in high school watching Al Gore debate NAFTA with H. Ross Perot. Taking the free trade position (government definition, not classical), Gore held up a picture of Smoot and Hawley, the accomplices to Hoover who caused the Great Depression. The tariff was originally designed to protect the agricultural sector. After being signed into law by Hoover, the Smoot Hawley Tariff raised duties to an average of 59% on over 25,000 goods. Woods pointed out that the tariffs ill effects were greatly assisted by the Hoover High Wage Policy. Citing Vedder and Gallaway of Ohio University, he pointed out that unemployment numbers would have lower by 3.8% if the tariff had not be enacted. Working in tandem to destroy jobs with the tariff, the high wage policy, per Vedder and Gallaway, accounted for 77% of observed rising unemployment from 1929 and 1932.
John T. Flynn
4.      “Associationalism” – This was the idea of creating trade associations in certain sectors that, with encouragement from the government, would coordinate pricing and output in order to keep competition amongst each other “fair.” If this sounds like a cartel to you, you are right on, at least informally. Hoover was a huge proponent of trade associations and trade boards to attempt to plan and coordinate market functions. As a cartel, albeit informal, the door was open to coercion and force when it came to dealing with issues that were not “fair” or “just.”
5.      White House Conferences – On the idea of “associationalism,” Hoover held series of “White House Conferences.” The purpose of these summits was to encourage businessmen to keep wages high and output and expansion up. These summits were derided by critics as some sort of “supreme economic council.” Woods mentions John T. Flynn, who would come to be one of the most outspoken critics of FDR. 

QE3 Is Here!

Move over QE2, QE3 is here! The markets are euphoric for now.