Gekkonomics

'Is there anybody there?' said the Traveller

2009-12-02T16:06:00.001+13:00

OK here's a question.

Are there any other anarcho-capitalists / Hoppeians / Rothbardians / voluntaryists in NZ? As a generally left-leaning country it's hard enough to get people to accept traditional right-wing concepts of economic activity let alone what must appear to them to be the fantastical world of the ultimate individualism.

If there are any fellow travellers out there in Arty-Rower who want to organise to share views and thoughts then please let me know.

I guess I'm just feeling lonely and need a hug <sniffle>

What business schools really teach

2006-05-02T10:26:00.000+12:00

A great skit by Columbia Business School (the CBS mentioned in the vid).

MTV for economists?

Those Evil Businessmen

2005-08-22T11:13:00.000+12:00

Aaron Singleton has posted an interesting article regarding the agenda of the state when prosecuting supposed big business fraud.

The Fed hasn't got a clue - it's official

2005-07-06T10:08:00.000+12:00

From Reuters:

But the view that the Fed is still creating excessive liquidity and depressing long-term borrowing rates remains a minority argument among policy-makers and private economists. "In terms of the impact on policy, the Fed remains confident interest-rate targeting is the best course," said Dean Maki, chief U.S. economist at Barclays Capital and a former economist at the Fed.
The Fed became disillusioned in the 1990s with confusing money supply signals and is still doubtful of a direct link between rising liquidity and asset price bubbles. "Although excess liquidity has been cited as a source of general asset price instability, the support for this conclusion is mixed, at best," Fed Vice Chairman Roger Ferguson said in a speech in Berlin last month.

It's good to know that those pulling the levers are as much in the dark as everyone else.

And as for the quip about excess liquidity not causing asset bubbles, the next time I try to buy a house I'll cite the Feds claim about liquidity, saying that the price signals are confusing while proving my own lack of excess liquidity by shaking the loose change out of my piggy bank.

The Mystery of Economics

2005-06-10T12:05:00.000+12:00

An opinion article in the UK Telegraph (free subscription required) paints an unfortunate but probably widely held view of economics (and not without good reason). The view that what goes on 'under the hood' is not only far too complex for us mere mortals to understand but increasingly that it is solely the kingdom of those 'benevolent' govt experts pulling the levers seems prevalent. The last paragraph sums it up:

"In short, the entire world economy is based on a confidence trick. The less we think about its workings, the more confidence we will have in our money, and the longer we will be able to go on feeding our families and going to the pub. I, for one, resolve never to think about economics again."

I suspect that this is precisely the outcome that suits the powers-that-be who hope, via their soothing words and frantic obfuscation, that nobody notices just how big the confidence trick actually is.

The Danger of the Debt Trap

2005-03-24T21:19:00.000+12:00

An interesting article at Mises echoing my previous post on the current 'hidden' credit fueled inflation.
As Mises states the booms and busts (or business cycle) which the central banks seek to control primarily by credit expansion are the result of their own interventions in a high latency negative feedback cycle: "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."

Big Government

2005-03-23T03:52:00.000+12:00

A nice article by Brian Walden on the size of government. With nearly a quarter of the working UK population now employed by the state it's an issue that seems curiously absent from the election campaign.

Keynes on Inflation

2005-03-22T05:29:00.000+12:00

"Lenin is said to have said the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equality equity in the existing distribution of wealth.... As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to become almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

John Maynard Keynes

And so governments, following the Olympian pronouncement of their guru, aim at a positive inflation target. Keeping it to single digits means that they hope nobody will notice, or that if they do they'll think the govt is doing a good job battling The Inflation Beast while keeping the 'wheels of commerce greased'.

Of course inflation is a result of government itself and it's monopoly on money creation, but that's not something they want people to know for all the reasons Keynes so helpfully elucidates above. So they define inflation to be a general rise in a set of prices of their own choosing rather than what it really is: price rises as a consequence of their pumping too much money into the economy thereby debasing the currency.

But even the CPI is misleading since the matrix of prices constantly shifts to reflect the differing demands of the economy so a single figure cannot say anything useful about the (subset of) prices other than that a weighted average may have changed. But inflation doesn't affect all prices at the same time or by the same amount making the already highly selective CPI an even less useful indicator.

The massive rise in UK asset prices are in large part the result of the current easy money supply and low interest rates. The state bureaucrats believe they know better than the market what the 'cost' of money should be. In order to implement this price-fixing they must create liquidity (read easy credit) to keep the demand for money in line with their desired interest rate. This is the inflation Keynes describes as the new credit debases the existing money supply, robbing it of purchasing power and conversely making (some) things more expensive.

The shift in the price matrix caused by the debasement sends the wrong price signals to the economy. It causes misallocation of resources and capital as some spending that was not previously viable now becomes so, even though the project may be of dubious value. If a credit contraction then occurs the effects of the misallocation have to work their way through the system, appearing as a recession. Clearly the best thing to do is to let it take it's course. But the first thing the govt will do in a recession is ease credit further, adding petrol to the fire and re-igniting the cycle but this time at a higher level.

It will be interesting to see how far Brown and the BoE can push things.

Inflation again

2005-03-21T00:53:00.000+12:00

There's an interesting article on inflation and the CPI over at Mises.
Given how much pernicious inflation ultimately impoverishes everyone to the benefit of the government it's good to see that not everyone believes the CPI figures.