I started this blog in June 2007 asking these questions: Are we in a massive asset bubble that will blow up in our faces ??? - ANSWERED YES ! Is western and particularly British society on the verge of social collapse??? What are the best common sense long term investment strategies to keep you rich? When will consumption/debt bubble economics end and a real savings/production economy begin ???

Sunday, 31 January 2010

The Austrian 'free market' really is free !

But since fractional-reserve lending is profitable to bankers and government in the same way that counterfeiting is profitable to counterfeiters, we find ourselves saddled with a central bank to make sure the various costs of expanding the money supply are passed on to the poor and middle class.

The idea that central banks are independent from the governments that gave them life is a bad joke. Through their purchase of government debt obligations, central banks provide a convenient way for politicians to spend wildly on their pet projects — whether it's welfare for seniors or wars overseas — without having to raise taxes.

more ...

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Saturday, 30 January 2010

Fox News talks about the ideas of Ludwig von Mises

You will never hear his name mentioned on the BBC !

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Thursday, 28 January 2010

Do We Really Need a Central Bank?

Economic Liberty Lecture Series: Steve Horwitz from The Future of Freedom Foundation on Vimeo.


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Hayek: Fighting the Planners

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Wednesday, 27 January 2010

An austro-libertarian guide to politics

You will never see a documentary like this on the BBC !

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Tuesday, 26 January 2010

"Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem


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Saturday, 23 January 2010

Rock bottom interest rates in the US and UK have allowed the rich elite to prosper at the expense of the middle class

The middle class was tricked into thinking that a rising tide was lifting all boats but their house price equity was just an inflationary illusion of wealth.

Can freedom and liberty survive the current democratic systems that encourage the masses to vote themselves money in the short term at the cost of their long term wealth ?

In the short term low interest rates make everyone happy because they can borrow cheap and therefore get rich ! Over the longer term all they do is generate massive inflation and thus boom/bust, while at the same time reducing savings and thus eroding the capital pool available for increasing the productive capacity (wealth engine) of the economy. Is it a coincidence that high savings economies e.g. Germany, Japan and China have outsize industrial capacity while the negative savings in the US and UK produce a hollowed out industrial base ?

In the EU things are great for France and Germany that get the correct interest rate but countries like Ireland, Spain and Greece will always have a rate that is far too low. Governments love this because it is an easy sell to their voters but over time these countries are killing themselves. They are condemned to permanent debt as the EU will not let them default, low rates mean they can't rebuild their savings and thus productive capacity and they can't monetise their debt. A real case of the meat voting for the meat grinder.

How many times are Irish voters told (often by academics in the pay of the EU) that international companies would not invest in Ireland without Irish membership of the Euro. What voters are not told is that a country can declare anything it wants as legal tender (e.g. the dollar in Panama and the Euro in Kosovo). The Irish could have the Euro without the European central bank - thus attracting big business while getting real market interest rates ! Also without the ECB government debt would be curbed and the boom/bust cycle much less pronounced as the only way to increase the money supply would be via increased exports from an increased production base built with savings. You would think the Irish would be wary of empires after their experience as a British colony in the 19th and early 20th century but the EU has done more damage in 10 years than Britain did in a 100 ! One of the main reasons for Irish independence was the over taxation of the Irish to pay Imperial Debt. How can a country saddled with unpayable debt be free ?

Are central banks really independent ? Do they really operate in the best long term interests of the people ? Why did Alan Greenspan try to get people off 30 fixed mortgages onto ARMs that were a lot more risky and only seemed better value because of the artificially low rates he engineered. http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm Was he helping ordinary people or his rich friends ?

What is the point of universal suffrage if no one understands the issues ? Surely to vote you must pay (e.g. £100) and pass an economics test to prove you understand basic Keynesian, neoclassical and Austrian theories. You have to pay and pass a test to drive but not to vote. An out of control economy is every bit as dangerous as a speeding car ! All US/UK politicians care about is the quick fix they can sell the masses that will produce minimum pain and therefore get them elected. Building an industrial base via a long term increase in savings (i.e. austerity measures) is not on the agenda.

There is no limit as to how high this graph can go as QE stoked inflation chokes the middle class:






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Wednesday, 20 January 2010

UK inflation out of control - biggest monthly rises on record !

UK inflation rose at its fastest annual pace for nine months in December.

The Office for National Statistics said the Consumer Price Index (CPI) measure of inflation had risen to 2.9%, up from an annual rate of 1.9% in November.

That was the biggest jump in the annual rate from one month to the next since records began, and exceeded the City's expectations of an increase to 2.6%.

The Retail Price Index (RPI), which includes housing costs, rose to 2.4%, its highest level since November 2008.

This was a rise from 0.3% in November, and also constitutes the biggest monthly rise in the annual rate of RPI inflation since 1979.



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Tuesday, 19 January 2010

Gold Vs Shares

How much inflation will it take before people start routinely owning gold in their portfolio ???

When an analyst or adviser tells you things like 'you never get your money back in gold' or 'when you buy gold you fight every government and bank in the world' don't believe them !

As long as the money supply is out of control you should have 10% of your savings in gold.

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How many jobs do minimum wage laws create ?

Hint: It's a negative number !

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Wednesday, 13 January 2010

The Tally Stick Monetary System - Government gold fixed money based on credit rather than debt

When the government runs out of gold tax money to buy things (rather than borrow money from banks) it simply prints its money as tally sticks.

Thus the government does not go into debt, no national debt is created. No interest has to be paid on the debt and future generations are not burdened paying it. Citizens are not born into debt.

To pay for things ahead of its gold tax take the government takes a polished stick, writes on it an amount of gold and then splits the stick in half. The government keeps one half and the other is 'spent into existence'. The merchant that is selling goods or services to the government will accept the half tally stick as payment because it can be used to pay taxes and can be swapped for gold (remember the gold value is written on the stick) or maybe goods from other merchants. Other merchants accept the stick as legal tender because they can use it to pay taxes just like the original merchant could instead of dipping into his 'intrinsic value' gold savings.

In effect the merchant has already paid some tax 'in kind' rather than in gold by supplying the government with a good or service. The tally stick is a marker that records this and this is why the government will accept the stick as tax payment.

Thus there are two forms of legal tender in circulation: half tally sticks and gold coins. Bad money drives out good and thus gold (with intrinsic value) will tend to be hoarded as savings while tally sticks are used in transactions.

The government will accept gold or tally sticks for payment of taxes. When it gets a stick it finds its other half and tries to see if they match. If they do not (e.g. the wood grain is different) the government knows the stick is counterfeit and starts hunting the counterfeiter. If the two halves match the stick is destroyed.

So what is to stop the government 'printing' too many tally sticks and thus inflating the fiat tally stick currency ? Well as tally sticks lose value people still have their savings in gold and thus do not have them wiped out by price rises. In practice a tally stick based currency can not be inflated ahead of economic growth. Thus inflation of the money supply can only occur in concert with growth. Also the money supply will shrink as the economy contracts. The tally stick money supply is perfectly elastic, expanding as the economy grows and shrinking as it contracts. Inflationary price rises (general rises in prices due to the reduced buying power of money) can only occur if the money supply increases while the goods and services produced by the economy do not (i.e. more money chasing the same or fewer goods and thus 'bidding up' prices).

In a debt based system the government can borrow money into existence ahead of economic growth and thus inflationary price rises occur. The tally stick system is credit based, no national government debt is built up and no inflationary price rises occur.

Tally sticks can't enter circulation until some work is done by someone to produce a good or service. Thus tally sticks can not be printed ahead of the economy's ability to produce stuff. The king can print up as many sticks as he likes and put whatever gold value on them he likes. However he can't get more of them into circulation than there is stuff to buy and he can't set prices in gold. The maximum quantity of the money supply is directly related to the productive capacity of the economy. It is not control by the government or central bank. Free market gold banking (rather than a central bank enabling a cartel of banks to use fractional reserve lending to generate fiat currency) places gold as money and tally sticks as a money substitute. The buying power of gold (and therefore it's substitutes) is set by the market.

Thus the success of tally sticks shows us that not all fiat money is bad. It does not always lead to price inflation and boom bust cycles. The key is whether the fiat money is debt based or credit based. England grew well under the credit based tally stick system for 700 years. However the move to a central bank / national debt system created long term problems. For 220 years (1700 - 1920) England grew to be the biggest empire ever and its monetary system was copied everywhere. The national debt seemed to be able to create massive growth but eventually the debt and inflation ruined the country - mainly by allowing the financing of massive and long global wars.

A debt based system can create money ahead of the economy's productive capacity and can therefore create growth with no extra production. This growth is not real and neither is the demand based on it. Thus it will end abruptly in a crunch i.e. boom/bust. A debt based system simply steals money from future generations so that the current one can live beyond its means. It also allows the government to tax the population by stealth via inflationary price rises.

We shouldn't fear fiat money itself but only fiat money that is created through debt. It is only fiat money created out of debt (ahead of the economy's productive capacity) that generates inflation, boom/bust and a national debt.

In a debt based pure fiat currency system rich countries like the USA (with the reserve currency) can postpone the inflation and debt crises many decades and generations into the future but when it comes the country is destroyed. The international debt based system means the richest country is not the one with the most productive capacity but rather the one that can borrow the most money. In the mean time it is ordinary workers who suffer the burden of the national debt and inflationary price rises ! The fiat Dollar has done well to last 38 years but is failing fast. It will not last 700 years !




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Tuesday, 12 January 2010

Sunday, 10 January 2010

Is there a way to monetise national debts without inflation ?

Could forcing banks onto 100% reserve requirements (thus ending the fractional reserve system) allow governments to print money to pay off debt while locking the resulting inflation up in bank reserves ?

With no national debt interest to pay could governments massively cut taxes without cutting spending ?

Could state banks (that have a guaranteed deposit flow from government activities) use profits from low interest loans to the public to pay for government services and infrastructure to replace some or all taxes ?


In the UK public money that was chasing fraudulent interest rates was lost when these private banks went bankrupt:

Regional UK local government banks making profitable low interest loans would be much preferable to the current system (established in 1998) of 'regional development agencies' doling tax payer money out to all sorts of questionable loss making activities:






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Friday, 8 January 2010

Don't Act on CO2 - It is a con !

In economics, the Jevons paradox (sometimes called the Jevons effect) is the proposition that technological progress that increases the efficiency with which a resource is used, tends to increase (rather than decrease) the rate of consumption of that resource. It is historically called the Jevons Paradox as it ran counter to popular intuition. However, the situation is well understood in modern economics. In addition to reducing the amount needed for a given use, improved efficiency lowers the relative cost of using a resource – which increases demand and speeds economic growth, further increasing demand:


The only way conserving energy will reduce CO2 is if the money you save is somehow destroyed - maybe by burning it, which is illegal ! (even burning money wouldn't work because by reducing the money supply you make all other money more valuable i.e. increase its purchasing power so others can buy more with their money)

In an economic analysis it is necessary to consider both what is seen AND what is unseen. The politician will only ever ask you to consider the seen and try to rubbish any mention of the unseen !

Energy conservation = an increase in productivity (i.e. doing the same with less) = more economic activity (the savings must be spent somewhere at sometime) = the same or more CO2 emitted. Or more dependence on Saudi oil if you prefer that bogey man.

Spending the saved money on almost anything will create some CO2 somewhere. Give the money to a tree planter ? Maybe, but the wrong trees could put out more CO2 than they take in e.g. Canadian forests are now carbon sources rather than sinks ! Moreover how carbon neutral will this new tree planting industry be ? Will they ride bicycles ? What will they spend their wages on ?

Just keeping the saved money in a bank account will not work, a multiple (maybe 5X ?) of it will be lent out via the fractional reserve banking system creating even more CO2 when it is spent by others than if you spent the money yourself straight away.

There is only one way to reduce CO2 and that is to build thousands of nuclear power stations - THERE IS NO ALTERNATIVE !

Dr Goebbels was an amateur compared to this propaganda machine - the kids are the key:

If you like conspiracy theory ask yourself why THEY are going to so much trouble to change your behaviour when THEY know CO2 will not be reduced ? Follow the money. Who is getting rich ? Why do oil companies spend so much money funding scientists who produce anthropogenic global warming theories ?

How do the oil companies recoup their massive investments in renewables and destroy the coal and nuclear competition after peak oil ?

If Shell and BP are behind climategate they are not shouting about it:
For us the debate on climate change is over.

Is your carbon footprint as low as this nice family man's ?

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Wednesday, 6 January 2010

Did the Toppling of Saddam Hussein Lead to Recent Events in Iran?

Having cut the Gordian Knot of Saddam in the middle east will America now tie it back up by attacking Iran ?

consider this: Many Iranians go as religious pilgrims to the holy sites of Najaf and Kerbala in southern Iraq. They have seen the way in which national and local elections have been held, more or less fairly and openly, with different Iraqi Shiite parties having to bid for votes (and with those parties aligned with Iran's regime doing less and less well). They have seen an often turbulent Iraqi Parliament holding genuine debates that are reported with reasonable fairness in the Iraqi media. Meanwhile, an Iranian mullah caste that classifies its own people as children who are mere wards of the state puts on a "let's pretend" election and even then tries to fix the outcome. Iranians by no means like to take their tune from Arabs—perhaps least of all from Iraqis—but watching something like the real thing next door may well have increased the appetite for the genuine article in Iran itself.



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Saturday, 2 January 2010

The Renegade Economist: Governments kill countries through inflation and taxing people's labour rather than land

The Single Tax: Economic and Moral
A Reply to Georgist Criticisms
by Murray N. Rothbard


Is there a property crash every 18 years? Fred Harrison thinks so. In his book: Boom Bust, House Prices, Banking and the Depression of 2010, Harrison describes a cycle of 18 years:

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Friday, 1 January 2010

No Central Bank, No Inflation and rising living standards

Modern Panama is a living hell - if only these backward savages could understand the need for a central bank !

For a real-world example of how a system of market-chosen monetary policy would work in the absence of a central bank, one need not look to the past; the example exists in present-day Central America, in the Republic of Panama, a country that has lived without a central bank since its independence, with a very successful and stable macroeconomic environment.

The absence of a central bank in Panama has created a completely market-driven money supply. Panama's market has also chosen the US dollar as its de facto currency. The country must buy or obtain their dollars by producing or exporting real goods or services; it cannot create money out of thin air. In this way, at least, the system is similar to the old gold standard. Annual inflation in the past 20 years has averaged 1% and there have been years with price deflation, as well: 1986, 1989, and 2003.


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