Page 6 of 16

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 10:54 am
by moda0306
Culture and morality intertwine.  The Austrian culture is one that enjoys their co-complaining and scheming of how to avoid their plight of government tyranny.  Their moral superiority creates a culture that is very strong.  Their culture creates a groupthink as well that reinforces their moral plight.

But I think it is a moral position first and foremost.  "Live and let live... No questions asked" is a very appealing and wonderfully simple moral structure and it would be easy to get behind it militantly (verbally, not literally).  Of course, pure freedom is complicated by us having been plopped on a big island with limited natural resources to share.

The food stuff is different, except where it's not.  I think vegans have, in part, a very tight moral plight with their hatred of factory farming.  However, they allow this to color their views on whether meat is healthy for humans. They're allowing their moral stance, reinforced by culture, to affect their interpretation of the science of nutrition.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 11:57 am
by Libertarian666
So it is okay on this forum to imply that Austrians are mentally unbalanced or emotionally immature? I guess that tells me all I need to know about the "civility" that we are supposed to engage in here.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 12:17 pm
by Gumby
Libertarian666 wrote: So it is okay on this forum to imply that Austrians are mentally unbalanced or emotionally immature? I guess that tells me all I need to know about the "civility" that we are supposed to engage in here.
Uh no. Nobody ever said or implied those things.

Surely you can have a high-level conversation about these concepts without taking everything so personally? (Your name isn't 'Ludwig von Mises' is it?) So, I assume you have the ability to objectively examine your own beliefs — as we all have done before. We didn't all used to believe these concepts. We examined them and our thinking evolved.

The fact of the matter is that the Austrians look at our currency as if it has a reserve constraint — as if it were still tied to a gold standard. They didn't update their dusty old textbooks once the currency lost its ties to gold, despite the fact that the currency became free-floating and operated differently after 1972. To add to the confusion. many of the legacy gold-standard laws were never updated by Congress (such as bond auctions). So, this only confused the Austrians even more as the Fed and Treasury unpegged the currency and stuck to the letter of the legacy laws.

This isn't a criticism of the Austrians so much as its a criticism of their outdated textbooks.

So, no, Austrians are not "mentally unbalanced" or "emotionally immature". Nobody here would ever say that. And you really shouldn't claim that we implied it. We didn't. Nobody did.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 12:18 pm
by systemskeptic
MediumTex wrote: Can you elaborate on why you think they are dangerous?

Is there an economic condition that the PP doesn't cover?
I doubt there are any examples that I can provide that would be new to you, so it's not really a question of new information but rather existing.  As an example, your response to D1984.

You seem to be holding the view, if I may summarize: "I have covered all the bases, so nothing can possibly go wrong"  again, fundamentally I think this is very dangerous.

Like you, I have an asset allocation that matches my view of the world and where it is going, and I feel is greatly diversified.  One difference I see in our perspectives is I accept that there are still many scenarios that could unfold that would result in poor performance, even devastating performance, over 5, 10, 20, 30 year periods.

To address your second point: in the view of many on this board, a US PP performs in "all economic conditions" yet to my view it only performs in two:  US prosperity and geopolitical/currency crisis.  The short of it is the world (and all it's invest-able assets) is far too big of a place for any investment to be as risk-free as you seem to believe. 

Again, just an opinion and an observation.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:09 pm
by Libertarian666
Ok, so then this would be an acceptable post? If you say so.

-------------------
I really think if "monetary realists" didn't have such a deep reluctance to admit the tail risks they are ignoring, they would have a much easier time seeing the light.

They are literally being blinded by their inability to admit that their portfolio could be demolished by a freeze-up of the US financial system.  I mean if you've gone your whole life thinking you're essentially safe in believing that the US empire is different from every other one in history, it can be hard to look at the system as one that could collapse without warning and leave your "safe portfolio" in ruins.

Admitting Austrian economics is correct would mean that a "monetary realist's" belief in the stability of the financial system was mostly a myth.  People don't like to concede that kind of "wrongness," especially if we've held these views for a long time. 

I'm not saying there isn't some life left in the current system, but it becomes a lot more of a nuanced discussion rather than "tail risks in the current system can be safely ignored" or whatever the common wisdom is.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:12 pm
by MediumTex
Libertarian666 wrote: So it is okay on this forum to imply that Austrians are mentally unbalanced or emotionally immature? I guess that tells me all I need to know about the "civility" that we are supposed to engage in here.
Just to clarify, I think that Ludwig von Mises was one of the deepest and most insightful thinkers in the entire field of economics.

He was as close to a true economic philosopher as you are ever likely to find.

I just think that there has been a paradigm shift in monetary arrangements that has rendered some of von Mises' conclusions obsolete, but it takes nothing away from the fact that he was an outstanding thinker.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:18 pm
by MediumTex
systemskeptic wrote: To address your second point: in the view of many on this board, a US PP performs in "all economic conditions" yet to my view it only performs in two:  US prosperity and geopolitical/currency crisis.  The short of it is the world (and all it's invest-able assets) is far too big of a place for any investment to be as risk-free as you seem to believe. 
The PP is premised upon the following assumptions:

1. At a given point in time, the economy can only be on an expansion trajectory or a contraction trajectory.  It's possible for the economy to be neither expanding nor contracting, but such a condition rarely lasts for very long.

2. At a given point in time, price levels across the whole economy are either increasing or declining.  It's possible for the price level to be neither increasing nor declining, but such a condition rarely lasts for very long.

What combination of economic conditions can you visualize that wouldn't fit into one of the four combinations of conditions based upon the assumptions above?

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:18 pm
by Pointedstick
Libertarian666, that seems like an eminently reasonable post to me.

Furthermore, I personally think us PP holders are doing a decent enough job of acknowledging those tail risks by holding 25% in gold. That's a heck of a lot more gold than most people, and if you do indeed view the currency collapse scenario as a tail risk and not a certainty, then it makes sense to take precautions against it but not go overboard, in case it doesn't happen in your lifetime. To me, 25% gold makes me feel like I've done a good enough job balancing the mitigation of those risks with my desire for growth and income during other conditions.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:23 pm
by MediumTex
Libertarian666 wrote: Ok, so then this would be an acceptable post? If you say so.

-------------------
I really think if "monetary realists" didn't have such a deep reluctance to admit the tail risks they are ignoring, they would have a much easier time seeing the light.

They are literally being blinded by their inability to admit that their portfolio could be demolished by a freeze-up of the US financial system.  I mean if you've gone your whole life thinking you're essentially safe in believing that the US empire is different from every other one in history, it can be hard to look at the system as one that could collapse without warning and leave your "safe portfolio" in ruins.

Admitting Austrian economics is correct would mean that a "monetary realist's" belief in the stability of the financial system was mostly a myth.  People don't like to concede that kind of "wrongness," especially if we've held these views for a long time. 

I'm not saying there isn't some life left in the current system, but it becomes a lot more of a nuanced discussion rather than "tail risks in the current system can be safely ignored" or whatever the common wisdom is.
I think that's a perfectly reasonable position.

Please understand that recognizing that the current system is based upon a monetary realism model doesn't mean any of us is saying it's a good idea.  It's just acknowledging reality as it currently exists.

We all still hold gold for the day when and if things change to some other type of monetary arrangement.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:24 pm
by Gumby
Libertarian666 wrote:I really think if "monetary realists" didn't have such a deep reluctance to admit the tail risks they are ignoring, they would have a much easier time seeing the light.

They are literally being blinded by their inability to admit that their portfolio could be demolished by a freeze-up of the US financial system.  I mean if you've gone your whole life thinking you're essentially safe in believing that the US empire is different from every other one in history, it can be hard to look at the system as one that could collapse without warning and leave your "safe portfolio" in ruins.

Admitting Austrian economics is correct would mean that a "monetary realist's" belief in the stability of the financial system was mostly a myth.  People don't like to concede that kind of "wrongness," especially if we've held these views for a long time. 

I'm not saying there isn't some life left in the current system, but it becomes a lot more of a nuanced discussion rather than "tail risks in the current system can be safely ignored" or whatever the common wisdom is.
Perfect. No hard feelings.

And I agree with you... the whole system could come crashing down if people lose faith in the government. But, then again, that's why we hold 25% gold here on this forum.

Now can we continue the conversation?

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:27 pm
by Gumby
MediumTex wrote:Please understand that recognizing that the current system is based upon a monetary realism model doesn't mean any of us is saying it's a good idea.  It's just acknowledging reality as it currently exists.
Exactly. Nobody here thinks that MR somehow proves that a debt-based fiat monetary system is some kind of perfection. From my perspective, it causes all sorts of problems in the long run. All MR does is describe the system as it is — flaws and all.

All we are saying is that Austrian economics is using an obsolete framework that doesn't apply to an autonomous debt-based fiat currency issuer. Surely you can have a conversation about that, tech.

Ultimately, you should know that we all used to believe the same things you currently believe. The only difference is that we picked up our noses from our obsolete textbooks and explored the operational realities of our current system.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:30 pm
by Libertarian666
Gumby wrote:
MediumTex wrote:Please understand that recognizing that the current system is based upon a monetary realism model doesn't mean any of us is saying it's a good idea.  It's just acknowledging reality as it currently exists.
Exactly. Nobody here thinks that MR somehow proves that a debt-based fiat monetary system is some kind of perfection. From my perspective, it causes all sorts of problems in the long run. All MR does is describe the system as it is — flaws and all.

All we are saying is that Austrian economics is using an obsolete framework that doesn't apply to an autonomous debt-based fiat currency issuer. Surely you can have a conversation about that, tech.
Certainly, as long as you can have a conversation that acknowledges that I am right about everything and that any disagreement with me is heresy.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:33 pm
by Gumby
Libertarian666 wrote:
All we are saying is that Austrian economics is using an obsolete framework that doesn't apply to an autonomous debt-based fiat currency issuer. Surely you can have a conversation about that, tech.
Certainly, as soon as you acknowledge that the Flying Spaghetti Monster is the one true god.
Well, if you want to be narrow-minded and not explore how our debt-based fiat monetary system really works, that's your prerogative. Your loss.

Personally, if it were my money, I'd want to explore all of the contrarian scenarios to make sure I wasn't doing something totally stupid (like listening to inflationists who have been wrong for decades).

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:38 pm
by Xan
Libertarian666 wrote:Certainly, as long as you can have a conversation that acknowledges that I am right about everything and that any disagreement with me is heresy.
There certainly was a major change in the nature of money in 1972, when gold officially became decoupled from the dollar.  We went from a federal government that couldn't create money out of thin air to one that could.

If a school of monetary thought didn't undergo a major change right along with it, then it's pretty obvious that school is not going to have predictive power under the new regime.

That isn't at all saying that they were wrong about anything.  The principles and consequences could all be absolutely correct.  It's just that they now describe a different universe from the one that we now occupy.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:40 pm
by Libertarian666
Gumby wrote:
Libertarian666 wrote:
All we are saying is that Austrian economics is using an obsolete framework that doesn't apply to an autonomous debt-based fiat currency issuer. Surely you can have a conversation about that, tech.
Certainly, as soon as you acknowledge that the Flying Spaghetti Monster is the one true god.
Well, if you want to be narrow-minded and not explore how our debt-based fiat monetary system really works, that's your prerogative. Your loss.

Personally, if it were my money, I'd want to explore all of the contrarian scenarios to make sure I wasn't doing something totally stupid (like listening to inflationists who have been wrong for decades).
Belief in the Flying Spaghetti Monster is a contrarian view as well. That doesn't make it correct or sensible. After reading all the posts about "monetary realism", I have exactly the same respect for it as I do for the FSM.

And as for inflationists having been wrong for decades, the reason I could retire early was because of a gold-heavy portfolio that STILL is outperforming the PP in the long term (15 years) after the recent unpleasantness. So if that is wrong, I don't want to be right.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:41 pm
by MediumTex
Libertarian666 wrote:
Gumby wrote:
MediumTex wrote:Please understand that recognizing that the current system is based upon a monetary realism model doesn't mean any of us is saying it's a good idea.  It's just acknowledging reality as it currently exists.
Exactly. Nobody here thinks that MR somehow proves that a debt-based fiat monetary system is some kind of perfection. From my perspective, it causes all sorts of problems in the long run. All MR does is describe the system as it is — flaws and all.

All we are saying is that Austrian economics is using an obsolete framework that doesn't apply to an autonomous debt-based fiat currency issuer. Surely you can have a conversation about that, tech.
Certainly, as long as you can have a conversation that acknowledges that I am right about everything and that any disagreement with me is heresy.
I assume that's a joke.

Seriously, though, what about the explanation that is being provided about how the current system works do you disagree with?

For example, we may both agree that Britney Spears' music is crappy (with the obvious exception of "Baby One More Time":)) ), but that doesn't mean that conclusions regarding the musical structure of her songs should be dismissed as nonsense.  The product itself may be nonsense, but it still has an internal structure and logic, whether you like it or not.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:45 pm
by Libertarian666
MediumTex wrote:
Libertarian666 wrote:
Gumby wrote: Exactly. Nobody here thinks that MR somehow proves that a debt-based fiat monetary system is some kind of perfection. From my perspective, it causes all sorts of problems in the long run. All MR does is describe the system as it is — flaws and all.

All we are saying is that Austrian economics is using an obsolete framework that doesn't apply to an autonomous debt-based fiat currency issuer. Surely you can have a conversation about that, tech.
Certainly, as long as you can have a conversation that acknowledges that I am right about everything and that any disagreement with me is heresy.
I assume that's a joke.

Seriously, though, what about the explanation that is being provided about how the current system works do you disagree with?

For example, we may both agree that Britney Spears' music is crappy (with the obvious exception of "Baby One More Time":)) ), but that doesn't mean that conclusions regarding the musical structure of her songs should be dismissed as nonsense.  The product itself may be nonsense, but it still has an internal structure and logic, whether you like it or not.
No, it is not a joke, but a reductio ad absurdum. Continuing a conversation that requires one to agree to a proposition that one finds absurd is nonsensical. Why would anyone do that?

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:46 pm
by MediumTex
Libertarian666 wrote: After reading all the posts about "monetary realism", I have exactly the same respect for it as I do for the FSM.
But in what ways does monetary realism fail to correctly identify the current monetary arrangement in the U.S.?

I would say that MR differs from FSM in that FSM doesn't provide me with a coherent explanation for the current nature of any aspects of reality, while MR does.

Do you agree with my distinction between MR and FSM?

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:48 pm
by Libertarian666
MediumTex wrote:
Libertarian666 wrote: After reading all the posts about "monetary realism", I have exactly the same respect for it as I do for the FSM.
But in what ways does monetary realism fail to correctly identify the current monetary arrangement in the U.S.?

I would say that MR differs from FSM in that FSM doesn't provide me with a coherent explanation for the current nature of any aspects of reality, while MR does.

Do you agree with my distinction between MR and FSM?
No. MR provides absolutely no value regarding the financial risks I am concerned with, as the FSM provides absolutely no value for me in the spiritual realm.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:50 pm
by MediumTex
Libertarian666 wrote: No, it is not a joke, but a reductio ad absurdum. Continuing a conversation that requires one to agree to a proposition that one finds absurd is nonsensical. Why would anyone do that?
Fair enough, but what proposition exactly do you find to be absurd?  If you find all of MR to be absurd, then why does it seem to so clearly and coherently describe the current system?  You may say that the entire current system is absurd (and I would agree with you), but notwithstanding its overall absurdity, it's still important to understand how it works if you want to have an investment strategy that is based upon reality as it is, as opposed to how we would like it to be or wish it to be.

If MR's explanation of the current monetary system is wrong, what would be a correct explanation?

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:52 pm
by MediumTex
Libertarian666 wrote:
MediumTex wrote:
Libertarian666 wrote: After reading all the posts about "monetary realism", I have exactly the same respect for it as I do for the FSM.
But in what ways does monetary realism fail to correctly identify the current monetary arrangement in the U.S.?

I would say that MR differs from FSM in that FSM doesn't provide me with a coherent explanation for the current nature of any aspects of reality, while MR does.

Do you agree with my distinction between MR and FSM?
No. MR provides absolutely no value regarding the financial risks I am concerned with, as the FSM provides absolutely no value for me in the spiritual realm.
You don't see the deflationary risk in an MR model if policymakers choose not to provide liquidity in response to a credit crisis?

This risk would seem to be of great interest to a gold enthusiast.  Why is it of no interest to you?

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:53 pm
by systemskeptic
MediumTex wrote: The PP is premised upon the following assumptions:

1. At a given point in time, the economy can only be on an expansion trajectory or a contraction trajectory.  It's possible for the economy to be neither expanding nor contracting, but such a condition rarely lasts for very long.

2. At a given point in time, price levels across the whole economy are either increasing or declining.  It's possible for the price level to be neither increasing nor declining, but such a condition rarely lasts for very long.

What combination of economic conditions can you visualize that wouldn't fit into one of the four combinations of conditions based upon the assumptions above?
There are dozens of scenarios, but here is one which seems contrary to your above statements:
1. US Economic stagnation/contraction (poor performance on US stocks)
2. Low real rates in $USD (poor performance on USG cash/bonds)
3. Positive real rates in other currencies (per performance on gold and/or $USD)

You don't necessarily have to have a crisis for the market favor to shift from one region to another.  So over the last 40 years, is the performance of the PP due to it covering all economic conditions, or it covering all economic conditions of a strong region?

Also, is it possible for a region-specific permanent portfolio to perform well if the overall prosperity / world presence of that region is declining / shifting to different areas?

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 1:57 pm
by Libertarian666
MediumTex wrote:
Libertarian666 wrote: No, it is not a joke, but a reductio ad absurdum. Continuing a conversation that requires one to agree to a proposition that one finds absurd is nonsensical. Why would anyone do that?
Fair enough, but what proposition exactly do you find to be absurd?  If you find all of MR to be absurd, then why does it seem to so clearly and coherently describe the current system?  You may say that the entire current system is absurd (and I would agree with you), but notwithstanding its overall absurdity, it's still important to understand how it works if you want to have an investment strategy that is based upon reality as it is, as opposed to how we would like it to be or wish it to be.

If MR's explanation of the current monetary system is wrong, what would be a correct explanation?
The Austrian explanation.
But of course you knew that already.

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 2:00 pm
by MediumTex
systemskeptic wrote:
MediumTex wrote: The PP is premised upon the following assumptions:

1. At a given point in time, the economy can only be on an expansion trajectory or a contraction trajectory.  It's possible for the economy to be neither expanding nor contracting, but such a condition rarely lasts for very long.

2. At a given point in time, price levels across the whole economy are either increasing or declining.  It's possible for the price level to be neither increasing nor declining, but such a condition rarely lasts for very long.

What combination of economic conditions can you visualize that wouldn't fit into one of the four combinations of conditions based upon the assumptions above?
There are dozens of scenarios, but here is one which seems contrary to your above statements:
1. US Economic stagnation/contraction (poor performance on US stocks)
2. Low real rates in $USD (poor performance on USG cash/bonds)
3. Positive real rates in other currencies (per performance on gold and/or $USD)
What would price levels across the whole U.S. economy be doing in your example above?  Would it be rising or falling?  It must be one or the other.
You don't necessarily have to have a crisis for the market favor to shift from one region to another.  So over the last 40 years, is the performance of the PP due to it covering all economic conditions, or it covering all economic conditions of a strong region?
I don't know.  The PP tests pretty well in any economy that has at least some diversification and a reasonable stable currency.  I don't know how well a Zimbabwe PP would work.
Also, is it possible for a region-specific permanent portfolio to perform well if the overall prosperity / world presence of that region is declining / shifting to different areas?
I assume you aren't talking about the United States, which is the largest economy in the world.  If a tectonic shift occurred, the U.S. would still be a top 5 world economy.  I don't see the U.S.'s many structural economic advantages coming unraveled as quickly as many doomsters seem to imagine (though I used to believe that a fast collapse was possible and even likely, but I no longer feel that way).

Re: Not Even Harry Browne Thought It Was Going To Be This Bad

Posted: Wed Jul 10, 2013 2:01 pm
by moda0306
Libertarian666 wrote: Ok, so then this would be an acceptable post? If you say so.

-------------------
I really think if "monetary realists" didn't have such a deep reluctance to admit the tail risks they are ignoring, they would have a much easier time seeing the light.

They are literally being blinded by their inability to admit that their portfolio could be demolished by a freeze-up of the US financial system.  I mean if you've gone your whole life thinking you're essentially safe in believing that the US empire is different from every other one in history, it can be hard to look at the system as one that could collapse without warning and leave your "safe portfolio" in ruins.

Admitting Austrian economics is correct would mean that a "monetary realist's" belief in the stability of the financial system was mostly a myth.  People don't like to concede that kind of "wrongness," especially if we've held these views for a long time. 

I'm not saying there isn't some life left in the current system, but it becomes a lot more of a nuanced discussion rather than "tail risks in the current system can be safely ignored" or whatever the common wisdom is.
Who's not properly handling tail risks.  Most people here hold 25% of their investment portfolios in an asset that will go absolutely gangbusters, even in real terms, upon the demise of the currency of the most stable legal entity in the world, and the world's reserve currency.

When I say "it's really hard" to change one's opinions when you're emotionally invested, I'm not saying you're emotionally immature, I'm saying you're human.

I could have gone on about similar things among liberals or conservatives.  I've found most MR'ists to have a deep desire to understand the system, not diagnose it before they even understand it.