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General Discussion on the Permanent Portfolio Strategy

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Cortopassi
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Re: No where to hide

Post by Cortopassi » Thu May 14, 2015 2:06 pm

I know we are getting off the original topic, but a couple things come to mind.

--Bureaucrats moan depending on left or right on cutting spending or increasing spending for different programs.  For example, the Amtrak derailment, caused increasing or decreasing funding for Amtrak to come to the forefront.  In the range of single billion up or down!  Why/how can these amounts of spending possibly be a concern when $85 billion was used per month during QE?  I am sure someone will explain to me it's not the same, not really "real" money, etc.  I just found the magnitudes interesting.  Social Security payouts per month are recently $72B a month.  What am I missing?  Seems that $85B could have been put to amazingly better use.

--As an engineer, we were talking about this positive train control being discussed and some outrageous cost mentioned for it.  I know it is simplistic, but with a smartphone with mapping/GPS or a Garmin system, an interface to the throttle of the train and I could have a working system to control train speed in production probably for less than $100k.  What am I missing?

A somewhat frustrated citizen.
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Re: No where to hide

Post by moda0306 » Thu May 14, 2015 2:19 pm

Corto,

To your first question, QE is not adding net new assets to the economy, while deficit spending is.  That's why you'll see a collective shrug out of most people here when the Fed "prints money," because taken in full macro-economic context, it's really not doing much of anything. It's giving people one form of fiat paper for another one.

(I've been waiting for MR principles to start getting debated again!!)
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Re: No where to hide

Post by Cortopassi » Thu May 14, 2015 2:25 pm

Moda,

I think I understand, but then why were so many intelligent well schooled pundits/commentators, etc. so firmly convinced that QE was going to cause inflation, or even hyperinflation?  It obviously didn't, or at least not immediately.

MR?
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Re: No where to hide

Post by Pointedstick » Thu May 14, 2015 2:39 pm

Cortopassi wrote: Moda,

I think I understand, but then why were so many intelligent well schooled pundits/commentators, etc. so firmly convinced that QE was going to cause inflation, or even hyperinflation?  It obviously didn't, or at least not immediately.

MR?
If they were all wrong, then I guess that calls into question just how intelligent and well-schooled they were, eh? ;)

If any given financial commentator was right, why would they be doing commentary instead of putting their money where there mouths were and buying assets that would profit from this predicted hyperinflation? I'll bet that very few of these guys decided to put 100% of their assets into gold and TIPS and the like. That should tell you how much faith they had in their own predictions. Their yapping is just noise; ignore it.
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Re: No where to hide

Post by moda0306 » Thu May 14, 2015 3:38 pm

Corto,

MR = Monetary Realism.  It's a school of thought around money trying to describe how our fiat currency system actually works.  Personally, I find some of the lessons and explanations within MMT (Modern Monetary Theory) to be easier to digest earlier on in my "how the f'k does our monetary system work" days, but MR is 1) technically more correct on how the operations actually work, and 2) not nearly as heavy handed with regards to policy prescriptions.  MR & MMT have some Keynesian-esque foundations along with what I'd argue is a few "Austrian" economic foundations (production is SUPER important).

Those pundits, while perhaps intelligent on micro-finance, are pretty lacking when it comes to macro-economics.  A lot them follow deficit-hawkery that is tied into monetarism and Austrian economic philosophies.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."

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Re: No where to hide

Post by moda0306 » Thu May 14, 2015 4:18 pm

TennPaGa wrote:
Cortopassi wrote: MR?
moda0306 wrote: Corto,

MR = Monetary Realism.  It's a school of thought around money trying to describe how our fiat currency system actually works.  Personally, I find some of the lessons and explanations within MMT (Modern Monetary Theory) to be easier to digest earlier on in my "how the f'k does our monetary system work" days, but MR is 1) technically more correct on how the operations actually work, and 2) not nearly as heavy handed with regards to policy prescriptions.  MR & MMT have some Keynesian-esque foundations along with what I'd argue is a few "Austrian" economic foundations (production is SUPER important).

Those pundits, while perhaps intelligent on micro-finance, are pretty lacking when it comes to macro-economics.  A lot them follow deficit-hawkery that is tied into monetarism and Austrian economic philosophies.
To expand on the Monetary Realism stuff, if you are interested...

A fellow named Cullen Roche has developed this school of thought.  He maintains a couple of different websites:

www.pragcap.com
www.monetaryrealism.com

He's also upload a number of papers on the Social Sciences Research Network:

Cullen Roche papers on SSRN

He's not the greatest writer, but he's worked really hard at explaining the operational realities of the monetary system.

We used to have many thread here discussing these issues.
Is the plural of thread "thread"? :)
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Re: No where to hide

Post by ozzy » Thu May 14, 2015 5:38 pm

For those interested, here's a good 30min video on how the ecomony works, according to Ray Dalio:

How The Economic Machine Works by Ray Dalio
https://youtu.be/PHe0bXAIuk0
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Re: No where to hide

Post by madbean » Thu May 14, 2015 5:45 pm

ozzy wrote: For those interested, here's a good 30min video on how the ecomony works, according to Ray Dalio:
The one thing that has always impressed me with Austrian Economics is the admission that nobody really knows how the economy works. There are simply too many moving parts.

Only problem is that then they turn right around and predict that we are headed off a cliff. How do they know?
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Re: No where to hide

Post by moda0306 » Thu May 14, 2015 6:04 pm

madbean wrote:
ozzy wrote: For those interested, here's a good 30min video on how the ecomony works, according to Ray Dalio:
The one thing that has always impressed me with Austrian Economics is the admission that nobody really knows how the economy works. There are simply too many moving parts.

Only problem is that then they turn right around and predict that we are headed off a cliff. How do they know?
Similar to Harry Browne, they commit the fallacy of composition.  Instead of really getting into economics, and the actual study of behaviors of people, they basically say that we all are the most efficient seekers of our own best interests, and therefore the freest markets reflect the best interest of the people as a whole.  Their supposed attempts at viewing history is more cherry-picking than analysis, IMO (OMG we cut spending in the 1920 recession and had an economic boom!) (OMG Weimar)

They also assume the validity of capitalist property norms in the pricing mechanism.

They have some really good ideas worth reading, but I think they fall off some cliffs that are just too high to ignore.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."

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Re: No where to hide

Post by Stewardship » Fri May 15, 2015 12:19 am

moda0306 wrote: Similar to Harry Browne, they commit the fallacy of composition.  Instead of really getting into economics, and the actual study of behaviors of people, they basically say that we all are the most efficient seekers of our own best interests, and therefore the freest markets reflect the best interest of the people as a whole.
IMO HB says that government intervention can't be desirable to the people as a whole unless it improves upon a free market system.  Then he gives example after example of how it does just the opposite.  I don't see a fallacy there.
In a world of ever-increasing financial intangibility and government imposition, I tend to expect otherwise.
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Re: No where to hide

Post by Stewardship » Fri May 15, 2015 12:59 am

ochotona wrote:
Stewardship wrote:
Ad Orientem wrote: Stating that government never works is just silly.
Have you read Why Government Doesn't Work by HB?

I believe HB would respond: please give a single example of a government program that works well.
If the government didn't operate traffic signals, I believe my 30 min commute today would've been like 3 hours with uncontrolled intersections. I do not believe organizations would voluntarily and charitably spring up spontaneously to handle this work. Also sewers, clean water, these are nice things. It could be better, but our food is relatively safe... safer than China, though much less delicious. All of these attributes are conspicuously absent in the third world, or countries headed toward that status, like Greece or Venezuela, where tax evasion is also rampant.
Traffic signals.  How many businesses would pay to operate traffic signals if they could advertise on them during a red light?  A lot, I surmise.  That's just one idea and I'm sure entrepreneurs much smarter than me could come up with even better ideas.
Sewers and water.  I can't think of any reason why competing private companies couldn't provide a superior service for less.
Safe food.  I don't know... organics are booming, so not everyone is confident about their food here in the United States.  China also regulates their food industry, so you are kinda making the argument that government doesn't work rather than disputing it there.  :-\

Third world countries regulate business as much or more as first world, save flourishing black markets, so I think that point is moot.
Last edited by Stewardship on Fri May 15, 2015 1:14 am, edited 1 time in total.
In a world of ever-increasing financial intangibility and government imposition, I tend to expect otherwise.
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Re: No where to hide

Post by ochotona » Fri May 15, 2015 5:21 am

So my sewers are run by a private company, which is funded by a municipal district which is a very tiny lightweight layer of government. It's low cost and efficient, but it is government. It's "single payer". There are no competing companies with different sewer systems drilled into the earth vying for my individual business.
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