MR Theory

[l2jperry]

Hello all,

New here... but I have read the new PP book, as well as Harry Browne's initial book. I'm 22 years old, working full time as a graphic designer, as well as maintaining a print media business through the internet (making and selling stickers, pins, t-shirts, banners, etc.). It is going fairly well. I got interested in Politics and Economics in 2007 thanks to Ron Paul... I have since gathered most of my knowledge on Economics from the Austrian Perspective, Peter Schiff, Jim Rodgers, Mises Institute, etc ... but even that I don't have a full grasp on. Regardless, most of the information I have been inclined to read has been from people predicting hyperinflation, or a currency crisis. Only recently have I been looking around for alternative approaches in Investing, and I must say that the PP really caught my attention, and I am very inclined to go with this strategy.

I have been reading the posts on here, and you all seem like very intelligent people that I would LOVE to learn from. One thread in particular stood out to me, but it looks like the conversation died out back in July. It was a thread going back and forth between some Austrians who talk of hyperinflation/currency crisis and others were talking about something called Monetary Realism (or something a long those lines?) It was the first I had heard of it. Anyway, I was very interested, and would like to open that discussion back up simply for the knowledge, and for questions I have.

Any suggested reading on this for me? Also... from my understanding of what many of you were saying is that the scenario for hyperinflation isn't very likely because the U.S. is such a productive economy and then when the FED is inducing QE it is merely swapping assets, not creating more money. Correct? I was under the impression that the FED was buying U.S. treasuries with cash or numbers that they made up digitally from Banks, is this correct so far? If it is, then what is stopping the banks from loaning out this money? I realize inflation is not really all that present right now, but if the banks started to lend out this newly created money, wouldn't inflation really start to show up? I have read that, the banks have more excess reserves than they normally do, so that is why we are not seeing inflation, but if they started to loan out these excess reserves, we would see inflation. Is that true? I am curious just because I am not 100% sold on the PP yet, although I am leaning towards it. Being young, and refraining from consumption in order to save while everyone else is out there spending there money really makes my savings very dear to me (even though I am sure it is for everyone.) So I care much about it, and am very open to all theories/ideas.

Just a few questions to get this started... I am rather new to all of this, so while reading your posts, I sometimes grasp a little bit of it, but not all of it . So I made an account so I could ask questions.

[Pointedstick]

Hahahaha! Just stick around, we seem to have this discussion every day. Mostly in the "Other Discussions" section. Welcome to the forum!

[Kshartle]

Gumby! Is that you! Moda! Tech! Who is pushing these buttons?!?!!?

perry....stick around.....PS made a prediction that is 100% certain.

[rickb]

If you're looking for reading material, see the references in this thread:

http://gyroscopicinvesting.com/forum/ot ... tives-org/

[moda0306]

Our debates on Monetary Realism and Austrianism have taken us into the depths of human nature and morality.  And I do mean DEPTHS.

I'm really not feeling well tonight, so I can't really get into it, but hopefully others can provide links and help out.

Oh and don't listen to Libertarian666 or kshartle.

[l2jperry]

Nothing.

But banks don't lend out reserves.  More specifically, lending is not reserve constrained.  Banks lend when they have credit-worthy customers seeking to borrow.  Their ability to loan out money is independent of the machinations of QE.

Interesting. Could you elaborate on what reserve constrained means? If QE is just a credit swap of assets between bonds and cash, and if banks do not lend our their reserves at the central bank, what then, is the point of QE?

Yes, if bank lending increased significantly, we would see inflation (all other things being equal).  But, again, bank lending is not reserve constrained.

Do banks make more money off of collecting interest on reserves than they other wise would by lending at present? If such is the case, if the interest rate changes where it is more profitable to lend, wouldn't banks then do so? It seems to me that it has been proven time, and time again that banks are not to overly worried about lending out money because it has been shown that they do not have to pay the consequences of these actions. Isn't it in the banks best interest to give out as many loans as possible in order to make a profit?

Thanks for all your posts guys, I will have lots of reading to do, just a little worried that some of it is going to go over my head.

(P.S. - not sure how to get the quotes working properly.)

[Xan]

(P.S. - not sure how to get the quotes working properly.)

I think the main problem is the spelling of "quote".

[Rien]

New here... but I have read the new PP book, as well as Harry Browne's initial book.

I am also rather new here, but a "bit" older than you...
May I suggest that you also listen to the radioshows of H.B.?
To me that was a big eye opener, even after knowing about the PP.

Like you, I am still not sold on PP. Especially once a post by Kshartle pointed out that PP does not capture volatility.

As to future economic conditions... interesting, but is it relevant to investing?

[Kshartle]

New here... but I have read the new PP book, as well as Harry Browne's initial book.

I am also rather new here, but a "bit" older than you...
May I suggest that you also listen to the radioshows of H.B.?
To me that was a big eye opener, even after knowing about the PP.

Like you, I am still not sold on PP. Especially once a post by Kshartle pointed out that PP does not capture volatility.

As to future economic conditions... interesting, but is it relevant to investing?

Thanks for the shout out, I'm sure some will not believe I proved it, they are welcome to look at the evidence and explain where I am wrong.

[moda0306]

Kshartle,

Could you point us to that exchange?  It seems to me that with bands at 35/15, the PP captures (harvests) long-term volatility to its advantage, but uses the short-term volatility of each asset to make it overall less volatile in the short-term, though, obviously, not technically "harvesting" that volatility.

[Kshartle]

Kshartle,

Could you point us to that exchange?  It seems to me that with bands at 35/15, the PP captures (harvests) long-term volatility to its advantage, but uses the short-term volatility of each asset to make it overall less volatile in the short-term, though, obviously, not technically "harvesting" that volatility.

The bands hamper the capture of long-term volatility if an asset goes a particularly long run (decades).

I'll try to dig it up, it was a month or two back.

[moda0306]

Kshartle,

Could you point us to that exchange?  It seems to me that with bands at 35/15, the PP captures (harvests) long-term volatility to its advantage, but uses the short-term volatility of each asset to make it overall less volatile in the short-term, though, obviously, not technically "harvesting" that volatility.

The bands hamper the capture of long-term volatility if an asset goes a particularly long run (decades).

I'll try to dig it up, it was a month or two back.

Absolutely it does, but let's not forget that the MAIN purpose of rebalancing is to reposition ourself to handle certain risks more effectively, not necessarily to make more money because we really, really think the other ones are going to bounce up.  The bands have worked well in the past, but are based more on risk-exposure than optimizing RoR by looking backwards.  Simply put, having more than 1/3 of your portfolio in one asset begins to look really risky.

[Kshartle]

Kshartle,

Could you point us to that exchange?  It seems to me that with bands at 35/15, the PP captures (harvests) long-term volatility to its advantage, but uses the short-term volatility of each asset to make it overall less volatile in the short-term, though, obviously, not technically "harvesting" that volatility.

The bands hamper the capture of long-term volatility if an asset goes a particularly long run (decades).

I'll try to dig it up, it was a month or two back.

Absolutely it does, but let's not forget that the MAIN purpose of rebalancing is to reposition ourself to handle certain risks more effectively, not necessarily to make more money because we really, really think the other ones are going to bounce up.  The bands have worked well in the past, but are based more on risk-exposure than optimizing RoR by looking backwards.  Simply put, having more than 1/3 of your portfolio in one asset begins to look really risky.

Yes I've said as much in the thread. Swamped with work at the moment or I'd dig for it.

[Xan]

http://gyroscopicinvesting.com/forum/pe ... /#msg78970