The Daily Reckoning December 14th

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Economics in 99 Pages

Imagine you have a friend who is completely unfamiliar with economics. Imagine further that he says he is going to read exactly 99 pages of economics and no more. What would you suggest that he read? I submit that Faustino Ballve’s Essentials of Economics: A Brief Survey of Principles and Policies would be an excellent candidate.

The book offers an admirable combination of breadth and brevity, and it delivers on everything promised in the title. The reader will come away with a brief survey of the essential principles of our beloved dismal science, a bit of familiarity with the intellectual genealogy of some of the ideas, and a handful of applications. At 99 pages, Essentials of Economics is a masterpiece of efficient communication of economic ideas.

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It is an ideal introduction to economic thinking for people who haven’t the time or the inclination to conquer such massive tomes as Human Action, The Wealth of Nations, or Man, Economy, and State — though I suspect that the uninitiated reader with Essentials of Economics on his nightstand or e-reader for a few days will be much more likely to read further.

By the end of the book, the reader should be convinced that, in the words of Gustavo R. Velasco’s preface to the Spanish edition, “It is not possible to escape from economics.” Ballve’s method follows in the tradition of the economists working then (and now) in the tradition of Carl Menger and Ludwig von Mises.

He begins from a set of very simple postulates — scarcity and action — and deduces from these a body of propositions that help us make sense of the world around us. Ballve writes with a passion and verve that makes sometimes dry concepts come to life. In the course of 10 short chapters, he explains to the reader what economics studies, how markets work, what entrepreneurs do, how income flows to factors of production, the origins of money and credit, the origins of business cycles, and the fallacies of protectionism, nationalism, socialism, and interventionism.

While reading, I was continually impressed with the problems we face as teachers, scholars, economic communicators, and citizens. Research on public opinion and public policy — like Bryan Caplan’s 2007 The Myth of the Rational Voter, for example — suggests that the fundamental problem with economic knowledge is not that many voters don’t understand the fine points, nuances, and subtleties of sophisticated macroeconomic models.

Rather, from all appearances, it looks like voters take issue with the most basic ideas in economics: People respond to incentives, resources are scarce, and trade creates wealth. Without getting bombastic or unnecessarily strident, Ballve reminds us how important these principles are in a translation that absolutely sparkles.

Much of what Ballve wrote will seem obvious today, and some readers might find his criticism of econometrics somewhat dated. It is important to remember the context in which Ballve was writing. The book first appeared in Mexico in the 1950s and in English in the early 1960s. The consensus at the time, even among professional economists, was that Mises and Hayek had lost the socialist-calculation debate. Keynesian macroeconomics ruled the roost.

Ballve stepped into this environment and produced a very short, power-packed volume that offers an unapologetic defense of markets and liberty that relies not on a stubborn refusal to remove ideological blinders, but on a nuanced understanding of the sciences of human action. Speaking of which, readers familiar with Mises’ Human Action and Adam Smith’s The Wealth of Nations will find much in this book that they recognize; indeed, there were times I felt like I was actually reading Mises or Smith.

For the uninitiated reader, it is a fantastic introduction. For the expert, it is a valuable refresher. For everyone, it is a valuable addition to any reading list. I expect to return to my notes on it quite frequently.

In short, Essentials of Economics is a book that any economist would be proud to have written. It offers a valuable corrective to the errors that inform too many policies. If we take Ballve’s lessons to heart, we can perhaps fix some of the damage done by policies made by those who either do not understand economics or reject it outright. At the very least, we can avoid making bad situations worse.

That Essentials of Economics has not received more attention than it has is curious, if not scandalous. I hope that this new Laissez Faire Books edition will remedy that. The world will certainly be better for it.

Sincerely,
Art Carden

Original article posted Laissez-Faire Today 

Economics in 99 Pages appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

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The State is Doomed…and Other Reasons to be Optimistic

The last few times I was invited here to speak, I talked about anarchy…the trend toward mass, geo-political decentralization, currency collapse, sovereign defaults…and the end of the global economic system as we know it.

For reasons unknown to me, people thought I was being pessimistic.

So today, I’m going to try something different. Something cheerier, peppier.

Therefore, the title of this presentation is:

“The State is Doomed…and Other Reasons to be Optimistic”

I’m fairly confident members of this audience have better things to do with their time than to follow tedious political cycles in the news. For those of you lucky enough to have escaped the circus, I’ll just let you know that there was an election in the US recently. It was between this guy:

And this guy:

Now don’t worry if you didn’t catch the action. You didn’t miss anything. Both of these guys are pro war, pro Federal Reserve, pro bailouts, pro corporatism, pro currency debasement, pro IRS, pro Patriot Act, pro deficit spending, pro drones, pro NDAA, pro indefinite detention of American citizens without trial or due process…and plenty more besides.

They agreed, in other words, on basically all the major issues.

That means anti-liberty…anti-freedom…anti-individual…anti, in a word, You.

But…according to the system in place…one of them “had” to win.

As the terminally quotable Emma Goldman once quipped: “If voting changed anything, they’d make it illegal.”

Those following the election through the Daily Reckoning lens might have caught our own brand of commentary in the lead up to the election. I pulled this from a column I wrote titled, Obamney vs. Robama:

Gradually, the non-voter class is wizening up to the fact that the act of voting is more akin to kissing one or the other cheek on the same bloated derrière than exercising any quaint, propagandized notion of “civic duty.” After all, a buttock smooch will not change the chief function of that end of the political anatomy. Indeed, the soft seat of the body politick is built for expelling one thing and one thing only…as the candidates dutifully and effortlessly displayed.

Happily for us non-voters, we were once again the majority:

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Nevertheless, President Obama’s reelection sent a secession wave across the nation. Or at least a ripple. I covered this in a Daily Reckoning column titled, perhaps optimistically, The Road to 7 Billion Secessionists.

Perhaps unsurprisingly, it was the Texans who led the charge. Here’s a snippet from their petition, as filed on a dot.gov website. (Because really…what better way to “stick it to the man” than to visit his website and kindly beg of him permission to do so?)

The US continues to suffer economic difficulties stemming from the federal government’s neglect to reform domestic and foreign spending. The citizens of the US suffer from blatant abuses of their rights such as the NDAA, the TSA, etc. Given that the state of Texas maintains a balanced budget and is the 15th largest economy in the world, it is practically feasible for Texas to withdraw from the union…to do so would protect its citizens’ standard of living and re-secure their rights and liberties in accordance with the original ideas and beliefs of our founding fathers which are no longer being reflected by the federal government.

Seems a pretty reasonable list of grievances, no? And it wasn’t just folks in the Lone Star State who were annoyed at the “changeless change” coming to the White House.

Indeed, within a week of the election, some 675,000 rebels had inked 69 petitions, issuing forth from all fifty currently-united states.

Folks from Louisiana, Florida and Georgia were among the most enthused of the seditious lot, garnering 36,738…34,468…and 31,799 signatures respectively. Tennessee, North Carolina and Alabama all posted more than 30,000 names.

Robamney has promised to grant a generous “review of online proposals” to petitions that attract more than 25,000 names.

Ah…can you smell that freedom?

But before our Fellow Reckoners grab their muskets and go charging off blindly to join the good fight, a little perspective may be in order.

31,799 signatures might seem like a lot of support…but it still lands the Georgian secession petition shy of the 33,869 signatures currently accrued to the Petition to “Not Allow The FDA To Regulate Premium Cigars.” To be sure, however, it did beat out the 31,788 brave and treasonable individuals championing the petition to “Finalize Standards for GLUTEN-FREE Labeling.”

There’s little doubt that the secessionists are in the minority…for now.

Still…there’s often value in being part of a minority…like the minority of people who decided to buy gold in 2000, when Bill Bonner issued his Trade of the Decade. In fact, I rather suspect attendees at Agora conferences are more comfortable residing in the minority than joining the longer queue. Independent minds find little comfort in the false security of consensus.

So why are folks…at least SOME folks…so upset?

Well, at $16.2 trillion, the national debt comes to roughly $50k per man, woman and child…or nearly three times that much per taxpayer. At current growth rates, that amount will explode to over $22 trillion by the next election, or roughly $70k for each and every beating heart in the union.

But who pays what?

Some say everyone needs to pay a “fair share.” But what constitutes “fair”…and who is so wise as to decide? Is it fair, for example, to simply divide the total amount outstanding among 300 million or so individual “Americans”…each of whom happen to have been birthed, through no fault or accomplishment owing to them, on a particular piece of land? And what about the generation not yet even born? It seems more than just a breach of decency to stick them with the bill for boondoggles they were not even alive to see pass.

Predictably, therefore, not everyone is happy with this arrangement. You’ve seen the pictures from the Occupy protests around the country. Here’s one from Oakland.:

Judging by the demographics represented in these protests, one may determine that this particular movement has something to do with this trend…

Which is directly related to this trend…which has been firmly in place since 1913…

All of which brings us to the last stage of what I’m going to call “Late, Degenerate Statism.”

The State is always, and has always, been an unworkable delusion. The great empires of history have all gone to ashes in service of precisely that point. Not one has survived the burden of its own aspirations. Each succumbs, in its own good time, to inexorable decay.

Often times, the final stages of Late, Degenerate Statism involve wanton acts of desperation, where broke and broken States try everything to hold onto and exercise brute power over those it affects to serve. We are talking here about capital controls, increased and burdensome regulation, censorship, surveillance, a tendency toward power centralization, consolidation of crony-corporate interests and, ultimately, police militarization or, The Police State.

Protesters, in addition to voters, need to be careful what they wish for…lest they get it, as the great H.L. Menken once said, “good and hard.

Tracking this trend, a Center for Investigative Reporting study found that local and state police forces were the merry recipients of $34 billion in federal grants since September 11, 2001. What does all that money buy you? A whole lotta servin’ and protectin’…

Just look at this spiffy new Serve and Protect Vehicle, for instance, recently purchased by the Doraville Police Department in Georgia.

“The Devil Went Down to Georgia…”

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This regression is all part and parcel of, as I mentioned earlier, Late Stage, Degenerative Statism. What we’re seeing here is a graphic display of precisely what it is The State does and, more importantly, how it trends. That it is collapsing around us is cause not for lamentation, but for celebration.

In tomorrow’s issue, we’ll spend some time detailing a few ways in which the free market is developing creative workarounds to The State’s repressive and, thankfully, moribund existence.

Regards,

Joel Bowman,
for The Daily Reckoning

The State is Doomed…and Other Reasons to be Optimistic appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

The Best Time To Buy Gold, Is…

If we lived in India or China the holiday season would be filled with gold purchases.

Here in the U.S. we’re not as apt to deliver gold for Christmas as we are a new video game or iproduct.

There is however one trend here in the U.S. that can help us with our gold-buying mindset. Let’s take a look…

A few weeks ago our own holiday season kicked off with Thanksgiving. And with the advent of the holiday comes the first official buying day: Black Friday.

What’s Black Friday got to do with gold? Not much. But there is a lesson: buy when there’s a bargain. After all, who wants to pay full price for an item – when you can buy it at a discount?

That said, the best time to buy gold is simple: You buy it when it’s on sale!

The Gold Sale Season?

Relatively speaking, gold is on sale right now. From its most recent price above $1,900, buying gold today is like slapping a 10% off sticker on the 2011 high. But there are more immediate price targets that we’ll want to keep an eye on – one that may offer an even more substantial savings.

Look at it this way…

2008’s market meltdown gave us a solid understanding of gold price action amidst turmoil. Back then, throughout the whole year, the fundamental case for gold remained strong. Yet, the financial fallout shaved 25% off the price of the Midas metal.

If we use 2008 as a playbook, which I urge you to often do, you’ll see that regardless of the fundamental case for gold (see: immense amounts of government debt and stimulus) prices can still drop.

So, regardless of the recent Fed chatter (which is, by nature, bullish for gold) there are two reasons to think that general market action could pull the price of gold lower. Namely, the “fiscal cliff” and “debt ceiling” talks.

Time will tell, of course. But the key for us is having a target gold price where we know we’ll be buying the metal at the best relative price we can get. Why buy that 55” Samsung flatscreen at $1000 when you can get it for $799, right?

Looking at the 6-month chart, gold’s price action tells us two things…

First, this 6-month chart shows the last two “steps” higher for gold – at $1,600 and $1,700. In a longer view, it’s clear that gold has been slowly stepping higher, a 100 bucks at a time. Indeed, if you were to lay this chart over a chart of the continually increasing money supply, you’d see a solid fundamental relationship.

This stimulus-based relationship goes back to early 2009 (when the bailout and fed action began) with gold starting at $1,000. Like a superstitious hotel elevator, the price of gold made a steady stop at every $100-floor, other than the 13th. Right now we’re sitting at the 17th, but we’re, not at the penthouse yet my friend .

The second trend you’ll notice in the chart above is a consolidation pattern forming, again. Much like we saw gold consolidate around $1,600 earlier this year, prices look to be consolidating around the $1,700 mark, today.

Consolidation, as we’ve outlined here before, is the precursor to a big move. But, buyer beware…this move could come in either direction.

If the market plummets on fiscal cliff or debt ceiling talk, gold could soon follow. Remember, when investors start losing money in other sectors and need to clear up some cash, they start selling their good assets with the bad. That’s what we saw in 2008 and we could be set for a repeat.

Hunt For Bargains At These Levels…

This is where the bargain hunting begins. With a clear head and, more importantly, a clear price target, we can make sure we’re buying gold at the best possible level.

There are two price points where you can count on gold being a good buy.

The first would be on the upside. If we see gold break out of its consolidation around $1,700 and it breaks above $1,745, it’s time to grab some gold and hold on. A sharp move to the upside could signal gold’s next try at all-time highs.

Our other buy point could be on the downside. If gold breaks from its recent consolidation to the downside we could see a quick $100 shaved off the price per ounce. If you’re a long-term buyer of gold, don’t even pay attention to this trading fluctuation. But, if you’re looking to buy some bullion, this is your opportunity.

Looking at the chart we could see a solid opportunity around $1,575. This price target takes in to account gold’s past consolidation point. With strong support at $1,550 I’d be a buyer at slightly above that, at $1,575.

After a quick stint at lower prices gold’s fundamentals could kick in, just like we saw in 2008. Over the past 5-years that was the best buying point for gold. It also led to a 150% gain, just in the price of bullion.

If we see a portion of that move, gold could be perched well above $2,500 sooner than you think.

At either buy-price target, though, look for gold to continue its fundamental relationship with the ever-growing money supply (thanks to Ben Bernanke’s latest comments we can count on the money supply rising for years to come.) Luckily, though, this confluence of events – fed spending and fiscal cliff looming – could lead us to a solid bargain. Stay tuned.

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Keep your boots muddy,

Matt Insley

Original article posted on Daily Resource Hunter 

The Best Time To Buy Gold, Is… appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

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avatarThe Daily Reckoning - The Daily Reckoning posted Friday, December 14th, 2012.

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