Posts Tagged ‘congress’

Where Does Speculation Come From?

Wednesday, January 21st, 2009

Speculation, as we know, comes about when bridge trolls get hold of refined sugar.  The rush of the abrupt shift from their normal grumpy diet of bone marrow and gruel, causes the trolls to dance out from under their bridges in a miasma of invisible gaseous trollulose, which makes the human world go mad.  Florida real estate soon follows.

This makes as much sense as most more commonplace explanations, when explanations are considered at all, and like “greed” most trolls are invisible– all you’ll ever see is their supposed primary effects.  (Something else: it’s frustrating that Congress has made no determination to regulate this bridge troll problem– a simple matter of requiring that no sugar, sodas, or baked goods be transported within five miles of any bridges– easily accomplishable by the use of dirigibles.)

Words must be made to work properly, and work hard, on behalf of their human (or egg) masters, contended Humpty Dumpty.  (I believe that Mr. Dumpty would have no issue with the slight shock transition here, since he’s willing to end poems in the middle of a sentence.  I’m not sure that every egg would have the guts to do that.)

It’s because of my humble attempts to make Mr. Dumpty’s philosophy of language live and breathe, and to do as he says (not to criticize too harshly, but as he says, not always as the great but inconstant semanticist does), that my keyboard caps lock key remains nearly virginal.  Its use could be viewed as a kind of cheating, since it deprives words of their proper labor.  I hardly ever even use exclamation points!!

But I’m drawn to embark on a strange desperate exercise:

Locate caps lock.  Check.

Fingers limber.  Check.

Brain function engaged…

Brain function engaged…

BRAIN FUNCTION ENGAGED!!… CHECK!!

CAPS LOCK ON…

OH… ALREADY ON.  I MEAN CHECK.

SPECULATIVE BUBBLES ARE NOT CAUSED BY BRIDGE TROLLS:

SPECULATIVE BUBBLES ARE CAUSED BY MONEY AND CREDIT CREATION. THIS WAS TRUE IN THE MISSISSIPPI BUBBLE IN THE 18TH CENTURY.  IT WAS TRUE IN THE STOCK MARKET BUBBLE OF THE ROARING 20’S.  AND IT’S TRUE TODAY.

One can sort of understand– though not without some contemptuous lip curl– why our leaders skip over this simple analysis to get straight to their “solutions”.  Sub-consciously at least, they must know that close examination of speculative causes would for them be an exercise even more perilous than my latent discovery of the caps lock key will no doubt be for me.  Blame is a dish best served over-spiced, over-garnished, and over-sauced, to someone else, who really only wanted a sesame bagel.

And anyway, there’s an easy short cut for politicians to skip from their vigorous, over-sauced non-analysis to expensive, fatuous, over-garnished non-solutions.  That short cut of course, is GREED.

Why was there speculation?

Greed caused it.

Oh well then, there you go.  We need a solution for that.

Never mind that greed can cause or not cause anything, or anything’s opposite.  A greedy child could hoard all his lollipops, or give all of them away hoping to be rewarded with ice cream.  Gordon Gekko had it completely wrong, even from his own imperturbable perspective.  “Greed,” Gekko should have said, “is meaningless.  Greed, for lack of two better words, doesn’t tell us crap about crap.”

Great bubbles aren’t arithmetic sequences.  They need pyramids of money, to enrich early speculators and stimulate the fantasies of growing numbers of newbies.  Whatever any politician or central banker (or non-central banker) says, we need to keep track of this fact– it’s not possible to come by these pyramids honestly– an honest society with honest institutions would never be able to keep these pyramids marching.

In The Theory of Money and Credit Ludwig von Mises said, “It is impossible to grasp the meaning of sound money, if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments.  Ideologically it belongs in the same class with political constitutions and bills of rights.”

We could hardly be further away from such a concept.  In fact (as some have recently pointed out), it’s more like we’re living in Atlas Shrugged, with very unsound money “solutions” that cause problems which appear to need more problem causing solutions.  No where on the horizon is there any Atlas capable of shrugging.  (At this point, I think most tax payers would settle for an Atlas with any capability to restrain himself from whimpering behind an outstretched begging hand.)

AS FOR THE U.S. MONETARY SYSTEM, THAT’S A CONTRIVANCE THAT ONLY TYRANTS AND SPECULATORS COULD LOVE.

By Les Lafave

Abolish The Federal Reserve – themaestrosrep.org

Originally Published at Strike The Root – 01/20/09 

Food Shortage Or Money Glut?

Thursday, May 8th, 2008

Why are food prices rising?

I watched Becky Quick on CNBC give Senator Bob Casey a superb opportunity for a mea culpa (ethanol subsidies), but for some reason he didn’t grab it with any real enthusiasm.

There are multiple causes and plenty of blame to go around, explained Senator Casey, very carefully never mentioning ethanol subsidies again (he’s on the Senate Agriculture Committee). The Senator enumerated a few other causes, somehow failing to notice that Congress is pretty much to blame for these as well:

  • Weak dollar (due to the Federal Reserve that Congress created, and Congress’s absurd, insatiable profligacy.)
  • Higher energy prices (due to the weak dollar as above, plus Congress’s generalized short-sighted, pandering interference and nimbyness.)
  • Increased demand in India and China (O.K., so maybe Congress is only three for four (including ethanol subsidies), though couldn’t it have occurred to Senator Casey before now that other people besides Americans might want to live comfortable lives and eat food?)

There’s another likely (and likely primary) culprit that Senator Casey didn’t mention directly: Inflation.

Economist Milton Friedman said that, “inflation is always and everywhere a monetary phenomenon”, which could be roughly translated as “the government did it.” Other factors can show up later, but monetary inflation is the necessary condition and first cause of any significant inflation of any kind.

Once government gets the ball rolling with monetary expansion, then the expectations and mood changes of the populace can have an impact. Whereupon, in a disgusting display of scapegoating by the powerful and pulpitorially well-endowed of the helpless and voiceless, they (yes Senator Casey, you’ve been there little more than a year, but you’re a quick study– you’ve slipped in smoothly as a part of they), they point to the people whose lives they’re destroying and say the boiled down equivalent of: “Those benighted peasants– they’re panicking; they’re hoarding; they’re speculating. They have nothing to fear but fear itself, and now damn them, they’re fearing it, which is destabilizing the economy that we worked so hard to stabilize with uncontrolled masses of debt and by changing policies every twenty minutes.” This too is an unfortunate always and everywhere phenomenon.

Even worse (though not quite more revolting) than this blame the victim phase is the type of solutions it can lead to– inevitably insane, since the “solvers” can never correctly diagnose themselves as the problem.

Fear, speculation and “hoarding” (which when government does it with taxpayer money is called a strategic reserve) are necessary market functions– part of the pricing mechanisms of the economy which help it move resources where they need to go. To try to stop them or blame them makes no more sense than it would for an individual to stop eating because digestion, when broken into parts, seems such an unpleasant process. If somehow it had been possible to do the impossible and completely suppress all of these economic mechanisms out of existence, then even now (for example) there’d be no green energy movement (here referring to the more rational ethanol subsidy free side of green). Instead, we’d simply and happily use our last drop of oil someday and say, “Darn– I hope we don’t run out of beer too.”

This can’t happen because of the fear, speculation and hoarding as well as myriad other economic interactions that can be subverted, but never entirely suppressed. These are also– at least as a general class– rational responses to mismanagement by authority, as well as a (rational) demonstration of mistrust that of course government is reluctant to see for what it is. Put another way, it would be hard to imagine anything more irrational than not fearing a government that has absolute power to screw up, and for some genuinely irrational reason, no real fear of using this power to screw up over and over again.

For myself, as I feel ever more fearful and speculative (and continue to hoard mostly candy and grievances at about the same pace as usual), my dreams at this point are modest: that every CNBC anchor– all of whom are no doubt familiar with Friedman’s always and everywhere quote– keeps a copy of Friedman’s words taped and bolded on their computer monitors, bringing it up every single time a Fed official or Congressional guest opens their mouth about food shortages or any other subject, to and beyond the point that the guests pretend that it’s rude and storm off set.

By Les Lafave

Abolish The Federal Reserve – themaestrosrep.org