Money and Finance
- Bill Gross – February 2013 Investment Outlook: Most ‘medieval’
Link to: Most ‘Medieval’So for those of you who don’t live in Washington State or Colorado or others who are a little miffed at this example, let’s just put it this way. P/Es of 3 or P/Es of 15 or P/Es of 0 are intimately connected to the amount...
- Richard Duncan Quotes
Longer excerpt from The New Depression (taken from my Kindle highlights, so the excerpts aren’t necessarily the paragraphs I have put them in below, and there may be things in between that I didn’t highlight).The quantity theory of money held that...
- Richard Duncan Quote
“When the United States removed the gold backing from the dollar in 1968, the nature of money changed. The result was a proliferation of credit that not only transformed the size and structure of the U.S. economy but also brought about a transformation...
- Hussman Weekly Market Comment: "illusory Prosperity" - Ludwig Von Mises On Monetary Policy
Illusory Prosperity - Ludwig von Mises on Monetary Policy"Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth...
- Credit Crisis - Robert Rodriguez, Fpa Funds
To begin with, I believe FPA Capital Fund and FPA New Income are well structured to weather this credit-crisis storm. FPA Capital stands with nearly 43% in liquidity that we believe should help it withstand the crisis and provide us with the necessary...
Money and Finance
WSJ: The Man Who Predicted the Depression - By Mark Spitznagel
Ludwig von Mises was snubbed by economists world-wide as he warned of a credit crisis in the 1920s. We ignore the great Austrian at our peril today.
Mises's ideas on business cycles were spelled out in his 1912 tome "Theorie des Geldes und der Umlaufsmittel" ("The Theory of Money and Credit"). Not surprisingly few people noticed, as it was published only in German and wasn't exactly a beach read at that.
Taking his cue from David Hume and David Ricardo, Mises explained how the banking system was endowed with the singular ability to expand credit and with it the money supply, and how this was magnified by government intervention. Left alone, interest rates would adjust such that only the amount of credit would be used as is voluntarily supplied and demanded. But when credit is force-fed beyond that (call it a credit gavage), grotesque things start to happen.
Government-imposed expansion of bank credit distorts our "time preferences," or our desire for saving versus consumption. Government-imposed interest rates artificially below rates demanded by savers leads to increased borrowing and capital investment beyond what savers will provide. This causes temporarily higher employment, wages and consumption.
Ordinarily, any random spikes in credit would be quickly absorbed by the system—the pricing errors corrected, the half-baked investments liquidated, like a supple tree yielding to the wind and then returning. But when the government holds rates artificially low in order to feed ever higher capital investment in otherwise unsound, unsustainable businesses, it creates the conditions for a crash. Everyone looks smart for a while, but eventually the whole monstrosity collapses under its own weight through a credit contraction or, worse, a banking collapse.
The system is dramatically susceptible to errors, both on the policy side and on the entrepreneurial side. Government expansion of credit takes a system otherwise capable of adjustment and resilience and transforms it into one with tremendous cyclical volatility.
- Bill Gross – February 2013 Investment Outlook: Most ‘medieval’
Link to: Most ‘Medieval’So for those of you who don’t live in Washington State or Colorado or others who are a little miffed at this example, let’s just put it this way. P/Es of 3 or P/Es of 15 or P/Es of 0 are intimately connected to the amount...
- Richard Duncan Quotes
Longer excerpt from The New Depression (taken from my Kindle highlights, so the excerpts aren’t necessarily the paragraphs I have put them in below, and there may be things in between that I didn’t highlight).The quantity theory of money held that...
- Richard Duncan Quote
“When the United States removed the gold backing from the dollar in 1968, the nature of money changed. The result was a proliferation of credit that not only transformed the size and structure of the U.S. economy but also brought about a transformation...
- Hussman Weekly Market Comment: "illusory Prosperity" - Ludwig Von Mises On Monetary Policy
Illusory Prosperity - Ludwig von Mises on Monetary Policy"Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth...
- Credit Crisis - Robert Rodriguez, Fpa Funds
To begin with, I believe FPA Capital Fund and FPA New Income are well structured to weather this credit-crisis storm. FPA Capital stands with nearly 43% in liquidity that we believe should help it withstand the crisis and provide us with the necessary...