Interesting Article

[Dubai]

see http://www.dailyreckoning.com.au/crack-up-boom/2007/06/26/ for full article..... here's a snip

“‘This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.’

“But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against ‘real’ goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

“It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.”

[dstars]

This is an enjoyable and thoughtful (thanks for posting it) article but von Mises didn't live in a world where a single, unemployed mother (nothing personal) can run up debts approaching (or even beyond) six figures in order to scunner von Mises' crack-up trajectory.

People (here in 'The West') simply do not sit upon their 'wealth' (nothing personal to any Japanese readers who do sit upon their wealth; as we are given understand by people who claim to measure such things) waiting for prices to come down; they simply borrow.

I believe it's unfortunate that this guy's ideas have come so late to the popular party. The world is so very radically different now and I'm certain that, if he (von Mises) were alive today, he would readjust his set, slightly. (Although, in this case, ‘slightly’ would basically mean he would have to lose the core principal of his arguments, and that would have made him grumpy, I expect).

Lack of proper regulation caused this (if we assume, as I cannot but help not to, a global crash is either imminent or even well underway) and von Mises wasn't a huge fan of regulation. Von Mises said (according to a von Mises sycophancy site I just found) "In the market economy the worker sells his services as other people sell their commodities. The employer is not the employees [sic] lord. He is simply the buyer of services which he must purchase at their market price."

And that is beautiful. What ideas!

But it's not true. Here it is rewritten for this planet, you know, the one that exists; this reality that we must live in. "In the market economy the worker sells his services... The employer is not the employees' lord unless you have to meet him then you find out that the employer is indeed at least your lord. Most probably your employer is the Lord your God and if you don't kiss his big, rich, dimpled buttocks his HR girl will send you a written warning followed by dismissal. But that doesn't matter anyway because the employer (praise be his name) has discovered the Indian sub-continent and that, even though they're all Brown and poor, they can do your job at least as well as you can, so until they get themselves into a tight market you can go on the dole and hope that someone is left actually working in order to pay for the interest payments on your mortgage that is just about to go variable so you might as well be on the dole and let someone else pay because you can't afford it anyway. Indeed, the Lord performs miracles."

If we told banks they simply could not charge above given (but flexible and profitable) ratios they wouldn't have been tempted to offer rates of 60% or more. Indeed I actually saw an offer that was delivered to someone I know, that offered credit at an APR of 60%.

As anyone reading this will have guessed before the end of the sentence, the last person who should be offered credit at 60% is someone who might need to pay 60% for credit. This is someone who should not be offered credit under (almost; but that's another subject) any circumstances.

BUT! In this wild world of ours, the more you owe the more they try to stuff down your gullet. It's the same for macro as micro. The fact that some shithole of an economy already owes many billions of dollars makes it a prime lending target.

Money is lent by people who work in banks. If I work in a bank and I put together a deal to lend say, some monster like Suharto a tunna munnie (32bn), then I'm long gone up the stairs to the director's table and retired to my country home before the bank finally has to get some bonehead like Bono or Geldoff to make it seem like my old company actually forgave the debt.

I love a lot of von Mises' ideas but mostly they're not relevant because of the world in which we live. To make his magic work we'd have to have a revolution and have serious guys with beards tell us all that we had to be free and that's that. Not to worry, the free market will sort it all out, no probs.

Russia has that kind of free market right now. In Columbia they have a very free market. All you need to make it is an AK47, a big set of Cojones Grande, and no soul.

Laissez Faire (is that how it's spelled? I can't be arsed looking it up), or zero regulation is about as useful as communism. It's a great, big, clever useless lump.

I love my von Mises to pieces but it’s wrong.

[LargelyIgnorant]

I love my von Mises to pieces but it’s wrong.

Mises' 'crack up boom' thesis has resurfaced because the Daily Reckoning read Ty Andros' updating of the theory.

My guess is that Ty is right.

[dog]

A very interesting response.

[Guest DissipatedYouthIsValuable]

This is an enjoyable and thoughtful (thanks for posting it) article but von Mises didn't live in a world where a single, unemployed mother (nothing personal) can run up debts approaching (or even beyond) six figures in order to scunner von Mises' crack-up trajectory.

People (here in 'The West') simply do not sit upon their 'wealth' (nothing personal to any Japanese readers who do sit upon their wealth; as we are given understand by people who claim to measure such things) waiting for prices to come down; they simply borrow.

I believe it's unfortunate that this guy's ideas have come so late to the popular party. The world is so very radically different now and I'm certain that, if he (von Mises) were alive today, he would readjust his set, slightly. (Although, in this case, ‘slightly’ would basically mean he would have to lose the core principal of his arguments, and that would have made him grumpy, I expect).

Lack of proper regulation caused this (if we assume, as I cannot but help not to, a global crash is either imminent or even well underway) and von Mises wasn't a huge fan of regulation. Von Mises said (according to a von Mises sycophancy site I just found) "In the market economy the worker sells his services as other people sell their commodities. The employer is not the employees [sic] lord. He is simply the buyer of services which he must purchase at their market price."

And that is beautiful. What ideas!

But it's not true. Here it is rewritten for this planet, you know, the one that exists; this reality that we must live in. "In the market economy the worker sells his services... The employer is not the employees' lord unless you have to meet him then you find out that the employer is indeed at least your lord. Most probably your employer is the Lord your God and if you don't kiss his big, rich, dimpled buttocks his HR girl will send you a written warning followed by dismissal. But that doesn't matter anyway because the employer (praise be his name) has discovered the Indian sub-continent and that, even though they're all Brown and poor, they can do your job at least as well as you can, so until they get themselves into a tight market you can go on the dole and hope that someone is left actually working in order to pay for the interest payments on your mortgage that is just about to go variable so you might as well be on the dole and let someone else pay because you can't afford it anyway. Indeed, the Lord performs miracles."

If we told banks they simply could not charge above given (but flexible and profitable) ratios they wouldn't have been tempted to offer rates of 60% or more. Indeed I actually saw an offer that was delivered to someone I know, that offered credit at an APR of 60%.

As anyone reading this will have guessed before the end of the sentence, the last person who should be offered credit at 60% is someone who might need to pay 60% for credit. This is someone who should not be offered credit under (almost; but that's another subject) any circumstances.

BUT! In this wild world of ours, the more you owe the more they try to stuff down your gullet. It's the same for macro as micro. The fact that some shithole of an economy already owes many billions of dollars makes it a prime lending target.

Money is lent by people who work in banks. If I work in a bank and I put together a deal to lend say, some monster like Suharto a tunna munnie (32bn), then I'm long gone up the stairs to the director's table and retired to my country home before the bank finally has to get some bonehead like Bono or Geldoff to make it seem like my old company actually forgave the debt.

I love a lot of von Mises' ideas but mostly they're not relevant because of the world in which we live. To make his magic work we'd have to have a revolution and have serious guys with beards tell us all that we had to be free and that's that. Not to worry, the free market will sort it all out, no probs.

Russia has that kind of free market right now. In Columbia they have a very free market. All you need to make it is an AK47, a big set of Cojones Grande, and no soul.

Laissez Faire (is that how it's spelled? I can't be arsed looking it up), or zero regulation is about as useful as communism. It's a great, big, clever useless lump.

I love my von Mises to pieces but it’s wrong.

Sing it.

Nobody believeses

The guff from von Mises......

It was just his talky breezes

About prices and stuff.

[Orbital]

Interesting posts above, ty. Slightly over my head lol but I did wonder about 2 points...

didn't live in a world where a single, unemployed mother (nothing personal) can run up debts approaching (or even beyond) six figures

Really? How? I know credit is relatively easy to get but I've always had to demostrate employment and ensure a good credit history. I cant believe that the above is common. Sure such a person could commit fraud and borrow 100k - but how would they make even the 1st repayment! They'd be found out too quick. I do realise we have a big ol' debt between us, heck I have a fair ol' mortgage, but this represents a small fraction of my monthly outgoings so whats the prob...? I borrow, I work, I pay back. I guess the argument goes that unemployed mum above cant settle the debt, but then I honestly dont think these are the people holding the debt!

I love a lot of von Mises' ideas but mostly they're not relevant because of the world in which we live.

I've often seen people here argue that history repeats itself, and few seem to accept that 'changing times' are relevant - look at the universal mocking of the phrase "its different this time"! Actually I dont know what my point is here! I guess Im saying I agree. I dont see how history necessarily has to repeat itself because conditions will always be different. That was then, this is now. Conditions might be similat - but they will never be the same!

Cheers.

Edited June 29, 2007 by Orbital

[Goldfinger]

Lack of proper regulation caused this...

This is wrong since the fundamental cause of this whole mess is the central banks, who have been forced into

life all along with their regulations. If money was still gold, such a mess could simply not happen. The thread of

bank runs would prevent individual banks from going crazy.

The fundamental cause of this mess is regulation. The main cause is (1) there exist central banks, (2) governments

prevent bank runs from happening. All the rest follows from these few regulations.

Mises is right, I conclude.

[gfromls]

Really? How? I know credit is relatively easy to get but I've always had to demostrate employment and ensure a good credit history. I cant believe that the above is common. Sure such a person could commit fraud and borrow 100k - but how would they make even the 1st repayment! They'd be found out too quick. I do realise we have a big ol' debt between us, heck I have a fair ol' mortgage, but this represents a small fraction of my monthly outgoings so whats the prob...? I borrow, I work, I pay back. I guess the argument goes that unemployed mum above cant settle the debt, but then I honestly dont think these are the people holding the debt!

I know of a single mum, who has 3 or 4 holidays abroad a year, drives a new car, spends thousands on clothes ect and has just had breast implants..... and earnes about 15k. (works in a bank!)

I don't know how much debt she's in, but it would be very significant.

(mew)

[Disillusioned]

Interesting posts above, ty. Slightly over my head lol but I did wonder about 2 points...

Really? How? I know credit is relatively easy to get but I've always had to demostrate employment and ensure a good credit history. I cant believe that the above is common. Sure such a person could commit fraud and borrow 100k - but how would they make even the 1st repayment! They'd be found out too quick. I do realise we have a big ol' debt between us, heck I have a fair ol' mortgage, but this represents a small fraction of my monthly outgoings so whats the prob...? I borrow, I work, I pay back. I guess the argument goes that unemployed mum above cant settle the debt, but then I honestly dont think these are the people holding the debt!

You're wrong. There are loans out there that you don't have to start repaying straight away. you can rack up the debt even before they start asking for it back! This website supports this point and then offers you a way of consolidating your loans to 'help'!!!!

I've often seen people here argue that history repeats itself, and few seem to accept that 'changing times' are relevant - look at the universal mocking of the phrase "its different this time"! Actually I dont know what my point is here! I guess Im saying I agree. I dont see how history necessarily has to repeat itself because conditions will always be different. That was then, this is now. Conditions might be similat - but they will never be the same!

That's the key point - the situation is similat [sic] to last time. It is not different enough to not result in HPC.

[Guest grumpy-old-man]

A very interesting response.

indeed.

I'm just glad he is a bear!

[LargelyIgnorant]

This is an enjoyable and thoughtful (thanks for posting it) article but von Mises didn't live in a world where a single, unemployed mother (nothing personal) can run up debts approaching (or even beyond) six figures in order to scunner von Mises' crack-up trajectory.

People (here in 'The West') simply do not sit upon their 'wealth' (nothing personal to any Japanese readers who do sit upon their wealth; as we are given understand by people who claim to measure such things) waiting for prices to come down; they simply borrow.

We live in a globalised economy, and people in the East have saved up a lot of cash - living in the most indebted country in the world makes one forget this. As the world's savers/cash rich/sovereign funds perceive this cash to become progressively more devalued, they will use some of it to buy up the declining oil, etc.

[Guest DissipatedYouthIsValuable]

I know of a single mum, who has 3 or 4 holidays abroad a year, drives a new car, spends thousands on clothes ect and has just had breast implants..... and earnes about 15k. (works in a bank!)

I don't know how much debt she's in, but it would be very significant.

(mew)

On the game.

[Harry Sacks]

I can't see hyper-inflation happening unless wages keep pace. IMO we have just been through the hyper-inflationary period. Think back to 2000. Back then £50K was a life changing amount of cash, now it's a deposit. Forget the consumer durables that money will buy, that's not deflation but advances in production and economies of scale. The money needed to increase the quality of your life is significantly more than seven years ago. Any fall in confidence on Sterling will not allow further leverage for tangible assets. The Dollar can get away with it purely because the Americans use force against the rest of the world to sustain demand.

[Benedict]

I know of a single mum, who has 3 or 4 holidays abroad a year, drives a new car, spends thousands on clothes ect and has just had breast implants..... and earnes about 15k. (works in a bank!)

I don't know how much debt she's in, but it would be very significant.

(mew)

Maybe she has a sugar daddy? The breast implants should help her find one if she doesn't.

[Dubai]

This is an enjoyable and thoughtful (thanks for posting it) article but von Mises didn't live in a world where a single, unemployed mother (nothing personal) can run up debts approaching (or even beyond) six figures in order to scunner von Mises' crack-up trajectory.

People (here in 'The West') simply do not sit upon their 'wealth' (nothing personal to any Japanese readers who do sit upon their wealth; as we are given understand by people who claim to measure such things) waiting for prices to come down; they simply borrow.

I believe it's unfortunate that this guy's ideas have come so late to the popular party. The world is so very radically different now and I'm certain that, if he (von Mises) were alive today, he would readjust his set, slightly. (Although, in this case, ‘slightly’ would basically mean he would have to lose the core principal of his arguments, and that would have made him grumpy, I expect).

Lack of proper regulation caused this (if we assume, as I cannot but help not to, a global crash is either imminent or even well underway) and von Mises wasn't a huge fan of regulation. Von Mises said (according to a von Mises sycophancy site I just found) "In the market economy the worker sells his services as other people sell their commodities. The employer is not the employees [sic] lord. He is simply the buyer of services which he must purchase at their market price."

And that is beautiful. What ideas!

But it's not true. Here it is rewritten for this planet, you know, the one that exists; this reality that we must live in. "In the market economy the worker sells his services... The employer is not the employees' lord unless you have to meet him then you find out that the employer is indeed at least your lord. Most probably your employer is the Lord your God and if you don't kiss his big, rich, dimpled buttocks his HR girl will send you a written warning followed by dismissal. But that doesn't matter anyway because the employer (praise be his name) has discovered the Indian sub-continent and that, even though they're all Brown and poor, they can do your job at least as well as you can, so until they get themselves into a tight market you can go on the dole and hope that someone is left actually working in order to pay for the interest payments on your mortgage that is just about to go variable so you might as well be on the dole and let someone else pay because you can't afford it anyway. Indeed, the Lord performs miracles."

If we told banks they simply could not charge above given (but flexible and profitable) ratios they wouldn't have been tempted to offer rates of 60% or more. Indeed I actually saw an offer that was delivered to someone I know, that offered credit at an APR of 60%.

As anyone reading this will have guessed before the end of the sentence, the last person who should be offered credit at 60% is someone who might need to pay 60% for credit. This is someone who should not be offered credit under (almost; but that's another subject) any circumstances.

BUT! In this wild world of ours, the more you owe the more they try to stuff down your gullet. It's the same for macro as micro. The fact that some shithole of an economy already owes many billions of dollars makes it a prime lending target.

Money is lent by people who work in banks. If I work in a bank and I put together a deal to lend say, some monster like Suharto a tunna munnie (32bn), then I'm long gone up the stairs to the director's table and retired to my country home before the bank finally has to get some bonehead like Bono or Geldoff to make it seem like my old company actually forgave the debt.

I love a lot of von Mises' ideas but mostly they're not relevant because of the world in which we live. To make his magic work we'd have to have a revolution and have serious guys with beards tell us all that we had to be free and that's that. Not to worry, the free market will sort it all out, no probs.

Russia has that kind of free market right now. In Columbia they have a very free market. All you need to make it is an AK47, a big set of Cojones Grande, and no soul.

Laissez Faire (is that how it's spelled? I can't be arsed looking it up), or zero regulation is about as useful as communism. It's a great, big, clever useless lump.

I love my von Mises to pieces but it’s wrong.

Er... what he said

I'm sure you'll be a valuable contributer, Dstars!

I wonder when they're going to put a spell checker on this site? If I tell you I meant to write "BUY' not "BY" does that alter anything??

[dstars]

This is wrong since the fundamental cause of this whole mess is the central banks, who have been forced into

life all along with their regulations. If money was still gold, such a mess could simply not happen. The thread of

bank runs would prevent individual banks from going crazy.

The fundamental cause of this mess is regulation. The main cause is (1) there exist central banks, (2) governments

prevent bank runs from happening. All the rest follows from these few regulations.

Mises is right, I conclude.

The word 'proper' in the sentence (...proper regulation...) is significant.

I understand that I'm saying a great behemoth of economics was dead wrong but people can conclude he was right in their millions but still; a completely free market cannot but lead to disaster. (And I'm not saying that markets not completely free don't lead to disaster but they can, do, and will continue to actually exist in this world, whilst FREE markets are forever doomed to the realm of fantasy. In fact, it is the lack of proper regulation that has indeed led to our current (and much denied) predicament. Von Mises wasn’t right about this because von Mises is dead.

I repeat: Could von Mises have conceived of regular Joes accumulating such insane levels of debt? And had he done so would he have still thought that people sit on their wealth? People are doing the opposite. Von Mises assumes all those daft economist-type things such as everything else being equal and everything else is always in a different dimension from equal. Unions happened for a reason. Unions happened within a ‘free’ market. Indeed, employers may as well be lords. The world is lumpy and difficult. There is no usable information in the assumption that all workers will get their just deserts and all employers will have to pay the market rate. It is meaningless in the real world. It’s like purchasing power parity (PPP) or the supply/demand curve; they seem to work sometimes so we use them as rough guides to reality.

I'm no fan of central banks and they really should butt out of interest rates. They're like fleas on a dog's back arguing about who owns the dog while smart speculators take profits for putting rates where central banks dictate - but it's breaking down because they (central banks) are so out of whack with reality.

I don't know if a return to the gold standard would be better or not, but nobody in this country is sitting on their ‘wealth’, they're all spend, spend, spending it, no?

Anyway, von Mises was a great thinker and I'm not saying anything to the contrary, except that he was wrong. Now, before anyone gets to asking me to write a new economics this afternoon (for my cheek) know that I'd be more than happy to do that with the appropriate advance.

Von Mises was dead right about what economics is; and many other things. But he believed in a FREE market. That it would work magic. He was Marx in a different hat. It's not just wrong it's ludicrous.

This is fundamental. Economics is built on axioms and assumptions. Von Mises pegged it as a branch of human action (or that may have been his student, Hayek; I’m not sure and it doesn’t matter anyway) and therefore quite complicated and not likely to be describable either by mathematics or by some imaginary free-for-all that ends up with happy workers instead of dead junkies and men with machine guns. Deregulation is the act of changing one set of rules for another. It is simply impossible to not apply any rules; for applying no rules, in itself, is an overriding rule.

Here's a fundamental law of economics for you: Stars' First law of horseshit detection:

"FREE market economies cannot and will never exist. They are mental constructs promulgated by brainy people with better jobs than me." (where FREE = zero regulation)

I might have to edit the last part but nevertheless isn’t that a decent law? You know, like science? As opposed to the shystery that is perpetrated upon us by the application of tomfoolery (in the form of economic thought) to our actual existences?

Anyway, I enjoyed the article and the subsequent comments.

As for my exampled girl borrowing too much. Of course, even if we were not there now, the continuation of current ‘strategy’ would certainly lead to that example. Indeed, the jokers (lenders) I cited in my MoneyWeek article were quick to suggest a hearty expansion of multiples as the solution to a problem that never would have existed without them expanding multiples in the first place.

I would hold that it is indeed possible (insane personal debt) and what does fraud mean in a self-certification society? The banks have simply shifted the blame. It’s preposterous to hold someone liable for a debt in which your risk control strategy was to deliberately look the other way. I have known many people in my life who would have borrowed to the hilt under such circumstances and described the borrowings as ‘wealth’. But none of them would have sat on it. Finally, the underclass has discovered that great get-out enjoyed by generations of entrepreneurs; the bankruptcy.

Some may argue that bankruptcy is a requirement in a society that needs people to create jobs, but really it’s a relic of a bygone age that has become an anachronism in a world where people with a lot less than nothing can borrow seemingly limitless amounts of money as long as they lie on the application? No need to rob a bank; just ask.

What kind of security system has nothing but a form asking you to tell the truth? This is like the US visa waiver that used to ask you if you were a terrorist (and they still let Jerry Adams in because he wasn’t a terrorist; if all you knew about the IRA was Gene Kelly movies.)

Do you really think banks really thought that everyone would tell the truth about themselves? Maybe that’s why they invented self-certification, but I doubt it very much.

Banks are not acting like businesses owned by individuals who even care about the survival of their own ‘carriers’ (the bank itself). The individual parts of financial institutions are cannibalizing their own carrier for they are rich enough to not give a toss.

Sadly, it is the honest people who will suffer for it. Youngsters who don’t know any better helped by their parents who know even less. We should all be ashamed to live in such a society. These are the people who will kill themselves to try to pay their dues while the monsters that threw them into their misery will live fat and happy.

Heads should roll but they won’t.

[Dubai]

Heads should roll but they won’t.

I wouldn't be too sure.

It's natural to become piqued when the present injustices in the world are being discovered by more and more of us ordinary folk.

We may feel completely powerless in a society that seems to be more and more biased towards the rich, where even the Courts cannot be relied on to see justice done.

But, I do believe that there is a natural order to things, that overall justice prevails, and in the end "the truth will out".

Plenty of us are going to learn some fairly harsh lessons in the not too distant future, but that can only be a good thing, in the long run.

Remember the French revolution....

[dstars]

Er... what he said

I'm sure you'll be a valuable contributer, Dstars!

I wonder when they're going to put a spell checker on this site? If I tell you I meant to write "BUY' not "BY" does that alter anything??

"If I tell you I meant to write "BUY' not "BY" does that alter anything?"

It wouldn't have found that as an error. Thanks for making me laugh. Have a good weekend, and thanks.

Dubai: That's refreshing but I can't see it in a world where people think if a politician resigns for causing the deaths of hundreds of thousands it would be seen as punishment (if it happened, which it won't).

[Dubai]

"If I tell you I meant to write "BUY' not "BY" does that alter anything?"

It wouldn't have found that as an error. Thanks for making me laugh. Have a good weekend, and thanks.

Dubai: That's refreshing but I can't see it in a world where people think if a politician resigns for causing the deaths of hundreds of thousands it would be seen as punishment (if it happened, which it won't).

Yep... quite right about the spell checker

Only some people think that. The majority, I believe, would like to see blair (et al) dragged into court, tried, found guilty and incarcerated for the rest of their naturals! Well, everyone I know would, anyway.

Have a good weekend all.

[subsidiser]

Do we have a Banker in the house?

I believe that the banks believe that they are more careful with their lending than ever before. They profile exactly who they lend to and lend accordingly. Maybe they don't take into account that they lend to people, and people are lying b*st*rds.

But if you remember they used to lend to third world countries that promised much and delivered zilch.

[Guest The_Oldie]

Do we have a Banker in the house?

Yes, lots of them

[oracle]

I can't see hyper-inflation happening unless wages keep pace. IMO we have just been through the hyper-inflationary period. Think back to 2000. Back then £50K was a life changing amount of cash, now it's a deposit. Forget the consumer durables that money will buy, that's not deflation but advances in production and economies of scale. The money needed to increase the quality of your life is significantly more than seven years ago. Any fall in confidence on Sterling will not allow further leverage for tangible assets. The Dollar can get away with it purely because the Americans use force against the rest of the world to sustain demand.

that's the nub of it isn't it.

Unless you hadn't noticed,many of uncle sam's old foes are coming back to life.

Russia,Japan,Germany....and bringing along the likes of venezuela with them.Old habits die hard,so it's not out of the question to see these guys using islam/communism as the proxy to supplant the US.....and that also means war by currency....many nations are now switching to the petro-euro.

[Goldfinger]

Has anyone understood dstars exact argument? Is it: "Joe Average has so much debt that von Mises simply cannot be right?"

I think that would be a grave mistake. We will soon see that debt indeed matters and that a credit boom is followed by

contraction or hyperinflation. This is what von Mises said. I can't see any solution inbetween really.

Edited June 29, 2007 by Goldfinger

[dstars]

Has anyone understood dstars exact argument? Is it: "Joe Average has so much debt that von Mises simply cannot be right?"

I think that would be a grave mistake. We will soon see that debt indeed matters and that a credit boom is followed by

contraction or hyperinflation. This is what von Mises said. I can't see any solution inbetween really.

I have no idea whether hyperinflation or contraction will or will not happen within any given timescale.

What I was talking about was von Mises' assumption that people sit on their 'wealth' and do not spend, which he conjectured led to something or other. Of course, I'm not saying that doesn't ever happen, I'm saying that's not happening now and I would guess that von Mises, being an actual thinker as opposed to one of his followers, who in his death might wax lyrical but in life would brag about making the man a cup of tea, would see that these levels of liquidity leading to insane personal debt through lax lending would mean that 'things' transpired differently, as they do seem to with every new crash.

All crashes are the same but different and after each one economists see something new. Of course they do, for 'economics' is not fully-equipped to explain economics and it must forever be damned to examining old tracks whilst the elephant has come full circle and is standing behind them (but in the room).

I suppose I'm also saying that anyone who believes a FREE market (zero regulation) is possible is a conk. It's ludicrous. If he hadn't said it and I was saying it here I'd be, quite rightly, pilloried. I understand the quote I used in which he claimed that workers and employers will reach the ‘correct’ prices for services sounds true and certainly cannot be argued with for its logic. It's not like the guy was thick, he was just wildly mistaken. For in the real world that never happened and never will. There are forces and powers outside of some imaginary ‘efficiency’ that has never been seen in real-life markets.

If I say Mises is wrong that doesn't mean I said that debt doesn't matter; only that someone else’s application of his apparent ‘opinion’ might be wrong. My original article was called Economic Cluster Bombs and other fancies and it referred to interest-only mortgages, and the threat they pose to our way of life.

I see neither hyperinflation nor contraction; I see stagflation. I see economies keeling over like great buildings crashing into each other.

Man, that really was boring.