Showing posts with label money. Show all posts
Showing posts with label money. Show all posts

Wednesday, August 01, 2012

Keynesians Winning in Explaining Economies in Deleveraging Shock: Krugman has the Story in Money for Nothing at the New York Times

We read Paul Krugman not because he is always right,
and indeed he admittedly does not always claim to be,

but Krugman stands out in the ranks of the world's top economists in rejecting voodoo economics, gullible wishful thinking and unproven politically-colored economic dogmas and pet theories, preferring to subject his own ideas to the actual empirical evidence. Krugman prefers an economics that is "evidence-based" rather than one based on some economic "school".

Read how the Keynesians are winning in explaining economies in "deleveraging shock", as Krugman has the story in Money for Nothing at the New York Times. One need not be a Keynesian. One needs to look at the facts to see that Keynes was right in major essentials, while others were wrong.

Compare the sensible things that Krugman writes to the abysmal theoretical economics written at Krugman-in Wonderland by a proponent of the largely reality-removed Austrian School of Economics, a theoretical school of economics somewhat comparable in its inflexible dogmatism to modern American "voodoo economics" of the American extreme right wing.

As noted at the Wikipedia about the theories of "Austrian School" classicist Friedrich Hayek:
"Jeffrey Sachs argues that among developed countries, those with high rates of taxation and high social welfare spending perform better on most measures of economic performance compared to countries with low rates of taxation and low social outlays. He concludes that Friedrich Hayek was wrong to argue that high levels of government spending harms an economy, and "a generous social-welfare state is not a road to serfdom but rather to fairness, economic equality and international competitiveness."
It is in fact rather astounding that such muddled economic thinking as can be found in the Austrian School is "made in Europe", a Europe whose modern astounding progress since WWII can be thanked to exactly the opposite kinds of economics as proposed by Hayek or compatriot Ludwig von Mises, who wrote dreamfully and in error that:
"The captain is the consumer…the consumers determine precisely what should be produced, in what quality, and in what quantities…They are merciless egoistic bosses, full of whims and fancies, changeable and unpredictable. For them nothing counts other than their own satisfaction…In their capacity as buyers and consumers they are hard-hearted and callous, without consideration for other people…Capitalists…can only preserve and increase their wealth by filling best the orders of the consumers… In the conduct of their business affairs they must be unfeeling and stony-hearted because the consumers, their bosses, are themselves unfeeling and stony-hearted."
In contrast, Steve Jobs, who made Apple the most profitable high-tech product-selling company in the United States is famously quoted as saying that "It isn't the consumers' job to know what they want."

Jobs was apparently very right and von Mises very wrong. Consumers are the suckers in the system, not "the captains".

Similarly and currently in the patent wars, what can be bought or not in retail shops is being decided by the patent laws and how these are being interpreted by the courts and the legal system. The consumers are not the ones deciding what they will be able to buy in the future.

So much for the so-called "Austrian School of Economics".
There is a good German saying for that school and it is "weltfremd".


Sunday, July 01, 2012

EU Eurozone Bank Bailout: Understanding the Current Debt Crisis as a Financial World in Deleverage : Bill Gross, Founder and Manager of PIMCO, World's Biggest Bond Fund, Gives Us the Nuts and Bolts

William H. Gross ("Bill"), founder and manager of Pacific Investment Management Co. (PIMCO), the world's biggest bond fund, has said that Europe is in a Debt Trap, Even After the Bank Bailout.

Bill Gross is a very bright guy, be sure about that, so his opinion carries weight with this author, and it is advisable to read what he writes.

We do think that Europe is stronger than Americans can imagine and we think that the USA by contrast has serious economic, political and social problems to solve down the road, so we are not necessarily in agreement with Gross on his conclusions that America is currently a better investment than Europe. But then again, we are not managing a $250 billion fund, and Gross does.

What Gross has been writing recently at his Investment Outlook page at PIMCO is outstanding in delivering basic economic knowledge (from an investment standpoint) about a world that is "delevering".

If you really want to get a nuts and bolts view of the current world debt situation, the PIMCO writings of Bill Gross are an absolute reading must.

Below are links to some of his writings at Investment Outlook at PIMCO together with excerpts we have chosen to give an idea about the content:

The Great Escape: Delivering in a Delevering World by William H. Gross:
"[T]he Great Leveraging of the past 30 years .... was a world not of yield, but of total return, where price and yield formed the returns that exceeded the ability of global economies to consistently replicate them. Financial assets relative to real assets outperform in such a world as wealth is brought forward and stolen from future years if real growth cannot replicate historical total returns."
Wall Street Food Chain by William H. Gross:
"The whales of our current economic society swim mainly in financial market oceans. Innovators such as Jobs and Gates are as rare within the privileged 1% as giant squid are to sharks, because the 1% feed primarily off of money, not invention. They would have you believe that stocks, bonds and real estate move higher because of their wisdom, when in fact, prices float on an ocean of credit, a sea in which all fish and mammals are now increasingly at risk because of high debt and its delevering consequences. Still, as the system delevers, there are winners and losers, a Wall Street food chain in effect."
What's in A Name by William H. Gross:
"An authentic debt crisis – which the world is now experiencing – can only be ultimately cured in two ways: 1) default on it, or 2) print more money in order to inflate it away."
See links to all of the articles by Gross at Investment Outlook Overview.

Crossposted at LawPundit.