Monday , February 17 2020
Home / Tag Archives: Central Planning

Tag Archives: Central Planning

Central Planning Vs. Economics, Report 29 Dec

We have spilled barrels of electronic ink, making the point that central banks are wreaking havoc. They hurt the poor, the middle class, and the rich. They hurt the wage earners, the business owners, the investors (aka the “rentiers”), and the pensioners. They have variously inflicted rising interest rates, too-high rates, falling rates, and too-low rates. They have imposed perverse incentives to destroy capital and consume wealth. Those discussions focused on the specific injuries, their...

Read More »

Open Letter to John Taft, Report 17 Dec

Dear Mr. Taft: I eagerly read your piece Warriors for Opportunity on Wednesday, as I often do about pieces that argue that capitalism is not working today. You begin by saying: “Financial capitalism – free markets powered by a robust financial system – is the dominant economic model in the world today. Yet many who have benefited from the system agree it’s not working the way it ought to.” Leaving aside that our financial system is not robust—the interest rate is collapsing, and the debt is...

Read More »

Targeting nGDP Targeting, Report 3 Nov

Not too long ago, we wrote about the so called Modern Monetary so called Theory (MMT). It is not modern, and it is not a theory. We called it a cargo cult. You’d think that everyone would know that donning fake headphones made of coconut shells, and waving tiki torches will not summon airplanes loaded with cargo. At least the people who believe in this have the excuse of being illiterate. You’d think that everyone would know that printing fake money and waving bogus theories around will not...

Read More »

Treasury Bond Backwardation, Report 22 Sep

Something happened in the credit market this week. A Barron’s article about it began: “There have been disruptions in the plumbing of U.S. markets this week. While the process of fixing them was bumpy, it was more of a technical mishap than a cause for investor concern.” Keep Calm and Carry On So, before they tell us what happened, they tell us it’s just plumbing, it’s been fixed, and that we should not be concerned. The article asserts that the reasons for the problem: “…are technical and...

Read More »

Directive 10-289, Report 25 Aug

Everyone must ask himself the question. Do you want the world to move to an honest money system, or do you just want gold to go up (we italicize discussion of apparent moves in gold, because it’s the dollar that’s moving down—not gold going up—but we sometimes frame it in mainstream terms). Gold’s Going Up We have written about the tension between these two goals before. Many people start with the former. They come to gold, as they begin to realize that the dollar is going off the rails, that...

Read More »

GDP Begets More GDP (Positive Feedback), Report 30 June

Last week, we discussed the fundamental flaw in GDP. GDP is a perfect tool for central planning tools. But for measuring the economy, not so much. This is because it looks only at cash revenues. It does not look at the balance sheet. It does not take into account capital consumption or debt accumulation. Any Keynesian fool can add to GDP by borrowing to spend. But that is not economic growth. Borrowing to Consume Today, let’s look at another problem with GDP. To understand it, let’s walk...

Read More »

Cubans Suffer Food Shortages as Economy Enters Crisis Mode

We’ve covered the plight of the Venezuelan economy as it has plunged into chaos over the last several years.  It’s gotten so bad that a year ago, video game money was worth seven times more than the Venezuelan bolivar. Meanwhile, the Venezuelan people have suffered horrible food shortages. Many people in Venezuela have turned to barter just to survive.But Venezuela isn’t the only country suffering the effects of socialism. Cubans are currently enduring food shortages of their own as the...

Read More »

The Fatal Conceit of Central Planners Dies Hard

Peter Schmidt has written extensively about the “Confederacy of Dunces” that helped bring about the financial collapse of 2008 and their “fatal conceit.” By fatal conceit, he means the arrogant belief that because of their superior intellect and education, they have the wherewithal to micromanage the economy.One of the members of Schmidt’s “confederacy of dunces” is Lawrence Summers. He served as a senior Treasury Department official during the Clinton Administration and was at the center...

Read More »

What Gets Measures Gets Improved, Report 23 June

Let’s start with Frederic Bastiat’s 170-year old parable of the broken window. A shopkeeper has a broken window. The shopkeeper is, of course, upset at the loss of six francs (0.06oz gold, or about $75). Bastiat discusses a then-popular facile argument: the glass guy is making money (to which all we can say is, “plus ça change, plus c’est la même chose”). Bastiat says it is true, and this is the seen. The glazier does make money. Then he introduces the concept of the unseen. The shoemaker...

Read More »

The Fed’s too slow

There are a number of weaknesses to using “central planning” in the implementation of monetary policy. Today we see another example—slow decision-making. Whereas markets move at lightening speed, committees of bureaucrats tend to move quite slowly. In 2008, that slowness created a deep recession. I don’t expect that outcome his year, but policy has recently been falling “behind the curve”. Take a look at this FT graph showing the probability of various policy paths in...

Read More »