The Market for Security
This is actually a pretty good summary of my views on private law and defense, for those who are interested…
A Web Conference Summarizing the US Economy
We conceived of this idea earlier in the week, as the market plummeted. The web traffic at Mises.org is through the roof, and we know people are searching about for various perspectives on what the heck is going on.
I will be offering an Austrian (naturally) take on our situation Friday, starting at 6pm Eastern time. It will be a 90-minute live web conference, where I’ll start with a half hour PowerPoint summarizing things. Then I’ll field questions from the live audience for an hour afterward. I won’t be providing specific financial advice, but will give viewers a general view of the scene from an Austrian perspective.
The price is $25.
Sign up here.
Big Deficits and Easy Money Have Failed
That was the title I had given it, but at Mises they called it “End This Agony.” For what it’s worth, I consider this the single best critique of Krugman I have written.
I realize it will not convince those of you who believe in bigger deficits and more quantitative easing, but I don’t know what else I could do to snap you out of it than what I tried in this piece.
Moore Doesn’t Realize That the President Only Has Power To Blow Up People, Not Arrest Them
This ridiculous story of Michael Moore and S&P has been making the rounds (HT2 Gene Callahan, but it’s all over):
Liberal firebrand Michael Moore called on President Obama to respond to the U.S. credit downgrade by arresting the leaders of the credit-ratings agencies.
On his Twitter feed Monday, the Oscar-winning film director also blamed the 2008 economic collapse on Standard & Poor’s — apparently because it and other credit-ratings agencies did not downgrade mortgage-based bonds, which encouraged the housing bubble and let it spread throughout the economy.
“Pres Obama, show some guts & arrest the CEO of Standard & Poors. These criminals brought down the economy in 2008& now they will do it again,” Mr. Moore wrote.
Correct me if I’m wrong, but the president of the United States doesn’t actually have the power to arrest people, right? At best, that would be the Attorney General, aka the “top cop”?
Moore is understandably confused, since the president of the United States does have the power to declare which U.S. citizens are guilty of fomenting terrorism and can be executed with no judicial oversight.
The Natives Are Turning Against the Banksters
This is humorous, uplifting, a sign of the times…and quite possibly true.
Is it weird that I stay abreast of political developments via Jon Stewart? I can’t possibly watch Fox, CNN, etc., but I can tolerate the collages his team provides.
Fed Keeps Us Guessing
You know how the debt ceiling deal made everybody mad? It looks like the Fed is playing the same game. The FOMC’s announcement didn’t promise anything “bold” like Scott Sumner, Paul Krugman, Tyler Cowen, and “the markets” were hoping, but they also didn’t promise to let their balance sheet shrink and let Treasurys find their natural price.
Instead, the Fed promised to keep interest rates at their current, exceptionally low level, through mid-2013. This had people on NPR in a twitter, because previously the Fed had just talked about “for an extended period.” We’ve never heard such specificity before! When Bernanke sees the world collapsing, he gets specific.
I haven’t heard such parsing of language since my single friends were trying to figure out “what did Alicia mean when she texted that?”
Free Advice That Was Totally Worth the Price
This Wednesday I will have a spirited take-down of Krugman’s “I told you so” column from last week. In writing the piece, I dug up this oldie but goodie from the days when Free Advice wasn’t yet potty trained. In all seriousness, I can sleep at night knowing this is what I advised on August 23, 2008:
I am pessimistic about the U.S. economy‘s prospects for the next five years. So let’s go over some very basic and obvious steps every household should take, as quickly as possible. Note that the goals don’t have to be achieved overnight, but setting those goals should be done ASAP.
(By the way, I admit that what I am talking about in this post is nothing brilliant. But it’s like going to church every week to hear a sermon on what you ought to be doing. You know what you’re going to hear, but you need someone else to say it once in a while.)
OK so here are some basic steps every American household should take:
(1) Set up a monthly budget that has a long-range view. Make it very convenient for yourself, to be able to just change a few entries and then see how, say, saving an extra $100 per month, impacts your net worth in five years.
(2) Don’t pay off dollar-denominated debts, even credit cards. Rather, defer those as best you can, and use the freed up dollars to tackle steps (3) and (4).
(3) Figure out how many months you would need, in order to find a job that could pay the bills, assuming you lost your present source(s) of income. People throw around rules of thumb, but I think that’s ridiculous; individual circumstances are very different. For example, in my case I have bounced around quite a bit, and do most of my work on a laptop. So I figure I really only need about two months’ worth of regular income in terms of very liquid reserves. That’s because if something happened and I lost my major source of income right now (I’m a consultant so I don’t have “a job” to lose), we could go into austerity mode and make two months’ of normal income stretch out for three, and I am certain that I could at least partially restore my income flow within three months. Even if I were in a car accident, I could still work unless I died (in which case my life insurance would cover things).
Yet for somebody else, maybe someone who works at a factory but doesn’t have obvious alternatives if that factory should shut down, maybe that household ought to have six months’ of income in the bank. Also remember that if you lose your job because of a crisis, then a lot of other people will be looking for work too. So the question isn’t, “If I quit tomorrow, how long to find another comparable-paying job?” No, the question is, “If I get laid off tomorrow, how long…?”
(4) If you currently do not have the liquid funds that you figured out in step (3), then start working towards that amount. When doing so, consider acquiring actual gold coins as at least a portion of your liquid savings. Again, some might quote you formulas for what percentage of your reserves should be dollar-denominated, and what percentage should be in gold coins, but it will depend on the individual’s tastes. Some people might feel like Indiana Jones if they kept $15,000 in gold hidden around their house, and economics can’t say that preference is irrational. People spend lots of money on fancy sports cars too; there’s nothing wrong with spending your money in a way that pleases you. So by the same token, if it excites you to own gold–maybe you are a libertarian and think you are giving a nod to a time when the dollar was tied to gold–then go ahead and make a larger fraction of your liquid fund consist of gold coins. On the other hand, if gold seems really scary and volatile to you, then invest in government bonds to supplement your checking account. (In future posts at Free Advice, we will develop more formal analyses as to “smart” investments, but a lot will still ultimately depend on subjective tastes.)
One final thought on gold: Unless you have to deal with tax consequences (because you have an IRA etc.), I would recommend getting the actual physical gold, rather than gaining exposure to a gold ETF in your portfolio. In the type of scenario where you might really need to access those emergency, liquid funds, the government could quite easily declare a financial crisis and suspend withdrawals from commodity ETFs. So in such a calamity (after a terrorist attack, or if Israel starts bombing Iran suddenly), you would be in a much more secure position if you held the actual coins in your possession.
So yes, I’ve been off in my warnings about CPI, but I don’t think anybody who did the above steps would be kicking himself right now. (Unless the guy happened to be a really flexible masochist.)
Bootleg Video of Mises University 2011
Tom Woods sent me this. I had absolutely nothing to do with it; I didn’t even know these guys were making it until the last day or so.
I think next year we are going to have a reality show going on. Can you imagine the drama? “Luke, get out of the shower! We’re going to be late for Hoppe’s lecture!” The hijinx ensue.
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