21 Oct 2014


Potpourri, Shameless Self-Promotion 12 Comments

==> This is a video I broadcast from a bunker to celebrate Mises’ birthday.

==> Ian Cioffi gives tips on how to make money hosting liberty events. So read up, and then hire me to speak!

==> Looks like I picked the right place to settle down. Apparently Nashville cops told the Secret Service to get lost after they were going to lie about having a warrant to harass an Obama critic. (At least one person asked me if I’m the guy in the story. No.)

==> In contrast, apparently this NYPD officer made a musician leave the subway even though he read that the man wasn’t breaking a law. (I say “apparently” because I couldn’t really hear the exact words when the musician claimed victory.) Notice how the public offers financial and moral support. If you click it, just “skim” through the first 4 minutes to get the gist. Unfortunately may be an omen for the future.

==> This Jimmy Kimmel bit with Eminem is actually pretty good. (Probably old, but I just saw it.)

==> Check out Cliff Asness’ half-apology for his 2010 (price) inflation warning to Bernanke. I love this part:

At the risk of enraging a whole different group (I promise I’m not denying anything I’m just making an analogy, and one I know is very far from dead on) I’m amazed that a Paul Krugman can look at 15+ years of the earth not warming and feel his beliefs need no modification or explanation, but 4 years of the CPI not inflating is reason not simply to declare victory, but to decry those who disagree with him as “Knaves and Fools.” In fact, rather than also anger Mr. Gore and Steyer, I hope they find this paragraph supportive as I’m saying these debates are rarely settled in either direction in short time frames. Now, if I were cheekier (cheek is not denial!) I’d ask if perhaps our letter was right and the inflation we predicted is in fact occurring in the depths of the ocean? Or, maybe we should ex post relabel our letter a warning of the risk of “extreme price action” including of course the extreme stability we have experienced in CPI these last few years.

To my knowledge, no one who (a) fervently believes the “science is settled on climate change” and (b) fervently believes “the evidence is on on the liquidity trap and austerity” has explained this tension.

What’s really interesting is that Asness goes on to make the ocean-analog argument, claiming that we do see price inflation in asset markets. The reason I like this so much is not because, “Phew, we can throw up that hypocrisy jab and run away from our bad CPI prediction.” Rather, I am truly fascinated by the psychology and rhetoric of both camps on this issue. I would appreciate more humility all around. I don’t expect Al Gore to jump off a bridge with each passing year, just like I shouldn’t be expected to fall on my knees in front of Krugman when the CPI comes out. On the other hand, everybody involved in these issues needs to deal with the fact that the incoming observations were not what some of us expected.

12 Responses to “Potpourri”

  1. Andrew_FL says:

    Bob, have you seen this? Am I crazy or is this an excellent illustration of exactly what malinvestmnt is? Apart from the fact that nobody woul actually try it, I mean.

  2. Maurizio says:

    What’s really interesting is that Asness goes on … claiming that we do see price inflation in asset markets.

    But then Asness needs to explain why inflation in asset markets is a bad thing. (Which he implicitely said, by using the word “risk”.) And I don’t see how he can do that. If he were an Austrian, he could respond that that kind of inflation is not sustainable, i.e. it must eventually crash, even if the Fed keeps printing money. But not being an Austrian, I suppose he believes that stock prices can remain inflated forever, provided the Fed keeps printing. So what can he say?

  3. Maurizio says:

    And by the way, am I correct that Austrians believe that stocks prices cannot stay this high indefinitely, even if the Fed keeps printing money? (unless hyperinflation occurs)

    • guest says:

      Hyperinflation is just an extreme form of false price signaling that happens every time an IOU for money is printed (in any amount) in excess of the money it is said to represent.

      (“Money” being a commodity, in this perspective.)

      Instead of people abandoning the paper all at once, as under hyperinflation, under slight inflation, they abandon it a little at a time: That is, the paper becomes worth less, requiring more of it to buy the same things.

      Another way of thinking about it is that, as prices for capital goods become higher, people will tend to conserve their money and buy more lower-order goods, thereby reducing demand for higher-order goods (such as stocks).

    • Jan Masek says:

      I think you’re correct, yes.

    • Tel says:

      My understanding of Austrian theory is that stock prices cannot remain this high without the price of other more mundane goods catching up (in nominal terms).

      That is to say, the relative gap between stocks and oil, food, electricity, wages, rent, etc will be (in the long run) determined by the market and not by the Fed. In the short run, the Fed can tip freshly printed money here, there, anywhere, but in order to maintain the Cantillon effect (i.e. price distortion) they must not only keep printing money, but print at an accelerating rate as other prices attempt to rebalance. It isn’t sustainable.

      • Maurizio says:

        My understanding of Austrian theory is that stock prices cannot remain this high without the price of other more mundane goods catching up

        Thank you Tel. So I am not the only one to be puzzled by the current situation where stock prices rise and consumer prices don’t. The obvious question is: can this situation go on indefinitely (provided they keep printing money), or must consumer prices too necessarily rise sooner or later? You say they must rise. I’d like to read more about this topic.

        • Russ says:

          “So I am not the only one to be puzzled by the current situation where stock prices rise and consumer prices don’t.”

          Prices have risen. The 3.5 oz stick of deodorant is now 3.0 oz, 32 oz jars of mayonnaise are now only 30 oz or 28 etc etc. You’re paying a higher price per weight or volume for some if not most goods.

        • Brian says:

          “..situation where stock prices rise and consumer prices don’t.”

          Setting aside the fatal flaws of measurements such as CPI, this situation shouldn’t surprise anyone. Asset inflation with low CPI was the very situation 2000-2010.

    • Brian says:

      Technically it’s not correct to say that stock prices “cannot” stay high, only that “all things being equal,” they will not. It’s possible some technological invention could come along that would spur real economic growth such that the real economy would catch up with the degree of inflation. But speaking in everyday language, no one anticipates such a rapid surge.

  4. Tel says:

    Bob, you believe in the power of voluntary activity amongst individuals. Go to your local Nashville cop bar and buy a round for everyone.

  5. Russ says:

    The NYPD video @ 2 mins it sounds like the cop is reading the law and says “are permitted” then says prohibited as though the cop read that the musician was right and then changed the law on the spot to not have to admit he was wrong.

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