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November 08, 2009 – Comments (20)

And Keynes is to economics was Arisotle was to chemistry.

Nathan came across an interesting historical piece on Mises and Keynes.

I have stated before, I belong to the Austrian school of Economics and I find Keynesism totally garbage.  

Who is going to be the winner out of this economic mess?

It is going to be the businesses that kept debt under control and paid it off and/or reduced it, not the idiot businesses that keep rolling debt over, and really dumb, did things like take on debt to buy their stocks back at record high prices.

Unfortunately for a lot of people they are vested, or their pensions are vested in these idiot businesses.  Instead of helping to provide for retirement the businesses will be fighting for their survival and profits will be stifled under the burden of debt servicing.

20 Comments – Post Your Own

#1) On November 08, 2009 at 6:49 PM, rofgile (99.25) wrote:

Hey Dwot,

 Do you enjoy books written by Mises, and if so, what is a good book to read for a casual economist like myself?  At this point, I would like to read some of his theory, since I haven't had much exposure.

 Thanks,

  Rof 

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#2) On November 08, 2009 at 8:09 PM, 1315623493 wrote:

Mises would have advocated the total collapse of the American financial system in absolute adherence to a misguided economic ideology...Free markets can only go so far. 

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#3) On November 08, 2009 at 8:39 PM, fooletfs (90.57) wrote:

rogfile, try reading Murray Rothbard

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#4) On November 08, 2009 at 9:06 PM, whereaminow (22.93) wrote:

Here's a great Mises story. In the 20s he was predicting that the ever expanding credit cycle would lead to a collapse and wipe out everyone. Boy, was he wrong!

In 1929, he was offered a position with one of the most prominent European banks. He refused. His fiance protested. He told her, "there is about to be a crash and I don't want my name associated with it."

When the crash came, Keynes' life savings were wiped out. HAHAHAHAHAHAHHAHAHA!!!!!!!!

The bank that offered Mises the job went bankrupt.

HAHAHAHAHHAHAHAHHAHHAHAH!!!!!

Here we are today, and BetapegLLC follows Keynes and calls everyone else misguided.

HAHAHAHAHAHHAHAHAHAH!!!!

David in Qatar

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#5) On November 08, 2009 at 9:17 PM, kaskoosek (73.45) wrote:

It is going to be the holders of debt actually, as currency turns into garbage.

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#6) On November 08, 2009 at 9:54 PM, rofgile (99.25) wrote:

David,

 Have you read any of Mises' books? and if so which are interesting to read, etc...?  I'm a Keynesian from education, but am interested in reading some Austrian economics theory, particularly Mises (as he is the most famous).

 -Rof 

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#7) On November 08, 2009 at 10:04 PM, dwot (61.44) wrote:

Fofquil, I haven't read Mises directly.  I read an excellent book by Edward Chancellor written around 2004 or 2005.  It referred to the different economic schools of thought through out it.

 

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#8) On November 08, 2009 at 10:13 PM, whereaminow (22.93) wrote:

rofgile,

Yes, the first book of Mises that I read was Socialism: An Economic and Sociological Analysis and it still sits on a prominent place on my bookshelf. I also have read Liberty and Property, The Anit-Capitalist Mentality, and Liberalism (also known as The Free and Prosperous Commonwealth. I'm currently working on the audio book for Human Action which is his magnum opus.

All of these books are free at LvMI.

Also of value is the Quotable Mises at LvMI, which is a fine selection of some of his best quotes and the various lectures and essays of his that have been reprinted over at LvMI. Just do a search for articles by author.

I do hope you take the plunge, not necessarily to convince you of the correctness of our cause, but so it will help find a common ground where you will understand us and be able to communicate with us more easily. If you remain unconvinced at least you'll have a better shot at convincing us that you're right, since you'll be able to speak our language.

David in Qatar

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#9) On November 08, 2009 at 11:10 PM, 1315623493 wrote:

Who is surprised at "David in Qatar" claim that the Austrians basically predict every boom and bust? Not me of course. He's ragging on Keynes, yet in 1929, there was no such thing as Keynesian economics. It's easy to predict a bust when that's all the Mises/fundamentalist libertarians, ever do. I think the term is, "perma-bear". I can predict everyday it's going to rain, but it doesn't mean anything when it finally does rain...

Practically everyone advocates fiscal discipline, free enterprise, etc. But what Mises and David in Qatar's ideology entails is, allowing a financial system completely collapse, taking everyone down with it. That's not rational, it's radical and if we'v learned anything from history, it's radical adherence to any ideology is for lack of a better word...retarded...

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#10) On November 08, 2009 at 11:19 PM, whereaminow (22.93) wrote:

BetapegLLC,

Why are you assigning to both Mises and myself things that we have never said?

I am going to attempt to spell this out for you as clearly as possible:

If your financial system is built on cheap credit and a lender of last resort (which in reality is taxpayers), it is going to collapse no matter what you attempt to do otherwise. It will either collapse now, or you will try to prop it up and it will collapse later (and by you, I mean the powers-that-be, you, BetapegLLC, have no power or decision making ability. You are simply a cheerleader.)

If making such a prediction is so easy, what does that tell us about the people who can't see the obvious? And what does it tell us that you listen to them?

David in Qatar

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#11) On November 09, 2009 at 2:27 AM, lucas1985 (< 20) wrote:

@whereaminow,
"When the crash came, Keynes' life savings were wiped out. HAHAHAHAHAHAHHAHAHA!!!!!!!!"
Another big lie.
Keynes lost a big chunk of his fortune in the crash but he recovered every penny of it investing in the middle of the GD. He also directed the endowment of Cambridge with great success.

@rofgile,
"what is a good book to read for a casual economist like myself?"
I'd recommend to read Hayek (I love the sharp analysis in The Road to Serfdom). He's a more thoughtful thinker and more grounded in reality. The Austrian insights on the credit cycle are being used by Post-Keynesians to build their models.

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#12) On November 09, 2009 at 3:11 AM, whereaminow (22.93) wrote:

lucas1985,

How is that a lie? He recovered after he lost his savings. Do you understand cause and effect? Clearly not, or else you wouldn't be an AGW supporter.

Keynes lost his savings in the crash. That is a fact, plain and simple.

As for John Quiggin, Carl Menger founded the Austrian School with the publication of Principles of Economics in 1871 (or was it 1873, can't remember?) Nice to see Keynesians finally acknowledge it after decades of ignorance.

I did enjoy Quiggin's analysis, even if he didn't agree, but it's always amusing that a person has to, on the one hand criticize an Austrian position as weak, while at the same time weaken his own position by littering it with ridicule and invective. Quite amusing.

David in Qatar

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#13) On November 09, 2009 at 9:32 AM, dudemonkey (38.86) wrote:

When the crash came, Keynes' life savings were wiped out.

So was Ben Graham's.

Just sayin'

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#14) On November 09, 2009 at 1:46 PM, MustBNuts (31.94) wrote:

I'm just trying to learn more about economic theory and monetary policy and blah, blah, blah.  I've read both Austrian(ish) and Keynes(ish) books and am not sure whether either is quite right.  What I do see on the blogosphere is a lot of bashing of the Austrian School.  Can someone tell me:

If the Austrian school of economics is misguided economic ideology then what isn't misguided?  Is there one that does a better job or supports superior strategies? 

Thanks!

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#15) On November 09, 2009 at 5:23 PM, lucas1985 (< 20) wrote:

@whereaminow,
"Keynes lost his savings in the crash. That is a fact, plain and simple."
Read dudemonkey's reference:
"So was Ben Graham's."
Do you realize that great investors were burned by the crash in the stock market but they recovered their fortunes in the middle of the Great Depression (not precisely a bull market)?

"Do you understand cause and effect?"
Do you understand that investment is a long-term process?

"Clearly not, or else you wouldn't be an AGW supporter."
It simply amazes me that you can find a correlation between AGW/ACC and investing in the 30s. Clearly a sign of kookiness.

"Nice to see Keynesians finally acknowledge it after decades of ignorance."
Keynesians know about the Austrian school. Scholars interested in political economy and the history of economic thought know about the Austrian school. They just ignore anything published in the last 70 years.

"I did enjoy Quiggin's analysis, even if he didn't agree, but it's always amusing that a person has to, on the one hand criticize an Austrian position as weak, while at the same time weaken his own position by littering it with ridicule and invective. Quite amusing."
Did you really read Quiggin's analysis? Where does he weaken his position or litter it with ridicule and invective?


@MustBNuts,
"What I do see on the blogosphere is a lot of bashing of the Austrian School."
That's a reaction to Austrians bashing everyone else who doesn't adhere to The One Objective Truth revealed to prophet von Mises.

"If the Austrian school of economics is misguided economic ideology then what isn't misguided?  Is there one that does a better job or supports superior strategies?"
Austrian theory is flawed in several points:
- It has an epistemological problem. Most Austrians say that praxeology is the only methodological way to study economics. If you really believe that verbal logic is enough to explain economic phenomena or that quantitative/empirical approaches are useless you have a serious problem with reality. Verbal logic is less rigorous than math and we still make mistakes in math.
- It's seriously invalidated by data. Read Quiggin's post and you'll find critiques from libertarians to progressives. Milton Friedman said that the Austrian Business Cycle Theory doesn't match the observed facts.

This doesn't mean that Austrian insights are completely useless. As Quiggin says, Austrian thoughts on the credit cycle are being applied to Minsky's models of finance. Post-Keynesians share with Austrians the concern over the oversupply of cheap credit.
That being said, a big chunk of today Austrians are intellectual refugees. Conservatives who held unhedged opinions regarding rational expectations and the efficient market hypothesis in its strong form are feeling the spectre of intellectual capitulation. So, instead of being intellectually honest and conceding defeat, some conservatives become even more radical. This is further reinforced by electoral losses and public condemnation of basic tenets of conservative thought. Austrian theory provides rational justification for extreme laissez faire and offers extra comfort in its perma-bear attitude to government intervention.

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#16) On November 09, 2009 at 6:38 PM, 1315623493 wrote:

Whereaminow

It's pretty much common knowledge that you Austrians claim to call every boom and bust, just as you and Dartothredux did in this blog...

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=283577&t=01007683460707738789

I find your notion that collapses only happen in floated currency, centrally controlled monetary policy, economies, absolutely ridiculous. Since the current system of the Federal Reserve System was instituted, only one financial collapse has happened, and that was 80 years ago. That is a far better record than your favorite free banking, gold standard, no regulation system of the 19th, early 20th century.

Odd how every single country in the world floats their currency and has a central bank. Actually it's not. Good thing they don't pay much credence to fundamentalist libertarian ideology. 

--------------

"If making such a prediction is so easy, what does that tell us about the people who can't see the obvious? And what does it tell us that you listen to them?"

Ah of course. You are the enlightened one. I couldn't count how many times I'v heard this drivel. Only the Austrians know what's right! LOL 

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#17) On November 12, 2009 at 11:25 PM, whereaminow (22.93) wrote:

lucas1985,

Keynes was neither an economist nor an investor. He was a bureaucrat with an inflated sense of self worth. The comment stands. He lost his savings in the crash. No lie, just truth. Mises called the crash and saved his money, and did quite well for himself as a long term investor.

Did you just plagiarize Quiggin? You essentially repeated what he said without giving credit. Do you have any original thoughts?

Here's what you/Quiggin are missing. The Austrian School was reborn under Rothbard, and anyone wishing to read the tremendous work he did, including his treatise Man, Economy, and State (finished in 1962 I think) can do so by visiting the Mises Institute. One quick perusal of the journals, books, and articles present from scholars all across the globe can easily see that Quiggin has no idea what he is talking about. For crying out loud, Human Action was printed in the 50's and Quiggin acts like it never even happened. Nevermind the work of Salerno, Hoppe, Hayek, Hazlitt, Hulsmann, De Soto, Kinsella, Caden, Murphy, Woods, and on and on.

The Austrian School is the fastest growing school of economics, and for good reason. Only someone wearing blinders (or someone who shamelessly plagiarizes any opinion that fits his ideological bent) would ignore the tremendous amount of work done in the past 70 years.

It's as if the Hayek-Keynes debates never happened! Ha!

BetapegLLC,

You never have anything original to say. It's so boring. Take a read through my blogs. Ever issue you pretend to understand is completely foreign to you.

The classical gold standard never caused hyperinflation. Paper currencies have done so numerous times, even in the West.

The gold exchange standard is not the classical gold standard. Neither is bimetallism.

Floating currencies have given us and endless expansion of government power, an increase in the welfare state, total war, and global empire. No wonder they aren't interested in libertarian ideology.

And yes, Austrians do have a far better track record of prediction thanks to the superiority of praxeological analysis.

David in Qatar

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#18) On November 13, 2009 at 4:16 PM, lucas1985 (< 20) wrote:

@whereaminow,
"Keynes was neither an economist [1] nor an investor [2]."
1- False
"In 1909 Keynes's published his first professional economics article in the Economics Journal, about the effect of a recent global economic downturn on India. Also in 1909, Keynes accepted a lectureship in economics funded personally by Alfred Marshall. Keynes's earnings rose further as he began to take on pupils for private tuition, and on being elected a fellow. In 1911 Keynes was made editor of the Economic Journal."
2- False
"Keynes was ultimately a successful investor, building up a very substantial private fortune. He was nearly wiped out following the Stock Market Crash of 1929 which he failed to foresee, but he soon recouped his fortune. At his death in 1946 Keynes's worth stood just short of £500,000 - equivalent to about £11 million ($16.5 million) in 2009. The sum had been amassed despite lavish support for various good causes and his personal ethics which made him reluctant to sell on a falling market as he knew if too many did that it could deepen a slump."

"He lost his savings in the crash"
- Benjamin Graham lost a big amount of his fortune in the stock market crash.
- Warren Buffett had significant losses in 2008.
According to your twisted logic, this means that:
- Graham and Buffett are not investors.
- Graham and Buffett are bad investors.

"Did you just plagiarize Quiggin? You essentially repeated what he said without giving credit."

New lows for you: baseless accusations and insinuations.
Plagiarism: a piece of writing that has been copied from someone else and is presented as being your own work.
My wording:
"As Quiggin says, Austrian thoughts on the credit cycle are being applied to Minsky's models of finance."
Quiggin is given proper credit.

"Do you have any original thoughts?"
Yeah, I have a lot of original thoughts. What do you want to know?
I'll ask the same question: do you have any original thoughts given that what you write is straight crap sourced word by word from Mises.org in the majority of your blog entries?

"The Austrian School was reborn under Rothbard, and anyone wishing to read the tremendous work he did, including his treatise Man, Economy, and State (finished in 1962 I think) can do so by visiting the Mises Institute. One quick perusal of the journals, books, and articles present from scholars all across the globe can easily see that Quiggin has no idea what he is talking about. For crying out loud, Human Action was printed in the 50's and Quiggin acts like it never even happened. Nevermind the work of Salerno, Hoppe, Hayek, Hazlitt, Hulsmann, De Soto, Kinsella, Caden, Murphy, Woods, and on and on."
Nobody cares, because the theory does not fit the data. After the 50s, almost nobody cares about new developments on Austrian theory.

"The Austrian School is the fastest growing school [1] of economics, and for good reason [2]."
1- Where's the evidence? Other schools have also been growing rather fast: behavioural economics, new institutional economics, evolutionary economics, etc.
2- It doesn't surprise me
"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness" -JK Galbraith.

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#19) On November 14, 2009 at 5:52 AM, 1315623493 wrote:

 whereaminow

"You never have anything original to say. It's so boring. Take a read through my blogs. Ever issue you pretend to understand is completely foreign to you."

Again with the elistist 'you'r too dumb to understand' argument. How original of you. Why would I want to read your blog which repeats the same Mises regurgitation I'v been hearing for years? You think I haven't studied up on it just because I don't subscribe to it? Do you automatically believe everything you read? See, I do a little something called 'critical analysis'. 

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"The classical gold standard never caused hyperinflation. Paper currencies have done so numerous times, even in the West."

Never said it did have hyper inflation. No system is perfect. Paper or gold. But as the entire world has come to understand, the benefits of fiat money over gold standard warrant the abandonment of the gold standard. 

-----------------------------------------------------------

"Floating currencies have given us and endless expansion of government power, an increase in the welfare state, total war, and global empire. No wonder they aren't interested in libertarian ideology."

Uh, all that was happening before there was ever such a thing as a 'floating currency'. You actually think a gold standard is going to bring heaven on earth huh? 

----------------------------------------------------------

"And yes, Austrians do have a far better track record of prediction thanks to the superiority of praxeological analysis."

Like I said, it's easy to predict a rainy day when you do it everyday. 

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#20) On November 14, 2009 at 11:37 PM, firenze1 (86.44) wrote:

Hi dwot,Thanks for your post. 

 When I landed on Mises, the economic theories resonated with me.  When I mentioned him to my older investment broker brother, he gave me a blank look.  

Anyway, I have been interested in investing for about 25 years, when my dad convinced me to buy a mutual fund with my summers' earnings.  I am not financial genius by any means.  I love that you are a woman and kicking ass on the CAPS bd.

I digress.  So what I really wanted to ask was how does one go about finding out about which companies or their pensions are vested in these idiot businesses?  My mother in law, works for Mayo Clinic and has asked me repetitively if she is going to be ok with the pension or if she should take the lump sum.  Dear god..now the pressure is really on.  I want to do a little research project on it.

 Thks for your suggestions,

F

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