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whereaminow (28.28)

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October 06, 2010 – Comments (33)

Let's look at some arguments often trotted out in the public arena.  This is a stream-of-consciousness blog, open for discussion, not a rigorous analysis.  I hope you find it interesting, if not the usual standard.

Gold is overpriced.
The Federal Reserve needs to avoid deflation.

These two arguments are rarely made in the same breath, but they are made by the same people. If you've been around here a while, you know who those people are. In case you are wondering where they've gone, just about every CAPS gold basher of the last two years has fallen off the radar or lowered themselves to snarky duck-and-run comments.

Just spend a moment to think about these two statements. Do you see the contradiction? If you believe the Federal Reserve must avoid deflation, then you also have to predict further currency devaluation.... and... .wait for it.... higher gold prices.  So how can you advocate a policy on the one hand that will increase gold prices, namely inflation, while telling everyone who will listen that only a fool thinks gold is underpriced?

Oh, sure, some of them get crafty (or just extra stupid depending on how you look at it), and they assure us that the Federal Reserve can withdraw the funds they've created, keeping the dollar stable (whatever that means to them).  In the end, they're just sure that gold buffoons will be squashed like bugs.  The glorious, supreme, and noble unelected technocrats of the Fed will triumph over selfish individual liberty and the evil capitalist market.

Yeah, sure.

Just keep in mind that back when the Credit Hoax, uh, I mean Crunch was happening, these jokers called for dollar devaluation.  Now they can't understand why gold prices are so high.  Are we sure they don't need medication? 

Freedom Isn't Free
Welfare Spending Is Bankrupting America

This one's a little nuanced.  Democrats, or just left-leaning people in general, let me help you. The next time a limited government, pro-war Republican tells you that the government cannot be trusted to manage healthcare, here is your response:

"If the government cannot be trusted to manage healthcare, why can it be trusted to fight prudent wars overseas?  Why can it be trusted with the power to wiretap American citizens?  Why can government agents be trusted to write their own search warrants under the Patriot Act? Why can it be trusted with nuclear weapons if you can't trust it with hospital services?  Why can it be trusted to have secret prisons, renditions, and authorized assassinations of American citizens?  Etc."

It's a slippery slope, as you can see.  The pro-war Republican may respond that the excesses of war are necessary because in today's world there are so many threats to our safety.  But who is to blame for today's unsafe world?  Governments!  The Tom Tancredo supporter will scare you with tales of nuclear footballs and dirty bombs, but who gave us a world with nuclear footballs and dirty bombs?  People like Tom Tancredo!  Helloooooo!

The pro-war Republicans are even worse on economics.  I'd like to point out to my Republican friends that the market supports universal health care.  Oh sure, I don't mean government enforced and mandated health care.  But before there was such nonsense, the market provided health care, clothing, and food for every American through something called charity - the original universal health care. It's obvious that Americans, like most humans, don't want to see their fellow countrymen starving and sick in the street, even though they may have differences over how the problem arises and determining the best solution. (Hint: voluntary is always the best solution.)  But where is the market desire for war?  Where are the Americans voluntarily paying to take down every bad dictator and evil-doer the planet has to offer?  Simple, there is no voluntary market for war.

Pro-war Republicans spun fairy tales (and many still do) about how war would pay for itself, appearantly forgetting their own caution about what happens when you give money to government.  Sure, Iraq and Afghanistan have natural resources that can be used to recoup the monetary expenses.  But let's not forget that the same Republicans telling you that government cannot manage health care are also trusting the government to extract trillions of $$$ in natural resources from a third world country! 

(And let's just skip the moral issue of invading a country to steal its resources for profit.)

In Today's Global Economy...

This isn't a contradictory argument, it's just a stupid phrase that annoys me.  When I come across this phrase, I know the author is an idiot. It really doesn't matter what comes next. Generally, however, what comes next is some philosophical waxing about how things are so different today because of blah blah blah, so of course what is required is more government economic cooperation and blah blah blah, and on and on.

Nonsense.  The minute Magellan went around the world it was a global economy.  (The Bedouins just honked their camel-towed Mercedes Benz's at me to protest. We always forget about the Bedouins.)

The only difference today is one of efficiency.  One hundred years ago, it was a global economy. Four hundered years ago, it was a global economy.  Why do you think there are Indians living in Cape Town and Durban, South Africa going back to the 1600's?  Try telling them it wasn't a global economy when they set sail on the Indian Ocean. Try telling a man on the NYSE in 1910 that he didn't live in a global economy and he'd laugh you out of the room.  People have always wanted to trade with as many other people as possible.  Global trade has existed for as long as people could trade around the globe.  It doesn't take any special magic sauce sprinkled by governments and their cabal of bankster gangsters and unelected bureaucrats. 

Like the freaking global economy needs a child such as Timmy Geithner to help it prosper. Jebus, what is wrong with people?

Can anyone explain to me why the SEC exists?

I can't wrap my head around this, so you'll have to help.  I guess the argument is that I need to protected from something, but what?  I'm an investor.  That means I have money.  Why do I need to be protected?  If I really cared about the safety of my investments, why wouldn't I just take some of that money off the table and hire someone who specializes in protecting investors? If you're poor, you play the Lottery. You don't buy 100 shares of some crappy shipping company.  So who exactly is the SEC protecting?

Investors have money, otherwise they wouldn't be investing!  They can buy their own protection, otherwise they wouldn't be investing!  Get it????  They don't need a nanny government agency, paid for by investors and non-investors, telling them what is safe or not safe.  And if they don't get that protection, who cares?  Are liberals really going to tell me I'm supposed to feel sorry for rich people that are too cheap to pay for investment protection?  Oh, c'mon.

In 1914 at the outbreak of WWI, there was no SEC.  Panic struck Wall Street and the entire investment community was bankrupted.  People hurled themselves onto the pavement after losing every dime.  Companies went bankrupt.  The entire American economy ground to a halt.

I just made all that up.

What actually happened?  Oder. No panic. No chaos. Order arose. Private institutions protected the shareholders, lenders and creditors.  The market barely hiccuped. 
For a detailed examination of the NYSE's response to WWI, see Benjamin Anderson's 'Economics and the Public Welfare.' It's also a fantastic book.

So tell me again, why do we need the SEC?

One hundred years later and the track record of the SEC is one train wreck after another, one shortsighted and foolish intervention after another, one missed fraud after another.  Yet they keep getting paid (it's gotta be trillions wasted by now) and they keep expanding their reach. 

Must be human nature

In 1974, Stanley Milgram published Obedience to Authority.  It was the results of an experiment that tested a person's willingness to go along with Authoritarian wishes even if it meant inflicting visible pain on another human, regardless of the reasons given.  The results were shocking and disturbing.  99% of humans will inflict increasing amounts of visible pain on other humans simply at the suggestion of Authority.  99%!!! 

The experiment works like this: two volunteers are selected.  One is a "teacher" and the other a "learner."  With each wrong response, the "learner" receives an increasingly more painful electric shock.  If the "teacher" begins to balk at adminstering the shock, the experiment director (the Authority) instructs the "teacher" to continue no matter what.

Despite the screams of the "learners" and voltage levels reaching dangerous levels, 99% of "teachers" continued to adminster the pain rather than stopping the experiment and walking out.  This experiment has been repeated many times and the results are always the same.  Only about 1% of the population stops the experiment once pain is visible.
Note: the "learners" are always paid actors and are never actually harmed.

This is a very sobering experiment. 

What does this say about the concept of Authority in general?  Can Authority ever be trusted?  Can a person acting on the behalf of Authority ever be trusted to act morally? 

I think humans have a natural desire to shuck responsibility for their actions.  I think this experiment "works" because humans would rather have someone make decisions for them (it's not my fault. He told me to keep adminstering shocks.)

But how can one have any hope in a benign and moral Authority when it is human nature to accept orders given by Authority even when we see the horrible impact those orders create?

Surprise! I'm an Anarchist

So that's just something to think about.  And yes, in case you were wondering, I am an anarchist.  It's too late now.  You already told me you liked me.  No takesies-backsies.

David in Qatar

33 Comments – Post Your Own

#1) On October 06, 2010 at 2:11 PM, kdakota630 (29.66) wrote:

The minute Magellan went around the world it was a global economy.

Note:  It took more than a minute for Magellan to go around the world.

Other than that glaring oversight, another brilliant blog, David.

Kudos (and baa) to you.

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#2) On October 06, 2010 at 2:17 PM, whereaminow (28.28) wrote:

kdakota630,

LOL, nice. I think it took him a couple days at least ;)

David in Qatar

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#3) On October 06, 2010 at 2:35 PM, Rehydrogenated (32.48) wrote:

But where is the market desire for war?  Where are the Americans voluntarily paying to take down every bad dictator and evil-doer the planet has to offer?  Simple, there is no voluntary market for war.

False,  the government does not pay for wars from the printing press. That would make too much sense. Instead, the US government takes loans from banks (sells them T-Bills) and pays interest on those loans. Why an organization in control of a printing press would voluntarily pay a private institution to give it money is beyond my understanding. In the past, governments would literally tax banks to death to finance wars. Now, we give them free money to lend back to us at a profit. This creates a huge incentive for powerful banks to start long, expensive wars and finance them for as long as possible.

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#4) On October 06, 2010 at 2:49 PM, whereaminow (28.28) wrote:

Rehydrogenated,

Yes, that's the mechanics of it, and what you say is very true, especially as you indicate, this arrangement lends itself to prolonged conflict.  But in the end, those loans must be paid by creating money.

Now, it gets a little tricky when we actually try to determine who finally foots the bill.  As I pointed out in my last blog, Europeans ended up paying for most of the Vietnam war because we exported our inflation, thanks to Bretton Woods, to European countries.  And then Americans paid the remainder in the 70's.

It's complex, I admit.  With some 2/3rds of all US $ held overseas, a lot of our inflation is exported.  In a way, the rest of the world is paying for our wars.  If those foreign holders start rejecting dollars and turn to something else (would that be gold?), then Americans will start to feel the real pain of our military adventures.

David in Qatar

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#5) On October 06, 2010 at 2:59 PM, mtf00l (44.91) wrote:

@Rehydrogenated

Not to mention financing both sides and creating CDO's to cover the risk of whichever the losing side is!

@whereaminow

First, when I first saw your label long ago I read it as "where a minnow". That said, can you explain to me why the UN still exist? Then perhaps we can both figure out why the SEC exist and will exist in perpetuity as long as there is a United States of America.

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#6) On October 06, 2010 at 3:09 PM, Dow3000 (< 20) wrote:

Man, I really am impressed with your ability to articulate these things so well...I find it quite difficult...but I am very new to libertarian ideas.

You say you are an anarchist.  I wonder how you define this b/c you seem to really know what you're talking about.  I have recently been reflecting on the fact that a government can never be checked by the ppl to remain small for long periods of time...the greatest example being the US government which started as the smallest and most limited in history but grew to become the largest EVER

Maybe a new term for anarchist is in order...I get the feeling that it has a very negative connotation right now...

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#7) On October 06, 2010 at 3:12 PM, BroadwayDan (97.47) wrote:

David - great post. The greatest thing about the CAPS blogosphere is the level of thought put into posts like this.

I am reconsidering my use of the word "liberal" as I think many impressive minds, especially around here, do not see the word as promoting freedom but promoting government power, corruption and waste. As I see it many people who consider themselves "liberal" have as much, or more, in common with libertarian thought as they do Marxist/Socialist thought. I guess what I'm getting at is in my experience most people, myself included, have virtually no clue how exactly money works. How it is printed, controlled, exchanged, etc. And as a result many people use words like "conservative" "libertarian" "liberal" and these same words mean different things to different people. So much so that there seems to be an Orwellian quality to them, in that words become almost worthless and add more confusion than clarity.

Bottom line is some of my favorite and most respected people these days share much of your thoughts. I hope my thought train didn't derail here as I try to figure out my own personal take on all this with an open mind. Appreciate your thoughts assuming you don't take a large dump on me here.

Anyway, great post. 

 

 

 

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#8) On October 06, 2010 at 3:12 PM, whereaminow (28.28) wrote:

mtf00l,

Jebus, don't get me started on the UN.

Oh damnit, too late.

In the early 1990's Sierra Leone was wrought with Civil War. A lunatic, blood thirsty warlord was going from village to village. He would separate able-bodied villagers from women/children/elderly.  Then, he'd drug the able-bodied and kill everyone else.  Once the 'new warriors' were part of his tribe, they had little choice: fight for him or be killed.

The government of Sierra Leone begged for help.  The UN told them they were too black to get any.  (They didn't really say that.)  So they looked elsewhere.

It was about that time that a disbanded group of special forces experts called Recces (pronounced Wreck-ies), started a private security firm called Executive Outcomes with the help of a couple American specfor experts.

Sierra Leone's gov hired Executive Outcomes for $1 million.

EO routed the warlord's army. It was completely one-sided. I think EO had about 40 combat troops, if memory serves me correctly. The warlord was totally defeated in about a month.

The UN freaked out.  They demanded that EO disband.  They finally offered to send 'peace-keepers.'

WIthin a year of EO's withdrawal and the arrival of 20,000 peacekeepers, the civil war was raging again.

Thanks a lot, UN!

David in Qatar

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#9) On October 06, 2010 at 3:28 PM, whereaminow (28.28) wrote:

Dow3000,

Thanks for the kind words.  If I understand things correctly, my line of reasoning goes like this:

Government is the only organization that derives its income by force, rather than voluntary means. Therefore, if it has a monopoly on force there is very little the people can do to keep it from expanding its reach.  Only economic constraints or a sudden surge in disobedience can stop government growth (all tyannies exist with popular support - that is a prerequisite to govern.)

Anarchy, in today's world, means violence.  That's a twist.  It used to mean: to live in a state without coercion.  Obviously these are two opposing definitions so it makes me wonder why/how the definition changed.  But anarchy, as I see it, is thoughtful, peaceful resistance to Authority, not running around Seattle with bandanas protesting the G8.  That stuff is nonsense and simply criminal behavior.

HollywoodDan,

Appreciate your thoughts assuming you don't take a large dump on me here.

Now why would I ever do that?  Oh yes, because quite often I can be surly prick. But hey, sorry about that.  I'm no angel.  I hope people have noticed that I am trying to be more connecting and less confrontational.  We're all in this shit storm together.  We fight amongst ourselves too much, and I have decided that I contribute to this far more than I should.

I'm glad you enjoyed the blog. I think your cartoons are fantastic and I always rec, even if I can't add much. 

You're not alone in your feelings about liberal/libertarian. Some things to consider:

1. Many libertarians, Roderick Long for example, argue that a libertarian society would be much closer to what liberals hope for than conservatives. Hence, they refer to themselves as left-libertarians.

2. Many liberals are aware that what was promised by the far left leadership (Pelosi, Reid) is not what they delivered. Case in point, the response to this Mother Jones editorial criticizing Pelosi's opponent John Dennis.  As the commentors pointed out (vehemently and eloquently), Dennis is anti-war, pro-Gay rights, and anti-bailout.  This libertarian no-name is certainly more 'liberal' than Pelosi. Why hate on him?

3. I'm starting to think that the Far Right and Far Left should be renamed.  It's the power elite that appear to be the American fringe.  Everyone else at least can find something they agree with from Nader and McKinney to Paul and Bednarik.

Thanks for the kind words.

David in Qatar

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#10) On October 06, 2010 at 3:32 PM, mtf00l (44.91) wrote:

Anarchist, nah, your just disgruntled.

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#11) On October 06, 2010 at 3:36 PM, kdakota630 (29.66) wrote:

I always thought David was gruntled.

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#12) On October 06, 2010 at 3:41 PM, amoldov (31.80) wrote:

LOL, nice. I think it took him a couple days at least ;)

I think it was a couple of years at least:) - for the few who returned to Spain, Magellan himself never made it all the way, I think he was killed in the Philippines.

Alex

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#13) On October 06, 2010 at 3:47 PM, whereaminow (28.28) wrote:

mtf00l,

Aw, c'mon!  Maybe, but that doesn't mean you can't love me =D

amoldov,

Yeah, he never made it back. He was on one of those Public-Private partnerships that we hear about so much. (What's another word for that? Hmmmm), and he messed around with the Filipinos. Btw, NEVER mess with the Filipinos!

David in Qatar

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#14) On October 06, 2010 at 3:59 PM, BillyTG (29.47) wrote:

Best rant of the day!

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#15) On October 06, 2010 at 4:06 PM, amoldov (31.80) wrote:

Btw, NEVER mess with the Filipinos!

Wow, I didn't know about that. But now it makes sense why there were no other candidates besides the incumbent on the ballot for the mayor and some city council positions in our last local elections :) - Our mayor is Asian-American, I don't know if Filipino, none of the reporters ever asked ...

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#16) On October 06, 2010 at 4:17 PM, StatsGeek (29.29) wrote:

Great post, David.  I have a few Republican friends who are for small government, except when it comes to military spending.  To me, it's pretty obvious that our "pre-emptive" wars are immoral, engender hatred and will just lead to more war down the road.

It is very difficult for me to accept this inconsistency in their thinking. Having spent quite a bit of time discussing issues with these folks, I've come to believe that they are morally righteous while I am more of a moral relativist.  They believe in a sort of "divine right of Americans/Christians" -- they are right, others are wrong, so they have the moral right and perhaps even the moral obligation to do what it takes to "fix" the rest of the world. I, on the other hand, have lived in 3 countries and visited dozens more, and I can see that value systems differ from place to place but I believe that none is de facto better than another.

To illustrate this moral dichotomy, let me tell you about a conversation I had recently with one of my Republican sheeple friends.  I told him that I didn't think that the U.S. had the right to go invade in Iraq.  He, of course, did not point to the original reason of WMD but instead talked about the atrocities perpetrated by Saddam on his people.  (Nifty and convenient how the rationale for war can change to suit the changing facts).  I pointed out that Africa has similar or worse atrocities -- so why aren't we fighting wars in those countries too?  Could it be because they don't have oil?  He seemed to get my point with that one.  On the other hand, he did say he believes that some things are univerally right and wrong and that we Americans have a duty to "do something about it" when another country does something that is universally wrong.

Here I pointed out right/wrong for me is never black and white but is on a spectrum and requires historical context.  For example, "Thou shalt not kill".  That's universal, isn't it?

...unless you're killing an evil dude that was found guilty of murder by a jury of his peers.

...unless it is a cow and you're going to eat it.

...unless it is an ugly spider.

...unless in your personal view you are defending your own life.

...unless you're fighting a war and your government has ordered you to do so.

...unless it is 1850 and one of your slaves tried to escape.

...unless you're the U.S. government and you've decided someone might be a terrorist.

...unless it is Salem, Mass in the 1600s and someone is a witch

...unless someone commits an abomination in God's eyes by engaging in gay sex acts.

You see my point here?  You can take just about any supposedly "universal" moral law and see all the potential caveats.  Even within a country, the moral code changes over time.  Remember how only white males could vote not too long ago?  How negroes were "property"?  

Let me bring it back to the main point I'm trying to make.  It is this:  I think the pro-"defense" Republicans think are arrogant and self-righteous.  They think they wrote the book on moral law, that they are more important or valuable than the subhumans in other countries and cultures and that America has a right to a disproportionate share of the world's resources.

I disagree.

But by the way, I don't consider myself an anarchist.  I'm more of a pragmatic libertarian who believes in small government.  (Not no government).

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#17) On October 06, 2010 at 4:38 PM, whereaminow (28.28) wrote:

StatsGeek,

Tremendous commentary.

Back in 2002-2004, I was dating a girl from Uzbekistan.  By placing a base in Uzbekistan to fight the war on boogeymen, uh, I mean terrorists, the American government propped up one of the world's most corrupt and despicable dictators, Islam Karimov.  My girlfriend hated Karimov (like most Uzbeks.)  Can you imagine the difficulty I had explaining to her that it was OK to strengthen Karimov in order to weaken Saddam or the Taliban? 

I remember relaying my girlfriend's dismay over the miltarization of Uzbekistan, caused directly by US foreign policy, to a Republican blogger. He told me not to worry, the US would get him next. WHAT??

In other words, they get to pick and choose who wins and loses in this world, and the concerns of people who merely wish to be left alone are irrelevant. 

David in Qatar

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#18) On October 06, 2010 at 4:58 PM, mtf00l (44.91) wrote:

How we swing from elites to republicans to democrats to liberals...

Who is not to blame?!

The United States Government has been involved in international intrigue since it got out of diapers.

Guess what, it's not going to stop anytime soon. I don't care which party is in office.

I read about how one is against this and that, I want to know what their for!

I'll start,...

Iraq wrong. Afghanistan, wrong. Pakistan, wrong. Patriot Act I, II and III wrong.  September 11th happened. I get that. Let's attack Saudi Arabia. No? Of course not, they're are good friends. They own a lot of this country, oh, and shucks OPEC. "Deep bow".

Surgical incursions don't work.  Any country trying it will end up there forever or until they are evicted by force or give up and go home.

Put your name on a ballot where you are and do something about it!

 

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#19) On October 06, 2010 at 5:07 PM, BillyTG (29.47) wrote:

@mtf001,

the only problem with voting is that it doesn't really work too well.

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#20) On October 06, 2010 at 5:55 PM, BroadwayDan (97.47) wrote:

David - if you ever become David in Chicago, beer on me, brother. You remind me of the great Bill Hicks who found a lot more enjoyment in life after he got sick and decided to try to see the good. Favorite books for/by intelligent Libertarians? 

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#21) On October 06, 2010 at 5:56 PM, BroadwayDan (97.47) wrote:

And here's to long lives for us all though of course. :>

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#22) On October 06, 2010 at 6:18 PM, whereaminow (28.28) wrote:

HollywoodDan,

Thanks Dan! I grew up in Chicago, and I'm sure I will be heading that way again for a stop this year or next.  I hope we can meet up.

Favorite books for/by intelligent Libertarians? 

Robert Heinlein wasn't a libertarian but he often presented a libertarian point of view.  Stranger in a Strange Land is probably my favorite.  Anything by Garet Garrett is also worth reading.

David in Qatar

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#23) On October 06, 2010 at 9:03 PM, Goofyhoofy (< 20) wrote:

How pathetic that you call it a "credit hoax" and no one calls you on it. I can only conclude that you have no idea what actually happened in the business world - and worse, have no interest in finding out.

For the record, my wife's company ($500m/annual) found itself with its credit lines hastily withdrawn and nearly out of business, putting almost 2,500 people on the street. Only because the CEO came from a corporate bankruptcy law practice and had a rolodex full of phone numbers was he able to cobble together enough money to get them through the holiday season - which is about 40% of their business.

Yes, yes, I know, "they had too much credit" Actually, for 14 of their 15 year history they didn't touch credit, and only began using it in late 2007 for expansion, which took them from 1,500 to 2,200 and eventually 2,500 employees, just as things cratered. Bad timing to be sure, but hardly some over-arching indictment of reckless behavior.

So, carry on, but in the future you might want to take hold of some real world info before you so lightly toss off what is common described - by people in a far greater position to know than you - as the worst credit disruption and economic contraction since the Great Depression.

 

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#24) On October 06, 2010 at 9:11 PM, whereaminow (28.28) wrote:

Goofyhoofy,

I'm glad you bring that up. 

How do you explain that the amount of available credit remained at an all time high throughout this supposed Credit Crunch?

Probably the most important measure of credit-market conditions is the amount of commercial-bank credit outstanding. These
figures show that although the middle part of 2008 does stand out in the long view, it does so not by virtue of credit's frightening contraction, but only by virtue of its hitting a six-month plateau from April through September.

After the six-month pause, commercial-bank credit zipped upward again, so that by the end of the year, the amount outstanding stood more than 8 percent higher than it had a year earlier. Some credit crunch! Année terrible, indeed.

David in Qatar 

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#25) On October 06, 2010 at 10:55 PM, whereaminow (28.28) wrote:

HollywoodDan,

Btw, my favorite Bill Hicks' commentary!

WARNING! Adult language!

David in Qatar 

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#26) On October 06, 2010 at 11:03 PM, Imperial1964 (97.76) wrote:

"If the government cannot be trusted to manage healthcare, why can it be trusted to fight prudent wars overseas?  Why can it be trusted with the power to wiretap American citizens?  Why can government agents be trusted to write their own search warrants under the Patriot Act? Why can it be trusted with nuclear weapons if you can't trust it with hospital services?  Why can it be trusted to have secret prisons, renditions, and authorized assassinations of American citizens?  Etc."

Exactly.

I wouldn't call myself a gold bull, though.  Deflation is only good for gold if it is bad enough that people start questioning the currency.  Inflation is good for gold, but unless inflation is extreme, it is mostly just reflecting currency devaluation and there are ways to play currency devaluation that have earnings power.

I think gold is more of a fear index than anything right now and I wonder if we may be closer to the end of this phase of the fear cycle than the beginning. 

I'm not saying I'm bearish on gold, though.  It will run for a while yet, but I make much of my money being a contrarian at the right time, not chasing momentum.  The rest of my money I make paying close attention to earnings and growth--two things gold doesn't have.

Some of it may just be that I hate to be late to a party.  Arriving halfway through and trying to catch up just leaves me with a hangover.

To each what he makes money at!

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#27) On October 07, 2010 at 12:09 AM, sawchain (< 20) wrote:

This thread reminds me of how I learned to stop worrying and love the bomb.

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#28) On October 07, 2010 at 6:54 AM, silverminer (31.55) wrote:

Amazing blog post, and fascinating discussion. Thanks to all!

HollywoodDan - I very much appreciated your comments regarding certain words being rendered useless through wanton misuse and hopelessly variable interpretations. To that list, I would add:

bubble

conspiracy

inflation

perma-anything

goldbug

The word "bubble" is itself the biggest bubble in the English language, since no one ever bothers to discuss their definition of the term before tossing it around. 

Conspiracy: what word turns off the mind of the listener/reader with greater swiftness? Immediately, the discussion turns to attachment of a label. Use the word, even where conspiracies can be proven to transpire, and immediately you are a "conspiracy theorist" and therefore must also believe the Apollo landing never happened. Question one possible conspiracy, and surely you must ascribe to them all. There is no rational nugget of thought behind such a practice, and the resulting apathy makes things far too easy for the world's conspiring criminals. :)

Inflation: Itself a very useful word, but in practice again we encounter severe impairment from the myriad ways in which it is commonly misunderstood. The failure to see that currency induced, cost-push inflation can occur even in a depressionary economic environment is the most relevant pitfall in present usage.

The last two have been thoroughly discussed elsewhere, so I will leave them alone for now. Suffice to say that are equally barren of value in rational discourse.

Sinch

 

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#29) On October 07, 2010 at 6:59 AM, outoffocus (22.96) wrote:

The problem with the gold bubble argument is we've seen so many bubbles lately, people think that anything that has a sustained price rise is a bubble. People tend to forget the characteristics of a actual bubble. 

Typically the main characteristic of a bubble is when the price rises for an asset absent of any fundamental price drivers. Typically the bubble goes parabolic when excessive leverage is used to bid up the prices.  When you apply that logic you can actually point the REAL bubbles and discern between a bubble and a bull market.  For instance, college tuition has had double digit increases over the past 2 decades. Yet no one is pointing out that bubble. I would argue that healthcare costs are a bubble as well but they are an insurance induced bubble rather than a speculative bubble. 

Treasuries are paying nothing.  The credit of the US government has deteriorated significantly.  The price of Treasuries are being held up simply by a fraudulent AAA rating and fear. Period.  But theres no bubble there (sarcasm intended).

Gold's sustained rise has been a result of many fundamental price drivers such as dollar devaluation and euro weakening. Its recent price action has beed tied directly to the weakening dollar.  Therefore gold is not in a bubble.  Thats not to say that gold cannot become a bubble.  But gold will not become a bubble until it meets the guidelines I stated above.  And if conditions in gold's price drivers change, such as the Fed raising interest rates (yea right) and the government cutting spending and paying down debt (don't make me laugh) and gold's price falls, then guess what, gold still wouldn't be a bubble because the price would still be tied to fundamental drivers. =O

So all these self-proclaimed bubble experts need to learn what the real definition of a bubble is before making their proclamations. 

I'd like to point out to my Republican friends that the market supports universal health care.  Oh sure, I don't mean government enforced and mandated health care.  But before there was such nonsense, the market provided health care, clothing, and food for every American through something called charity - the original universal health care.

THANK YOU! 

I personally believe that people use taxation for welfare services as a crutch to clear their conscience because they know that they are selfish people and would never give to charity on their own.  Its pretty sad but thats the nature of how we are. 

 

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#30) On October 07, 2010 at 1:56 PM, leohaas (33.32) wrote:

As usual, very interesting. Took a long lunch break to read all this. Maybe it is good that CAPS is not always about investing...

Anyhow, just realized you answered one of your own questions: why is it that deflation is to be avoided? In Comment #4 you are pegging it: "Europeans ended up paying for most of the Vietnam war because we exported our inflation..."

In other words: inflation is needed to afford our wars! Looks like we are doing our best to apply this right now so we can pay for the wars in Iraq and Afghanistan. With the upcoming Republican victories, are Iran and North Korea next? Rinse and repeat!

And I always thought we tried to avoid deflation because consumers might stop spending on non-essentials...

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#31) On October 07, 2010 at 1:56 PM, 4everlost (29.47) wrote:

David,

" I hope people have noticed that I am trying to be more connecting and less confrontational.  We're all in this shit storm together.  We fight amongst ourselves too much, and I have decided that I contribute to this far more than I should."

I have noticed and a couple of your most recent posts have been great reads.  On the other hand I really enjoyed the in-your-face, prove-it-or-shutup tone.  In the end I suppose you are right: We fight each other too much and are in this shit storm together.

Rec #44!

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#32) On October 07, 2010 at 4:07 PM, whereaminow (28.28) wrote:

silverminer,

Thanks for your comments. I understand your point on word meanings.  Our debates with opposing viewpoints and our efforts to explain our system of thought is made more difficult by the misleading and inappropriate alteration of meaningful terms.  Personally, I think we need to draw a line in the sand.  These words have real meanings, let's not allow people to distort them any further.

outoffocus,

THANK YOU! Your explanation of the characteristics of a real bubble are spot on.  It's a topic that I have considered blogging about, but you said it far better than I could have. 

leohaas,

I'm glad you enjoyed the post!  Another effort I have made recently is to try and explain why the information I am presenting is relevant to investors and something they should know about, if not specifically investment advice.  I have never really felt comfortable giving specific investment advice and more importantly, I have no reason to believe that I can offer better advice than our best CAPS analysts.  I admit that I occasionally wander into self-indugent ruminations on topics that have nothing to do with investing, but I can't help myself. Please try to take the good with the bad.  I just can't shut up sometimes.

4everlost,

Thanks!  I promise I will find a way to still be a total jack*ss without making it personal and confrontational.  (George Carlin made a career out of it.)  The new style is a work in progress.

David in Qatar

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#33) On October 11, 2010 at 2:50 PM, TMFPencils (99.81) wrote:

Awesome post, David! Nothing beats the effectiveness of a society built on free, uncoerced, voluntary interaction and cooperation.

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