Politicians proclaim the benefits of small business while on the campaign trail. But when they meet in the seedy halls of Congress, they have no problem doing whatever they can to stifle, regulate, and subdue their progress. Instead of siding with entrepreneurs, these politicians often side with political allies and cronies that helped put them into office.
Just because you’re retired doesn’t mean you have to stop working. Especially now that you have all the time in the world to do what you really want. Entrepreneurs don’t only come out of Silicon Valley. They come from all walks of life, from all different ages. If you’re retired and want to stay active while you relax, then find out the steps you need to take in order to start, manage, and grow your next small business.
Austrian economics does more than tell you what happens when the government disturbs market forces. In the hands of knowledgeable investors and entrepreneurs, it can tell you exactly what to expect from the market. Market behavior depends on how people behave. And how people behave is central to the Austrian perspective.
The U.S. dollar has been the world's reserve currency for almost a century, and already there are signs it may be in decline. But that doesn't mean it's not still valuable. On the contrary... As Chris Mayer explains, there are many reasons the U.S. dollar will remain relevant on the world stage for years to come. Read on...
World War II might have dragged the country out of the Great Depression, but it did so at a great price. Central planning took center stage, and politicans and bureaucrats suddenly knew what was best for America, the economy, and your life. On top of that, they replaced the free market with a new economic system… Creditism.
If you’re good at something should you be penalized so others have a chance at success? Should award winning actors and actresses be barred from future Oscar ceremonies to give other men and women the chance to succeed? Success should always be rewarded and encouraged. But what happens when you have a government that wants to even the playing field and take away the spoils of success. Gregory Bresiger finds out...
Practical people often pooh-pooh fiction reading as a time wasting dalliance, dominated by a Marxist coloring of the world. However, fiction readers were given a scientific reason recently for spending hours absorbing fanciful figments of someone’s imagination.
Argentina is suffering the ravages of government debasement of the currency -- i.e., inflation, the process by which government pays for its ever-increasing debts and bills by simply printing more paper currency. The expanded money supply results in a lower value of everyone’s money, which is reflected in the rising prices of the things that money buys.
When government expansion is allowed to continue unabated or when it casts a heavy regulatory shadow on America’s entrepreneurial spirit, the freedoms that we’ve come to know, and perhaps take for granted, slowly begin to slip away.
Its acceptance is as widespread as its justification is important, for it provides the rationale for the Federal Reserve’s unprecedented monetary expansion since 2008. While critics may dispute the wealth effect’s magnitude, few have challenged its conceptual soundness. Such is the purpose of this article. The wealth effect is but a mantra without merit.
Baron Rothschild, the famous French financier, was once heard to say that he knew of only two men who really understood money -- an obscure clerk in the Bank of France and one of the directors of the Bank of England. “Unfortunately,” he added, “they disagree.”
The new reality of Obamacare’s tax credits has left finance reporters to pen articles warning readers to “take care” when considering a tax credit and providing strategies for how best to “protect yourself.” So what do finance reporters know that the White House doesn’t?
Nihilo ex nihilo fit. Out of nothing, nothing comes. First put forward by ancient Greek philosopher Parmenides in the fifth century B.C., Thomas Aquinas and St. Augustine later used this axiom to prove that the universe needed a “first mover” to get things going. Even if the whole thing began with some kind of “Big Bang” moment, it still needed a banger to bang it. Who? God, of course.
Economic theories don’t lend themselves to laboratory testing, so the work of a national appraisal firm is especially enlightening. A new study lends support to the Austrian business cycle theory, which says that the less government is involved, the faster a market will recover.
What positive steps can we take? The energy that is now expended by well intentioned, freedom-seeking individuals on the destructive course of politics can be turned into powerful steps that will have a positive effect on the future. All are moral, right and just. None require aggressing. Consider the following...
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”As the inequality gap grows, there is an ideological battle unfolding in the West.On the one hand, there are those who think government can fix things. It must do more, tax more, […]
The voting machine that is the market deemed an ounce of gold to be worth $1,600 a few days ago and then, whoops, two days later, that same market, the collection of rational minds that trade in the metal, valued that same ounce to be worth less than $1,400.
Keep in mind: These prices are in dollars that are not backed by anything other than Uncle Sam’s less-than-creditworthy promise.
Economists of the rational-expectations school and believers in the efficient-market hypothesis must be scratching their heads. These deep thinkers contend all information is known in the market. There are no such things as bubbles and busts.
Wikipedia explains rational expectations,
“it is assumed that outcomes that are being forecast do not differ systematically from the market equilibrium results. That is, it assumes that people do not make systematic errors when predicting the future, and deviations from perfect foresight are only random.”
Yep, that sounds exactly like you, me, and your idiot brother-in-law. Nobody makes mistakes when predicting the future.
At the same time, Eugene Fama, father of the efficient-markets hypothesis, says, “I think most bubbles are 20-20 hindsight.” When asked by John Cassidy at the New Yorker to clarify whether he thought bubbles can exist, Fama answered “They [bubbles] have to be predictable phenomena.”
Fama is no Nobel laureate, but he did co-author a textbook with Nobel Prize winner Merton H. Miller, and he himself has won plenty of prestigious awards for his theoretical work.
These guys can theorize all they want to, and win awards doing it, but what they have to say has nothing to do with how markets act and react.
This week’s Laissez Faire Club author, Alec Macfie, was an economist lecturing at the University of Glasgow back in the 1930s. He had a better head on his shoulders than today’s fuzzy-minded theoreticians who evidently haven’t taken the time to look out of their campus office windows to see how the world really works.
Macfie explores the ups and downs of the business cycle as well as investment booms and busts in his elegantly written Theories of the Trade Cycle. He not only, among other things, provides a clear synopsis of Hayek’s Austrian Business Cycle theory, but he also makes use of psychology to solve the business cycle puzzle. Investor errors are revealed in a crash as entrepreneurial errors are revealed by recessions. In Macfie’s view, the term error should be substituted with “excesses of optimism and pessimism.”
He explains that in a bull market the possibility of potential profits is spread by suggestion and is overemphasized. Investors hear the potential but not any opposing rational criticism. “A man acting under the influence of suggestion is like commander of a submarine observing his enemy through a periscope. He sees his easy prey and is impelled toward it, but his periscope cloaks from him the surrounding dangers,” writes Macfie.
But how could investors or entrepreneurs go from bullish to bearish so quickly to create huge drops in assets prices? A. C. Pigou, a renown English economist at the time, sheds some light on this, explaining, “An industrial boom has necessarily been a period of strong emotional excitement, and an excited man passes from one form of excitement to another more readily than he passes to quiescence.”
So for investors there is no inbetween, they go from bullish to bearish in the blink of an eye. Just what is it that sets them off? “It is, of course, common knowledge that we tend to manufacture rational explanations for conduct which springs largely from our unconscious urges,” Macfie explains. “Every politician, every elector, exemplifies this.”
Manufactured rational explanations or rationalization is constant in individual finance, according to Elliott Wave’s Robert Prechter. Individuals use reason to succeed in economic endeavours. However, in finance, individuals rationalize the decisions they have made that amount to simply herding with other investors. Rather than make their own valuations, investors depend upon others’ valuations. Rather than having knowledge about markets they remain ignorant. Rather than using objective value, investors value subjectively.
Bubbles and crashes are consistent with nonrational risk aversion, but not with rational assessments of risk. Still, people are hyper risk sensitive and often resort to bailout first and analyze later. “Thus, it is the instinct of each herd member to flee from danger that supplies the force behind the stampede,” writes Professor Macfie, even though that force maybe be a mere suggestion.
And while an individual will achieve prosperity acting in the economic sphere, that same person will chase booms and busts in finance. Why? According to Prechter, speaking at The 2013 Socionomics Summit in Atlanta, these decisions are made with two completely different parts of the brain. We use the rational part of our brain, the neocortex, to make economic decisions and maximize utility. However, investment decisions are made in the limbic system, that is driven by emotion, making us follow the herd.
Does any of this make sense from an evolutionary standpoint? Actually, yes, according to Prechter, “Prosperity keeps humans alive in the short run. Setbacks keep the species alive in the long run.”
The pummeling of gold was certainly a setback for those who are betting against the central bank controlled new world order. But one should realize that central bankers are no more than academic theoreticians lucky enough to get a government job. Their views of how the how the economy and markets work have no basis in reality.
Yes, the gold herd was spooked a few days ago. But the yellow metal has been around a lot longer than Ph.D. economists and will prove more durable in the end.