The Internet is experiencing another Y2K moment. A quiet overhaul is taking place behind all the 1s and 0s. And very few know about it. And you won’t either until you read on…
If hyperinflation were going to happen in the U.S., it already would have, right? Wrong. Jim Rickards explains the clear reason why the U.S. hasn’t seen hyperinflation… and why it’s still more than possible. Read on…
A new war is quietly brewing in America. A war on your retirement. Either you take steps now to protect yourself, or watch Wall Street and Big Government suck away everything you’ve worked for. Because, as Chris Campbell shows, the first shots have already been made. Learn how to protect yourself. Read on…
Are you a deflationist? Or an inflationist? No matter which way you believe the wind will blow, the truth is this: it’s up in the air. But, as Jim Rickards explains, there are things you can do to cover your assets, no matter which one wins the tug-of-war. Read on…
Smart meters are supposed to be our saving grace. Reduce pollution… reduce blackouts… and keep you and your family safe. The truth, though, is the exact opposite. What’s the true agenda behind smart meters? And why are you being lied to? Read on…
You hear a lot about gold these days. But what about silver? Chris Campbell speaks out about the moon metal with one shocking confession. Read on…
Markets have you spooked? You’re not the only one. In today’s Laissez Faire Today, you’ll hear from three market experts on how to stay safe, no matter what direction the overall market heads. Read on…
Savvy investors: Two experts weigh in on why having your own personal gold standard… and betting that Ebola will get worse… could be your best investment decisions of 2014. Read on…
Writing a book? Chris Campbell shares a PROVEN system to making your book go viral on the Internet. But he doesn’t just tell you how to do it, he shows you how he did it too. Just last weekend he received nearly 7,000 downloads in only three days. Read on…
Bitcoin has been pretty quiet lately. But that doesn’t mean big things aren’t taking place behind-the-scenes for the digital currency. In today’s Laissez Faire Today, Chris Campbell pulls back the curtain and shows you how Bitcoin is quietly slipping into the mainstream. He also shows you why now could be the time to buy now, or forever hold your peace. Read on…
Want to get rich? Don’t listen to financial “gurus,” says Chris Campbell. In today’s Laissez Faire Today, Chris shares a Zen proverb and shows how understanding it is the only real way to get rich (and live a rich life). Read on…
Ben Franklin once said, “An ounce of prevention is worth a pound of cure.” In today’s Laissez Faire Today, you’ll learn about one FREE website that has the potential to not only keep your family safe – but also open your eyes to what’s happening in your own neighborhood. Chris Campbell has all the details. Read on…
All over the world, power is dying. The dictators and tyrants of the world are no longer able to wield it like they once used to. And they’re losing it to the “little guy.” Chris Campbell shows you how to be the king of your castle by taking advantage of this fact. Today, you’ll learn how to grab “power gaps” in the market and channel them into your product idea or project. Read on…
The fireflies along the tidal rivers of Malaysia show "feats of synchrony that occur spontaneously, almost as if nature has an eerie yearning for order." Chris Campbell tells you where else this might occur in the world. Also, new technology may revolutionize the agriculture industry and what we think of as a farm.
Jeff Davis is running for Governor in Hawaii and has an interesting campaign strategy. Also, what motivates hackers is revealed and the findings might surprise you. Finally, Ferguson is discussed in a new light. Chris Campbell has more...
When the government pumps trillions of dollars into the economy, they’re not actually printing the money. It enters as digital entries in banks across the country. It’s made the system fast, responsive, and, unfortunately, vulnerable. Now our money is no longer something we hold in our hands, but something that exists on a very susceptible network.
In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which […]
The U.S. dollar is the dominant global reserve currency. All markets, including stocks, bonds, commodities, and foreign exchange are affected by the value of the dollar.The value of the dollar, in effect, its “price” is determined by interest rates. When the Federal Reserve manipulates interest rates, it is manipulating, and therefore distorting, every market in […]
The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance or the get-rich-quick adventurer. They will die poor.– Jesse Livermore, How to Trade in StocksThe trouble with capitalism’s guardians is that they have no […]
Let’s head back in time…In 2004, a mere decade ago, the US national debt rang the register at $7.4 trillion. That represents “debt per citizen” of over $25,000. You, me, your neighbor, your 4-yr old grandson, you name it and they’re portion of the U.S. debt is $25k.But flash forward to today and you’ll see […]
Alexander Hamilton was America’s first Secretary of Treasury under President George Washington. When he first entered office in 1789, America was an agricultural nation of just 4 million still broke from its financially costly victory over the British Empire in the Revolutionary War.The states had accumulated relatively massive debts to finance that war, which mostly […]
We’ve come to realize that the best opportunity in real estate isn’t in the physical world. After all, everyone knows — they aren’t making any more beaches. Physical real estate is a game of shuffle. You have to buy a plot or a house — already at a high price. Luckily, I’ve discovered an entirely different kind of real estate. Not land — not anymore. New millionaires are being minted every day in a very 21st-century kind of real estate. One without the limitations of the physical world.
Remember that correction we’ve been quietly talking about over the past couple of months?Well, it might be right around the corner. Stocks waited until the last day of the month to nose-dive. The S&P 500 posted its first 2% down day since April — and the Dow wasn’t far behind. Early this morning, futures continue […]
A great technology solves a problem that we didn’t know we had. It makes us aware of deprivations we didn’t know existed until we discover the new thing. Once discovered, we can’t go back.People in the 1950s, for example, never missed the smart phone. They were pleased to have a phone at all. But today, […]
Fifty years after the 1929 crash, a group of money managers and investment thinkers put together a collection of essays looking back at that experience. The result was a distillation of some pretty fine investment wisdom. Timely, I think, to review now.One of the contributors was Arthur Zeikel, then with Merrill Lynch. The title of […]
In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.The U.S. was already the world’s commercial powerhouse, having eclipsed the British […]
By the time you receive this month’s issue, your New Year’s hangover should be a distant memory. Your empty champagne bottles are on the curb waiting for the holiday-weary recycling guy, your house guests are long gone, and you’re just days into your New Year’s resolutions. Ahh yes. It’s the time of year when hope springs eternal. A time when anything and everything is possible. It is a new year, after all, and we have 365 days (give or take) to make 2015 your best year yet.
When you type a website address into a browser, you might have noticed that the letters “http” appear at the front. “HTTP” stands for Hypertext Transfer Protocol. In typing a Web address, you are actually sending an HTTP command to transmit that website to you. Hypertext Transfer Protocol is the means by which information is […]
Some people are saying it is just what the doctor ordered. Others are saying that the cure is worse than the disease.The Affordable Care Act? Reengagement in Iraq? Tea Party bullying in the GOP?Not this time. Just as protracted in the corridors of Congress and the White House is the debate over the proposed reform […]
I just spoke to a friend, Skinner Layne, who is from Arkansas, but now lives in Santiago, Chile. He emigrated there and is now heading a startup enterprise that is showing great promise. It is called Exosphere. I asked him about the backstory to the company. It turns out that he moved in 2008, six months before the U.S. real estate markets blew up. He left to escape the worst of it.
How did he know that the downturn was coming? His answer came quickly: “The yield curve inverted.”
I was just reading about this very indicator in Mark Skousen’s new book, A Viennese Waltz Down Wall Street. Here, Skousen, investor and economist, explains how the teachings of the Austrian School provide some excellent rules of thumb that allow us to anticipate, and act on, the big turns in the business cycle.
In the Austrian view tracing back a century ago, interest rates indicate the preference for goods sooner, rather than later. If you don’t have the money to get the stuff, you borrow for some period of time. Borrowers pay a higher rate if their payback term is longer. That’s because the risk is higher — who knows what’s going to happen in 30 years? — and lenders expect a higher payoff to wait longer for their money. So naturally, the yield curve should show lower overnight rates than five-year, 10-year, or 30-year rates. That’s why the normal yield curve is positive — that is, upward sloping to the right.
What does it mean for the yield curve to be negative? It’s a bit like water running uphill. You can be pretty sure that there is some seismic shift going on. Usually, it means a Fed tightening. Or it could mean that investors are expecting bankruptcies in the future. It is highly predictive of a coming recession.
When it happens, you can also be sure that hordes of television pundits and economists will emerge to say that there is nothing unusual here. It is a perfectly normal thing, and it’s even healthy — certainly nothing to be alarmed about.
My friend Skinner knew better. How? He had been reading the work of F.A. Hayek and Ludwig von Mises for years. He knew that there are certain constants in economic forces that do not change, no matter what government does. In fact, government and central bank attempts to manipulate the market can have exactly the opposite effect of the advertised results.
TV pundits are quick to agree with everything the Fed does. To spot the policy errors requires special knowledge that comes from reading sound economics.
That doesn’t mean that once you learn economics, you can predict the exact timing of events. In fact, this is also one of the observations of the Austrian School: There are no predictable quantitative relationships in the world of human action. This too differs from the mainstream view, which is forever seeking the magic formula to predict price movements.
I like the way Skousen describes financial markets. He says that prices in markets are like a dance. There are patterns and habits at work. But there are also surprises and improvisations going on. That’s part of the spirit of dance too. But the crucial thing here is that it takes two people to coordinate their moves in a dance, just as in markets, it takes buyers and sellers to make a price. Financial markets bring people together to their mutual benefit.
Nice image, isn’t it? It’s one that he elaborates on at length. In the course of his argument, he criticizes other points of view that don’t account for human decision-making and don’t account for the parameters of those decisions as set by economic reality. For example, just as dancers can’t start flying, markets can’t sustain parabolic price increases in one sector forever, even with Fed intervention.
Why did Skinner choose Chile as his home? Well, he knew it to be the most pro-enterprise country in Latin America, at least so far as he could tell. His reading in the Austrian tradition helped him see why this is important.
And he likes Latin America because it is the new world and doesn’t have economies bogged down by bad habits and massive welfare and regulatory bureaucracies. There is far less sludge in the system to harm economic growth. For this reason, he is very bullish on the whole region — and bearish on the U.S. and Europe.
This too reminds me of something else explored in the Skousen book. He discusses how institutions affect economic growth and can help people make better predictions about coming economic booms. A regime that is friendly to free enterprise might lower taxes or cut regulations. Even a little bit helps. Economies are like sponges for this stuff. Just a bit of encouragement — or, more precisely, just a bit of relaxation of the fetters — can spark huge economic booms.
This is why Skousen strongly suggests following the politics of a country to understand its economic future. He goes so far as to slightly scold fellow Austrians for holding a permanent bearish view on economies. He says that this point of view causes investors to miss economic booms such as, say, those in the 1980s and 2000s. And he is right to this extent: If your goal is to play the markets, it makes sense to be able to discern their upside, as well as their downside.
Monetary policy figures in here substantially. As Skousen says, an economy without a huge debt overhang that is emerging from rough economic times can find itself on an upswing if the Fed is pumping money at a rapid pace. Under this rule, you might have bought stocks in 2009. The problem is that this approach to economic policy cannot last. It creates new problems that cry out for correction. The tricky thing is to be able to spot the turning points.
What do Austrian economics imply about today’s precarious situation? Well, the Fed is making loud noises about pulling back its stimulus program. If the drug of new money is cut off, we could see short-term rates rise and blow up the balance sheets of many businesses, not to mention governments.
The beauty of the Austrian School is, fundamentally, this: It sees economics as an extension of human choice. There is nothing mechanical and predictable about it. But there are certain patterns that emerge just from the logic of human action itself. Skousen’s purpose here is to elucidate that logic and illustrate it with examples from the business pages. The results are interesting: You can gain insight into both worlds. In this book, the rubber of finance truly does meet the road of economics.
I’m intrigued at the confidence with which my friend Skinner took the step to move. Five years later, he has a thriving business and a happy life. He only did it once he had intellectually seceded from mainstream thinking. But just as important, he did it with the aid of solid economic thinking.
Now with Skousen’s book A Viennese Waltz Down Wall Street, anyone can gain access to that knowledge. A selection like this makes a mighty contribution.