KA-POW! #42 - Shostak

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to Frank Shostak for “Is Deflation Really Bad for the Economy?” :

A general fall in prices can also emerge as a result of a fall in the money stock. An important cause for such a fall is a decline in fractional-reserve lending. The existence of a central bank and of fractional-reserve banking permits commercial banks to generate credit not backed up by real savings, i.e., credit created out of thin air. Once the unbacked credit is generated, it creates activities that the free market would never support — activities that consume, and do not produce, real wealth. As long as the pool of real savings is expanding and banks are eager to expand credit, various false activities continue to prosper.

Whenever the extensive creation of credit out of thin air lifts the pace of real-wealth consumption above the pace of real-wealth production, this undermines the pool of real saving. Consequently, the performance of various activities starts to deteriorate, and bank's bad loans start to rise. In response to this, banks curtail their loans by not renewing maturing loans and this in turn sets in motion a decline in the money stock.

KA-POW! #36 - Mises

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to Ludwig von Mises for “The Market Economy as Affected by the Recurrence of the Trade Cycle” :

The boom is called good business, prosperity, and upswing. Its unavoidable aftermath, the readjustment of conditions to the real data of the market, is called crisis, slump, bad business, depression. People rebel against the insight that the disturbing element is to be seen in the malinvestment and the overconsumption of the boom period and that such an artificially induced boom is doomed. ...

...[W]e must call the boom retrogression and the depression progress.

KA-POW! #31 - Mises

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to Ludwig von Mises for “Role of Interest in Entrepreneurial Calculations” :

A drop in the gross market rate of interest affects the entrepreneur's calculation concerning the chances of the profitability of projects considered. Along with the prices of the material factors of production, wage rates, and the anticipated future prices of the products, interest rates are items that enter into the planning businessman's calculation.

The result of this calculation shows the businessman whether or not a definite project will pay.

KA-POW! #28 - Mogambo

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to The Mogambo Guru for “No Cure for Government Spending” :

“Nothing can be done and you are a moron for trying” is a snotty-yet-unshakable Foundation Stone of the Mogambo Grandiose Economic Theory (MGET), which, as a corollary, also says that you should always bet against the government using a fiat currency over the long term because that particular bet has always paid off, paying out unbelievable odds, which means you should be buying gold, silver and oil with Both Freaking Hands (BFH).

KA-POW! #22 - Schiff

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to Peter Schiff for “Don’t Bet on a Recovery” :

Beyond the question of “how” the spending could be achieved, is the deeper question of “why” such activity should be sought at all. Excessive spending, fueled by an insane housing bubble and catalyzed by reckless monetary and fiscal policy, was the reason that our current recession became unavoidable. Why would we want to go down that road again?

KA-POW! #19 - Barnes

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to Harry Elmer Barnes for “Revisionism and the Historical Blackout” :

The First World War and American intervention therein marked an ominous turning point in the history of the United States and of the world. Those who can remember "the good old days" before 1914 inevitably look back to those times with a very definite and justifiable feeling of nostalgia. There was no income tax before 1913, and that levied in the early days after the amendment was adopted was little more than nominal. All kinds of taxes were relatively low. We had only a token national debt of around a billion dollars, which could have been paid off in a year without causing even a ripple in national finance. ...

KA-POW! #16 - Bonner

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to Bill Bonner for “Government Spending Economic Theory” :

Yesterday, we went on at some length as to why government jobs weren’t the same as private sector jobs. Since they’re never put to the test of the market, you never know whether they are worth having, let alone saving. Do they add to the sum of human wealth and happiness…or do they subtract from it? No one knows for sure.

But here’s the strange and remarkable thing; modern economists actually would prefer jobs that are NOT worth doing.

KA-POW! #14 - Mises

This week's “Kick-Ass Post O’th’ Week” (KA-POW) goes to Ludwig von Mises for “Free Banking and Contract Law” :

It is a fable that governments interfered with banking in order to restrict the issue of fiduciary media and to prevent credit expansion. The idea that guided governments was, on the contrary, the lust for inflation and credit expansion. They privileged banks because they wanted to widen the limits drawn to credit expansion by conditions prevailing on the unhampered market or because they were eager to open to the treasury a source of revenue.

A Minsky Mistake

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