• Tag Archives Austria
  • The ECB Blames Inflation on Everything but Itself

    Unsurprisingly, central banks are reluctant to claim credit for inflation. In their latest bulletin, the European Central Bank (ECB) published the graph below explaining what causes inflation.
    See the problem? Neither the money supply nor the ECB are mentioned. While there are many factors that influence the purchasing power of money, inflation is still inherently a monetary phenomenon and the role central banks play simply can’t be ignored.
    ***
    Instead, the ECB prefers to do what all central banks did just before the 2009 great recession: blame inflation on rising food and energy prices. But large central banks like the ECB have a strong and disproportionate effect on energy prices, as predicted by Austrian business cycle theory. The rise in oil prices in 2007, for example, was triggered by the end of the euphoric monetary boom initiated by the Fed and the ECB in the years prior. As investment in energy production was fueled, in part, by credit expansion instead of real savings. The quantity of producer’s goods – or at least of some of them – revealed themselves to be insufficient to complete the plans of entrepreneurs, thus generating a sharp increase in their prices.

    This post was published at Ludwig von Mises Institute on June 23, 2017.


  • Money Supply Growth Fell to a 104-Month Low in May

    Last month, the money supply growth rate in the United States fell to a 104-month low, rising by 5.91 percent. This is the lowest growth rate recorded since July 2008 when the growth rate was 5.24 percent.
    Given the imprecise nature of these estimates, however, it is fair to say that the rate of growth is essentially unchanged since March, and for the past three months, money supply growth has been at eight-year lows.
    In March, we reported that money supply growth had fallen to a 103-month low. In April, the growth rate increased slightly to 6 percent, but fell again in May.
    The M2 measure also showed a downward turn in recent months, although not to the same extent as the “Austrian” measure. In May, however, M2 growth had moderated to the point of matching our money-supply growth measure with both now being at 5.9 percent.

    This post was published at Ludwig von Mises Institute on June 21, 2017.


  • Government as the Source of Monopoly: US Airlines Edition

    “Is Government the Source of Monopoly?” asked Chicago economist Yale Brozen in an essay first published in 1968. Yes, he answered – not only directly, by awarding exclusive licenses and contracts, but also indirectly, via regulation, minimum-wage legislation, and other forms of government intervention. Austrian economists such as Murray Rothbard and Dominick Armentano went further, arguing that monopoly per se is impossible on the free market, as long as government does not restrict entry into markets. More successful firms will tend to grow and increase their market share, but this does not constitute monopoly, as long as other firms are free to compete, or try to compete. The concept of monopoly only makes sense, theoretically and empirically, when the government protects privileged firms from competition, either directly or through the kinds of indirect means discussed by Brozen.
    I recently came across a lucid example of government-created monopoly in Thomas Petzinger excellent book Hard Landing: The Epic Contest for Power and Profits That Plunged the Airlines into Chaos (Crown, 1996). Petzinger explains the emergence of the US commercial airline industry in the 1930s as the result of efforts by Walter F. Brown, Postmaster General in the Hoover Administration, to reorganize the nascent airmail business.

    This post was published at Ludwig von Mises Institute on June 17, 2017.


  • JUNE 16/DEPT OF JUSTICE SHENANIGANS/NY FED LOWERS ESTIMATE OF 2ND QUARTER GDP TO 1.8%/GOLD RISES $1.80 BUT SILVER LOSES 5 CENTS/ FOR THE 12TH CONSECUTIVE DAY, THE AMOUNT OF SILVER STANDING AT THE…

    GOLD: $1254.00 UP $1.80
    Silver: $16.64 DOWN 5 cent(s)
    Closing access prices:
    Gold $1253.40
    silver: $16.67
    SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME) SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
    SHANGHAI FIRST GOLD FIX: $1260.95 DOLLARS PER OZ
    NY PRICE OF GOLD AT EXACT SAME TIME: $1252.61
    PREMIUM FIRST FIX: $8.34

    This post was published at Harvey Organ Blog on June 16, 2017.


  • How We Should Name Business Cycles

    Economists have long played semantic games with business cycles. In particular, they try to downplay the significance of the crisis and to obfuscate its cause.
    First of all, bubbles and economic crises are initially denied and then usually not named until after they end and particular sectors of the economy are revealed to be what Lionel Robbins called ‘a cluster of entrepreneurial errors.’
    The housing bubble was an exception because it was obvious to Austrian economists that there was a bubble as early as 2002 and that it was concentrated in housing due to various government subsidies, tax breaks, and regulations.
    Murray Rothbard explained that economists have played semantic games regarding the naming of business cycles. Up until the Great Depression an economic crisis typically started with a boom, followed by a ‘panic’ and concluded with a ‘depression.’
    After the disaster of 1929, economists and politicians resolved that this (i.e., a ‘depression’) must never happen again. The easiest way of succeeding at this resolve was simply to define ‘depression’ out of existence. From this point on, America was to suffer no further depressions.

    This post was published at Ludwig von Mises Institute on June 16, 2017.


  • Mises-Influenced MP Becomes Brexit Minister

    Steve Baker, a Conservative Member of Parliament, was announced today as junior Brexit minister under fellow libertarian David Davis. Baker, who has referenced Austrian scholars such as Ludwig von Mises, Jess Huerta de Soto and F. A. Hayek in the House of Commons, has long been a Eurosceptic and seen as a ‘hardliner’ in future negotiations with the EU. Along with his opposition to the EU, Baker has been a vocal opponent of the Bank of England’s policy of quantitive easing, and the IMF.
    In his own words:
    I am afraid that the contemporary mainstream of economics is missing some vital information…
    As I explained, as Mises set out, as Hayek followed in his steps and as others have predicted, we risk a final and total catastrophe for our currency system.
    To conclude, we are in danger of simply kicking a can down. … We are looking at further credit expansion, further monetisation of debts and further socialisation of risk. Throughout the western world, we are in danger of appearing as King Canute, trying to use politics to hold back the realities of social co-operation, which we usually describe as economics. The IMF is an institutional legacy from a monetary system that failed 40 years ago, and the successor to which is even now failing as well.

    This post was published at Ludwig von Mises Institute on June 14, 2017.


  • Why bad economic theories remain popular

    Ludwig von Mises and Friedrich Hayek, the most prominent ‘Austrian’ economists of the time, anticipated the 1929 stock market crash and correctly predicted the dire consequences of government attempts to artificially stimulate economic growth in the aftermath of the crash. John Maynard Keynes, on the other hand, was totally blindsided by the stock market crash and the economic disaster of the early 1930s. And yet, Keynes’s theories gained enormous popularity during the 1930s whereas the work of Mises and Hayek was largely ignored. Why was it so?
    Keynes became popular because he told the politically powerful what they wanted to hear. In particular, he provided power-hungry politicians with intellectual support for the schemes they not only already had in mind, but in many cases were already putting into practice. Despite being riddled with errors, Keynes’ theories also appealed to many economists because the implementation of these theories would confer a lot more influence upon the economics fraternity. The fact is that in a free economy there wouldn’t be much for an economist to do other than teach economics. He/she would certainly never have the opportunity to be involved in the ‘management’ of the economy.
    The points outlined in the above paragraph, along with Keynes’ charisma and salesmanship, explain why ‘Keynesian’ economic theories became dominant, but it doesn’t explain how they managed to stay dominant in the face of an ever-growing mountain of evidence indicating that they result in long-term economic decline.

    This post was published at GoldSeek on 26 May 2017.


  • How Will The ‘GREAT DEFLATION’ Impact Gold & The Dollar?

    The coming GREAT DEFLATION will impact the value of Gold and the Dollar much differently than what most analysts are forecasting. Unfortunately, most analysts do not understand the true underlying value of gold or the U. S. Dollar, because they base their forecasts on information that is inaccurate, flawed or imprecise.
    This is due to two faulty theories:
    monetary science supply-demand market forces While some aspects of monetary science and supply and demand forces do impact the prices of goods and services (on a short-term basis), the most important factor, ENERGY, is totally overlooked. You will never hear Peter Schiff include energy when he talks about the Federal Reserve, Commercial Banks, money printing or debt. Schiff, like most analysts, is stuck on studying superficial monetary data that does not get to the ROOT OF THE PROBLEM.
    Furthermore, the majority of folks who believe in the Austrian School of economics, also fail to incorporate ENERGY into their analysis. For some strange reason, most analysts believe the world is run by the ENERGY TOOTH FAIRY (term by Louis Arnoux). Without cheap and abundant energy, monetary science and supply-demand forces are worthless.

    This post was published at SRSrocco Report on MAY 18, 2017.


  • The Economic School You’ve Never Heard Of

    Submitted by Valentin Schmid via The Epoch Times,
    Mainstream economics is under heavy pressure. Consistently wrong policies and forecasts have damaged the field dubbed ‘the dismal science.’ But what do critics propose should supersede the prevailing neo-Keynesian and neoclassical schools? Almost all alternative economists are calling for more government involvement to ‘fix’ the free market and make it work better.
    But there is one school of economics, once prevalent in academia until it was pushed into obscurity, that places the power to fix the world’s problems in the hands of the people.
    ‘Economists err if they forget that economic life existed before them and that it operates, for the most part, independently of them,’ American economist Peter J. Boettke wrote in his book ‘Living Economics.’
    Economics was once tasked with describing how man manages the world’s scarce resources, a process far older than economics as a science. But it has morphed into a field that blames the individual and reality for not measuring up to its theories, and then uses the coercive power of the state in an attempt to shape individuals and reality according to its ends.
    The Austrian school of economics, the once dominant school of economic thought at the turn of the 19th century, focuses on the individual – and his or her actions and motivations – to explain economic life. It derives its name from the many scholars from Austria who developed 19th-century classic liberalism into a coherent explanation of economic life.

    This post was published at Zero Hedge on May 15, 2017.


  • Bob Murphy: Where Monetarism Goes Wrong

    The following video was published by misesmedia on May 12, 2017
    The great Austrian economist Friedrich Hayek celebrated a birthday earlier this week, while the prominent monetarist (and Fed historian) Allan Meltzer passed away the same day. Joining us to discuss monetarism is our friend Bob Murphy, who lays out the central tenets of the Chicago school and its godfather Milton Friedman. At its heart, Bob explains, monetarism is a cousin of Keynesianism – one advocates fiscal stimulus, the other monetary stimulus. Both go astray when it comes to money, and both fail to see the trees in the macro forest. Bob explains why in this great discussion of the differences between the Austrian and Chicago schools.


  • Money-Supply Growth Fell to an 8-year Low in March

    The supply of US dollars has slowed during early 2017 with March’s year-over-year percentage increase hitting a 103-month low of 5.9 percent. The last time the year-over-year growth rate was lower was during September of 2008, when the growth rate was 5.2 percent. Monthly year-over-year growth rates in the money supply have been falling each month since October. (All the numbers used here were posted in mid-April 2017.)
    Over the past eight months or so, money supply growth rates have become somewhat volatile with the growth rate surging from 6.7 percent in late 2015 up to 11.3 percent by late 2016, and down again to March’s multi-year low.
    The M2 measure also showed a downward turn in recent months, although not to the same extent as the “Austrian” measure. The year-over-year change in M2 during March was 6.3 percent which put M2 growth near a 12-month low. M2 movements were otherwise unremarkable, however.

    This post was published at Ludwig von Mises Institute on May 12, 2017.


  • Belly of the Beast — Doug Noland

    The problem confronting Beijing – and global policymakers more generally – relates to the old ‘Austrian’ analysis that Bubbles are sustained only by ever-increasing quantities of Credit creation. Inflate a Credit Bubble – with resulting elevated price structures throughout the real economy, asset markets and the financial sphere – and these various inflated price levels become progressively susceptible to any meaningful and sustained slowdown in Credit creation.
    There remains this dangerous misconception that economies can simply grow/inflate their way out of debt problems. This is at odds with reality. Especially late in the cycle, liquidity is funneled into inflating asset markets rather than to the real economy (suffering from overcapacity and waning profit opportunities). It becomes easier to make returns in finance than in goods and services. Meanwhile, policy measures to sustain the unstable boom further incentivize leveraging and speculating.
    To this point, Chinese officials have ‘succeeded’ in ensuring ever-increasing amounts of Credit. The upshot has been only more outrageous real estate (largely apartment) Bubbles, rapid Credit deterioration and deeper structural maladjustment.
    Beijing understands that it has a problem and appears to have a new approach: They’re going to the Belly of the Credit Beast – ‘shadow banking’ and, more specifically, ‘wealth management products’ (WMP). They’re also cracking down on ‘insurance’ companies.

    This post was published at Credit Bubble Bulletin


  • Austria Wants to Tax Any Search, Like, or Communication via Internet

    Andreas Schieder (born 1969) is the parliamentary head of Austrian Chancellor Christian Kern’s Social Democrats. He is a typical career politician since 1997 and the very type of person who has no idea about the world economy no less human nature. He is a highly dangerous bureaucrat who only looks at people like cattle from which the government can extract greater and great sums.
    Schieder is obviously a Marxist who wants to now tax human behavior and any interaction you have with Twitter Inc., Google or Facebook among others. He wants to tax every time you do anything from searching, posting, tweeting or just liking someone’s post.

    This post was published at Armstrong Economics on May 2, 2017.


  • U.S. Airstrikes on Syria Signal More Military Spending, Deficits, Higher Gold Prices

    Mike Gleason: It is my privilege now to be joined by a man who needs little introduction, Marc Faber, editor and publisher of The Gloom, Boom and Doom Report. Dr. Faber has been a long-time guest on financial shows throughout the world and is a well-known Austrian school economist and an investment advisor and it’s a tremendous honor to have him on with us today.
    Dr. Faber, thank you so much for joining us again and how are you?
    Marc Faber: My pleasure, thank you.
    Mike Gleason: Well, to start out here Dr. Faber, before we get into some other stuff I wanted to hear your comments on the state of the U. S. economy. Now, it appears the Federal Reserve has finally gotten serious about moving rates higher at least modestly. U. S. equity markets seem to be discounting that fact, focusing instead on the so called Trump trade. Markets are pricing in a huge infrastructure spending program and tax cuts stimulates that could overwhelm any modest tightening at the Fed. Now that efforts to reform healthcare seem to be failing we expected some of the optimism surrounding president Trump’s other initiatives would leak out of the stock market but so far that hasn’t happened.
    Stocks remain near record highs and there isn’t a whole lot of interest in safe haven assets including precious metals. So what are your thoughts here Marc? Is now a time to take some profits and move towards safety or is there still some good upside in equities?
    Marc Faber: Well, I think that in terms of the economy I don’t think the economy is as strong as people believe or as the statistics would show and recent trends have rather been indicating some weakness is auto sales, not a particularly strong housing market and we have several problems as a result of excessive credit. So I think that the economy is not going to do as well as people expect and concerning the huge infrastructure expenditure that Mr. Trump has been talking about, it is about a trillion dollars over ten years, maximum. In other words a hundred billion a year.

    This post was published at GoldSeek on 11 April 2017.


  • Citi: Central Banks “Took Over” Markets In 2009; In December The “Unwind” Begins

    Citigroup’s crack trio of credit analysts, Matt King, Stephen Antczak, and Hans Lorenzen, best known for their relentless, Austrian, at times “Zero Hedge-esque” attacks on the Fed, and persistent accusations central banks distort markets, all summarized best in the following Citi chart…
    ***
    … have come out of hibernation, to dicuss what comes next for various asset classes in the context of the upcoming paradigm shift in central bank posture.
    In a note released by the group’s credit team on March 27, Lorenzen writes that credit’s “infatuation with equities is coming to an end.”
    What do credit traders look at when they mark their books? Well, these days it is fair to say that they have more than one eye on the equity market.

    This post was published at Zero Hedge on Apr 8, 2017.


  • Heraeus Gold Refinery Buys Swiss Refiner Argor-Heraeus

    – Heraeus gold and precious metals refinery buys Swiss refinery Argor-Heraeus
    – Heraeus reported to have paid ‘few hundred million euros for the remaining Argor shares’
    – Argor-Heraeus ‘goodwill’ alone reported to have been valued at over ‘half a billion Swiss francs’
    – Global technology & precious metals refiner Heraeus will acquire stakes from Commerzbank and Austrian Mint
    – Heraeus involved with Argor-Heraeus since 1986
    – Swiss refinery Argor Heraeus once fully-owned by UBS
    – Heraeus to profit from Argor’s competence for gold and silver refining and international footprint
    – Prudent Germans know history and love gold
    ***
    Heraeus, the family owned German global technology and precious metals refining company has announced that it is to buy one of Switzerland’s largest gold and silver refineries, Argor-Heraeus.

    This post was published at Gold Core on April 5, 2017.


  • Week in Review: March 25, 2017

    Our guest on Mises Weekends is Professor Per Bylund, a man who studies entrepreneurship for a living. Why is the role of the entrepreneur – the individual who risks capital, time, and energy to build a business – almost completely disregarded by most economists? Does the Austrian focus on individual human action explain why business schools are far more willing to embrace Austrian principles? Can real-world entrepreneurs improve their business skills in traditional university settings, or are much-hyped campus incubators a waste of time? Why do progressives dismiss entrepreneurs with their “You didn’t build that” mentality? And how do socialist policies in places like Dr. Bylund’s native Sweden kill the spirit that makes us rich? Join Jeff and Per for an insightful discussion of “Who Built That?”


    This post was published at Ludwig von Mises Institute on March 25, 2017.


  • For Keynesians and Austrians, “Uncertainty” Means Two Different Things

    Keynesian economics has witnessed a remarkable resurgence since the crisis of 2008. The inability of mainstream economics to predict or explain the crisis led many economists to become skeptical of its core macroeconomic tenets. Several have turned the clock back to the ideas of Keynes to make sense of the housing bubble and the ensuing recession.
    One such explanation inspired by the General Theory emphasizes the endemic uncertainty of the future and its implications for market stability. Championed by Paul Davidson1 and popularized by Robert Skidelsky,2 this line of thought blames the crisis and recession on the fickle expectations and ‘animal spirits’ that guide investment in a market economy.3
    Per this thesis, in an uncertain world, entrepreneurs and investors suffer from mood swings. Optimism regarding the future abruptly gives way to pessimism. Fluctuations in economic activity are the result of these variations in outlook.
    With its focus on uncertainty, this line of thought bears a striking resemblance to Austrian ideas. Moreover, its rejection of mathematical probability as a foundation for expectations is echoed by several prominent Austrian economists.
    Nevertheless, while Keynesians conclude that the uncertainty of the future renders a market economy inherently unstable, Austrians embrace uncertainty without losing faith in the order generated by a market economy. What lies at the root of this puzzle?

    This post was published at Ludwig von Mises Institute on March 23, 2017.


  • Money Supply Growth Falls to 17-month Low in February

    The supply of US dollars has slowed during early 2017 with February’s year-over-year percentage increase hitting a 17-month low of 7.7 percent. Monthly year-over-year growth rates in the money supply have been falling each month since October.
    Over the past eight months or so, money supply growth rates have become somewhat volatile with the growth rate surging from 6.7 percent in late 2017 up to 11.3 percent by late 2016, and down again to under 8 percent by February of this year.
    This recent period of volatility comes after a long period of relatively sedate and consistent growth in the money supply through most of 2013, 2014, and 2015.
    The “Austrian” money supply measure (AMS) used here is a measure of the money supply pioneered by Murray Rothbard and Joseph Salerno and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on this metric and its growth.
    The “Austrian” measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short time deposits, traveler’s checks, and retail money funds).
    Since 2014, money supply growth has ranged from about 7 percent to 8.5 percent. In October of last year, money supply growth hit a seven-year low of 6.8 percent, although this proved not to be an indication of any new trend.

    This post was published at Ludwig von Mises Institute on March 23, 2017.


  • Yellen: “GDP is a Pretty Noisy Indicator”

    As much as the Fed pretends it is data dependent, in actuality they do what they want and use the data to justify their actions. Or, in the case of GDP, they shoo it away as if it doesn’t matter. We always hear how important GDP is as a summary of the economy’s health (the Austrian view is that the GDP is quite overrated). But when the narrative is that “it’s all good!” the Professional Monetary Bureaucrats can’t let a lousy GDP number get in the way.
    Just before the FOMC’s announcement, the Atlanta Fed’s forecast put the Q1 GDP number below 1%. When asked about it during her press conference, Yellen simply stated that “GDP is a pretty noisy indicator.”
    Of course, regardless of the actual GDP headline, the economy’s fundamentals are never on the right track if the “growth” is built on the artificial expansion of the money supply. But as much weight as economists and other academics place on this precious statistic, it’s wholly amusing when it doesn’t really matter if it contradicts the official story.

    This post was published at Ludwig von Mises Institute on March 16, 2017.