Tag Archive: Basic Reports

The Duality of Money, Report 10 Mar

2019-03-11

This is a pair of photographs taken by Keith Weiner, for a high school project. It seemed a fitting picture for the dual nature of money, the dual nature of wood both as logs to be consumed and dimensional lumber to be used to construct buildings.

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Is Capital Creation Beating Capital Consumption? Report 3 Mar

2019-03-04

by Keith Weiner

2019-03-04

We have written numerous articles about capital consumption. Our monetary system has a falling interest rate, which causes both capital churn and conversion of one party’s wealth into another’s income. It also has too-low interest, which encourages borrowing to consume (which, as everyone knows, adds to Gross Domestic Product—GDP).

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Is Lending the Root of All Evil? Report 24 Feb

2019-02-25

by Keith Weiner

2019-02-25

Ayn Rand famously defended money. In Atlas Shrugged, Francisco D’Anconia says: “So you think that money is the root of all evil? . . . Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them.

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Central Planning Is More than Just Friction, Report 17 February

2019-02-19

by Keith Weiner

2019-02-19

It is easy to think of government interference into the economy like a kind of friction. If producers and traders were fully free, then they could improve our quality of life—with new technologies, better products, and lower prices—at a rate of X. But the more that the government does, the more it burdens them. So instead of X rate of progress, we get the same end result but 10% slower or 20% slower.

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What They Don’t Want You to Know about Prices, Report 10 Feb

2019-02-11

by Keith Weiner

2019-02-11

Last week, in part I of this essay, we discussed why a central planner cannot know the right interest rate. Central planner’s macroeconomic aggregate measures like GDP are blind to the problem of capital consumption, including especially capital consumption caused by the central plan itself.

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Who Knows the Right Interest Rate, Report 3 Feb 2019

2019-02-04

by Keith Weiner

2019-02-04

On January 6, we wrote the Surest Way to Overthrow Capitalism. We said: “In a future article, we will expand on why these two statements are true principles: (1) there is no way a central planner could set the right rate, even if he knew and (2) only a free market can know the right rate.” Today’s article is part I that promised article.

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Modern Monetary Theory: A Cargo Cult, Report 20 Jan 2019

2019-01-28

by Keith Weiner

2019-01-28

Newly elected Representative Alexandria Ocasio-Cortez recently said that Modern Monetary Theory (MMT) absolutely needed to be “a larger part of our conversation.” Her comment shines a spotlight on MMT. So what is it? According to Wikipedia, it is: “a macroeconomic theory that describes the currency as a public monopoly and unemployment as the evidence that a currency monopolist is restricting the supply of the financial assets needed to pay taxes...

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The Dollar Works Just Fine, Report 20 Jan 2019

2019-01-23

by Keith Weiner

2019-01-23

Last week, we joked that we don’t challenge beliefs. Here’s one that we want to challenge today: the dollar doesn’t work as a currency, because it’s losing value. Even the dollar’s proponents, admit it loses value. The Fed itself states that its mandate is price stability—which it admits means relentless two percent annual debasement (Orwell would be proud).

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Rising Interest and Prices, Report 13 Jan 2019

2019-01-14

by Keith Weiner

2019-01-14

For years, people blamed the global financial crisis on greed. Doesn’t this make you want to scream out, “what, were people not greedy in 2007 or 1997??” Greed utterly fails to explain the phenomenon. It merely serves to reinforce a previously-held belief.

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Surest Way to Overthrow Capitalism, Report 6 Jan 2019

2019-01-07

by Keith Weiner

2019-01-07

One of the most important problems in economics is: How do we know if an enterprise is creating or destroying wealth? The line between the two is objective, black and white. It should be clear that if business managers can’t tell the difference between a wealth-creating or wealth-destroying activity, then our whole society will be miserably poor.

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Are Stocks Overvalued, Report 24 Dec 2018

2018-12-27

by Keith Weiner

2018-12-27

We could also have entitled this essay How to Measure Your Own Capital Destruction. But this headline would not have set expectations correctly. As always, when looking at the phenomenon of a credit-fueled boom, the destruction does not occur when prices crash. It occurs while they’re rising.

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Why Do Investors Tolerate It, Report 17 Dec 2018

2018-12-18

by Keith Weiner

2018-12-18

For the first time since we began publishing this Report, it is a day late. We apologize. Keith has just returned Saturday from two months on the road. Unlike the rest of the world, we define inflation as monetary counterfeiting. We do not put the emphasis on quantity (and the dollar is not money, it’s a currency). We focus on the quality. An awful lot of our monetary counterfeiting occurs to fuel consumption spending.

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The Prodigal Parent, Report 9 Dec 2018

2018-12-10

by Keith Weiner

2018-12-10

The Baby Boom generation may be the first generation to leave less to their children than they inherited. Or to leave nothing at all. We hear lots—often from Baby Boomers—about the propensities of their children’s generation. The millennials don’t have good jobs, don’t save, don’t buy houses in the same proportions as their parents, etc.

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Inflation, Report 2 Dec 2018

2018-12-03

by Keith Weiner

2018-12-03

What is inflation? Any layman can tell you—and nearly everyone uses it this way in informal speech—that inflation is rising prices. Some will say “due to devaluation of the money.” Economists will say, no it’s not rising prices per se. That is everywhere and always the effect. The cause, the inflation as such, is an increase in the quantity of money. Which is the same thing as saying devaluation.

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A Golden Renaissance, Report 25 Nov 2018

2018-11-26

by Keith Weiner

2018-11-26

There is the freedom of speech battle, with the forces of darkness advancing all over. For example, in Pakistan, there are killings of journalists. Saudi Arabia apparently had journalist Khashoggi killed. New Zealand now can force travellers to provide the password to their phones so the government can go through all your data, presumably including your gmail, Onedrive, Evernote, and WhatsApp.

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The Ultimate Stablecoin, Report 18 Nov 2018

2018-11-19

by Keith Weiner

2018-11-19

A long time ago in a galaxy far, far away we wrote a series of articles arguing that bitcoin is not money and is not sound. Bitcoin was skyrocketing at the time, as we wrote most of them between July 30 and Oct 1 last year. Back in those halcyon days, volatility was deemed to be a feature.

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The Failure of a Gold Refinery, Report 12 Nov 2018

2018-11-13

by Keith Weiner

2018-11-13

So this happened: Republic Metals, a gold refiner, filed bankruptcy on November 2. The company had found a discrepancy in its inventory of around $90 million, while preparing its financial statements. We are not going to point the Finger of Blame at Republic or its management, as we do not know if this was honest error or theft.

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Wizard’s First Rule, Report 4 Nov 2018

2018-11-06

by Keith Weiner

2018-11-06

Terry Goodkind wrote an epic fantasy series. The first book in the series is entitled Wizard’s First Rule. We recommend the book highly, if you’re into that sort of thing. However, for purposes of this essay, the important part is the rule itself: “Wizard’s First Rule: people are stupid.” “People are stupid; given proper motivation, almost anyone will believe almost anything.

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What Can Kill a Useless Currency, Report 28 Oct 2018

2018-10-29

by Keith Weiner

2018-10-29

There is a popular notion, at least among American libertarians and gold bugs. The idea is that people will one day “get woke”, and suddenly realize that the dollar is bad / unbacked / fiat / unsound / Ponzi / other countries don’t like it / . When they do, they will repudiate it. That is, sell all their dollars to buy consumer goods (i.e. hyperinflation), gold, and/or whatever other currency. Redemptions Balanced With Deposits No national...

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Useless But Not Worthless, Report 21 Oct 2018

2018-10-22

by Keith Weiner

2018-10-22

Let’s continue to look at the fiasco in the franc. We say “fiasco”, because anyone in Switzerland who is trying to save for retirement has been put on a treadmill, which is now running backwards at –¾ mph (yes, miles per hour in keeping with our treadmill analogy). Instead of being propelled forward towards their retirement goals by earning interest that compounds, they are losing principal.

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