Caturday Night Special, Episode 0x4F

The Epic of the Eight-Fold Invisible Hands

I, for one, welcome our new tiny-pocketed arachno-capitalist non-overlords.

Rendering unto Caesar

He that has the gold (and maintains a lock on it through issuance of notes), makes the rules for those that use those notes:

There were reports of public outrage and confusion after the announcement of the measure, which requires North Koreans to swap existing won notes for new ones at an exchange rate of one to 100 — effectively knocking two zeroes off their value. Because of a cap of 100,000 won per family (£475 at the official exchange rate), anyone with significant holdings of cash will have their savings wiped out.

“Loud sounds of weeping in every house have not ceased since the news was released,” a South Korean website quoted an inhabitant of Sinuiju, a city on the border with China, as saying. “Weeping and fighting between couples has not stopped anywhere. The atmosphere of the city is terrible now.”

Promissory notes are just that: promises. When the distributor is a known liar, is it wise to put any faith whatsoever in the endless promises of stability and solvency?

I'm looking at you, Bernanke... You and all of your cohorts, elected or not.

Liquidity management yields solid waste with hot gaseous byproduct

A billion here, a billion there... As Everett Dirksen observed, it does add up:

Oct. 17 (Bloomberg) -- Harvard University’s failed bet that interest rates would rise cost the world’s richest school at least $500 million in payments to escape derivatives that backfired.

Harvard paid $497.6 million to investment banks during the fiscal year ended June 30 to get out of $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects, the school’s annual report said. The university in Cambridge, Massachusetts, said it also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps...

“Substantial losses” in Harvard’s General Operating Account, a pool of cash from which bills are paid, further put pressure on the school, the report said. The net asset value of the account fell to $3.7 billion from $6.6 billion during the fiscal year, according to the report.

With the frequency that the phrase "the best and the brightest" is thrown around, to watch the institutions that advocate and enable these financial schemata to manifest in "a free market" get burned in a pyre of their own making is delicious beyond measure, and sweet beyond belief.

The article also offers up this tasty tidbit:

The annual report provides new details on Harvard’s derivative-related losses. Many were entered into in 2004, said Harvard spokeswoman Christine Heenan. Lawrence Summers, director of President Barack Obama’s National Economic Council, was the university’s president at the time. White House spokesman Matthew Vogel declined to comment.

No comment is necessary, Mr. Vogel.

Jim Rickards on the US Dollar Three-Card Monty

Jim Rickards spells it out:

"If you go through all the contingent liabilities, the total comes to about sixty-trillion dollars... There is no combination of growth, no feasible combination of growth, and taxes, that can fund [those] liabilities."

Although I think that the total liability is quite a bit higher, nearer to something of Richard Fisher's estimates of $99.2 trillion, they ultimately reach the same conclusion regarding the untenable debt accumulated by our government: currency implosion.

Plan (and invest) accordingly, folks.

Flask, and ye shall receive

Finally, a welcome respite from a week that was sorely lacking in my recommended daily intake of awesome.

Smithers, release the booze-hounds!

jeffrey Published: June 6, 2009 9:57 PM

Well, after the big reaction here, we went ahead and ordered them and I think they will be in next week!

How awesome? This awesome.

Mises University 2008 Selections, Part I

Every so often I embark on the long drive home, and I am loathe to make the journey without something to engage my brain, as the "scenic" I-5 isn't, and the drive is usually made during the late evening, since the darkness has a mildly soothing effect on my anti-automotive feline. Having caught up on everything else I regularly listen to via podcast, I downloaded the entirety of Mises University 2008.

I'm not quite done with the series, but I'll be posting links to the lectures that were particularly interesting, entertaining or enlightening.

The Mises Circle: Who Killed the Constitution?
Thomas E. Woods, Jr. : 8/21/2008

Woods colloquially expounds on some of the subject material in his previous works, 33 Questions About American History You're Not Supposed to Ask and The Politically Incorrect Guide to American History, with an emphasis on the progressive circumvention of Constitutional restrictions on the Federal government by means of Federal interpretation and control of public education.

Woods goes on to examine some of the legal vehicles employed by government entities to erode the rights of the People and the states, including the utter disregard for the Ninth and Tenth Amendments, extrapolation of positive power from the Commerce Clause and the historical consequences, presumed Constitutionality of Federal action, Federal interpretation of "fundamental rights", the abuse of executive orders in the 20th Century and beyond, the inference of positive unrestricted powers in Article II and dodging Congressional restriction through signing statements that are seen as "advisory in nature".


Calculation and Socialism
Joseph T. Salerno : 9/04/2008

This lecture focuses on the article "Economic Calculation In The Socialist Commonwealth", written by Ludwig Von Mises in 1920, and some of the arguments and counter-arguments made by Mises and the various camps of socialist economists. Salerno expands on the central point that a pricing system is necessary for efficient production ("rational allocation of resources"), and that all of the various socialist economic models either rely on capitalist markets to set their own levels of production or blindly attempt to set production based on various mathematical, trial-and-error, or estimation by labor-hours or gross-output production.

In addition to outlining Misis' key ideas from the article, Salerno discusses the various historical consequences for each of the socialist methods, and the a priori refutations by Mises for each of the attempted applications: mathematical calculation yielded a equilibrium without means of feedback forced a static economy, trial-and-error "market socialism" presupposed a price-system as a basis for production, and estimation through "natural units" and labor-hours relied on heterogeneous units of measurement, resulting in what Mises called "planned chaos" in production. Furthermore, the positive argument for a free-market with entrepreneurial actors is revealed to be the fundamental basis for efficient production, as only the "social appraisment process" provides for a self-correcting price mechanism.