Market Insanity

Speculative bubbles have been around for a long time. Whether it's a single item or a broad generality like real estate, they have the seeming power to make your wildest dreams come true or to destroy entire economies.

The Dutch Tulip Mania was the first recorded speculative bubble back in the late 1600's. Tulips were highly prized flowers and the bulbs weren't exactly cheap. But a group of investors saw them as a way to make money - big money. They started bidding prices up and up and tempting more people into the bubble, until a single bulb could be "worth" several years of actual wages.
 
Then one day a few people finally said "This is crazy. They're only flowers. Beautiful flowers, but just flowers." Over a matter of a few weeks the prices plummeted and lost 95+% of their "value" and wiped out the entire life savings of a lot of very foolish people.

Bubbles have been blowing up on a regular basis for quite a while now. The dot coms and real estate are only the two most recent to pop.

But they're back. All those trillions of dollars the FED has been pumping into the economy since 2008 haven't been invested in actual productive pursuits, but into speculative investments. Propping up companies that should have gone under (bail outs anyone?). Starting of companies that should never have been started (think Solyndra). Projects that never got off the ground. Real estate again. Dot com again. Multi billion dollar buyouts. Lusting after the Next Big Thing.

I don't expect a pop in the next few months, but I'd be surprised if it was more than a couple of years away and this one could be a lot bigger than the last. A whole lot of paper wealth is going to disappear and there's even more dominos lined up to fall over this time. Time to be thinking about battening down your financial hatches.

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Trade Wars

Do imports really hurt the American Economy?
95% of the people used to work on farms. Now it's 2%. Yes, there were periods of wrenching dislocations and plenty of individuals who were hurt. But does anyone really think it would be best to go back to 95% of the population spending their days in strenuous back breaking labor in the fields?
 
Most of the manufacturing jobs we lost were due to mechanization and improving productivity, not lost to other countries, for all of the political pronouncements to the contrary. The unions had a heyday in the aftermath of WWII when most of the world's manufacturing had been destroyed - except ours. But that couldn't be expected to last. We even paid to help everyone else rebuild theirs while ours started to rust away.
 
It's always easy to point to the individual people hurt by a process ... they're always there. But what do the poor do when prices for essentials start skyrocketing because of punative tariff taxes. How much steel does it take to make a car, a refrigerator or a washing machine. Those prices will be going up if either Trump or Clinton has their way. Prices go up, fewer bought, lower production and lost jobs. They just aren't as obvious or concentrated as the ones we can directly point to.
 
Neither one of the candidates have been honest with us. They both pandered to fears and scare tactics and outright lies. In the end the election isn't about who most people wanted in the Oval Office, it's who they fear the most moving in.

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Hayek Vs Keynes

Just ran across links to a couple of my favorite economics videos.

A little background … Hayek was a free market economist of the Austrian school and Keynes an interventionist. Their biggest argument was about the causes of business cycles and of the Depression in particular. So without further ado, here you go …

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BLM Has More Problems Than Just Cattle

Here’s the story. Wild horses run free on Federal land. Nobody owns them, they’re just another species on the land. But, being horses, they like to eat grasses and do other things that “hurt” the environment. Complaints that there weren’t enough taken were met with the explanation that BLM didn’t have enough money to do more.

Don Boudreaux at Cafe Hayek found a way around that little money problem. Give it a read and see if you like his suggestion.

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Socialized Health Care Candy

Excellent post today at the Mises Institute making an excellent analogy between “free” sweets in socialized Yugoslavia, when he was there as a boy, and “free” emergency care in socialized heath care in other countries.

Here’s the link: Health Care and the Candy Store Called Socialism

 

In the US, if you wake up with a sore throat and call the doctor, they will usually be able to get you in to see him today. So you go in, pay your co-pay, see the doctor, and maybe get a prescription and told to call back if it isn’t cleared up in a few days. You’re happy, the doctor’s made money, the pharmacy’s made money and you get better in a few days. Problem solved.

If you call your doctor in most of the socialized health care countries, you might be able to get in sometime in the next month. So you don’t bother calling the doctor and the sore throat usually goes away in a few days anyway. No money spent, but you still get better.

US health care costs more with the same outcome. But since we’re not paying much directly out of our own pocket, we way overuse it. Sounds more like an over-insured problem to me, not the lack of available care. Insurance is for risk management, not every day or expected maintenance.

Let’s take a more serious example now. Say you’re in a friendly game of basketball and overextend an arm and get hit at the same time. Your shoulder hurts like hell and you can’t hardly move it. Either place, you go to the ER and get a cold pack and prescription for pain meds with instructions to call the doctor if it’s not better in a few days.

A few days go by and it’s not any better.

Here, we call the doctor and either get in that day or the next. The doctor sets you up for a CT scan that afternoon and finds a nasty rotator cuff tear. Two days later you’re in surgery and get it fixed. It costs you a good $500 or so all told, but you’re not hurting any more, the doctor’s happy, the hospital’s happy, big smiles all around.

Elsewhere, you call the doctor and get in a month or so down the road. Then you get scheduled for the CT scan, but the next opening isn’t for another 6 weeks. You get the scan and they find the same rotator cuff tear and put you on the waiting list for the surgery. That’s another few months. But hey, it didn’t cost you a penny and, long term, you have the same health outcome. The tear is fixed.

How much is all those months waiting in pain worth to you? You have to decide that for yourself. If you find yourself on Medicaid or one of the new “narrow” providers pool, you might be finding yourself in effectively socialized health care waiting lines already.

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