It's a pretty simple straight forward question? You can't answer it?
"how do you approach providing long-term financial safety+ asset protection advice services given your aversion for making informed predictions about the future?"
Approach must be tailored to the individual client. In general there are two types of client :
1] someone who has been recommended to me by someone else and does not really care about details of why something works, all they care about are the proven results [a 30 year + record]. Those are the easiest. They are also few and far between.
2] Much more common is the "I need everything explained to me" type of person- someone who, because they feel vulnerable [usually after having lost a great deal of money betting on a "sure thing"] is willing to listen to me but who is understandably cautious about the long term savings plan I advocate, and have no close friends or business acquaintances who have used the system and could recommend it to them but who, on the other hand are desperate for some sort of piece of mind regarding their long term savings- hence a willingness to listen- at first, at least.
With this type of client my main task is to closely analyze the individuals personal belief systems regarding economics, investments etc. and attempt to clearly expose inconsistencies and contradictions to them . This basically comes down to a psychoanalysis of the individuals belief systems in those areas.
If I'm successful with my analysis then I can usually get the client to see just how unsafe their previous long term savings plan was, and therefor why they lost money, and often, at that point, the client themselves can see how to rectify the imbalances in their portfolio which lead to their present predicament, with very little prompting from myself.
Hello From a "Post- Austrian",Anarcho-Capitalist ,Taoist, 911 "No- Planer" :
the mind boggles how you can help your clients compare and contrast their financial options without recourse to making informed predictions about the future.
is it perfectly feasible, right and proper for an individual to build a 'portfolio' and plan for their financial future without considering what the world of the future would look like?
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
I'm going nuts trying to remember the name of the system I think he uses. Damn it's on the tip of my tongue. Obviously I don't know for sure but it sounds like a coaching deal I signed up for but couldn't wrap my brain around doing all of the things onebornfree just detailed....sounds just like it.........The name of the course is a man’s name if I remember correctly. They want you to revamp everything you know and psycho analyze your client and alter their way of thinking. It seemed like swimming up a Class 5 rapid to me....but hey if it works, it works.
Still that's not an answer to what they are investing in....You did mention they have to not like losing money or have actually lost money which is where the pain comes in therefore it must be bonds or annuities your offering....
do they work out the thetans?
hahahaha. Not quite but on the right track...
from my understanding, inflation can be caused by several things. 1. An increase in the supply of money in circulation. 2. A decrease in the overall supply of goods while the supply of money in circulation holds constant. 3. Some semi-magical set of circumstance including mass irrationality.
So, even though the FED is absolutely and inarguably inflating the supply of money (monetary base) that does not necessitate a general price inflation. I think that lgoically however, it is easy to deduce that if the excess monetary base is not pulled back by the FED, or if reserve ratio requirements are not raised, that the additional reserves sitting in banks will eventually be lent out. If it is lent out to similar ratio levels of just 2 years ago we will absolutely see a hyperinflation UNLESS productivity and supply of goods shoots up as well. It seems unlikely that productivity and supply of goods would shoot up at a similar pace to circulation credit.
Now, in another post you talk about a long deflation and then a hyperinflation. I don't think anyone on this board thinks that we are in a hyperinflation, just that the supply of money is being increased laying the foundation for price inflation.
I hope my thoughts are not too disjointed, I rarely post on message boards, but found this topic interesting.
Your writing is clear enough, thanks for the input; in fact your logic is better than most on here in my opinion. I agree with your definitions but my agreement of them doesn't really matter, those ARE the definitions. If the media wants to spin things or tell us we are in inflation now when we are in a deflation that is not my problem even if it's most peoples. In fact bearing1 says,’
It's funny, people call falling prices deflation. Rising prices a Bull Market. They rename it inflation after the bubble bursts.'
He/she pokes fun at the media for telling us we are in an inflation after the bubble bursts then cites economic numbers and other content that is part and parcel of the media? Pick a side. Is the media lost or not? The media is telling us we are going to have hyperinflation, not deflation? It seems very educated and read but is as confused as the high school dropout as far as I'm concerned.
Secondly your 100% correct, they ARE inflating the money base. I'm not arguing that, I'm arguing whether it's being monetized, getting into the hands of the consumer, it's not. We seem to have some fortune tellers on this board who may NOT think we are in one NOW but who want to predict the future as they are seemingly assured of 'runaway inflation', or hyperinflation', among others terms used, is coming.
Next the chances we see anything like we saw in terms of debt borrowing like we've seen in the past 10 years minus the last couple is almost laughable. How seemingly well read and educated people can assume that is beyond me. So your house is going to be worth 10 million dollars now? A Honda is going to sell for 100k? Are you serious? Really, ARE YOU SERIOUS?? No, it is laughable. We are going into a depression and price deflation, my gosh, it's happening right before our eyes BUT NO, WE ARE GOING INTO A HYPERINFLATION THE FED IS PRINTING MONEY.
BE ORIGINAL AND THINK FOR YOURSELF, WE CAN HEAR THE INFLATION STORY ON THE BOOB TUBE, I DON'T NEED IT HERE AS WELL.
stuff to consider
http://www.shadowstats.com/article/hyperinflation
Couldnt increased reserve-rates take care of inflation by making banks be able to lend out less of their reserves?
"the mind boggles how you can help your clients compare and contrast their financial options without recourse to making informed predictions about the future.
is it perfectly feasible, right and proper for an individual to build a 'portfolio' and plan for their financial future without considering what the world of the future would look like?"
For me, it's all about humility, that is, the humility to recognize that although markets _always_ work, they usually do so in unforseen ways, and I have no ability to consistently predict those ways [and nor does anyone else].
Such an attitude involves the removal of the ego [mine, and ultimately theirs too] from the process.
If I can show clients that it is dangerous , futile [i.e. a waste of time] _and_ ultimately entirely unnecessary to rely on predictions of future events in order to keep and grow their long term savings [i.e money they cannot afford to lose], I can then help them construct a long term savings plan that will be impervious to unforseen economic events, whether those events are called "inflation", "hyper-inflation", "recession", " deflation", "tight money" "good times", or whatever.
Then, if they have any money that they _can_ afford to lose [i.e "play money"], left over [and kept entirely separate from their long term savings plan], I can show them how to freely speculate with _that_ money and how they are then free to follow the advice of any "investment advisor" they believe can predict future events, be it inflation, deflation or whatever, with complete peace of mind, simply because they are speculating with "play money" , not with money that is precious to them .
mpablazer said: "from my understanding, inflation can be caused by several things. 1. An increase in the supply of money in circulation. 2. A decrease in the overall supply of goods while the supply of money in circulation holds constant. 3. Some semi-magical set of circumstance including mass irrationality."
1] may be true, but only under certain conditions.2] is wrongheaded.
Definitions: "inflation": a decrease in the per unit value of the [fiat] currency.
"Deflation": an increase in the per unit value of the [fiat] currency
"money supply" : the rate at which new money is produced, relative to the previous rate.
"money demand" the general demand to hold onto cash[and not spend it] by individuals, businesses etc.
1] "inflation can be caused by several things 1. An increase in the supply of money in circulation. " :
An increase in supply that occurs when demand holds steady would be inflationary, however, an increase in supply that occurs when demand is increasing at an even faster clip, will not cause inflation, but would have deflationary effects .
Also, if supply is falling, but demand for that supply is falling even faster, then inflation is the result, not deflation as might at first be thought.
2]: "inflation can be caused by several things 2. A decrease in the overall supply of goods while the supply of money in circulation holds constant. " :
No , however a decrease in the _demand_ for money under those circumstances [steady supply of money] will have inflationary effects.[i.e steady supply- falling demand for that supply= inflation, or decreased value per currency unit]
The ultimate value of money [its final price/worth] at any point in time,regardless of whether it is a fiat currency or lies entirely outside of government control, and no different from any other economic goods, is wholly dependent on the outcome of the interaction of the 2 factors: 1] the supply of the goods and 2] the demand for that supply.
From my examples, it should be clear that when the demand factor is properly considered, that there are several circumstances when increasing or decreasing money supply does not /will not have the "normally" presumed effects.
both are bad for business. better to have the purchasing power of money constant. This could be done but not under our current monetary system where 10 are back by only 1 dollar.
Without FRL the supply of money could achieve a 100% constant purchasing power of money.
Ryan L Morelli: It's funny, people call falling prices deflation. Rising prices a Bull Market. They rename it inflation after the bubble bursts.' He/she pokes fun at the media for telling us we are in an inflation after the bubble bursts then cites economic numbers and other content that is part and parcel of the media? Pick a side. Is the media lost or not? The media is telling us we are going to have hyperinflation, not deflation? It seems very educated and read but is as confused as the high school dropout as far as I'm concerned.
I'm not sure what the entire media is saying. It does not matter to me.
You posted an article showing that CPI, an index of prices, is falling. This does not signal deflation in the Austrian sense of a contracting money supply. A general decline in prices can easily be caused by increased hoarding of dollars which raises the purchasing power of money.
Ryan L Morelli:Secondly your 100% correct, they ARE inflating the money base. I'm not arguing that, I'm arguing whether it's being monetized, getting into the hands of the consumer, it's not. We seem to have some fortune tellers on this board who may NOT think we are in one NOW but who want to predict the future as they are seemingly assured of 'runaway inflation', or hyperinflation', among others terms used, is coming.
OK, well, a few posts back, you insisted that the Fed was not monetizing or increasing the monetary base, but instead selling short term bonds to buy long-term bonds. I see you have changed your view, correctly, in my opinion.
Also, I was not the one predicting the future. In fact, I made clear in my posts that my point was that a runaway boom cannot be dismissed. I never dismissed the possibility of deflation. You have created this thread called "Inflation vs. Deflation FINAL." You seemed to have wanted to come to a definite conclusion and my argument was that there is no certain conclusion.
I definitely understand severe deflation (a contraction of the money supply) could happen tomorrow if the Federal Government revoked the FDIC protection causing massive bank runs while at the same time, the Federal Reserve began selling its assets and destroying the money it received.
Likewise, you should acknowledge that, tomorrow, the Federal Reserve could begin to monetize everything in sight with limitless amounts of paper/
Ryan L Morelli:Next the chances we see anything like we saw in terms of debt borrowing like we've seen in the past 10 years minus the last couple is almost laughable. How seemingly well read and educated people can assume that is beyond me. So your house is going to be worth 10 million dollars now? A Honda is going to sell for 100k? Are you serious? Really, ARE YOU SERIOUS?? No, it is laughable. We are going into a depression and price deflation, my gosh, it's happening right before our eyes BUT NO, WE ARE GOING INTO A HYPERINFLATION THE FED IS PRINTING MONEY.
Hyperinflation does not require borrowing by consumers/businesses at all. All it requires is sustained printing of money by the Federal Reserve. They can buy whatever they like with their dollars including oil, gold, houses, commodities, etc.
And yes, in hyperinflation, everything rises in dollar terms. I understand that it's hard to imagine, but you must already know that it's happened many times before in history.
There is no reason to make hyperinflation and depression mutually exclusive. Hyperinflation would actually cause the worst type of depression imaginable as savings get wiped out and the structure of production is devastated.
Ryan L Morelli:BE ORIGINAL AND THINK FOR YOURSELF, WE CAN HEAR THE INFLATION STORY ON THE BOOB TUBE, I DON'T NEED IT HERE AS WELL.
So because people talk about inflation on TV, that means it won't happen? Well, I hate to break it to you, but I've heard countless stories about deflation on TV.
If you don't need/want to hear about inflation here at Mises.org, you really should not have started a thread called "INFLATION VS. DEFLATION FINAL."
onebornfreedotblogspotdotcom:iif I can show clients that it is dangerous , futile [i.e. a waste of time] _and_ ultimately entirely unnecessary to rely on predictions of future events in order to keep and grow their long term savings [i.e money they cannot afford to lose], I can then help them construct a long term savings plan that will be impervious to unforseen economic events, whether those events are called "inflation", "hyper-inflation", "recession", " deflation", "tight money" "good times", or whatever.
but you cant show them that by using true argument. its impossible.
i.e. lets say you psycho-analyse them into accepting that they have 'play money' and 'critical money' , without accepting the possibility of informed predictions about the future, it is impossible to allocate the money's in differing ways for rational purposes.
how would you provide greater protection for the critical money over the play money?>. if you cant predict the future, you wont think of a way thats safer than other riskier ways.
Ryan,
Lastly again you speak about the Fed's tripling the money supply. Why don't you explain to us the difference between, printing money and the tripling of the money base supply AND monetization. How is that money going to get into the hands of consumers? How is that going to cause inflation? The money is not being flooded into the marketplace? All it's doing is replacing the money that has been lost in derivatives and other financial instruments, it is not being monetized. Please explain how it is being monetized or being put in the hands of spenders to decrease it's value and cause inflation?
Truth is I don't have the time to dig up facts & numbers to formulate a detailed or persuasive argument. To try to argue with you otherwise is pointless. I'd like to be wrong on this one. I will say that the gov't, since November, has passed a trillion dollar stimulus package of which half of it is a spending package. Billions have been allocated toward earmark spending on pork. All this money will flow into the hands of consumers one way or another. With people now saving and liquidating debt the gov't is the one now stepping in to spend and consume in place of the consumer. The Fed in March came out and said they planned to print $300 Billion to buy US treasuries. In that same statement they claimed to be printing an additional $800 Billion to buy other debt - to get credit flowing again in the economy ( http://news.yahoo.com/s/ap/20090318/ap_on_bi_ge/fed_interest_rates ). I expect to see another spending bill be passed before summer is out. Any money spent that came from printing, not borrowing, is raw inflation. Maybe it only stabilizes prices (preventing them from falling) but that's still price inflation in real terms.
I don't think credit default swap implosion will create an inflation. I do think that the Fed creating money to loan to banks to enable the "Geithner Toxic Asset Plan" - to enable the over priced sale of mortgage backed securities to reduce bank losses and firm up bank balance sheets - will get credit flowing to reflate the collapse of the housing bubble. If it doesn't, the Fed can enforce other ways to force banks to lend.
I do believe the US dollar will lose reserve currency status. When, I don't know. Maybe in 5 years from now. I hope later than that. I do believe it is inevitable. Russia and China seem adamant on the idea.
The Fed will continue to print money to buy US treasuries. The Treasury International Capital (TIC) Flows for February ( http://www.ustreas.gov/press/releases/tg89.htm ) shows capital flowing out of the USA, not in. It has reversed, meaning foreigners are pulling out and are not buying our debt as anticipated by the Fed and Treasury. They're actually selling. There are not enough domestic buyers to take the place of foreign investment. The Fed will have to print and buy the gov't bonds or else we'll face high interest rates and further economic collapse. This is not good for the dollar.
I came across this article that someone may find interesting:
http://www.garynorth.com/
On Deflation: Ten Issues That Deflationists Need to ExplainGary North November 28, 2008These days, we hear that deflation is imminent. A great depression is coming. When you read these forecasts, examine the arguments. Be sure the argument answers these objections.They all rest on some version of "pushing on a string." John Exter, the former Citibank officer, used this argument in 1973 to defend his theory that when commercial banking debts get too great, the central banks will buy assets, thereby providing bank reserves, but banks will not lend.We are finally at a point where his theory is being tested.I rejected it in 1973. I reject it now. Here is why: "There ain't no such thing as a free lunch." (TANSTAAFL)Here is the reality of commercial banking: If banks offer to pay interest on a deposit, they must find a borrower who will pay the bank even more interest.Put another way: for as long as depositors do not pay money to a bank to store their money digitally, "pushing on a string" is a myth. It cannot happen.This is simple. Anyone can understand it. But those who predict deflation do not understand it. Not only do they not understand it, their argument implicitly denies it. Every argument for deflation is a variation of this argument: Commercial banks take deposits, pay interest on them, and then do not lend the money. They give free money to depositors.The argument makes no sense to me.There are ten things every theory of deflation must deal with. I have yet to see any deflationist deal with as many as three. I have waited 35 years.1. The definition of deflation. Is it "falling prices"? If so, it's as wrong as a definition of inflation as "rising prices." Make sure he means "monetary deflation." Then see what he says about price deflation. The price of hand-held calculators has fallen since 1970. This is not deflation.2. Someone is always holding the money. Once the Federal Reserve System creates a dollar to buy an asset, someone owns that dollar. If the institution that issued the asset pays the FED interest on it, you can be sure it will spend the money. It has to make enough profit on the money to pay the FED its interest. No one can hoard a digital dollar except the FED (in reserve accounts).3. Every spent dollar initially winds up in the banking system. The institution that sold the bond deposited the FED's dollar in its bank account. Then it spent the money. That money was then deposited by the recipient in his bank account.4. Fractional reserve banking takes over. The depositor's bank sends 10% (or less) to the FED as a deposit for reserves. Then it lends the money to a borrower. The fractional reserving process multiplies the money supply. If you do not understand this, read Rothbard's little book, What Has Government Done to Our Money?. Download it for free here:http://www.mises.org/books/whathasgovernmentdone.pdf5. A withdrawal of currency can thwart fractional reserves. When someone withdraws currency and does not deposit it in another bank, this reduces the money supply. The banking system moves into division rather than multiplication for that dollar. This is the sole case for deflation. We have yet to see it take place. The FDIC was invented in 1934 to make sure it does not happen. At any time that currency withdrawals threaten the banking system, Congress can set limits on the withdrawals. 6. The currency eventually gets spent. It is stays in the black market, it is no longer inflationary. But the day it is spent in a local business, it will deposited by the business into its bank account, usually the same day. It goes back into the fractional reserve process. Conclusion: only money sent abroad that stays in the black market abroad is truly deflationary for U.S. banks.7. Banks lose money when they (a) pay interest to depositors and (b) sit on the money. So, they do not sit on the money. They lend it. The deflationist relies on a theory that banks hoard money. Banks do not hoard money (except at the FED. They lend money.8. There is one exception to the economic law against hoarding: increased reserves at the FED. The FED now pays the FedFunds rate on reserves. Banks can safely "lend" money to the FED and earn interest. This will end when FefFunds goes to zero. As soon as banks earn nothing on deposits at the FED, they will hold only the minimum reserves required. They will lend money. Also, if banks pay 3% interest to depositors, and FedFends pay 1% to banks, the practice of holding money with the FED will have to end. The banks are losing money on the FedFunds deposits. It's "emergency money." Where can they lend safely at a rate high enough to pay depositors? The U.S. Treasury. Banks can buy long bonds. I remain bullish on 30-year T-bonds for this reason.9. Deflation occurs when a bank goes bankrupt, and no one bails it out. At least 9,000 U.S. banks went bust, 1929-33. (No major bank did -- the old boys network was protected by the FED.) When they did, the money supply shrank. There was deflation in the depression. Today, no bank is allowed to fold. The FDIC buys its assets and pays off depositors. It does this with -- you guessed it -- fiat money. If the FDIC ceases to cover bank losses, there could be monetary deflation. How likely is it that Congress will let the FDIC go bankrupt? That is how likely deflation is.10. Derivatives have nothing to do with the money supply. Derivatives are written promises to pay. No money is created when they are written. No money disappears when they produce losses. A default on a contract does not affect the money supply.Anyone who forecasts deflation has to show what will break the fractional reserve process. He must show why banks will accept deposits, for which they pay interest, and not lend out this money to earn interest. He must offer a brand-new theory of how banking operates: as a charity to depositors.So far, I have not seen this theory suggested, let alone defended.
"but you cant show them that by using true argument. its impossible."
So you say, and obviously believe at this point. You are free to believe whatever you wish. My clients would disagree with your beliefs.
"lets say you psycho-analyse them into accepting that they have 'play money' and 'critical money' , without accepting the possibility of informed predictions about the future, it is impossible to allocate the money's in differing ways for rational purposes."
Again, so you say, and obviously believe at this point. You are free to believe whatever you wish. My clients would disagree with your belief.
"how would you provide greater protection for the critical money over the play money?>. if you cant predict the future, you wont think of a way thats safer than other riskier ways."
On the contrary. Admitting that neither yourself or anyone else can reliably and consistently predict future economic events is the very first, and very vital step to constructing a savings plan that is designed to equally protect against a broad range of known,historically occurring economic events/scenarios. My clients agree with _that_ statement :-)
how is it possible 'without making an informed prediction of the future' to decide that doing A with money X is 'safer' and 'more sensible long term' than doing B with it.
it s absurd.
in order to decide that doing A with money X rather than doing B with it is 'safer' or a 'better plan', one must make informed predictions about the future.
if you are going on holiday, and you want to be dresed properly , and you have only room to take with you swim shorts and a hawai shirt, or alternatively an eskimo coat, would you need to make an informed prediction as to you holiday climate, or would you not?
"it s absurd."
OK then, obviously, that settle's it!
I understand and sympathize with your point of view, and your lack of understanding of mine.
At this time I feel there is nothing further to discuss- why don't you get back to me if and when you have lost virtually everything you had because of "investment " decisions that were based on knowing "what has to happen" in the future.
Hopefully, this will not happen to you [i.e. you are a lucky guy] , and your market speculations will pan out and convince you that you [or whomever advises you] can predict future economic events with certainty,[thereby reinforcing both your beliefs and your ego], and by sheer luck, the market never chooses to teach you firsthand the lesson of humility [it can be a terribly hard lesson to learn].
I wish you sincerest good luck with your future market speculations.
i think you dont know the difference between making informed predictions about the future, and knowing the future with absolute certainty
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