General

Re: In defense of Peter Schiff

filc — Fri, 24 Dec 2010 06:18:54 GMT

MagnumPI:
When I say hurt the economy, I mean induce a business cycle.

In that case no, it wouldn't cause a business cycle, but consider this. It is the effect of a business cycle however. The end result of a business cycle is the same thing as the Chinese ghost town city.

In other words, the consequence of a business cycle is mis-allocated resources. The Chinese governments forceful distribution of resources is the same thing, achieved in a slightly different way. The end result is the same, resources are allocated to places where they cannot be of benefit.

To elaborate on LS's point. These activities effect the whole economy. If there is X amount of steel in the industry, and 100,000 metric tons are employed for the construction of some benign object(A state statue?), then the steel industry is now 100 million tons more scarce. The pricing mechanism will react to this. The government did not satisfy the needs of consumers so there is still demand to employ steel elsewhere. To the degree that the state has intervened in the redistribution of resources, is the degree in which the pricing mechanism has been perverted.

Not only have you caused the price of steel to rise, you've deprived the economy of that much steel in the first place.

Re: In defense of Peter Schiff

MagnumPI — Fri, 24 Dec 2010 02:41:45 GMT

filc, I didn't word that specifically enough. When I say hurt the economy, I mean induce a business cycle. I realize the citizens are getting the short end of the stick. The market is not being allowed to coordinate production for the soul purpose of satisfying their individual wants, I understand that, but could the proportion of production that the Chinese goverment has at its disposal be so large that a bust will not occur.

Re: In defense of Peter Schiff

liberty student — Fri, 24 Dec 2010 01:27:10 GMT

filc, you're right in a sense. The truth is, there are no productive activities done by government, and so any city, ghost or otherwise, cannot be said to have been in the best interest of the consumer, because we don't have the consumer feedback via the market to make that determination.

Peter Schiff cannot make a claim that the Chinese economy is freer because he has no consumer choice results to validate such a claim.

Re: In defense of Peter Schiff

filc — Fri, 24 Dec 2010 01:21:37 GMT

MagnumPI:
Esuric, is it possible that the Chinese people are saving enough that the Ghost Towns will not hurt their economy

For each raw material that went into constructing those ghost towns, thats one less raw material available on the market to improve the quality of life for the actual citizen's of China. We cannot say that it did not hurt their economy. Mis-allocated capital of that size, currently sitting idle, is slap in the face for any economy. Those are scarce factors being used away from the needs and wants of consumers.

Re: In defense of Peter Schiff

liberty student — Fri, 24 Dec 2010 00:42:42 GMT

Smiling Dave:
Ok guys, start telling Dr Murphy that he is the stupidest most annoying and most ignorant halfwit who knows nothing about economics and denies the very basics of economic principles, as laid down by the great Ricardo. Time to be nasty to him, not to me.

Dave, you do understand everything you quoted has nothing to do with economics, right? Because Bob Murphy is an economist (and this is a pretty transparent appeal to authority) doesn't mean that everything he says is a statement about economics. Bob is also a Catholic IIRC. Are we going to say that his opinions about religion are economically sound?

You're confusing two disciplines. Economics and investment are not the same thing.

Re: In defense of Peter Schiff

MagnumPI — Fri, 24 Dec 2010 00:00:29 GMT

Esuric, is it possible that the Chinese people are saving enough that the Ghost Towns will not hurt their economy? Could it just result in their wants not being satisfied as fully as they would have been sans the government intervention? Anybody have any thoughts on whether the Chinese government would go so far as to direct portions of the population to live in these areas?

Re: In defense of Peter Schiff

Smiling Dave — Thu, 23 Dec 2010 22:34:00 GMT

A little more of Dr Murphy, speaking out prophetically against some of the posters here:

"In closing, I want to reiterate that I agree with Peter Schiff on the present dismal prospects for the US dollar. In particular, I do not think that his analogy is that far off; I definitely think that America's current account deficits in the last few years are due to "unproductive" debt,

Got that, guys? Unproductive debt. There is such an animal. And Peter describes what it looks like.

Even when he disagrees, he agrees. In another article he writes: [emphasis in bold is mine]:

For some time I have been trying to defuse the hysteria over the US current account deficit (e.g., 1, 2, and 3). Using economic arguments and (I hoped) funny analogies, I tried to show that there is nothing necessarily bad about foreigners selling us more final goods and services than we sell to them. My refrain was always that yes, a massive trade deficit could be a sign of American profligacy and a day of reckoning down the road, but it could also be a sign of superior financial institutions and investment climate.

In other words, he was agreeing that Peter Schiff is right, UNLESS our financial institutions are so great and wonderful and the USA is the worlds greatest place to invest. He just isn't sure if that's true or false.

I think that in 2010, when we STILL have a $50 billion a month deficit, and our economy is in a shambles, and our wonderful financial institutions all insolvent, we must agree that option 1 is right, that the trade deficit is, in Dr Murphy's words, a sign of American profligacy and a day of reckoning down the road.

Ok guys, start telling Dr Murphy that he is the stupidest most annoying and most ignorant halfwit who knows nothing about economics and denies the very basics of economic principles, as laid down by the great Ricardo. Time to be nasty to him, not to me.

Re: In defense of Peter Schiff

z1235 — Thu, 23 Dec 2010 22:32:38 GMT

Esuric:
Who's broke? I'm not broke.

Your friendly KneeBreaker Inc. (a monopolistic co-op, PDA, "protector", racketeer) borrowed a lot in your name, bought goodies, and gave them to you to gobble up ("Geez, this co-op is so great!"). When the loan re-payment comes due, and the co-op is unable to pay, they'll probably turn to you first for a "contribution". You may not be broke -- your knees, though, that's a different story...

Hence, the slight difference between KneeBreaker Inc. and all dudes named Dave, as groups.

Re: In defense of Peter Schiff

Smiling Dave — Thu, 23 Dec 2010 22:07:08 GMT

Someone is about to be hoisted on his own petard.

Dr Murphy is crazy about Peter Schiff.

Unlike some posters here, he knows quality when he sees it, and agrees with 99% of what Peter says.

Unlike certain people here, he asserts that Peter "very well read in Austrian economics", and that "Schiff is remarkably well-versed in Austrian theory for someone who is not a professional economist..."

Unlike a few here, he also recognizes the existence of "creditor nations" and "debtor nations", and adds that becoming a debtor nation under today's circs is a recipe for disaster. Feast your eyes, guys:

Although Schiff is remarkably well-versed in Austrian theory for someone who is not a professional economist, I do have a few quibbles with his presentation on the trade deficit. However, as Schiff himself remarked after reading my critique, my objections are akin to medieval scholars debating how many angels could dance on the point of a needle. The important thing is that the US transformation from the largest creditor to the largest debtor nation is the result of our fiat money system, and is not at all a sign of economic strength.

Unlike certain people here, he accepts Peter's views on China being economically freer: "Schiff's conclusion is that "in ‘communist China' entrepreneurs have more freedom than they do in America. It is far easier to go into business there than here." Oddly enough, he does not raise any of the objections to such a statement that some people posted here.

Unlike the sceptics here, Dr Murphy says that Peter's prediction that "Our days as the dominant economic power are numbered. The dollar is going to collapse, and Americans are going to experience stagflation on an unprecedented scale in the form of recession and hyperinflation." is a "knockout".

He also admits Peter was right, and he was wrong. Follow the example of Dr Murphy, and man up, guys.

Re: In defense of Peter Schiff

NidStyles — Thu, 23 Dec 2010 21:43:10 GMT

I'm not really responding to you. You're hopeless. I'm merely refuting your nonsense so that others, who are actually here to learn, don't get confused and make the same fundamental mistakes that you're making. There is no such of thing as a favorable balance of trade. There is nothing inherently beneficial about a current account surplus. America is not doomed because it has a current account deficit. If America is doomed it's because of its central banking system and our international monetary system (but if this is the case, which it is of course, than most nations are doomed).

Oh ok, well then I will nice and point out the fallacy of your argument in every post then. I'll start with this paragraph.

First you denounce my post, then you renounce it in a far more intricate form with some exuberance. You basically stated that the problem is not the Deficit, but the Central Bank, and our International Monetary System. The Central Bank doesn't control trading to China. The Treasury does. They also control the deficit levels by trading T-bond's for currency.

My entire argument was based on this wholesale giving away of T-bond's to China and the EU. This is public knowledge. The point that you made was that the Central Bank and the International Monetary System would bring us down. Where is this International Monetary System you are referring to? We only do such trade in T-Bond's and market sales. The Federal Government only trades with T-Bond's. Like I stated previously we have to eventually pay them back. Where is it that think they will get the Currency to pay them with? What do you think is going to happen when they start coming for their currency?

Can you see the point? Do you understand the flaw in your logic yet?

Re: In defense of Peter Schiff

Smiling Dave — Thu, 23 Dec 2010 21:12:34 GMT

That quote from Bob is about borrowing to produce, not borrowing to consume.

Re: In defense of Peter Schiff

liberty student — Thu, 23 Dec 2010 20:56:39 GMT

NidStyles:
Honestly my "cheerleading" was for making sense not a personal stride. There had been a person that was posting contradictory evidence in their post's. This was what I was referring to. In the light of the discussion that was being made, there was a trend for some of the posts that were clearly Austrian School in nature, but came up with conclusions that did not fit with the rest of the text, IE they didn't conclude what they should have in the Austrian sense.To add, my post of contention had not been responded to, when it pointed out the fallacy of the line of debate before to continued onto an entire page of obscurity.

Sometimes people are obstinate, or they miss a post. Address the post, not the poster where possible please.

NidStyles:
As for this debate. The payment to the Chinese is in the form of T-bond's. These are Money Instruments, and they do have a shelf life. Most of the ones that were sold to the Chinese are held by Bank's, and they have a 20 year maturity. That mean's in 20 year's if not sooner depending on the the exchange rates, the Chinese will come asking for their return when it benefit's them. We will not be able to pay for them, as we have no real asset's as a nation. I know I will not be willing to pay for the Nation's debt myself. I do not have $800 Billion laying around, do any of you?

Do you owe the value of the T-Bonds? What are the assets of a nation? Step back one more iteration, what is a nation?

NidStyles:
This is what separates the business man like Mr. Schiff and the Theoretical Economist. Businessmen tend to live in reality, and try to make an Economical Theory work. Mr. Schiff is known as he is the most successful person at this point in time that follows the Austrian School. Is he the best person to listen to 100% of the time, no certainly not. Then again there are other's that follow the same suit. Mike Maloney comes to mind as well.

Perhaps you have not heard of Marc Faber or Jim Rogers. Mr. Schiff is one of many investors who draw on Austrian ideas. But his investment experience and opinions have absolutely no bearing on economic science. The truth is not dependent on application. This isn't marxism.

To make your claim, as someone I believe may have before, that Schiff is more knowledgable about economics, because somehow he performs more economic action than you or I, let alone a Mises or a Rothbard, is silly on its face my friend.

Re: In defense of Peter Schiff

Esuric — Thu, 23 Dec 2010 20:56:11 GMT

His homely example about a private citizen having a trade deficit with cities where he does not live is talking about a guy who HAS THE MONEY he spends, not a guy who maxed out his credit card and has no job. Nowhere in his lecture does he discuss that situation, the one we are in.

I will directly quote Bob Murphy from this lecture because you either (a) did not listen to the whole thing (about 3 minutes dealing with the myth that trade deficits are "bad"), or (b) you're just a liar:

Bob Murphy:

You gotta be careful, because here, the traditional trade statistics only look at certain things. So for example, let's say that an American entrepreneur wants to start a new business, and let's say he needs to buy an office and equip with it computers and so on, and let's suppose he needs to raise some capital for that, and so somebody in Japan has saved up money, and wants to invest. So the agreement they reach is that the American entrepreneur says, "if you lend me $100,000 to start my business, I'm going to use that to buy all sorts of office equipment (maybe some of which he's buying from Japanese producers), and then in exchange you'll own, let's say, 50% of my company. So you're not getting anything tangible from me today; I'm giving stock certificates, or I'm giving you some sort of agreement that says you'll get 50% of any future net income that this firm generates.

So that transaction, once it's all said and done, and once he uses it to buy office equipment, some of which comes from Japan, would have increased the American trade deficit from Japan because, if you think about it, there would have been copy machines and computers flowing across the ocean from Japan to the United States, and there wouldn't have been any Japanese people buying U.S. products. So the observer (you) says, "oh man, these Americans, these profligate Americans are crazy. They're just getting, you know, a wash in debt here. They're just buying goods today and promising away future earnings to pay for it." But looking at the individual transactions, that doesn't actually seem short-sighted at all; it's actually productive and it's what we want.

Now Dr. Murphy limited his example to just securities. But in many situations, the Japanese investor actually gets tangible goods immediately. He either buys a piece of real-estate, or he invests directly in America (FDI) with the dollars he's received from the American trade deficit. Your confused response was typical: you claimed that those funds don't go to investment opportunities but rather go towards consumption. Now it's certainly conceivable that an American businessman would issue stock, and rather than buying capital goods, he blows it all on consumer goods. But why are we assuming that this is the rule, that this is what typically happens? It's so absurd.

Ergo, I releive you of the task of replying to me, becasue I will merely ignore you from now on.

I'm not really responding to you. You're hopeless. I'm merely refuting your nonsense so that others, who are actually here to learn, don't get confused and make the same fundamental mistakes that you're making. There is no such of thing as a favorable balance of trade. There is nothing inherently beneficial about a current account surplus. America is not doomed because it has a current account deficit. If America is doomed it's because of its central banking system and our international monetary system (but if this is the case, which it is of course, than most nations are doomed).

Esuric, remember when you were a Keynesian and went around arrogantly insisting that you knew it all? Nothing has changed since then but the garbage in your head. Keynes has been replaced with some muddled mish mash.

You don't know what it means to be a Keynesian, and that "muddled mish mash" you're referring to is called economics (basic economic doctrine).

It's not a myth.

It's not a myth? So America doesn't produce anything, and yet, it has the largest manufacturing base in the entire world. Much larger than any other nation, and it peaked right before the crisis. Got ya.

I could pull a Liberty Student and say I won't do your research for you.

One person's debt is another person's asset. I don't disagree with the fact that Americans have a lot of debt. I disagree with your assertion that every single individual and firm are inherently bankrupt, and I especially disagree with the notion that trade deficits cause systemic bankruptcy. Also, importing doesn't mean that we consume more than we produce. The fact that we import doesn't mean that our consumption rate exceeds 100%. You seem to think this because you continuously say, "if we produced so much, we wouldn't need to import." This, of course, laughable.

Re: In defense of Peter Schiff

NidStyles — Thu, 23 Dec 2010 19:35:48 GMT

Honestly my "cheerleading" was for making sense not a personal stride. There had been a person that was posting contradictory evidence in their post's. This was what I was referring to. In the light of the discussion that was being made, there was a trend for some of the posts that were clearly Austrian School in nature, but came up with conclusions that did not fit with the rest of the text, IE they didn't conclude what they should have in the Austrian sense.To add, my post of contention had not been responded to, when it pointed out the fallacy of the line of debate before to continued onto an entire page of obscurity.

As for this debate. The payment to the Chinese is in the form of T-bond's. These are Money Instruments, and they do have a shelf life. Most of the ones that were sold to the Chinese are held by Bank's, and they have a 20 year maturity. That mean's in 20 year's if not sooner depending on the the exchange rates, the Chinese will come asking for their return when it benefit's them. We will not be able to pay for them, as we have no real asset's as a nation. I know I will not be willing to pay for the Nation's debt myself. I do not have $800 Billion laying around, do any of you?

This is what separates the business man like Mr. Schiff and the Theoretical Economist. Businessmen tend to live in reality, and try to make an Economical Theory work. Mr. Schiff is known as he is the most successful person at this point in time that follows the Austrian School. Is he the best person to listen to 100% of the time, no certainly not. Then again there are other's that follow the same suit. Mike Maloney comes to mind as well.

Re: In defense of Peter Schiff

Smiling Dave — Thu, 23 Dec 2010 18:55:30 GMT

DD5, we seem to be talking past each other, so I am going to stop replying. In any case I would only be repeating what I have written several times in different ways, trying to get the ideas across.