Admittedly I am a little soft when it comes to econometrics (what essentially is seen as modern economics), OK EXTREMELY SOFT… but as a history major I am extremely drawn to the data. Data is statistical history and nothing more as Von Mises illustrated (Human Action: Prices XVI). Traders, economists, and the Fed unlike seem to have skipped this chapter in Human Action.
What is most important is what is driving forces behind the data. Modern day economists are drawn to the data without taking into account the human factors that provided them with the numbers, without evaluating the history properly. As a history major I am trained to look at human intentions; the why and how’s that can help us understand where the data came from. Data is nothing more then statistical history and nothing more. What is most important is what is driving forces behind the data, aka the HUMAN ACTION.
Let me get right to the point.
I think it would behoove money managers to look back at the history of , prices and focus on the praxeological reasons as to how and why the prices were driven to given level. When discussing the recent 3.5% so called recession ending GDP number Peter Schiff pointed out:
During the decade that corresponds to the Great Depression, annual GNP expanded for six years and contracted for four. After nose-diving in the early years of the decade, GNP turned positive in 1934 and then logged three more years of solid growth (the four year average annual growth rate was 8.5%). But does anyone really believe the Great Depression ended in 1934, when the economy first stopped contracting? Unemployment reached 19% in 1938, nearly the peak of the entire Depression, almost a full decade after the stock market crashed! Why will we be so much luckier this time around?
Currently U3 unemployment is at 9.7% and U6 is at 17%. Now some say that U6 measure is most like the Great Depression 1938 as unemployment was calculated much differently at the time and suggest that is functional equivalent of the methodology that was used in the 1930’s. According to N. Andrews such suggestions may be factually incorrect. Current U3 measures are actually most like 1930 (a year after the 1929 collapse in which the estimated U3 spike from 5 to 10%…sound familiar?).
Unemployment is at 9.7% or 17% to depending on how you look at it. Helicopter Ben says that he won’t REPEAT the mistakes that Japan made and send this country into a deflationary spiral. Obama is not going to take his foot off the money producing accelerator like the Japanese did briefly in 1998 sending the Nikkei into a tailspin (the proverbial Dump Japan Era). But let me leave you with this, where did the money printing philosophy get Japan? Hint
I keep hearing about a V-Shape recovery, perhaps this nothing more then government induced drunken zig zag.
The Street seems to believe that the Fed can control the situation and will pull the liquidity from the system. But how can we let interest rates rise politically? Rising interest equals more defaults and more homeless Americans. Eventually we will forced take our medicine and you will get deflation, but it won’t in terms of dollars.
Actually come to think of it, some day I will wall paper my man den using dollar’s, that way all that expensive paper doesn’t go to waste.
Oh yeah, so what has history shown is the cards for this money manager: rise in gold prices, increasing hostility finger pointing, and dare a say warfare? God, I hope not.
Wendall Wilkie History, Uncategorized history majors, money managers, Peter Schiff, The Great Depression
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