Economics

Welcome to my new economics page. I am using some new technology (for my site), the addition of XML feeds into the main content. That is how I have business news on the right bar and feeds from Mises.org and LewRockwell.com down below.

I have been following the current economic troubles. It seems to me that the fiat currencies are finally beginning to falter--they are just paper, anyway. As the Fed and the Treasury Department pump money (out of thin air) into the economy, the paper is depreciating. Fortunately for us, all of the other nations of the earth are in the same or similar boats. There is no place for the investment money to go to get out of the sinking ships, except commodities and other "hard" businesses directly related to production and not highly leveraged. Hence the steady but significant increase in oil, gold, silver and other commodity prices over the past few years. Since many in the industry seem to not understand what is happening (or at least feign ignorance), the market reacts erratically and inconsistently. Sooner or later, people will figure out what is going on and then the market will truly respond (welcome, inflation). Sooner or later, people will realize that the "money" being pumped into the economy actually comes out of the taxpayers' pockets via inflation, for it is just paper (or digits on a screen). Why did we ever go off of the gold standard?

A quick discussion of the interest rates: the Fed manipulates the supply of loans into the economy by loaning money at their designated interest rate to the banks. If the Fed loans money at 1% (which it did for several years recently) there is a vast oversupply of capital into the economy--normally, the loan rate would be based on supply of capital and demand for capital. The banks turn around and try to use this money by loaning it out. To use it all, they loan far more aggressively and at far lower rates than they would normally--that is how the subprime mortgage bubble got started. The aggressive loaning worked okay as long as the prices of real estate went up, and go up they did due to the huge amount of capital available to home buyers (that was the purpose of Fannie Mae--to give cheap loans to otherwise ineligible home buyers). However, eventually the market saturated and turned down. The Fed tightened up credit to reduce inflation. Foreclosed homes were no longer worth what the loan had been for--thus the loans were overvalued on the books. Coupled with the Fed's higher interest rates, the banks got squeezed from both sides and many have collapsed. And you can trace it all back to the Fed's artificially low interest rates. Incidentally, that is why a savings account has such an extremely low yield--because the Fed is providing lots of money at low yields to the banks, and you, the saver, are in competition with the Fed.

Some links on this economic stuff:

• 24hGold.com -- An excellent resource for news and commentary from a gold-based/Austrian economic viewpoint. Take the commentators with a grain of salt, though.
• 24hGold -- Editorials -- Many links to editorials about gold in the economy.
• Ludwig von Mises Institute -- Austrian school economics, which I consider real economics. Probably the best, most coherent collection of authors and writings on economics on the web.
• LewRockwell.com -- Plenty of articles applicable to the current economic and governmental situation. Take note of the many articles by Ron Paul.
• The Cody Word -- A young trader's blog from a non-establishment viewpoint, which is good. A little worldly sometimes.
• Campaign for Liberty.com -- Ron Paul's Campaign for Liberty Blog.
• Ron Paul's Texas Straight Talk Column -- Ron Paul's weekly column; he is the primary advocate for Austrian Economic policy in Washington, D.C.
• Shadow Government Statistics -- Perhaps the government doesn't always tell the truth about the economy.
• Chaostan.com -- Yes, Richard Maybury has been predicting much of what we are seeing for years. He's cynical enough to tell how to make money off of the government's blundering--something I might not do.
• Safe Haven | Preservation of Capital -- Articles about saving money.
• Gold Price.org -- Lots of information about gold.
• The Gold Report -- More information on gold.
• Kitco -- A vendor of bullion articles and coins. Good commentary and (particularly) a good forum.
• American Precious Metal Exchange -- A vendor of bullion articles and coins.

That should cover the highlights of the current situation. Ron Paul understands the economics better than most--certainly better than those who have been trained in the Keynesian and other interventionist schools. It seems the government could drive the economy into the ground, eventually, whether purposeful or not. Somehow, though, everyone seems convinced that the Fed is helping us by its moves.

Crazy, what goes on out there in the world. Good thing we are not part of it nor under its dominion. Our God reigns, and He guides the paths of those who seek Him. We have nothing to fear.

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