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Comment Re:20 year old news? (Score 5, Insightful) 521

The F-150 is the best selling vehicle (car, truck, or suv) in North America,and has been for almost 20 years. This isn't some niche manufacturer that is going to sell 50,000 units and be happy with it. Ford is expecting to sell millions of these before then can do another redesign, so if it isn't successful it's a serious problem, and therefore it's a huge risk.

Furthermore, losing 700 lbs on every one of the millions of these that are going to be sold over the next few years will do more to reduce dependency on foreign oil and co2 emissions than all of the zero emission vehicles put together. So as cool as the technology behind electric and hybrid cars is, if you want to burn less gas, you have to root for advances in truck technology such as this.

Comment Re:Limited money supply is a problem? (Score 1) 691

The argument was that currency inflation incents people to make investments (even low-risk investments) which appear to be profitable, but are actually below average and reduce economic output rather than contributing to growth.

What do you mean by "below average?" Under any economic condition, about half of investments will be below average. If that average level does not provide the level of real growth that people would like, the problem is not with monetary policy, it is, as I mentioned before, a problem with the quality of investable options.

And for purely financial investments, remember, for every buyer, there is a seller and one of them is wrong. That's a joke of course, but when the investment is real, say, to build a factory or not, the actual return is in the widgets that come out of the completed factory - it doesn't actually print dollars. And the real value of those widgets, and therefore the real return on the factory and the real contribution to economic growth and standards of living, is independent of the monetary expansion or contraction that has occurred and is entirely dependent on the relative value of those widgets to other widgets in the economy (including the ability of people to pay for them) at the time they hit the market.

That's never the best deal you can get, because in the absence of price inflation or deflation you can stuff your money in a mattress and get a guaranteed 0% real return

You and I can do that, but Bill Gross, Calpers, and Temasek can't, and those are the marginal investors that set the order book, not you and me.

The really interesting case doesn't even involve negative returns; that's the one where price inflation and currency inflation are not at the same rate. For example, if technological progress and/or improvements in economic efficiency would naturally lower prices by 2%, but there is a 5% increase in the currency supply over the same period. The net result is 3% price inflation, but an investment with a 5% nominal return, while higher than price inflation, is really a malinvestment because it's not producing any real improvement on the resources consumed—the 5% is entirely due to currency inflation—in a time where the average investment is giving 2% real returns. The 2% increase in purchasing power is due to other investments which led to a general improvement in the state of the economy, not that particular investment, which is dragging down the average.

This is where you really have to take care about what kind of investment you are talking about. If this is a financial transaction, where I invest $100 and get $105 next year, it's not malinvestment because no real resources are being consumed. Trader A wins and trader B loses, with a second order effect that trader A probably gets to risk more money on his positive supply shock bet and trader B gets less money to risk on his low real return bet.

But if you are referring to a real investment in capital or labor, then I disagree with your premise that you get a nominal return on those. A capital investment, or a worker, can't make you $105 worth of cash; they can only make you goods or services which you then sell for, say, $105 cash. Note that this $105 isn't because of the 5% increase in the currency supply (unless this widget is the only thing in the economy), it's because someone is actually willing and able to spend $105 to get what you are offering, as opposed to spending that money on some other good or service that someone else is offering. So this wasn't a malinvestment - it truly is something that people want more than the 3% overall inflation rate, otherwise it wouldn't have been a $105 price.

Comment Re:Limited money supply is a problem? (Score 1) 691

The market only factors in price inflation. You're still left with malinvestments which looked profitable on paper, even after factoring in price inflation, but are actually net losses because they are below the average real rate of return and draw resources away from other, more profitable ventures. Yes, investors should be looking to get the highest possible return for their money, but not everyone can find above-average investments, and for those who can't, inflation leads them to invest somewhere to avoid the inflationary loss even if the economy would be better off with them simply holding on to their money.

This is a common misperception - that inflation can lead to malinvestment because it incents people to take more risk than they otherwise would have, just in order to preserve capital. But that is not a result of inflation, that is entirely a result of the available investment opportunities and the available *real* rates of interest. There is no "right" to an expected return of 10% on stocks, or to a guaranteed 5% return on bonds. More importantly, there is not even a right to a guaranteed 0% return (real or nominal) on even the safest risk-free investment. (Technically for small investors who have so little money that they can literally stuff cash under their mattress, a 0% nominal return is guaranteed, but that is not the marginal investor).

Imagine a world with no monetary expansion and zero inflation as far as the eye can see. If the market says you must pay me $101 today in order for me to give you $100 tomorrow, and that is the best deal you can get, then the real rate of return is -1%. Clearly this person is in the same situation as the person who can only earn a -1% real rate of return by investing 2% risk-free in a world with 3% inflation. If these investors choose to reach for yield to get a higher than -1% real rate of return, that is the market pushing them in both cases (most likely due to an excess of investable funds versus good ideas to invest in), not inflation. If inflation dropped to 1% in the second scenario (cetiris paribus), then the person offering a 2% rate of return asset wouldn't still be offering a 2% nominal rate of return - they would offer 0% nominal return. The market doesn't care if it would be "better" for an investor to earn 0% real return; it simply settles at a real rate of return that clears buyers and sellers. Sometimes that will be higher than 0%, sometimes less.

Comment Re:Limited money supply is a problem? (Score 1) 691

There are three reasons why that's not as big a deal as that analysis implies. First, intertemporal comparisons may be of academic use, but economic actors can only decide between good a and good b contemporaneously; you can't choose between buying good a today and buying it last year. And the relative efficiencies of all of the inputs get rolled into that one dimensional price - that's the whole point of a market.

It does matter when it is possible to choose between a good today and a good tomorrow, such as deciding whether to make a particular investment. But for low risk goods, where the rate of inflation will meaningfully affect real returns, they are typically liquid enough that the market appropriately prices in the expected inflation (yes it leaves inflation risk but even that can be indexed away if there is enough demand to deal with that problem. E.g. High inflation countries like Brazil where payouts on fixed income securities typically are adjusted for inflation). And for high risk ventures, whether the payoff is 50% or -50% is going to be determined by the success or failure of the risk, not the movement of the medium of account.

Lastly, a little money illusion can be a good thing for an economy populated by real people with all of the anchoring heuristics and biases that are not in simplistic theoretical models. The best example is unemployment. It is generally better for ten people to take a 10% real paycut than for 1 out of 10 to lose a job while the others keep their original pay. But employers are loathe to cut nominal wages, and employees are loathe to take them. Some inflation allows for real pay cuts in response to real supply shocks while mitigating the baseline anchoring bias.

Comment Re:Comparison: Bitcoin is like 'Abortion' in the U (Score 1) 475

I agree that it is very difficult to compare different countries but the Fed fairly quickly went to ZIRP and QE and avoided a double dip recession while Europe did not take those steps, went into a recession, then took those steps to try to fix the problem. Not proof, but a convincing argument to me that they probably should have done it in the first place. The reason they didn't was because of excessive independence.

And yes what I meant was bitcoin is designed to maintain it's value against a basket of goods and services better than other currencies will

Comment Re:Limited money supply is a problem? (Score 1) 691

*Assets* are a store of value. Currency is a medium of exchange and a medium of account. So a $20 bill is an asset, and stores value. "Dollars" are a currency because they are a medium of exchange (I can list a price of a thing in "dollars") and a medium of account (I can figure out the equivalent value of my assets in "dollars"). Neither inflationary currency nor Florida swampland are good assets that will store value very well, but a mildly inflationary currency is still a perfectly good currency because it can still be a fine medium of exchange and account. For example, in the 1970's, the US dollar was mildly inflationary, but there was little demand in America to denominate everything in British Pounds or Mexican Pesos because it was still an excellent currency - it was good for transactions and accounting of value even though holding any amount of money in that currency for a period of time was sure to lose value, thereby making dollars a bad store of value. Note that a hyperinflationary currency no longer satisfies these criteria to be a currency and can therefore be a bad currency.

But my only comment about the article itself (which of course I haven't read) is that instead of focusing on the problems with bitcoin, maybe it would be worth thinking about how one might take the best elements of bitcoin and incorporate those into fiat currencies (or a next generation of fiat currencies and central banks). And don't say it's not possible - 10 years ago if you said you wanted to make a uncounterfeitable digital currency people would have said that's not possible either.

Comment Re:Comparison: Bitcoin is like 'Abortion' in the U (Score 1) 475

This really goes to the main point about how one should judge a currency, and specifically the central bank when it is the monopoly supplier of the currency. I strongly disagree with using strength/value w.r.t. other currencies as the main metric for quality. Instead, one should judge the currency based on how well it reduces the risk of price instability (this is not the same as zero inflation) thereby supporting the real economy that uses it as the medium of exchange.

So the first place I look is at the performance of the real economy. Granted, non-monetary events can hurt the real economy (e.g., war, natural disasters), but decent monetary policy is a necessary though not sufficient condition for good economic performance. And on that measure, the ECB has not done as well as the US, dipping back into a recession while the US has managed positive, albeit slow, growth since the great recession ended.

And this goes back to my point about bitcoin. It is designed to maintain its value against other currencies, but there is no function that I can see that tries to counteract economic shocks and lay the groundwork for economic growth. In the US, the political structure, and yes, only quasi-independence of the Fed ensures that economic growth is a priority of the central bank. With the ECB it is less so, and bitcoin almost not at all.

Comment Re:Comparison: Bitcoin is like 'Abortion' in the U (Score 1) 475

One interpretation of "not governed" could be "not governed *well*". And it is fair to say that the Euro has not been governed well over the last few years. The ECB (i.e. Germany) has shown huge resistance to being a lender of last resort, and has run an overly tight monetary policy, risking deflation and only recently dropping interest rates to where the US Fed dropped them years ago (and even the Fed was not aggressive enough - witness the weak recovery).

This is the main problem with bitcoin. The decentralization and anti-counterfeiting measures (and crypto that does it properly) are, IMHO, phenomenal advances in the realm of e-money. However, the "set-and-forget" monetary policy is inappropriate for a modern economy. The "great moderation" in the US between the mid-80s to the early 2000's was a period of low inflation and generally mild recessions. However, to achieve that stability in outcomes, the Fed had to change policy inputs many times, sometimes quite drastically (e.g., 1987 stock market crash, LTCM, Asian crisis).

Comment Re:American race to the bottom roadshow (Score 2) 606

As you point out, there are things that China could do even better, and the question of how China is allocating the investment versus consumption decision, and whether it is depressing its own currency (making it's own people poorer) in order to export more, are all legitimate issues. But remember that the Wealth of Nations is in the productive capacity of the population, not its stores of gold (or US Treasury securities), so a lot of China's growth has come from the elimination of really bad policies that prevented its workforce from producing, rather than the adoption of a mercantilist export regime.

Comment Re:American race to the bottom roadshow (Score 5, Insightful) 606

Americans are actually behind Europeans in the "race to the bottom": median income by country. Median household income in the US is 25% higher than Germany, 43% higher than Italy, and 70% higher than Spain. The only European countries with higher median income than the US are oil-rich Norway, or ones that benefit from "don't ask don't tell" banking sectors. So the typical American worker is doing better than the typical worker just about anywhere in the world.

To the extent that the "race to the bottom" means competing with third world nations like China for manufacturing jobs, note that China's rapid economic growth the in the last 20 years has done more to improve the quality of life and reduce worldwide inequality than just about any economic development program. While there are many in America and Germany who end up getting the short end of the stick, when comparing the additional misery of hundreds of thousands of Westerners who lost their livelihood versus the improvement in the standard of living for tens of millions of people in the third world from subsistence farming to a modicum of caloric stability, it is difficult to say that the "race to the bottom" is an entirely bad thing for humanity as a whole, or that America has not done an acceptable job of dealing with this challenge at least as well as other nations.

Comment Re:Dice Strikes Again... (Score 3, Insightful) 184

There is a (almost certainly apocryphal) story about an American economist who goes to an underdeveloped nation to try to help them improve their economy. The government guide shows him some civil engineering project out in a rural area (building a road or a bridge or a dam or something) with at least a hundred workers digging all over the place with shovels. The economist sees that there is a bulldozer sitting idle nearby, and assumes that it is broken and they don't have the technical skills to get it running. He tells the guide that they need to work with a technical school somewhere to get a steady supply of trained mechanics so that they don't waste resources like that. The guide assures him that the bulldozer works, but there is so much unemployment in the area that they can't afford to put all of these people out of work by using the bulldozer. So the economist recommends (facetiously) hiring hundreds more from the countryside, taking away their shovels, and giving them all spoons to dig with.

Getting things done and providing a safety net are two different (orthogonal, not opposing) things.

Comment Re:Speaking of advocates (Score 1) 406

Further, it's not just freedom for developers, but freedom for users. There's a reason the GPL prevents one from redistributing a covered work with restrictions on use (e.g., that it can't be used by Nazis, etc.), no matter how good an idea that might seem in any particular case.

As innovators, engineers will almost always do someone harm. A new technology might (and probably will) put people out of work. Is the engineer to be held morally responsible for that? Isn't it better that engineers build new things, while society as a whole determines the morality of their use?

Comment Re:That room on the 6th floor of the Book Deposito (Score 2) 381

I think that people of the day just couldn't handle the simple truth, so they made the story complex so that it could conform to their preconceived opinions. Many people on the left were sympathetic to Marxism/Communism during the cold war, and so it was hard for them to believe that a Communist sympathizer would assassinate their icon. People on the right believed in the superiority of the West, and the successful assassination of a US president by a good old American boy who was converted to the superior ideology of Communism would be a Soviet victory that was equally difficult to accept. And people in the middle were uncomfortable believing that their leader was so vulnerable that a single person couldn't possibly have done it.

Therefore, for most people, anything else - the mob, the CIA, aliens - was preferable to reality.

Comment Re:And people called Atlas Shrugged Fiction.... (Score 1) 702

This is nothing like what happens in the UK. What you are thinking about in the UK is that a business charges a higher than market value price by using some sort of bait and switch trick or complex loan arrangement. However, in this case, the stores being expropriated *are* charging a market price

The government doesn't like the fact that its mismanagement of the economy has meant that the average Venezuelan worker is not productive enough to be able to pay Chinese workers to build TV's for them. In a government store, they can charge whatever they want, but there are chronic shortages of basic food and toiletries because they set the prices to low relative to the productive capacity of the economy. Specifically, the oil wells have been used as piggybanks to be drawn upon rather than investments to keep up - like killing the goose that lays the (black) golden eggs.

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