Tuesday, September 6, 2016

The Slippery Austrian-Lites

Hollow Daze left this comment earlier today:
Trump: the US has a “false economy” and an “artificial stock market.” Sounds like we got another Austrian-lite on the loose, huh RW? 
But this Austrian-lite, Hollow Daze, is changing the debate. Nothing Trump said based on this quote is Austrian-lite (Though Trump's economic thinking, in general, is lacking.) It is what I have been stating.

I have always stated that the boom was a Federal Reserve manipulated boom as part of the boom-bust business cycle and that the capital goods sector, e,g, real estate and the stock market, is where the boom occurs.

I was pointing this out because Austrian-lites argued last year that the Fed:

A. Would not be able to raise rates.

They then switched to Claim B after the Fed hiked rates in December: That the hike would have to be reversed and that the boom would not continue.

Back last September there were comments here at EPJ like this:
Why is it metaphysically impossible for the Fed to never raise rates again?
And, Hollow Daze wrote this at the time::
Doubling down already? I'm starting to wonder what the purpose of this blog is. We'll see negative rates and cash illegal before any rate hikes. It'll be done for the "chillruns" and against the "terrists", of course. The Fed cares not about its "credibility" in the eyes of the .000001% of people who understand its machinations. It only cares about allowing the "system" to live another day. BTW, rate hikes won't crash "the economy" necessarily, but would crash the Fed-fueled speculative real estate, stock and bond markets.
Well, we did not see negative rates, we got a hike and it did not crash real estate or the stock market.

So it is pretty damn slippery for Hollow Daze to imply with his Trump quote that I was somehow wrong because what occurred is the exactly what I said would occur and the opposite of what he said would occur.

I repeat, I have always called it a manipulated boom, "false" if you prefer, and that the Fed would raise rates. This is the opposite position of Hollow Daze and other Austrian-lites, who first held the position that the Fed was not going to raise rates and, indeed might go negative, and that a rate hike would cause a crash of the stock market and real estate.

So to answer another question Hollw Daze asked back in September, the purpose of this blog might be to warn about the bad theory and analysis of Austrian-lites and to warn about the slippery way they will change the debate.

As for the future, I expect more Fed rate hikes AND, given what is going on now with the money supply, in the EPJ Daily Alert I am positioning for a likely major new up leg in the stock market.



  1. Have there really been any rate hikes? What are mortgage rates today, 3.44% for 30 yrs per freddie mac? Oh dip, 30 year mortgage rates were 3.89% per freddie mac in Sept 15. Carry trades and stock buybacks still the rule of the day in the bond and stock markets. My primary barometer is anecdotal but... I still get offers to borrow money (intermediate term) at 0% interest rates. These offers are identical to what I was receiving this time last year. So really, have rates risen or are you pimping Fed propaganda?

    What Trump is saying, indirectly at times and directly at others (like today), is that raising rates will crash this "artificial" economy, including the stock market. Typical Austrian-lite, I guess.

    1. Wouldn't it be easier just to admit you were wrong?

    2. @John Jacobson Jingleheimer Schmidt: Got an argument about rates actually being higher so as to impact investor behavior? I'd like to hear it. RW was pushing (but carefully hedging his own opinion) the Fed's John Williams "5 rate hikes in 2016" nonsense at the beginning of the year. You think Trump believes the economy is booming in the face of the Fed "raising rates"? Really?

    3. .... the Fed hiked the only rate it directly controls ... you obviously know this and are being obstinate

    4. @Danger Pioneer: If the Fed hiked the rate it directly controls to 5%, what do you think would happen to mortgage rates and rates on other loans? What would happen to bond prices? Think housing would still be booming?

  2. PS- At least you didn't call me an SJW, this time.

  3. I can make just about any prediction I want and will eventually be right. If crashes are shorter lived then booms, does it make RW more "right" because he's right more of the time? Or was Schiff more "right" because the prediction was more dramatic? I'm not picking sides here - just saying, this is ridiculous.