"I am far from an expert in Austrian theory. I am a novice...."
Imo, you make their case more effectively than they themselves
do.
"You do not understand it well enough to trash it."
You don't need to be an ornithologist to not like the sound of
quacking. The AS is an extremist ideology, and that alone
invites obliquy. porc is extremely anti-extremist.
"I also disagree about whether it has intellectual merit in
understanding what's going on in the world and the implications
of those actions. I am CERTAIN it does."
I made it very clear that I believe the AS does have some
merit. I clearly said that Central Bank credit creation leads to
suboptimal resource allocation generally and that the Japanese
situation, in particular, exemplifies this. Why are you implying
that I said it had no intellectual merit?
"Economics is a subject that has only marginal value in "value
investing" other than to perhaps understand why an economy is
performing the way it is in the 'short term'."
I must be misunderstanding your point here. As you know, Graham's undertaking was to employ economic principles to acertain the economic value of a company, and buy when its per share market price was safely lower. Buffett perfected the process. That's why Janet Lowe quoted some notable (I wish I could remember his name), who declared "Value Investing is applied economics". [emphasis added]
It is a fundamental thesis of free market economics that price
and value tend to converge in the long run. Value Investing uses
these microeconomic principles in an attempt to ascertain short
term discrepancies between price and value.
"So it's really not worthy of a long discussion."
New readers: Welcome to Wayne's World <g>. Wayne, you have
repeatedly put the economic ideas of the AS into play. Yet, when
I raise economic issues (e.g., does the production process
generate enough income to clear the market of what is produced?),
you dismiss economics as having little relevance. But, economic
analysis is what distinguishes Value Investing from contrarianism
for the sake of contrarianism (buying a security solely because
its price has gone down is no more necessarily rational than
buying solely ecause it has gone up.)
I once heard Peter Lynch say, if one believes the U.S. economy
will be in good shape over most of the coming 20 years, one
should be in the stock market. Otherwise, one should not. I
agree.
"It just seems to me that if you truly believe in free markets,
(and I know you do) you would not be such a big fan of central
banking credit inflation or government intervention for the
simple reason that both are not free market activities. Even if
the intention is to correct prior mistakes by those very
institutions."
porc is not a "big fan" of government or industry. porc
is a big fan of checks and balances.
Beleive it or not, I agree with both the Marxists and the
AS as to the nature of the problem. Governments, because
of their monopoly on coercive power, are inherently problematic
for individual liberty and economic rationality. But, it is
nonetheless extremist, unrealistic and dangerous to abolish
government, or its role in stabilizing society in general and the economy in particular.
Conversely, the institution of private property's narrow focus on individual profit leads to all sorts of human and social ills. But, it is likewise extremist, unrealistic and dangerous to abolish the
right of private property.
"I have several thoughts about Japan. I am not quite sure how
Japan can get out its mess with undo pain. Perhaps they will
have to devalue significantly and lower their peoples
standard of living to avoid credit deflation. I do not know.
I do know this though. It was central bank credit inflation
that caused the stock market and real estate bubble back in
the 80s that is primarily the cause of the current problems
there to begin with. It was subsequent government actions
that built all those uneconomical bridges to nowhere, piled
up debt etc... trying to jump start the economy for the last
few years. It was more central bank credit inflation
(attempting to bail banks out from the bubble bursting) that
lead to all sorts of overcapacity throughout the rest of Asia
as they sought to grow out of the mess. And it was the "Yen
Carry" trade in small part that helped cause the financial
seizure last year.
"10 years of hell for the Japanese has been the result of
something that Austrian analysis would have both predicted
and prevented to BEGIN WITH. Something that many investment
proponents used to cash in on big time when the bubble did
finally burst."
As I wrote before, the Japanese problem is perhaps the AS's best
case. The conflict between the U.S. and East Asia is, in
economic terms, the conflict between Capitalism and Mercantilism.
The former seeks to maximize the gap between costs, including
the cost of capital, and revenues. The latter seeks to maximize
asset accumulation -- and the cost of capital be damned. As with any enterprise that essentially ignores costs, bankruptcy is the inevitable outcome.
I completely agree that in the latter case, Central Bank fiat
credit creation is the fire department spraying gasoline on the
flames. And, as the AS would predict, all of East Asia is
essentially insolvent.
However, I disagree that Japan has had 10 years of hell. On the
contrary, the general population has hardly felt the problem,
which is the major reason the political will does not yet exist
for change. "Hell" is when the government does nothing while
panic degenerates into economic and political chaos.
" To me understanding and money is already enough merit."
porc doesn't understand what that means, but he like the sound
of it --'''':>
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