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Market Oracle FREE Newsletter

Category: Economic Theory

The analysis published under this category are as follows.

Economics

Wednesday, January 23, 2013

The Free Money Miracle? / Economics / Economic Theory

By: MISES

Jonathan Goodwin writes: The "Miracle of Wörgl," refers to the story of currency demurrage and the impact it had on the economy of Wörgl, a small town in Austria. For a bill of such currency to retain its face value, the currency holder must pay a regular, periodic payment (a tax) for a stamp or other marking. Wörgl is regularly touted by advocates of demurrage as a successful implementation of such a currency, one designed to encourage velocity due to the incentive to spend it in order to avoid the periodic tax.

The experiment at Wörgl was implemented by the town’s mayor, Michael Unterguggenberger in the midst of the Great Depression. Wörgl, like many towns throughout the world at the time, was suffering from high unemployment and low economic activity. The experiment began on the 31st of July 1932, with the issuing of "Certified Compensation Bills," a form of currency commonly known as Stamp Scrip, or Freigeld. It resulted in a boom in government projects, and a corresponding increase in employment and economic activity not just in the government sector, but throughout the town.

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Economics

Monday, January 14, 2013

Austrian Economics in 2013 / Economics / Economic Theory

By: Alasdair_Macleod

Regular readers of my articles either have some knowledge of Austrian economic theory or at least suspect that Keynesian and monetarist alternatives are flawed. Their failures are becoming more evident, which suggests we will hear more of Austrian theory in 2013. So how is Austrian theory different? Consider the following simple propositions in accordance with Austrian theory, which we can confirm from personal experience:

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Economics

Monday, December 24, 2012

Present Crisis Pattern, End of the Third Industrial Revolution / Economics / Economic Theory

By: Submissions

Wim Grommen writes: This paper advances a hypothesis of the end of the third industrial revolution and the beginning of a new transition. Every production phase or civilization or human invention goes through a so- called transformation process. Transitions are social transformation processes that cover at least one generation. In this paper I will use one such transition to demonstrate the position of our present civilization. When we consider the characteristics of the phases of a social transformation we may find ourselves at the end of what might be called the third industrial revolution. The paper describes the four most radical transitions for mankind and the effects for mankind of these transitions: the Neolithic transition, the first industrial revolution, the second industrial revolution and the third industrial revolution.

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Economics

Sunday, December 23, 2012

Government Spending is Not Economic Growth: Real GDPP 2000–2011 / Economics / Economic Theory

By: Robert_Higgs

In the 1930s and 1940s, when the modern system of national income and product accounts (NIPA) was being developed, the scope of national product was a hotly debated issue. No issue stirred more debate than the question, Should government product be included in gross product? Simon Kuznets (Nobel laureate in economic sciences, 1971), the most important American contributor to the development of the accounts, had major reservations about including all government purchases in national product. Over the years, others have elaborated on these reasons and adduced others.

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Economics

Sunday, December 23, 2012

Bernanke Loosens Up, Fundementally Misunderstands How Weath is Created / Economics / Economic Theory

By: Frank_Shostak

On Wednesday December 12, 2012 Fed policy makers announced that they will boost their main stimulus tool by adding $45 billion of monthly Treasury purchases to an existing program to buy $40 billion of mortgage debt a month.

This decision is likely to boost the Fed’s balance sheet from the present $2.86 trillion to $4 trillion by the end of next year. Policy makers also announced that an almost zero interest rate policy will stay intact as long as the unemployment rate is above 6.5% and the rate of inflation doesn’t exceed the 2.5% figure.

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Politics

Wednesday, November 28, 2012

Obama's Economic War on Women, The Free Market Punishes Discrimination / Politics / Economic Theory

By: MISES

With the re-election of President Barack Obama, it is increasingly evident that the tax eaters outnumber the taxpayers in America. From food stamps to free cell phones, President Obama has achieved significant political success by putting more and more Americans on the government dole. During his recent re-election bid, this effort included considerable pandering to women voters.

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Economics

Tuesday, November 27, 2012

Capital Formation and the Fiscal Cliff, Economic Perception Vs Reality / Economics / Economic Theory

By: John_Mauldin

In today’s economic environment, we often complain about volatility and uncertainty, but there is one thing I think we can be fairly certain of: taxes are going up. I constantly try to impress upon my kids, most of whom are now adults, that ideas and actions have consequences. In today’s letter we will look at some of the consequences of an increase in taxes. Please note that this is different from arguing whether taxes should rise or fall. For all intents and purposes that debate is over. As investors, our job is to deal with reality. We must play the hand we are dealt. Taxation is a complex issue, but let’s see if a few word pictures can help us understand what we face.

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Economics

Friday, November 23, 2012

Economics Can't Violate the Laws of Physics: Rising Systemic Risk and Multiple Black Swans / Economics / Economic Theory

By: DK_Matai

In the aftermath of the colossal damage caused around the world by extreme weather induced floods, fuel and food shortages, questions are constantly being posed about the improbability of endless growth of human population and over consumption on a planet with finite resources.  There are limits to growth and humanity is colliding with them head on.  High fuel and food prices and floods caused by climate chaos are all symptomatic of those growth limits. 

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Economics

Thursday, November 22, 2012

Ireland and Iceland : A Tale of Two PIIIGS / Economics / Economic Theory

By: Frank_Shostak

There were a lot of commentaries regarding the Ireland and Iceland 2008–2012 financial crises. Most of the commentaries were confined to the description of the events without addressing the essential causes of the crises. We suggest that providing a detailed description of events cannot be a substitute for economic analysis, which should be based on the essential causes behind a crisis.

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Politics

Monday, November 12, 2012

Ron Paul In Praise of Price Gouging / Politics / Economic Theory

By: Dr_Ron_Paul

As the northeastern United States continues to recover from Hurricane Sandy, we hear the usual outcry against individuals and companies who dare to charge market prices for goods such as gasoline. The normal market response of rising prices in the wake of a natural disaster and resulting supply disruptions is redefined as "price gouging." The government claims that price gouging is the charging of ruinous or exploitative prices for goods in short supply in the wake of a disaster and is a heinous crime But does this reflect economic reality, or merely political posturing to capitalize on raw emotions?

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Economics

Monday, November 05, 2012

Abolition of Fractional Reserve Banking, Chicago, My kind of town / Economics / Economic Theory

By: Alasdair_Macleod

Quite a bit of media attention has been devoted recently to a working paper by two International Monetary Fund economists that re-examines the “Chicago Plan”. First put forward by University of Chicago economists in 1933, this proposal calls for the abolition of fractional reserve banking and the replacement of bank credit with government money in order to do away with credit-induced business cycles.

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Economics

Thursday, November 01, 2012

The Economics of Dracula / Economics / Economic Theory

By: MISES

Diamond Rated - Best Financial Markets Analysis ArticlePeter C. Earle writes: Another Halloween is upon us, bringing its late autumnal burst of costumes, candy, and merriment. Ghosts, witches, mummies, zombies, Frankenstein's monster, film and television characters, and others will make appearances, as will the quintessential Halloween figure: Dracula.

Most people are familiar with Count Dracula's first literary appearance in Bram Stoker's 1897 Gothic horror novel Dracula. And many are also aware that the undead villain was loosely based on a real historical figure, Vlad Tepes III — "Vlad the Impaler" (sometimes "Vlad Dracula") — who ruled mid-15th century Wallachia, a region of modern day Romania.

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Economics

Thursday, November 01, 2012

The Conundrum of Malaysia's proposed Minimum Wage / Economics / Economic Theory

By: Sam_Chee_Kong

Diamond Rated - Best Financial Markets Analysis ArticleDue to the scarcity of resources such as labor it is common for the government at times intervenes into the markets with the objective to prevent prices from rising and dropping  too much from the equilibrium price. The Government can influence the market supply and demand through setting the price floors and price ceilings in the market.

An example of price ceiling will be the rent controls on housing. By imposition of the rent control, the government hope to provide affordable housing for the lower income group. Similarly the imposition of minimum wage is another form of setting the price floor. This will help prevent wages from going below a certain level set by the government. The Government hope that such a move will help alleviate the income and also ease the burden  of the lower income group.

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Economics

Monday, October 29, 2012

Measuring GDP, Economics of Assumptions and Investing in an Uncertain World / Economics / Economic Theory

By: John_Mauldin

Diamond Rated - Best Financial Markets Analysis Article“As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.” – Albert Einstein

“To trace something unknown back to something known is alleviating, soothing, gratifying and gives moreover a feeling of power. Danger, disquiet, anxiety attend the unknown – the first instinct is to eliminate these distressing states. First principle: any explanation is better than none… The cause-creating drive is thus conditioned and excited by the feeling of fear …"– Friedrich Nietzsche

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Economics

Friday, October 26, 2012

A New Model for Capitalism - How to Spark an Economic Boom Without Increasing Debt / Economics / Economic Theory

By: Nadeem_Walayat

Best Financial Markets Analysis ArticleThe UK and US economies are stagnating whilst much of the euro-zone economies are in the grips of an economic death spiral of ever greater economic austerity in response to ever increasing debt to GDP ratios as economies contract.

The solution as far as the west is concerned has been one of printing money (electronically) to monetize government debt via the bailed out banks which is highly inflationary as the money printing is not backed by any real economic activity and hence continues to drive an exponential inflation mega-trend resulting in real terms loss of purchasing power for all workers and savers.

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Economics

Tuesday, October 23, 2012

Why Estonia Is Beating the Eurozone Economy / Economics / Economic Theory

By: Frank_Shostak

Best Financial Markets Analysis ArticleAgainst the background of a severe economic crisis in the eurozone, one is surprised to find a member of the euro area that is actually showing good economic performance. This member is Estonia. In terms of so-called real gross domestic product (GDP) the average yearly rate of growth in Estonia stood at 8.4 percent in 2011 against overall eurozone performance of 1.5 percent. So far in 2012 the average yearly growth stood at 2.8 percent in Estonia versus -0.2 percent in the eurozone.

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Economics

Saturday, October 20, 2012

The Growth Recession, Can the Fed Create Demand? / Economics / Economic Theory

By: John_Mauldin

Diamond Rated - Best Financial Markets Analysis ArticleThe Hoisington Quarterly Review and Outlook is one of the cornerstones of my reading on where the economy is headed. Van Hoisington and Lacy Hunt do a masterful job of turning data points into cogent, well-argued themes.

This month they waste no time in dissecting the Fed’s recent move to QE3 and similar efforts in Europe, arriving at the conclusion that “While prices for risk assets have improved, governments have not been able to address underlying debt imbalances. Thus, nothing suggests that these latest actions do anything to change the extreme over-indebtedness of major global economies.”

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Politics

Friday, October 19, 2012

Another Numerologist Gets Nobel Economics Prize / Politics / Economic Theory

By: Ed_Bugos

Best Financial Markets Analysis ArticleWitness the latest economist to win the Nobel Prize from the Swedes, who I’m certain lead the world in economic nonsense, for allegedly solving the unsolvable knowledge and calculation problems of central planners.

Huh?

Rather than explaining all that is wrong in their problem solving, in the interest of brevity let me just ask: did you mean you didn’t know Ludwig von Mises showed that this kind of thing was impossible almost 100 years ago?

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Economics

Wednesday, October 10, 2012

Counterproductive Minimum Wage Mandates / Economics / Economic Theory

By: BATR

Best Financial Markets Analysis Article

Working for wages has never been the path for significant wealth. Most people are not equipped nor do they have the inclination to be engaged in business endeavors that will earn them a viable living. The reluctance that most workers bring to their occupation stems from their inability or unwillingness of properly understanding the related components that are essential in creating wealth. While many view work as a curse, the indispensable reconciliation for a practical and tolerable acceptance of universal plight is that no one is owed a living.

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Economics

Wednesday, October 03, 2012

What Parenting Teaches us About Economics / Economics / Economic Theory

By: William_Bancroft

Best Financial Markets Analysis ArticleRecent BBC documentaries on the great economists have created quite a buzz in the UK. No doubt the shows are proving popular on the BBC’s international channels too. The sorry state of the global economy and withered trust in economics today prompts another look at the giants of this social science. The usual names are re-examined, including John Maynard Keynes and Friedrich Hayek.

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