Tag Archives: Ron Paul

Paul vs. Paul Debate


www.valuewalk.com is a recommended blog. Several readers kindly sent me links to the Ron Paul vs. Paul Krugman debate.  I am biased toward Ron Paul, but for the life of me I could not understand what Krugman was saying. Perhaps using reason will not convince a religious fanatic.

I stopped reading half way through the discussion, because I knew Ron Paul’s positions but couldn’t understand the logic behind Krugman’s contrary position.  Do you? A few examples:

Krugman’s response to Ron Paul:

You can’t leave the government out of monetary policy. If you think we’re going to let it set itself, it doesn’t happen. If you think you can avoid the government from setting monetary policy, you’re living in the world that was 150 years ago. We have an economy in which money is not just green pieces of paper with faces of dead presidents on them. Money is a part of the financial system that includes a variety of assets – we’re not quite sure where the line between money and non-money is. It’s a continuum.”

What is he saying. Getting the government out of monetary policy would be like regressing? A fall into a primitive state?  Krugman makes an “Elephants can fly” assertion.

Has a monetary system worked without government control? Yes, in the brief period of a classical gold standard pre-WWI.  However, fractional reserve banking (ponzi finance) operated so, of course, booms and busts would not be eliminated. Another assertion without facts. Fiduciary media existed during the gold standard era.

“History tells us that in fact a completely unmanaged economy is subject to extreme volatility, subject to extreme downturns. I know this legend that some people like that the Great Depression was somehow caused by the government or the Federal Reserve, but that’s not true. The reality is it was a market economy run amok, which happens repeatedly…I’m a believer in capitalism. I want the market economy to be left as free as it can be, but there are limits. You do need the government to step in to stabilize. Depressions are a bad thing for capitalism and it’s the role of the government to make sure they don’t happen, or if they do happen, they don’t last too long.”

So let me try to understand……an unmanaged economy is subject to extreme volatility. But with the Fed operating since 1913, we have had the Great Depression, Inflation of the 1970s, Ultra high interest rates of the 1980s, credit crisis of 2007-2009, a managed economy (the FED cartelizing the fractional reserve banking system and suppressing interest rates) is LESS volatile? What amount of failed economic policies due to intervention would you need to say–this is a failure?

The Federal Reserve helped inflate the boom: http://library.mises.org/books/Murray%20N%20Rothbard/Americas%20Great%20Depression.pdf

Since the inception of the Federal Reserve System in 1913, the supply of money and bank credit in America has been totally in the control of the federal government, a control that has been further strengthened by the U.S. repudiating the domestic gold standard in 1933, as well as the gold standard behind the dollar in foreign transactions in 1968 and finally in 1971. With the gold standard abandoned, there is no necessity for the Federal Reserve or its controlled banks to redeem dollars in gold, and so the Fed may expand the supply of paper and bank dollars to its heart’s content. The more it does so, the more prices tend to accelerate upward, dislocating the economy and bringing impoverishment to those people whose incomes fall behind in the inflationary race.

The Austrian theory further shows that inflation is not the only unfortunate consequence of governmental expansion of the supply of money and credit. For this expansion distorts the structure of investment and production, causing excessive investment in unsound projects in the capital goods industries. This distortion is reflected in the well-known fact that, in every boom period, capital goods prices rise further than the prices of consumer goods.

See what Graham and Buffett had to say about booms and busts:A Study of Market History through Graham Babson Buffett and Others

Krugman seems neither to understand Austrian Business Cycle Theory nor economics (“ABCT”): http://mises.org/daily/4993 and http://mises.org/daily/3579

Krugman is constantly shifting arguments:http://mises.org/daily/5086

Krugman’s response:

“I want to say something about Milton Friedman here because if you actually read what he wrote in his writing for economists, as opposed to some of his loose popular writings, he actually said that the Federal Reserve was responsible for the Great Depression because it didn’t go enough. Friedman’s complaint was that the Federal Reserve did not print enough money. I know this. When Ben Bernanke was talking about the helicopter, he was taking that from Milton Friedman. That was really his idea. The state of the economic debate in America right now Milton Friedman would count on the far left of monetary policy.”

Milton Friedman was advocating for the government to intervene and prevent the market clearing. But why was a non-interventionist policy during the vicious 1920/21 depression so successful:http://www.youtube.com/watch?v=czcUmnsprQI. Both theory, common sense and empirical evidence expose Krugman’s and Friedman’s nonsense.

Here is a seven minute video that explains booms and busts: http://www.youtube.com/watch?v=d0nERTFo-Sk

If Value Investing Works, Why do Value Investors Underperform?

Value investing works, so why do value investors underperform? The evidence for activist value investors.

Visit the great blog www.greenbackd.com


The Research Paper is here:Do Value Investors Underperform

The author doesn’t know why value investors either under or outperform in my opinion.

The Paper’s Conclusion

Value investing comes in many stripes. First, there are the screeners, who we view as the direct descendants of the Ben Graham school of investing. They look for stocks that trade at low multiples of earnings, book value or revenues, and argue that these stocks can earn excess returns over long periods. It is not clear whether these excess returns are truly abnormal returns, rewards for having a long time horizon or just the appropriate rewards for risk that we have not adequately measured. Second, there are contrarian value investors, who take positions in companies that have done badly in terms of stock prices and/or have acquired reputations as poorly managed or run companies.

They are playing the expectations game, arguing that it is far easier for firms such as these to beat market expectations than firms that are viewed as successful firms. Finally, there are activist investors who take positions in undervalued and/or badly managed companies and by virtue of their holdings are able to force changes in corporate policy or management that unlock this value. What, if anything, ties all of these different strands of value investing together? In all of its forms, the common theme of value investing is that firms that are out of favor with the market, either because of their own performance or because the sector that they are in is in trouble, can be good investments.

What inspired Ron Paul: Mises Lecture on Socialism

http://bastiat.mises.org/2012/04/audio-of-the-mises-lecture-that-inspired-ron-paul/  Amazing audio lecture on why and how Socialism has to fail economically (no ability to use prices and thus allocate resources efficiently)

What is Money? A Three Part Series of Video Lectures

We have the best government that money can buy. –Mark Twain
Three excellent videos on money–highly recommended for learning.

Part 1: What is Money by Joe Salerno:


Part 2: What is constitutional money by Dr. Viera:


Mr. Viera says, “We have an irredeemable paper (electronic) currency coming out of a private banking cartel for which the American people are on the hook for some type of bailout. Of course, the banking cartel will always go to the public and say we made terrible mistakes–that if you don’t bail us out, the result will be total collapse. And by the way, next time will be worse. This cycle just perpetuates until the end—a hyperinflationary collapse of 50% monthly depreciation of the U.S. dollar. Ugly.

A summary of Viera’s book, Pieces of Eight on Constutional Money: http://mises.org/books/rozeff_us_constitution_and_money.pdf

An alternative to disaster? Rid the nation of legal tender laws and let states use different monies. Move away from the fiat dollar.

Part 3: What is it about Money that Causes Financial crisis by PEter Schiff


Update on VALUE VAULT; Questions from a Reader; Apple and Strategic Logic

A lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.

A lot of people in our industry haven’t had very diverse experiences. So they don’t have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one’s understanding of the human experience, the better design we will have.

Again, you can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

An iPod, a phone, an internet mobile communicator… these are NOT three separate devices! And we are calling it iPhone! Today Apple is going to reinvent the phone. And here it is.

And it comes from saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too much. We’re always thinking about new markets we could enter, but it’s only by saying no that you can concentrate on the things that are really important.
–Steve Jobs

Update on the VALUE VAULT

(contact: Aldridge56@aol.com with VALUE VAULT in subject line for the key)

I uploaded 21 videos of 2010 value investing lectures into a sub-folder in the VALUE VAULT.  The VAULT seems cluttered so unless anyone objects, I will place non-videos into folders with sub-categories for easier searching. I will choose a quiet time to work on the vault—probably Sunday.

If you are having trouble opening the folder, please contact www.yousendit.com customer service at 888-535-9442 or (outside the USA) 1-408-385-8491 and email me if the problem has or hasn’t been fixed.  I will #$%^&*! find out the problem. I am having no issues accessing the folder or videos so far.

If anyone has an idea for a more accessible storage option, let me know.

Question from a Reader

I’ve just started digging into the Competition Demystified PDF (in VALUE VAULT) and came across this passage (also mentioned in the “Strategy is Local” PDF) and couldn’t help but wonder what’s changed:

“Apple’s experience stands in stark contrast. From the start, Apple took a more global approach than Microsoft. It was both a computer manufacturer and a software producer. Its Macintosh operating system anticipated the attractive features of Windows by many years— “Windows 5 = Macintosh 87,” as the saying goes. Yet its comprehensive product strategy has been at best a limited and occasional success, especially when compared to Microsoft’s more focused approach.”

This strategy of controlling everything (operating system, hardware, software licenses/developers, content delivery, etc.) is, according to Greenwald, a competitive liability, yet today, as Apple is the most valuable company in the world and the most successful tech company, it is the very reason given for their massive success, and the “special genius” of the recently departed Jobs.

What gives? Is Apple just a fad? Is Greenwald making stuff up? Or is there some other piece of this puzzle I am not considering?

The Reader follows up with: “I thought of another strategic element for Apple. I read this somewhere a few months ago, don’t remember where, but Apple basically made exclusive contracts with its various suppliers such that they guaranteed them large volume up front in return for them not taking orders from competitors, essentially (some arrangement like that).

This resulted in two things:

First, conferred a competitive advantage in supply to Apple because they were able to achieve lowest cost in production.

Second, accomplished the strategic goal of totally denying their competitors access to suppliers of similar quality/cost. This meant that the only way a competitor could create something of Apple quality would be to pay (and charge) a lot more for it. But Apple commanded a brand premium in the market place while the competitors did not. This would be a good example of the Jarillo principle of the premium company charging less than they could, forcing competitors who don’t command a premium to price near cost.

I think normally the issue of “what suppliers do we use and how do we contract with them?” would be tactical. But because Apple interfered with their competitors’ ability to compete by working with suppliers the way they did, this seems to be a strategic consideration as well.

My reply: Like a lecturer before an audience, I was hoping no one would notice that my fly was unzipped. The reader is mentioning the elephant in the room–did Steve Jobs read Prof. Greenwald’s Competition Demystified and just do the opposite–Apple has a closed system for hardware and software. Has Apple been successful?

There are a number of possible answers:

  1. Prof. Greenwald has missed something in his approach to strategy.
  2. Apple may be using elements of strategic logic to be successful like economies of scale, customer captivity, network effect, and patents.
  3. Steve Jobs may be a genius who invented an industry or product beyond the immediate scope of strategic analysis. In other words, you can’t analyze the reasons for success of someone who invents the cure for cancer or a process that turns an element into a resource. You can’t predict genius.

Who said strategic thinking would be easy. Let’s take our time to look at a problem from all sides and go through our strategic logic process. We will soon discuss the Coors case study and then move on to Chapter 6: Compaq and Apple in the Personal Computer Industry or pages 113-136 in the book. Once we have finished the book and all the cases, let’s circle back and study Apple’s current success.

One question that should slap you in the face, “Why does Apple have such a low multiple of earnings and cash flow?” Perhaps the market does not believe that Apple can have real growth and/or the genius of Steve Jobs will no longer drive Apple’s future.

Should the government tell you how to live?

Freedom of choice: http://www.youtube.com/watch?v=A6a9549ZeqQ&feature=g-vrec&context=G22064f2RVAAAAAAAABA

Personal Prejudices

We all have our prejudices. Here is how to deal with them.

Prejudice: http://www.youtube.com/watch?NR=1&feature=endscreen&v=9aVUoy9r0CM

Sensitivity Training: http://www.youtube.com/watch?v=iliNaspGVDg&feature=related

More posts to follow…………