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Thursday, October 6, 2022


Hayek vs. Keynes – An Economic Smackdown

In yesterday’s morning post I made the anti-Keynesian comment:

Ordinarily I wouldn’t care if a new bunch of suckers gets fleeced buying shiny bits of metal and gooey liquids but the rising commodity prices suck capital away from the entire rest of the planet and that damages the global economy.

The World did not suddenly fall apart last week, we are only finally dealing with the myriad of problems that have been swept under the rug during 2009 as the market mindlessly ran up 30% off our June/July consolidation without a significant break.  Could things really have been that good?  Of course not, it was silly.  Actually it was reckless and stupid and, ultimately, damaging because, as I said in my 2010 Outlook, it causes a MIS allocation of capital away from new companies and sectors that can thrive and create jobs – instead plowing money into the same idiotic commodity investments that popped just 18 months ago.

Now ordinarily I don’t want to get into long drawn-out academic discussions of various economic philosophies in my morning posts (that’s what weekend posts are for!) but who knew the whole thing could be set to music?  Well, Zero Hedge did and I thank them for posting up this video, which I hope does a little to bring attention to poor Hayek who, although well honored himself, had to endure a 93-year life where everyone knew what "Keynesian" meant and everyone thought Hayek was "that hot Mexican actress."   

Freidrich (as opposed to Salma) Hayek belived that the central role of the state was to maintain the rule of law, with as little arbitrary intervention as possible and that interventionist policies caused dangerous mis-allocations of capital that were damaging to the system.   In The Use of Knowledge in Society (1945), Hayek argued that the price mechanism serves to share and synchronize local and personal knowledge, allowing society’s members to achieve diverse, complicated ends through a principle of spontaneous self-organization. He used the term catallaxy to describe a "self-organizing system of voluntary co-operation." 

Although both Thatcher and Reagan based much of their econonomic policies on his work in the 80s, Hayek himself laid out the case for "Why I AM Not A Conservative."  He’s a complicated guy – I like that…



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Phil –
Thanks for your patience on the dia covers – much appreciated – trading in a faster moving market it certainly more compicated for the newbie than just rolling them up and watching them go down in value – more fun too! 
BNI – I know you were not a big fan of holding this through the full takeover but with Berkshire – B getting added to S&P, those 95 puts on BNI are going to be even further out of the money – i don’t need the margin so its enticing to hold – would not mind being put the Berkshire B
Your AAPL 185 / 235 bull spread seems like it might pay for my full years subscription – not counting chickens or anything.

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