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Intervene or not intervene? The eternal struggle between Keynes and Mises / Hayek

July 27, 2020

In business, politics and love, we all create ourselves as experts. So suddenly we haven’t made much progress in these areas. While the real experts constantly question and rethink their ideas, the caffeine “experts” confirm assumptions with an iron will. The British economist John Maynard Keynes died in 1946. The Austrian Ludwig von Mises died in 1973. And the Austrian Friedrich von Hayek also died in 1992.

Politicians are bad economists and worse thinkers. The ignorant become dogmatic because of their few lights. The stubborn investor with the big debates of economic thinking and macroeconomic predictions is a simple novice. So or clearer? It is therefore not uncommon for crypto-millennials to revive the old debate between so-called “Austrians” and so-called “Keynesians”. But good, This debate is as absurd as the debate between socialism and capitalism. Nobody learns. Nobody wins. Nobody loses. Nobody develops. Everyone is upset and has a bitter taste in the mouth. They are sterile fights and sons.

All of these debates are emotional. Hence subjective. They have more to do with the politics of the moment and the humor in the environment than just with economic aspects. Here there is error and semantic ambiguity. This man’s debate is a false dilemma. The healthiest thing is to overcome it. Turn the page.

Intervene or not intervene? The eternal struggle between Keynes and Mises / HayekIntervene or not intervene? The eternal struggle between Keynes and Mises / Hayek

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Jerome Powell, a man at the head of the Federal Reserve, has only two missions: Stability and employment. That is his job and that is what politicians and the public want him to do. How do you do that now Is it Keynesian? Are you Austrian? Well, Powell currently has too much weight on his shoulders to waste time on coffee house debates. Powell has no choice but to be pragmatic. In other words, use all the tools at your disposal to complete your missions. And if he doesn’t do it right, Congress cuts his feet and he loses his job. There is no debate. There is technology.

Two things: the inflation rate and the unemployment rate. The strategy is to use all the mechanisms in your hands to reach the magic numbers. The goal is an annual inflation rate of 2-3%, full employment and good or excellent economic growth. It is therefore a matter of constantly measuring the relevant variables and implementing the corresponding measures step by step. It is measured, measurements are carried out, it is measured again and the measurements are reset. In other words, Tango is danced to the rhythm of music on the street of pragmatism.

This is the strategy by consensus. Business people, politicians from both parties and the general public support this. Academic economists typically conduct descriptive and technical diagnoses and studies. But whether you like it or not, the measures taken were generally supported in the 2018 crisis and this crisis. Resentment and allegations arise from abuse, inequality, corporate privileges, etc., not from inflation or intervention itself.

Libertarians, anarcho-capitalists and ultra-conservatives reject intervention measures, but not so much because of their economic impact. Nor do they do so in the name of inequality or social justice. It’s more of a political problem. It is about the deep rejection by the Americans of the idea of ​​the great government. The cult of the individual. Free market idolatry. Individual responsibility. These are very gringo values. And these values ​​were very important to the success of the United States as a country. N.or there are doubts. But passions always overflow and some go to the extreme. Radical positions are taken more out of anger and dissatisfaction with the “establishment” than in a good sense.

If we leave the cafeteria now and leave politics for a moment, we will see that all these discussions will not bring any food to our table. From an investor’s perspective, all of these discussions are a waste of time. When we listen to these pages, we divert the struggle from what’s important. In fact, they can confuse us in the midst of so much noise and bias. The smart investor doesn’t wake up and think about macro issues. Crises come and go. The essential thing is to continue jogging, raining or shining. Marathons are not for grumblers. Neither Keynes, Mises, nor Hayek will send you money. You have to work to eat.

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What an investor has to think is not the one who is right in the debate between Keynes and the Austrians. That’s a waste of time. Our energy must be to find assets that are currently undervalued, but which have great growth potential in the future. Macroeconomics are like climate. There is too much complexity and uncertainty to make decisions based on it. We have to focus on what we can control. That means what we buy, what we sell and what we store. If an asset is undervalued based on our valuation, we buy it. And when an asset is overvalued, we sell it. We wait the rest of the time.

Invest or not invest? That itself is worth a debate. And the answer is simple. So it’s the short debate. It takes two seconds. The solution is to invest. No doubt.

Well, all this worry about the dollar weakening. I mean: The government’s interventionist and irresponsible policies with all of these (excessive) impulses will ultimately weaken the dollar and destroy it with our savings. Okay. It’s okay. And what idiot has savings today? “”Cash is rubbish“” Here and in Beijing. First, the Americans have no savings. The poor have no savings. The middle class has no savings. And the rich have no savings. The rich have property, assets, etc. That is, investments. Yes, there is a lot of debt. However, devaluing the currency is a blessing for a debtor as the debt becomes cheaper. The debtor wins and the creditor loses.

Inflation is controlled fiscal and monetary policy. And deflation the same. The cycles come and go. The measures will be adjusted in favor of price stability. In the midst of a deep deflationary crisis like the current one Frankly, it’s absurd to “inflation!” from the heart. Why? Well, because there is no inflation. The rate tells you. It’s ridiculous to report something that doesn’t exist. Once inflation rises, Friend Powell will take corrective action. Measurement, adjustment, measurement, new adjustment. This is how it works. It is not quantum physics.

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Now the champions of frugality in the style of grumpy old men. The money is on Wall Street, baby. Not under the mattress on bills. Apart from the fact that no one has big savings, that the dollar is primarily a unit of account and a medium of exchange, and that the investor protects his assets with more than three fingers, there is a somewhat absurd element of all of this. It’s like the subject that throws stones at the Spanish message for the colonial crimes of the empire. They are not new crimes, but the subject has just found out and is upset. To report that the dollar is a poor store of value is like regretting that the New York Yankees won’t stand a chance at the next World Cup. Paco, don’t talk anymore. They just don’t know anything about sports. You make a fool of yourself.

If you don’t like the dollar as an investment, it is because the dollar is not a good investment. Here and in Beijing. Before Bitcoin and after Bitcoin. Now and 100 years ago. In crisis and boom. Cash is rubbish. If you already have your money in assets (like Bitcoin), then why should you keep complaining about the dollar? It’s like hanging out with the prettiest girl in school and spending the whole evening talking badly about her ex-boyfriend. To deceive! Now I’m going on. If there is no inflation and the stimulus increases asset prices (including Bitcoin), Why am I so sorry when the money is already invested and things are on the rise? I think it’s time for Keynes, Mises and Hayek to have their eternal peace. Down with the dogmas! Up Bitcoin!

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