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Credit Card Question

What motives may Citi-Bank have for badly wanting to herd me into changing my run-of-the-mill Citi Platinum Select Card into some kind of super duper Rewards card with a new account number? Read more »

The Prescription for Prosperity

Embedded in a recent Lew Rockwell speech is a pretty credible prescription for economic prosperity. Read more »

Healthcare Questions

Within the last two weeks, I've had the following healthcare related experiences :

1. Got a non-emergency appointment to see my HMO Primary Care Physician at 8:30AM for 2:10PM on the same day

2. Had the remnants of a split root canal tooth extracted the afternoon of the day I called the dentist.

3. Had a low priority open MRI head scan scheduled and done eight days after asking for an appointment. This was supposedly a longer than normal delay and the private MRI facility no longer needed 24 hour scheduling to meet demand.

Question #1 :

Based only on the above, am I more likely to live in Toronto or Boston?

Question #2 :

Upon leaving the MRI facility, I was given a CD that included both head images and a viewer for use on a PC. As a lay person, what interesting use can I make of this besides proving that vacuum has a texture? Although my PCP will receive an independent report, has anyone published 'MRI Scan Analysis for Dummies'?

Addendum below : Read more »

Austrian Economics Puzzle

Hammering the Pieces Into Place

In a previous post, The World's Hardest Austrian Economics Puzzle , based on the pdf paper entitled: On The Optimum Quantity of Money by William Barnett II and Walter Block, the question was posed as to whether a gold standard society would benefit more, or at all, from an exclusive infusion of an increase in monetary gold or non-monetary gold.

As the paper notes, it has been an accepted belief of Austrian Economics that Society does not realize a benefit from a larger money supply, nor does it suffer from a smaller one. While the issues involved in this question often seem to be almost endless in both their quantity and complexity, this puzzle only attempts to deal with the specific benefit(s) that the paper proposes as benefits to society from an increase in monetary gold. Read more »

The World\'s Hardest Austrian Economics Puzzle

Candidate #1, Version 0

This puzzle has to do with the benefits, if any, to society from an increase in the supply of money in a gold standard economy.

The background for this puzzle is to be found in the following pdf paper :

On The Optimum Quantity of Money by William Barnett II and Walter Block.

However, some of the contents may need to be qualified or revised and extended before being applied to this problem.

Problem Statement : Read more »

Challenge, Prove or Disprove

Historical Equity Premium of Stocks over Bonds

I hypothesize that at least 50% of the historical real total return premium of stocks over bonds since 1933 is due to the actions of the Fed in driving monetary supply inflation and alternately supressing and boosting interest rates. It is certain that stocks and bonds will not be equally sensitive to Fed actions over both the long and short term. I suspect that some potential reader will be especially qualified to prove or disprove this hypothesis through simulation.

The basis for this hypothesis is that once purchased, a bond has no means for combatting price inflation, while stocks can partially capture an inflationary trend by buying production factors earlier and cheaper and selling finished products later and dearer. Also, stocks will be artificially inflated in value at times when the Fed is supressing interest rates, and the discount rate for valuing future free cash flows is low. Read more »

Social Security, Simplified

It is a source of endless frustration to see otherwise intelligent and competent commentators of all varieties continue to make the kinds of confused statements about SS that have no basis in reality.

Much of the confusion can be eliminated if we can isolate the part of SS which depends on predictions of an uncertain economic future and that which depends on the structures and formulas of the present and future mandates set by law.

Without any prediction about the future path of the economy, the following things are unequivocally true : Read more »

Stock Valuation

Following up on this post , a modification is offered to the traditional linking of fundamental stock values and anticipated dividend streams. Read more »

Dividends and Equity Returns, Past and Future

When the historical total returns on stocks are referenced, for example, when thinking about the future of possible personal accounts associated with Social Security, the total return is typically described as being the sum of dividends and capital gains. These two components are then often treated as independent variables and hypothetical scenarios are produced that predict higher future dividend payouts in response to retirees' preference for spendable income. It appears that there is some belief that higher future dividends mean that higher future rates of return are more credible. Read more »

How the SS Trust Fund is Like an Auto Lease

Imagine that you have leased an automobile for 36 months at $300 per month.

When you reach the end of the lease and make the 36th payment, is this a welcome event or an unwelcome event?

Answer - Some of both.

The good news is that you now have an increase in free cash flow of $300 per month.

The bad news is that you no longer have the services of the leased automobile.

If you have the option to simply continue the $300 payments and the use of the automobile on a month to month basis, would you choose to do so? Read more »

The Hedonic Pricing of Computers, Use and Misuse

So-called 'hedonic pricing' is used in an attempt to adjust the prices used in statistical studies for variations in the quality and characteristics of specific products for the purpose of calculating price inflation, and national GDP and Productivity growth.

Many believe that the inappropriate hedonic pricing of computers, especially in the latter half of the 1990's, has resulted in a substantial understatement of price inflation and also a substantial overstatement of the growth rates of both national GDP and Productivity. Read more »

<i>The Power of Productivity</i> by William W. Lewis

This 1994 book, subtitled "Wealth, Poverty, and the Threat to Global Stability", surprisingly turns out to be very interesting and entertaining reading, in addition to its substantive content.

This Amazon link can used to see what the book is about, so I'll restrict myself to quoting one of its many rather amazing findings. Read more »

A $7.7 Trillion National Debt?

When someone claims that the US has a $7.7 trillion national debt, this claim can be backed up by sites such as this.

What we see is that the Gross National Debt of $7.7 trillion is made up of $4.5 trillion in debt held by the public and about $3.2 trillion in debt held by the government, mostly in various Trust Funds, with $1.7 trillion of that held by the Social Security Trust Fund, in particular. Read more »

Will Personal SS Accounts Depress Equity Returns?

Opponents of personal accounts often claim that allowing a portion of SS taxes to be invested in the stock market will be at least in part self-defeating in that the extra investments in stocks will reduce the rate of return from stocks going forward. The idea is that prices will quickly appreciate to a relatively large degree, meaning that investments at higher prices in the second and following years will see less and less potential future appreciation. Read more »

Assuring the Solvency of Social Security for Free

One possible definition of solvency with respect to Social Security is that, for all future years, the contents of the Social Security Trust Fund, largely special non-marketable government bonds, do not become exhausted as they are redeemed by the Treasury to make up a yearly shortfall in the ability of payroll taxes to make the social security payments required by law. Under current conditions, redemption is expected to start in about 2018.

Presently, the special government bonds earn an interest rate of about 6% which is also paid by the Treasury. Read more »