Shostak invokes Hazlitt

Frank Shostack invokes Henry Hazlitt in his Mises Daily today:

Increases in the money supply set in motion an exchange of nothing for something. They divert real funding away from wealth generators toward the holders of the newly created money. This, not price rises as such, is what sets in motion the misallocation of resources. Moreover, the beneficiaries of the newly created money — i.e., money created "out of thin air" — are always the first recipients of money, who can divert a greater portion of wealth to themselves. Obviously, those who either don't receive any of the newly created money or get it last will find that what is left for them is a diminished portion of the real pool of funding.

Furthermore, real incomes fall, not because of general rises in prices, but because of increases in money supply; in other words, inflation depletes the real pool of funding, thereby undermining the production of real wealth — i.e., lowering real incomes. General increases in prices, which follow increases in money supply, only point to the erosion of money's purchasing power — although general rises in prices by themselves do not undermine the formation of real wealth as such.

When money is injected into the economy, it never affects the prices of goods instantly. Because money moves from one market to another market there is a time lag. We have estimated that in the United States it takes about 36 months before changes in money supply generate a visible effect on the prices of goods in general. It must be emphasized that the lags are variable, i.e., in some periods the time lag could be less than 36 months, in some other times it could be more than 36 months.

Hazlitt made the same argument in Economics in One Lesson, but it is good of Shostack to bring it up when the prospect of inflation is just over the horizon.

Did You Know that the military has been using psy-ops on influential senators?

Rolling Stone reports:

The orders came from the command of Lt. Gen. William Caldwell, a three-star general in charge of training Afghan troops – the linchpin of U.S. strategy in the war. Over a four-month period last year, a military cell devoted to what is known as "information operations" at Camp Eggers in Kabul was repeatedly pressured to target visiting senators and other VIPs who met with Caldwell. When the unit resisted the order, arguing that it violated U.S. laws prohibiting the use of propaganda against American citizens, it was subjected to a campaign of retaliation.

Those singled out in the campaign, according to RS, included senators John McCain, Joe Lieberman, Jack Reed, Al Franken and Carl Levin; Rep. Steve Israel of the House Appropriations Committee; Adm. Mike Mullen of the Joint Chiefs of Staff; the Czech ambassador to Afghanistan; the German interior minister, and a host of influential think-tank analysts.

And the military industrial complex continues....

If you thought that was bad check this out from Zerohedge:

Socialism Gone Apeshit: Obama Wants To Use Proceeds From $20 Billion Fraudclosure Settlement To Reduce Underwater Mortgages

According to the WSJ: "The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America's largest banks to pay for reductions in loan principal worth billions of dollars…

Under the administration's proposed settlement, banks would have to bear the cost of all writedowns rather than passing them on to other investors.

And the worst case: the 10 million or whatever underwater mortgages will get an average reduction of $2000 each.

Nothing like buying votes on the backs of the big banks that funded his election to begin with.  And Obama said he was above politics.

I will end on a more humorous note.  From the always hilarious James Altucher:

I was standing right next to Steve Jobs in 1989 and it was the closest thing I ever felt to being gay. The guy was incredibly wealthy, good looking enough to get any girl, a nerd super-rockstar who had just convinced my school to buy a bunch of NeXT machines (which, btw, were in fact the best machines to program on at the time) and I just wanted to be him.