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Published by: richardck61 on Oct 31, 2012
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01/10/2014

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CURRENCY 
 
CURRENTS
 
A free global-macro & market newsletter
 
Wednesday 31 October 2012Quotable
But how is this legal plunder to be identified? Quite simply. See if the law takes fromsome persons what belongs to them and gives it to other persons to whom it does notbelong. See if the law benefits one citizen at the expense of another by doing what thecitizen himself cannot do without committing a crime.
 Frederic Bastiat,
The Law
Commentary & AnalysisWishing there were another economically devastating hurricane to follow Sandy ...
Sandy, you
’ 
re a fine girlWhat an economic boon you would be If my life, my love, and savings weren
’t at 
the bottom of the sea Dooda-dit-dooda, Dit-dooda-dit-dooda-dit 
We at BLACKSWAN have decided to hose down the fine art and walls of our office andthrow our computers through our windows. Sound stupid? Nope, it
s genius ... if you think about the money we
’ll be pumping into the local economy to have our office gutted
andrebuilt and our durable goods replaced.And that is why, during this uncertain economic recovery in the US, we should be thankingGod for Sandy.You know
 – 
Sandy, the storm that is expected to cost East coast businesses $20 billion indamages and about the same amount in lost business activity. Sounds rough. But don
’t
forget the multiplier effect, boys and girls!Frank Holmes, the fearless leader of US Global Investors, uses the multiplier effect toestimate the economic boost from the storm to be about $100 billion worth of newspending and activity.If you
’re wondering who the heck Frank Holmes is, you
probably have plenty of company.But consider that PIMCO
s well-known Mohamed El-Erian agrees with Holmes in that thecosts of short-term destruction will be more than off-set over time.This begs the question: really?Our system of gauging growth in this country (and the rest of the world) is severely flawed.I have to believe the only way to accept the above analysis is because the growth-at-all-costs mentality has become so perverted. We have come to value spending and
 
Black Swan Capital’s Currency Currents
is strictly an informational publication and does not provide personalized or individualizedinvestment or trading advice. Commodity futures and forex trading involves substantial risk of loss and may not be suitable for you.The money you allocate to futures or forex trading should be money that you can afford to lose.
Please carefully read Black Swan’s full
disclaimer, which is available at http://www.blackswantrading.com/disclaimer
 
consumption as the virtue of an economy at the expense of savings, production ANDwealth creation.I mean, let
’s pretend Frederic Bastiat and the broken window fallacy never existed, right?
 Bastiat put forth the idea that money spent on fixing a broken window could now
not 
bespent by that
same
person elsewhere. Additionally, Bastiat emphasized the unintendedconsequences of such a destructive event, namely the assumption that the worker who ishired to fix the window actually benefits. And even if he does benefit, does society benefitto an extent at least equal to the value of the broken window?In other words, destruction for the sake of generating activity does not balance.If it did, why not hire men to destroy our roads so we can hire crews to repair them? Atsome point, it begins to amount to stealing value for the sake of generating spending andlabor. I
’m not sure about you, but
I think that
’s one of several
appropriate descriptions of acentral government.A big feature of Bastiat
’s analysis is the concept of finite resources. Critics of Bastiat point
to times when there is a slack in resources to justify employing destructive practices inorder to generate activity. Let
s call it
forcing a good investment.
 In fact, there is slack in a key resource
 – 
money. With that in mind, this Sandy may just bewhat the Feds ordered.The expectations of the multiplier advocates are that this need to rebuild will beget andincrease in the velocity of money. After all, a key feature of the on-again off-againeconomic recovery since the financial crisis has been a plunge in the velocity of money.(Perhaps that
s good, since it
’s kept some of the “
broken-window
inflation plot underwraps!)
 
Black Swan Capital’s Currency Currents
is strictly an informational publication and does not provide personalized or individualizedinvestment or trading advice. Commodity futures and forex trading involves substantial risk of loss and may not be suitable for you.The money you allocate to futures or forex trading should be money that you can afford to lose.
Please carefully read Black Swan’s full
disclaimer, which is available at http://www.blackswantrading.com/disclaimer
 
But all the extra money sitting idle is not in the bank accounts of small businesses andespecially not in the bank accounts of consumers who
’ve
spent much of the last four yearsdeleveraging.I propose we let the banks fund the rebuilding effort.After all, that
’s where all the Fed
-generated money has gone. Unfortunately, that
’ll never 
happen. What is hoped for is that consumers and businesses will help policymakers carryon their preferred model whereby everyone borrows from banks backstopped by an endlessmoney supply (i.e. taxpayers and central bank money printing.)In other words, policymakers want to see the demand for credit increase; they want to forcegood investments because they neglect the subjective theory of value. I guess it makessense since nothing holds value anymore when the money spigots are permanently openand savings don
t matter. If this perverted debt-based economic system can return to speed,then what harm will it be to destroy a little financial and moral wealth here and there?Let
’s just say, the real costs
go unseen ... for a while.All I can say is thank goodness Sandy spared the BLACKSWAN headquarters down herein South Florida.

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