Author: s4k

As expected, no rate hike. Full statement below.

Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Gains in employment, household spending, and business fixed investment have been solid, and the unemployment rate has stayed low. On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2 percent. Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12‑month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/4 to 1‑1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Voting for the FOMC monetary policy action were Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Jerome H. Powell; Randal K. Quarles; and John C. Williams.

Personnel saving rates have plunged to more than a decade lower. It is not to far away from making an all time low, since accurate records have been kept anyway. This is a product of federal reserve policy over the last few decades. Pushing interest rates down discourages savings and encourages borrowing. Capitalism needs capital.

Visualizing the Venezuela disaster in one chart.

Housing continues its relentless climb into space. I don’t believe this is going to end this year.

Natural Gas is popping out of its 5 year minimum range.

I do not recall this happening in a very long time. Natural Gas is one of the few commodities that sits around the “How can it go any lower” band. We are sitting on a nice profit with natural gas from the last trade. Below is the buy zone.

The only issue, as mentioned before, is the cost of rolling the contracts from month to month. A post will follow on when it’s time to buy.

Crude oil production: Saudi Arabia vs USA

As a follow up to the last post on entrepreneurship and being in the minority is the story of Jack Ma. He was in a room surrounded by people when he told them about his idea. They told him it was a stupid idea. They told him he knows nothing about the internet. They told him he knows nothing about computers or programming.

Israel Kirzner contribution to economics was pointing out the entrepreneur sees an opportunity. More than that he acts on it. I consider the part of acting the most important. He draws a line between the capitalist, the man who has the money, and the entrepreneur, the man who sees an opportunity. You don’t need money to make money.

Due to the success of science in the 1800’s, people began to use the scientific method in their study of social sciences, such as economics. They construct hypotheses, go through history to gather data, and from this data they make conclusions and laws. I call this methodology malpractice. Milton Friedman was guilty of methodology malpractice. Friedman’s work, “A Monetary History of the United States”, displays this. While I find these types of works interesting, to make theories from historical data in social science is absurd.
Economics is the study of human action. Physics can tell us with precision where a cannonball will land if it launched at 45 degrees, with a velocity of 10m/s. Humans are not rocks or intimate objects. Individuals react very different to stimuli. A particular individual might react to the same stimuli different one year from now. The movie “The Matrix” points this out.

Let us say the money supply doubled in a particular ten year period in history and price inflation was 5%. Put aside the issue of the definition of money supply and inflation and how it is measured. There is no way it could be said the same thing will happen in the future. This historical information only tells us about a particular period of time. No laws can be deduced from this statistic.
Laws in social science are found by deductive logic, not be empirical data.
An entire field of economics called econometrics has been developed. It is taught in all classrooms. The Federal Reserve, other central bankers, governments, investment firms, etc. use this as a means of quantitative analysis. Econometrics contributes nothing to the study of economics. It is all nonsense.
One of Hayek’s greatest works was “The Counter Revolution of Science”. The entire book is dedicated to attacking scientism. Below, is what I consider, his most profound statements in the whole book.

Nothing is more instructive than to compare the nature of these statistical wholes, to which the same word “collective” is sometimes also applied, with that of the wholes or collectives with which we have to deal in the theoretical social sciences. The statistical study is concerned with the attributes of individuals, though not with attributes of particular individuals, but with attributes of which we know only that they are possessed by a certain quantitatively determined proportion of all the individuals in our “collective” or “population.” In order that any collection of individuals should form a true statistical collective it is even necessary that the attributes of the individuals whose frequency distribution we study should not be systematically connected or, at least, that in our selection of the individuals which form the “collective” we are not guided by any knowledge of such a connection. The “collectives” of statistics, on which we study the regularities produced by the “law of large numbers,” are thus emphatically not wholes in the sense in which we describe social structures as wholes. This is best seen from the fact that the properties of the “collectives” with statistics studies must remain unaffected if from the total of elements we select at random a certain part. Far from dealing with structures of relationships, statistics deliberately and systematically disregard the relationships between the individual elements. It is, to repeat, concerned with the properties of the elements of the “collective,” though not with the properties of particular elements, but with the frequency with which elements with certain properties occur among the total. And, what is more, it assumes that these properties are not systematically connected with the different ways in which the elements are related to each other.
The consequence of this is that in the statistical study of social phenomena the structures with which the theoretical social sciences are concerned actually disappear. Statistics may supply us with very interesting and important information about what is the raw material from which we have to reproduce these structures, but it can tell us nothing about these structures themselves. In some field this is immediately obvious as soon as it is stated. That the statistics of words can tell us nothing about the structure of a language will hardly be denied. But although the contrary is sometimes suggested, the same holds no less true of other systematically connected wholes such as, e.g., the price system. No statistical information about the elements can explain to us the properties of the connected wholes. Statistics could produce knowledge of the properties of the wholes only if it had information about statistical collectives the elements of which were wholes, i.e., if we had statistical information about the properties of many languages, many price systems, etc. But, quite apart from the practical limitations imposed on us by the limited number of instances which are known to us, there is an even more serious obstacle to the statistical study of these wholes: the fact which we have already discussed, that these wholes and their properties are not given to our observation but can only be formed or composed by us from their parts.
What we have said applies, however, by no means to all that goes by the name of statistics in the social sciences. Much that is thus described is not statistics in the strict modern sense of the term; it does not deal with mass phenomena at all, but is called statistics only in the older, wider sense of the word in which it is used for any descriptive information about the State or society. Though the term will to-day be used only where the descriptive data are of quantitative nature, this should not lead us to confuse it with the science of statistics in the narrower sense. Most of the economic statistics which we ordinarily meet, such as trade statistics, figures about price changes, and most “time series,” or statistics of the “national income,” are not data to which the technique appropriate to the investigation of mass phenomena can be applied. They are just “measurements” and frequently measurements of the type already discussed at the end of Section V above. If they refer to significant phenomena they may be very interesting as information about the conditions existing at a particular moment. But unlike statistics proper, which may indeed help us to discover important regularities in the social world (though regularities of an entirely different order from those with which the theoretical sciences of society deal), there is no reason to expect that these measurements will ever reveal anything to us which is of significance beyond the particular place and time at which they have been made. That they cannot produce generalizations does, of course, not mean that they may not be useful, even very useful; they will often provide us with the data to which our theoretical generalizations must be applied to be of any practical use. They are an instance of the historical information about a particular situation….