But the question is, what does using this framework give you? Which falsifiable predictions flow out of it, predictions which are contested by mainstream economics? As you recall, Marx predicted how history will develop and he turned out to be wrong.
Your answers tend to follow the first iron law of the social sciences: “Sometimes it’s this way, and sometimes it’s that way.” and sure, the future is uncertain, but then why is the Marxist theory of value better than any other one?
I appreciate you giving a specific scenario for the world economy, but it looks entirely mainstream to me. I doubt you will have trouble finding conventional economists who will look at it and nod, saying “Yep, that’s very likely”. Though you might keep in mind that post-2008 the central banks around the world have dumped huge amounts of money into their economies, amounts that many if not most economists thought would trigger significant inflation. And… it didn’t happen. At all. So that “fear of depreciating paper currencies with respect to commodity-money” could be baseless. Or maybe not X-D—macroeconomics is really in disarray these days.
What does this framework give me? Well, I bet that I’ll be able to predict the onset of the next world economic crisis much better than either the perma-bear goldbugs of the Austrian school, the Keynesians who think that a little stimulus is all that’s ever needed to avoid a crisis, the monetarists, or any other economist. I can know when to stay invested in equities, and when to cash out and invest in gold, and when to cash out of gold and buy into equities for the next bull market, and so on and so on. I bet I can grow my investment over the next 20 years much better than the market average.
There are plenty of mainstream economists who will warn from time to time that there might be a recession approaching within the next few years. But what objective basis do they ever have for saying this? Aren’t they usually just trying to gauge fickle investor and consumer “animal spirits”? And how specific and actionable are any of their predictions, really? Can an investor use any of them to guide trades and still sleep well at night and not feel like a dupe who is following some random guru’s hunch?
To time the cycles, I do not need to rely on fickle estimations of consumer confidence or any unobservable psychology like that. There are specific objective numbers that I will be keeping an eye on in the coming years—indicators that are not mainstream, including Marxist authors’ estimations of the world average rate of profit, the annual world production of physical gold, and the annual world economic output as measured in gold ounces (important!). No mainstream economist that I know—even Austrian goldbugs—think that world gold production has a casual role in world economic cycles.
Yes, it does not surprise me that most economists were wrong about the expected inflation from quantitative easing. They could not foresee that most of this money would not enter circulation or act as a basis for additional multiples of credit creation on top of it that would enter circulation. They could not foresee that this QE money would sit inert for the time being as “excess reserves” due to central bank payment of interest on these excess reserves that was competitive with other attainable interest rates on the market. In reality, these excess reserves—so long as interest is paid on them—are not typical base money, but instead themselves function more like interest-bearing bonds. Heck, I didn’t even have to know anything about Marxism to anticipate that!
Now, here’s a concrete prediction: if the Federal Reserve were to decide to cease all payment of interest on excess reserves without also at the same time unwinding the QEs, leaving a permanently-swollen monetary base of token money that then has the incentive to be activated as the basis for many multiples of loans to be made on top of it—then you will see continued depreciation of the dollar with respect to gold.
Thankfully, though, I am not relegated to trying to mind-read what the Federal Reserve will do because my strategy of trading between equities and gold is only concerned with the relative prices between those two. I will come out ahead in real terms by correctly timing relative changes in their prices, regardless of whatever happens to their nominal dollar prices as a result of Federal Reserve shenanigans. And I would argue that, on average over the medium to long run, the Federal Reserves operations are neutral with respect to these relative prices. The Federal Reserve can change the nominal form of crises (whether they take the appearance of unemployment, dollar-inflation, or some intermediate admixture of the two like 1970s stagflation), but the Federal Reserve cannot actually influence the relative movements of equities and gold. If, thanks to incredibly dovish Federal Reserve policy in response to the onset of a crisis, equities continue to appreciate in dollar terms, gold will be appreciating even more.
Yes, that’s still classical Marxism, isn’t it?
But the question is, what does using this framework give you? Which falsifiable predictions flow out of it, predictions which are contested by mainstream economics? As you recall, Marx predicted how history will develop and he turned out to be wrong.
Your answers tend to follow the first iron law of the social sciences: “Sometimes it’s this way, and sometimes it’s that way.” and sure, the future is uncertain, but then why is the Marxist theory of value better than any other one?
I appreciate you giving a specific scenario for the world economy, but it looks entirely mainstream to me. I doubt you will have trouble finding conventional economists who will look at it and nod, saying “Yep, that’s very likely”. Though you might keep in mind that post-2008 the central banks around the world have dumped huge amounts of money into their economies, amounts that many if not most economists thought would trigger significant inflation. And… it didn’t happen. At all. So that “fear of depreciating paper currencies with respect to commodity-money” could be baseless. Or maybe not X-D—macroeconomics is really in disarray these days.
What does this framework give me? Well, I bet that I’ll be able to predict the onset of the next world economic crisis much better than either the perma-bear goldbugs of the Austrian school, the Keynesians who think that a little stimulus is all that’s ever needed to avoid a crisis, the monetarists, or any other economist. I can know when to stay invested in equities, and when to cash out and invest in gold, and when to cash out of gold and buy into equities for the next bull market, and so on and so on. I bet I can grow my investment over the next 20 years much better than the market average.
There are plenty of mainstream economists who will warn from time to time that there might be a recession approaching within the next few years. But what objective basis do they ever have for saying this? Aren’t they usually just trying to gauge fickle investor and consumer “animal spirits”? And how specific and actionable are any of their predictions, really? Can an investor use any of them to guide trades and still sleep well at night and not feel like a dupe who is following some random guru’s hunch?
To time the cycles, I do not need to rely on fickle estimations of consumer confidence or any unobservable psychology like that. There are specific objective numbers that I will be keeping an eye on in the coming years—indicators that are not mainstream, including Marxist authors’ estimations of the world average rate of profit, the annual world production of physical gold, and the annual world economic output as measured in gold ounces (important!). No mainstream economist that I know—even Austrian goldbugs—think that world gold production has a casual role in world economic cycles.
If this sounds cuckoo, I suggest reading these two short articles: “On gold’s monetary role today” https://critiqueofcrisistheory.wordpress.com/a-reply-to-anonymous-on-golds-monetary-role-today/ “Can the capitalist state ensure full employment by providing a replacement market?” https://critiqueofcrisistheory.wordpress.com/can-the-capitalist-state-ensure-full-employment-by-providing-a-replacement-market/
Yes, it does not surprise me that most economists were wrong about the expected inflation from quantitative easing. They could not foresee that most of this money would not enter circulation or act as a basis for additional multiples of credit creation on top of it that would enter circulation. They could not foresee that this QE money would sit inert for the time being as “excess reserves” due to central bank payment of interest on these excess reserves that was competitive with other attainable interest rates on the market. In reality, these excess reserves—so long as interest is paid on them—are not typical base money, but instead themselves function more like interest-bearing bonds. Heck, I didn’t even have to know anything about Marxism to anticipate that!
Now, here’s a concrete prediction: if the Federal Reserve were to decide to cease all payment of interest on excess reserves without also at the same time unwinding the QEs, leaving a permanently-swollen monetary base of token money that then has the incentive to be activated as the basis for many multiples of loans to be made on top of it—then you will see continued depreciation of the dollar with respect to gold.
Thankfully, though, I am not relegated to trying to mind-read what the Federal Reserve will do because my strategy of trading between equities and gold is only concerned with the relative prices between those two. I will come out ahead in real terms by correctly timing relative changes in their prices, regardless of whatever happens to their nominal dollar prices as a result of Federal Reserve shenanigans. And I would argue that, on average over the medium to long run, the Federal Reserves operations are neutral with respect to these relative prices. The Federal Reserve can change the nominal form of crises (whether they take the appearance of unemployment, dollar-inflation, or some intermediate admixture of the two like 1970s stagflation), but the Federal Reserve cannot actually influence the relative movements of equities and gold. If, thanks to incredibly dovish Federal Reserve policy in response to the onset of a crisis, equities continue to appreciate in dollar terms, gold will be appreciating even more.
Interesting. I wish you luck, though I’d still recommend you not commit all your financial resources to this particular strategy.