Bitcoin made headlines earlier this week when the cryptocurrency value surpassed $1000, its highest valuation since 2013, but Bitcoin traders didn’t enjoy the sudden increase for too long as the price began to fall rapidly. By 8AM EST on Thursday a single coin was valued at $892. Read the rest of this entry »
Mr. Grant confronts the subjectivity of economic measurement head-on in his book in an enlightening discussion of whether the 1921 depression was, in fact, a depression at all.
The Forgotten Depression: 1921 — The Crash That Cured Itself, by James Grant, Simon & Schuster, 2014.
Joseph Calandro Jr. writes: To better understand the current economic environment, financial analyst, historian, journalist, and value investor James Grant, who is informed by both Austrian economics and the value investing theory of the late Benjamin Graham, analyzes the Depression of 1920–1921 in his latest work, The Forgotten Depression: 1921 — The Crash That Cured Itself.
Grant understands that despite the pseudo-natural science veneer of mainstream economics the fact remains that economic value is inherently subjective and thus economic measurement is also subjective. Mr. Grant confronts the subjectivity of economic measurement head-on in his book in an enlightening discussion of whether the 1921 depression was, in fact, a depression at all.
Was It a Depression?
Grant concludes it was a depression, but mainstream economist Christine Romer, for example, concludes it was not a depression. As Grant observes, Ms. “Romer, a former chairman of the Council of Economic Advisors, presented her research, titled ‘World War I and the Postwar Depression,’ in a 1988 essay in the Journal of Monetary Economics. The case she made for discarding one set of GNP estimates for another is highly technical. But the lay reader may be struck by the fact that neither the GNP data she rejected, nor the ones she preferred, were compiled in the moment. Rather, each set was constructed some 30 to 40 years after the events it was intended to document” (p. 68).
In contrast, Mr. Grant surveys economic activity as it existed prior to and during 1920–21 and as it was evaluated during those times. Therefore, five pages into chapter 5 of his book, which is titled “A Depression in Fact,” we read that:
A 1920 recession turned into a 1921 depression, according to [Wesley Clair] Mitchell, whose judgment, as a historian, business-cycle theorist and contemporary observer, is probably as reliable as anyone’s. This was no mere American dislocation but a global depression ensnaring nearly all the former Allied Powers (the defeated Central Powers suffered a slump of their own in 1919). “Though the boom of 1919, the crisis of 1920 and the depression of 1921 followed the patterns of earlier cycles,” wrote Mitchell, “we have seen how much this cycle was influenced by economic conditions resulting from the war and its sudden ending. … If American business men were betrayed by postwar demands into unwise courses, so were all business men in all countries similarly situated.”
So depression it was … (p. 71)
- War finance (the currency debasement and credit expansion associated with funding war) has long been associated with economic distortion including World War I, which preceded “The Forgotten Depression.” Such distortions unfortunately continue to the present day.
- Scandal is also associated with booms and busts; for example, the boom preceding “The Forgotten Depression” had Charles Ponzi while the boom preceding “The Great Recession” had Bernie Madoff.
- The booms preceding both financial disruptions also saw governmental banking regulators not doing a very good job of regulating the banks under their supervision.
- Citibank famously fell under significant distress in both events.
- Both eras had former professors of Princeton University in high-ranking governmental positions: Woodrow Wilson was president of the United States at the beginning of “The Forgotten Depression” while Ben Bernanke was chairman of the Fed during “The Great Recession.”
- On the practitioner-side, value investor Benjamin Graham profited handsomely from the distressed investments that he made during “The Forgotten Depression” while his best known student, Warren Buffett, profited from the distressed investments that he made during “The Great Recession.”
The Crash That Cured Itself
Despite similarities, there are noteworthy differences between these two financial events. Foremost among the differences is the reason why “The Forgotten Depression” has, in fact, been forgotten: the government did nothing to stop it. Not only were interest rates not lowered and public money not spent, but interest rates were actually raised and debt paid down. The context behind these actions is fascinating and superbly told and analyzed by Mr. Grant. Read the rest of this entry »
— Richard Lloyd Parry (@dicklp) August 14, 2015
Josh Chin writes: China offered an almost exclusively positive portrait of its human rights situation in a white paper released Monday that cited progress in a wide range of areas. Near the top of the list: development of the country’s film and cartoon industries.
“The white paper has departed so much from reality that its claims that the government has made ‘great achievements’ on human rights are absurd. The government could have counted the number of pandas as a sign of rights progress.”
— Ms. Wang
The annual white paper, which weighed in at 21,000 characters this year, is China’s response to frequent foreign criticisms of its human rights record. In contrast to its critics, who tend to emphasize the rights of the individual, China advocates a broader definition of human rights that puts greater weight on social goods, such as economic and cultural development.
And, evidently, entertainment.
In the report’s first section, titled “Right to Development,” this year’s white paper backed up Beijing’s claim to have better protected the Chinese people’s cultural rights by pointing to, among other things, China’s burgeoning television, cartoon and film production.
”The tremendous achievements China has made in its human rights endeavors fully demonstrate that it is taking the correct path of human rights development that suits its national conditions.”
In 2014, the paper noted, China produced 429 TV series, accounting for 15,983 episodes, and cartoon programs amounting to 138,496 minutes. The report also flagged growth on the silver screen, saying the country produced a total of 618 feature films — 36 of which earned more than 100 million yuan each — and racked up total box office revenues of 26.9 billion yuan ($4.3 billion) last year.
The latter figure represented a 36% increase over 2013, the white paper said. It wasn’t clear from the report how that growth related to human rights. The State Council Information Office, which produced the report, did not immediately respond to a request for comment. Read the rest of this entry »