It’s a double-edged sword, because now we need to get the government back out, and that is certainly not going to be easy.

If you walked away from this article thinking that I am in “full support of government intervention into the economy,” then I gave you the wrong impression and I’m sorry.

While I agree entirely with you about your investment techniques, I have to say that you are WAY off on this article.

As a value investor, I would expect you to understand the role that man’s mind plays in the production of goods and services. Try to invest without using reason. Try to make any sort of product without using your brain. It’s impossible. And yet, here you are in full support of government intervention into the economy. Force negates man’s ability to reason and government intervention IS force. Force does not “grease the wheels,” freedom does.

I never said that printing money and handing it out creates wealth. But the thesis that producing tangible goods is the only path to prosperity is the sales script of a commodities salesman, not the cornerstone of an economic policy.

As best as I can tell, Warren Buffett has never physically crafting anything in his life. He turned hundreds into millions (for himself and his investors) from the late 1950s to the early 1970s without producing a thing of tangible value.

Advertising firms, graphic design companies, and accountants produce nothing of tangible value. Musicians and Google produce nothing of tangible value. Banks and Wal-Mart produce nothing of tangible value. Do they all really exist so that our fine citizens can smelt lead and grow corn?

We let credit get out of hand, but the real problem happened in September when the global economy froze and nearly collapsed. Clearly there is still a lot of misinformation out there about this; so, I guess I have another post to write!

The point Peter is always trying to make, is that in order to buy something from others, you need to sell something first of equal value to others. Yes, your article makes sense in your context. And your context is that Butcher Baker and Candlestick maker are all borrowing from each other and from banks inside their city. The real situation is that all three of them stopped producing meat, bread and candlestick a long time ago. What they do in reality, they borrow money from other cities, to buy meat, bread and candlesticks from those other cities. How long do you think those other cities are going to tolerate it?

It doesn’t matter how much credit your are going to free up by printing more money, if no one will want to trade you anything for it. Peter is right! people need to start producing again in this country. Only when you produce your own meat, bread and candlesticks you create real capital the banks can loan to people.

I have a question for you Joe. Why do you think that if printing money and giving it to banks, so they can lend it to everybody, is the correct way to stimulate economy, common citizens are not allowed to do it? Why can’t you buy a printing press and pay for it by the money you print with it. This should stimulate the printing press production industry will it not? We can all be printing money and lending it to each other and all be millionaires.

In the late 1920s, the government did nothing, and the then what was a massive contraction, a myriad of business failures, and one-in-four unemployment. It’s easy today to say, “Let them all fail.” I can promise you this: In 1931, everyone was saying, “Why the hell didn’t we do more to avoid this?”

Today’s actions will result in tomorrow’s then whats – inflation and higher taxes among them. Don’t get me wrong – I’m not 100% behind everything that is being done to stem the problem. Personally, I think that AIG, for example, should have been given the initial bailout money and been immediately broken up.

As investors, we shouldn’t be sucking our thumbs and whining about the past. We need to be asking: “How do we profit from the then what?”

Not to sound like a lemon but I tend to find “re-confirmations” of my own analysis in W.B’s statement that higher inflation than the past decade are ahead.

IMO, its intellectual enough… not everyone in society concerns themselves with Financial theories in practice; rather, they are busy in their own vocations but I understand what your saying.

Thanks for the suggestions too, appreciate it Garrette!

I encourage you and the other folks on here reading your article and these comments to read again this fine paragraph from “Mike” up above (see below):

QUOTE: “Yes, a broken clock can be right twice a day, but when a group of hundreds of economists and hundreds of thousands of their students have used logical theory to predict every recession or depression in the 20th century in any country and to explain all those before, it is most likely because they are correct.”

And after you get done doing that, should spend a few seconds thinking about Warren Buffett’s “The Superinvestors of Graham – and – Doddsville” article.

And notice how Mike’s comment is entirely consistent with Buffett’s article. (Mike’s comment is also true, by the way, just like Buffett’s “Superinvestors” article.)

The Austrians and Peter Schiff are not just lucky coin flippers on the topics of economics and how central banks and monetary policy affect economies. No more so than Buffett is just a really, really lucky coin flipper on the topics of stock picking and business.

Both Schiff and the Austrians, on the one hand, and Buffett, on the other hand, are right because they’re practicing “truth” in their discipline.

You should’ve put this topic in the “too hard” pile, Joe.

By the way, this debate is far from just intellectual.

Inflation and bailouts have normous real-world implications.

The broader point I hear from Peter Schiff and Ron Paul is the huge and tragic HUMAN cost of monetary. It’s the people who can least afford it who suffer the most from monetary inflation: savers and other folks on fixed incomes and so on. The politicians and their favored constituents (bankers, etc.) will not suffer to anything like the same degree.

Thanks.

Garrett

Cheers Fwallstreet

People may panic and continue to sell. We might see a DJIA of 3000. But after the frenzied selling, little by little, people will get into their cars and drive to the stores after eating at McDonalds.

And they’ll think to themselves “wow, the world hasn’t ended. I should find a better job. I should get a better car. and I should definately start planning for my retirement. I’m gonna go buy that Joe Ponzio book.”

Very well said, really very excellent.

A very realistic viewpoint that I agree with 100%.

Thanks for doing what you do – adding a little balance to the rest of the insanity.

Tom