Austrian Economics is not a forecasting tool!!! 🔮🧙

I'm sorry, but it's not.

It's a guidance tool.

And really it's unfortunate that there even have to be terms, rather than just "economics". (The correct version of algebra is just "algebra".)

"Austrian economics", at least I'm totally sure, is the correct and valid framework.

But it's not a tool to magically make good predictions!!!

Think of it like this:

Bob wants to take heroin.

Fred and Mary and all the confused people say, yes Bob, indeed, taking some heroin is good for you and improves you.

Peter knows better, and rolls on the floor laughing his ass off.

"No, you silly geese!!!" he tells them. "That's not how it works. Your body doesn't need heroin. And if you're not careful, you can grow dependent and fall into a dangerous spiral that's hard to come back from."

Peter Smith was right!!!

That's exactly right.

But Bob brainwashedly listens to the geese and takes some heroin, unfortunately.

From that point forward, Peter doesn't have any useful way to predict exactly what next Wednesday looks like for Bob.

You see? Peter knows what Bob should do. He has the realistic outlook and knows the correct course of action. But he doesn't have a prediction mechanism of what exactly happens if Bob ignores the good advice.

He knows it'll be generally less than ideal, but if he tries to make really pointed, specific predictions, he's basically just talking out of his ass.

And actually..

If anything, I'd rather ask the addicts.

Peter is focused on the long-term, process-oriented, correct thing to do. He knows how to be a sane, healthy person. Whereas the addict should be more intimately familiar with making the mistake and managing the symptoms and paying mind to the cues and signals that go along with that.

Make sense?

It can be tempting to feel like you have some wonderful ability to predict things, because you look around and there are so many people who don't get it, who believe in the voodoo nonsense version of economics.

Who think taking heroin is good for you.

But the way any market mechanism works is the smart money can bid things to the rational price even where the average opinion is something different.

Sports betting markets are an example of this. The average chatter isn't necessarily putting their money where their mouth is, and even if they do, someone with deep enough pockets and better information can come around. So price will tend to make sense, even where the median person doesn't have any idea what they're doing.

It probably doesn't hurt..

It's always better to see things how they are rather than see it incorrectly, obviously.

But it isn't that big of a deal. Knowing Austrian economics essentially means you're normal. You aren't grossly confused like some others are. But being normal and fundamentally sound won't make you better than the market pricing mechanism.

Probably where it matters in practice is that you're more likely to avoid manias and awful mistakes. (You won't be the person holding fiat in Nazi Germany or trying to pay millions of dollars for a shitty house because you think housing prices will go up forever, etc.)

You're sane and realistic, is essentially what it is.

But being sane and realistic doesn't mean you can start telling us which stocks will go up and what the price of gold will be in 5 years.

People like Peter Schiff and Doug Casey..

I think genuinely want to make the world a better place, but they try to use Austrian economics in a way where they can get credit for predicting things.

And then when, naturally, they're a little off here and there, it can have the effect of making Austrian economics appear kind of off, but really there's no issue at all with Austrian economics, it's just that they're attempting to use it for something it isn't meant to do.

I know you shouldn't steal, kill, or rape, but I don't know exactly what happens next when people do these things.

It's like if you design a beautiful golf club and I go around trying to use it to hammer nails into the wall.

Peter is a bold and honorable man and I'd like to hug him. I just happen to have this observation.

And I think it's important since the people like him who make it on television are the only exposure some people have to peaceful economics.

That said, if he didn't throw predictions around he probably wouldn't make it on television.

One important aspect to all this is..

The real economy is a strong force.

The network of people cooperating and building and creating and solving is quite adaptive and resilient. And it gets exponentially better as time passes and technology grows.

So while on one hand there's the damage and the negative pressure of violent interventions, there's also the counter-force of the economy continually getting better and tougher to destroy.

So how much it actually takes to send us into ruin, in the manner that Schiff and Casey predict, seems hard to say.

It's also tough to predict government/banking behavior and to know that they'll continue making the same mistakes.

They want to leech as much money as they can for themselves, but presumably they don't want to destroy the goose.

Sure, they seem to believe in Keynesianism. So if you take them on face value, it's like oh okay, I guess they're gonna drive the car into the ditch.

But you shouldn't take them on face value. Doing what's "right" or economically wise or what's good or conscionable isn't the game that they're playing. They're trying to end up with the most money possible, and they say whatever behooves them.

Their ideology is money.

And Keynesian ideas offer an excuse and a storyline for their behavior. For a set of policies that benefits a special few interests at the top of the pyramid, at the expense of the world in general.

But they don't necessarily actually believe those ideas. The people in high places making important banking decisions likely aren't economically illiterate in the way the average gender studies college student is. They're next-level, and understand how it actually works even if they posture otherwise.

It's like maybe you'd say "whoa, no way Hulk Hogan ever goes mask" if you took it seriously and thought he was a real guy. But when you consider that Hulk Hogan is just made up in the first place, it's easy to see how it could just change at any moment whenever changing is practical and convenient.

So you don't know for sure that they'll keep doing the same exact things into perpetuity, to the point of pushing too hard on the string and breaking the economy.

I'd guess that they have it in mind to extract what they can while trying to not overdose.

Maybe they'll screw up and break it lol. But I don't think you can know for sure that they will.

Bitcoin

If you ask me, the end game is that they back their currencies by a fixed amount of BTC. And the currencies essentially become a transition mechanism, until eventually enough people aren't mind-blown by what a decentralized ledger is and don't need it to be represented by a traditional currency note.

It sounds weird now, but it won't in 50 years.

When the dust settles and the books are written (like, centuries from now), fiat currency may be understood as essentially the brief transition period (between gold and digital money) where banksters were able to skim value off the top until the digital version was ready.

We'll see.