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Author Topic: Defending the Speculator  (Read 1386 times)
Walter Rothbard
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April 30, 2013, 03:54:15 PM
 #1

Excerpt from Defending the Undefendable, By Dr. Walter Block

http://mises.org/daily/4466

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Yet the truth of the matter is that, far from causing starvation and famines, it is the speculator who prevents them.

I'm mystified to hear people blame price volatility on speculators and to hear talk of creating a "speculation-proof" fork of Bitcoin.  Huh

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Walter Rothbard
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April 30, 2013, 03:55:12 PM
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A speculator cannot be expected to have a perfect record of prediction, but if the speculator guesses wrong more often than right, he will tend to lose his stock of capital. Thus he will not remain in a position where he can increase the severity of famines by his errors. The same activity that harms the public automatically harms the speculator, and so prevents him from continuing such activities. Thus at any given time, existing speculators are likely to be very efficient indeed, and therefore beneficial to the economy.

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April 30, 2013, 03:55:43 PM
 #3

Looks like there's an audio recording available, read by Jeff Riggenbach.  I've listened to several books read by Riggenback, and highly recommend him.

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April 30, 2013, 04:01:13 PM
 #4

Man, what a great article:

Quote
Contrast this with the activity of governmental agencies when they assume the speculator's task of stabilizing the food market. They too try to steer a fine line between storing up too little food and storing up too much. But if they are in error, there is no weeding-out process. The salary of a government employee does not rise and fall with the success of his speculative ventures. Since it is not his own money that will be gained or lost, the care with which bureaucrats can be expected to attend to their speculations leaves much to be desired. There is no automatic, ongoing daily improvement in the accuracy of bureaucrats, as there is for private speculators.

We can surmise that whatever adjustment schemes people dream up for an alt currency will not be as effective as the action of speculators.

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The oft-quoted objection remains that the speculator causes food prices to rise. If his activity is carefully studied, however, it will be seen that the total effect is rather the stabilization of prices.

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April 30, 2013, 04:03:59 PM
 #5

There's a goldmine bitcoinmine of information on speculators:

https://www.google.com/search?q=site%3Amises.org+speculators

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April 30, 2013, 08:32:39 PM
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I hate to interrupt your monologue, but around here the word "speculator" is usually used in the same way that one would use the word "boogeyman".

As in, "The boogeyman speculators crashed the market."

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May 01, 2013, 04:53:18 AM
 #7

Excerpt from Defending the Undefendable, By Dr. Walter Block

http://mises.org/daily/4466

Quote
Yet the truth of the matter is that, far from causing starvation and famines, it is the speculator who prevents them.

I'm mystified to hear people blame price volatility on speculators and to hear talk of creating a "speculation-proof" fork of Bitcoin.  Huh

Nice post Smiley
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May 01, 2013, 05:34:35 AM
 #8

I think you confuse HEDGING with SPECULATING.

Hedging of risk gives us things like futures markets in commodities and insurance, real people pay someone else to assume risk and this creates valuable price signals for future costs and for future events.

Speculating is merely buying an asset to see if you can pass it on at a higher price to another person later as part of a general rise in the assets price, from this comes bubbles and false price signals that lead to malinvestment.

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kjj
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May 01, 2013, 05:48:28 AM
 #9

I think you confuse HEDGING with SPECULATING.

Hedging of risk gives us things like futures markets in commodities and insurance, real people pay someone else to assume risk and this creates valuable price signals for future costs and for future events.

Speculating is merely buying an asset to see if you can pass it on at a higher price to another person later as part of a general rise in the assets price, from this comes bubbles and false price signals that lead to malinvestment.

Maybe you should take Keynes's dick out of your ass and read what Adam and Ludwig have to say on the subject.

Hedging is totally different; a topic of finance, not economics.  Smith, for example, destroyed your "merely" before your great-great-great-grandmother was born.  Mises followed up with specific refutations to the rest of your bullshit a while later.

If you had actually read the article linked, you'd see that rather than being about a "general rise in the assets price", speculation is the action taken by traders that believe that some specific asset is misvalued, and their attempts to correct that specific error.  This leads to the opposite of bubbles and malinvestment.

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May 01, 2013, 06:03:59 AM
 #10

I think you confuse HEDGING with SPECULATING.

Hedging of risk gives us things like futures markets in commodities and insurance, real people pay someone else to assume risk and this creates valuable price signals for future costs and for future events.

Speculating is merely buying an asset to see if you can pass it on at a higher price to another person later as part of a general rise in the assets price, from this comes bubbles and false price signals that lead to malinvestment.

I think u confuse POOR SPECULATORS with SPECULATING
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May 01, 2013, 10:27:14 AM
 #11

Great thread, enjoyed reading it.

One point on speculators, they can momentarily increase (or decrease) prices but they cannot sustain an artificially inflated value. That's why bubbles burst. Eventually, and usually quite quickly, the price will have to return to that supported by actual demand.
Walter Rothbard
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May 01, 2013, 07:09:38 PM
 #12

Speculating is merely buying an asset to see if you can pass it on at a higher price to another person later as part of a general rise in the assets price, from this comes bubbles and false price signals that lead to malinvestment.

On the contrary, those signals do not come from speculating.  They come from regulation, which distorts the economy.

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May 02, 2013, 01:25:45 AM
 #13

Maybe you should take Keynes's dick out of your ass [...]


I approve of this thread
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May 02, 2013, 04:11:52 AM
 #14

I think you confuse HEDGING with SPECULATING.

Hedging of risk gives us things like futures markets in commodities and insurance, real people pay someone else to assume risk and this creates valuable price signals for future costs and for future events.

Speculating is merely buying an asset to see if you can pass it on at a higher price to another person later as part of a general rise in the assets price, from this comes bubbles and false price signals that lead to malinvestment.


"Speculating means capitalizing on politically caused distortions in the marketplace. " -Doug Casey
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May 02, 2013, 04:14:24 AM
 #15

I think you confuse HEDGING with SPECULATING.
Maybe you should take Keynes's dick out of your ass and read what Adam and Ludwig have to say on the subject.
Good advice, especially about getting yourself de-impaled.

I approve of this thread
As do I. Smiley

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