"The social system of private property and limited government is the only system that tends to debarbarize all those who have the innate capacity to acquire personal culture." ~Ludwig von Mises
Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.
~ Fed chairman Ben Bernanke, Washington Post op-ed, November 4, 2010
Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other.
~ Ronald Reagan
The überphilosopher Bertrand Russell presents a particularly toxic variant of my surprise jolt [like dropping an ice cube down someone's collar] in his illustration of what people in his line of business call the Problem of Induction or Problem of Inductive Knowledge (capitalized for its seriousness) - certainly the mother of all problems in life. How can we logically go from specific instances to reach general conclusions? How do we know what we know? How do we know that what we have observed from given objects and events suffices to enable us to figure out their other properties? There are traps built into any kind of knowledge gained from observation.
Consider a turkey that is fed every day. Every single feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race "looking out for its best interests," as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.
[...]
Let us go one step further and consider induction's most worrisome aspect: learning backward. Consider that the turkey's experience may have, rather than no value, a negative value. It learned from observation, as we are all advised to do (hey, after all, this is what is believed to be the scientific method). Its confidence increased as the number of friendly feedings grew, and it felt increasingly safe even though the slaughter was more and more imminent. Consider that the feeling of safety reached its maximum when the risk was at the highest! But the problem is even more general than that; it strikes at the nature of empirical knowledge itself. Something has worked in the past, until - well, it unexpectedly no longer does, and what we learned from the past turns out to be at best irrelevant or false, at worst viciously misleading.
~ Nassim Taleb, "One thousand and one days, or how not to be a sucker," The Black Swan: The impact of the highly improbable, 2007
This industry really took off post-GFC, like exploded. Now it its defense, one of the reasons why it exploded is because the banks had to pull back, so somebody had to replace them. But on the other hand, there's another aspect to this which I think is really hurting them, which is:
You're an institution. You are not previously invested in private equity. You were in public markets. '08 was unbelievably painful because you lost basically 40% of your money like that [snaps fingers]. You don't want that volatility anymore, so what you did was you put money into private equity because at least you could pretend that is wasn't volatile. Now private equity is just as volatile as the public markets. It's just that you don't get a price every single day. So you could sleep at night pretending to yourself, "I got my money with some great professionals in private equity who are going to make me a lot of money and it's not volatile."
And I think that's one of the big reasons why that industry grew so much. Now no one's getting monetized, rates keep going higher - this business only works on low rates because it's a leverage business. I think the private equity business is going to go through a long period of very troubled times.
~ Steve Eisman, "Big Short Reunion w/ Danny Moses: Rising Rates, AI & Private Equity, The Real Eisman Playbook, 25:05 mark, October 19, 2026
The lapse of time during which a given event has not happened, is, in this logic of habit, constantly alleged as a reason why the event should never happen, even when the lapse of time is precisely the added condition which makes the event imminent. A man will tell you that he has worked in a mine for forty years unhurt by an accident as a reason why he should apprehend no danger, though the roof is beginning to sink; and it is often observable, that the older a man gets, the more difficult it is to him to retain a believing conception of his own death.
~ George Eliot (Mary Ann Evans) in Silas Marner (1861), Chapter 5
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| 1861 |
Robert Higgs, author of Crisis and Leviathan, has shown how government grows the most during times such as these. In a usual wartime situation, the government massively expands and then falls back only partially after it is over. This creates a ratchet effect that guarantees a relentless march of the state. Every new spending program creates a precedent said to apply in peace time. How often have we heard calls for a "Marshall Plan" to solve this or that social issue?
~ Lew Rockwell, “What Not To Do,” Mises Daily, September 14, 2001
| 1987 |
The US government didn’t stop with wars. It violated the civil liberties of Americans and established enormous new bureaucracies. It trampled on the rights of states and localities. It turned flying into a massive police operation. It began a series of protectionist campaigns.
The Bush administration busted the budget and saddled the country with the largest deficit in history. Congress and the presidency engaged in a transparent logrolling whereby the warmongers gave the welfare statists what they want, in exchange for which the welfare statists gave the warmongers what they want. The rest of us watched freedom melt. We did what we could, in our writings and public advocacy, but the government tide was too high to hold back.
~ Lew Rockwell, “Times Change, Principles Don’t,” Mises Wire, September 11, 2003
