vineri, 2 noiembrie 2012

Using Twitter for Link Relationships - Whiteboard Friday

Using Twitter for Link Relationships - Whiteboard Friday


Using Twitter for Link Relationships - Whiteboard Friday

Posted: 01 Nov 2012 06:09 PM PDT

Posted by RuthBurr

Link building outreach can be really difficult and unpleasant. I've always hated the tactic of emailing site owners and asking for links; it feels awkward, doesn't work very well, and requires a lot of time and effort. One of my favorite things about our modern world is that with social media, it's possible to form real relationships with people you don't already know. By the time you ask for a link or a share, you're not just some creeper just emailing out of the blue asking for a favor; you're viewed a friend whom they trust to provide value and not spam them.

I recently spoke at PubCon Las Vegas about my tactics for finding link targets online and building relationships with them using my favorite social media platform, Twitter. This is a strategy that I've been able to use in the past to completely replace sending "link ask" emails. For my very first-ever Whiteboard Friday, I want to share these tactics and the tools I use to do them with you! This is a strategy that takes some time and effort to set up and execute, but it can result in a set of social connections you can use to get links and promote your content again and again. Please pardon my occasional coughing - cold season has really hit the Mozplex hard this year.



Video Transcription

"Howdy SEOmoz fans. My name is Ruth Burr, and I'm the Lead SEO here at SEOmoz. Today is my first Whiteboard Friday. Today we are going to talk about using Twitter to build relationships for links. This is my favorite link building tactic, and it something that I recently talked about at Pubcon 2012. I wanted to share it with our awesome community as well. So here we go.

Some caveats for using this strategy before we get started. This is not a strategy that is going to work unless you are already creating and have a strategy around good content. Content is still king, and this strategy is only going to work if you are creating unique, compelling, sharable content. There's a ton of other resources out there, including on SEOmoz about how to do that. So we're not going to talk about that today.

Second of all, it's important to be real and to be realistic. What that means is that you're not going to have a lot of success with this tactic if you're starting out with a brand new Twitter account with no followers, or if you tweeting in a style that's very corporate. You really want to have an established account that you've got an existing voice for that can be conversational, because what you are really looking for here is to make friends almost. You're building real relationships with real people.

The other part of being realistic is to be realistic when we are talking about selecting our link target. So, no matter how many times you tweet @
Barack Obama, you're probably not going to get a link from Whitehouse.gov. That's okay, but it's important to be realistic if you want this strategy to work.

So caveats in place, let's get started. So the first think that we're going to want to do when we're thinking about a Twitter focused link building strategy is still the fact that what we want is links. Some social strategies are more focused around shares or around finding influencers. If we want to do that, that's great. It's not a bad thing, but really we want to focus on building relationships with people who can publish content somewhere and give you a link.

So we start out actually just doing that same sort of link prospecting that you're probably pretty used to right now. You go into OSE. You look at your backlinks. You look at your competitor's backlinks. You look at sites that are similar to yours that you want links from, maybe look at who linked to them. You get a list of websites. That's a great first step.

From there, what I really like to do is visit each of those sites and see if they have a blog role or a list of their favorite sites, because those are really great targets if you want to build relationships with people. They're basically saying to you, "Here are some sites where my attention already is. Here are some people that if you talk to them, I'm going to know." You can be like, "Oh, you know them? I love them." It really can build credibility. Plus a lot of those sites are also going to be good link targets in and of themselves.

So I like to use a tool called Multi Links. It's free. It's a Firefox plug-
in. It's great. What that allows you to do is highlight any section of a page, and it will copy the links within the highlighted section to your clipboard so then you can just easily paste them into Microsoft Excel or Google Docs or whatever spreadsheet program you might want to use.

So now you've got this great list of sites that link and sites you want links from. From there, you just have to get their Twitter handles. Most websites now have Twitter information in their Contact Us. You can either take a day and just go through manually, or if you have like an intern, maybe that is something he or she could do.

What I've done in the past is just build a simple PHP scraper, which will find the Twitter.com links that contain their handles and just scrape those out. But if you're not the scraper building kind, which not everybody is, you can also just do it manually. It takes some time, but we're investing. We're investing in strategies for the future. So that's step one of finding your targets, is you found websites, and then you found the Twitter handles that go with those websites.

Step two we're actually going to do the same thing, but in reverse. We're going to use Followerwonk. Yay Followerwonk, which you should all have subscriptions to with your SEOmoz Pro account. It's the best tool. I used it before SEOmoz bought it. So there.

What you're going to do is look for your target. So Followerwonk allows you to search for people's Twitter bios based on keywords. So maybe you're looking for architects. Maybe you're specifically looking for architects who live in New York. You can search on their keywords. You can search locations. But again, because what we're looking for here is publishers, we want to make sure that we're only looking at profiles that have a URL associated with the profile.

A really easy way to do that is to just put .com and nothing else in the URL box when you're searching on Followerwonk. That will bring back any account with your keywords that have a .com URL. You can do the same with
.org or .net if you want .net links. Whatever you want to do, but that's a really great way to bring back a broad selection of people, most of whom will probably have some kind of publishing power associated with that site, or know somebody who does.

You can also take your initial list from step one and plug it into Followerwonk's compare and contrast function, which will allow you to see who are the people who follow Profile A as opposed to Profile B as opposed to Profile C. People who follow those people are probably good people to target as well.

An even better set of targets are the people that all of these people also follow. Again, they all follow Barack Obama. Barack Obama is not going to link to you. It's okay. You're still special. But again, be realistic. You can pull up a whole extra list of Twitter handles, and that would be your target.

So now you're going to put them into Twitter. You're going to create a private list so nobody else knows that you are like, "This is my link target list." Make sure that's private.

Now it's time to actually talk to them and build relationships. Again, this is something that is going to take time. It's not going to happen overnight. So this is something you should be doing in conjunction with your other link building and content building strategies, but over time it can be really successful.

So you're going to talk to them. Just start talking to people every day. Some things that you might say to them, you could share their stuff. You want them to share your stuff, start by sharing their stuff, because sharing is caring.

You could also say, "Hey, you're really great." Don't just say, "Hey
@RuthBurr, you're really great." I'm going to be like, "Hey." Instead, while you're sharing my stuff, maybe say, "Awesome post from @RuthBurr, very insightful." Then I'll see that and I am like, "Oh, I'm insightful. I like you." That's what you want. Compliments are good. People like to feel important. They like to feel special. They like to feel cool.

A really great tactic for this, and this is something that can also inform your content strategy is to answer a question. So every day when you're doing your tweets, you can look in your special link target list, and just do a quick search for question words - who, what, where, when, why, is there, why isn't there - and spend some time answering questions if you can.

Again, what you really are trying to say is you're trying to provide some value. You're trying to build a good relationship. Make them think that you're cool. So if you have a good answer to a question, provide it. If you know of a resource that they're asking for, provide it. If no such resource exists, "Hey, I've got a great content idea for you. Why don't you create that resource." Now when they're like, "Why isn't there a guide for pet owners who are also gluten free," you can be like, "There is. I've created it. It's right here. There you go."

Number four, one of my favorite things to do is to introduce people to other people. You can be like, "Hey so-and-so, do you know this guy? He's awesome and I think you guys would really like each other." A suggestion that seems totally altruistic, all you're trying to do is connect people to other people. People might make a new friend or get a new resource or make a new contact, and they get something out of it. Again, you're reinforcing the idea that you are somebody who's providing value online.

You're doing all of this stuff and over time you want to track who are the people who are responding to this. Who are the people saying, "Hey, thanks for sharing," or, "That was a great tip"? Over time you are really going start to figure out who are the people who are responding that you're actually building a relationship with? Who are the people that are not picking up what you're putting down? If they are not picking up what you're putting down, take them out of the list, stop targeting them, move on.

Now you've spent some time building relationships. You can discreetly and tastefully ask them to share your content. We're not talking about carpet bombing your entire list one day with, "Hey, check out my new infographic."
But when you create a piece of content that you think some of your Twitter relationships would like say, "Hey check this out, I think you would like it." Don't say, "Please link." Don't say, "Hey could you link to me."
That's creepy. People don't like it unless they're your really good friends.

Instead try, "Hey, check this out. Thought you'd like this. See what you think." People if they like it, if you're creating good content, you make them aware of it, and they naturally share it especially because you've already planted the seeds in their minds that what you're providing is valuable.

Now this all sounds like it's going to take a lot of time, and this part does take a lot of time. This is the part that you really invest a couple of days in. But this part can be done in just 15 minutes or half an hour a day. All you do is go online, go on Twitter for 15 minutes. Spend five minutes replying to stuff, five minutes retweeting and sharing other people's stuff, and five minutes talking about your own stuff.

When you do that, it's really easy, and you get a nice variety. Don't do it at the same time every day, because people tend to use Twitter the same time every day. If you mix up the times that you're doing it, you're going to target more of your overall list. You don't have to talk to everybody every day. Just try to talk to some people. Try to get to everybody once a week. Whatever feels natural. Just talk to some people every day, and over time you'll build these relationships. Then when you create your really great pieces of content, you have people you can ask to share, check it out, link to it, and you get links and shares and friends.

Thank you."

Video transcription by Speechpad.com


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Moz #Movember Kick-Off

Posted: 01 Nov 2012 07:59 AM PDT

Posted by Justin_Vanning

Hey Mozzers!

This year marks the first year that the Moz staff (of all genders) have banded together to form an official Movember team.

What's Movember?

Well, Movember is a fundraising effort that started in 2004 to help raise money for men’s health issues. Since then, it has spread to over a hundred countries around the world and has almost one million participants. In 2011, 854,000 Mo-Bros and Mo-Sistas joined the cause to help raise over $126 million to help “change the face of men’s health.” These funds go toward finding cures for men’s health issues such as prostate and testicular cancer.

Now that we're almost at 100 employees here at Moz, we thought we could pull together a decent sized team this year. As of today, we have over 30 team members and will work to raise as much money as we can during the month of November. Our famously bearded CEO, Rand Fishkin, has agreed to join the team and is already sporting his new clean-shaven look!


Rand in his Halloween costume yesterday

How Do I Donate?

While growing a mustache for 30 days is probably something many Mozzers would do without any motivation, the main reason we’re doing this is to raise money for charity. We’re also a pretty competitive bunch here at Moz so we want to see how much money we can raise and would love your support. Plus, here’s the best part... now that Moz has a new benefit perk of 150% charity matching, we’ll be able to more than double our final tally with money from Roger!

Each Mozzer who is participating has an individual profile page that you can donate to (below). The money each Mozzer raises will go towards our overall team goal.

You can also donate directly to the Team MozStaches page here: http://us.movember.com/team/547105
 

Show Me The Team

Here’s a list of each Mozzer who is participating and a link to their profile pages:

Patrick Roby

 

Lisa Wildwood

 

Rand Fishkin


Joel Day


Renea Nielsen

 

Miranda Rensch


David Weiser


Andrew Mohler


Andrew Dumont


Aaron Wheeler


Matt Peters


Douglas Vojir

 

Casey Henry

 

Nick Sayers

 

Jamie Steven

 

Kurtis Bohrnstedt


Justin Vanning


Chris Auty

 

Stephen Wood

 

Derric Wise

 

Dan Lecocq

 

Abe Schmidt

 

Koos Klevin

 

David Kosciuk

 

Leah Candelaria-Tyler

 

Chiaryn Miranda

 

John Fearnside

 

Devin Ellis

 

Phil Smith

 

Kenny Martin

 

Ethel Evans

 

Richard Nelson

 

Can I Participate Also?

Of course! We’d love to see members of the Moz Community also participate in Movember. Think your company can raise more money than us? We welcome any and all friendly competition! Send us your pics of your fine mustaches as well, and we’ll see how they compare to the Mozstaches.

Will You Be Documenting This?

Why yes we will. We plan on taking photos every day (and posting them to Facebook) to document the mustaches as they grow from infant stage to something Ron Burgundy would be proud of. Also, Roger was pretty darn excited about this chance to raise money for his human counterparts and decided to join in the fun. Keep on the lookout for photos as his robotic stache takes shape.

Thanks again for all your support and helping us raise money for charity!

#Movember Love During Mozcation Portsmouth, NH!

Portsmouth Foursquare is hosting checkin-for-charity at Mozcation to benefit Movember! To participate, check-in on foursquare at The Music Hall during the event and for every person that checks in (up to a swarm badge - 50 people), a donation will be made to the Movember Foundation. If you are interested in sponsoring please let Porstmouth Foursquare know by filling in their form at http://bit.ly/pledge4checkins.


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joi, 1 noiembrie 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Reflections on "Moral Choice" and Definition of "Temporary"

Posted: 01 Nov 2012 03:39 PM PDT

California voters have some choices to make in the upcoming election. For example, Governor Brown says Californians Face 'Moral Choice' in Tax Vote
California Governor Jerry Brown said voters face a "moral choice" on his ballot measure to raise taxes to avoid deep cuts to schools.

"What we're facing here is a very stark moral choice," Brown, a 74-year-old Democrat, said today at a conference of the National Association for the Advancement of Colored People, or NAACP, in San Mateo, near San Francisco. "Are we going to invest in our kids, in our schools, in our colleges, in our universities, or not?"

Brown's measure, Proposition 30 on the Nov. 6 ballot, would temporarily boost the state sales tax to 7.5 percent from 7.25 percent and raise the levy on income starting at $250,000. A rejection by voters would trigger $5.5 billion in education cuts.

His plan is being challenged by a competing proposal offered by Los Angeles lawyer Molly Munger, whose father Charles Munger is vice chairman of Berkshire Hathaway Inc. (BRK/A) Her initiative, Proposition 38, would increase tax rates for 12 years on income of more than $7,316 by 0.4 percentage point for the lowest earners to 2.2 percentage points for those making more than $2.5 million a year.
Reflections on "Moral Choice"

The moral choice was not to put ludicrous proposals in front of voters in the first place. Was there nothing else but schools for Brown to cut?

Even if there was nothing else but schools to cut, pray tell, why can't teachers make a "moral choice" of reduced benefits "for the sake of the kids"?

Why is it overburdened taxpayers have to pony up so teachers and other public unions get benefits most can only dream about?

The real "moral choice" is to tell Brown where to shove it and the same thing can be said to Molly Munger who wants to "temporarily" hike taxes.

Definition of "Temporary"


Molly's definition of "temporary" is a "mere" 12 years. You are out of your mind if you think that will be the end of it. As soon as taxes are hiked, public unions will be demanding massive pay hikes, "for the kids" of course.

My friend Hugo Salinas Price discusses the meaning of "temporary" in his excellent article Reflections on the effects of War as compared to the effects of Fiat Money.
At Bretton Woods in 1944 Henry Morgenthau and Harry Dexter White outmaneuvered John Maynard Keynes, the British Delegate to the Monetary Conference, and the Conference ended by accepting the American "diktat" for the post-war monetary structure of the world: the dollar was to be as good as gold for purposes of international payments, and the US promised to redeem for gold dollars held by other national central banks at the rate of one ounce of gold for each $35 dollars tendered for redemption. ...

Came the fateful day, August 15, 1971, and the US had to default on its promise to redeem dollars for gold – it was going to be only a "temporary" suspension, Nixon assured the American people.

Alas, in politics nothing is more permanent than a temporary measure. The dollar became the full-fledged fiat currency of the world.
Cut the Money to Special Interests

Ed Ring, Director of Finance, Yes on Proposition 32 writes ...
Hello Mish

Special interests who oppose the YES on the Prop. 32 political spending reform initiative have raised nearly $70 million.

Virtually all of this money has come from public sector unions, who use forced dues and fees, taken from government worker paychecks, to fund the annihilation of any political rival who challenges them. How's that for your tax dollars at work?

And apart from government union organizations, how many actual individual donors from these alleged "middle class working families" are reported on the California Secretary of State's website as having voluntarily contributed to this massive warchest? Only 6 people. Seven, if you include the hedge fund billionaire who donated $500,000.

Please join millions of Californians next week to vote YES on Prop. 32, a campaign finance reform public sector unions have raised a massive war-chest to defeat.

Proposition 32 prohibits union political contributions from being automatically deducted from employee paychecks. This means that if public sector unions want their members to contribute a portion of their paycheck to a political campaign, first they have to ask permission. Is this so unreasonable?


Without passage of Prop. 32, California will never fix the public schools, reform the prison system, hold fair elections, balance government budgets, streamline government agencies, or reduce the crippling tithe demanded by the pension bankers. A YES vote on Prop. 32 is a vote for freedom.

The dismal results of unionizing our state and local governments should be clear to anyone, Republican or Democrat: Failing schools, bankrupt cities, and no money left for anything apart from more pay and more benefits for unionized public employees. And unlike private sector unions who must be reasonable or they bankrupt the company, public sector unions simply elect politicians who vote to raise taxes. No wonder California has the highest taxes in the nation.

Public sector unions have been the most powerful political players in California for decades. Prop. 32 doesn't break these unions, it merely requires them to ask their members' permission before using their dues to make political contributions. It is a necessary step towards restoring balance to California politics.

Vote YES on November 6th for real campaign finance reform: Prop. 32, the Stop Special Interest Money Act, is our best chance to take California back. Here's how it will change the rules in Sacramento:

1) Prohibits direct corporate and union contributions to state and local candidates,

2) Prohibits contributions by government contractors to the politicians who control contracts awarded to them,

3) Prohibits automatic deductions by corporations, unions, and government of employees' wages to be used for politics.

Let's make our voice heard again. Vote YES on Prop 32 to Stop Special Interest Money.

Please help us - donate now.
Please make a donation, I just did, and I do not even live in California.
And when time comes to vote ...

  • Vote Yes on 32
  • Note No on 30
  • Vote No on 38

Remember, when it comes to politics and especially tax hikes in California, "nothing is more permanent than a temporary measure".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


"Deposit Wars" an Act of Desperation by Spanish Banks; Bankia Déjà Vu

Posted: 01 Nov 2012 10:44 AM PDT

Acts of Desperation

Looking for the next major thing in Spain to blow sky high? I have a strong candidate in mind.

Bank deposits are down 154 billion euros this year and banks have resorted to paying unsustainable interest rates as high as 8% to attract money.

Via Google translate from El Economista, please consider war rages over deposits: Spanish banks are "desperate"
A new war between Spanish banks deposits threatens to destroy their already depleted profit margins by offering higher interest to depositors to attract new customers in a desperate battle for scarce capital.

Entities found new ways to avoid legal restrictions and encourage customers to leave deposits to buy notes, products which are not protected by the Deposit Guarantee Fund.

Spain is in the spotlight of the debt crisis in the euro zone and many of its banks are unable to raise money in financial markets, forcing them to attract customers with deposits with annual rates above 4%, and that in some extreme cases reach 8% - a figure well above the average rates in the euro zone, amounting to 2.7% within two years.

"Self-destructive strategy'

"It's a self-defeating strategy," said a banking analyst in Madrid. "The margins are falling. When banks have to resort to such practices is because they are desperate," he added.

Most Spanish banks offer more than 3% for new customers who deposit at least $ 3,000 for a year or more, although some entities like People or Ibercaja offer more than 4%. While banks need capital, rates are likely to continue rising.

"There will probably be an intensification of the war in deposits this quarter to post some good numbers at the end of the year", said the chief executive of Bankinter, Maria Dolores Dancausa told analysts on a conference.
Depositors Beware!

"Superdepósitos" penalties were lifted in August and bank deposits have somewhat stabilized.

However, banks are paying far more for deposits than they can get for mortgages and other loans. Moreover the mortgage business and indeed the entire lending business in Spain is a disaster.

This setup cannot possibly end well for those chasing high rates, so it won't.

Bankia Revisited

Many Bankia investors thought they were making government guaranteed deposits, but in reality they were buying debt instruments later wiped out in bankruptcy. The same thing appears to be happening again.

Consider the May 29, 2012 Bloomberg article Bankia Depositors Buying Bonds Leave Spain on Bailout Hook
Bankia is among Spanish lenders that sold 22.4 billion euros ($28.2 billion) of preferred stock to individual investors through retail branches, according to data compiled by CNMV, the financial markets supervisor. In a so-called bail in, these investors would be wiped out before holders of more senior bonds, which tend to be banks and institutions.

Fernando Herrero, the secretary general of ADICAE, a Madrid-based association of clients of financial institutions, estimated that about 1 million Spanish households bought banks' preferred shares, some of which have been converted to common equity or subordinated convertible bonds.

"The instruments were marketed as very liquid and as safe as a deposit," said Herrero, who described issuing the risky securities to individual investors as an "original sin."
Next consider my June 28, 2012 post Bankia Valued at EUR -13.635 Billion; Spain Becomes Sole Owner, Shareholders Totally Wiped Out; Entire Bankia Board Resigns.

Déjà Vu All Over Again

There is no way Spanish banks can pay 3% interest, let alone 8% interest on deposits. Anyone taking such offers is bound to get hammered down the road in debt-to-equity conversions.

Expect "Déjà Vu All Over Again" because more Bankia-type blowups are surely on the way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


What's "Really" Behind Gross Inequalities In Income Distribution?

Posted: 01 Nov 2012 03:03 AM PDT

Here is the question of the day: What's Behind Gross Inequalities In Income Distribution?

I ask the question after reading three incorrect answers in the article Inequality and the Second Gilded Age on the Real-World Economics Review Blog.

Misguided Notions on Commodity Values

Writer David Ruccio kicks things off by stating "The only way you can answer that question is based on a theory of value — a theory of how commodity values are determined and how the resulting flows of value are distributed to different participants in the economy."

Ruccio gets off on the wrong foot because there is no such a thing as "commodity value" that can be measured.

Here are a few snips straight from chapter 2 "On the Measurement of Value" from The Theory of Money and Credit by Ludwig von Mises.
Although it is usual to speak of money as a measure of value and prices, the notion is entirely fallacious. ... Acts of valuation are not susceptible of any kind of measurement. ... But subjective valuation, which is the pivot of all economic activity, only arranges commodities in order of their significance; it does not measure this significance.
Misguided Notions on Skill-Based Technology

Ruccio goes on to state "Brad DeLong, who admits that he was wrong to presume that the late-20th century America would be 'a much more equal place than early 20th century America,' focuses on exogenous factors such as winner-take-all markets in an increasingly globalized world and skill-based technical change to explain growing inequalities in the Second Gilded Age."

Clearly there is a "winner-take-all" concept in the markets, but it should be equally clear that winner-take-all is not primarily based on technical skills.

Did Mitt Romney really have any "technical skills" or did he learn how to use leverage to his advantage? Most top executives of financial companies have no "technical skills" to speak of although many do have "analytical skills".

Many one-percenters were nothing more than huge gamblers. Get enough people gambling, and the law of averages says some will strike it big. Some were just plain lucky.

Misguided Notions on Changing Attitudes Towards Unions

The worst explanation comes from Mark Thoma who emphasizes "the changing political tide over the last few decades, and how that has altered public policy towards institutions such as unions that were able to help workers get a fair share of the output they produce."

Good grief. If you are looking for someone who is 180 degrees wrong and is not even in the correct ballpark, then look no further than Thoma.

The fact of the matter is unions, especially public unions have bankrupted cities states and municipalities by driving up costs far more than politicians were willing to hike taxes to pay for them.

Many police and firefighters make more in retirement than they did working. Moreover, a majority of them get to retire at age 50 or so, provided they put in 20 years.

Those benefits may not be in the top 1% but they are probably in the top 5%. Who has to pay for that? The bottom 95%, that's who.

Framework For Discussion

Let's step away from the misguided notion of "value" and reflect on the last two major boom-bust cycles.

In 2000, there was an internet boom of epic proportion followed by an equally large bust. Who benefited from that? Clearly it was not the 99%.

From 2002 through 2006 there was a housing boom, the biggest the world had ever seen. Who benefited from that? Clearly it was not the 99%.

By the time those on the bottom end of the totem pole took part in the credit expansion boom, they were destroyed by it.

Many one-percenters (with zero technical skills) amassed fortunes during the housing boom. Some lost it all back. Others (with zero technical skills) made fortunes betting against the bubble. Still others went broke betting against the boom too early.

Some gamblers won and some lost. Technology had nothing to do with any of it.

Take a look at Countrywide Financial CEO Angelo R. Mozilo. He cashed out $1 billion in stock options in a few short years during the housing boom. Yet the company itself  became nearly worthless!

If one really wants to understand "gross inequalities in income distribution" one needs to understand precisely how and why that happened.

Here's a hint. Lack of unions had nothing to do with it. Fiat money does. So does fractional reserve lending.

Reflections on the Effects of Fiat Money

My good friend, Hugo Salinas Price touches upon the root cause of income distribution inequity in his latest article Reflections on the effects of War as compared to the effects of Fiat Money.

I encourage you to read the entire article because he provides excellent historical perspective, but here is one critical snip.
The apparent prosperity of the developed nations of the world today has been sustained by credit expansion, not by savings. The West has been living like an heir to a great fortune, wasting away its inheritance. It is now bankrupt. The continuance of a whole way of life is now in danger of collapse, because it is becoming impossible to expand credit any further. The Chinese are in no better situation: their supposed prosperity will crumble when the policy of expanding credit in the West has to come to a halt and the markets which China has supplied fade away.

Fiat money is the child of the arrogance of human intellect, which has sought to invalidate the laws of human nature which have regarded the precious metals as money for thousands of years, and sought to substitute an intellectual construct for the real thing. Now we are going to pay for that arrogance.

What now? Nobody knows. Unquestionably, we are headed straight into fearful problems never seen before. At least, owning physical gold and silver may be help some of us survive.
Inflation Targeting Non-Solution

Fed Chairman Ben Bernanke would have you believe deflation is a bad thing. Common sense says otherwise. So clearly Bernanke is devoid of common sense.

Ask anyone on the street if they want lower food prices, lower energy prices, lower rentals, lower health-care costs, or lower education costs.

100% of the 1% would want exactly that!

Yet Bernanke wants prices to go up by 2% a year. Here is a chart and commentary from my post World Economic Forum Endorses Fraud
Inflation Targeting at 2% a Year



click on chart for sharper image.

Many bad things can happen with Bernanke's 2% inflation target.

  • Wages do not keep up.
  • Asset bubbles build
  • Rising asset prices make it appear debt is sustainable
  • Wage growth is disproportionate to debt
  • Wealth concentration
  • By the time bubbles are spotted it is already too late
  • Recessions happen
Take a good look at that first bullet point.

Did wages rise to keep up with inflation? They did for a while. Then what? Then manufacturers decided to move jobs to China.

Then we had boom bust cycles of immense proportion as Bernanke saved the banks and the bondholders (the wealthy) at the expense of the 99%.

The 1% knew all along Bernanke would do that because Bernanke carried out the same fatally-flawed moral-hazard "too big to fail" policies as Greenspan.

Bernanke also slashed rates to 0% and paid banks on "excess reserves". This is free money for the wealthy but yields 0% interest for those on fixed income.

Now Bernanke is so trapped in his academic ivory tower that he cannot figure out that he personally is part of the problem.

Steve Keen Chimes In

Australian economist Steve Keen chimed in on my inflation targeting post with Mish Mashes the WEF
The American mathematician Andrew Bartlett claims that "The greatest shortcoming of the human race is our inability to understand the exponential function", to which I'd add that that shortcoming almost defines neoclassical economics. 2 percent per annum doesn't sound like a lot, but over 36 years that means the ratio doubles, over 72 it quadruples, over 144 it becomes 8 times what it was, and so on.

Mish provides some nice graphs to illustrate this process.

For the record, the actual rate of growth of the private US debt to GDP ratio was roughly 2.9% p.a. from 1945 till 2008. That means that the ratio doubled every 25 years, from 45% in 1945 to 90% in 1970, 180% in 1995, and if it had kept going, it would have been 360% in 2020.

Instead it fell over in 2008, and is now going backward at a rate of knots. Here's an extrapolation of the trend that the WEF says is "nothing unsustainable about", from the time period they should have started their analysis—not 2000 but 1945—and focusing on the key problem—private debt:


"Nothing unsustainable about" it, eh? This naivety by neoclassical economists about growth and exponential processes in general is positively dangerous for the human race.

I'll let Mish take over from here.
Three Credit Questions, Three Answers

  1. Who has first access to credit? Answer: The banks, the political class, and the already wealthy.
  2. Who benefits the most from inflated asset prices? Answer: The banks, the political class, and the already wealthy.
  3. Who gets hammered in real terms by rising inflation? Answer: The bottom 10%, then the next 20%, then the lower middle class, then the upper middle class.

The Biggest Academic-Sponsored Fraud in History

Inquiring minds may be wondering "Is deflation really a problem?"

The fact of the matter the natural state of affairs is deflation. Productivity improvements over time lead to lower prices. Attempts to prop up prices only benefits those in unions, those holding assets, and government bureaucrats who want to raise taxes.

Deflation is only perceived to be a problem because of the reckless expansion of credit that preceded it.

Look at it this way: If deflation caused a downward spiral in which everyone held off purchases expecting lower prices tomorrow, not a single computer would have been sold since 1990!

Yet, the price of computers, memory cards, wide-screen TVs, and in fact everything technological has been dropping like a rock for ages. Every day such items are bought. That would not be happening if Fed and academic theories regarding the downward spiral of deflation were remotely true.

Moreover, and as noted above, the unseen effect of the Fed's attempt to prop up wages and prices directly led to a loss of jobs to China.

The "deflation is bad" theory is the biggest academic-sponsored fraud in history. 

Fractional Reserve Lending as the Great Enabler

Here is a crucial fifth question: What is the enabler of rapidly rising credit?

The answer is fractional reserve lending.

However, fractional reserve lending and expansion of base money supply by the Fed does not guarantee expansion of credit (a point Keen would agree with).

Nonetheless, fractional reserve lending does serve as the enabler to massive credit expansion (a point Keen may dispute). 

Many Austrian economists make a huge mistake by assuming that money supply will quickly come pouring back into the system expanding 10-times or more, causing massive price inflation.

The reality is banks lend if and only if both of the following are true.
  1. They are not capital impaired
  2. They have credit-worthy borrowers willing to borrow.
For a discussion please see Can Bernanke Force Banks to Lend by Halting Interest on Excess Reserves?

Before you object to point number 2, please read Reader Questions on "Credit-Worthiness": Did Banks Give Mortgages to Non-Creditworthy Borrowers?

Role of Government

We are still not quite there. Let's not ignore the role of government in this mess.

  • Numerous "affordable housing" programs helped send housing prices to the moon. 
  • President Kennedy authorized collective bargaining of public unions, driving up costs to cities, states, and taxpayers. Unions and politicians benefited. Everyone else lost purchasing power due to rising taxes.
  • Student loan programs made debt slaves out of kids for life.

In short, government interference into the free markets exacerbated the problem of Fed bubble-blowing policies.

We can now finally answer the question.

What's "Really" Behind Gross Inequalities In Income Distribution?

  1. Fractional Reserve Lending
  2. Inflation targeting by the Fed
  3. Moral hazard policies of the Fed that encourage winner-take-all speculation
  4. Government interference into free markets
  5. Public unions

The result of all five practices is the hollowing out of the middle class from the bottom up.

The solution is sound money, elimination of the Fed, the end of public unions, and minimal government interference in the free markets, not income rules, not misguided regulation of banks, and not more debates about how to measure something that cannot be measured.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

"Wine Country" Economic Conference Hosted By Mish
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