miercuri, 20 august 2014

"Jim Foley's Life Stands in Stark Contrast to His Killers"

Featured

"Jim Foley's Life Stands in Stark Contrast to His Killers"

This afternoon, President Obama spoke about the killing of journalist James Foley by the terrorist group ISIL. "The entire world is appalled by the brutal murder of Jim Foley," he said. "Jim was a journalist, a son, a brother, and a friend. He reported from difficult and dangerous places, bearing witness to the lives of people a world away."

The President made clear that Foley's life "stands in stark contrast to his killers" -- and reiterated that the U.S. will continue to do whatever is necessary to protect the American people.

"We will be vigilant and we will be relentless," he said. "When people harm Americans, anywhere, we do what's necessary to see that justice is done. And we act against ISIL, standing alongside others."

Watch the President's full statement here:

Announcing the All-New Beginner's Guide to Link Building

Posted: 19 Aug 2014 05:15 PM PDT

Posted by Trevor-Klein

It is my great pleasure to announce the release of Moz's third guide for marketers, written by the inimitable Paddy Moogan of Distilled:

The Beginner's Guide to Link Building

We could tell you all about how high-quality, authoritative links pointing to your site benefit your standing in the SERPs, but instead we'll just copy the words straight from the proverbial horse's mouth:

"Backlinks, even though there's some noise and certainly a lot of spam, for the most part are still a really, really big win in terms of quality for search results."
— Matt Cutts, head of the webspam team at Google, 2/19/14

Link building is one area of SEO that has changed significantly over the last several years; some tactics that were once effective are now easily identifiable and penalized by Google. At the same time, earning links remains vital to success in search marketing: Link authority features showed the strongest correlation with higher rankings in our 2013 ranking factors survey. For that reason, it has never been more important for marketers to truly earn their links, and this guide will have you building effective campaigns in no time.

Read the Beginner's Guide to Link Building

What you'll learn

1. What is Link Building, and Why Is It Important?

This is where it all begins. If you're brand new to link building and aren't sure whether or not it's a good tactic to include in your marketing repertoire, give this chapter a look. Even the more seasoned link earners among us could use a refresher from time to time, and here we cover everything from what links mean to search engines to the various ways they can help your business's bottom line.

2. Types of Links (Both Good and Bad)

Before you dive into building links of your own, it's important to understand the three main types of links and why you should really only be thinking about two of them. That's what this short and sweet chapter is all about.

3. How to Start a Link Building Campaign

Okay, enough with the theory; it's time for the nitty-gritty. This chapter takes a deep dive into every step of a link building campaign, offering examples and templates you can use to build your own foundation.

4. Link Building Tactics

Whether through ego bait or guest blogging (yes, that's still a viable tactic!), there are several approaches you can take to building a strong link profile. This chapter takes a detailed run through the tactics you're most likely to employ.

5. Link Building Metrics

Now that the links are rolling in, how do you prove to ourselves and our clients that our work is paying off? The metrics outlined in this chapter, along with the tools recommended to measure them, offer a number of options for your reports.

6. The Good, the Bad, and the Ugly of Link Building

If we're preaching to the choir with this chapter, then we're thrilled, because spammy links can lead to severe penalties. Google has gotten incredibly good at picking out and penalizing spammy link building techniques, and if this chapter isn't enough to make you put your white hat on, nothing is.

7. Advanced Link Building Tips and Tricks

Mastered the rest of what the guide has to offer? Earning links faster than John Paulson earns cash? Here are a few tips to take your link building to the next level. Caution: You may or may not find yourself throwing fireballs after mastering these techniques.

Enough talk, let's get to the guide!

The PDF

When we released the Beginner's Guide to Social Media, there was an instant demand for a downloadable PDF version. This time, it's ready from the get-go (big thanks to David O'Hara!).

Click here to download the PDF.

Thanks

We simply can't thank Paddy Moogan enough for writing this guide. His expertise and wisdom made the project possible. Thanks as well to Ashley Tate for wrangling the early stages of the project, Cyrus Shepard for his expert review and a few key additions, Derric Wise and David O'Hara for bringing it to life with their art, and Andrew Palmer for seamlessly translating everything onto the web.

Now, go forth and earn those links!

Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!

The Six Principles of Good Choice Architecture

The Six Principles of Good Choice Architecture

Posted: 19 Aug 2014 12:30 AM PDT

"If anything you do influences the way people choose, then you are a choice architect".

These are the words of Richard Thaler, a behavioural economist who is one of the authors of Nudge, a book about choice architecture and the role it can play in improving how people make choices.

Choice architecture applies to all aspects of life but combines particularly well with marketing. Websites enjoy a unique position within marketing and form the centrepiece for many brands' communication efforts.

By applying the core principles of choice architecture you can improve the effectiveness of your website in simple but powerful ways.

There are six core principles of choice architecture that I outline below. Each one is accompanied by some real life examples, some from the web and some from other walks of life, to give you a feel for each principle.

Understanding these principles can make you look at communication in a new way and help you to improve overall user experience online; something that Google is increasingly keen on!

1. Incentives

The first principle of effective choice architecture is concerned with answering the question, "what's in it for me?"

When someone is presented with a choice they will need some form of incentive to encourage them to make the correct / desired choice.

This is easier to explain by using some examples.

Selling your car

Before the days of the internet, selling your car used to come down to two options: sell it privately or part-exchange.

Both options were accompanied with a heavy cost in terms of hassle, so not much incentive there.

We Buy Any Car has used the internet to make the incentive to sell your car to them much more enticing.

The We Buy Any Car website does a fantastic job of giving the customer an incentive to try their service.

The personal cost of finding out how much they will pay for your car is very low – there is little hassle involved in entering your registration number.

The website also does a good job of communicating the advantage of selling with them; 80% of customers say they get a better deal than part exchange.

This is clearly a good example of where the incentive of removing hassle has resulted in a behaviour change for people selling their car.

Washing your hands

Rory Sutherland (of Ogilvy Change) has a novel way of changing behaviour with a simple nudge. The video below describes how using a simple system can show people that making a small change at low cost can come together to make a big impact.

The incentive: save the environment, the cost: change your behaviour in a very small way.

2. Mappings

Effective mapping is all about making it easy for your customer to understand what they are going to experience when they purchase your product or service.

Mapping is a particularly important principle for websites because a website does not enjoy the luxury of being able to hold a face-to-face conversation with a customer. Instead, the experience of purchasing your product or service needs to be communicated through content.

Below are examples of where I think two websites could make improvements in this area.

Megapixels

When buying a new camera, one of the most prominent features advertised is the number of megapixels the camera uses.

Here is a screenshot of how the Jessops website sells cameras:

Notice the navigation on the left, which allows the customer to filter search results by the number of megapixels the camera has.

The problem is that megapixels as a measurement is a pretty useless number; not many customers truly understand what it means when purchasing and using a camera.

Customers don't really need to know how many megapixels they get, instead they need to know what size photos they can print.

Jessops could improve the choice architecture on their website by allowing customers to filter results by photo print size instead of megapixels, as shown in the table below:

Mobile data contracts

Another confusing choice that consumers face is how much mobile data they will need with a new phone contract.

The screenshot above is taken from the Three.co.uk website displaying three mobile phone options including data.

Notice how the data is sold in gigabyte (GB) units.

All very well except what on earth is a GB?

All a consumer wants to do is check their emails, login to Facebook, send a tweet, check the news and find a restaurant.

How many GBs would that require?

I work with websites every day and I have never taken the time to truly understand how much data I use on a daily basis.

Perhaps a better way to sell mobile data could be to sell it in units of time; 5 hours of data, 10 hours of data and so on.

Time is something everybody understands and as a result will be able to 'map' what they are purchasing to the experience they will have after making the purchase.

This is a simple change that phone providers could make to their websites that would remove an unnecessary layer of confusion from the customer journey.

3. Defaults

The simple truth that makes the defaults principle work is that people take the action that requires the least amount of effort.

Based on this understanding, a good piece of choice architecture will set the correct default options from the start in order to guide the consumer in the correct direction with the least amount of action.

Take note of this principle when building a form on your website, or putting together a product offering that requires making lots of decisions in terms of specific features.

Saving for retirement

The UK government recently made use of the defaults principle when coming up with a new approach to pension choices.

Before 2012, pensions were something that workers were required to opt-into. The default position was that workers were not enrolled into a pension scheme unless they specifically chose to do so.

Following the introduction of auto-enrolment, where employers are required to automatically opt staff into a pension scheme, being a member of a pension scheme is now the default choice.

The result is that a lot more workers will be opted-into a pension scheme and will be saving for retirement.

Software updates

In 2013 Apple launched iOS7 for its mobile phones and tablets.

With it came automatic app updates; the default position was that apps would now automatically update themselves unless the user actively asked them not to.

The result is that fewer Apple device users are using apps that are out of date and at risk of being hacked, attacked by malicious software, or failing.

A simple change that shows how a default position can be used for the good of your customers.

By setting the correct defaults you can prompt your customers to make the correct choices and ensure that they end up with the experience that they are looking for, without having to jump through hoops to get it.

4. Give Feedback

The best way to improve your performance at something is to receive feedback. This is what the feedback principle is all about.

When you throw a ball at a target and miss you get immediate feedback (via your eyes) that can help you to improve your next throw.

Imagine if you could not see the result of your throw. Chances are you would never improve because the lack of feedback would hinder your ability to learn and make adjustments.

A good piece of choice architecture should work in exactly the same way.

A website that does not provide feedback when an action is taken can lead to a negative user experience; I know a panda who is very keen on user experience by the way…

Form validation

An example of good feedback is seen when using Google's insurance comparison tool.

Whenever you reach a new field in the form and then move on without completing it, the page immediately tells you that you have missed a required field (as shown above).

This is in contrast to websites that wait for you to complete the entire page before telling you that something is wrong (or even worse, not telling you at all).

Google does a good job of providing immediate feedback allowing you to move through the fields quickly, completing them correctly straight away. No wasted time and no frustration.

E.on energy comparison

E.on has come up with a clever way to use the feedback principle to help its customers to change how they use energy.

The service allows customers to compare their energy use with similar customers who live nearby, using the company website.

Customers can tell if they are using too much energy and find out ways to reduce their energy costs based on the information they receive.

The feedback this piece of content marketing provides is that it allows customers to make choices based on information they had previously not had access to.

5. Expect Error

All websites should expect their users to make mistakes. Whether it is clicking on the wrong link, using an out of date web browser, or misunderstanding a complicated idea.

Working on solutions for websites, I often come across situations where we must change a feature to cater for all types of mistake.

How customers use the website

A recent example was seen when implementing a new method of conversion tracking on an ecommerce website. The method required the customer to return to the client's website from PayPal (where the transaction was completed) and this process would register as a sale.

Although the path back to the website from PayPal was the obvious route, the problem was that there was a chance some users might not follow the conventional path to the website and, as such, a more robust system had to be developed in order to avoid an error.

The error in this example would have been rare, but the 'expecting error' principle meant that we looked at all angles and created a solution that avoided the potential for the customer to get lost between PayPal and the website.

Forgotten attachment

A clever way email clients expect error is when you forget to add an attachment to your email:

Microsoft Outlook (pictured above) and Gmail both have a feature which looks for words like 'attached' or 'attachment' within emails.

If the word is found, the email client will then check to see if a file has been attached to the email. If not, a reminder pops up to ask if you intended to add an attachment before you send it.

This simple piece of choice architecture has saved more than a few blushes; it is one my personal favourite features of Gmail and Outlook.

6. Structure Complex Ideas

When faced with a small number of choices, consumers are pretty good at reviewing each option and then making a choice based on their own preferences.

However, the comparison process is not as easy when there are lots of complex options.

Amos Tversky, a cognitive psychologist, described the process of dealing with a complex set of choices as 'elimination by aspects'.

The process Tversky described involves a person deciding on the most important features of the available options and then setting a minimum requirement to make a decision.

The example used in Nudge is when you are searching for a new flat to rent. Because it would not be realistic to go and view all of the flats in the city, you are forced to make some cut-off points:

Flat is no more than 30 minutes from work
Flat has no fewer than two double bedrooms
Flat costs no more than £X per month

Although this approach greatly reduces the number of flats you must consider, it can prove costly if the perfect flat to rent happens to be 31 minutes away from work.

The principle of structuring complex ideas is all about reducing the opportunity to miss out on the correct choice because of complexity.

Finding a new car

Finding a new car to buy can be a pretty complex process.

Motors.co.uk does a good job of offering its customers choices based on real-life scenarios, in order to filter down to suitable cars:

The smart search feature lets the customer rank different features in order of importance to make the process of purchasing a car less reliant on budget only.

Finding a film to watch

One of the appeals of Netflix is that it includes a lot of films. So many that finding one to watch can be a bit of a nightmare.

To make this complex process simple, Netflix has made use of 'collaborative filtering'; a process where your previous behaviour matches up with that of similar people, which in turn allows the service to recommend what to watch next.

Please ignore the fact that I have been watching Jonathan Creek, but above is a screenshot from my Netflix account.

Netflix uses a feature that monitors what I have watched and rated highly, and then recommends new films and programmes to watch based on what it knows about me.

Ok, so it doesn't always get it right, I can't say that Stargate SG-1 is my cup of tea, but Utopia is right up my street, so well done Netflix!

Summary

There you have it, the six principles of good choice architecture.

If you think about these principles when working on your website you can make the user experience a thing of beauty.

For me, choice architecture boils down to one key element: simplicity. If your website and associated services are easy to use and easy to understand, then you should have no issues.

The post The Six Principles of Good Choice Architecture appeared first on White.net.

Seth's Blog : Totally and completely out of my control

Totally and completely out of my control

Gravity, for example.

I can't do a thing about gravity. Even if I wanted to move to Jupiter or the moon for a change in gravity, it's inconceivable that I could.

On the other hand, there are lots of things I can do to control my reaction to gravity. I can take Alexander classes or get in better shape. I can avoid situations where gravity makes me uncomfortable (the trapeze, for example). I can choose to not whine about gravity and its effects.

There are countless forces in our lives that are out of our control. That doesn't mean we can't do anything about how they influence our work and our life...

• Email to a friend •

marți, 19 august 2014

Mish's Global Economic Trend Analysis

Idiot's Guide to Austrian Economics
Ukraine Overnight Interest Rates Soars to 17.5%; External Debt Cannot Be Paid Back; Ukraine Demands Rebels Surrender
Recovery Mirage in Spain Dissipates Into Ashes

Idiot's Guide to Austrian Economics

Posted: 19 Aug 2014 02:12 PM PDT

Congratulations go to Forbes columnist John Tamny and editor of Real Clear Markets for producing the "Idiot's Guide to Austrian Economics'.

Ironically, that is not exactly what Tamny set out to do. The actual title of Tamny's article is "The Closing Of The Austrian School's Economic Mind".

Point by Point Look

Tamny: "It's well known that some Austrians have a major problem with 'fractional reserve banking' whereby banks pay for liabilities (deposits) by virtue of turning those liabilities into assets (interest paying loans). Instead, they borrow money from depositors seeking a return on their savings, and who don't need access to their savings right away, only to lend the money borrowed to individuals who do need it right away. The profits come from borrowing at one rate of interest, then lending longer term at a higher rate."

Mish: With that single paragraph Tamny proves he does not understand AE or fractional reserve lending. In fact, he makes it clear he is clueless as to where the money banks lend even come from. AE has no beef against lending. Rather, AE does object to money being created out of thin air for lending.

I don't care, nor does AE care if 100% of deposits are lent out, as long as three conditions are met: 1) Money is not created into existence by the loan 2) Money is not lent out for terms longer than the bank has access to the money 3) Depositors who lend money to the banks for interest are the ones who pay the price should there be a default on the loans.

In regards to point number three, it should be implicitly understood that the higher the interest banks pay for deposits, the greater the risk the banks (and depositors) must take to achieve that return. If it blows up, depositors, not innocent bystanders should pay the price.

Tamny: "Banks aren't in business, nor could they remain in business if they simply warehoused money."

Mish: Is there a need for warehousing? Even if the answer is no (which it isn't), Tamny clearly fails to understand AE does not preclude lending. AE only precludes fraudulent lending.

Tamny: To many Austrians, this non-coerced act of exchange between consenting individuals is a fraud, and needs to be treated as such by the state. The Austrians want government to restrain what they deem a violation of property rights.

Mish: No! The problem of property rights comes into play multiple ways. Let's go through some examples.

1. Banks take a deposit, say a CD that pays interest for 5 years. Then the bank lends the money for 30 years. That's as fraudulent as me leasing a home for 5 years and issuing a 15 year sublease on my lease.

2. Checking accounts are known in the industry as "demand deposit accounts". Money is supposed to be available on demand. It isn't. In 1994 Greenspan allowed sweeps, whereby banks can nightly "sweep" all money from checking accounts into savings accounts, unbeknown to the depositor, so the money could be lent out. Money people think is there for safekeeping isn't there at all. The Fed recently stopped reporting of sweeps

Sound fraudulent to you? It does to me.

It's fraudulent even if people agree to it in obscure hard to understand legalese. Why? Because it's as fraudulent as lending out 100 tons of grain when only 20 tons are in the warehouse, whether or not the owner of the 20 tons of grain signs an OK for lending out 100 tons.

3. Fraudulent lending of money causes economic distortions of all sorts, especially economic bubbles and income inequality. Those with first access to money (the banks and the already wealthy) are the ones who benefit the most. By the time money is available to the lowest guys on the totem poles, assets are already grossly overpriced. Price and asset inflation caused by lending out more money that exists is tantamount to theft. It artificially and fraudulently lowers the value of money on deposit kept for safe-keeping (checking accounts).

Tamny: The problem here is that the Austrians don't stop at merely seeking an end to bailouts, Fed lending from its discount window, and while it's largely bank financed, privatization of the FDIC. They once again feel that borrowing from savers in order to lend those savings out is a fraud, and that the state should abolish "fractural banking" in favor of banks backed by "100 percent reserves." To Austrians, fractional banking leads to "excess credit creation" through what they refer to as a "money multiplier."

Mish: Tamny keeps repeating nonsense, further proving he does not understand AE or lending. You can also safely conclude Tamny does not understand 100% reserves. Note that 100% reserves do not preclude lending as Tamny seems to imply.

Unfortunately, the "money multiplier" effect to which Tamny refers is believed by some Austrians (but also some non-Austrians). Tamny gives a ludicrous straw-man example then sets out to prove it wrong.

Tamny: The problem is that the very notion of a "money multiplier" is a logical impossibility; one that dies of its illogic rather quickly if analyzed in the lightest of ways. To explain what isn't, banks are generally required to keep a 10% deposit cushion. Simplified, if a bank is the recipient of a $1,000 deposit, it can generally only lend out $900, or 90% of its deposits. What might surprise some is that the previously described loan is what has many Austrians up in arms.

Mish: Those who believe in the "Money Multiplier" theory are wrong, but so is Tamny. In a fractional reserve system banks can (and do) make loans whether they have reserves or not. Heck, banks can even borrow reserves from the Fed if need be.

From the BIS report Unconventional monetary policies: an appraisal

The level of reserves hardly figures in banks' lending decisions. The amount of credit outstanding is determined by banks' willingness to supply loans, based on perceived risk-return trade-offs, and by the demand for those loans.

The main exogenous constraint on the expansion of credit is minimum capital requirements.

The BIS has it correct. Any Austrians or other who believe in the money multiplier are wrong. Of Course Tamny is wrong as well.

Tamny: "Banks are generally required to keep a 10% deposit cushion."

Mish: There are no reserve requirements on savings accounts, and Greenspan allows sweeps of checking accounts into savings accounts so there are effectively no reserves of checking accounts either.

Lending is entirely based on whether or not banks believe they have a credit-worthy borrower that won't default (or that rising asset prices will cover any defaults).

On the absurd theory that consumers would not walk away from houses or home prices would go up enough to cover losses, banks made some pretty horrendous decisions. Once capital impairment set it, then and only then could banks not lend. 10% deposit cushions have nothing to do with lending, or lending restraints. The money multipliers are wrong, but so is Tamny.

Tamny: No reasonable person would suggest as certain Austrians do that banks multiply credit in lending out a large portion of the money they take in.

Mish: Total Credit Market Debt is $59.399 trillion. Base Money Supply is $4.01 Trillion. Thank God banks don't lend out a large portion of what they take in!

It seems to me that 100% lending looks reasonable compared to the 1,357% lending we have now.

Tamny: Notable here is that no one is keeping "deposit banks" backed by 100 percent reserves from forming, thus raising the question why Austrians themselves don't fulfill what they deem an essential market need. Indeed, if fractional banks are a fraud, wouldn't the free markets welcome the banks desired by Austrians that are apparently the opposite of fraudulent? The answer to the above is fairly simple. The markets shun "deposit banks" simply because the warehousing of cash involves a cost.

Mish: The answer is indeed easy but it's not the answer Tamny gives. The answer is banks make a profit off "legal fraud". They would make less profit if they didn't. Banks have every incentive to make money fraudulently simply because it's allowed.

People are willing to go along because of deposit guarantees, and also because the state mandates fiat money as legal tender.

In the Name of Fairness

Tamny had a bit on "fairness". And to be fair, Tamny is correct on this aspect:

To be fair here, Austrians are properly offended by bank bailouts and other governmental backstops that prop up errant banks, and it's the politically protected nature of banks that at least partially informs their views on banking. There's agreement on the subject of bailouts. Those that took place in 2008, and long before that, were an abomination that weakened the banking system. Precisely because we love banks and their economic function, and because failure is the author of innovative evolution, we should let them go bankrupt when they can no longer attract operating funds.

AE vs. Purported AE Writers

I can be fair too.

There is a difference between sound AE theory and what various writers propose as sound AE theory. I can claim to be a Martian. Does that make me one?

Many writers alleged to be AE writers are anything but.

Most of the hyperinflationists fall into this camp (and there is a huge number of them). The hyperinflationists range from being seriously misguided on a few points to being outright charlatans to serve their own purpose (and it is difficult at best to tell the difference).

Yet, the articles keep on coming and coming. The authors tend to have a few things in common:

They do not understand the difference between credit and money.
They do not understand debt deflation.
They are overly US-centric.

In a fiat credit-based economy, reckless expansion of credit lead to asset bubbles. Then when the bubbles burst, debt deflation ensues.

Japan, the Eurozone, and the US all went through this.

Debt deflation is still underway in the Eurozone. If asset prices in the US tank (which is inevitable), the US will be back in it. Japan, after decades (and inane Abenomics) may be coming out of it.

The US-centric authors point out soaring money supply in the US but ignore soaring money supply elsewhere, especially in China. The US is certainly not alone in economic madness. With nearly every major country doing the same thing, and with money supply soaring in China at an even faster rate than other major countries, it is ridiculous to signal out the US for hyperinflation.

There are conditions that could cause hyperinflation (defined as a complete collapse of currency), but it would take a political event to cause it.

For example: Congress could vote to give every US citizen $1,000,000 per year, indexed to price inflation. That would surely do it.

$4 trillion in QE when the total credit market is $59 trillion, hasn't (and won't) produce hyperinflation.

For a discussion of the political aspect of hyperinflation and what causes them, please see Reader Questions On Hyperinflation; Would Printing $50 Trillion Tomorrow Do Anything?

Money Multiplier and Reserve Madness

When it comes to the money multiplier and reserves, it's important to understand that in a practical sense there are no reserves.

One might dispute this by looking at Excess Reserves of Depository Institutions as shown below.

It appears banks have excess reserve lending capacity of $2.6 trillion dollars.

Economically illiterate writers (including some of the purportedly AE writers) make inane claims "Just wait till this money comes pouring into the economy 10 times over".

Yeah right. The fact is, lending comes first and reserves second. As I stated before (and the BIS agrees) when it comes to bank lending, reserves are essentially irrelevant.

Note that with every injection of QE, alleged excess reserves go up. They are "real" in the sense banks collect free interest on the reserves. In a "practical" sense, they are vaporware. The Fed can produce as many reserves as it wants, at any time, out of thin air.

If banks wanted to lend, they would lend, and then the Fed would create adequate reserves after the fact.

Excess reserves are simply free money to the banks who collect interest on them.

What bank doesn't want free money?

And who pays the price? Taxpayers via asset bubbles and inflation.

Property Rights

Let's return once more to property rights.

If I give money to a bank and it promises my money will be available on demand, and the next moment it lends a large portion of it out, my property rights are clearly violated.

What happens in such instances is twofold.

I own my money.
Someone else owns my money too.

Logically that is impossible. And that is precisely why it's fraudulent. I challenge Tamny to dispute that simple math!

It doesn't matter that most of the time not enough people show up for withdrawals to uncover the fraud. It is still fraud, every bit as fraudulent as someone subletting an apartment for 15 years when their lease is 5 years.

Moreover, the boom-bust cycle, caused by the creation of fiduciary media (deposits backed by nothing, out of thin air), harms completely innocent parties as well. It also impinges on their property rights and the value of their money and assets.

Finally, it should be clear that zero economic advantages can accrue from creating money from thin air. Not one iota of new capital can be created in this manner, it only redistributes already existing real wealth to those first in line for the money.

Reason for Rising Inequality

Looking for the reason behind rising income inequality and the decline in real median wages? Look no further than the Fed, free money to the banks, deficit spending, and fractional reserve lending.

Rothbard Chimes In

For more on the case against Fractional Reserve Lending please see

What Has Government Done to Our Money by Murray Rothbard.
Case Against The Fed by Murray Rothbard

On page 46 of the book Case Against The Fed Rothbard says "By the very nature of fractional reserve lending, banks cannot honor all its contracts".

Since that is known upfront, in advance, how is that not fraud?

My easy-to-understand examples show precisely where and why Tamny is wrong. Nonetheless, I also recommend the above eBooks by Rothbard. They are generally easy to read, and cover related topics in depth.

Conclusion

Tamny did not write "Idiot's Guide to Austrian Economics", rather, he wrote a guide guaranteed to make you an AE idiot, assuming you believed much of what he wrote.

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

Ukraine Overnight Interest Rates Soars to 17.5%; External Debt Cannot Be Paid Back; Ukraine Demands Rebels Surrender

Posted: 19 Aug 2014 11:30 AM PDT

It's crystal clear Ukraine has no interest in a ceasefire under any terms. Instead it demands rebels lay down weapons and for Russia to stop intervention. In short, Ukraine demands surrender.

Thus death and destruction will continue, possibly long after Ukraine takes over Luhansk and Donetsk (or rather what's left of Luhansk and Donetsk).

Please consider Ukraine Says It Makes Gains Against Rebels in Luhansk.

The Ukrainian government said its forces took control of one of four districts in the pro-Russian separatist stronghold of Luhansk and are fighting in the city center as diplomatic efforts to end the conflict intensified.

European leaders are pushing to halt the conflict that's killed more than 2,000 people and fractured Ukraine since Russia annexed Crimea in March.

"Ukraine's armed forces have been beating the separatists for weeks now and are moving deeper into the east," Karl-Heinz Kamp, academic director at the German government's Federal Academy for Security Policy in Berlin, said by phone. "Something must have happened that's boosting their fighting skills. My gut feeling -- and I don't have any concrete evidence -- is that the Ukrainian forces are getting support from the outside."

Ukraine's government says it will declare a truce only if the pro-Russian rebels lay down their arms and Russia stops supplying them with weapons. Russian Foreign Minister Sergei Lavrov, meeting with his Ukrainian, French and German counterparts in Berlin, repeated calls yesterday for an unconditional cease-fire. Russia denies it's aiding the rebels.

Ukraine Rates

The conflict has cost Ukraine $8 billion, Prime Minister Arseniy Yatsenyuk was quoted as saying today by the Unian newswire. Ukraine's central bank raised its overnight refinancing rate to 17.5 percent today from 15 percent as it seeks to support the hryvnia. The Ukrainian currency fell as much as 1.6 percent before trading little changed at to 13.03 per dollar, taking its decline for the month to 5.8 percent.

Hryvnia vs. US Dollar

From mid-2007 the hryvnia crashed from 4.50 to the US dollar to 13.03 to the US dollar. That is a decline of 65%.

Given that Ukraine's external debt is not priced in hryvnia, but rather euros or US dollars, this currency decline really hurts.

Ukraine External Debt

Rule: When you have massive (relative to the size of your economy), external debts denominated in foreign currencies, very bad things happen.

Ukraine's external debt as valued in US dollars has risen from under $40 billion in 2005 to nearly $140 billion today. Yet, I hear no mainstream media reporting on how Ukraine is supposed to pay this back.

Here's a hint. It can't.

And that is why interest rates are totally out of control, and why Ukraine will be beholden to the IMF and other creditors for decades unless it defaults.

As we all know ... This is a "small price" to pay for "peace".
And in case you missed it, please consider the Rule of Small Prices.

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

Recovery Mirage in Spain Dissipates Into Ashes

Posted: 18 Aug 2014 11:33 PM PDT

The mirage in Spain pretending to be a recovery, has officially dissipated into wind-blown ashes.

Spain's trade deficit doubled in the first half as imports soared. Spain is again dependent on foreign financing.

Via translation from Libre Mercado, Spain Again Borrows Abroad to Finance Consumption.

One of the main and genuine green shoots making the Spanish economy begins to show the first worrying signs of weakness. It is the foreign sector, one of the few economic engines of the country in recent years. And not because of the export slowdown , as the significant increase in imports.

Spain recorded a trade deficit of 11.882 billion euros in the first half of the year, almost double a year ago now, when this same gap stood at 5.824 billion.

According to the Economy Ministry report released Monday, exports slowed their growth, after rising just 0.5% yoy. Imports, meanwhile, rose 5.3%.

"Spain is still in debt," says economist Juan Ramón Rallo. "That 6 million unemployed can only increase imports, not domestic production illustrates our problems," he warns.

In the same vein, economist Javier Santacruz adds that the most worrying of these data is that we are not competitive (exports stagnate), but "imports soar to finance domestic consumption," as shown by the increase internaual foreign car purchase (+ 17.6%) and non-durable consumer goods (+ 19.1%).

In fact, overall imports do not even account for energy products, which fell by 4.1%.

Spain has been living on borrowed time for years, accumulating a huge debt to maintain their level of consumption and investment-their standards of living. Between 2002 and 2007, Spain was amassing a growing external deficit, as more and sell less abroad (exports) and bought more (imports), bringing its foreign debt grew.

This imbalance is reflected in a very specific indicator, the current account deficit, which in 2007 reached a record high close to 10% of GDP. That is, the entire country that year said external financing close to 100 billion euros to cover their consumption and investment.

The fact that the trade deficit has risen again after the minimum economic rebound in recent quarters is a sign of weakness, because it demonstrates the strong dependence Spain still external financing to maintain their level of consumption and investment.

Think Spain is going to meet its budget deficit goals for 2014? If so, think again.

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