Bikini Economics And The Red Queen

“You heard Marcellus threw Tony Rocky Horror out a four story window for giving me a foot massage? And you believe that?” – Pulp Fiction

Ahh, Chuck Norris, with his hair feathered like the wings of a majestic eagle . . .

We have a built-in bias that there is a way that the world should be, rather than spending effort on understanding how the world it, and adjusting accordingly.

When something “big” happens, the default human condition is to assume that things will eventually go back to the way that they were before the event.  This is normal.  I recall reading in Taleb’s The Black Swan about how his relatives in Beirut kept expecting Lebanon to go back to the way it was before war broke out in the 1970s.  It hasn’t.

And it won’t.  And Lebanese police have it the worst:  they have to investigate restaurants if they hear of a bad hummus side.

Our economy is that way.  It is built, in large part, on inertia.  In January 2020, a broad definition of money (the Federal Reserve® calls it M2) was $15.5 trillion dollars.  Today, it stands at $22 trillion dollars.  Keep in mind that this includes money just sitting in accounts, gathering dust.

The money supply has increased by at least 43%.  How?

This graph is somewhat misleading – it doesn’t explain that savings accounts were added in the adjustment to make that big vertical line.  The totals I have in the text above are the latest I could find at the Fed®.  All I can suggest is that you find someone as interested in you as the Wilder Spokesmodel® is interested in economics.

The government printed it and then spent it.  The banks lent it, since there is essentially a zero reserve requirement now.  Regardless, what it means is that dollars are being printed at an ever-increasing pace.  The latest spending bills just add trillions to the mix.

Through all of this, economists are pretending that 20% inflation is growth.  As prices go up, the Gross Domestic Product goes up. But inflation is increasing faster.  We’re in recession, but that recession is hidden by inflation.  Our economy is shrinking even as printed money makes it seem larger.

Oddly, there are plenty of jobs at lower wages that are going unfilled.  Why?  Because with current stimulus spending and government benefits, in some cases it doesn’t make sense for people to go back to work.  Work for $15 an hour, or play vidya and eat Twinkies® for $12?

Not a hard choice for many.

Did you hear about the Amish topless bar?  Not a bonnet in sight.

What about people who want to work but don’t want to take the “jab”?  Those wages are going up phenomenally as companies work to compete for a shrunken pool of labor.  Think EMTs.  Firefighters.

It is a weird recession – prices go up, wages are going up (but not as much as prices), labor is scarce, but the GDP is down in constant dollar terms.

Looking around the corner, this simply cannot last.  I’ve written about the Red Queen before.  The Red Queen said to Alice in Alice in Wonderland’s sequel, Through the Looking-Glass as Alice asks the Red Queen why they’re running and not getting anywhere:

“Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”

Well, it’s almost a bikini picture.

Printing dollars like we are is just keeping the economy (sort of) in the same place.  It’s the monetary equivalent of using increasing amounts of crack to cure a junkie, or using electrical shocks and massive amounts of medication to keep a doddering 79-year-old Alzheimer’s patient mobile enough to give a rambling speech off of a teleprompter when wheeled out in front of a crowd.  But in either case, a Biden and pudding are involved.  So there’s that.

I’ve begun to wonder if Hunter might not be the best of the two for the Oval Office, at least he has goals.  Prostitutes and crack cocaine are goals and there’s a chance he might not show up for work at all in a four-year span.  He’s good at taking jobs and getting paid for nothing.

But this ignores a basic principle of fact.  When I print a dollar, I have created nothing.  To explain this, I’ll go back to the writings of dead French guy Frédéric Bastiat.  Bastiat asked a simple question:  what happens if someone breaks a shopkeeper’s window?

Well, he must go buy another window.  If that costs 6 francs (7 and 3/16 liters) then the glassmaker has an economic gain, which he could invest in increasing the size of his glass manufacturing, or, more likely (since he is French) use it to buy cartoonishly long wands of bread, cheap cigarettes, and berets.

So everyone wins, right?  The shopkeeper gets a new window, and the glassmaker gets a profit.

Well, if that were correct, then all we would have to do is enjoy the George Floyd Economic Plan®:  burn down cities and everyone gets rich when we rebuild them.

Obviously, that’s nonsense, primarily because the economy is (at best) the same as it was before.  At worst?  Every dime spent to replace broken glass is a dime that wasn’t spent making the economy wealthier:  many profits are spent to increase capacity or efficiency.  Increased capacity increases the wealth that the factory can produce.  Increased efficiency lowers their cost.  Both of these things are (generally) good.

Breaking windows, like printing dollars, is just theft.  Whereas the shopkeeper has his window destroyed, the people can have all that they worked for and saved destroyed.

My friend patented a cold air balloon, but it never took off.

Printing cash is theft, but theft from those that have been productive to those that either leech off of the system or those that are insiders.  But I repeat myself.  In the bailouts following the Great Recession in 2009, billions of dollars were offloaded to Wall Street insiders for taking no-risk positions in mortgage-backed securities.  If the insiders won, they won and kept the money.  If the insiders lost, the U.S. Treasury (that is, us) lost.

The games have gone on too long – the economy is a lie, and politicians of both flavors are happily breaking windows to keep it going just a few more years until they get theirs.

I’ll point out that I’ve correctly predicted five of the last three recessions, so I do tend to be a bit on the pessimistic side.  Regardless, I’ll maintain that all of the elements exist right now for significant and lasting decline.  All of the “emergency” spending bills, the “Build Back Better” bill – all of those have one purpose – to feed the Red Queen so we can go faster and faster.

To stay in the same place.

Why do I never eat before a marathon?  I fast.

As much as we might like to go back to a simpler time – a rewind to the 1990s, perhaps, we cannot.  Resets don’t really exist – the only actual outcome is to create a new (or the same) set of winners.  We are on the verge of a strange and dangerous new future.

It starts the moment printing ceases to have any effect.  That’s just around the corner.

Time to stock up.  I think there might be a lot more broken windows by the time we’re done.

Author: John

Nobel-Prize Winning, MacArthur Genius Grant Near Recipient writing to you regularly about Fitness, Wealth, and Wisdom - How to be happy and how to be healthy. Oh, and rich.

30 thoughts on “Bikini Economics And The Red Queen”

  1. a friend from college was working in Africa and he mentioned that when they left the oil company compound to go out to dinner, they would almost need a second car trunk to carry the blocks of cash. then they would eat dinner and upon getting the check, they would weigh the blocks of 1000 $ bills (I cant remember the currency there) instead of count them. I get the sense we are almost there in the US. I think once china and russia decide to actively work together to move the oil barrel from the US dollar then our days are numbered.

    1. That’s a great point – oil transactions soak up a massive amount of money, that would immediately slosh right back here . . .

  2. At some point, the leaves that I’m composting into my vegetable garden will be of more value to me than fiat currency. It takes years to develop good soil, good seed, and good gardening practices. Whether the recession begins to bite today, or ten years from today, it’s always a good time to make your food supply more local and more nutritious. (And, as long as you don’t grow burgers and fries, the urban refugees won’t recognized any of it as food and steal it.)

  3. Put solar panels on your house today, when energy is $0.10 per kWh, and they’ll be ten times more valuable when energy is $1.00 per kWh, and 100x more valuable at $10.00 per kWh, whether the rate increase is just inflation, or a stunningly unexpected consequence of renewable energy programs (or both). You can probably only install enough to cover your historical power consumption, but cut your consumption, and sell the excess.

    1. I was at a gun auction the other day, and guns were going 20% or so above market. Lightbulb! Guns will hold value far more than dollars.

      And might be a lot more useful.

  4. Now, I’d hate to seem like a complainer, but … obviously I don’t hate it quite enough. (I’ll work on that.) Meanwhile, one (1) bikini plot, and two (2) pictures of Bidens? Admittedly, an extremely high-quality bikini graph, in which I found it easy to ignore that ominous curve in favor of several delightful curves. But, really, your bikinis-to-Bidens ratio of 1:2 is way out of whack here, don’t you think? I mean, it should be at least 10,000:1. Or more. To infinity, and beyond!

    And then: “If that costs 6 francs (7 and 3/16 liters) …” Please, sir, the entire virtue of the metric system (and I assure you, that virtue does exist) is that it is entirely decimal in character. That really should be “7.1875 liters.”

    You know, a couple more bikini graphs, and I’d never even have noticed that mis-styling of metric stuff. Your post only required one graph? No problem. You could plot anything against anything, however irrelevant, as long as there was one of those Wilder swimwear models as the background in each plot. You big tease, you!

    1. Do you *want* pictures of Jill Biden in a bikini? Because this is how you get pictures of Jill Biden in a bikini.

      Just typing that out makes me wretch a bit.

    2. *I knew* I should have done a repeating fraction. And the fraction *was* on purpose. 🙂

      More models to come. I just had the picture late, and The Boy is studying for finals at college, and he’s the one that makes ’em transparent so I can bikinize ’em.

  5. What most people don’t see and don’t even think about is that it is taking more and more intervention to keep the whole thing from crashing. They might understand prices are going up but they have no idea why, and especially no idea what the longer term ramifications might be.

    1. They always say…What goes up must come down.

      How’s that working out for you? Cost of food, up. Cost of utilities, up. Rent, up. And although the price of gas fluctuates, don’t count on it ever getting back to pre 2020 election prices.

  6. Part of the compromise of being in a marriage is that I have to watch her favorite HGTV shows along with my documentaries on Why Hitler Lost (and for the record, yes, of course I’m glad he did, but boy, talk about a close and fascinating bout…). And let me tell you, House Hunters is without a doubt the scariest show on television.

    https://www.hgtv.com/shows/house-hunters/house-hunters-full-episodes-videos

    I live in a locale consistently listed at the top of low-cost, retiree friendly cities in America. I like living here and I like my house, which is convenient, because my house value has not kept up with the explosive numbers I see on HH. There is a hole the floor in front of my TV dug out by repeated impacts from my jaw dropping from watching that show and the crazy wage slave mortgage contracts those fools are locking themselves into. I could never afford to move anywhere else in the USA even if I wanted to.

    Some graphs (alas, with no bikinis) that show what I’m talking about (and one day soon will show a deflationary drop like we saw in 2008?)

    https://wolfstreet.com/2021/05/25/most-splendid-housing-bubbles-house-price-inflation-in-america-may-update/

    And if you think it’s bad in the USA…

    https://www.economist.com/img/b/1280/760/90/sites/default/files/20170318_WOC001_hr.png

  7. Sir,
    Forgive me, but the time is now upon us (in my view) where the situation has clarified to the extent that it is now clear what is about to happen, what is in the process of happening… what has been happening our entire lives, in fact.

    People who haven’t exactly got this sorted in their own heads by now, are facing a serious learning curve. The tendency to avoid extreme positions or conclusions in favour of more moderate ones, in spite of evidence that suggests the wisdom of concluding otherwise, is running up against the fact that the middle ground is by now eroded by observable facts.

    There is no middle ground left. The truth is what it is.

    This is very sad, and tragic outcomes will be shared by all, but our choices are now very difficult. The financial catastrophe only just gathering itself into full fruition will provide the backdrop against which our other battles will be fought.

    Looking to elections as a means to avoid the troubles is looking increasingly like a fool’s errand; that tale has been told elsewhere.

    And in the end, we may not overcome; that time for that sort of optimism may have already come and gone. We shall, however, hold the line, until it is overrun.

    Let it begin, so that we may measure the task more keenly.

      1. Not until now… although I wonder why you have brought it to my attention. I am surely missing your point.

        1. Nevermind. See this egg? That’s my face behind it. My sense of humor is so twisted that not even I get it a lot of the time.
          🙂

          1. I do apologize for this sir, and I regret not getting what I suspect would have been gold.

            Win some….

          2. True comedy is about taking risks. Sometimes it pays off, sometimes you get Sarah Silverman.

  9. Printer go brrrrrrrrrr. Been seeing that comment for a few years now.

    Ricky, GPT3 speaks just like a politician speaks a lot but says a whole lot of nothing. Must have been created by politicians. Garbage in garbage out. Maybe they can replace the politicians and we just cut the power to knock them out.

    2. Good job government, you undersold and overperformed just like the manuals say to do.

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