Category: Sexy Economics

Gold, Silver, And The End Of The World

“What do you know about gold, Moneypenny?” – Goldfinger

Why don’t pirates travel on mountain roads?  S’curvy.

A reader writes:  “. . . if you could explain to me the rationale behind buying gold or silver as a hedge against economic collapse, I would appreciate it.”  I answered by sending him bikini graph after bikini graph, but yet he persisted in wanting to know an actual answer.

I don’t think anyone will complain that this one is a repeat . . . .

He had me cornered.  I wrote to him (embellished for this post and clarified for readability):

Thank you for the question.  I promise to answer, just as long as you give my dog bag safely.  He may be old and one-eyed and have diabetes and alopecia . . . we call him, “Lucky.”

It’s good that he’s not a dinosaur – he’d probably be called an eyesaur. 

I thought that I had already answered this question and looked for the post.

As I’ve got over 1,000 up, I couldn’t find it after I looked for about 22 seconds.  Maybe I developed notes on it and never posted?  Maybe I’m just lazy at searching.  In the worst-case scenario, a previous version exists, and everyone just has to deal with this new, superior post.

The question is a subtle one.  The first part of the answer is the degree of collapse.  I’ll start out with this idea: how bad does it get?

  1. Another Boring Wednesday: Would I rather have a ton of gold on a Wednesday morning than not?  Of course.  But I’d probably worry about George Clooney and his wisecracking band of thieves breaking into Stately Wilder Mansion.
  2. Personal Economic Problems: Again, in a sequel, having that ton of gold is still great, but I still have that pesky George Clooney problem.  In reality, gold is somewhat less liquid than cash, but having a bunch of it is still nice.  Also, if you bought gold in 1990, you would have had zero profit on it until 2006.  This was mainly due to sane economic policy and high-interest rates that tamed inflation.

Or is this why they were always after his Lucky Charms®?

  1. Recession: What’s going on in the economy?  If you look closely, silver and gold actually dropped in value at the start of the Great Recession in the 2000s.  As people liquidated their “stuff” so they could still buy the G.I. Joe® with the Kung Fu™ grip for their kid at Christmas, the price actually dropped.  For a while.  Then the price jumped up when it became clear that the Fed® would print as much money as required to choke every person on the planet.  In the fiat world, gold and silver are something I’d look to have.
  2. Depression – 1930s Style: This is a hard analogy – back in the 1930s, the dollar was backed in gold, until FDR (press S to spit) stole the gold from the American people.  Now?  The dollar is nothing more than, to quote Aerosmith, “a lick and a promise.”  (See below)
  3. Weimar-Style Hyperinflation: I don’t think we’ll get here, until there’s a lack of faith in the dollar.  Brandon is doing his best to make Jimmy Carter look like a master of economics, so, if hyperinflation hits?  Gold is awesome, and you might be able to repay your mortgage with five or six pre-1965 silver quarters.  So, yes, gold and silver make sense.  A lot of sense.

In a Leftist world, everyone is a Billionaire.  And also starving.

  1. Country Collapse: What happens if the country ceases to be?  It has happened again and again through history, especially with large “empire-like” countries that don’t have any sort of ethnic commonality.  Japan will always be Japan because there are Japanese and it’s a nation, not a country.  China, likewise.  Without a functioning country, there is no nation to fall back on.  This is where we add another precious metal:    So, yes, gold and silver, but understand that it might be some time before it’s useful again.
  2. International Collapse: Rome provides a powerful example here.  In Great Britain, they’re constantly finding hordes of money – including silver money, and gold.  Why?  Because people stopped using it, and you can’t eat it.  Did that last forever?  Of course not, but 100 years is nearly long enough.  Lead is nice here, too.

Who sang “Can’t Touch This” for Caesar?  1100 Hammer.

  1. Civilizational Collapse: What happens if there’s no oil for the cars – anywhere?  What happens if we don’t have phosphorus for fertilizer?  Bad things.  Gold and silver might be helpful, but lead is much better here.  If the warlord wants your stuff and you can’t keep it from him, welcome to no longer having that stuff.
  2. A Kamala Harris presidency: Looks pretty much like number 8, but with more makeup.
  3. A Neutron Star Eating The Earth: I suggest investing in SpaceX®.

I think that we underestimate the likelihood of things getting really, really bad.  To give an example, I once worked at the headquarters of a big company.  They asked me to look at disaster recovery.  I looked at all of the natural hazards that might hit the company.  The most likely disaster would hit the headquarters once every three hundred years.

“Huh,” I said to my boss, foreshadowing future writing endeavors, “a new civil war is far more likely than that . . . I mean if the company lasts that long.  Companies go out of business all the time.”

He was not amused.  Corporations tend to not like actual reality to interfere in their projections.  But, I maintain I was right.  How many companies have ceased to exist – big companies – since 2000?  I’ll leave that work to the reader.  Enron®, anyone?

Country music and calculators are both produced by Texas instruments.

Listen, I don’t mean to sound paranoid, but banks are giving mortgages out at 3.3% and inflation is at 6%, which means that banks will lose money every year as long as inflation is a thing.  How can they do this?  Volume!

No, I’m kidding.  The Fed® is giving them tons of money to lend cheaply to keep housing prices up.  When mortgage rates go up?  Then the housing bubble bursts.  So, we could end up in Scenario 3., 5., or 6. very, very quickly.

Gold and silver (in my NON FINANCIAL ADVISOR) opinion are awesome in most scenarios.  If it devolves past the point where order matters at all, then it comes down to weapons, political connections, preps, and sheer dumb luck.  If nothing happens, then my kids will get to enjoy some shiny metals after I pass away.

What’s the best way to tune a bagpipe?  A pitchfork.

I would, however, not want to put all of my eggs in any one basket.  I will personally limit the amount of gold and silver I own to about 10% of my net worth.  Why?  Random number – not bad if things go well in the rest of the world and gold and silver don’t go up in value.  If things go really south, it’s a decent enough hedge to act as a parachute as the plane goes down in flames.

So, that’s my answer:  it depends.  What do you think?  What Scenario above is the most likely?  What’s missing?

Ohhh, Lucky, come here, boy . . . oh, wait, he’s deaf, too . . . .

(Appended Graph)

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.

Bikini Economics And The Money Supply

“What do you know about gold, Moneypenny?” – Goldfinger

One of the few things that Pa Wilder left me in his will was his bed. I guess you could call it an heir mattress.

On April 5, 1933, Franklin Roosevelt signed an executive order that made the owning of more than trivial amounts of gold by individuals illegal. Owning gold wouldn’t be legal again until Gerald Ford signed a bill into law that reversed that abomination of a policy.

That law went into effect on December 31, 1974, and people could once again buy gold.

In 1933, the price of gold was fixed: $20.67 per ounce. It didn’t vary, because the value of the dollar was pegged to the price of gold. The Fed© couldn’t print dollars unless they had at least 40% of that value in gold to back it up.

Pro tip: If you have a balloon elephant that won’t fit in your backseat, you can always pop the trunk.

What did the government then do?

It defaulted on the dollar. A dollar had been worth (around) 1/20th of an ounce of gold. After the government stole it all, they decided that a dollar was now only worth 1/35th of an ounce of gold. Poof. Immediately, and with the stroke of a pen, the government stole 43% of the value of every dollar in existence.

The penalty for “hoarding” gold was a big one: a $10,000 fine and up to 10 years in the slammer. I guess the government didn’t (and doesn’t) like competition when it comes to stealing.

It was the biggest heist in history – until Nixon severed the link between the gold and the dollar completely. After that, people could own gold again. There was no real reason for the government to not allow them to own it: they had now stolen the rest of the value of the dollar.

If you rob a vape store, is that a Juul® heist?

And it only took 41 years from 1933 to 1974 to convince people that was acceptable.

Since Nixon removed all gold connection, a dollar is worth (today) about 1/1800th of an ounce of gold.

But that isn’t enough to feed the beast.

The (metaphorical) printing presses have been shoveling money into the economy under the mistaken assumption that all we need is additional debt to keep the engine going. It’s like a demented congressman who doesn’t understand engines deciding to open up the hood of an F-150® to just pour gasoline on it using the dim understanding of a toddler that, “gasoline makes engines go, so if I pour enough gasoline on the engine, it will be as fast as a spaceship.”

That’s really what passes as logic in Washington, D.C. now. I keep writing about the economy in the slim hope that whatever passes for an intellect in the halls of congress will get distracted enough to spend at least a minute or two learning before returning to the concept of, “Ugh, free stuff good. Grug pay for stuff easy because all money free. Wonder why Grug’s armpit’s stink?”

I swear, AOC couldn’t spell “cat” if you spotted her the “C” and the “T”.

See, economics can be interesting!

The Fed® has gone all-in on this economic shadow puppet theater, shoving pools of money toward banks to shore up their balance sheets. Some of the people who are on the winning side of this great wave of money being sloshed around have even spent some.

Blackrock® buying up all the houses for sale? Yup. They see what’s coming. All the rich and powerful buying farmland that will never produce enough via crops or cattle to justify the price? They see what’s coming. They’re moving as quickly as possible to use this money to buy everything they can.

And people are happy. “Hey, I sold Ma’s old house after she passed away for twice what she paid for it in 2000! I made out like a bandit.”

It’s not all bad. Thankfully, the velocity of money is down.

What’s the velocity of money?

That’s how fast a dollar gets spent. Poor people move money the fastest – a dollar comes in and, poof, out it goes again. They have to spend it because they don’t have any spare money. They get paid on Friday and on Saturday it’s turned into rent payments and insurance payments and Cheetos® from Target™.

Roses are red, roses are blue, depending upon their velocity relative to you.

But the velocity of money is now slower than Joe Biden when he’s asked difficult questions, like, “What is the year, Joe? Hey, we’re talking to you. Dammit, he’s gone catatonic again. Someone get those squeaky toys he likes. And keep Kamala out of the vodka.”

Things would be far worse if the velocity of money hadn’t dropped so far that it was moving as slow as Oprah trying to get off of a couch. Since poor people slosh it around so much, that means it’s exactly where the Fed® put it: with the rich people.

So, if the money supply has gone vertical, then why hasn’t the price of everything doubled?

And most of it is sitting in pools right now. Except for the early adopters who are looking for something, anything to buy so that when the dust clears out of the coming inflation that they are richer than ever and Oprah has even more Twinkies®.

I’m not against capitalism – but this isn’t capitalism. It’s a rigged card game where your money evaporates – first slowly, and then all at once.

The engine of debt isn’t driving economic growth anymore. What the debt is doing is papering over the holes in the system so that it keeps going another week, another month, and hopefully another year.

But the downside to this is the longer a failing system is kept going by speeding it up, the more energy it stores, the bigger the crash, the bigger the collapse.

Why did Princess Diana cross the road? Inertia.

The economy has inertia, though. Even though it’s working on the most significant collapse in the history of the United States, people still believe. They take dollars because they believe. They believe the rules aren’t going to change.

They will.

Since we’ve seen this game before – we can take at least some steps to protect ourselves. I suppose it’s time to buy PEZ® before the rush . . . .

Culture Wars: The Boy Scouts And Hollywood, Including A Bikini Graph

“Envy the country that has heroes, huh?  I say pity the country that needs them.” – Reign of Fire

My book on the Nordic nations is really difficult to write.  I’m not sure I can Finnish.

There are institutions in this country that are fundamental in shaping it.  Two, in particular, helped define the 20th century in the United States of America:

  • Hollywood®
  • Boy Scouting

Both were a product of the American expansion between 1850 and 1940, and both were forged in the American West.

Boy Scouting?  American?

The official story is that Boy Scouts was brought to the United States from Great Britain.  In the immortal words of Jules, “Please allow me to retort”:  Sir Robert Baden-Powell was the guy who “officially” started Boy Scouting, but given his aristocratic upbringing, Baden-Powell’s idea of camping was spending an afternoon on the patio with only one servant and no ice for his gin.

The truth is much more American:  Baden-Powell based Scouting on Frederick Russell Burnham, who was born in Minnesota and crossed paths with outlaws and thieves as he learned the tricks from old cavalry scouts that served in the Indian Wars.  Once all the Indians were killed or in a reservation, Burnham got bored and hitched a ride to South Africa to kill and conquer that continent, too.

In South Africa, Burnham was eventually made Chief of Scouts of the British South African Army in one of the Boer Wars.  The Boer Wars were that time when the British found out that the Boers were sitting on the biggest gold strike in the world, and decided that all that was required was to get those pesky Boers off of all of that obviously British gold.  I first heard of Burnham while reading this amazing true story (LINK).  It’s long-ish, but amazing because it’s true.

Why do Scoutmasters wear that hat?  This guy.  This picture was taken after he was personally decorated by the King with the second-highest award given by Britain to soldiers, and given a permanent rank in the British Army.  Also given personally by the King.

Why do Boy Scouts wear neckerchiefs?  Because Burnham wore a neckerchief.  In Baden-Powell’s estimation, the goal of Boy Scouts was to turn boys into men like Burnham.

Scouting was built on just that American ideal – individual ruggedness and preparedness.  Baden-Powell said it very well, “A Scout is never taken by surprise; he knows exactly what to do when something unexpected happens.”

Scouting, in one quote that I read sometimes back, was based in the preparation of an ideal citizen – one that could contribute, one that could learn, and one that was not reliant on the government.  It created capable, rugged boys who in turn became capable, rugged men.

Scouting found very fertile ground in the United States.  Very soon there was a shortage of little old ladies to escort across the street, and they had to take shifts so the Boy Scouts could assist.

I kid.

But there are very few organizations (outside of churches) that have done as much good for the United States as the Boy Scouts.

Sadly, Boy Scouts is essentially dead.  The last decade killed it.

Well, you can’t say the Left isn’t good at something.

It had already been on life support.  The peak number of Boy Scouts was in the early 1970s at about five million boys.  To have a similar number today would mean that there would be ten million Scouts.  There aren’t.  I expect that the number (when it is announced later this month) will certainly be less than two million, and probably closer to one million than two.  The graph I put together (there are many conflicting sources, and I put this together using the most accurate numbers I could find, along with some guesswork and interpolation) shows that the number of Scouts is consistently declining.

I guess that nobody asked the Scouts what their opinion was.

This utter collapse in the number of Scouts is despite the tricks that the national leadership has employed to keep numbers up:  they added kindergarteners, the glue eating set, to a new program called Lions.  Since the name “Boy Scouts of America” wasn’t clear to them, they decided to add girls to the program and rebrand it as Scouts BSA® where BSA™ doesn’t stand for anything really.  It was all an effort to keep the numbers up.

I don’t have high hopes for the girls involved in Scouts BSA™.  One local Scouts BSA© leader took girls out camping.  One of them snuck a spare cell phone, called a boy with a car, and disappeared with him for a week.  Somehow, that didn’t make the local papers.

If you look at the graph, the Boy Scouts had been in trouble before.  In the 1980s they realized the program had deviated from what made it popular:  being rugged.  They reintroduced the old-school methods, and popularity surged.

In 2014, they admitted homosexuals as youth.  In 2015, they admitted open homosexuals as leaders.  In 2017, girls who think they are boys were allowed to join.  Deciding that none of that mattered anymore, in 2019 girls could become Boy Scouts Scouts BSA™ members.  At every point, the Left made the point:  it’s not enough.  Now they want atheists to be able to join.

The Boy Scouts® used to stand for something.  Scouts BSA™ stands as just the latest conquest by the Social Justice Warriors.  Note that commies throughout history have hated the Scouts.  Now that they own it, they can finally kill it.

This is just one story.  You can find attack after attack on the Boy Scouts from the Left since the Scouts were founded.  Why?  Boy Scouts until 2010 was the thing that scared Leftists the most:  strong individuals who were responsible for their own actions.

Hollywood© is a similar American story – rooted in the West.  About the time that Burnham was killing his way across South Africa and unwittingly starting a youth movement that would transform the 20th century, the movie industry cranked up in California.  Why?  Well, Edison owned patents, and California was a very long way away from Edison’s lab in New Jersey.  The bandits that Burnham knew in California didn’t disappear – they just turned into businessmen.

See?  I can do a transition!

Hollywood™ has been a similar success story, though with a few twists and turns.  For a large number of years, films coming out of Hollywood© mirrored (in many cases) the Rightist views of the American public.  In the height of the Vietnam War protests, John Wayne starred in The Green Berets.  Even as late as 2002, Disney® put out Reign of Fire, which was staunchly Right in attitude.

I’m not ashamed to say that I love movies.  There are those who say that’s silly, and you’re more than welcome to your opinion.  I see them as a way to thrill to bravery and watch as Good defeats Evil.  It is a myth-making process that can showcase the very best of what we, as humans, can be.

Duty.  Honor.  Tradition.  Cannons, pistols, and swords.  French people being shot.  How can you not love this movie?  Did I mention French people being shot?

Now, in Current Year, Hollywood™ has managed to mangle several amazing film franchises because they had to inject either gender or identity politics into the films, and not in a light way.  The latest Star Wars™ films?  Pretty bad, like eye-rollingly bad.  It wasn’t the effects, mind you.  Those were amazing.  It wasn’t the actors – Hollywood© is a consistently ruthless meritocracy of talent.

It was the stories.

Once upon a time, movies were fun.  Really fun.  Some, of course, still are.  But what happened to the funny teen comedy?  Well, comedy requires that someone is made fun of.  So?  Comedy is out.

No, today movies have to be “woke” and parrot the Social Justice Warrior line and teach an important moral.  It’s funny when that moral isn’t what China likes, so that Hollywood™ has to change their picture, or change posters to minimize black cast members so Chinese people will go to see the movie.

Hmmm, I wonder if BLM® approved of the poster change? Think they speak Chinese?

Perhaps the reason for the injection of the Leftism is the studio executives wanting to placate their talent or their audience?

It doesn’t matter.  It failed horribly.

Sure, it’s a Wilder Bikini Graph®.  I was so very not going to do a bikini graph for the Boy Scouts.

Just like in Boy Scouts, now that the Left has fully taken Hollywood®, the rot has set in, and it begins to decay.  People don’t want to tune in to see what Leftist fantasy has won this year’s Leftist award.

Neither one of these losses of the Left is a win for the Right.  The world was better when we had Boy Scouts.  The world was better when we had more movies with better heroes, and comedies that made fun of everyone.

Thankfully, I have a sea of old movies that I can watch.  Also, thankfully, something will come to replace the Boy Scouts in time.  Politics is downstream of Culture, and Boy Scouts and Hollywood® are part of a culture that no longer exists as it did for nearly 100 years.

That’s okay.  We will rebuild.  We will create institutions that will renew our culture.

Just like Burnham taught us:  we will never give up.  We will keep the flame alive, and fight when the odds are stacked against us.

Why?

Because we are so very pretty.  We are just too pretty for God to let Western Civilization die.

Welcome To The Exponential, Including One Bikini Graph

“If the rule you followed brought you to this, of what use was the rule?” – No Country For Old Men

When I went to Ireland I met some shy people, which surprised me.  No one expects the Irish inhibition.

I had noticed it some time ago a strange mathematical relationship – the National Debt (sort of) doubles about every eight years.  Is it an exact mathematical relationship?  Nope.  It varies a bit based on which eight years that you pick.  But the relationship is simple – the national debt is growing faster than yeast in AOC’s armpits, at about 9% per year.

It wasn’t always like that.

I also looked at the national debt between World War II and 1970 or so.  During that time period, the national debt was as flat as Joe Biden’s brain activity scan.  Hmm, whatever could have happened around 1970?

You’ll be happy to know that my search for “Richard Nixon bikini” came up empty.

The reason for most of our problems is that understanding the idea of exponential growth is difficult.  Our minds are (mostly) made for understanding linear things, or things that happen slowly.  No one really expects that, no matter how badly they eat, that they’d double in weight overnight, or even over the course of a month or year.

Yet, a lot of natural processes do follow exponentials, at least for a limited amount of time.  Take a baby.  Please.  I really have no use for them anymore.  Even the thought of a baby makes me exhausted.

Babies start with one cell, then two, then four, and then eight, and so on.  The initial growth of a child is exponential.  Thankfully, that levels off, or else there would be no way that I’d be able to afford to feed Pugsley.  If that exponential growth rate had continued, he’d be the size of the Solar System and need to eat cheeseburgers the size of Saturn just to make it to lunch.

Want fries with that Saturn?

No.  He’ll settle for the rings.

So, exponentials can’t continue on forever.  Math proves that.  If exponentials could continue forever, by the year 2032, the only blog left on the Internet would be this one, and everyone on Earth would have to spend 18 hours a day reading it.

Ahhh, I can dream.

But our national debt is following that trend.  Here’s a graph I put together:

Actual conversation with The Mrs.:  I said, “I promise I can make this [economic idea] interesting.”  The Mrs. responded, “Bikini graphs aren’t interesting to me.”

One of the lines is the actual national debt.  It’s the red one.  I just picked actual national debt data every eight years going into the past from today.  The other one?  I extrapolated back into the past from today: I just assumed that the national debt doubled every eight years.

How accurate was I?

In 1973 the actual national debt was $466 billion.  My backwards approximation?  $438 billion.  Close enough that a snake that was 3.14 feet long could be called a πthon.

Sure, in the middle, sometimes I was higher, sometimes lower.  But in general, I stuck the landing.

That means that in 2029 (if the United States is made of math) that we’ll be seeing a national debt of $56 trillion.  And in 2037?  $112 trillion.  Jeff Bezos sometimes works a whole year and doesn’t make that much money.

I heard he didn’t want to be CEO or president, just Prime® minister.

Does it make sense to anyone that the world will still keep accepting a doubling of debt every eight years and still keep sending us oil and steel and copper for the dollars that we print?  Sure, it worked for a long time.  Having an unmatched military and all the nukes gives a lot of room to dictate terms.

But how many people remember back to 1980 when the winner of the Cold War was in doubt?  The United States couldn’t print all of the dollars it wanted to without inflation.  The rule that the dollar followed changed, though, when the Soviet Union decided that it wanted to retire and spend the rest of eternity in Boca Raton in a retirement community gumming applesauce.

After that, the United States printing press could go wild.  Inflation?  Well, why bother with that?  The United States could print all the money it wanted and ship it overseas.  What else were people going to want?  Rubles?  Marks?  Rupees?

No.  The way that international trade was done was with the dollar.  We could print them up, and the world would soak them up and then the inflation could be exported all over the world, since the demand for dollars was now the entire world.  The United States could, in essence, tax the entire world to allow them to use the good old dollar.

I heard my chiropractor owes back taxes.

It was a good ride.  Need oil?  Print a few billion and send it to the Saudis.  Need copper?  Print a few million and send it to Chile.  Need cars?  Print a few billion and send it to Japan.

There are good things that happen when you win it all.  You get a trophy.  You get a party.  You get oil and copper and cars.  But if you have too much fun at the party?

There’s always the hangover.

Exponential growth can continue, and it can continue for quite a long time.  Without it, life itself wouldn’t be possible.  But life proves, again and again, that there is only so far that growth can go.

But, hey, it’s different this time, right?  The national debt can go on forever, right?

Blinded By Science: But Are We Wiser?

“Well, once again, my friend, we find that science is a two-headed beast. One head is nice, it gives us aspirin and other modern conveniences. But the other head of science is bad. Oh, beware the other head of science, Arthur. It bites.” – The Tick

It sucks being the youngest clone – all your genes are hand-me-downs.

One of the things that I am really fascinated about is the limit of human knowledge.

Imagine, only a few decades ago:

  • We had no proof that there were planets around distant stars,
  • We had no idea that Neanderthal DNA was a part of modern humans, and
  • We thought Jimmy Kimmel was funny.

As time goes on, human knowledge keeps increasing. We learn a lot more, well, stuff. That’s not to say that we’re any the wiser.

A typical adult male on a homestead in 1880 could understand nearly any device on his farm. Beyond that, he could fix many of them. My Great-Grandpa McWilder was an example of just that. He had a shop that smelled of oil, wood, and leather. The tools were, by today’s standard, ancient.

Grandpa McWilder’s power drill was cordless – that meant it was a drill bit in a chuck that was hand-cranked. The power to run it entirely off of McWilder power. The faster Grandpa cranked the handle and the harder he pushed the drill bit into the wood, the faster it would drill.

What’s my favorite drill dance? DeWalts®.

There was a certain intimacy with the wood that kind of drill gives, that’s lacking with a power drill. Of course I noticed that when I was drilling into the trim around the door, and the floor, and the workbench.

When I had complained that I didn’t have a suitcase to visit Grandpa (as a five-year-old would), he took an old suitcase that he had in the closet and gave it to me. “This doesn’t have a handle,” I complained. Within twenty minutes, Great-Grandpa had selected an old leather belt and braided it into a handle that still graces that suitcase today.

Life was simpler then.

Now, not one person in a thousand could explain how an old tube television works. The Internet we use today? Very few people understand even the basics of how it works.

And yet, we’re bombarded on all sides with information about things we should passionately care about, even though we don’t understand them even a little bit. Net Neutrality? Sure, a blog written by someone from Netflix® or Comcast™ tells you, “Hey, care about this.”

In reality? Network Neutrality is a fight between billion-dollar companies about who gets the spoils of our Internet and streaming fees. If that were our only knowledge problem, well, that’s something we could easily conquer, I mean, if we cared.

But it’s not the only thing we don’t understand.

The very fundamental parts of the Universe we live in are still quite a puzzle.

Step off the Trump Train, and onto the No-Fly List.

General Relativity is one of the most successful theories in the history of science. When Relativity predicts something, often our observations prove that Relativity is correct to as close as we can measure. Without Relativity, we couldn’t explain why Mercury orbits like it does. GPS would be impossible without making relativistic corrections. And, good heavens, how would I ever convert matter into energy in my kitchen?

Quantum Mechanics (QM) is similarly successful. Every time we make a measurement based on this theory, it’s also as close to theory as our instruments can measure. Lasers and transistors depend on Quantum Mechanics – they are well explained by that theory.

But both theories can’t be correct. And we have no idea why. Scale Relativity down to the QM world? Nothing makes sense. Scale QM to the Relativity world?

It doesn’t work, either. So, our two best theories in physics don’t really mesh.

Women are like an open book, but it’s about Quantum Mechanics and it’s written in Chinese.

There’s a gulf there in human knowledge. Sure, you don’t have to know how beams and columns work in order to build a house – otherwise we would have lived in caves until 1700 or so. But we just have no idea how two theories that interact to form the cutting edge of technology could ever be compatible.

So, there’s that. Okay, physics is messy. Surely biology is better, I mean, we can dissect pandas and giant turtles to see how they tick.

Sadly, biology is a lot messier, and that’s even before you carve the panda into steaks. Richard Nixon declared a “War on Cancer” back in the 1970’s, and cancer appears to be just as successful as the Viet Cong. It’s winning. Sure, we’re better at fighting it, but I’ve read about a dozen “silver bullet” cures for cancer over the last decade.

Biology is much worse than physics, because we can’t do proper experiments. I’ve made the point in conversations with friends that if we conducted controlled experiments on people with cancer and let the researchers have immunity from prosecution (on pesky Nuremberg-level crimes) for five years to a decade? We’d have real silver bullet cures for cancer.

But even outside of my war-crimes-level thought experiment, biology is a basket case compared to physics. Biology can’t explain some really, really basic things, like why I should care what a woman thinks.

Or, like DNA.

DNA is the most miraculous (word choice consciously made) molecule ever. DNA information density is far beyond anything humans have created. 0.141 ounces of DNA (four of some communist unit called a “gram”) could hold all of the information all of human activity from ancient Egypt to 2011, including the useless information like what The Mrs. asked me to get at the store.

Four grams = two zettabytes of data, Marty!

I tried to mix killer whale DNA with human DNA. What did I get? Banned for life from Seaworld®.

The idea that biology professors try to support is: DNA is the result of an accident in slimy pools at the beginning of the Earth.

DNA is the greatest level of information density in the known Universe. Heck, DNA represents the greatest level of information density conceivable in our world today. It’s just a coincidence that it’s able to be read and written by squishy cells in squishy people.

An accident.

Sure. Anyone who believes that probably voted (D) all the way down the ballot in the last election. Some of those people, presumably, were even alive.

But that’s not a question scientists can approach today (either elections or the origin of DNA). A big problem with science today is that it is just a larger, more grey-haired version of Twitter®. The questions before science aren’t small:

  • Don’t believe in Global Warming®? Heavens! Heretic! Cancel them! Even little Swedish girls know better.
  • Think that Dark Matter is more properly spelled Dubious Matter? Is Dark Matter the physics equivalent of bloodletting and leeches?
  • Why aren’t we seeing or hearing aliens? Is it because they didn’t pay their cell bill? Did they block us because we made T.?
  • Why do we sleep? I mean, not me, because I blog. But why do humans have to sleep?
  • How are space, time, and gravity connected? Heck, we don’t even know how dementia, the Presidency, stairs, and gravity are connected.

Biden tried to get off of stairs, but it was a multi-step program.

In the first paragraph, I noted that we’ve learned a lot of things recently that would have been incomprehensible to people 100 years ago. And I stand by that. But here’s the paradox:

Even as we’ve learned so much, science is currently broken, and hopelessly politicized. The vast sums of money and decades required to run experiments that will give us a glimmer of the next revelation of science require that the scientists who design and run the experiments are from the orthodoxy.

To be a part of orthodox science means you have to ignore inconvenient facts. There are entire fields of study that cannot be researched because people might have their feelings hurt. Actual people who claim to be scientists say that there is no difference between men and women.

In 2021, you have to be politically correct, and heaven help you if the Woke Left doesn’t like your shirt choice. Remember that poor guy who wore a silly Hawaiian shirt? You know, the guy who just helped land the Rosetta probe on a comet in frigging space in 2014? In 2021 they’d have just taken and immediately burned him at the stake, live on Facebook™.

See, there’s an answer to every difficult question.

Guilty admission: I really did email the guy and asked to buy the shirt. I figured it was at least worth a shot.

As we advance in science, it seems we learn more and more about less and less. Yet, as we’ve learned more we’ve created a world that’s increasingly alienating to the individual through a haze of increasingly impenetrable technology. Perhaps the future of the human race is a VCR clock, flash 12:00PM endlessly?

The world has also become increasingly hostile to simple variations in individual behavior that fall out of the current norms. In the case of people like Abraham Lincoln or Dr. Seuss, they can be charged and found guilty in the court of public opinion because the ideas of 100 years ago or 160 years ago don’t agree with today’s ideas.

That’s okay. I still have the suitcase that Grandpa McWilder fixed for me. The handle he made from the leather belt is still doing its duty, better than anything made today.

Bonus: Here’s the pattern on the material that the guy’s shirt was made from:

The Funniest Article You’ve Ever Read About Bon Jovi And The Everything Bubble

“Yeah, it was like, even though Bubbles was Bubbles, he was two people at the same time as bein’ Bubbles. He was trying to be this other person that wasn’t Bubbles, but he was still Bubbles.” – Trailer Park Boys

What was Schrödinger’s favorite Bon Jovi song? Wanted Dead or Alive.

Euphoria. The name even sounds good. It comes from the Greek “Eu” meaning “quite slippery and frictionless” and the Greek “phoros” which means “wet”. A direct translation is “Slippery When Wet,” as noted by the great Italian philosopher, Giovanni Bongiovi.

If you’ve ever been to a college party you’ve seen the application of euphoria over common sense, especially in the hours between 11 P.M. and 1 A.M. It’s at that time that the liquor has hit several partygoers like a Canadian baboon on a yak crotch. They have ambition. They have a limitless lack of common sense.

There is no tomorrow! Party on!

And euphoria has had several pleasant outcomes: more than one happy accident of a child has turned up nine months after the euphoria ended. Let’s face it – if every child was planned, there’d be six or so people living in the United States.

Justin Trudeau’s parents decided they don’t want kids anymore. Who is going to tell Justin?

Euphoria has even allowed people to exceed what they themselves ever thought possible. When throwing common sense to the wind, sometimes the outer limits of human performance are defined – we find out what it is that we can really do.

More often than not? We end up flat on our faces. That can be its own victory, but it’s often part of a longer story.

The real interesting part is when euphoria meets money. That’s when we get stupid, and we start convincing ourselves of crazy things.

The biggest crazy thing of my life was the Dotcom Bubble. That was amazing. Companies were formed in days and then ended up being “worth” ten million dollars a week later, without ever producing a product. Heck, it wasn’t just producing a product – they didn’t even know what product they were going to produce.

Spanish coders like to use Si++.

Several of my friends were caught up in the front end of one Dotcom venture. They were flown to a kickoff party. The band at the kickoff party? Hall and Oates®. Sure, Hall and Oates™ were 20 years past their prime, but, still, the kickoff was for the idea of installing some fiber optic cables.

It wasn’t even that large of a project. I’m not sure if they ever built any fiber optics. But when I asked if I could be at the party my boss said, “I can’t go for that.” (Sorry jokes aside, they really did hire Hall and Oates© for the party.)

How much oat could Hall and Oates haul if Hall and Oates hauled oats?

Another friend sold his website for a total of $50,000,000. The website was making a profit – about $1,000 a month. Of course, the kicker was that he sold his website for $50,000,000 in Alta-Vista® stock that he couldn’t sell for a year.

Oops.

Don’t cry for him – he didn’t have enough money to retire, but he had enough that he took three years off to hike and relax.

Euphoria makes people do crazy things.

The second crazy thing that happened in my life was the Housing Bubble. When I was looking for one loan, I was told that I qualified to borrow ten times my annual income.

“Why would you offer me that kind of money? I could never pay it back.”

The Loan Officer responded, “Yeah, I know, but you qualify for it. So the computer tells me I have to offer it to you.”

We all know how well that ended.

Thankfully they allowed me to finish the “Alan Parsons Project” I was working on.

Through this, Citigroup® has maintained a panic/euphoria model. The idea is that there is a way to measure what investors think about the market. Are they panicked? Or are they as giddy as drunken freshmen at their first college kegger.

If investors are skittish, the idea is that stocks are a bargain. People are afraid of stocks and would be happy to sell them to you. It’s the idea of buying when blood is in the street.

But if investors are euphoric, then the prices for things are too high. How high? Double-digit high.

Looks like party central!

Right now, Citigroup’s® panic/euphoria model is flashing “Slippery When Wet and Three Tequila Shooters.” It’s higher than the Dotcom® Bubble. It’s much higher than the excesses of the Housing Bubble.

It’s the Everything Bubble. And investors are still three sheets to the wind, knee-walking, too-loud singing, drunk.

This makes sense, too. Presidents love to pop the bubble in the first year of their first term. It’s not like people will remember the pain three years from now, if they’re able to manage growth and restart the economy. Besides, you can blame the pain on the last guy.

I guess he swallowed a few on that “steel horse” he rides.

There is ample incentive for Biden to crater the market. There is ample incentive for him to crater employment, too. In both of those things, he can restart the clock and claim growth from worst that 2021 or 2022 brings to us.

If we’re lucky, all we get is a hangover. I don’t think anyone wants this baby.

The Post That Gave The World Bikini Economics: Why MMT Is A Bad Idea.

Life has me trying to pack 32 hours into 24 today, so I’ll leave you with this blast from the past, the famous post that gave us bikininomics.  New stuff on Friday.

“Grab a brew.  Don’t cost nothing.” – Animal House

changeingdp

The future economic expansion is so bright, she’s gotta shield her eyes with a hat.

So, today I’d like to talk about economics.  No, wait, don’t leave!  I promise pictures of girls in bikinis if you stay!

Today’s economic idea is a particularly stupid one.  Just about as stupid as when the Ming Dynasty tried to disarm Japan by buying all their swords.  This really happened around 1432 A.D. (according to some experts) but was less successful than the Ming projected:  the Japanese just made more swords – at least 128,000.  Today’s stupid idea is called, “Modern Monetary Theory.”  Epsilon Theory had an article on it (LINK), and I did some research and thought I’d give you a rundown on this horrible, horrible idea which smells worse than Johnny Depp’s sweat socks after a night running through a farm ditch in Utah.  Don’t ask.

Okay, John Wilder, I’ll humor you if you promise bikini pictures.  What is Modern Monetary Theory (MMT)?

curves

This poor person is deprived by a Marxist economy, so poor she cannot afford proper clothing and is weak enough from hunger that she’s forced to crawl along the beach.

Here’s a bikini picture to prove that these will be the sexiest graphs in the history of economics.  Now pay attention and I’ll explain Modern Monetary Theory.  MMT is simple:

The main idea of MMT is that since government creates money there are exactly no limits to how much money government can create.  Back when money was backed by gold (say, with one ounce of gold being worth $20) there was a physical limit – by definition you couldn’t have more $20 gold coins than you had ounces of gold.  MMT says, “Hey, since Nixon took the world off of the gold standard, we’ve been making up this money stuff anyway.  So let’s go all in.”  This is not exactly like a drunken 21 year old with Mom and Dad’s credit card in Las Vegas.  Not exactly.  The credit card has a credit limit.

So, under MMT, there is no limit to how much money government can print.  The genius idea (from Bill Mitchell, an Australian economist who came up with the name “Modern Monetary Theory”, and whose dog’s name is “Dog” and daughter’s name is “Girl”, and whose pet name for his wife is “That Woman On The Couch”) is that there is also no limit to the amount of money that government can spend.  This is Alexandria Ocasio-Cortez’s high school prom fantasy where Justin Bieber picks her up in a pink helicopter and makes her all warm in her special place.  Oh, and by special place I mean other people’s wallets:  this is a family-friendly blog, get your mind out of the gutter.  The implications are stunning.  “Why not just pay for everything?  The government can just print the money, right?”

AOC

Yes.  She really said that.  See, pure economic genius!

Yes, this is exactly the logic of a twenty-something girl who can’t figure out how to pay for an apartment, and wonders what fruit Froot Loops® are made of.

Bill Mitchell has a doctorate in economics, which shows you how easy it is to learn absolutely nothing while getting a doctorate, just as Ocasio-Cortez can demonstrate that an undergraduate degree in economics is essentially majoring in pure pre-barista.  An analogy used on a website that promotes MMT is that football referees don’t have a limit to the number of points that can be awarded during a football game.  There’s no requirement that they come from somewhere, and giving someone else a point doesn’t take a point away from you.  Therefore points are infinite and don’t change the way the game is played.

Genius.

gunsbuttergraph

You can clearly see the equilibrium required in an economy consisting entirely of tequila shooters and cocoa butter.

Why not make every dollar worth, oh, say $10?  That way everyone could just add a zero to their bank balance?  Doesn’t cost anything, right?  And why not pay for every person’s medical care?  We’re just making up the dollars as we go.  While we’re at it, there are unemployed people.  Why not pay your average unemployed art major to make Xir’s (a gender-neutral pronoun) armpit-hair sculptures each and every day?

Don’t cost nothing.

This is an amazing idea!  Government can have it all!  There is no limit to the amount government can spend because Tom Brady can make all the touchdowns he wants during a game.  Yay, tortured grade-school logic!

There’s a corollary to this – Dr. Mitchell thinks we can have all of this infinite money and low interest rates.  There’s no need for inflation.  Print the money.  Prices won’t go up.  MMT says we can spend ourselves into prosperity*.

*As long as you appropriately tax people to soak up excess money.  Mitchell, in the fine print, says that we can spend up to the entire productive capacity of the nation on, well, whatever.  When we get to that capacity, then we have to soak up the extra money with taxes.  The taxes don’t really go to anything, we just use them to pull money out of circulation.  Government still buys stuff with whatever money it prints.  Taxes exist only as a sponge to soak up excess cash.

gdpdrop

Two consecutive quarters of GDP contraction make a recession, and they’d also leave a nasty sunburn.

This puts the printing of money into the hands of the Federal Reserve Bank, and the spending and taxation into the hands of Congress.  Sadly, Mitchell never postulated putting adults in charge.  Regardless, Congress never ever spends too much money and certainly wouldn’t structure taxes to be punitive against groups they don’t like.  So, sober people like Mitch McConnell and Nancy Pelosi would have infinite spending ability.  I’m sure, like Goldilocks, they’d get the porridge “just right.”

MMT will be the next economic pied-piper of the political class in Washington, and will probably be the torch carried by the next Democratic presidential nominee.  It has no downside!  Spend today because deficits don’t matter.  Interest rates are 100% controllable.  Only have to pay a few taxes, and we’ll have free prosperity for all.

We’ll just print the money.  “You just pay for it.”

And, no one will have to be a barista!  We can guarantee a living wage to each and every artist so that the United States can be the undisputed leader in the creation of sculptures made out of armpit hair.

There’s no reason this can’t work.  Why, The Boy, when he was in kindergarten, came up with a system that was very similar.  For whatever reason, his class had made “feathers” by cutting out feather-shapes out of different colors of construction paper.  The Boy got into his Gummi-bear® addled kindergartner brain that these construction paper feathers were actually worth real money.  He even had an exchange rate in mind – each feather was worth three dollars.  He had three feathers, so, he demanded nine dollars.  I tried to negotiate, but it was useless – he drove a hard bargain, what with the laying on the floor and crying.

But he made the same mistake that Karl Marx and MMT make.

realgdp

GDP is proportional to the height of the girl in the bikini.  That’s a basic economic concept.

You see, Marx’s theory (as well as MMT) both incorporate a fascinating idea – that the value of an item is based on the inputs that it takes to make the item.  So, from that standpoint, our armpit-hair artisan should be able to charge the cost of her Xir schooling (plus that summer in Europe with Marco!) and her Xir apartment and food cost for that armpit hair sculpture.  It is that valuable.

Real world economics that don’t result in economic collapse and the starvation of millions of people would disagree.  An armpit hair sculpture is worth only what someone is willing to pay for it, and not a penny more.  It’s a market, and it’s based on free exchange.  It’s that simple idea of the market setting the price that makes capitalist economies work.  And it’s the brutality of the market that ensures that armpit-hair artists have to have a real job actually producing things that people want.  Like coffee.

Ideas like MMT seem to be too good to be true because they are too good to be true.  They always end in failure, poverty, and human suffering.  Thankfully they can use that taxation sponge to soak up all the blood after the revolution.

But “infinite free stuff” is sure a great line when you’re running for office.  Worked out great in Venezuela….

Money In 2021? (Explained With One Bikini)

“Well, Saddam owed us money.” – Arrested Development

What does Superman® dry off with?  A Tow-El.

Money.

What is it?

Really, the truth is money is anything we accept as having value that we can trade for something else.  Cigarettes have been used for money.  Cowrie shells were used in China for money nearly 4,000 years ago.  Booze has often been used for money.

I read an article back in 2013 that bottles of Tide® were being used to trade for drugs in New York City, so you know that there are plenty of insane.  Heck, I hear the Germans are even raising money online through Krautfunding.

Ideally, money has some sort of scarcity attached to it.

Gold has a historic role as money.  You can cut it up into very, very tiny pieces, and you have lots of tiny pieces of gold.  It hasn’t changed – you can melt it back into a single bar again, having lost nothing.  You cut up a dollar bill into very tiny pieces?  You have a pile of gerbil cage fluff.

Gold is nice.  So is silver.

But, like anything, there are problems.

I found a little gold once while prospecting – it was a minor success.

Well, generally always the same problem.  Government.

I’ve mentioned Rome before, because it’s a great illustration of what happens when government designs money.

At the beginning, Roman silver coins were, well, actually silver.  The problem with silver coins is that you can’t make silver show up out of thin air.  Oh, wait, if you’re a government, you can.  The Imperial Romans managed to maintain enough restraint that their silver coins were over 90% silver for a little over 150 years after Empire.

Proving once again I definitely deserve the Nobel Prize™ in Economics for my discovery of Bikininomics©.

After that, the percentage of silver in the coins declined rather quickly.

So did the Roman Empire.

Interestingly, where it took Rome 150 years, it took the United States 142 years for the same thing to happen:  from 1792 (when the Coinage Act was passed) to 1934 (when Roosevelt confiscated United States silver and gold).  History may not repeat, but it sure does rhyme.

Sure, there were silver coins produced after 1934, but silver coins were (largely) discontinued as United States currency in 1965.  (*There were exceptions for dollar and half dollar coins in selected years.  That ended in 1976.)

As soon as the non-silver coins were minted, the silver coins began to disappear from circulation.  Gresham’s Law states the simple fact:  bad money (non-silver coins) drives out good money (silver coins).

But it’s had an impact on people’s thought processes as well:  they have (largely) stopped thinking about gold and silver as money.  Want proof?

Yup.  When Mark Dice offered people either a King Size® Hershey’s™ chocolate bar or a 10 ounce silver bar, everyone chose the candy bar.  As bad money replaced good, people stopped even thinking about silver as money.

The money supply today is fiat money.  I’ve written about that before – it means that our money is entirely made up.  No silver backing, no gold backing, the only backing is the faith of the people who accept it.  Oh, and several thousand nuclear weapons, if you’re talking about the United States dollar.

The next step from that are the cryptocurrencies.

Those are entirely a mathematical concept, though Ricky has noted in comments that this mathematical construct can cost upwards of a million dollars in power a day.  Bitcoin is currently at $33,000.  Four days ago?  $40,257.

Used with permission.

Is Bitcoin a bubble?  Will it go to zero?  Will I go to $500,000?

Honestly, I have no idea.  I would have bet against it going to $40,000.

The scary part of today is just that uncertainty.

  • Gold has (generally) held its value over time, performing far better than the dollar since the Federal Reserve© came into being.
  • Gold hasn’t performed as well as stocks over the same period – creative people added more value than a motionless metal.
  • Stocks are today at a valuation that is (by my reckoning) insane. They can stay that way longer than I can bet against them.
  • Bitcoin? Who can say?  I think its primary role right now is to indicate bubble tops.
  • Bonds? Who wants to buy bonds at nearly zero interest rates?

This is probably one of the more difficult times to invest in my lifetime – risks are very high, but returns don’t seem to have kept up.

First role of 2021?  Don’t talk about 2020.

We seem to be, everywhere I look, near to a breaking point in our systems – economic, political, and social.  Who knows, maybe we’ll be back at cowrie shell money by 2030.

But I think I’d prefer the booze, since I don’t smoke and, well, if you have booze do you really need clean clothes?

Bikini Economics, The Money Supply, And Dinner With Gandhi

“It’s a growth economy, Gus. We’ve already made like, 500 rupee.” – Psych

The economy is so bad, Facebook® just laid off 50 Congressmen.

I was flittering across the Internet the other day and I came across a disturbing image.  I mean, who wants to even think about Barack Obama wearing just a feather boa and covered in gerbils?  See if I ever go to the New York Times® website again.

But, if I may, I think I found an even more disturbing image – a graph of M1.  What is M1?  M1 is the narrowest definition of money:  it’s the cash in your cushions, it’s the cash in your pocket.  It’s the cash in your checking account.  Nearly anything you can go out and spend right now and not owe anyone for:  that defines M1.

M1 is not, however, credit cards.  And it’s not savings accounts or the stock market or savings bonds.  It’s ready, hot cash.

And the M1 graph has spiked.  Spiked as in going up from just under $4 trillion last year at this time to nearly $6.6 trillion right at this moment – a growth of $2.6 trillion dollars – in one year.  That’s a huge change, since it took sixteen years to grow from $1.4 trillion to $4 trillion, and those sixteen years contained the biggest recession the United States had seen since the Great Depression.

So, here, take a look.  Since it’s Christmas time, I tried to get the most festive pictures I could find, even though technically one of them isn’t a bikini.  Oh, sure, you feel like complaining, but what about me?  I’m the one who has to flit through literally hundreds of bikini photos to find the best ones to properly illustrate economic principles while being festive.

This is the longer view, which shows M1 since 1975.

This is a close up of more recent M1 behavior.  I made the last little bit on the graph thicker and orange because it was hard to see.

It certainly looks scary.  The graph, not the bikini.  Look at the graph.

What’s going to happen?

I’m not certain.  I originally wrote, “I have no idea” but what has happened historically when a country prints 65% extra cash in one year?

I have an idea of what happens there, and it really is scary.  After World War I, the German economy was pretty well wrecked, plus they had to put down a communist revolution.  I’m not getting into the details (mainly because it’s boring) but the Germans just started printing money as fast as they could.

And by printing as fast as they could the printing presses were the problem.  Thankfully, they managed to double money production – by only printing on one side of the currency.

That’s AOC-level super-genius thinking.

A ewe in a swimsuit just drove up in an Italian sports car.  It was a lamb bikini.

Within six years what had cost 1 Mark cost 1 trillion Marks.  And all because they printed money.  I write on a regular basis about the world changing around us, and this is a great example.  In 1914 everyone had been happy with their new-fangled electric lights, and in 1924 you had to pay 4 trillion Marks for a newspaper, but even then the news was the wurst.

The good news is that the Germans could pay off their mortgage with cheap money, right?

No.

While their money melted away in a blizzard of banknotes, their debt was (eventually) tied back to the new currency that replaced the inflated mess.  As an example, mortgages were revalued at 25 billion (yes, billion) times their value in the inflated currency.

Surely they did the same thing with depositors, right?

Of course not.  In some cases bonds were revalued, but only at a tenth of the value of the mortgages.  As always, there were winners and losers, and, as always, most people aren’t in the club that allows them to make out like bandits while the economy collapses around them.

My crack research staff uncovered that Adams never said that even though it sometimes is attributed to him.  It took a Google® search and one result.  Arduous.

As I write this, a $2.3 trillion dollar spending plan was just passed by Congress.  Nearly a trillion dollars of that is going directly to people, many of whom badly need the cash.  Trump wants to hold out to double it, since as we’ve seen, what’s another trillion?

The rest of the bill is packed with nearly six thousand pages of “stuff”.  Since it’s well known that most Congresscritters can’t spell or type, who wrote those six thousand pages, filled with things like making unauthorized downloads of movies a felony, $30 million to set up the Martin Luther King, Jr./Mohandas Gandhi Scholarly Exchange Fund.

Sounds like CoronaBux for Leftists complaining about how awful the United States treats the hordes of people that keep trying to sneak in?  Probably.  I could go on and on about the rest of the money we’re shooting like water out of a Super Soaker™, but I won’t.  The point is, since we’re in a budget deficit already, this is just printing more money.

Okay, this one might have been a bit made up.  And Gandhi was notorious for being able to put back six or seven bacon cheeseburgers at a sitting.

Not all of this money will go directly into cash.  But some of it will be quickly recycled back into the United States as cash:  we lend Egypt a billion or so to buy guns and jet fighters and bombs, and that money goes, partially, to the salaries of the Americans who make the stuff.

And from there right into that M1 graph.

The one thing I know is that vast amounts of money sloshing around within our economy have consequences.  Right now, some of those consequences are being held in check – a steak today costs about the same as a steak last year.  Gasoline costs less than gasoline did last year.

Why?  Most commodity prices that I’ve tracked are still declining, and have been for nearly a decade as the Everything Bubble that followed the Housing Bubble funnels investments into ever-lower returns.

As I’ve said before – we will have inflation.  But we will have deflation first.  And when it whips back into inflation?

Well, thankfully, I’ll have a graph for that . . . .