Category: Weimerica

“Martha’s polishing the brass on the Titanic.” – Fight Club

When I met The Mrs. I said, “Titanic.”  She said that was a terrible icebreaker.

I worry that sometimes I talk too much about the downsides of workings of the economy and was asked, “What does it look like when things start to look better?  What does it look like if it’s all going to be fine?”  I know this might seem like rearranging the deck chairs to keep the Titanic from sinking, but, hey, let’s go with it?

These are great questions.  Not as good as, “Would you like another beer?” but still very good.

These are also questions that could be political in nature (I might write more about that for Monday) but in this case I’m going to focus on the economy as much as I can, though it’s certain that political will slip in here and there – it can’t be avoided because we’ve got Joe all over the economy.

What will make things “fine” and how will we know when we get there?

If someone steals your booze, does that mean they’ve lifted your spirits?

First:  Stop the infinite debt spending.

Several years ago I wrote about Modern Monetary Theory.  In a nutshell, Modern Monetary Theory says that if you have a bill, pay it.  If you don’t have the money, make it.  The theory goes that there aren’t a set number of points in a game of football, so why should there be a set number of dollars in the economy.  So, if you have a bill, pay for it.

This is an awesome theory only for a person that has the I.Q. of a Kamala/AOC lovechild.  The worst thing about it is that it actually worked in the short term, which is the worst when it comes to an economic policy, because it gives lots of time for Bad Things to pile up.

What made it work is because the United States can pawn the piles and piles of dollars off to the world since everyone takes them because we have nuclear weapons and aircraft carriers and everyone knows what happened to Saddam and Qaddafi when they decided they’d start taking gold instead.

I asked a friend if he wanted to hear about the Russian victory parade.  He said, “No tanks.”

Eventually either the desire or ability to soak up the dollars goes away.  When that happens, even for a short time, the inflation inherent in the system feeds back.

Can this go on forever?  No.  Should we, you know, maybe consider stopping it before we totally wreck the economy?  If we do that, there will be a hangover and a tough political bill to be paid.

Will we?  Yes.  As Ben Stein’s dad said, “If something can’t go on forever, it won’t.”  That will be a very, very bad day if it’s not one of our choosing.

Also?  Fiat economies have a worse track record than Fiat™ cars for reliability.

Second:  Stop the Wealth Pump®.

I really enjoyed Peter Turchin’s book, End Times.  In it, he convinced me (he also has data to support this) that one of the biggest failures of my lifetime is the priming of what he calls the Wealth Pump™.  The really short version of this is that policies that would support concentration of capital in the billionaire class are enacted (for example:  open borders) while policies that benefit the average worker (for example:  strictly controlled borders) are ignored.

I dropped a piece of ice in the kitchen.  I was upset, but then it melted.  I guess it’s water under the fridge.

Turchin’s models have shown that the Wealth Pump™ everywhere and always leads to tremendous social turmoil.  Even without the economic misery for the common man that the Wealth Pump© implies, the turmoil from the hordes of teeming illegals will create turmoil that will last lifetimes.  But stopping the Wealth Pump™ is imperative.

Will Bezos and Soros owned Senators suddenly ignore the billionaire class they serve?  At this point, not voluntarily.  The bacon-wrapped shrimp and cool stock tips are pretty powerful to keep them in line.

Third:  De-financialize the economy by putting out the FIRE.

Finance, Insurance, and Real Estate is called the FIRE sector of the economy.  In theory, FIRE exists to serve the actual productive sectors of the economy that make actual things that people need like potatoes, beer, steak, PEZ™, shoes, rifles, books, and toilet plungers.

That’s the way it should work.

Instead, it’s a gambling economy filled with people who try to manipulate and tweak and profit without producing anything.  The big oil squeeze of 2008?  Rumor was that was a big investment bank trying to make a bet profitable on a short against a particular company.  The investment bank didn’t produce anything useful except for profits.  By manipulation.

I think FIRE might be more dangerous than fire.

Again, ask the Nancy Pelosi why her stock portfolio is so profitable, and ask why first term Senators do so well in the stock market.  Or don’t.  But it’s FIRE that’s the primary machine in the Wealth Pump™ and these create increasingly horrific schemes.

Examples?  Everything is a subscription because it increases revenue and profits.  Now it’s moving into video games:  design a game once, sell a subscription to it so that people can’t play it again for free, but instead have to pay a monthly fee.  It’s already moving that way for software.

And look into who is buying all the housing.  It’s on FIRE.

Fourth:  Rational housing valuations.

People need a place to live, and a pod won’t cut it, but houses are now big investments.  Why?  Because they need more profits to feed the Wealth Pump®.  Housing prices returning to something a guy with a high school degree working a manufacturing job can afford is crucial, since that’s where families come from.  Is it possible in San Jose?  No.  It’s possible in Modern Mayberry, but that’s because BlackRock© hasn’t started buying here.

Fifth:  Space for humans and A.I.

I know that some are skeptical, but A.I. is already making hundreds of thousands of jobs obsolete.  Running a backhoe?  No.  Writing articles?  Yes.  Things that are easy for humans, are hard for A.I.  Things that are hard for humans (and thus draw a higher salary), are often easy for A.I.

Are expert-level programmers still required?  Absolutely.  But not as many, since an expert-level programmer acting in tandem with A.I. will have a tenfold increase in productivity.

Who loses?  The “not as good” programmers who are now not required.

This has happened before in all sorts of industries.  DJs on the radio began voice tracking decades ago.  The average DJ makes minimum wage (average, some are highly compensated, most are not) but still the radio stations paid $20,000 to eliminate them because making the product cheaper is what they know.

ChatKGB:  it asks the questions.

Automation increases profits, but it doesn’t lead to some sort of techno-utopia where we have three hour work days.  People just lose their jobs.  As profits have gone up, pay has gone down (relative to inflation) and work hours have gone up for salaried folks.

A.I. hasn’t hit in a big way, yet.  It will.  Making space for people is unlikely, but necessary.

That’s a summary of how we can tell if we’re going to pull out from the looming economic catastrophe, what it looks like if things are going to get better.  I’ve started sketching out a few political things to show that things are going to be okay, and (like I wrote above) will likely show up on Monday.

So, like the Titanic, it looks like we might have a change in destination.  But we’re making good time!