“Something’s the matter. Something sinister and something grotesque. And what’s worse is that it’s going on right here under my very nose.” – Blackadder Goes Forth
It’s amazing that one very short role was so iconic it cemented Ben Stein’s Hollywood career – he’s now known as Economics Lecturer to the Stars. He taught Miley Cyrus everything she knows about pole-dancing while nearly nude and its impacts on global trade due to dynamic trade imbalances in an information-driven economy.
Ben Stein is an odd person. Lawyer. Economic commentator. Writer. Actor. Inventor of the phonograph. But his father Herbert Stein was pretty spiffy, too. Herbert was an economist who headed up the Council of Economic Advisors for President Nixon and President Ford.
But that isn’t interesting. Or at least interesting to anyone not named “Stein.”
However, in 1976 he said something very interesting:
“If something cannot go on forever, it will stop.”
So silly, so obvious. So profound.
But what can’t go on forever?
Well, in the big scheme, almost everything. The Universe even has an expiration date. Unless there is are some pretty significant physical laws to the contrary that we have yet to find, all indications are that the Universe will keep expanding for a very long time. Like, for all of time. Forever. The Universe has moved on from the hot, incandescent birth where even light couldn’t exist to the relatively short period of now where we have stars and planets and Amazon® Echoes™ and such.
Eventually, because the Universe is continuing to expand, the galaxies will move so far apart that we won’t be able to see other galaxies at all. At somewhere around 100,000,000,000,000 years from now on February 13, late in the afternoon, the last star visible from the Milky Way® will burn out. That’s okay. The Sun will only last another 7,500,000,000 years or so. And the Earth will be gone billions of years before that. And that sucks, because I keep all my stuff here.
Eventually, even black holes evaporate. And under some theories even protons, the building blocks of everything we think of as matter, might decay. This proton decay would render normal matter obsolete. The implications of this are stunning. Making even a rudimentary PEZ™ dispensers would be impossible unless you made it out of pure ultra-dense neutronium, and even Amazon can’t ship a PEZ© dispenser that weighs 100 billion tons for free, even if you do have Prime®.
And at that point? It’s all gone. Nothing left but a very thin, diffuse mist of subatomic particles existing at a very cold temperature, where no more thermodynamic reactions are possible – known romantically as the Heat Death of the Universe. It’s like the Universe was the shower, and all the hot water was gone because your kids are incapable of taking a shower of less than an hour’s duration.
Ginsburg is never gonna carpool with anybody but Sotomayor again.
So everything has an end, with the possible exception of Hillary Clinton’s twin needs for political power and chardonnay. Oh, and maybe Ruth Bader Ginsburg, who has been rumored to have uploaded her consciousness to a small robot that she fashioned out of an old Sony® laptop and a Roomba© vacuum cleaner. Okay, to be honest, I started the Ginsburg rumor, because it would be really amazing if all of the members of the SCOTUS did that. I therefore declare personal ownership of the concept of RoboJudge©, including animation rights, but I would be willing to trade the Mongolian comic book rights for a beer right about now . . . .
Speaking of Heat Death, I found the following graph at RStreet.org (LINK):
Ohhhh, pretty bumps! If this was a roller coaster, what would happen next?
I actually drew this graph out on paper (back to the 2006 Dow levels) on a really slow work day one winter when I worked in Fairbanks, calculating what the Dow-Jones Industrial Average would be if it were in constant dollars. I even used data on the Consumer Price Index, and did all the math, and sacrificed a chicken, which is required in economics to make sure the results are right. Anyway, what’s interesting to me is that this graph shows the result of asset prices in a “forever low” interest rate environment.
I never, ever, would have guessed that this would have been the outcome of the Fed’s policy of printing money like a toddler drools to cover the massive spending and deficits of everyone who’s been president this century. I would have guessed that we would have had massive inflation, and an economy that would make the socialist paradise of Venezuela feel happy that they could stand in line for two days to get the free half cup of sawdust to eat.
Instead, we have Netflix®, a soaring asset base, and tacos on Tuesday.
I think I missed two things:
In a unipolar world, where we have the biggest and most intimidating armed forces the world has ever seen, everybody feels safe to use a dollar. It doesn’t make sense, but neither does the popularity of Twilight®. How intimidating are our armed forces? So intimidating that literally no power on Earth would ever consider taking us on in a conventional war. We’ve spent so much money on awesome military stuff that we’ve made World War II tactics impossible to use on us. So people around the world use dollars. It’s the next iteration of the Golden Rule: He who has the gold, makes the rules. And he who has the gun, has the gold. Just ask governments that tried to sell oil in their own currencies – I won’t use real names, let’s just call them Kuamar Mhadafy and Haddam Sussein.
This soaks up a lot of cash. Piles of it. And, better yet? Everyone in the world is willing to sell us actual physical stuff in exchange for electronic transfer of codes that say they have dollars. We don’t even have to print new dollars anymore!
Oh, and I’m sorry to have mentioned Twilight. If it helps, at least it’s not 50 Shades of Grey.
The other thing I missed is that banks just sat on huge deposits of cash to make their depleted balance sheets look better. They could just deposit the money at the Fed. I think we all agree that this was a better idea than just lending $2.7 million to absolutely anyone who wanted a house, even if “anyone” was a 12 year old buzzed on Pixie Sticks™ and the house was a cardboard box in the alley behind an all-night waffle and pizza restaurant.
But keeping that sort of balance is hard. Eventually the money starts to leak back into the economy – Chinese folks purchase Vancouver from the Canadians. Then the Canadians get excited because they can take their maple-syrup covered hands and spend the recycled American dollars on comic books and pantyhose from the United States. End result? Those dollars leak back.
And into stocks. And other assets. Some observers have said that, in addition to the high prices on the stock market, we also have a bubble in absolutely everything. But back to the stock market:
So, given that we’re at historically high valuations for a stock market . . . is it real? Can it sustain this high level?
Bueller, Bueller, anyone?
