Not to be a dick, but didn't you tell us last week we can't simulate the properties of
complex systems? Yet now you pimp v. Mises, whose whole thing is making claims *a priori* from his axioms? For all it's flaws, central banking is an empirical art, where intuitive hustlers (Greenspan, Powell) out perform theoreticians (Bernanke, Yellen).
MV=PT=Nominal GDP
When Nominal GDP drops below trend, in big, diversified economies, you get a recession.
When NGDP holds around a trend line, for decades, like in Australia, you get economic stability. This is empirically how things have worked for decades, in many countries. Greece and Italy, on the tight-money of the Deutsche Mark, I mean Euro, hadn't seen NGDP growth for a decade prior to the China Virus, and those economies still haven't recovered. Still waiting to clear all that "malinvestment".
Did you know that neither Poland, Israel, nor Australia had recessions in 2008-2009?
Isn't that remarkable? Have a look at their NGDP charts. They all have their own central banks.
Every country on earth uses a fiat currency managed either by a central bank, or pegged to another fiat currency. No one uses commodity money, or even a voluntarily frozen monetary base. You'd think Russia, Iran or some other more or less sovereign country would adopt a gold standard, and reap the theoretical benefits. None of them do, because they've learned the lesson of the 19th century. When you move from a Malthusian, farming economy, to an industrial and commercial economy, with financial markets, less and less barter, more and more posted prices, and more activity mediated through markets, price stickiness becomes 'a thing'. Rather than have all the prices in the economy chase the fluctuating value of commodity money, you have a flexible, fiat monetary system so that the value of money can be adjusted, in a manner expected to stabilize the economy. In a manner expected to produce stable NGDP growth.
Prior to ~1800, home production dominated. You could avoid the money economy for months, years even. After 1800, it becomes harder, and then impossible to avoid the money economy. We shouldn't be surprised that such a change necessitates a modification of the monetary system.
If you don't like 2.5% inflation, don't keep all your wealth in a demand account, and maybe campaign against the capital gains tax. If you want to improve the position of workers (increase the labor share of GDP), regulate immigration, and restore womenfolk to home production. If you don't want stocks going up so much in 2021, campaign for a lower trend rate of NGDP. Prior to the China Virus, we were on a 4% trend line, now, under China Joe Chernenko, we're on a 5% trend line. What's 1% of 20 trillion, compounding every year, indefinitely? It's got to be priced into the income streams of equities.
Vilfredo Pareto (inventor of Pareto principle and Pareto Optimization) in his book "Mind and Society" very elegantly handles your objection. Let us take the Austrian Axiom: When demand outstrips supply, price of the good increases. This is well and true but then you notice in the real world that demand for cars has increased, supply remained the same and yet prices did not increase. Has the axiom found it's exception? Was the axiom wrong? No in contrast, the axiom is completely true, but the real world is infinitely complex. What you might notice is that motorbikes are an elastic substitute to cars and so people bought motorbikes in large numbers instead of cars maintaining the price of cars. Or you might find some other perfectly valid reason. In all these cases what you find is that there was some other cause (some other axiom) that was pushing the price of cars down and it counter-acted the current axiom that pushed the price of cars upward. Just because we don't find the current axiom holding in the real world, doesn't mean the axiom is false, it means there are other causes for the events that we need to search for and consider. Directly quoting Pareto, though you should read the first chapter, "The Scientific Approach" of Mind and Society (It's free on archive.org, if you're fine with internet versions!) is
"The concrete situation is very complex and must be regarded as a compound of many elements A,B,C... Experience teaches us that to understand the situation it is best to isolate instances of A,B,C.. and examine them one by one so that we may gain the theory of the complex as a whole. This is what the logic experimental science does. But those unfamiliar with its approach grope blindly forward shifting from A to B, B to C, then ever so often turning back, mixing things up, thinking of B while studying A, thinking of something else while studying B, worse if you are thinking of A they remind you of B, if you are thinking of B they remind you of C, demonstrating their ignorance of the scientific method."
Modern economics falls exactly into the trap Pareto described above. In Austrian economics (or the logico-experimental approach) an axiom is false if it leads to logical inconsistency (a paradox like in the mathematical sciences) or a consistent negation in a closed repeatable experiment. For example you lock people in a room, force demand to increase over supply and yet price never increases. With this I hope I have defended the Austrian Economic Approach sufficiently and can deal with the real-world phenomena that you have explained.
In my view according to Moldbug (and me), Economics is infinitely complex, the best way to shape the economy is in direct simple understandable approaches. So if we want to provide jobs to everyone able (regulate the labor market), take money from everyone and then hire people to build monuments like the kings of the past. Its effect would be simple, understandable and predictable (few axioms involve themselves on it). Modern economics has decided to instead inflate the market with a number of complex approaches that we can't even clearly measure inflation anymore and then keep making broad un-understandable touches to the market based on empirical correlations that are true until they aren't and everything crashes. If we design an economy with hard currency, no fractional reserve banking then we should have no recessions according to Austrian Theory (The Dutch economy in the 17th century was like this and had no recessions), when we don't do this we open up the possibility of recessions and economic destruction that eventually happens. Once it happens, we can look back and diagnose the reasons but each recession is different, the system fails differently every single time because it is so complex, we can never prevent a new recession in this empirical approach (To date we haven't). Russia in fact has come quite close to a hard currency. They have enough reserves to completely wipe out their government debt which is the way things should work, Russia also is very resilient to US sanctions and other external economic shocks. Russia is trying hard to replace the dollar, and they keep proposing currencies backed by gold. I find it interesting that country closest to a monarchy, is the one that favours a hard currency. Either way I don't doubt that their might be empirical correlations that are true for a period of time and can help the economy for a period but eventually they all will fail since this system is fundamentally broken/ unstable. Try using empirical correlations on the stock market.
I'm not aware of good examples of an Austrian Business Cycle. Seems to me that damn near every recession, in an advance economy, is associated with a collapse in financial market prices and then slowdown/dip in NGDP, and the recovery, often rapid, is associated with a rebound in asset prices and NGDP. Very simple, Scott Sumner recessions.
Lastly, on the point about complexity...ABC is complex. Some old man thought it up and ran the 'simulation' in his head. I mean how could you guys really establish causality? How can you be sure the economy is so sensitive to modest changes in interest rates, as such, rather than monetary policy (expected changes in value of money, possible correlated with interest rates)? Not aware of anyone even coding an agent based model to maybe begin to establish causality.
If you want to establish causality, do small scale controlled experiments and you will always end up with the same results. An Austrian in the sense of Mises, Rothbard would just confirm with logic and the belief that humans are rational, Pareto though does a host of experiments. I don't think its possible to find any of the fundamental Austrian axioms to be false in any closed repeatable experimental setting, though I doubt those experiments were done in recent history (The last person to do them is probably Pareto). From these axioms the Austrian Business Cycle flows naturally, thus it cannot be false. If you falsify one of the axioms, you falsify the theory like a maths theorem (or you discover another axiom that we did not consider in the economy, which also I doubt is possible). Changes in interest rate basically is a change in the amount of money (in a fractional reserve banking system). We know the effect of changing money so we know what changing the interest rate will do. You can check in a closed, repeatable experiment, inflate the amount of money and see an increase in prices. Though if prices in the real world don't change it just means there are other factors at play, even worse the prices would have probably fallen if we didn't inflate the currency (something goldbug mentions) Theres much more detail into the functioning of central banks given in this book by Rothbard: https://mises.org/library/mystery-banking/html.
Frankly the focus of modern economics on mathematical models seems like an anachronism because of the lack of computers in the development of economics. You could just as easily simulate agents as an economic model, but it would be equally meaningless as mathematical models since we would never begin to approach the complexity of a real economy.
Austrians don't claim any predictive power in empirical macro-economic sense, they don't even consider the NGDP as a valid measure that makes any sense. Our claims are twofold: Our axioms are 100% true, if you agree with that you can design an economic system that will never see a recession ever since it will have no effect that can crash the entire system at a time (there are some historical examples but none since 20th century of such a system existing).
(P.S. Regarding Caplans article he seems to be arguing more against the radical libertarianism of Rothbard than anything fundamental to Austrian Economics. For example- Caplan disagrees that artificially induced investments become maladjusted investments. Sure, some of them can be good investments (the govt could get lucky), probably unlikely and Rothbard in his radical libertarian view argues that none can be good investments. None of these are an axiom though, perhaps Caplan can appreciate a non libertarian view of Austrian Economics in the works of Hoppe)
Financial repression always steals from savers, and therefore steals from the old - and the traditions that once stabilized a society turn to progressive rot.
Financial repression works to only return the normal amount for the level below your assumed risk. Savers become investors, but only get savers' returns. Investors become speculators. Speculators become traders. And traders become hair-on-fire gamblers. This is wrong. And it isn't necessary.
All cultures have cycles, many tied to the financial well-being of the citizens (a bit of chicken-egg here), but exacerbating those cycles with an Elite Wealth Program (monetary dilution) is only put up with because the ones getting taxed aren't powerful enough or educated enough to combat it.
Depending on what one defines as "a chance" : a lot more than "10 or 20" -- e.g. U.S. state lottery tickets cost only a few $... and they sell them every day.
every crypto millionaire made his money by dunking on desperate retards using a digital casino. a financial gladiator pit doesnt sound like freedom or liberty or any kind of nice word.
Joshua, I am referring to an economic principle explained by Stanford economists in the 1970s whereby a government precludes a market rate for capital by repressing the natural rise in interest rates. I didn't say I had been repressed - though as one in statistical arbitrage I most definitely have.
> After 1800, it becomes harder, and then impossible to avoid the money economy
Not physically impossible; but anyone who seriously (and on an interestingly large scale) tries will find himself prosecuted as an "enemy of the people" per Wickard v. Filburn.
Obligatory Ozark quote: “ Scratch. Wampum. Dough. Sugar. Clams. Loot. Bills. Bones. Bread. Bucks. Money. That which separates the haves from the have-nots. But what is money? It's everything if you don't have it, right? Half of all American adults have more credit card debt than savings. 25% have no savings at all. And only 15% of the population is on track to fund even one year of retirement. Suggesting what? The middle class is evaporating? Or the American Dream is dead? You wouldn't be sitting there listening to me if the latter were true. You see, I think most people just have a fundamentally flawed view of money. Is it simply an agreed-upon unit of exchange for goods and services? $3.70 for a gallon of milk? Thirty bucks to cut your grass? Or, is it an intangible? Security or happiness - peace of mind. Let me propose a third option. Money as a measuring device. You see, the hard reality is how much money we accumulate in life is not a function of who's president or the economy or bubbles bursting or bad breaks or bosses. It's about the American work ethic. The one that made us the greatest country on Earth. It's about bucking the media's opinion as to what constitutes a good parent. Deciding to miss the ball game, the play, the concert, because you've resolved to work and invest in your family's future. And taking responsibility for the consequences of those actions. Patience. Frugality. Sacrifice. When you boil it down, what do those three things have in common? Those are choices. Money is not peace of mind. Money's not happiness. Money is, at its essence, that measure of a man's choices.”
In all cases these can be rewritten as: "For you -- frugality. Today skip concerts; tomorrow, skip meals. For me -- 27th yacht."
Tighten belt, practice "work ethic" so you can park some pennies in that 0.1%-yielding savings acct. (Or, if you're the gambling sort: into casino-stocks ,where the trading co. front-runs with impunity, and in the end "the house always wins.")
On the final sentence that you quote -- So, the more money you have, the taller your choices have been? The longer? The heavier? The faster? Surely not the better. The amount of money that you have is the measure of the extent to which your choices were the kinds of choices that would have been likely to result in your accumulating money? But that isn't true either.
Most crypto people would suggest that the solution is decentralization. Remove the traditional power boundaries to remove the traditional wealth consolidation. I have no problem having less than others so long as its a matter of competency.
As balaji likes to note, we live in an inherited world, time to found something new
I constantly find intellectual overlap between CY and BS. If I could get a audio/text dialogue between the two I would pay any price for it. I would sell my mother into slavery.
Dominic Cummings is here in the UK today lambasting the UK gov around Coronavirus failings... And he might as well be reading straight this substack or UR. It's incredible
It isn't accurate to say one wouldn't be able to profit from passive investing under the system described. Equity instruments bear risk and holders of equities accordingly demand a risk premium. A better way to put it is that the nominal value of the equity market would not increase absent flows out of money out of other assets (or circulation). The prices of shares in an individual's widely diversified portfolio could still rise from share repurchases. The nominal value of the total equity market (or asset market generally) just wouldn't rise systematically.
I’ve actually invested a lot in understanding monetary economics, which is really hard, and I feel like I’m having a Knoll’s Law moment with respect to Curtis, but I’m just gonna assume this is a weak area for him. I recommend Scott Summer on the subject, or Yudkowsky’s decent summary of Sumner.
And the caricature of the US economy is cute, and may even be accurate from Curtis’s vantage point, but as a lifelong Midwestern plebe, I can only say I live in a very different place or America is a really big place or Curtis isn’t thinking about Midwestern plebes who don’t matter or something like that.
I've been bugging people I actually know who are experts in economics to take a gander at Curtis's writings (hard to do, as they are sorta like getting into Jonathan Pageau). I think Bob doesn't take into account the full dastardly nature and impossibility of pricing in the Greenspan put because it wasn't on a particular stock but on whatever stocks important people had. However, I think he finds a few other things which could be refined.
I live in a simple economy with three other people. I am a fisherman, and the other three are a farmer, a lumberjack, and a tool maker. Our entire economy has only $10, but I owe $30, $10 to each of my friends. It’s impossible, right?
Not at all.
On day 1 I catch enough fish to earn $2, then pay down my debt to friend #1. He uses that money to buy lumber or tools or whatever. Rinse and repeat until I have paid down my debt to all three.
How can $18T debt be paid off with $6T? The answer is: over time. How do you eat an elephant? One bite at a time. Yes, there is a huge amount of debt, but much of it is spread over decades, and the same dollars are spent countless times.
By the way, no Austrian Economist thinks that instantaneously changing our economic system would be viable. It is a strawman made of exceedingly flimsy straw.
Great piece, glad to have you back. Wishing the best for you and your family.
Not to be a dick, but didn't you tell us last week we can't simulate the properties of
complex systems? Yet now you pimp v. Mises, whose whole thing is making claims *a priori* from his axioms? For all it's flaws, central banking is an empirical art, where intuitive hustlers (Greenspan, Powell) out perform theoreticians (Bernanke, Yellen).
MV=PT=Nominal GDP
When Nominal GDP drops below trend, in big, diversified economies, you get a recession.
When NGDP holds around a trend line, for decades, like in Australia, you get economic stability. This is empirically how things have worked for decades, in many countries. Greece and Italy, on the tight-money of the Deutsche Mark, I mean Euro, hadn't seen NGDP growth for a decade prior to the China Virus, and those economies still haven't recovered. Still waiting to clear all that "malinvestment".
Did you know that neither Poland, Israel, nor Australia had recessions in 2008-2009?
Isn't that remarkable? Have a look at their NGDP charts. They all have their own central banks.
Every country on earth uses a fiat currency managed either by a central bank, or pegged to another fiat currency. No one uses commodity money, or even a voluntarily frozen monetary base. You'd think Russia, Iran or some other more or less sovereign country would adopt a gold standard, and reap the theoretical benefits. None of them do, because they've learned the lesson of the 19th century. When you move from a Malthusian, farming economy, to an industrial and commercial economy, with financial markets, less and less barter, more and more posted prices, and more activity mediated through markets, price stickiness becomes 'a thing'. Rather than have all the prices in the economy chase the fluctuating value of commodity money, you have a flexible, fiat monetary system so that the value of money can be adjusted, in a manner expected to stabilize the economy. In a manner expected to produce stable NGDP growth.
Prior to ~1800, home production dominated. You could avoid the money economy for months, years even. After 1800, it becomes harder, and then impossible to avoid the money economy. We shouldn't be surprised that such a change necessitates a modification of the monetary system.
If you don't like 2.5% inflation, don't keep all your wealth in a demand account, and maybe campaign against the capital gains tax. If you want to improve the position of workers (increase the labor share of GDP), regulate immigration, and restore womenfolk to home production. If you don't want stocks going up so much in 2021, campaign for a lower trend rate of NGDP. Prior to the China Virus, we were on a 4% trend line, now, under China Joe Chernenko, we're on a 5% trend line. What's 1% of 20 trillion, compounding every year, indefinitely? It's got to be priced into the income streams of equities.
Vilfredo Pareto (inventor of Pareto principle and Pareto Optimization) in his book "Mind and Society" very elegantly handles your objection. Let us take the Austrian Axiom: When demand outstrips supply, price of the good increases. This is well and true but then you notice in the real world that demand for cars has increased, supply remained the same and yet prices did not increase. Has the axiom found it's exception? Was the axiom wrong? No in contrast, the axiom is completely true, but the real world is infinitely complex. What you might notice is that motorbikes are an elastic substitute to cars and so people bought motorbikes in large numbers instead of cars maintaining the price of cars. Or you might find some other perfectly valid reason. In all these cases what you find is that there was some other cause (some other axiom) that was pushing the price of cars down and it counter-acted the current axiom that pushed the price of cars upward. Just because we don't find the current axiom holding in the real world, doesn't mean the axiom is false, it means there are other causes for the events that we need to search for and consider. Directly quoting Pareto, though you should read the first chapter, "The Scientific Approach" of Mind and Society (It's free on archive.org, if you're fine with internet versions!) is
"The concrete situation is very complex and must be regarded as a compound of many elements A,B,C... Experience teaches us that to understand the situation it is best to isolate instances of A,B,C.. and examine them one by one so that we may gain the theory of the complex as a whole. This is what the logic experimental science does. But those unfamiliar with its approach grope blindly forward shifting from A to B, B to C, then ever so often turning back, mixing things up, thinking of B while studying A, thinking of something else while studying B, worse if you are thinking of A they remind you of B, if you are thinking of B they remind you of C, demonstrating their ignorance of the scientific method."
Modern economics falls exactly into the trap Pareto described above. In Austrian economics (or the logico-experimental approach) an axiom is false if it leads to logical inconsistency (a paradox like in the mathematical sciences) or a consistent negation in a closed repeatable experiment. For example you lock people in a room, force demand to increase over supply and yet price never increases. With this I hope I have defended the Austrian Economic Approach sufficiently and can deal with the real-world phenomena that you have explained.
In my view according to Moldbug (and me), Economics is infinitely complex, the best way to shape the economy is in direct simple understandable approaches. So if we want to provide jobs to everyone able (regulate the labor market), take money from everyone and then hire people to build monuments like the kings of the past. Its effect would be simple, understandable and predictable (few axioms involve themselves on it). Modern economics has decided to instead inflate the market with a number of complex approaches that we can't even clearly measure inflation anymore and then keep making broad un-understandable touches to the market based on empirical correlations that are true until they aren't and everything crashes. If we design an economy with hard currency, no fractional reserve banking then we should have no recessions according to Austrian Theory (The Dutch economy in the 17th century was like this and had no recessions), when we don't do this we open up the possibility of recessions and economic destruction that eventually happens. Once it happens, we can look back and diagnose the reasons but each recession is different, the system fails differently every single time because it is so complex, we can never prevent a new recession in this empirical approach (To date we haven't). Russia in fact has come quite close to a hard currency. They have enough reserves to completely wipe out their government debt which is the way things should work, Russia also is very resilient to US sanctions and other external economic shocks. Russia is trying hard to replace the dollar, and they keep proposing currencies backed by gold. I find it interesting that country closest to a monarchy, is the one that favours a hard currency. Either way I don't doubt that their might be empirical correlations that are true for a period of time and can help the economy for a period but eventually they all will fail since this system is fundamentally broken/ unstable. Try using empirical correlations on the stock market.
I'm not aware of good examples of an Austrian Business Cycle. Seems to me that damn near every recession, in an advance economy, is associated with a collapse in financial market prices and then slowdown/dip in NGDP, and the recovery, often rapid, is associated with a rebound in asset prices and NGDP. Very simple, Scott Sumner recessions.
He's a weird guy, but Bryan Caplan really lays it all it in this old essay: https://econfaculty.gmu.edu/bcaplan/whyaust.htm
Lastly, on the point about complexity...ABC is complex. Some old man thought it up and ran the 'simulation' in his head. I mean how could you guys really establish causality? How can you be sure the economy is so sensitive to modest changes in interest rates, as such, rather than monetary policy (expected changes in value of money, possible correlated with interest rates)? Not aware of anyone even coding an agent based model to maybe begin to establish causality.
If you want to establish causality, do small scale controlled experiments and you will always end up with the same results. An Austrian in the sense of Mises, Rothbard would just confirm with logic and the belief that humans are rational, Pareto though does a host of experiments. I don't think its possible to find any of the fundamental Austrian axioms to be false in any closed repeatable experimental setting, though I doubt those experiments were done in recent history (The last person to do them is probably Pareto). From these axioms the Austrian Business Cycle flows naturally, thus it cannot be false. If you falsify one of the axioms, you falsify the theory like a maths theorem (or you discover another axiom that we did not consider in the economy, which also I doubt is possible). Changes in interest rate basically is a change in the amount of money (in a fractional reserve banking system). We know the effect of changing money so we know what changing the interest rate will do. You can check in a closed, repeatable experiment, inflate the amount of money and see an increase in prices. Though if prices in the real world don't change it just means there are other factors at play, even worse the prices would have probably fallen if we didn't inflate the currency (something goldbug mentions) Theres much more detail into the functioning of central banks given in this book by Rothbard: https://mises.org/library/mystery-banking/html.
Frankly the focus of modern economics on mathematical models seems like an anachronism because of the lack of computers in the development of economics. You could just as easily simulate agents as an economic model, but it would be equally meaningless as mathematical models since we would never begin to approach the complexity of a real economy.
Austrians don't claim any predictive power in empirical macro-economic sense, they don't even consider the NGDP as a valid measure that makes any sense. Our claims are twofold: Our axioms are 100% true, if you agree with that you can design an economic system that will never see a recession ever since it will have no effect that can crash the entire system at a time (there are some historical examples but none since 20th century of such a system existing).
(P.S. Regarding Caplans article he seems to be arguing more against the radical libertarianism of Rothbard than anything fundamental to Austrian Economics. For example- Caplan disagrees that artificially induced investments become maladjusted investments. Sure, some of them can be good investments (the govt could get lucky), probably unlikely and Rothbard in his radical libertarian view argues that none can be good investments. None of these are an axiom though, perhaps Caplan can appreciate a non libertarian view of Austrian Economics in the works of Hoppe)
Too late.
Financial repression always steals from savers, and therefore steals from the old - and the traditions that once stabilized a society turn to progressive rot.
Financial repression works to only return the normal amount for the level below your assumed risk. Savers become investors, but only get savers' returns. Investors become speculators. Speculators become traders. And traders become hair-on-fire gamblers. This is wrong. And it isn't necessary.
All cultures have cycles, many tied to the financial well-being of the citizens (a bit of chicken-egg here), but exacerbating those cycles with an Elite Wealth Program (monetary dilution) is only put up with because the ones getting taxed aren't powerful enough or educated enough to combat it.
yeah you're financially repressed. You've only had, what? 10 or 20 chances to turn $10k into FU money in the last 15 years off publicly traded assets?
Depending on what one defines as "a chance" : a lot more than "10 or 20" -- e.g. U.S. state lottery tickets cost only a few $... and they sell them every day.
every crypto millionaire made his money by dunking on desperate retards using a digital casino. a financial gladiator pit doesnt sound like freedom or liberty or any kind of nice word.
Joshua, I am referring to an economic principle explained by Stanford economists in the 1970s whereby a government precludes a market rate for capital by repressing the natural rise in interest rates. I didn't say I had been repressed - though as one in statistical arbitrage I most definitely have.
I see...well then.
> After 1800, it becomes harder, and then impossible to avoid the money economy
Not physically impossible; but anyone who seriously (and on an interestingly large scale) tries will find himself prosecuted as an "enemy of the people" per Wickard v. Filburn.
"If you don't like 2.5% inflation, don't keep all your wealth in a demand account, and maybe campaign against the capital gains tax."
hmmmmmmmm
“Inflation means: everything keeps getting more expensive, because rich people keep stealing money from everyone.”
You’re a damn genius Curtis.
So you're saying buy Enron? Or short it? Looking for actionable advice, dude.
If you haven't been thinking about this for 20 years non-stop, how do you suppose to understand this? But if this art, it is beautiful!
Obligatory Ozark quote: “ Scratch. Wampum. Dough. Sugar. Clams. Loot. Bills. Bones. Bread. Bucks. Money. That which separates the haves from the have-nots. But what is money? It's everything if you don't have it, right? Half of all American adults have more credit card debt than savings. 25% have no savings at all. And only 15% of the population is on track to fund even one year of retirement. Suggesting what? The middle class is evaporating? Or the American Dream is dead? You wouldn't be sitting there listening to me if the latter were true. You see, I think most people just have a fundamentally flawed view of money. Is it simply an agreed-upon unit of exchange for goods and services? $3.70 for a gallon of milk? Thirty bucks to cut your grass? Or, is it an intangible? Security or happiness - peace of mind. Let me propose a third option. Money as a measuring device. You see, the hard reality is how much money we accumulate in life is not a function of who's president or the economy or bubbles bursting or bad breaks or bosses. It's about the American work ethic. The one that made us the greatest country on Earth. It's about bucking the media's opinion as to what constitutes a good parent. Deciding to miss the ball game, the play, the concert, because you've resolved to work and invest in your family's future. And taking responsibility for the consequences of those actions. Patience. Frugality. Sacrifice. When you boil it down, what do those three things have in common? Those are choices. Money is not peace of mind. Money's not happiness. Money is, at its essence, that measure of a man's choices.”
In all cases these can be rewritten as: "For you -- frugality. Today skip concerts; tomorrow, skip meals. For me -- 27th yacht."
Tighten belt, practice "work ethic" so you can park some pennies in that 0.1%-yielding savings acct. (Or, if you're the gambling sort: into casino-stocks ,where the trading co. front-runs with impunity, and in the end "the house always wins.")
On the final sentence that you quote -- So, the more money you have, the taller your choices have been? The longer? The heavier? The faster? Surely not the better. The amount of money that you have is the measure of the extent to which your choices were the kinds of choices that would have been likely to result in your accumulating money? But that isn't true either.
Most crypto people would suggest that the solution is decentralization. Remove the traditional power boundaries to remove the traditional wealth consolidation. I have no problem having less than others so long as its a matter of competency.
As balaji likes to note, we live in an inherited world, time to found something new
I constantly find intellectual overlap between CY and BS. If I could get a audio/text dialogue between the two I would pay any price for it. I would sell my mother into slavery.
I know this is not related to this post but
Dominic Cummings is here in the UK today lambasting the UK gov around Coronavirus failings... And he might as well be reading straight this substack or UR. It's incredible
This is a great post, very lucid.
Eeks! This is too scary. I am going to crawl and hide under a rock.
Modern Monetary Theory substitutes monetary velocity for the store of value function. #sad!
I guess this is why I was an English major, didn't get much of that at all - all I know is BTC going to the moon... ;)
I didn't understand it either.
It isn't accurate to say one wouldn't be able to profit from passive investing under the system described. Equity instruments bear risk and holders of equities accordingly demand a risk premium. A better way to put it is that the nominal value of the equity market would not increase absent flows out of money out of other assets (or circulation). The prices of shares in an individual's widely diversified portfolio could still rise from share repurchases. The nominal value of the total equity market (or asset market generally) just wouldn't rise systematically.
I’ve actually invested a lot in understanding monetary economics, which is really hard, and I feel like I’m having a Knoll’s Law moment with respect to Curtis, but I’m just gonna assume this is a weak area for him. I recommend Scott Summer on the subject, or Yudkowsky’s decent summary of Sumner.
Would you mind elaborating on this? As well as your comment about the caricature not vibing with your experience.
And the caricature of the US economy is cute, and may even be accurate from Curtis’s vantage point, but as a lifelong Midwestern plebe, I can only say I live in a very different place or America is a really big place or Curtis isn’t thinking about Midwestern plebes who don’t matter or something like that.
https://www.bobmurphyshow.com/episodes/ep-209-bob-murphy-critiques-curtis-yarvins-explanation-of-inflation/
I've been bugging people I actually know who are experts in economics to take a gander at Curtis's writings (hard to do, as they are sorta like getting into Jonathan Pageau). I think Bob doesn't take into account the full dastardly nature and impossibility of pricing in the Greenspan put because it wasn't on a particular stock but on whatever stocks important people had. However, I think he finds a few other things which could be refined.
I live in a simple economy with three other people. I am a fisherman, and the other three are a farmer, a lumberjack, and a tool maker. Our entire economy has only $10, but I owe $30, $10 to each of my friends. It’s impossible, right?
Not at all.
On day 1 I catch enough fish to earn $2, then pay down my debt to friend #1. He uses that money to buy lumber or tools or whatever. Rinse and repeat until I have paid down my debt to all three.
How can $18T debt be paid off with $6T? The answer is: over time. How do you eat an elephant? One bite at a time. Yes, there is a huge amount of debt, but much of it is spread over decades, and the same dollars are spent countless times.
By the way, no Austrian Economist thinks that instantaneously changing our economic system would be viable. It is a strawman made of exceedingly flimsy straw.