Vladimir Putin isn’t the only guy who loves a giant shiny table

For the over-40 or crypto-uninitiated or non-bodybuilding-4chan-reading crowd, NGMI stands for ‘not gonna make it’.

It’s typically used in a tsk-tsk fashion to describe someone who is not going to succeed because they chickened out or fundamentally misunderstood the big picture, as in “Joey sold all his Bitcoin at $40k. NGMI.” or “I sent Jimmy the links to my due diligence on Gamestop and MOASS, but he still didn’t buy. NGMI.” It’s meant as an accusation of a lack of knowledge, but in truth it’s almost always an accusation of a lack of faith.

Jay Powell and the Fed, hiking rates to Whip Inflation Now? NGMI.

I mean that as both an accusation of lack of knowledge and lack of faith.

This is Loretta Mester, from a screen shot of her appearance this Sunday on Face the Nation. Mester is the head of the Cleveland Fed and a 2022 voting member of the FOMC, the Fed committee that decides on interest rate hikes. Loretta Mester is a 63-year-old academic economist. She joined the Philly Fed in 1985, a freshly minted Princeton Ph.D., and has never worked outside of the Federal Reserve system. Never.

It’s going to seem like I’m picking on Mester, but everything I say about her and every quote I have from her could just as easily be said about or quoted from any other Fed governor. They are ALL part of the same inbred, arrogant, frequently wrong but never in doubt, Soviet nomenklatura-esque priesthood of central economic planning and control.

  • John Williams, head of the NY Fed, has never held a job outside of the Federal Reserve system.
  • Jim Bullard, head of the St. Louis Fed, has never held a job outside of the Federal Reserve system.
  • Esther George, head of the Kansas City Fed, has never held a job outside of the Federal Reserve system.
  • Mary Daly, head of the San Francisco Fed, has never held a job outside of the Federal Reserve system.
  • Charles Evans, head of the Chicago Fed, has never held a job outside of the Federal Reserve system and academia.
  • Raphael Bostic, head of the Atlanta Fed, has never held a job outside of the Federal Reserve system and academia.
  • Kenneth Montgomery, interim head of the Boston Fed since Eric Rosengren resigned in disgrace, has never held a job outside of the Federal Reserve system.
  • Meredith Black, interim head of the Dallas Fed since Rob Kaplan resigned in disgrace, has never held a job outside of the Federal Reserve system.
  • Patrick Harker, head of the Philadelphia Fed, is not a Fed lifer. No, he’s an academia and government lifer.
  • Thomas Barkin, head of the Richmond Fed, is also not a Fed lifer. No, he’s a former senior partner and CFO at McKinsey. LOL. Oh and fun fact … while she’s no longer a regional Fed president (but is on the Fed board of governors), Lael Brainard had a stint at McKinsey as her only job outside of government and academia. So weird.

Anyhoo … here’s part of the transcript of Mester’s interview:

Q: The White House argues the true read of the economy is the strong jobs market. Do you believe employment is so strong, too strong to actually generate a recession?

MESTER: I think we can reduce that excess demand relative to supply without pushing the economy into a recession. So, I’m pretty optimistic we can do this. It’ll be challenging, but I think we can do it. And certainly my modal forecast of what’s going to happen this year is that the expansion will continue.

“my modal forecast”

Not ‘model’, but ‘modal’, as in mean, median and mode, as in run some econometric simulations and see whatever the most frequently observed outcome looks like. It is – and I mean this in all literal seriousness – the modern equivalent of cutting open a dozen rams and examining their entrails to see what the most typical pattern looks like.

Here’s what Loretta Mester saw in the entrails modal forecasts last year.

I expect some higher inflation measures in the next couple of months but that is different from underlying inflation levels reaching 2%. – Feb. 28, 2021

I am unconcerned with inflation running away from us. – April 5, 2021

I’m not worried about inflation getting out of control. – May 5, 2021

The Fed needs inflation expectations and real inflation to rise. – May 6, 2021

I’d like to see inflation rise to 2% or higher. – May 14, 2021

By the end of the year I expect inflation to be between 3.5% and 4%, with a drop in 2022. – Aug. 27, 2021

Inflation will be little more than 2% in the next years. – Sept. 24, 2021

But wait, there’s more. It’s not just that Mester and the entirety of the Federal Reserve economic research team – more than FOUR HUNDRED Ph.D. economists with a budget of literally hundreds of millions of dollars – got the 2021 transition to an embedded inflationary environment completely and utterly wrong, it’s also that Mester et al got the prior embedded deflationary environment completely and utterly wrong.

Since early 2009, the Fed has provided the most accommodative monetary policy in the history of man with the express purpose of stimulating inflationary expectations and behaviors to something close to their 2% target. This effort was based on an essentially linear model of the macroeconomic relationship between the price of money and the velocity of money.

Does lowering the price of money from 8% to 7.5% create more risk-taking? Does it increase the velocity of money through the real economy as corporate and household risk-takers are willing to borrow and spend and invest more at 7.5% than they were at 8%? Yes.

How about lowering the price of money from 7.5% to 7%? Yes.

7% to 6.5%? to 6%? to 5.5%? to 4%? Yes, yes, yes, and yes.

It’s a nicely linear relationship (technically the word is ‘monotonic’, not linear per se, but close enough). Lower interest rates have a specific and direct relationship with risk-taking economic behavior and expectations. The lower the interest rate, the greater the spur to “inflation”, by which central bankers mean risk-taking economic behavior.

But a funny thing happens to risk-taking economic behavior and expectations when the price of money gets close to zero. Not only do you not get the same inflationary bang for your lower interest rate buck, but the relationship starts to go the other way. You start to get LESS risk-taking and inflationary behaviors in the real economy as you get really lower and lower interest rates.


Because the relationship between the price of money and real world behavior is non-linear.

Just like water.

See, we all know that when gases or liquids get colder, they get denser. They get heavier. The molecules in the gas and the liquid are less energetic as they cool off. They bounce around less. They sink. This is why pool water and lake water and ocean water gets colder the deeper you go. It’s a perfectly linear relationship … the colder the water, the heavier the water … the colder the water, the more it sinks.

But when water gets to 4 degrees centigrade, this nicely linear relationship between temperature and density stops happening. In fact, it REVERSES. It’s not only non-linear, it’s non-monotonic (a ten-dollar word that means reversal). As water gets colder than 4 degrees centigrade, it no longer gets heavier. It no longer gets denser. It no longer sinks.

Without this non-linear, non-monotonic property of water, life as we know it would hardly exist.

Every Ice Age would be every bit as much an extinction event as a giant meteor of death. Every lake or pond above or below a certain latitude would be as lifeless as the moon.

It’s a miracle of life that liquid water – the foundation of life on our planet – gets lighter instead of heavier right before it changes state into solid ice.

There’s no reason why this non-linear property of water should exist.

And yet it does.

If you were predicting the behavior of water from a theory of thermodynamics, there is no way you would predict 3-degrees cold water would be lighter than 4-degrees cold water.

And yet it is.

A Song of Ice and Fire (May, 2019):

What’s the point here? Just this:

So long as the academic Fed continues to use a set of essentially linear, monotonic models to understand the relationship between the price of money and real world economic behaviors, their predictions will be just as wrong in the hiking stage of ZIRP monetary policy as they were in the cutting stage.

The Fed will overestimate the impact of rate hikes on curtailing inflation in exactly the same way they overestimated the impact of rate cuts on stimulating inflation.

Will hiking rates off the near-zero line make a difference in economic behaviors? Oh yes! Just not the behaviors that the Fed (and the White House) expect.

Cutting rates from 4% to 0% did not spur real world inflationary behaviors, it spurred market world financialization behaviors.

What is financialization?

Financialization is profit margin growth without labor productivity growth.

That sounds like a small thing, but I tell you it is EVERYTHING.

Financialization is the smiley-face perversion of Smith’s invisible hand and Schumpeter’s creative destruction, where profit margin growth is both pulled forward from future real growth and pulled away from current economic risk-taking.

Financialization is tax and balance sheet arbitrage to leverage laws passed by bought-and-paid-for politicians.

Financialization is stock buybacks to sterilize stock-based comp awarded to entrenched management.

Financialization is the acquisition and burying of smaller competitors to create an insurmountable, anti-competitive moat of scale in every economic sector.

Financialization is the zombiefication of an economy and the oligarchification of a society.

What has the last decade-plus of Fed interest rate cuts and balance sheet expansion given us? Not stable prices with healthy 2% inflation expectations. LOL.

No, the last decade-plus of Fed monetary policy has given us this, the worst stretch of labor productivity growth in the history of the United States of America, not coincidentally occurring alongside the greatest stretch of financial asset appreciation in the history of the United States of America.

US Labor Productivity, Q2 2009 – Q2 2021

What will Fed rate hikes reverse? Not inflation. Financialization.

What will Fed rate hikes spur? Not number go up. Productivity.

Like this:

Howard Schultz Is Returning ss Interim Starbucks CEO, Hoping to Improve  Barista Relations | Food & Wine

Starbucks’ Schultz announces halt to stock buybacks, shares fall

Starbucks Corp will pause billions of dollars of stock buybacks to invest more in employees and stores, longtime former chief executive Howard Schultz said on Monday on his return to lead the global coffee chain for a third time.

I think what Howard Schultz did is very smart. I think Howard Schultz gets it. I think that taking the risk of investing more in employees and stores is exactly how Starbucks in particular and this economy in general will grow its way out of embedded inflationary expectations. I think what Howard Schultz announced is great for his company and great for the country!

If you’re a Starbucks investor, though, you probably don’t agree with me. Here’s a price chart for SBUX starting on March 16, when the company announced that Schultz would be returning (again) as CEO. That sharp decline starting on April 4, an 11% free fall in the stock price? Yeah, that was the day that Schultz announced he was going to use their cash to take a shot at boosting productivity instead of the sure thing of stock buybacks.

Starbucks (SBUX) % price change, March 16 – April 11, 2022

I figure it will take 2+ years for Schultz’s capital allocation shift to translate in a serious way to improved, more robust profit margins through improved, more robust labor productivity. It may not happen at all if all the reinvestment is sucked dry by unionization. It’s a risk. A risk worth taking, I suspect, but definitely a risk. Which is why risk takers get paid the big bucks. Or used to, anyway, until the non-risk takers figured out they could get paid even bigger bucks by awarding themselves enormous levels of stock-based comp, converting it into cash comp through sterilizing stock buybacks, and then giving themselves even larger stock awards under the narrative of “aligning interests with shareholders”.

So 2+ years for this risk to pay off, if it pays off at all. Meanwhile, Starbucks stock price is down 30% from last summer.

And this is why the Fed NGMI.

Will the Fed rate hikes work to spur real growth and real productivity improvement in the real economy, breaking the vicious cycle of embedded inflationary expectations? Yes! Yes, they will! It’s already happening, in fact, with most recent (partial Q4 2021) labor productivity rates jumping to 6.6%, the highest non-recession rate in 15 years!

But the rate hikes won’t curb inflation in the way that the Fed thinks they will. Their linear, monotonic models will get this all wrong until rates get back up to some normal-ish risk-free rate … I dunno, say 3.5% or thereabouts.

And while the reversal of our obscenely financialized world will lead to more and more companies taking real risks in the real economy, just like Starbucks is doing, which is fantastic for the long-term growth prospects of the United States, this process will take years. It took a decade-plus to get into this mess, and it will take a decade-plus to get out of this mess. We don’t have that kind of time.

Because capital markets have become political utilities.

Our political system cannot withstand a decade-plus of mediocre to poor returns from capital markets, even though that’s exactly what is required to wring out the decade-plus of financialization that Fed ZIRP policies and monetary accommodation have created. Hell, I don’t think our political system can withstand more than a quarter or two of this, where every company is a Starbucks down 30%+ and every bond portfolio is having the worst year in 40 years.

The Fed’s not gonna make it because:

a) their lack of knowledge, using linear models to predict a non-linear system, and

b) their lack of faith, choosing a path of political expediency over stewardship of American productivity.

What comes after all this? What happens when it becomes common knowledge that the Fed can’t “control” inflation the way they predicted?

I think we get a war.

I think we get a man with a plan.

And that’s when our troubles truly begin.

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  1. Reading along nodding my head.

    Yep. The Fed is clearly incompetent.

    Yep. Borrowing money to finance stock buybacks is a misallocation of capital.

    Yep. US politics does not allow long-term planning and thinking.

    Then “I think we get a war. I think we get a man with a plan”.

    Not “We might get a war. We might get a man with a plan”.

    For someone as perceptive as Ben to state his predictions that strongly is sadly disturbing. There are many possible future paths but we do seem to be at a point in history taking a dark turn. Stakes are higher than ever before. Will nukes actually prevent conflicts from escalating beyond an ugly simmer or in the end are we just apes with godlike technology who burn our houses down. I’m old enough to have done the “duck and cover” nuclear drills in school. Crouching under my desk now will be just as effective as it was ao many years ago.

  2. Avatar for bhunt bhunt says:

    I gotta call 'em like I see 'em. No matter where that takes me.

  3. Avatar for jrs jrs says:

    Aside from being inspired to read Kashkari’s Wikipedia bio and getting a little nauseous, the most salient thing I learned from this essay is:

    It is useful to think of financialization as path-dependent.

    Financialization has been a long time coming, and it’ll be a long time to go. This is because it was not caused by any simple rate equation or other switch flippable by the feds.

    Rather, financialization was caused by the separate actions of thousands of managers over the past 20–40 years. It can only be undone by managers, like Schultz, independently weighing the merits of risk-taking and productivity increases and making thousands of separate decisions to take risk in thousands of different ways, which will be industry-dependent.

    Whether the rates set by the Fed will be high enough to be “risk-free”, in the eyes of each of these managers, is only one of hundreds of variables that need to align in the right ways in order to reverse financialization.

    One place I’m confused after reading this is the precise relationship between our financialization and our inflation. @bhunt writes:

    I think that taking the risk of investing more in employees and stores is exactly how Starbucks in particular and this economy in general will grow its way out of embedded inflationary expectations.

    This implies to me that our current inflation is also path-dependent, as “embedded inflationary expectations” are one form of financialization. IOW: all the narratives, the missionaries, the blame, the excuses, the BS for the virus of rising prices, all of these things are one kind of profit margin growth without productivity growth.

    So, here’s my point of confusion: I had assumed from other forum threads and reading about the Volcker era that, to a useful approximation, our current inflation is not path-dependent.

    IOW, I had assumed that if somehow the political will existed tomorrow to wind down the Fed’s balance sheet and raise the prime rate to (say) 10%, then inflation would end.

    If I interpret NGMI correctly, Ben is saying that this is wrong. If these things happened tomorrow, of course we’d find ourselves in a large economic contraction, and but our embedded inflationary expectations would still persist for some time. Depending on how strongly these expectations are now driving our inflation itself, we might also expect inflation itself to persist for quite some time, meaning we’d have The Mother Of All Stagflation.

    Am I now thinking about this stuff correctly?

  4. I will be quite poetic to see happening what Ben suggests. The Fed hiking, the economy slowing…and inflation being “stubbornly” high. What to do? More hikes! The economy slows more but inflation continues to be high! A poetic opposite to the 2010s

    Not sure if I would put it as my base case, but definitely it’s a neglected risk as it goes against core beliefs economic policy makers and market participants have. Great insight Ben!

    As the Fed starts to increase rates, it will be great to use this forum to keep track this if this corporate behaviour (e.g. Starbucks) gains pace. As Ben did on Twitter with inflation last year.

    Curious to hear thoughts on who will become the winners and losers in this world (commodity producers vs companies of the gig economy?, bond holders even if they are positioned at the 2-5 year part of the curve?)

  5. Bravo Ben , I agreed with virtually every word , the only issue I might take is that the productivity gains we have seen this year may be ,at least in part , to some people finally getting back into the office. I know our team has been way more productive since getting under one roof.

    That is just splitting hairs though .

    The FED will chicken out at the first sign of trouble and the next “stimulus” will be bigger than the last two. I wonder if the 8.4% CPI number but lower than expected “core inflation” does not give them some cover to back off a bit.

  6. This post is gold.

    Sounds like the same thing I have been expecting to happen for the past decade+…

  7. Agree, but it’s the kind of finality I only thought about and hated to say out loud. It makes sense at D.C. will have to do something to take everyone’s minds off of the huge & increasing loss of their purchasing power, so why not take our Forever Wars! tm from ‘medium warm’ to ‘high’ and see if that works? I hope you are wrong, Ben, because I doubt that empires and oligarchs go gentle into that good night.

  8. I overheard a conversation recently where a man and woman were discussing a sex scandal that had rocked the Christian ministry where the woman worked. When the friend asked if she had hope for the future of said ministry, her reply was “overall I am bullish on the future”. …“bullish on the future.” Someone who clearly works in a completely unrelated field used a market metaphor to express a core emotion, hope.

    The “Speculation Layer” is now the Water We Swim In.

    When everyday normies are casually using “number go up” symbolism to express hope for a better future, I think the moment number-goes-down for any length of time we’re NGMI. Unfortunately, I strongly suspect Ben is right about this leading to War and a Strongman-with-a-plan.

  9. Thought provoking post, well done.

    RE: Howard Schultz Gets It

    Maybe. I’m willing to be persuaded by a detailed plan and evidence. But here’s what I argue Howard Schultz doesn’t get:
    Succession Planning/Talent Management.

    Schultz starts his 3rd bout as CEO, making him the Rocky Balboa of coffee.

    With a combined ~23 yrs in the top spot, Schultz has had ample time, power, and resources to invest in talent and processes. Talent management/organizational effectiveness generally includes executive succession planning with identified successors and detailed developmental plans for each key executive.

    Whatever Schultz thinks he needs to invest in, it should escape no one that Schultz was at the helm for more years than not over the past two decades.

    Giving him the benefit of the doubt, perhaps Schultz’s people investment plan means better coffee, faster, at the same or lower price point thanks to productive, efficient employees. We will see.

  10. I am elated that this note is calling attention to a question of massive importance, that simply no one is talking about and I can’t understand why. That question is:

    WHAT is the deal with Putin and his giant tables?


    Seriously. What is up with this? Does he like…have to shout?

    I’m a very visual person so this bothers me. I concede that one of the great unspoken casualties of the pandemic is well-staged public figure photography, see, e.g., the awkwardness of this photo that makes me die a little inside from an internal cringe hemorrhage:

    But I get it, world leaders are frequently old, so COVID is especially bad for them. The cringe for me in the G7 photo comes not from exactly how it looks, but the fact that I am sure everyone in this photo is fully vaccinated, so the social distance is just pandering to make them appear that they are in solidarity with the common folk. It’s also creepy due to the vague threat delivered with friendly smiles - “public health mandates issued from on high must be obeyed at all times, even when common sense dictates in certain situations that they are totally unnecessary. We are doing it, therefore you are going to do it.”

    Well, but okay, it is also just how it looks. None of them but Trudeau know what do with their hands. If it were zoomed in or they could shake hands, or put them together on a glowing orb, or something, then the hand thing wouldn’t be an issue.

    Putin is getting old, sure. He wants to social distance, maybe doesn’t trust the Sputnik vaccine. But then why have the meetings in person? I mean, yeah, you want the photo-op. The leader, taking charge, directing advisers, getting after people, for the motherland. But it’s producing a bunch of bad photos. Especially with the imbalanced spatial distribution of advisors/ministers, the interior setting with total absence of natural light (it looks like the Kremlin uses the same lighting guy as your local dentist’s office), this reads more like “paranoid isolated germaphobe” than “maverick defender of the Russian people.”

    I’m only 45% joking when I say, to me this is actually the most disturbing signal to come out of the Kremlin. Putin doesn’t look strong, he looks unhinged, but even worse - apparently doesn’t realize that he looks unhinged? I thought this guy was supposed to be a master of manipulation and propaganda - but maybe he’s really more like late-life Howard Hughes with nukes? Maybe it’s not all just yes-men telling him what he wants to hear and it’s really Putin himself who is NGMI?

    Now the other brief comment I had about the Fed and interest rates is this:

    There seems to be a debate on whether the Fed’s actions will be effective, or whether they have been asleep at the wheel and this thing has gotten out of their control.

    For months now I have been asserting to people that it’s neither - the Fed’s actions won’t be effective, but not because they are asleep at the wheel, because THERE IS NO WHEEL. They don’t really know what they’re doing and never did, and in a way it’s not their fault, because carefully controlling the economic behavior of millions if not billions of people, and trillions of dollars in commerce solely by tinkering around with a couple benchmark interest rates - in a way it is absurd to think that this is an effective tool to maintain control?

    The truth is, they can AFFECT interest rates, and other economic activity. They can lean one way and they can lean another to try to make the car veer on direction or another. That’s not the same thing is as controlling things. In the absence of the ability to do that, their other main job is to put out propaganda to make people THINK they are Very Smart People Tackling Tough Complex Issues, and use their powers of professional academic research to produce sophistry purporting to prove that their recommended course of action or inaction is correct. One thing I have learned in life is that when dealing with complex systematic problems, academics and experts can become extremely proficient at finding sophisticated ways of avoiding saying, “I don’t know, and no one knows.” In truth, it is the same as with many other endeavors: Everyone is just winging it all the time.

  11. Small-explosive-ophobe, not germophobe.

    Or perhaps nerve-agent-smear-ophobe.

  12. Avatar for jrs jrs says:

    None of them but Trudeau know what do with their hands.

    Trudeau is also apparently the only one who knows how to get his pants tailored.

    I zoomed in but still can’t tell exactly what he’s doing with his hands that looks so good. It’s not the classic “fold your hands child you walk like a peasant” business.

    (Which would also look OK, but none of them are doing that correctly either. Both women are holding their hands too high, like they just saw a mouse and jumped up on a chair!)

    Is he holding each thumb in the opposing hand? I just tried that and it feels real awkward.

  13. McKinsey (and consulting firms in general) are one of the all time greatest narratives of finacialization. It is all about numerical optimizations and “better models” that lead to the kind of outcomes that Enron achieved.

    Said differently, McKinsey is the Good Housekeeping Seal for Financialization.

  14. Another excellent note Ben. Thank you. I would love to hear more about your thinking around the war expanding. It wasn’t long ago that in pretty much any conflict the media raced to draw a line between the perpetrators and the innocent civilians out of fear that the conflict might otherwise bring persecution upon those who might otherwise have been associated with the bad actors by way of race or religion, etc. Remember the otherwise completely unidentifiable “British man” with no apparent motive for taking a bunch of hostages at a synagogue in Texas earlier this year?

    Now suddenly, in less than 2 months, we have launched into “if you are not with us, you are against us.” Nestle was pilloried for wanting to continue to sell (at a loss!) basic staple items to Russian people who need such items to live day-to-day. School children (US citizens!) who have Russian relatives are being hazed and bullied. Suddenly it feels like the world is steeling itself for total war.

  15. Agree. If anyone needs another anecdote on McKinsey’s ability to destroy real world value, just look at the ongoing CNN+ debacle. Big cuts coming for CNN+ after slow start

    1. CNN can barely giveaway ad inventory on its airwaves and its website
    2. Nobody (even dyed in the wool libs) I have spoken to had even the slightest urge to sign up
    3. Propaganda is always free

    And yet, somehow, McKinsey helped management jump off of this cliff.

  16. Two comments here.

    The G-7 photo - anybody else reminded of bowling pins?

    “Winging it” - you are so, so, right. Often paired with “Cover your ass” Although I certainly don’t want to imply that the U.S.A has any corner on that market for some reason Roger McGuinn’s " One of America’s Great National Pastimes" cued up in my brain on that line.

  17. Questions I’m asking myself and preliminary answers. I’d love to hear the questions other pack members are asking themselves and how they’re thinking about this.

    Can Fed NGMI common knowledge coexist with Central Bank Omnipotence? No, I don’t think so

    Does a narrative as entrenched and powerful as central bank omnipotence with all the missionaries that create and support that common knowledge just roll over and die one day? No, NGMI will have to mount a convincing and prolonged narrative attack to overcome omnipotence as the dominant central bank narrative.

    Who are NGMI’s potential missionaries? I can only think of three; the market, a rogue priest or an alt priest. I’m less convinced on priests so if the Market is the only missionary how long does that take? Given the number of players on the wrong side of the trade, presumably quite some time.

    What to do personally and for portfolios while you wait? IDK

  18. Avatar for jrs jrs says:

    What do you mean by “rogue priest” vs “alt priest”? Are you thinking someone like Bullard in St Louis as a potential rogue priest?

    What to do personally and for portfolios while you wait?

    I am a beginner to investing who is not a finance pro, has little skill or interest in stock-picking, and previously drank Bogle’s Kool-Aid.

    My conclusions from this and many other ET threads are:

    • Stop contributing new money to my 401(k) and Roth.
    • Just keep rolling my protective puts on VTI and VXUS in those tax-sheltered accounts until/if a big contraction hits, then cash out.
    • Instead just put all my new savings into taxable. Take the tax pain up-front, seek out real local opportunities with real people, and/or possibly be convinced to pick some stonks if Spitznagel’s prophecy from Dao of Capital comes true re MS Index dropping toward 1. (I suspect the market can stay irrational longer though…)

    Re how to hedge the inflation, the idea of borrowing money to buy a stable of foreign currencies, as physical paper bills, is looking more and more attractive to me. Need to take a HELOC anyway for other personal reasons at this point, so won’t be overly risky.

    And buy some land and get some chickens…

  19. Clay Shaw in the movie JFK has some thoughts on the subject of big tables.

  20. If it were just that I would agree with you.

  21. NGMI not because the Fed is incompetent, but because “Our political system cannot withstand a decade-plus of mediocre to poor returns from capital markets…” no matter what happens in corner markets, and the Fed knows it.

    Our political narrative is that the main beneficiaries of capital markets are “makers,” while people who work and trade in corner markets are “takers,” and we’ve had literally 4 decades of shifting risk from the former to the latter in ways both large-and-small. Currently our political economy narrative assumes financialization = “Freedom!” while risk mitigation for workers = “Socialism!”

    Of course Freedom! wins.

    Before the Fed can screw things up, for all the reasons you listed, the political will to not screw them up will need to exist.

    That requires changing the narrative. You kinda just reinforced it.

    I’ve negotiated with unions for decades. While there exists a few who resemble the shadiest of humanity on both the union and management sides, mostly it’s about good faith efforts to achieve collaborative goals. Howard Schultz may be a legit maker, Boeing’s and a host of other management isn’t, but the assumption that unionization is an a-priori “taker” reinforces the narrative that brought our political system to this place.

    We’re the Pack! We should be conscious of the narratives we deploy.

  22. Avatar for bhunt bhunt says:

    I’m more pro-union than anti-union, but in terms of labor productivity I don’t think there’s much of an argument that a barista union would be anything but a negative. Is there more to an economy and a society than productivity? Of course! But if you want to break embedded wage/price inflation - and I do - the only way to do that in a societally positive way is through strong productivity gains.

  23. jrs

    I was referring to terminology from Magical Thinking, one of my personal favorites of Ben’s. Magical Thinking - Epsilon Theory

    My understanding of a Rogue Priest would be someone from within the failing institution. If I had to guess as to the personality traits of a rogue Priest they would probably include; extreme narcissism-by which I mean significantly more than the required above average narcissism needed to make it in the world of the high functioning sociopaths. As well as possessing very little real world success-by which I mean success defined by people like you and I. Not as in their ability to climb through the ranks of various hyper political organizations. While I’m sure those traits can be conferred on many individuals currently residing at the federal reserve if I had to guess the one person with missionary prowess and willingness to throw the whole institution under the bus to get a little closer to the levers of power, I’d bet on everyone’s favorite Stalking Horse Neel Kashkari. Stalking Horse - Epsilon Theory That said, I would think the NGMI writing has to be on the wall before anyone would take the risk of stating it publicly. The first rat to recognize the ship is sinking if you will.

    As for an Alt Priest- My understanding is this would be someone outside the institution, presumably a politician, likely a populist politician seeing it as an opportunity to increase their stature. I struggle to see an alt priest having the missionary influence to overcome the status quo preserving statements of every other missionary until things are really, really bad.

    It is for these reasons I think it will be years, not quarters of the Market being the only missionary whispering NGMI in everyone’s ears until an enterprising individual steps up to the plate to create the common knowledge everyone had personally already known to be true.

    To answer my own question as to how to invest? an oldie but a goodie. It’s Not About the Nail - Epsilon Theory
    Trend-following strategies are driven by the maxim that the market is always right, and that’s never been more true – or more difficult to remember – than here in the Golden Age of the Central Banker.

    Then again, guns, gold, and food sound pretty reasonable too


  24. The only way? That is a pretty absolute statement. Perhaps its a way, although I am not totally sure that it is as societally positive as you think it is, Ben.

    I am not pro-union organizations because, by and large, they turn into self-perpetuating grifters, skimming from the top and becoming takers. I am equally not pro-management because, by and large, they turn into self-perpetuating grifters, skimming from the top and becoming takers.

    And to be totally honest, half the time I have no idea what people mean by “productivity” in the real world. I understand it in economic land, but I am not sure that I can translate it into what that looks like “socially” and whether its even desirable.


  25. Avatar for jrs jrs says:

    Yes, Kashkari makes sense in that light. There were at least 3 things about his life that disturbed me in his Wikipedia entry. The most salient was that he said in an interview once that he decided to begin praying on a regular basis right around the time that TARP started. It doesn’t disturb me that he prays, of course, but rather that he messaged everyone this about himself at that particular point in time.

    My nod to trend-following is to keep 100% VTI+VXUS in my 401(k)/Roth. I know that’s not what finance pros really mean by the term, but I know what I don’t know and my stock-picking time is limited.

    “Guns, gold, and food” is catchier, but I prefer “food, energy, and community” as more realistic in the event that stuff really starts breaking down due to inflation or whatever. (Don’t get me wrong, I enjoy guns and see their place in that scenario, but over-emphasizing them in the context of my community would be to, um, shoot myself in the foot, I think.)

  26. Avatar for jrs jrs says:

    I am not totally sure that it is as societally positive as you think it is

    I always have these thoughts myself, a little, when reading anything about macroeconomics. But I guess I’ve stopped thinking it through because I really didn’t want to be that guy in a forum of people who swim in this water. I really appreciate you going there (I think).

    To expound where I think you are pointing: If our primary goal in this whole endeavor is to maximize societal sustainability and/or minimize regret (eg induced from a civil war of the rhinos in the extreme case), then is this goal really served by maximizing productivity, or GDP, or any other number that a small clique of pointy-headed humans can abstract?

    I’m reminded of Douglas Adams’ joke (before Paypal et al) about how it’s crazy that people think they can be happier by sending little pieces of paper around the world to each other. They aren’t any happier, and nor even is the paper!

  27. Avatar for lwear lwear says:

    Ben - Nice tie-in to Hayek to close out the piece.

    Since the last time I spoke with Dr. Marvin Goodfriend (1950-2019, RIP) in 2016, I’ve had a sense that the next global financial crisis will start with the collapse of a major/important central bank (Fed/ECB/BOJ/PBOC/etc). As my professor, Dr. Goodfriend’s main conviction that a central bank cannot conduct effective monetary policy without 3 things: 1) the ability to speak truth to power (thank you Paul Volcker…), 2) percieved independence from the political process, and 3) credibility for low inflation, which, by extension, also means credibility for preventing deflation.

    In 2016, Dr. Goodfriend was talking about his idea of floating the deposit price of paper currency, a concept he had presented at Jackson Hole earlier that year, as a more effective mechanism to transmit negative interest rates through the banking system. It seemed to me at the time that this concept would require an enormous amount of faith in institutions by the people.

    I’ll pick on the Fed because it is most relevant in the context of your post. The “work” histories you cited for each of the Fed governors should lead anyone to question #2, compounded by the congressionally imposed limit of $10B ‘net income’ generated by assets on the Fed balance sheet the Fed is allowed to keep, with the remainder being swept to the Treasury. Does anyone speak truth to power as frequently as Elon Musk (not a fan, but rather a Jason Segel/Russell Brand Forgetting Sarah Marshall dynamic, less the mutual ex-girlfriend)? Certainly no one you cited does, though some like to appear as though they do (see: Neel). In March of last year, I asked my team to start thinking about inflation and how it would likely manifest through our business, mostly because no one was talking about inflation despite ZIRP/NIRP + major fiscal policy blowouts. The Common Knowledge now is that the Fed is behind the curve and I’m starting to see an emerging narrative that inflation just peaked - downhill from here, bumpy, but downhill. So how does the Fed recover it’s credibility for missing so badly on 1/2 of its dual mandate and everything it needs to do in order to conduct effective monetary policy?

    When I asked Dr. Goodfriend what happens when his three fundamental conditions are violated and the people lose faith in institutions, it turned out to be the only question I ever knew the man to be unable to answer.

    What I realized back in 2016 was that if all three of these conditions were violated and monetary policy as we know it were in-fact to become ineffective and broken, the result would have to be a complete loss of faith by the people in these institutions. Perhaps something new could step in (i.e. crypto/decentralized finance/etc.), but for some period of time, it seems likely there would be all the ‘fun’ that comes along with a [monetary] regime change, including increased tribalization of groups and, yes, your expectation of coming war.

    All that negativity aside - thank you to you, Rusty, and The Pack for the time, thought, and perspective you bring to the table for the world to see and to discuss.

    • LW
  28. This, unfortunately for investors, has been the Common Knowledge construct in markets ever since inflation accelerated way out of the Fed’s preferred zone. Not the Fed is behind part, but the inflation is peaking aspect. It spawned the infamous “transitory” and all of the mental gymnastics the missionaries threw at us boiling frogs still accepting 10 year Treasury yields around 1.50% months after that acceleration. We all have to be careful as this will be the siren song keeping investors stuck in variations of the 60/40 that will not compound at a real rate that grows purchasing power UNLESS that Common Knowledge is our future.

  29. Side note here: Of all the fantastic wordsmith techniques I am treated to in the writing of Pack members, this one is my favorites - attributing some shared characteristics to two seemingly opposing parties/forces. Ben and Rusty nail this as well. Love it! That’s all.

  30. Avatar for bhunt bhunt says:

    Labor productivity = making more stuff with less labor (measured as either time or cost … same thing)

    The classic example of labor productivity improvement is to replace a person with a machine. This IS the engine of real economic growth.

    You can make an argument that unionization of, say, meatpackers or farm workers can, in the long run and in the absence of technological replacement of said workers, lead to labor productivity gains. You can’t make that argument when it comes to teachers, police or baristas. You just can’t.

    The reason I’m emphasizing real economic growth through labor productivity gains as societally positive is not because I am indifferent to the workers who are replaced by machines or even to the baristas who imagine themselves to be oppressed feudal serfs. I am emphasizing it because it is the least societally harmful way of breaking an embedded inflationary spiral, and by least harmful I am not talking about harm to the moneyed class but real and permanent economic and political harm to the meatpackers, farm workers, teachers, police and baristas alike.

    You want to see what REAL serfdom is like? Then let’s keep going with what we’re doing. At best we end up like Brazil. At best.

  31. I was treated to a brief career in public works construction as an on-site project engineer. Worked two years on a union job and 20 months on a non-union job. We were actually picketed by the union on the non-union job until an accommodation on apprentices was reached.

    I agree with the problematic self serving and perpetuating observations.

    But the men in the field were 500% better protected by safety protocols on the union job. I saw the role the union played in that,

    We killed a guy senselessly on the non-union job saving some money on a free lay down area versus paying for a much safer location. Not my decision but I was in the meeting where we decided to go the cheap route. I was also the 2nd guy on the scene after the incident that killed a crane operator. From what I saw on the Union job the steward could have possibly rejected the free site.

    Just because something is not optimal in all ways does not mean it does not have purpose.

  32. Avatar for bhunt bhunt says:

    Completely agree with that!

  33. Avatar for jrs jrs says:

    In this least-worst-case scenario of increasing productivity, what then becomes of these workers?

    I think the classical answer I learned in high school economics is that, to lift from a crappy pop song, every new beginning comes from some other beginning’s end. That is, increasing productivity will always create some new opportunity in the economy.

    There will always be a new way for the structurally unemployed barista to make money somehow, and enough to live well, if only they are clever enough to find it. For every desire that is sated by a machine, another desire can be created by a human, and a new category of stuff added for which to measure productivity anew. Not all the baristas can do this – as some must fail so that others can succeed in any sustainable economy – but enough of them can.

    Eg, many were excited about Uber and the gig economy 20 years ago for this reason.

    This always seemed to me to be a faith-based argument. I don’t see any essential reason why the number of jobs (or income opportunities, or sustainable new businesses, or whatever you want to call them) should match the number of mouths to feed, or even be on the same order of magnitude.

    In a regime of ever-increasing productivity and ad lib population growth, if the number of humans becomes much greater than the number of jobs and we disallow UBI and other distortions (as by definition they will create a tax drag that decreases productivity), then what you still get is starvation and/or war.


    The only response I can think of is: “@jrs, yes, this badness very well may come to pass as you say, but it might also not, if this faith-based argument that you learned in high school economics happens to be correct. And if we keep going the direction we’re going, this badness will more likely come to pass. So let’s pursue the lesser evil.”

  34. That is a very important statement.

    How far does government’s reach into the meaning of what it is to be human have to extend? Sustenance by bureaucratic approval, existence by permission, sex in accordance with policy??

  35. Excellent article!

    So much to unpack but to focus on one aspect, I’d like to explore Ben’s conclusion …… “War” or “Man with a Plan”

    My interpretation of the article is that because the market has become a political utility, the Federal Reserve, even if it had the proper mindset, could not do what has to be done. Namely establishing a true “cost of capital “ that prevents easy financialization , weakens risk markets and forces Corporate management to take risks to win.

    And because the Fed doesn’t do the necessary hard things , we fall into “War” or “MWAP”

    Yet Markets as a political utility is only relevant to the elites. As something like 90% of the stock market is owned by 10% of the population.
    And data shows that the broad middle class has clearly suffered on a relative economic basis over the past 30 years ,

    So obviously the voter numbers care more about Inflation than the stock market. Yes, Obviously there is resentment of the vast wealth and income inequality heavily created by Fed policies.

    So why the jump to disaster?

    Why not a more optimistic sea change in economic thinking. Milton Friedman “Free to Choose” ( the tv series was a big hit, still available on Amazon prime) was a revelation for those seeking a way out. The economist
    Arthur Laffer gave an optimistic way out. Jack Kemp the politician bought in and drove the points.

    I guess having lived through that 1970s-1980s period, the successful dealing with those stresses and believing in the long term virtues of this very unique country I think there IS a way out.

    Maybe I’d like to see from Ben his leap at the end of his very insightful article to what looks to me as a terrible conclusion

  36. Avatar for jrs jrs says:

    How far does government’s reach into the meaning of what it is to be human have to extend? Sustenance by bureaucratic approval, existence by permission, sex in accordance with policy??

    Exactly. I take your meaning of “have to” as imperative, not rhetorical. Ie, we can conceive that there may literally come a time when government has to try these things in order to prevent war or starvation, under whatever economic regime one likes. Based on my experience with government, if we get to that point then I predict their efforts would not work, instead making things even worse.

    I hope there is something big I am missing about economic theory and that I am wrong. If I am right, then we can all agree that it would be good to do all we can now, as free people, to prevent this state of affairs.

    My understanding of the neoliberal economic argument is that the humans>>jobs problem “naturally” solves itself under their preferred regime, because fertility naturally decreases with increasing standard of living. (Excess humans due to immigration is left as an exercise for the reader.)

    My suspicion from experience is that (1) fertility has also tended to decrease with increasing real estate prices and video games and Twitter LARPing and other bread/circuses, and but (2) this neoliberal argument is at its core also just one more faith/fiat-based argument that cannot be trusted by those of us interested in true sustainability.

  37. Avatar for bhunt bhunt says:

    I think UBI is the least bad solution to the very real problem you correctly note.

  38. Avatar for robh robh says:

    The alternative is to create a recession that drives unemployment into the high single-low double digits and make keeping your job (or having any job) more important than getting a raise.

    Not societally positive, but looks to be the direction of travel (at least until the Fed blinks and starts cutting and/or the progressive fiscal stimulus machine spools back up).

  39. Not knowing the US unemployment benefit system, I am inclined to ask what scale of an extra burden on the deflating in relation public purse the added claimants would incur?

    There is a reality in the foundations of language that is difficult to deny.
    The keeper of a household’s bread was called Loafward.
    It literally meant the bread warden.
    It is shortened in English to become Lord .

    Who gives you bread is your Lord.

  40. Avatar for jrs jrs says:

    I think this opinion completes the original NGMI essay! Also would appear to make the ideas in it more politically tenable, at least in the short-term on one side of the aisle. Thanks for clarifying.

    That said, I know very little about UBI, other than this 2018 series linked by Slate Star Codex during the Yang zeitgiest that concludes most of the proposals at the time “failed basic math” or would otherwise be ineffective.

    Searched the site and couldn’t find anything in your essays about UBI. Would love to hear more if you have any further thoughts. Especially how to avoid regulatory capture and raccoon exacerbationism. (Speaking as both a doctor and an insured, the Affordable Care Act failed for me on both of these points.)

  41. It’s not either/or, it’s not even two ends of a spectrum.

    Y’all are looking at this through the frame of our current economic system. I fall into that mode all the time. The question I have to ask is why am I thinking this way? Whom does it benefit?

    Increasingly the answer to these questions is I don’t know and the system at large.

    I’m not saying it isn’t a path. I am just saying that declaring it the only path is a failure of imagination,

  42. Avatar for robh robh says:

    Fair enough — I meant if we are expecting the Federal Reserve to solve the wage inflation problem, this is the only way they actually have to do it.

  43. This is a fascinating article. For several reasons but perhaps most so because I agree with its fundamental assertion - that the people in charge do not understand the relationship between real-world behaviour and the price of money and that this will lead to trouble.

    That said, I am quite surprised that this note does not include a meaningful section on the nature of labour productivity growth today, versus that in the past. Particularly as this relates directly to the need for unions, or at least some sort of institution, to represent “labour” in the tug of war between labour and capital. After all, automation plays a significant part of labour productivity growth. Alongside the hotly debated topic of globalisation.

    As soon as anyone points out the significant labour displacement from automation (past and present) and today’s developments within artificial intelligence - someone else will pop up just as quickly to point out the so called “myth” that automation leads to labour displacement. Forgetting that this is only a myth if you are willing to accept that all jobs are equal. this strikes me as being similar to the famous issue with economics in general - the fact that you have to accept the idea that economic actors are “rational”.

    I mean, at the beginning of the 20th century just over 40% of the US workforce was employed in the agricultural industry, far from today’s figure of 2%. Sounds like a disaster. But nevertheless the US is still one of the world’s main producers and exporters of agricultural products and its unemployment rate is at a very low 5%. Sounds like everything is alright then? Only if you are an economist.

    In addition, there are several aspects of current developments in tech and sciences that would suggest that the next cycle (perhaps the current one?) will be markedly different than anything we have seen so far. While we are talking about those non-linear relationships - does anyone think this is actually how AI advances will roll out? In a nice orderly fashion? I’m not going to quote any specific sets of estimates on how many of our current jobs are expected to disappear by 2030 as these are easy to find and all unlikely to get it right but the trend is clear. The number of jobs is that not important, rather the scope and type of job that will be best done by an algorithm is most interesting. And so is the fact that we can expect progress to proceed at a rate that makes any notion of “up-skilling” or “re-training” a laughable matter. How many times in your lifetime can you be expected to re-train in order to be deserving of the means to live your life in dignity?

    I have tried to not let it shine through too much, but I am getting to what I consider to be the most important, unspoken issue we face as a civilisation. Define “we” however you like, I have mentioned this before I grew up in Norway, got my two degrees in the States and I now live in Scotland, so I am thinking of more than one country - but absolutely with a Western bias.

    It is entirely possible, plausible even, that Ben is right in pointing out that higher interest rates will spur labour productivity growth. But underneath that term “labour productivity growth” is a can filled to the rim with worms… such as:

    Question: Why would (and do) capital owners invest in employees when the ROI on algorithms slowly removing the employees is often much more “productive”? After all, doing so means less pesky unions and much happier shareholders? Why indeed.

    Likely answer: Because doing so holds up their part of their “bargain” with Government. The bargain that shapes a landscape where corporations and financial entities make the rules.

    Yes, we still need people for a lot of our societal functions. But if we are honest with ourselves we need a lot less of them then even just 10 years ago.

    Financialisation has been the scourge that allowed the pricing of “work” to get all out of whack. We do not pay people in order of their importance to society (otherwise nurses and teachers would be in a whole other bracket) no we pay them in accordance with how much money is produced for shareholders. And yes, it will be great to finally see this distorting practise scaled back via the reprising of money to something that at least is not a million miles away from “normal”. But if you ask me, this is an interesting side-show at most.

    The real issue that we will need to tackle as we approach the non-linear development of our collective efforts with AI is this- For how long will we insist that the means to human survival are linked to our ability to work?

    For how long are we willing to keep up the pretence that your only value to society is the work you do for corporate entity and not all all related to your other human activities during your lifetime? Do we need to watch our civilisation burn to the ground before we admit to the fact that our efforts as parents, colleagues, neighbours, friends and voters might actually be crucially important to the world we live in?

    I can practically hear the shaking of heads but hear me out. I can rephrase it like this: How much societal damage (from health, politics, children, families etc etc) are you willing to accept before you are at least willing to consider whether the current direct link between survival and working for a living is warranted?

    And let’s something be clear from the start. I am not suggesting socialism, or communism. Quite the opposite in fact.

    Consider the following. The social “contract” between governments (or society if you will) and its people - that stipulate what “work” should look like came about during a period of economic development where every man, woman (and often child) was needed to play their part. It was your duty, and your ability to do so hence dictated your status. There was a certain logic to this. If you work hard both you and your country prospered.

    Before you go too far down the road the tabloids like to walk you along, where everyone gets to rage at people with little means who dare to attempt to live without one of the socially sanctioned “jobs” I would like to consider what this social contract did for companies. For corporate entities are no longer just useful economic actors with the ability to provide people with the means to survive.

    What I think it did for companies, was to cement the relationship between the government and companies rather than the government and its people. Companies basically control the supply of jobs/work. Jobs that governments are completely reliant upon in order to get re-elected. This was a happy relationship for a very long time, as companies needed employees as much as the people needed the jobs. And a free-ish market developed to satisfy the various actors.

    Importantly, companies got more than just the required labour force out of this. Companies got incredibly advantageous tax rates and a favoured position within our political systems. Money speaks, but so does your ability to hire people. And your threats to get rid of those people later.

    Today, our governments basically spend most of their time in service to the corporate entities that control the supply of jobs/work. Why? Well because those in government have only got a couple of options - go down the route of communism where you make up government work in order to employ people, OR make really good friends with those other potential suppliers of jobs. A bit of both is usually required in order to keep the people “in jobs”.

    Reality check: any guesses on how much of a basic income you could provide for people if you got rid of some of the insane tax rules around corporations?

    Any perceived concerns about abandoning the direct link between basic means of survival/dignity and work needs to be examined in the light of the current breakdown of society as we know it. The employment data looks ok, but is anyone looking around these days and thinking to themselves “Meh, I think things are going pretty good, no problems here!”

    If you ask me, the so called “protestant work ethic” has a lot to answer for. We berate people for letting family values collapse, for their lack of involvement in their kids life, for not volunteering in their community, for abandoning their responsibility for their elderly parents - yet we live in a society that demands that both adults in any family with kids are required to work two jobs in order to provide the very basics of a dignified life. All while our governments commits ongoing theft of our purchasing power via fiat money mismanagement. It is surely not a mystery that people are looking at revolutionary options?

    I digress, but my point is this. Capitalism needs a reboot in order to assimilate with the exponential development of technology/AI from here. This will require a reboot of the social contract between governments and corporations.

    Corporations are well aware that making significant portions of their employees redundant is not politically palatable, which is why (I think) it is happening much slower than would otherwise be the case.

    Should we (and our governments) decide to be brave enough to examine and break the link between basic means of survival and work, we will finally be a position of seeing clearly what work is and is not “needed”, and to break the sycophantic link between corporations and government.

    Governments could go back to being the bureaucratic branch of “society” and serving its people.
    Corporations could go back to efficiently serving their shareholders by honestly examining the ROI on investments in employees. versus technologies. And people? People could go back to the business of creating meaning in their own lives, and the lives of those around them.

    We are witnessing a collective loss of our sense of meaning, and the ramifications of this are so widely felt as to make them almost impossible to observe and measure. And a loss of meaning is perhaps the one single thing that humans will not tolerate.

    So watch out.

    As Buckminster Fuller so eloquently put it:

    “We should do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian Darwinian theory he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living.”

    I’m interested in any and all thoughts on this from those of you who managed through my ramblings…

  44. Em- wonderful post. We may not agree on evéry twist and turn down the road but we definitely come up at the same end point. We have created Productivity! the cartoon where being productive means having 2.3 children and two incomes and everything you described eloquently in your note. It’s closely tied with financialization. We have turned everything in life, every activity, every moment into a monetary equation where we are maximizing output and not really looking at the human cost of the inputs.

    One of the best books i ever read to gain perspective on this is a book called Centering by MC Richards. A poet, teacher and potter. Her reflections on her live outside of society and how she found her way set me on my journey of self discovery (which ironically led me to the discovery that there is no self :slight_smile:

    Loved this…thanks for putting it out there.

  45. Thanks Zenzei, reading it over I realised I should perhaps have paused to improve some of my run-on sentences and punctuation but when you get going about something you care about…

    I will look up that book you mentioned, self discovery is always of interest.

    And isn’t it interesting how much trouble we have created for ourselves with our measurement-bias?

    I am thinking a lot about the concept of of “society” these days. For a while I have been worried about how little attention we give this idea, yet how important it is for all of us. For better or for worse.

    I have been reading up on Bitcoin since I made a modest investment in 2015 and in this sphere I find a lot of hope but also a lot of rampant individualism which completely negates the importantance of society. Mostly due to the difficulty we have in actually pinning it down and defining it, but also due to certain segments of politics hijacking the term and using it for their own benefit.

    I have come to think of “society” or perhaps even more generally “other people” as being a bit like dark matter. Like dark matter, society can be hard/impossible to pin down by traditional means of observation and measurement and we are left “deducing” its existence via observation of the effect has on the relevant agents. I.e. galaxies/planets/stars and humans. And like dark matter for the Universe, society is a integral for the past present and future of humanity. Many of us would perhaps prefer to be little islands of individual humanity, but come to find out…we are not.

    For anyone with a strong libertarian/individualistic bent I would recommend some in depth reading about epigenetics. It is enough to make anyone start caring about your “fellow man”.

    Thanks again.

  46. Thank you for the thoughtful post, it is always great to read something that someone is both articulate and passionate about.

    Your post got me thinking again about a topic I’ve been musing over for a long time - why are corporations, and specifically, profit seeking corporations, the default entity structure and organization?
    Would our society be better served by having many of the functions currently serviced by corporations, served by non-profit entities? To be clear, I don’t mean charities, whose sole purpose (cynically or not) is to fundraise and basically serve the needs/desires of backers and donors. I mean organizations and corporations whose primary structure would be to provide a good or service at cost, or at a profit where the profit cannot accrue to owners as there are no owners to profit maximize for.
    A few industry examples:
    Why do we allow corporations to maximize profit on water? Water is a necessity of life, yet we’ve allowed its consumption (or at least a large portion of the retail consumption market) to be tied to profit maximizers. That seems like a recipe for disaster.
    Same for long standing drugs. What good comes from a corporation buying life-saving medicine that has been around for decades for no other purpose than they’ve realized in their cost benefit, financialization analysis they can get away with raising prices to create profit for themselves.
    It just seems like many corporate entities that exist as for-profit, don’t need to except for
    1). That’s how its always done. 2). Financialization of the corporation allows owners, founders and managers to get ridiculously more wealthy than a founder or manager of a non-profit corporation (and by an exponentially unreasonable degree - see CEO pay vs median pay gap difference increases over the last 40 years).
    Maybe it is the default because the profit maximizing benefit of the for-profit entity really does produce the best outcome for society, but the longer I study, meditate and analyze the situation, the more I believe that financialization and the inherent pay for play company/government system is the reason why rather than any inherent benefit of a for-profit structure.

  47. Discussing interest rates and productivity brings to mind the correlation of present consumption and delayed consumption (which is also a description of levels of preference to save).

    There were once different phases of a western citizen’s life.
    Very simply these probably were:

    1st Consume & Play
    2nd Consume & Learn
    3rd Produce & consume
    4th Save excess production for deferred consumption whilst producing and consuming.
    5th Consume & play, whilst coming to terms with mortality.

    The production of potable water, food and domestic energy is already very mature in terms of known technologies. AI can only add marginal gains for production of consumer goods, as raw material must be hard fought for, and the brilliance of a human operator is likely to be priced at the marginal cost of replacement by a market priced hardware/software license combo.
    It is important to not miss out the sunk costs in the risk of the allocation of capital to projects that never deliver the expected returns or satisfaction of consumers’ demands, with deep enough pools of savings to exchange for the expended energies necessary in the production cycle.

    Some people enjoy being creative, others only destruction.

    Some of them want to abuse you
    Some of them want to be abused

    There is no such thing as a free life. Someone has to produce the victuals from hard won resources.
    It is commonly thought of as a sign of comparatively superior intelligence to convince others to support your lifetime of leisure, or superior force or it could be just plain luck.

    It is also a foolish thought to imagine ourselves able to grant a third party the power to arrange whom, what and when, expecting equitable results. Just try and describe what equitable results would mean in the context of a species with as diverse perceptions and wide ranges of ages, circumstances and tastes that we have.
    Every individual decides for themselves whether they need to save their fruit or consume it today. It is possible to grossly mislead in respect of the narrative of the need for delaying consumption (interest on savings). Only if you can’t count or it isn’t your money, would you risk lending capital for virtually no return. And it is possible, for a time, to substitute by force (from someone else’s savings) the lack of delayed consumption, but it is not possible to magic up goods that were previously consumed, especially if the means of production was not vested for either.

  48. because… (extra text to satisfy the 20 character post requirement).

  49. The core message I am taking away from your post after reading 2 x is that you are postulating that society should work on getting the money out of politics. Whole lot of other territory covered and enjoyed the tour and thought provocation so thanks for that.

  50. Avatar for jrs jrs says:

    Thanks for writing this. I think we agree on motivation, as you can see from my posts above. I’m just trying to understand what you mean concretely about this paradigm shift and struggling, although I begin to see where Zenzei is pointing when he says “Y’all are looking at this through the frame of our current economic system.”

    (I think he was referring, in part, to the Yang-era UBI schemes whose naive Yang-era math did not work out. I think I see now that asking “Can you show me such a system where the math works out and Big Business does not capture and screw it up?” is analogously naive to what I asked a few months ago on here, to straw-man myself somewhat, “What is the evidence for Active Investing™?” It assumes that math is an important and consequential thing and The Water is not. Although I still don’t see why this is all OK and MMT, somehow, is not.)

    But, but, but… I find your essay quite abstract for my small brain.

    What would the system that you point toward look like in practice?

    What people in the world, if any, come closest to implementing it at present?

    Can you write or link to a story about everyday life of a middle-class-equivalent person under such a system, if class distinctions remain a thing?

    How would they eat, if they did not produce their own food?

    How would their dwellings be distributed?

    Would there be societal consequences for having as many kids as they pleased?

    What would be the motivation(s) of the few people who owned the machines and still produced food to keep producing it without becoming hegemonic and destabilizing the system?

    Would money still exist? Inflation? Envy?

    Seems to me that economically consequential envy, eg the hedonic treadmill, has been with us since the start of civilization. But maybe I have been duped by historicism and Just So Stories.

  51. Thanks John. One of the reasons I so enjoy this forum is the genuine interest people display, even when they are not necessarily in complete agreement. It seems like such a little thing, but also crucial for any kind of learning.

    I think your question is a really important one, and one that usually gets ignored due to the allure of black and white thinking. In America it has seemed politically important for a very long time that the structure of the market is perceived to be either completely “free” or completely “nationalised”. And clearly if any part of your market is nationalised then you are effectively a communist and we can have none of that.

    In the country I grew up in (Norway) this was never quite so. Along with the long standing belief that a social safety net does not in of itself tranquilise the “animal spirits” of a free market, there has also been a belief that certain sectors simply do not easily lend itself to free market rules. Water being one of them course. The problem is, in a very basic sense, that there is no one good answer. My father worked for what was originally known as Statoil. He was an electrician on a platform for most of his life and by accident and experience he ended up as the union head for a couple of platforms. (As the family lore goes he was early to instituting a smoking ban when he brought me to meetings in a moses basket in the late 70s and demanded that everyone put down their cigarettes.)

    My understanding from listening to my father who was sitting firmly in the middle of the union totem pole, was that there were lots of things wrong with the Union when you looked up (the leaders become ever more detached from the group of people they were supposed to represent) but that every time he felt discouraged and annoyed he simply looked down the pole. At all the workers on oil platforms risking their lives for the prosperity of the entire nation on these structures in the North Sea that were hastily built and that were initially not imagined to be in place for as long as they eventually were.

    If I have a point it is this - optimal ownership structure is probably not a question you can settle once and leave forever. When something stays nationalised or even heavily regulated for too long it can grow bloated and ineffective and innovation can start to lag behind. When profiteering is allowed to run rampant in crucial national infrastructure industries decisions made in the name of efficiency will eventually cause problems on a national scale. So a middle ground is needed. The middle ground would seem to be a healthy dose of awareness of the pendulum-nature of this “beast” and corresponding flexible regulatory powers. You can’t easily put that on a political flier - hence the problem.

    As a side point, the question you are pondering is also being thought about by the crypto-industry and their best idea so far appears to be DAOs. Decentralised Autonomous Organisations. So far the theoretic promise is not at all matched by the real world, but it is an interesting concept where the blockchain technology essentially replaces the need for trust and also allows for a type of organisational direct-democracy voting structure.

    I feel about DAOs as I do about NFTs. So far any real world examples have been silly and frivolous but I tend to think of NFTs as the playground where smart contracts grow up, and DAOs as a real-world direct-democracy experiment. You don’t have to “believe” in them or buy into them just yet. You just have to keep an eye on them and their potential promise for down the road.

  52. Thanks for your comments. I wrote that last post in a hurry and I can absolutely see that a lot of it sounded a little too abstract.

    The problem with talking about a system that does not yet exist is a bit like looking for Utopia on a world map. It’s not there - yet the idea of Utopia seems rather crucial for any kind of progress to take place.

    I followed Yang’s campaign, as an early non-American supporter. I saw him as an important vehicle to bring attention to a much needed idea. I don’t see Universal Basic Income as the primary idea, and neither did Yang I don’t think. Instead, UBI is part of the tool kit that could help deliver us safely into the future, without some of the pitfalls Ben mentions like a “strong man with a plan” and war. The math for UBI can absolutely work, but it depends on what level you implement the idea.

    There are many ways to fund UBI. Most assume that it would require higher taxation of the rich, something that is perennially unpalatable for reasons that can at times escape me. It must be the Norwegian in me. We tend to think of taxes as the cost you pay for civilisation. Personally, I tend to favour the so-called “robot tax”. The idea of robot taxes was first suggested by Bill gates in 2017 to address the loss of payroll revenues as algorithms replaced workers. At the time, payroll taxes accounted for more than one-third of the annual federal budget. There are many ways to do this, but the idea is to not let corporations eliminate humans at zero cost, in order to facilitate an orderly transition to the era of AI.

    For an idea of the scale of this problem, the Brookings institute has estimated that 36 million American jobs are likely to be automated within the next decade, and it is worthwhile remember that AI technology follows an exponential rather than linear line.

    Importantly, the goal would be for UBI to fund itself to an extent, by allowing a reduction of the welfare system elsewhere. Our current welfare system is notoriously ineffective and expensive, This is where many of the left actually disagree with the idea of UBI, and where the idea gains backing amongst those with a more libertarian world view.

    The general idea is this - it is extremely expensive, bureaucratically speaking, to means-test your welfare system. It might satisfy our desire to make sure that no one gets something without perceived struggle, but we all lose out in a system like this. Instead of infantilising those who temporarily or permanently require assistance, give them the freedom and responsibility to make their own decisions about what they need by moving to a system that based on universality. Does that mean that some will use their UBI to buy alcohol, drugs and cigarettes? For sure. Is that ok? Absolutely. Also, will lots of people who technically don’t need the payment receive the payment? Yup. Is that ok? Absolutely,

    It is ok because society as a whole will benefit. We will benefit from increased levels of perceived personal responsibility, improved childhood conditions, better nutrition, less stress. Stress is a big one and worth focussing on. Whatever else you may feel about your fellow citizens existing below the poverty line, you should respect the cognitive “tax” they pay for being poor. There is an abundance of evidence for this, here is small and fairly random sample of source:,the%20expense%20of%20future%20goals.

    There is so much to talk about here. About the lasting effects of childhood poverty, poverty induced trauma, you could go on and on. Caring about these areas requires a level of recognition of the importance of our surroundings/society on ourselves and individuals which is sometimes hard to find amongst hard core individualists and libertarians, but the field of epigenetics alone should provide plenty of food for thought.

    For more on UBI’s appeal to libertarians and those who value freedom in general, this is a very good outline: Matt Zwolinski | A moral case for Universal Basic Income | The Critic Magazine

    So what would the system look like in practice? A lot like the current system, except with an income floor. This floor would need to be a floating one, especially during these crazy fiat times, but it could start small and grow in line with cost reductions elsewhere. It would essentially give more individuals more freedom. Freedom from coercion from government, employers, abusive spouses or family members etc. This is where Yang’s corny moniker “the freedom dividend” came from.

    There is no relevant comparison country to point to, that currently has UBI in place. This link provides a good overview of trials and pilots in place, Basic Income Experiments Around the World

    Class distinctions would most definitely remain a thing. I’m not sure about you, but for me and my family (middle to upper middle class by UK standards) a £1000 a month UBI payment would not in of itself alter our decisions around work and careers. When we were young and childfree I do imagine it would have been a helpful factor during the period of time after university when I applied for many different jobs. I like to think it would have provided me with the freedom to hold off until I found the job I really wanted. For those even higher up on the income scale, I imagine UBI philanthropy could become a powerful social force. You received your payment due to the cost and stress savings inherent in the “universal” element, and then you paid it forward. This would particularly resonate with Americans I think, who very much prefer to ability to choose which causes to support.

    Some of your questions betray the belief that decoupling the means of survival from work and implementing UBI will cause work everywhere to disappear. I don’t personally believe this to be the case. Perhaps I live a sheltered middle class life, but few families that I know would be content to merely survive. The means to survive however, would become the fuel to help you thrive. To do that unpaid internship to get experience. To complete that additional level of education. The animal spirits of the free market would persist, but with a floor. The system would encourage you to thrive, but provide means of survival for those who simply can’t. And the ugly truth is that there are those who simply don’t want to or can’t. In my opinion, the best we can do is to recognise this fact and do the best we can to build a system that allows for this, rather than one where this relatively small but desperate group becomes a dangerous and destabilising element.

    Your final question is perhaps most interesting and hard to elucidate. Clearly, money as a concept would persist - but what would it do for inflation? I don’t have any issues with admitting that this is an open question. And also one where the answer would likely depend a lot on the initial funding mechanisms. Yang’s proposal for a VAT tax to partially fund UBI strikes me as a very bad idea if you are concerned about inflation. A fundamental concept here is the separation between production and income, which is directly connected to Ben’s arguments in the NGMI note. Economists would argue that worker are essentially selling their labor on the labor market as a contribution to the production of goods and services for the economy and that this type of income increases do not result in inflation. Increases in income that aren’t directly related to correlating increases in production tend to result in higher prices so the two sides of the equation can balance.

    I tend to think that this is a definite hurdle that needs to be jumped/figured out, but it is not something to make us discard the idea entirely. Productivity is becoming ever more linked to economic forces that are unrelated to human labour. And I hear very little outcry about the leisure/upper classes detrimental effect on the balance between income and productivity. Perhaps (gasp!) the economic theory of this will not match reality?

    Does any of that make more sense? On a final note I just want to reiterate that I don’t personally think that UBI is the be all and end all. I just think it is a helpful mechanism to transition to a better place for human civilisation. My starting point when first exploring the effects of automation and AI on our relationship with work and obsession with productivity goes back to my interest in Aristotle and his thoughts on “leisure”. His ideas around “noble leisure” was part of his theory of education (another topic of great interest to me).

    All of life can be divided into work and leisure, and war and peace; and of actions, some aim at what is necessary and useful, while others aim at what is noble…

    Just as war is for the sake of peace, so work is for the sake of leisure and what is necessary and useful is for the sake of what is noble…

    One should be able to work and go to war, but should rather prefer to remain at peace and be at leisure, and accordingly, one should act with a view to what is necessary and useful, but, more so , with a view to what is noble…

    Nature itself aims not only at the correct use of work but also at the capacity for noble leisured activity. Since such activity equates to flourishing, it is the starting point for everything else…”

    – Aristotle, Politics (1333a30-b3)

    Whilst the majority of humans will use incremental improvements in their own lives to simply consume more and/or work harder to provide for themselves and their families, I like to believe that an important minority will use the improved conditions to “think into being” the tools we need as a species to not just survive - but to thrive for many centuries to come.

  53. Providing extra fiat currency for consumption as a UBI or income floor, does not work (from an economic stability perspective) without a universal basic goods and services price ceiling. The extra currency does not come from the sale of extra production and if exchanged for extra goods, because they cannot be magicked into being by fiat, there would be the same amount of goods and services, with more currency available to pay for them. It is a recipe for price increases…

    Stimmie checks-used car prices-gamestop call options

  54. Em,

    “Whilst the majority of humans will use incremental improvements in their own lives to simply consume more and/or work harder to provide for themselves and their families, I like to believe that an important minority will use the improved conditions to “think into being” the tools we need as a species to not just survive - but to thrive for many centuries to come”.

    A friend of mine is active in the ethics of climate change. Donald Brown’s Bio | Ethics and Climate

    He quoted to me a conclusion from Hannah Arndt’s book Human Condition in her chapter on Action:

    “If you have the opportunity to work for the common good, you have a moral obligation to do it”

    Just what you said……. Thank you,

    Jim Handshaw

  55. Avatar for bhunt bhunt says:

    When I tell people that the ET Forum is hands-down the best thing on the Internet today, I’m going to point them to this thread in general and this post in particular. Thank you, Em!

  56. ‘Moral obligation’ and ‘common good’ are both phrases that denote complex abstracts.
    They do not describe these abstracts with any degree of precision.
    They need to be used with extreme caution because the listener assumes an inference and acquiescence to the language that often they ought not.

    “One must shed the bad taste of wanting to agree with many. ‘Good’ is no longer good when ones neighbour mouths it. And how should there be a ‘common good’! The term contradicts itself: whatever can be common always has little value. In the end it must be as it is and always has been: great things remain for the great, abysses for the profound, nuances and shudders for the refined, and, in brief, all that is rare for the rare.”


    One woman’s morals are another man’s offence.


  57. Do you mean grow in number or grow in concrete and steel or grow in spirit?
    The first two could be a bad thing.

  58. And what to do with the thought that less of the first two could be necessary for the third to flourish?

  59. Was it nature’s plan for us to be forever in despair for the common future?
    I doubt it.
    There is a harmony. Nature is perfect. Perhaps we must find it through constant error.

  60. Yes, but is it an issue of how we are going about things or is there an inevitable human population reset necessary to restore harmony? Or both? I do not claim to even begin to have any of the tools to take a real stab at that.

  61. This is more of a response to the end of the article rather than the beginning. I think the natural state of mankind is essentially feudalism/tribalism. I don’t mean the western European model necessarily, but essentially a top-down hierarchy. King/emporer/pharoh etc at top that controls a state level region. Nobility/satraps/governors/CEOs/oligarchs that control subregions. Minor nobles/mayors/CEOs that control smaller regions. Each have their own nested hierarchy of peasants, artisans, soldiers, priests, and VIPs.

    I think regardless of our labels, our societies are tied to that natural state of mankind like a rubber band. We can stretch towards individual freedom on one end of the bell curve and on the other despotism. But in general the arc of history seems to me to show that they’re fighting a gravitational like pull back towards a natural state of something akin to feudalism or tribalism.

    Politically fascism and communism both seem to me as different flavors of a feudal/tribal hierarchy. I see the religious hierarchy of the Medieval periods of Europe as just another flavor as well. I’d chalk up the current various versions of state capitalism that are running in the world today (including the US) as various diet flavors of the same.

    I think we’re in the process of mean reverting in the west. So yeah, strong man a 'comin.

  62. Because algorithms are only an advanced set of software tools. Software can be replicated with almost no overhead. Only copyright licensing keeps its price from approaching zero. In a mercantilist macro the motivation for further innovation in this sector is opaque and probably not consumer demand oriented.
    Production of consumer goods requires commodities and hardware. These require capital and labour.
    The risk is who will exchange money for the future produced goods.
    Will they have any excess currency to spend on your product?
    This is the factor that controls jobs creation. Do the potential customers have
    the means to afford your labour and material cost, plus a margin for the duration of the production cycle. Historically it was called savings. Maybe soon it will be called permission token entitlements.

  63. No it does not.
    Current macroeconomics posits that a theory of aggregate behaviour is provable or falsifiable by empirically testing the model.
    If only they would!

    Your argument suggesting economic actors being not rational is a different concept.

    The conscious and purposeful action argument is an easy one to prove.

    Chicago school Vs Austrian School

  64. Hi James,

    While I personally have not found that I agree with Nietzshe on very many topics I do find the push and pull between individualism and society/community really relevant and interesting for the time we are living through. It is one of the big paradoxes of our time I think.

    On the one hand, as an agnostic female I certainly have profound appreciation for my ability to live a life relatively free of religion and some sorts of tradition which in a society with less focus on the individual would not have been possible. I think many good things have come from an increased focus on the individual. Things like a focus on autonomy and self-exploration, and in a more basis sense - our focus on individual rights.

    On the other hand, I think we (Western culture perhaps?) are starting to see and feel some of the reasons why historical societies have put limits on autonomy and rights, in favor of society, due to the rather anti-social nature of this focus and the force with which these ideals can work against that prosperity of a group as a whole. This is not new of course, liberalism was after all in many ways supposed to be the solution to this conundrum. Mill’s “harm principle” was formulated to help us cope with the conflict and differences that individualism give rise to. In this sense, liberalism seems like individualism 2.0.

    I am going to struggle to explain some of this, but the problem I have with liberalism and the current focus on the individual is not based on actual disagreement. In fact, whenever I read anything about this push and pull mechanism between the individual and society I tend to come down on the side of the individual, in many ways because I personally fear the consequences of less personal freedom (something very easy to notice) more than the denigration of the society I live in (decidedly harder to notice in real time). I try not to generalise too much, but if we took a vote and honesty was ensured I would guess most of us feel similarly.

    My issue with individualism/liberalism is more squiggly and goes something like this. While it has been a force for good in the pull away from religion, tradition, monarchy/feudalism etc. it is not in-of-itself a desired ultimate travel destination. By that i mean that if the ideology achieved everything it could ever dream of, then the very ideology that got us there would serve as a force of self-destruction. At it’s peak, it would be the snake that started to eat its tail as the type of society that best facilitates individual freedom would eventually collapse upon itself and start picking away at those freedoms one by one. This is not due to some flaw in the philosophy, but rather because it quite intentionally concerns itself with individual interactions and not the shape of the society that those interactions produce.

    Individualism is a force for good during one section of the pendulum swing, but also entirely consistent with gross inequality (of the destabilising kind) and the loss of any perception of meritocracy,

    Another paradox arises as a society which focuses entirely on individual rights, can very easily become one that is not very focussed on individual well-being. As an aside, the US health care system was my main motivation for leaving the States - despite San Diego’s magnificent weather and lovely people.

    Individual rights is important in all of this, but those who come out strongly in favor of individualism often have a laser focus on negative liberty, meaning the barriers that need to be removed in order for freedom to be experienced. This laser focus often deter our ability to appreciate the influence that positive liberty have over our sense of personal freedom. Freedom is not just freedom FROM a long list of restrictions. At its heart it is also the freedom TO live your life in certain ways. And inequality of the scale we are starting to see is about to become the self-eating snake that will start to restrict many of these “positive” liberties.

    I personally believe that the kind of personal autonomy that we strongly desire is only possible in a society with well developed education system, somewhat structured opportunities and a culture/appreciation of debate, as well as legal protections well beyond those only concerned with the individual. Only in that setting can individual autonomy be fully exercised. Said differently, I believe that the social context drives and shapes individual autonomy. And any philosophy that fails to consider the social context is not well suited to drive the shape of our civilisation.

    All of this is to say that I don’t think the subjective nature of concepts like the “common good” or “society” and the corresponding difficulty in pinning these down is a great argument for ignoring them. I wrote earlier that I think our social setting, society if you like, bears resemblance to our current conception of dark matter. Our social settings are to humans what dark matter is to the stars, planets and universe. It is a near impossible-to-measure force, whose existence we can only infer via the influence it exerts on the humans living within it. And while traditional observation and measurement may fail, its influence on humans is clear as day. From birth until death.

  65. I’m not completely sure what you mean when you say that the conscious and purposeful action argument is an easy one to prove. But I can agree with many of the ideas of the Austrian school of economics. In fact it was Hayek’s “Road to serfdom” that first introduced me to the ideas behind the concept of a universal basic income.

    Hayek’s teacher and mentor Ludwig von Mises (who was seen as being a major part of the post-world war revival of liberalism) is quoted as having said this about the action axiom:

    Human action is purposeful behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego’s meaningful response to stimuli and to the conditions of its environment, is a person’s conscious adjustment to the state of the universe that determines his life…

    The action axiom is the basis for praxeology which is in turn the actual methodology of Austrian economics. And even Mises with his emphasis on individual agents, could not side step the importance of external stimuli and the conditions of each “ego’s” environment.

    I would be fascinated to hear what Hayek and Mises would make of their theory in light of everything (which is not yet very much) we know about epigenetics. How exactly does our growing body of research of the many ways our environment influences our genome via epigenetic modifications influence any theory that views an individual as the sole relevant actor?

    I have no idea but what an interesting thought it is.

  66. Stable capital values are what gravity is to solar systems.

    A wise man who built his house on the rock. The rain came down, the streams rose, and the winds blew and beat against that house:
    yet it did not fall, because it had its foundations on the rock.
    A foolish man who built his house on sand. The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash.

    I don’t need to mention who said that , do I.

    A class of person taught to rely on the generosity of others for sustenance, despite having the physical means not to, over a long enough time, will self-validate parasitism.

    Thankyou for consciously and purposefully expressing your incomplete understanding of the Austrian individual choices function.
    Producers choose to risk production on the view to a profit. This mechanism is the magic of stable currency capitalism supply chains. The less able to imagine a benefit to purposeful action, the less productive free economic actors become.
    Command and control from a central authority, dreams that an AI software can replace the ability to fine tune the production process individual actors possess. The input channels of this great machine of state would also need an equivalent number of distributed sensors and emotional/utility value transducers, as a population. Almost Matrix-esque.
    Parasites absorb nutrients by deception and theft.

  67. This is a discussion about the meaning of work and utility. These concepts are chimeras.
    ‘The pursuit of happiness’ is a good start.

    Whilst having this conversation this tenet has to be included:

    “That the aggregate demand price of output as a whole is equal to the aggregate supply price for all volumes of output is equivalent to the proposal that there is no obstacle to full employment.”


    This is the current BIOS for the western world.

  68. Meh. Your mileage may vary on that.

    My personal journey has led me to the view that the world’s complexity does not reduce into simple equations no matter how much we wish it to be so. That the essential qualities of being alive, purposeful, authentic, [choose your word] are not things that can be easily converted into monetary values through equations. Alan Watts said it well in the Wisdom of Insecurity

    The greater part of human activity is designed to make permanent those experiences and joys which are only lovable because they are changing.

    So, I too find no use for the money changer’s tables at the temple of the soul. Instead Ecclesiastes’ speaks to me strongly and I am looking for other perspectives on my time on this planet.

  69. Here is one back at ya from Aesop…

    A Giant Oak stood near a brook in which grew some slender Reeds. When the wind blew, the great Oak stood proudly upright with its hundred arms uplifted to the sky. But the Reeds bowed low in the wind and sang a sad and mournful song.

    “You have reason to complain,” said the Oak. “The slightest breeze that ruffles the surface of the water makes you bow your heads, while I, the mighty Oak, stand upright and firm before the howling tempest.”

    “Do not worry about us,” replied the Reeds. “The winds do not harm us. We bow before them and so we do not break. You, in all your pride and strength, have so far resisted their blows. But the end is coming.”

    As the Reeds spoke a great hurricane rushed out of the north. The Oak stood proudly and fought against the storm, while the yielding Reeds bowed low. The wind redoubled in fury, and all at once the great tree fell, torn up by the roots, and lay among the pitying Reeds.


  70. My reference to the Sermon on the Mount was that there is a better way to build a capitalist system than on a shifting capital base.

    I’ve shown you mine, now show me yours.

  71. My reference to Aesop’s fable was that there is more than one way to measure the robustness of a system.

  72. It is of nature that the oak was borne. It was over hundreds of years that it grew mighty. It is not a misdeed of nature that it should fall.

    It is civilisation that builds houses. It is because of our imperfections that they fall.

  73. So in your view, civilization is outside of nature?

  74. Every living thing and the things they build all eventually fall. Why is it that civilization is less perfect than an Oak?

  75. Of eternal rest Nature knows nothing.
    An oak falling is part of the Mother’s plan .In its and her manner of perfection acorns take its place.
    Civilisation is built to serve mankind, but in our search for truth and happiness we serve ourselves.
    I know of no civilisation that was built with the original intent, and prime purpose of being superseded.

    There is a primitive reason that primitive man was given by nature. Civilised man is not content with this.
    We seek to know more than we need know. It is not to perfect ourselves in our natural world, in which we were by nature superior to the other beings but to make ourselves supreme in the realm of men. This is our corruption.
    I cannot know to what extent man can share his happiness with others without losing a great part of it for himself.
    I think this goes someway to explain the problem of civilisation at a scale requiring too much agency,
    as we distance ourselves from our natural state and sustenance that is nature.
    So it is not civilisation per se, but an excess of civilisation, refinement, self-judged perfection, like an excess of reason, that is outside of nature.
    But I also know that I cannot lift nature’s veil, for I have only the reason that she, in her wisdom, chose to give me.

    Obviously I spell civilisation wrongly, I don’t know why. Perhaps someone can tell me.

  76. This raises so many questions for me that keep me from seeing that duality clearly…

    If civilization exists outside of Nature, where does it exist?
    What do you call the domain that encompasses both civilization and nature, the Universe?
    Where is that line drawn between civilization and nature?
    Has the line shifted over time?
    Is that line constant and absolute for all humans?
    When did primitive natural human become non-primitive civilized human?
    Is all civilization un-natural?
    Is all nature un-civlized?

  77. Civilisation is from nature. We have been given the power to adapt the world around us.
    Our violence against nature is at odds with this. How can it be part of her plan for us?
    Did she force the moon to pull the tides? Is the weather not her will?

    To what end we struggle beyond our selves, I know not. There is so much easy to see beauty in her and her ways, that I need do no more than hold dear and wonder at her mystery and power.

  78. Elon Musk can afford to buy an entire company for $44 billion. Elon Musk pays nothing in taxes, and receives billions in subsidies (welfare) from the American tax payer. Elon Musk is a member of a class of freeloaders who leach off our public goods for their own enrichment, and always give less than they take.

    I suspect we have baristas forming labor unions because this is the only thing they feel they can do to challenge the corrupt and rigged status quo. A better solution would be to end socialism for the rich and tax them at a rate at least commensurate with their use of public goods. However, our governing institutions have been so thoroughly bought and paid for by these same wealthy welfare queens this better solution stands a snowball’s chance in hell of actually becoming policy.

    So, we’re stuck with labor unions for baristas. Yay, Capitalism!™

  79. If we are from nature, then we are part of nature unless we have gone elsewhere, but where that would be I know not. So, perhaps civilization is a game that nature plays with herself to pass the time?

  80. Avatar for bhunt bhunt says:

    1,000 millionaires > 1 billionaire

    We can use a lifetime cap gains tax exemption of $1,000,000 plus progressive cap gains taxation above that to help make this happen.

  81. I 100% agree with this.

    On a related note, I can see why the narrative of a “wealth tax” has been gaining in popularity due to the ability of the wealthy to play accounting games that allow them to avoid taxes altogether. One in particular being the practice of borrowing against assets to fund living expenses / lifestyle. However, I suspect a wealth tax would cause more harm than good in practice.

    I bring this up because, as I have watched events unfold around me, I can’t help but notice so many of the narratives being hurdled around are shaped to appear truthy to a particular set of biases, but would fail to achieve desired goals if implemented. Some of these “solution narratives” are created in good faith and some are not. However, they all share an immediate “graspability” by their target audience. This allows them to infect and replicate in the public consciousness. Whereas, a “solution” like the one you proposed above, while valid, is not immediately graspable by a wide audience. It requires the individual hearing it to possess a body of knowledge about investing and capital gains many don’t possess, and requires the effort to think through the ramifications of the proposition. This sort of narrative has a structurally imposed lower transmissibility value due to the effort required to comprehend it.

    I like your idea of a “Luther Protocol”, but struggle with how to create truthier narratives which can outcompete less efficacious narratives on infectivity. Unfortunately, all “good” ideas seem to share one trait in common; they all look like foolishness to someone’s biased model of “how things work”. Furthermore, as conditions in our society continue to deteriorate raising the stakes for finding “solutions”, people become even more attached to the stories they believe will save them. Having a good faith conversation across ideological fault lines has become damn near impossible.

    I have no solutions, and even less understanding of where to begin with process.

  82. TIL that $11,000,000,000 is still considered nothing.

    We should do a deep examination of just who the freeloaders are. I’m not sure you’re going to like where that goes.

  83. Elon is a slippery slope for certain folks , first off he will pay billions in personal taxes.

    Second if they are not careful they may find themselves arguing against subsidies for green technologies. I am sure they will end up just arguing against subsidies for green energy companies that don’t get in line with their ideology.

    The hilarious thing to me is that “fair share” is such a subjective concept —-talk about the water in which we swim.

    I could make the argument that you take the cost of the Federal Govt divide it by the number of adults in the US and send each one a bill for their “share”. I can’t think 0f anything more fair.

  84. When you try and convert the whole of human activity into a monetary equation and then go around trying to find some equivalency between all that currency - hilarity will ensue.

  85. Where does a flat tax stand with ET members?

    Personally, I feel an n% Flat Tax for all citizens AND corporations would be fair. I know adding corporations to that will most likely divide people. I’m just someone who feels that corporations, a legal structure to conduct business, shouldn’t be treated better than a tax paying human citizen.

    However, if the numbers work I’m open to dropping corporations from the requirement so long as everyone is paying an equal % of income, capital gains, etc…I just can’t see how the system wouldn’t get gamed even with a flat tax.

    Dividing the # of people by our Federal Budget and ‘sharing’ that equally doesn’t seem as fair, thought, getting everyone to actually chip in would be a great first step in the right direction.

  86. I would find that agreeable.

  87. Given the degree of the wealth and income divide and the resulting resentment in this country, which to my mind is the leading cause of the political divide, some kind of Flat Tax has NO SHOT.
    and attempts to implement will only create more resentment.

    The bigger issue to me is how do we get to some kind of “Shared Sacrifice” to solve our growing long term problems and avoid Ben’s prediction of either War or dictatorial type leader as the ultimate result?

  88. We need an envy based solution.

  89. Ha, No, we need an “Anti-Envy” based solution

  90. :beers:

    Your correct that is well put.

  91. Are you implying those with less wealth will resent paying their share of a flat equal percentage; or are you saying the wealthy will resent having to pay a flat equal percentage? Personally, imagine to some degree a percentage of both camps would feel a bit resentful.

    However, I’m not sure I’d feel sympathetic to either camp if I’m honest. As the middle-class has shrunk over decades, contributing to the wealth/income divide, they are still burdened with the heavy lifting of tax contributions. Even if somehow the total tax dollars generated by the middle-class was less than that contributed by the wealthy in terms of actually dollars (I can’t see that being the case but don’t want to assume too much here as I don’t really know) the total percentage of income going to tax for the middle-class is very much disproportionate to the tax rate of those with less or more wealth.

    With inflation now starting to eat into whats left after taxes I think it could be the middle-class who is beginning to feel resentment of their fellow countrymen.

    This comment surprised me a little because what is more “Shared Sacrifice” and “We the People” than the bonding and camaraderie formed by knowing your neighbor, your boss, the wealthy, the poor, the middle-class are all feeling just as sh*tty as everyone else about giving up a percentage of their income to taxes. And how much would it change the mindset of the nation when we take away the narrative “this country wouldn’t be were it is if x or y paid their fare share of taxes!”?

    Of course, we can’t assume a positive result is wanted or inline with the political parties ‘divide and conqueror’ strategy as they duel to the death to consolidate power for control over the country.

    Honestly, it has no shot if the 1% don’t support it for the greater good. That and that alone is the only thing I see preventing it. There are obviously more nuanced things to this argument but in the end it’s up to those who are in control today. And I believe that’s where most of the resentment will come from.

    However, this is all my opinion and speculation. Does anyone have data to show what flat rate percentage of income would be a workable number to deploy across the board? A number which would cover our spending and also give us room to pay down debt?

    I’m not oblivious to the fact that this won’t work. Not because of the flat tax but because America and American’s have a spending problem. It seems American corporations have really mastered the psychology of selling us sh*t we don’t need and against our long-term interests.

    The realization that the average human life at its core today is simply a mechanism of production to generate vast wealth to a limited few speaks volumes about who we are as a species. Spend your childhood sitting still and attentive 8hrs a day in school while society pretends rote memorization and neatly filling in a bubble with a #2 pencil is an education. Then with some luck you get to spend the rest of your life working 8-16hrs a day so you can buy material possessions which are either disposable or end up owning you in the end. That appears to be humanities purpose.

    Have good things come from this system? Sure. Absolutely. Is this the perfect or only way humanity is meant to be? F*ck! I hope not! I feel the vast majority of people, aka the middle-class, have a job or career that isn’t that cool or very interesting like business strategy, figuring out marco investment ideas, buying another company to see if you can run it better, etc…it’s more process oriented and just not that exciting. Not horrible. Just routine without much self-expression or creativity required.

    More important it’s meeting others expectations of what purposeful creative work is and not ones own definition of purposeful creative work. Not only is limited in terms of meeting others expectations, not your own, but the end result is essentially for the wealth creation of those at the top.

    And before anyone starts calling me a commie or socialist let me be clear: all those systems suck too. Or more accurately, each of those systems are probably as good as the other. It’s a condition within humans that eventually corrupts the systems which govern us. Is there really any system that can provide true equality?

    What was I talking about? Flat tax? Had some strong coffee without breakfast. Thinking about the tax system often brings a red hue in my vision and I blank out and lose time only to wake and realize I send a strongly opinionated and resentful rant to strangers. Ha!


  92. The difference between Elon Musk and Adam Neumann is Adam’s grift failed.

  93. I can’t come up with an equally absurd thing to say so I’ll just go with a polite smile and nod.

  94. Knowing Shit is Hard

    I was born and raised in the rural heartland of America. The guns, Jesus, freedom crowd were my people. I went to church every week and voted Republican. Everybody in my world knew that if more people turned from their wicked ways, God would hear us and heal our land. Back then the world made sense, and I knew how to fix it.

    Then a couple things happened; first, I moved out of my parents house and paid my own bills, second, the 2008 financial crisis tore through our country. The experiences I had as a result of those two key events led me to realize that the neat organized stories I was so certain explained how the world works were straight up fiction, and I needed to take a long hard look at why I believed what I believe.

    Fast forward 14 years, and looking back at my younger dumber self, I can’t help but feel a twinge of embarrassment over having been so certain. I imagined myself to be fiercely independent, but was in reality utterly dependent on systems I neither appreciated nor understood. Don’t get me wrong, I’m still an idiot, but would like to think I’m a little less ignorant. The most important lesson I have learned from that long hard look at why-I-believe-what-I-believe can be summarized as follows.

    All truth is fiction; and while some of those fictions are useful, figuring out which ones are is very hard.

    Or put another way…

    Knowing shit is really fucking hard, which is why most people don’t know shit.

  95. Truth is a fiction. We each have our own Personal Truths that shape our world view. The more I let go of my ego centric truth, the easier I find it to be in the world rather than outside it.

  96. The number of times I say this (about myself, not you obviously) in any given week is somewhere between three and seven, depending on what’s happening that week. The most capable people I know are the ones who more often than not say “I don’t know anything, but I’ll try to figure it out”.

  97. Master @Zenzei, I agree with you, and would like to expand on the idea. I too aspire to be in the world rather than outside it.

    When I say all truth is fiction, I do mean all. All truth is stories we make up, even the stories we label “facts” or “objective”. Spend five minutes on the internet and you will see all kinds of people arguing over contradictory “facts” and “truth”. Why? None of those stories are literally truth nor fact. We assign those labels to stories we feel are useful for our wellbeing. That last part is why people can get so up in arms about defending their stories. However, at no point are those stories anything other than something we made up. There are no true or false stories, only more or less “truthy” stories.

    It is easier to give the ego a vacation when we realize that everything we think we know is a collection of just-so-stories, which may or may not have the predictive value we would like to believe they do. Certainty is the ego asserting dominance; humility is allowing the unknown to teach us.

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