Wednesday, March 31, 2021

Our "Wealth": Cloud Castles in the Sky

Buyers know there will always be a greater fool willing to pay more for an over-valued asset because the Fed has promised us it will always be the greater fool.

I realize nobody wants to hear that most of their "wealth" is nothing more than wispy Cloud Castles in the Sky that will dissipate in the faintest zephyr, but there it is: that which was conjured out of thin air will return to thin air.

I've assembled a few charts that reflect the illusion of financial wealth that has a death grip on the public psyche. Something for nothing is a powerful attractor, but it doesn't offer a narrative that the delusionally self-important demand: I earned this by working hard and being smart. Oh, right, yeah, sure. It had nothing to do with currency being created out of thin air and made available to insiders, financiers, banks, etc., or being able to leverage this new money into ever-larger bets, all guaranteed to be winning trades by the Federal Reserve. Nope, you're all stone-cold geniuses.

Back in reality, note that tangible assets--real as opposed to financial conjuring--are at historic lows relative to financial-bubble assets: tangible assets represent such a meager proportion of total assets that we might assume they could slip to zero without affecting our "wealth" much at all.

If we compare financial-bubble assets to the nation's Gross Domestic Product (GDP), a (flawed) measure of real-world activity, we find Cloud Castles in the Sky are worth over six times the nation's real-world economy. This reflects what happens to the valuations of Cloud Castles in the Sky when "money" is created out of thin air and then leveraged into fantastic, monstrous illusions of "wealth."

The next two charts illustrates the sole dynamic driving assets higher: the Fed is the greater fool. Assets are chasing their own tails higher, completely disconnected from the real world, a reality visible in the chart of IWM, the small-cap index. Examine the recent rocket launch higher and explain why this is completely disconnected from previous decades' valuations.

The answer is the Fed is the greater fool: since everyone knows the Fed will always save the day should valuations falter, buyers know there will always be a greater fool willing to pay more for an over-valued asset because the Fed has promised us it will always be the greater fool.

Take a look at the chart of M2 money stock, and please explain how this is just plain old normal healthy "capitalism" at work. After you've explained chasing your own tail, then explain who's getting all the Fed's free money for financiers. It isn't those working for a living, as evidenced by the chart of money velocity, which has plummeted into the Dead Money black hole from which there is no escape.

So by all means, lavish yourself with praise for constructing a Cloud Castle in the Sky of "wealth" with your hard work and genius, and keep chasing your own tail because the Fed has promised us it will always be the greater fool. What a pretty cloud, what a pretty fantasy.

Look on my works, ye Mighty, and despair!"
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare.













If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon #40: Subprime Attention NFTs (1:01 hrs) --NFTs--non-fungible tokens...

Disconnects between the Economy and the Financial Markets (FRA Roundtable, 41 min)

My COVID-19 Pandemic Posts


My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).



Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Cheryl A. ($50), for your marvelously generous contribution to this site -- I am greatly honored by your steadfast support and readership.

 

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Monday, March 29, 2021

The Hazardous Detour in the Road to "Recovery" Few Foresee

As the level of Fed smack and crack needed to maintain the high increases, system fragility increases geometrically.

You know the plot point in the horror film where the highway is blocked and a detour sign directs the car full of naive teens off onto a rutted track into the wilderness? We're right there in the narrative of "the road to recovery": the highway that everyone expected would be smooth and wide open is about to be detoured into a rutted track that peters out in a wilderness without any lights or signage.

Oops--no cell coverage out here either. Is that the road over there? Guess not--we just careened into a canyon alive with the roar of a raging river. Our vehicle keeps sliding downhill, even with the brakes locked... this trip to "recovery" was supposed to be so quick and easy, and now there's no way out... what's that noise?

You know the rest: the naive, trusting teens are picked off one by one in the most horrific fashion. Substitute naive punters in the stock market and you have the script for what lies ahead.

The "recovery" has an unfortunate but all-too accurate connotation: recovery from addiction. The "recovery" we've been told is already accelerating at a wondrous pace does not include any treatment of the market's addiction to Federal Reserve free money for financiers; rather, the "recovery" is entirely dependent on a never-ending speedball of Fed smack and crack and a booster of Fed financial meth.

The addiction to Fed speedballs had already turned the entire financial sector into a casino of lunatic junkies who delusionally believe they're all geniuses. Beneath the illusory stability of the god-like Fed has our back, the addiction to free money has completely destabilized America's social, political and economic orders by boosting wealth and income inequality to unprecedented extremes.

While it's convenient to blame the carnage on the response to the Covid pandemic, the damage to the speedball-addicted financial system had already reached extremes before the pandemic: the addiction began decades ago, but like all addictions, the amount of stimulus needed to maintain the high keeps expanding, and eventually the need can't be met without toxic doses: then the junkie / addicted system collapses.

The ever-greater doses of Fed speedballs have unleashed both deflation (smack) and inflation (crack): real returns on ordinary savings have been crushed to zero (deflation of ordinary income), and as the cost of capital/credit have been dropped to near-zero, then the purchasing power of wages has deflated while the speculative gains of those who own assets have soared (asset inflation).

By lowering the cost of capital to zero, the Fed has generated fatally perverse incentives. With the cost of capital at zero, it makes sense to buy labor-saving technologies to replace costly labor-- labor that is costly to employers because of America's perverse sickcare system, which burdens employers with ever-higher costs.

Not only have the Fed's free-money speedballs made it essentially free for financiers to speculate in the stock market casino, the Fed has rigged the game and bailed out its cronies whenever their bets soured. This has fueled infinite moral hazard: Go ahead and gamble with free money from the Fed, and go ahead and leverage it up 10-to-1 because the Fed will bail you out if you lose, but if you win, the stupendous gains are yours to keep.

The problem with addiction is you're dependent on the high, no matter what the eventual consequences may be. Long-term consequences are ignored because all that matters to the addict is to get the next Fed speedball and throw it on the gambling table to keep the high going.

Our entire economy is now dependent on ever-expanding speculative gains. Should the casino winnings falter, our economy will crash, and given the primacy of money and consumption in our society and political system, the financial collapse of the Fed's casino lunacy will sweep those systems over the falls.

As the level of Fed smack and crack needed to maintain the high increases, system fragility increases geometrically. The irony of addiction is that when the crack/meth kicks in, the addict feels god-like, in control, invulnerable. This artificial confidence is entirely illusory, a deadly combination of delusion and hubris.

In this delusional state of supreme confidence, the addict loses touch with reality, i.e. the fatal consequences of the addiction. That's the detour we've taken in becoming addicted to the Fed's free-money speedballs. Now the rutted road has ended in a trackless wilderness. There is no way back and no way forward. The addict's addled confidence will push them into the ice-cold river, and as they're swept over the falls, the realization that it was all a drug-induced delusion will come too late to make a difference.









This essay was first published as a weekly Musings Report sent exclusively to subscribers and patrons at the $5/month ($54/year) and higher level. Thank you, patrons and subscribers, for supporting my work and this free blog.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon #40: Subprime Attention NFTs (1:01 hrs) --NFTs--non-fungible tokens...

Disconnects between the Economy and the Financial Markets (FRA Roundtable, 41 min)

My COVID-19 Pandemic Posts


My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).



Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Bindu M. ($50), for your superbly generous contribution to this site -- I am greatly honored by your steadfast support and readership.

 

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Saturday, March 27, 2021

Health, Wealth and What Kills Most of Us

If health is wealth, and it most certainly is the highest form of wealth, then we would be well-served to take charge of our health-wealth in terms of what behaviors we can sustainably modify.

Longtime correspondent J.F. (MD) recently shared a fascinating graphic ranking the leading causes of death in the U.S. (2016 data, pre-pandemic) compared to searches on Google and what the media reports. (see chart below) Note that this data isn't a survey asking people to rank the leading causes of death, but it does reflect what health topics they were interested in finding more about via web searches.

The media coverage of each cause of death is also not a representation of what the media presents as the leading causes of death; it's a reflection of the quantity of media coverage of each cause of death.

I'm making these stipulations because this reminded me of a similar chart which depicts three different views of wealth inequality in the U.S.: (see chart below)

1. The actual distribution of wealth

2. What survey respondents thought was the actual distribution of wealth

3. What survey respondents thought was the ideal distribution of wealth

This survey made quite a media splash when it was published a few years ago because wealth inequality was so much more extreme than what people thought and what they reckoned as ideal. Economic Inequality: It's Far Worse Than You Think: The great divide between our beliefs, our ideals, and reality.

Here's the source research: (Mis)perceptions of inequality

And here is a typical research presentation of just how extreme wealth inequality has become in the U.S.: Middle Class Now Holds Less Wealth than Top 1 Percent

Returning to the causes of death chart, note the remarkable disparity between the leading cause of death, heart disease, and the search and media coverage of heart disease. While heart disease causes almost a third of all deaths, the search results and media coverages were tiny fractions of the total searches/coverage.

Cancer has a higher profile, appearing in searches somewhat in proportion to its ranking as the #2 cause of death, also about a third. Media coverage of cancer was modest but far more significant than the coverage of heart disease.

Not surprisingly, the most dramatic and tragic causes of death--suicide, homicide and terrorism-- attracted the most media coverage, and a larger percentage of searches than the actual percentages of causes of death.

This may reflect the higher media coverage, the human interest in life-and-death situations and perhaps the often-noted skewing of our perceptions of risk to the dramatic (terrorism, aircraft crashes, shark attacks, etc.) rather than the mundane (heart disease).

I noticed an interesting "missing link" in the causes of death data: no mention was made of alcohol impairment as a cause of death, even though alcohol is clearly a factor in deaths from disease, homicide and motor-vehicle accidents.

J.F. noted that half of all homicides involve alcohol impairment: Strong alcohol policies help reduce alcohol-involved homicides (sciencedaily.com)

"In the U.S., between 40 and 50 percent of homicides involve the use of alcohol by either the victim or perpetrator, and more than half involve people who are significantly impaired by alcohol, which means that their blood alcohol levels are at or above 0.08 percent, the legal limit for driving."

About 30% of all vehicle fatalities involve alcohol impairment as well.

This means alcohol impairment is a direct causal influence in 8,000 murders and between 10,000 and 12,000 traffic deaths each year, plus the 95,000 people who die every year of alcohol-related diseases--a total of around 115,000 people annually.

That puts alcohol as the 7th leading cause of death in the U.S. If we include smoking as a key cause of respiratory diseases (160,000 deaths annually, the 4th leading cause) and lung cancer (142,000 deaths annually), tobacco and alcohol are key factors in 300,000+ deaths annually, right behind heart disease and all cancers. Deaths from Excessive Alcohol Use in the U.S. (CDC)

What are the leading causes of death in the US?

In stark contrast, cannabis use has no statistical effect on mortality. Though various authorities continue to claim cannabis is a "gateway drug," alcohol isn't a gateway; it's a major cause of death all by itself. The legal substance kills 115,000 users a year, and the illegal substance (Schedule 1, as dangerous as heroin according to our federal government) has no discernable impact on mortality.

The Health Effects of Cannabis and Cannabinoids: The Current State of Evidence and Recommendations for Research. (NCBI):

"After adjusting for confounders, including alcohol use, cigarette smoking, and demographic factors, individuals who reported using cannabis, but not other substances (i.e., cocaine, heroin, hallucinogens, inhalants), at baseline were not at increased risk of all-cause mortality compared with individuals who reported not using cannabis or other substances at baseline."

"After accounting for potential confounders, Andreasson and Allebeck (1990) found no statistically significant association between cannabis use and mortality."


Prohibition of alcohol didn't work as intended, and neither does the Prohibition of cannabis. Public health education, economic opportunities and healthier choices are the policy keys, not 10-year prison sentences.

This raises the question: how large a role does behavior play in the causes of death? Although it's an inexact calculation for obvious reasons, it's been estimated that roughly 2/3 of our health and longevity results from our behaviors and environment and only a third is the result of genetics.

The low search/media profile of heart disease suggests it's accepted almost as background noise rather than the #1 cause of death that is largely preventable by behavioral means: diet and fitness.

Many cancers also have behavioral factors. It's been well established that deficiencies in diet and fitness dramatically increase the risks of many cancers.

J.F. is a physician, and he reminds me that high blood pressure is a key indicator of cardio-vascular risk. You've probably heard this from your doctor and from health-related literature / research.

In past posts, I've covered the remarkable discoveries being made about the profound impacts of the microbiome on our health. All the research on the importance of the microbiome reaches the same conclusion: the more diverse real food rich in fiber, the better.

Mental Health May Depend on Creatures in the Gut

The microbiome thrives on a diverse diet of real (non-processed) foods rich in fiber. The connection between wealth and health is well-established, and while much of the correlation is attributed to the high cost of healthy food, beans and brown rice are not expensive, and neither are ethnic vegetables in season. Widening how we shop and cook need not cost a fortune. Rather, once the money being squandered on fast food (garbage in, garbage out) is spent on real food (assuming every ounce is eaten rather than thrown away), household spending on food may well drop dramatically.

Dietary effects on human gut microbiome diversity

How the Western Diet Has Derailed Our Evolution: Burgers and fries have nearly killed our ancestral microbiome.

I've also covered the dramatic positive effects of regular modest exercise. As a generality, the 80/20 Rule (the Pareto Distribution) applies to exercise: the first 20% of regular exercise generates 80% of the positive results. For example, walking an extra 2 miles a day will generate most of the benefits gained by walking more than 2 miles.

As we all know, the trick is to form habits of fitness that are akin to brushing our teeth-- or even better, of course, find types of fitness that we enjoy.

If health is wealth, and it most certainly is the highest form of wealth, then we would be well-served to take charge of our health-wealth in terms of what behaviors we can sustainably modify that will increase our health-wealth over the long-term. (Or put another way, what can we do to lower the risk factors that are within our control?)

Our choices and habits have an enormous impact on our health and health risks. Even modest changes can have life-changing positive results over time once they become our new set-point.





This essay was first published as a weekly Musings Report sent exclusively to subscribers and patrons at the $5/month ($54/year) and higher level. Thank you, patrons and subscribers, for supporting my work and this free blog.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon #40: Subprime Attention NFTs (1:01 hrs) --NFTs--non-fungible tokens...

Disconnects between the Economy and the Financial Markets (FRA Roundtable, 41 min)

My COVID-19 Pandemic Posts


My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).



Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, N. Callaghan S. ($50), for your superbly generous contribution to this site -- I am greatly honored by your support and readership.

 

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Thursday, March 25, 2021

Do We Really Think a Band-Aid Will Heal a Tumor?

Borrowing a quarter of the nation's entire economic output every year to prop up an ineffective, corrupt status quo is putting a Band-Aid over a tumor.

If we misdiagnose the disease, our treatment won't work. We're all familiar with medical misdiagnoses, which lead to procedures and prescriptions that can't possibly fix the patient's illness because the source has been missed or misinterpreted.

Medical diagnoses are often tricky, as many general symptoms can arise from a variety of sources.

Social and economic ills can also be tricky to diagnose, and the diagnosis is hindered by political polarization and sacrosanct orthodoxies which make it difficult to have a rational discussion in public about many difficult issues.

If we can't even discuss a problem, then that creates another problem, because problems that can't be discussed openly cannot be solved.

There's also a human tendency to choose the diagnosis with the easiest-at-hand solution. This allows us to quickly apply an approved solution and then declare the problem solved.

The current flood of financial stimulus is an example of this misdiagnosis and application of an easy solution which fails to address the underlying disorder.

The conventional diagnosis of the post-pandemic economy is that the only problem is people don't have enough money, and so giving them money to spend will cure the financial damage the pandemic inflicted. (Never mind that the economy was rolling over in 2019 long before the pandemic, which served as a catalyst in a sick, unstable status quo.)

Creating $1.9 trillion out of thin air and distributing it is painless: who doesn't like free money? But is a scarcity of cash the source of America's economic malaise?

The general view is that pumping free money into the economy will automatically increase employment, launch new businesses, increase profits and tax revenues, etc.

Yet as I discussed in my blog post on the velocity of money, Our Dead Money Economy, as the money supply expands in a parabolic fashion, the frequency that all this new money is changing hands (money velocity) is in a free-fall to historic lows.

Simply put, much of this money is either being saved ("hoarded" to economists who want us all to spend every dime of it), applied to debts outstanding (back rent, credit cards, etc.) or sent overseas for imported goods.

There is no guarantee that all this stimulus will generate the jobs, new enterprises, profits and tax revenues that are anticipated.

Distributing stimulus money and expecting this solution to fix America's economic malaise is akin to applying a Band-Aid over a tumor. It may well hide the problem but it cannot heal the disorder or save the patient.

My current work focuses on three dynamics that define any human civilization: the distribution of resources, capital and agency. Resources are straightforward--food, energy, shelter, etc.-- and capital is financial (money), tangible (tools, ownership of land and enterprises, etc.) and intangible (social and human capital). Capital productively invested produces income.

Agency is control of one's life and having a say in community/public decisions and having some control and power over one's circumstances.

When these three are distributed asymmetrically, where the majority of the resources, capital and power are distributed to an elite, the society and economy are imbalanced and prone to stagnation and eventual discord.

The statistics are unequivocal: income-wealth inequality in the U.S. continues reaching new heights. This is reflected in asymmetric access to healthcare and other resources, asymmetric ownership of income-producing capital and limited agency. ( Trends in Income From 1975 to 2018)

The bottom 90% of the U.S. economy has been decapitalized: debt has been substituted for capital. Capital only flows into the increasingly centralized top tier, which owns and profits from the rising tide of debt that's been keeping the bottom 90% afloat for the past 20 years.

As I've often observed here, globalization and financialization have richly rewarded the top 0.1% and the top 5% technocrat class that serves the New Nobility's interests. Everyone else has been been reduced to a powerless peasantry of debt-serfs who rely on lotteries and playing the stock market casino or hoping their mortgaged house on the Left or Right coasts doubles in value, even as the entire value proposition for living in a congested urban sprawl vanishes.

America has no plan to reverse this destructive tide of Neofeudal Pillage. Our leadership's "plan" is benign neglect: just send a monthly stimulus of bread and circuses (the technocrat term is Universal Basic Income UBI) to all the disempowered, decapitalized households so they can stay out of trouble and not hinder the New Nobility's pillaging of America and the planet.

The bottom 90% of American households receive a mere 3% of capital-generated income. That 3% might as well be 1% or 0.1%--it's inconsequential.

As for agency: Martin Gilens of Princeton University and Benjamin Page of Northwestern University are the authors of the study "Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens."

Professor Gilens gave this brief summary of their conclusions:

"I'd say that contrary to what decades of political science research might lead you to believe, ordinary citizens have virtually no influence over what their government does in the United States. And economic elites and interest groups, especially those representing business, have a substantial degree of influence. Government policy-making over the last few decades reflects the preferences of those groups -- of economic elites and of organized interests." (Source: Foreign Affairs, January 2021, Monopoly Versus Democracy)

That is as definitive as soaring income-wealth inequality. Both are inherently destabilizing.

Meanwhile, central bankers, monopolists and the politicos whose campaigns are funded by monopolists are all frantically trying to convince us their Band-Aid will heal the metastasizing tumor consuming America. And if it doesn't, well, it was inevitable that the central banks would boost the wealth of the top 0.1% and leave the bottom 90% spiraling into the abyss; we really can't stop "technology" (heh) or "capitalism" (heh-heh). Consider this excerpt from the article:

"...high-tech monopolists (pursue) a strategy of encouraging people to see immense inequality as a tragic but unavoidable consequence of capitalism and technological change. But as Lynn shows, one of the main differences between then and now is that, compared to today, fewer Americans accepted such rationalizations during the Gilded Age. Today, Americans tend to see grotesque accumulations of wealth and power as normal. Back then, a critical mass of Americans refused to do so, and they waged a decades-long fight for a fair and democratic society."

Distributing "free money" (much of which goes to favored industries and cartels) is a Band-Aid over the metastasizing tumor of perversely imbalanced distributions of resources, capital and agency/power.

If America cannot bear to discuss these realities (and structural solutions-- yes, there are solutions) openly, they will unravel the social, economic and political orders in a non-linear Cultural Revolution with a highly uncertain outcome.

Borrowing a quarter of the nation's entire economic output every year to prop up an ineffective, corrupt status quo is putting a Band-Aid over a tumor.






If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon #40: Subprime Attention NFTs ((1:01 hrs) --NFTs--non-fungible tokens...

The Coming Deflationary Tsunami (53 min)


My COVID-19 Pandemic Posts


My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).



Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Arthur W. ($50), for your superbly generous contribution to this site -- I am greatly honored by your support and readership.

 

Thank you, Patrick L. ($5/month), for your marvelously generous pledge to this site -- I am greatly honored by your support and readership.

Read more...

Tuesday, March 23, 2021

Welcome to the Winter of Our Discontent

If you think this scale of stimulus is sustainable and consequence-free, you must be mainlining Delusionol.

Wall Street's euphoria knows no bounds, so how can this be the Winter of Our Discontent? We all know the source of Wall Street's euphoria: $1.9 trillion in stimulus, followed by another $3 trillion for corporate welfare, oops, I mean infrastructure, and a Federal Reserve whose solution to destabilizing wealth and income inequality is to make the rich even richer because, well, that's what we do here at the Federal Reserve.

An old adage holds that what everybody else already knows has little value. So everybody knows about the Fed's endless spew of monetary giveaways to Wall Street and the federal government's endless trillions in borrow-and-blow stimulus, but does everyone already know that the stimulus-based economy and all the Fed-inflated asset bubbles are completely phony?

Yes, phony. Does everyone already know that none of the promises that have been made to you can possibly be kept?

"Free" (to you) healthcare: no.

Future Social Security payments with an equivalent purchasing power to the checks issued today: no.

A national currency that holds its value into the future: no.

High-functioning public infrastructure: no.

A working democracy in which citizens can affect change even if the power structure defends a dysfunctional, corrupt status quo: no.

An affordable higher education system that prepares its graduates for entrepreneurial jobs in the real-world economy: no.

Cheap, abundant fossil fuels and reliable surpluses of electricity: no.

High returns on low-risk savings: no.

A government that can borrow endless trillions of dollars with no impact on interest rates or the real economy: no.

Pay raises that keep up with real-world inflation: no.

Ever-rising corporate profits: no.

A status quo that actually ends privilege instead of cloaking it with PC PR: no. (Recall I wrote an entire book about institutionalized privilege and inequality: Inequality and the Collapse of Privilege.)

A system that encourages the launching of new real-world businesses: no, no, no, a thousand times no.


A status quo that has some realistic plan to impose Cold Turkey withdrawal on all of Wall Street's junkies addicted to Fed smack: you must be joking. The junkies are running the entire financial system.

The faint glimmerings of reality leaking through the public-relations blitz is the first light of The Winter of Our Discontent. The Federal Reserve's apologists and lackeys are speaking 21 times this week, all to reassure the Wall Street junkies and dealers that the Fed's supply of smack is infinite. Why don't we just rename the Fed The Ministry of Propaganda? Wouldn't a dash of calling it what it really is be refreshing?

If you think this scale of stimulus is sustainable and consequence-free, you must be mainlining Delusionol. According to the Fed's apologists and the political class, Spring is here and will last forever. This chart says The Winter of Our Discontent has yet to start, but the first signs are visible to those willing to look past the PR.




If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon #40: Subprime Attention NFTs ((1:01 hrs) --NFTs--non-fungible tokens...

The Coming Deflationary Tsunami (53 min)


My COVID-19 Pandemic Posts


My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).



Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

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Sunday, March 21, 2021

We Don't Need The Great Reset, We Need The Great Rebalancing

Perhaps we have collectively "lost our mind." Perhaps what we need is not a new technology but a new way of living that uses existing technologies to echo "old ways" that worked rather well on much lower energy consumption.

The Great Reset is much in the news--the proposed top-down plan for combating climate change designed by the global elites, who then as now will be jetting around in private aircraft while dictating exactly how the rest of us will reduce our carbon footprints.

My CLIME proposal takes a much different approach: change the way money is created and people are paid to create a new incentive structure that lets people and communities decide how best to reduce energy consumption and waste and address scarcities. (CLIME is described in my books A Radically Beneficial World: Automation, Technology and Creating Jobs for All and A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet.)

Charlie Munger (head of Berkshire Hathaway) famously said: "Show me the incentive and I will show you the outcome." That's how humans operate: we respond to the incentives presented, even if they destroy the planet.

How do we instantiate incentives? With rewards: money, power, status, recognition, praise.

How do we instantiate disincentives? With punishment: imprisonment, fines, closure of businesses, social shunning.

Being social animals, humans are hard-wired to value status, recognition and praise. But first we must have a livelihood and some way to feed, clothe and house ourselves. So we must first have access to the essential resources needed for life, what I call the FEW resources (food, energy and water).

There are many other resources we need to access, of course--minerals, building materials, and so on--but the point here is our access to these resources can be direct (you grow your own food) or indirect (you earn money which you use to buy food).

So money is the key incentive structure, as money is the means to access essential resources.

How you create money determines the outcome: if you create money at the top of the wealth-power pyramid and distribute it to those at the top, the outcome is a destabilizing asymmetry in the distribution of money and thus resources. There is no other possible outcome.

Secondly, how you reward people with money determines the outcome: in the present system, we reward people for creating monopolies and destroying the planet if that maximizes profits, we reward people for expanding the power of authoritarian states and we reward people for wasting resources, designing planned obsolescence into everything so the economy is nothing but a conveyor belt of stuff going through consumers to the landfill: the Landfill Economy.

With these incentives, rewards and process for creating money, the only possible result is a doomed, dysfunctional status quo, what we have now. I've laid all this out in greater detail in my books:

Why Our Status Quo Failed and Is Beyond Reform
Inequality and the Collapse of Privilege

As I always say: If you don't change the way money is created and people are paid, you change nothing. (I explain the dynamics of money and work in my book Money and Work Unchained.)

This is why The Great Reset is a fraud: it doesn't change the incentives via how money is created and people are paid, so it changes nothing. All it does is further consolidate wealth and power at the top of the wealth-power pyramid.

Relying on The Authoritarian Savior State is also doomed, for reasons I explain in my books Pathfinding Our Destiny and Resistance, Revolution, Liberation: A Model for Positive Change.)

What we need is The Great Rebalancing, a rebalancing of the planet's resources and human needs.

My proposed CLIME system instantiates the incentives and mechanisms needed to rewire the global economy.

CLIME is the Community Labor Integrated Money Economy. In CLIME, money is created solely to pay people for performing useful work in their community. The only way money can be created in CLIME is to pay people for work the community deems useful and that meets the CLIME standards, which are simple:

1. The primary goal is not to maximize profit by whatever means are available. (Profit and a return on capital remain incentives, but they're no longer the only incentives.) The goal is to use the least amount of energy and resources to perform the needed work / fill essential scarcities.

2. Every manufactured item must be 95% recyclable or reusable by design, and the cost of this recycling / reuse is in the initial price.

Consider photovoltaic (solar) panels as an example of what the current system incentivizes. The current generation of panels is not recyclable at scale--and neither are the lithium-ion batteries that store the PV electricity. PV panels and lithium-ion batteries are just more toxic "stuff" going to the landfill in our infinite-growth Landfill Economy.

"The International Renewable Energy Agency (IRENA) estimated that the world had 250,000 metric tons of solar panel waste that year; and by 2050, the amount could reach 78 million metric tons." Source

The same is true of thousands of enormous fiberglass wind turbine blades--impossible to recycle or reuse, they're being buried in giant landfills.

It's difficult for many people to imagine a world in which the incentives are to consume as little energy and resources as possible and waste as little as possible, but money and the economy are human constructs: they can be changed at will.

Change the way money is created and people are paid, and you change the incentive structure and thus the outcome.

We are so accustomed to staggering waste that we cannot imagine how we could manage without burning 90 million barrels of oil a day (and vast quantities of natural gas and coal).

What never ceases to amaze me is how many people seem to have forgotten that great civilizations and cities flourished without fossil fuels. The capital of the wondrous Tang Dynasty in China (near present-day Xian) contained upwards of 1 million people circa 700-900 A.D., and was a complex entrepot of trade and treasure from distant lands.

The great Thai capital of Ayuttaya also had nearly a million residents in the 1600s and early 1700s before it was sacked and burned by the Burmese army; Westerners had carved out their own small quarters in the sprawling city.

Neither Imperial Rome nor the Song Dynasty's capital, Hangzhou (circa 1100-1275 AD) consumed much hydrocarbon energy.

For more on what daily life was like in Hangzhou, find a copy of the marvelous 1964 book Daily Life in China on the Eve of the Mongol Invasion, 1250-1276.

Paris and the other great cities of Europe thrived in the same timeframe (1600s and 1700s) with (by today's standards) extremely modest use of fossil fuels.

Those who expect a decline in energy availability to immediately lead to civilization-ending chaos overlook how similar life was in 1906 San Francisco, when hydrocarbons generated (by today's standards) modest amounts of power and biofuel transportation (i.e. horses) were the common form of drayage.

The machinery of that era was terribly inefficient. With current technologies, very modest amounts of energy could power a very rich lifestyle if we measure lifestyle not by wasteful consumption but by having enough food to eat, useful work to do, mobility and access to various entertainments.

Consider this 8-minute film of Market Street in downtown San Francisco shot a few days before the catastrophic earthquake and fire of 1906. A trip down Market Street before the fire (Library of Congress)



Yes, there are plenty of jalopies (autos) careening through the traffic, but note the wealth of transport options. An endless string of cable cars moves up and down Market Street (that they are cable cars is evidenced by the cable trough running between the rails). To the right, a procession of horse-drawn carts and wagons head down toward the Bay--the 1906 equivalent of today's diesel trucks.

Toward the end of the film, as the trolley approaches the Ferry Building, you can see a small horse-drawn trolley entering Market Street (the rear sign identifies it as a "Montgomery Street" trolley.)

Electric trolleys (note the overhead arm to the conducting wire) crossed the street numerous times. You will also see many people on foot--still a reliable mode of transport, as well as bicyclists and an occasional rider on horseback.

On several occasions, people are almost struck by cars; pedestrians, as in Developing World countries today, had to keep their wits about them. Those unfortunate enough to be struck very likely did not sue the city or the owner of the vehicle; if you couldn't manage crossing the street competently, then it was assumed you knew better than to try.

There are no street lights or even police guiding traffic. This is very much like the semi-chaotic traffic which is commonplace outside the First World.

To the First World resident accustomed to being told what to do and ordered about at all times, this seems like madness. But notice how it all works quite well without a huge costly structure to organize and control conformity. Indeed, it is a truism of city-street traffic control that people drive more cautiously and thus more safely when there are limited or no traffic controls.

Our present culture cannot grasp the potential of energy devolution. When I heard James Howard Kunstler speak a few years ago, he observed that many people approached him expecting a pat on the back for buying a Prius. Jim noted that these souls did not yet "get it"--the automobile-centric and suburban, auto-dependent economy and culture was the problem, and the Peak-Lithium auto is no different from the Peak-Oil vehicle. (Manufacturing the Peak-Lithium auto consumes even more oil than manufacturing the Peak-Oil vehicle.)

From a very basic point of view, the more decentralized options that are available, the better; just as monoculture crops lead to disease and crop failures, so mono-systems lead to extreme vulnerabilities.

The "modern" (infinite growth, maximize profits) impulse is to "fix" the vulnerabilities created by mono-systems with more costly and complex "fixes." Then as these "fixes" trigger more unforeseen consequences, another round of ever-more complex and costly engineering is applied to "fix" the "fix."

This is how systems become so high-energy, high cost and complex that the returns of further investments become ever more marginal, and the system eventually collapses under its own weight.

The idea that a great city could depend largely on human power, animal power, water/wind-based transport and energy-efficient transport strikes those inculcated with the "infinite growth" religion/mindset as "primitive."

But if we were able to go back in time and ask the well-fed, well-dressed, well-educated (and oh-so-busy) passersby on the streets in 1906 if they were living a "primitive," "deprived" life in a "chaotic" city, they would very likely have reckoned that you had lost your mind.

Perhaps we have collectively "lost our mind." Perhaps what we need is not a new technology but a new way of living that uses existing technologies to echo "old ways" that worked rather well on much lower energy densities and much lower energy consumption. (As for relying on A.I. to save the day and perform miracles, I dismantle this fantasy in my book Will You Be Richer or Poorer? Profit, Power and A.I.)

The Great Rebalancing need not be painful. We simply need new incentive structures that change the outcome from waste, fraud, fatal asymmetries and fatal synergies to paying and rewarding people for doing more with less--much less, and only creating money to pay those doing more with less.

This essay was first published as a weekly Musings Report sent exclusively to subscribers and patrons at the $5/month ($54/year) and higher level. Thank you, patrons and subscribers, for supporting my work and this free blog.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon #40: Subprime Attention NFTs ((1:01 hrs) --NFTs--non-fungible tokens...

The Coming Deflationary Tsunami (53 min)


My COVID-19 Pandemic Posts


My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).



Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Valerie M. ($108), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

 

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Friday, March 19, 2021

How We Stumbled to the Edge of the Cliff

Oops. Looks like the Fed's magic (and our luck) have finally run out.

Now that we're teetering on the edge of the cliff, it might be a good idea to retrace how we stumbled down to this crumbling, precarious ledge. As I've discussed for the past 15 years, there are a handful of systemic forces that have taken us to the point of no return.

1. Demographics have reversed from tailwinds to headwinds. All sorts of extravagant promises could be made back when there were 10 workers paying taxes to support each retiree/state dependent. Now that we're down to less than 2 full-time workers for each retiree/state dependent, the promises are impossible to keep, with the one exception of printing the trillions of dollars that were anticipated to be paid in taxes--that is, creating near-infinite sums of funny-money out of thin air and hoping the rest of the world will continue to accept it. History doesn't have any examples of that working, but hey, we're special and this time it's different. Oh, right...

The Narrative Of Inflation Amid Depopulation

Just Charts of Demographics (Econimica)

2. The fuel of postwar prosperity, oil, is no longer cheap enough or abundant enough. A great many people are delighted to put their faith in renewables (actually replaceables, as Nate Hagens has described) but as Tim Morgan has explained, the era's secular stagnation that so puzzled conventional economists can be traced back to the decline in cheap energy available per capita: Mapping the economy:

"The cost element is known here as ECoE (the Energy Cost of Energy), which has been rising relentlessly over an extended period. Whilst ECoE remained low, its omission mattered much less than it does now. This is why conventional, money-based economic modelling appeared to work pretty well, until ECoE became big enough to introduce progressive invalidation into economic models. This process can be traced to the 1990s, when conventional interpretation noticed -- but could not explain -- a phenomenon then labelled 'secular stagnation'."

I addressed the relationship between hydrocarbons and stagnation in Oil and Debt: Why Our Financial System Is Unsustainable. (2/25/21)

3. The balance between labor and capital has collapsed. $50 trillion in earnings has been transferred to the Financial Aristocracy from the bottom 90% of American households over the past 45 years. This is the reality that must be obscured by any means available, but alas, there's data and facts: Trends in Income From 1975 to 2018.

The status quo response to stagnation was to push financialization and globalization, both of which reward those who own capital and control the market forces (heh) of rigged "markets." Given the incentive structures of financialization and globalization, the best way to maximize profits by any means available has been to offshore production (costly, risky, low profit in a world of excess capacity, get rid of it) and generate obscene profits by financial speculation (clean, easy and guaranteed because The Fed has our back).

This is how the nation has been hollowed out, financially and morally.

4. The nation's leadership elite no longer trusts the citizenry. The entire purpose of what passes for leadership now in the U.S. is to bamboozle, lie, prevaricate and obscure how the nation's resources are being squandered globally and domestically. The nation's leadership elite continues to assume that the resources and money available are essentially limitless, and so there's no Endless War (tm) that can't be extended indefinitely, no corporate welfare that can't be increased, and now that the populace is restive, no limit on how many trillions (pocket money, we're America! We can do anything!) can be distributed in bread and circuses to increase the voters' dependence on The Savior State. (Be a good little debt-serf or tax donkey and everything will be just fine.)

When it gets serious, you have to lie, and now it's serious every single second of every day.

5. The central bank's magic does not work forever. If you look at the fine print on the bottom of the Federal Reserve's magic lamp, it warns that lowering interest rates stops working when the rate is zero, and that creating trillions out of thin air and giving it to banks, cartels and super-wealthy financiers only works to inflate speculative asset bubbles for 20 years. So let's see, 2000 plus 20 equals 2020... oops. Looks like the Fed's magic (and our luck) have finally run out.

Just a thought, but removing the blindfold might be a good idea here. The edge is crumbling and the bottom is a long way down.



If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon #40: Subprime Attention NFTs ((1:01 hrs) --NFTs--non-fungible tokens...

The Coming Deflationary Tsunami (53 min)


My COVID-19 Pandemic Posts


My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).



Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Gavin T. ($54), for your splendidly generous contribution to this site -- I am greatly honored by your support and readership.

 

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Wednesday, March 17, 2021

Our Dead Money Economy

The U.S. stock and bond markets and its entire financial system now teeter on the edge of collapse if there is even a slight hint that 1) the Fed won't give more free candy to Wall Street or 2) the Fed has lost control of the Dead Money Economy it has created.

Take a quick glance at these depictions of Dead Money: while the broad measure of the money supply in the U.S., M2, has gone up 12-fold since the start of 1981, the velocity of money--how many times it changes hands over a period of time--has collapsed.

What does this tell us about the U.S. economy and what lies ahead? The Federal Reserve's FRED database provides a definition of M2 that's a good starting place.

Note that the Fed refers to money stock, where the word stock refers to the sum total of money in the system, as in "the store is fully stocked with merchandise". They're not referring to the stock market, but to all the money that's in the "store" of our financial system: cash, money in checking accounts and money market funds, etc. Here's the definition of M2:

"Beginning May 2020, M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs (money market funds) less IRA and Keogh balances at MMFs."

Put somewhat more directly, M2 is all the money in the financial system which people can spend. It doesn't include the money in individual retirement accounts because that has been set aside for the long-term and is not available (except in cases of early withdrawal) to spend.

Here's the definition of the velocity of money:

"The velocity of money is the frequency at which one unit of currency is used to purchase domestically produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy. A decreasing velocity might indicate fewer consumption transactions are taking place."

You might have seen one of the illustrative tales circulating around the web about the one $10 bill that ends up paying a half-dozen debts as it circulates through the town: the grocer pays a debt owed the baker who uses the $10 to pay a debt to the florist and so on. This is an example of a high velocity of money: the $10 bill changes hands many times in the space of a few hours, funding transactions that all lead back to the exchange of a good or service.

There's one part of the definition that is often overlooked: the velocity of money only tracks domestically produced goods and services, so all the transactions that end up in a container of goods from China being unloaded in Long Beach aren't counted.

I've annotated the charts of M2 money stock and the velocity of M2 money to provide historical context for the unprecedented expansion of the stock of money and the equally unprecedented collapse of money velocity. In short, while America's GDP (gross domestic product) has gone up 6.5-fold since the start of the financialization-globalization boom in 1981, the stock of money has risen 12-fold.

This is striking: money stock basically doubled from 2009 (the brief Global Financial Crisis recession) to last February, before the pandemic had any impact on the economy. In other words, setting aside the extraordinary vertical expansion of money stock in the past year, the U.S. economy's stock of money doubled in a bit over a decade, just to keep GDP ("growth") at an anemic, barely-above-flatline rate of expansion.

Put another way, there wasn't much bang for doubling the supply of bucks.

Meanwhile, the velocity of money has absolutely tanked. In the era of widespread prosperity in the 1960s and 1970s, the velocity of money ratio remained in a band between 1.7 and 1.8, moving up toward 2 in the inflationary late 70s as it made sense to trade cash that was losing value for goods and services before it lost even more purchasing power.

Velocity returned to this range in the 1980s boom, and then rocketed to postwar highs at 2.2 in the Internet boom of the 1990s. Since that top in 1997, money velocity has been in a secular decline. As every Fed-inflated financial bubble pops, money velocity takes another leg down. Even before the pandemic, it was in a steady free-fall even as the supply of money steadily rocketed higher.





So what do we make of this stunning expansion of money and equally stunning collapse of money velocity? Ours is a Dead Money Economy. New money is created in the trillions of dollars, but it is either shipped overseas to exporters selling goods to Americans or it's being stashed somewhere rather than being exchanged for domestically produced goods and services.

In other words, our financial system is pushing on a string: it keeps creating trillions in new money which is either stashed away or sent overseas, having been spent on imported goods. This is the acme of a Dead Money Economy.

Lastly, let's look at the Fed's broadest measure of money, MZM which is inexplicably being discontinued, just as the measure it replaced, M3, was discontinued. (Do we need to keep moving the goalposts on money stock to mask the abject trajectory of our Dead Money Economy?)

Here's the Fed's definition of MZM money stock:

"MZM (money with zero maturity) is the broadest component and consists of the supply of financial assets redeemable at par on demand: notes and coins in circulation, traveler's checks (non-bank issuers), demand deposits, other checkable deposits, savings deposits, and all money market funds. The velocity of MZM helps determine how often financial assets are switching hands within the economy."

In other words, if we want a summary of America's financial system, we look at the velocity of MZM money. MZM money stock has skyrocketed right along with M2 money stock--no surprise there.

The surprise is that the velocity of MZM money topped out in the inflationary peak of 1981 and has been in a free-fall since the start of the financialization-globalization era began.

Not to put too fine a point on it, but this aligns with the secular stagnation of earnings/wages which began in earnest at the same time (1981), and the rising dependence on central bank intervention / stimulus which has reached the extreme absurdity where the U.S. stock and bond markets and its entire financial system now teeter on the edge of collapse if there is even a slight hint that 1) the Fed won't give more free candy to Wall Street or 2) the Fed has lost control of the Dead Money Economy it has created.

If you think a Dead Money Economy is a healthy economy, you might want to cut your intake of Delusionol.





If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon #39: Capital vs Currency vs Cash vs Crypto ((1:06 hrs) --Call this one "The Money Episode"

The Coming Deflationary Tsunami (53 min)


My COVID-19 Pandemic Posts


My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).



Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Hector G. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

 

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