With all due respect to the people arguing this one way or the other – many of whom are super intelligent. This argument is a self-defeating doom loop that can only be resolved via an act of faith.

Introducing your Economic Apocalypse Toolkit

With both Bitcoin and gold (and stonks, for that matter) at or recently off of all time highs the age old debate of whether gold is better than Bitcoin or vice versa is everywhere. I finally sat down and mapped out the Economic Apocalypse Toolkit after listening to Grant Williams and Bill Fleckenstein’s End Game podcast episode with Fred Hickey, who writes The High Tech Strategist.

In it they hit on the perennial question of “gold vs Bitcoin” and Hickey laid out his objections to it. I’ve been a subscriber of The HTS for several years now and think it’s absolutely fantastic, and of course I also subscribe to Grant Williams TTMYGH and Fleck’s newsletter as well. All great stuff, well written, from extremely intelligent people. I do get the sense that Williams is somewhat open to Bitcoin and he wants to talk about it and explore the idea that it may be something more than the usual tropes: a ponzi, based on nothing, Tulipmania, etc, but maybe he’s hesitant at prospect of taking heat for suggesting it.

I just find the entire debate pointless because people who invest in either asset class are doing so for the same reasons. They are reacting to the same threat, they see the same unsustainability, they are preparing for the same End Game, if you will.

Given that many of the people who see the underlying issues are of a capital allocator, long term mindset, why is this being thought of in terms of either/or and not in terms of probabilities and scenarios?

If the job at hand is to protect one’s wealth from systemically rigged and disintegrating monetary regime, arguing for one over the other feels like trying to defend against it with only half the available toolkit. Is there a mechanic who wouldn’t be caught dead with a screwdriver in his toolbox because he can give you a list of reasons why every problem can be solved with a wrench? “Screwdrivers for suckers!”

The entire gold vs crypto argument goes away when one realizes that there is more overlap in the objectives of each asset than there are differences. And if you can get your own biases out of the way, then even the differences when looked at objectively seem to have uncanny parallels

Gold has a 5,000 year track record, and has never failed to hold its value, which is quite impressive and has to count for something….
Bitcoin has broken out of nowhere and taken the world by storm in an astonishingly small amount of time, which is quite impressive and has to count for something…

Bitcoin is backed by nothing.
Gold is just a shiny rock.

Without electricity, Bitcoin is useless.
You can’t eat gold.

Quantum computing will eventually destroy Bitcoin’s encryption.
Asteroid mining will eventually make gold abundant and cheap.

Bitcoin is a ponzi.
What’s the definition of a gold mine? A hole in the ground with a liar standing beside it.

I could go on….

Since the future is unknowable and certainty elusive, aligning with one aspect of the above over the other has to be a choice not a fact. It’s an act of faith. So why not embrace agnosticism and make use of both sets of tools in your financial survival toolkit?

The Toolkit

Let’s just step briefly through some of the items in the mindmap. We have metals on one side, cryptos on the other.

On the cryptos side, I just think Bitcoin is the crypto-reserve currency and will continue to be for the foreseeable future. My preferred way to accumulate BTC is to earn it via my businesses. easyDNS has been accepting Bitcoin since 2013 and we’re developing a payments service for clients that will be based on BTCPayserver.

I put Litecoin and alts in there to trigger the maximalists. As per the Supersuckers song, “I like it all man. (All or nothin’ I’m all in even when I’m bluffin’)”.

Ethereum is different animal, I think the Bitcoin vs Ethereum schism is every bit as fucking stupid as Gold vs Bitcoin. They do different things, and while they overlap in some aspects, that doesn’t mean there should only be one path forward.

The way I think about it, Bitcoin is the value, Ethereum is the execution. When I hear people dismiss Bitcoin because “there is as yet no ‘killer app’ that anybody has come up with for Bitcoin” I like to ask them “what is the killer app for the money in your wallet?”. Do you want to be able to play video games on your money? Collaborate on a document with your coworkers before you spend it? Dollars or  euros aren’t dismissed as useless because nobody has come up with a compelling use case for them. You just spend it. That’s the use case.

Ethereum on the other hand, well that’s a whole different ball game. Smart contracts, DeFi, even Dao’s (despite early setbacks) will completely transform our lives. Ethereum, and other projects like it (Cardano, EOS, and even Ravencoin, which is actually a Bitcoin fork)  are going to provide ways to code parameters and instructions around value and wealth that will be guaranteed to execute and can outrun government overreach.

We’re now coming out of that “Trough of Disillusionment” I wrote about back in 2018 and we have actual companies, actual businesses and ways to derive income now in crypto. We can invest in miners, in crypto based publicly traded companies, we can stake our assets or lend them and earn a return on them. Multiple income streams available here so we actually have some ability to compound whatever wealth we’ve managed to port to the crypto-economy separate from any nominal gains garnered in fiat terms.

And of course, with crypto we have the ability to move capital, in figurative terms, simply by thinking about it. If Actual Communism comes to your habitat and the best you can manage is to get out with your skin and some pass phrases you’ve remembered in your head, you can retrieve some of your assets wherever you come up for air (read “We The Living”. Take it to heart. This is the fate we seek to avoid, and large chunks of the world are barreling straight at it).

On the precious metals side you have your physical metals which, if all goes well, you simply keep vaulted in various places and your currency never collapses and you teach your kids that they should preserve the hoard and only use it in extreme emergencies down the road. And to teach their kids the same. You have junk silver in case there is a currency crisis and you don’t want to have to carve off a piece of a Krugerrand in order to buy some food at the market.

You have some gold tucked away in international vaults like Bullionvault and Goldmoney. My cousins run TrustableGold.com which rates these places.

All of this stuff, especially on the crypto side, has to be set up in advance, and you have to know how to navigate these systems before TSHTF. When a mob of mostly peaceful democratic socialists are tearing through your town and burning down your homes and businesses, or when the government is hanging both goldbugs and HODL-ers from lamposts, you do not want to be learning how to set up a Monero wallet and frantically converting as much as you can into it, nor do you want to be just then opening your Goldmoney account and trying to wire in some funds.

It has to be ready now, so  when the inevitable Financial Repressions intensifies, or God forbid, the Financial Tyranny occurs, you can focus on executing your exit plans and coming out on the other end with enough capital and wealth to rebuild.

The missing link

What we really need are bridges between crypto-currencies and gold. Not metaphorical “can’t we all be friends” bridges, I mean gateways, tokenized/staked storage and transfer of precious metals. Conversion into or out of crypto from metals. This is not easy.

There have been attempts in the past, Roger Ver, in Sal the Agorist’s recent “Gold vs Bitcoin” podcast mentioned e-gold. easyDNS was the only domain registrar to accept e-gold back in the day and that’s how we amassed our physical gold which remains on our balance sheet even now. But contrary to Ver’s assertion that the government’s shutdown of E-gold speaks to gold’s inferiority to Bitcoin – that’s not entirely accurate. E-gold turned a blind eye to governance and it really was a wild west of ponzi schemes and criminal activity. Contrast with other DGCs of the day, like Pecunix or Goldmoney, the latter of which still exists. Goldmoney had far more stringent KYC and governance protocols, self-enforced, and here they are – still up and running.

In fact it was Goldmoney who had one of the more recent attempts at Bitcoin to vaulted gold convertability under their incarnation as Bitgold. They’ve since discontinued this precisely because of the governance hurdles.

I won’t trivialize how hard this is, but for people droning on about the need for a ‘killer app’, this one would probably do well.

It’s all about optionality

Both metals and crypto tribes look at the financial system and our legacy institutions as entering some form of breakdown and decline. Because the future is inherently unknowable, what makes more sense?

A) Betting on one half of a toolbox that may pay off huge in some scenarios but be worthless in others, or

B) Having a full toolbox that can give you some good outcomes under most imaginable circumstances?

If you’re a goldbug, would it kill you to have a fraction of your liquidity in Bitcoin, knowing that from past events crypto superspikes tend to 10X or 100X or more with stubborn repetitiveness and increasing magnitude?

If you’re into Bitcoin, buying the right gold miners now with a fraction of your capital may very well set you up with an increasingly fat, cushy dividend stream in a few years that you can use for living expenses while you continue to HODL.

Now there are many End Gamer luminaries out there who are invested in both even though they prefer one or the other.

But there are too many out there who are not only completely dismissing the other side, they are going even further and acting under an assumption that their preferred asset will prevail so totally that it will in the fullness of time become the world reserve asset.

In part 2 I’ll discuss why the odds of that happening in either case are near infinitesimal. For anybody paying attention to how governments actually function, it is not even desirable.

If your thesis is one that of these assets will form the basis of a new global statist monetary system and you’re an extreme skeptic of gold or Bitcoin, you should be hoping that the other guy’s favourite asset is the one that gets used.

Get on the list or follow me on Twitter if you want to know when Part 2: Careful What You Wish For, is available.

Further Reading:

• Gold vs Bitcoin Part 2: Careful what you wish for

Read https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpgs, not Marx if you want to learn anything useful about the future.

It Ain’t What You Don’t Know That Gets You Into Trouble. It’s What You Know for Sure That Just Ain’t So

— Unknown (but frequently attributed to https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpg Twain)

 

Over on AxisOfEasy we often say the defining conflict of our time is between centralization and decentralization. When I listened to Howard https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpgs on the Value Investing Legends podcast he said there are two schools of thought, the “I know” school and the “I don’t know” school.

As I thought about this, I realized that the distinction between centralization / decentralization and I know vs I don’t know delineate out in a similar fashion.

Those espousing centralization do so because they think the centre knows. The trains will run on time as long as there is a super-intelligent brain, or AI or committee in the middle that has everything figured out and can direct traffic.

What could possibly go wrong? Well, you could make the case that history is largely a chronicle of things that didn’t go as expected, or at least things that happened that weren’t expected at all. As Winston Churchill termed it, history was “one damned thing after another”.

How is this relevant to contrarianism?

What is often misunderstood, as per Ken Fisher’s Beat the Crowd, contrarian calls are frequently mistaken for opposite calls. He used the analogy of an analog clock, if the hour hand is at the 1, the opposite call is 7. He called this “Curmudgeonly Contrarianism”.

But real contrarianism isn’t just picking the diametrical opposite outcome, it’s realizing that there are many other options than where the hour hand is pointing (or is predicted to be).

In other words, contrarianism isn’t really about thinking you know what’s going to happen that is different from what the crowd thinks. Contrarianism is more about knowing that whatever it is the conventional wisdom thinks is going to happen, probably won’t.

Thinking about it in this way helped me put a point on some bullet points / aphorisms I had been mentally pencilling out over the last while. If I tried to expand on all of them below this would be too long, I may break them out in detail in subsequent posts. Keep in mind, none of these are absolutes.

If something will never be the same again, it’ll be close enough.

The more hysterically that experts are shrieking about some unthinkable scenario, the greater the odds are that you can ignore it.

The batting average for the accuracy of the most sophisticated macro models about nearly everything is abysmal.

There is no such thing as AI. There are expert systems, a label from the 90’s, but they are by no definition “intelligent” and none of them give anybody any edge about predicting anything, let alone everything.

Some of the most sacred cows and established tenets that underpin conventional thinking are demonstrably wrong (Phillips Curve) or unfalsifiable (OOL theories).

The consensus outlook describes the one scenario that is impossible to occur (see Douglas Adams in his Hitchiker’s Guide to the Galaxy and his concept of the recipriversexcluson, a number whose value can be anything but itself , “In other words, the given time of arrival is the one moment of time at which it is impossible that any member of the party will arrive.”)

Continuing on above: It’s true that a gaggle of of people who guess at the number of jelly beans in a jar will often times be wrong individually, but close enough statistically. For some reason the Wisdom of Crowds phenomenon does not translate to consensus outlooks by experts. My suspicion is that if you did the jelly beans in a jar guessing thing with a population comprised solely of  Nobel Economics Prize laureates and central bankers, their guess would be further off than a crowd of inbred hillbillies.  I don’t know why this is, but a few years back Dan Gardener put out a pretty good book about this called Future Babble: Why Expert Predictions Fail – And Why we Believe Them Anyway.

There is a big difference between something being inevitable and it being imminent – the differential between the two can exceed the length of multiple lifetimes.

However, the corollary is that “eventually” inevitably shows up sooner than anyone expected.

The majority of expectations are delusional. Keynesian beauty contests lead to perverse feedback loops in which entire premises are built on infinite linear extrapolation. Then if you want to see real hysteria (or exuberance), put in an exponential curve. Exponentials cannot continue indefinitely anywhere, but our expectations around them certainly can.

Many fears are unfounded. When bad things happen to people they are more often things that they didn’t expect rather than things they were actively fearing.

All of the above boils back town to https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpgs’ (not Marx’s) “I know” vs “I don’t know”. https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpgs doesn’t know. Marx knew. Marxists today know.

The governors of the Fed Board, Ben Bernanke, Janet Yellen, Stephanie Kelton, Anthony Fauci, Paul Krugman, Neil Ferguson, Greta Thunberg, Klaus Schwab, they are all of the “I know” school. There’s an expression “Left knows best” and it’s not wrong, but it’s not limited to lefties. Right wing conservatives belong to the “I know” school too. Especially those Neocons.

Austrian-school capitalists, libertarians, Howard https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpgs and I suspect, all master class investors, belong to the “I don’t know school”. And so do I. At least I try to.

So when I make a bet on gold, on silver and crypto currencies, I’m not making a bet because I think “I know what’s going to happen”. Contrarianism may not actually be about “everybody is wrong, the market is wrong, and I’m right, I know what’s going to happen”

Contrarianism may more accurately understood as being about examining what everybody thinks they’re right about and what they take for granted. It’s not about what will happen as much as what can’t happen, or will likely stop working.

You can’t print prosperity, you can’t indebt your way to wealth, you can’t save an economy by destroying the currency, even if you invent a scholarly sounding perpetual motion machine like MMT to justify it. And you can‘t keep leaching the last crumbs of wealth out of the under-class to enrich the elites and expect the underclass to sit still for it in perpetuity.

I think the experts and the policy makers are wrong about inflation and I think they’re wrong about debt and I think they’re wrong about interest rates. That means I don’t want to be in cash, and to get out of a cash I don’t want to put it in things that are over priced and expensive relative to their value.

Out of all that, it leaves a contrarian bet on precious metals, crypto currencies (because of capital destruction), income producing businesses (economic destruction) and commodities (because of inflation).

Over the past year as I’ve been seeing increasingly more references on #fintwit that fundamentals are dead, value is dead, the New Normal is permanently high multiples, there is certainly some merit to these arguments given  the destruction the monetary reset that certainly seems to be coming (even if we don’t know how it’ll play out).

But also reminds me of the famous “permanently high plateau” remarks of yesteryear and other forms of New Era thinking, and thus the last couple of aphorisms from my collection:

If it’s unprecedented, there are precedents.

and

If it’s different this time, it isn’t.

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Postscript

After I had finished the first draft of this post, my copy of Christopher Mayer’s How do You Know? arrived. Mayer has written such investment classics as Invest Like a Dealmaker and 100 Baggers (which was in turn his study of the Tom Phelps’ fabled 100-to-1 In the Stock https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpget).

The graphic I used in this post is from Mayer’s book. In the chapter on General Semantics he is talking about William O’Hanlon’s demonstration of reality:

“Let the dots represent ‘facts’. Now we want to “connect the dots”, or make sense of them. O’Hanlon’s chart shows some of the ways in which you can connect the dots.

It’s a brilliant rendering that makes clear there are many ways to interpret the same set of facts”.

It is a different kind of book than his other two, but in this day and age of experts-uber-alles, mandatory narratives and institutionalized groupthink, it’s more important and a must read. This book is an ode to the I Don’t Know school of investing and of life.

(Note: To be clear, this tweet comes from a fake Klaus Schwab account. But the book I quote from is the real deal)

Well, here’s hoping that World Economic Forum founder Klaus Schwab’s twitter was hacked by somebody from 4chan, ’cause if this is for real, it’s really hard not to subscribe to Great Reset conspiracy theories.

The World Economic Forum are working with the Biden Administration to ensure that most people will survive the coming food shortages.

Citizens that have up-to-date vaccination documents will receive regular packages of plant-based protein products ????https://t.co/ttCRBqJHSl

— Klaus Schwab (@_Klaus_Schwab) November 12, 2020

Schwab, of course is the founder of the World Economic Forum, where the world’s wealthiest elites meet at Davos each year to reimagine your future.

This year’s theme was The Great Reset. Schwab also wrote book by that same title. One part manifesto, one part think piece on the way Covid has changed the world forever that came out in June. My copy arrived today and I started forcing myself to read it this aft and I was planning to write up a more comprehensive review (subscribe here to get it when that’s done).

In it Schwab opines that The New Normal will

provoke changes that would have seemed inconceivable before the pandemic struck, such as new forms of monetary policy like helicopter money (already a given), the reconsideration/recalibration of some of our social priorities and augmented search for the common good as a policy objective, the notion of fairness acquiring political potency, radical welfare and taxation measures, and drastic geopolitical realignments.

The broader point is this: the possibilities for change and the resulting new order are now unlimited and only bound by our imagination, for better or for worse. Societies could be poised to become either more egalitarian or more authoritarian, or geared towards more solidarity or more individualism, favouring the interests of the few or the many…

you get the point: we should take advantage of this unprecedented opportunity to reimagine our world, in a bid to make it a better and more resilient one as it emerges on the other side of this crisis.

It’s a telling passage, one that boils down to “never let a good crisis go to waste”, and which clearly highlights collective solidarity as the preferred outcome than suffering “more individualism”.

Earlier passages make clear that COVID is not the existential threat in of itself acknowledging that “Even in the worst-case horrendous scenario, COVID-19 will kill far fewer people than the Great Plagues, including the Black Deaths, or World War II did”, but that is has “the potential to be a transformative crisis”.

When I saw the tweet I thought it had to be faked, especially since Biden isn’t even officially the president-elect yet and here’s this guy talking about impeding food shortages, famine, and mandatory vaccinations in exchange for soy rations. The insect emoji is really what has me convinced this is the work of some epic hacking troll.

Here’s hoping.

That tweet is archived here (Twitter has since suspended the account) but as I mentioned at the top of the post,  that this is from a fake (albeit brilliant!) Klaus Schwab parody account (and my Twitter is @stuntpope if you want to follow me there).

Never before in history have we seen such fertile ground and incentives toward groupthink and mass histrionics as we have today with total saturation of social media. Once our mobile phones were converted into near Star Trek level tricorders, and WiFi became ubiquitous we found ourselves swimming in “The Spew”, without even realizing that we had become like fish in a digital aquarium.

While I would be loathe to dispute the benefits the advent of the Internet bestowed on humanity, those of us who have watched it evolve over the past few decades or even had a minor hand in shaping and building it can’t help but wonder if somewhere along the way, things took a bad turn.

The great enablers of digitized groupthink are the social media platforms.

All that time you spend on Facebook, arguing politics with people you’ll never meet or care about. It can take over your life and you end up having those same arguments with the  people who truly matter in your own life: your friends and family.

All of that time, all those threads, tweetstorms, pile-ons, trending hashtags, updating your avatar in conformance with the issue de jour, at some point you have to ask yourself why you are expending the bulk of your mental energy chiming in with your opinion on things that are for the most part completely out of your control and that you’ll never be able to impact in any meaningful way.

Whose ends are you serving by participating in that? Certainly not your own. You don’t actually gain anything from going along with this, and if you actually consider the opportunity cost you begin to see the possibilities of what you could accomplish in your own life, for yourself and your family, if you spent your time doing something else.

What is the difference?

Or, how can you tell the difference between participating in some online social movement that you are told benefits the greater good vs. acting in your own rational self interest?

When you click or “like” or share or block or comment  you are generating data for the platform and the platform is not the greater good. It is not the collective will of the people, it is aggregated data that can and will be manipulated by the few to move the many  in the direction that serves the aims of other people, not you.

You see this exposed when the platform overtly signals what it desires to be amplified versus what it seeks to attenuate. In a truly digital “collective” the will of the aggregate would simply be expressed in the unfiltered propagation of certain narratives over others.

But that doesn’t happen and in it not happening the veneer of legitimacy is removed from collectivism in totality, revealing it for what it really is.

Collectivism is not community, it is not the greater good, and it is not cooperation. There is only The Collective in the rhetorical or symbolic sense, but in reality Collectivism is the manipulation of the many by the few. That’s it. It’s basically marketing at the level of the psyche except the payload isn’t brand awareness as much as they are incentives for compliance and disincentives for wrongthink.

The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of.

This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. …In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.”
– Edward Bernays, Propaganda, Chapter 1: Ordering Chaos

You could switch tabs right now and switch tracks

Instead of feeding the collective, you could channel your efforts into raising your own conditions and your own level of consciousness. In times like these, this is really the only play, the only counter-move and the only antidote to the dystopia we find ourselves facing.

Use the power of this Internet to accomplish something useful, something truly productive and rewarding. Something life affirming instead of succumbing to mob consensus.

How do you know if what you’re doing is serving your own goals and values versus The Collective? The way to tell is to ask yourself: Who are you generating data for right now? Every click, every like, every retweet, every comment, every share, that’s all grist for the mill of the digital Leviathan of conformity.

Even when there is a veneer of choice and you are being presented with options: Democrat or Republican, Facebook or Twitter, Uber or Lyft, Coke or Pepsi.

“Hey, what do you want for lunch?”

“What are my choices?”

“Grubhub or Doordash”.

You will never be presented with real choices or given options that deviate outside predetermined outcomes, and by definition, other people’s agendas.

The only way to break out of this paradigm is to invest in the most precious commodities: time and attention, and allocate it to the most important recipient: yourself.

Use the power of the Internet to learn a new skill, hone your mind and body, discover a new artist, read a book from 100 years ago, research an investment, expand your circle of competence, express yourself creatively, start a new business, help out in your direct community or get involved in a bleeding edge movement (like crypto anarchy, ftw).

The Collectivist ideal of a greater good can only be accomplished by one individual at a time. Individuals are only effective to the degree that they cultivate their own skills and talents, and understand their own biases and weaknesses. The only thing anybody can truly control are themselves.

Samuel E. Konkin once wrote, “Liberty grows individual by individual. Mass conversion is impossible”.

Switch from being a data cow, being data mined to furthering your own aims and fulfilling your own purpose.

Work on yourself instead of working for Big Tech

(If you want to follow my work directly, sign up for the mailing list. )

This post was originally my comment to a person on Facebook, which somebody then deleted. This person repeatedly throws out the 1.2 M deaths worldwide number and I finally lost it and posted a response to him after he scolded people for “spreading disinformation and not listening to science”. He actually told people disputing the Second Wave Hysteria to “shut up and listen to the government and science”.

As one of my all-time favourite economists, Thomas Sowell, would say…. “Oh dear, where to begin?”

1 million or 1.2 million deaths worldwide sounds like a big number and on its own you can use it to club “Covidiots” into silence, that is, until you actually look at it.

For starters, bandying out a number, any number in isolation is meaningless. For any number to have any relevance, to anything, it has to be part of a data set or otherwise part of some meaningful comparison.

If we take the 1.2 million COVID deaths worldwide, at it’s face (more on that below), the obvious question then becomes “is that good or bad?”

The most useful signal we can get from a global  COVID death toll is how it compares to what is called the “Absolute Fatality Rates” globally, which is simply the rate of all fatalities from all causes.

From the charts, we can clearly see, there was a lot of excess mortality in March and April, and then, like every other meaningful metric around Coronavirus, it drops off drastically and starts to level out, with a slight seasonal rise as we head into the winter.

Interestingly, in “no lockdown” Sweden, it turns out their absolute death toll is much lower than one would think:

It could possibly come in lower by the end of the year, but if not, will come in not that much higher. Not as high as, say, the US or England.

If reducing fatalities is the goal, there is a much easier way to do that

Sadly, a lot of people die every day, and I’m sure you’ve seen memes on social media on how many more people die from other causes like Tuberculosis (1.4M in 2019) than COVID-19.

In the US, where the COVID death toll currently sits at 225K, it is estimated that medical malpractice kills 250K Americans a year.

But an even bigger number, according to the WHO, is that alcohol abuse kills 3 million people annually, and that number will surely go even higher this year given the massive spike in mental illness, domestic violence, child abuse, depression and suicide caused by the lockdowns.

If this is about saving lives, we could literally bring those alcohol related deaths to zero, turning it off like the flick of a switch by instituting a global ban on alcohol. We could do it tomorrow. Should we? The lives we save may include your own.

In fact if we banned alcohol then we could let Coronavirus run and still be ahead nearly 2M preventable deaths annually, provided COVID-19 kept going with the same intensity it was going in March and April, which it clearly isn’t (see below).

Of course, nobody would seriously entertain that, and they could probably articulate some decent logic around why we shouldn’t.

But they may dismiss it without considering how closely the lockdown approach toward reducing COVID fatalities is analogous to a worldwide ban on alcohol to eliminate alcohol related deaths would be. Especially since we also know that a large portion of coronavirus fatalities die with COVID-19 and numerous other comorbidities* than of it (however, see my footnote on that at the end of this post).

In that sense, alcohol related carnage is very similar. Few alcoholics drink themselves to death outright. Far more kill themselves (and others) in car accidents, commit suicide, or wreck their livers, hearts, kidneys, brains or generally run themselves down so low nearly anything else will finish them off.

Second Wave Hysteria

Case counts are clearly rising again globally, that much is true and we have oodles of data to track it. With it, there come fears of the dreaded “Second Wave” of fatalities.

In the often cited Spanish Flu of 1918, the bulk of the fatalities came in the second wave. However, the Spanish Flu was a very different pandemic than the one we have today. That one attacked people right in the early years of the prime-of-life  age curve:

Scientists believe the nature of that strain caused “cytokine storms”, the phenomenon where the immune system overreacts and attacks itself. In a perverse twist of fate, this made the population with the strongest immune systems more vulnerable to the flu.

Contrast with COVID-19 where nobody disputes that the most vulnerable members of the population are the elderly and those with underlying medical conditions that render them immuno-compromised. In this sense, comparing 1918 to COVID-19 is not accurate or useful.

So, bear this in mind as I put in the graph below of how the Coronavirus Second Wave is playing out when it comes to case counts vs fatalities:

If we were in for a 1918-style Second Wave fatality overrun, we would see it in the data. As I pointed out in my previous post, the above data comes from the Province of Ontario, but pretty well all graphs from locales undergoing second waves in case counts, look the same. The fatalities are riding the floor (that “spike” in the fatality count was a data correction where they took previously missed data from the proceeding 90 days, and added them all to 2 data points), but the case counts are going up, as are the number of tests.

Right now the slope of the case count far exceeds the slope of the fatalities.

For the fatalities to come in anywhere near the Second Wave of 1918 scenario, the slope of the fatality line needs to blast off in a near vertical line right now. In the Ivor Cummins interview he mentioned Dr. Sunetra Gupta’s work indicating that COVID seems to peter out when it hits 20% of the population (but I can’t find the cite). If true, it is hard to envision a scenario where that is mathematically possible.

If not true, and we’re about to experience a Second Wave of fatalities, it would be impossible to occur without seeing it in the data and right now, all of the data, everywhere is showing either a moderate rise with seasonality, or an aggregate, overall decrease in fatalities.

It’s also been pointed out that the rationale behind the lockdowns was to prevent the healthcare system from being overrun. Aside from a few notable exceptions in Phase 1, that didn’t happen. If we look at the data now, it doesn’t look like that’s going to happen now, either. When I first started posting about the second wave numbers, I pointed out that even the ICU cases line was diverging from the hospitalizations line (right side, below). Right now it looks like the total hospitalizations are lower in Wave 2, then they were in Wave 1, even against a case count exceeding previous highs.

All of this should be good news, but for some reason, people become very upset when you try to walk them through this. I’m open to all logic, data and science based objections or counter-points to where I am wrong on this, bearing in mind that “SHUT UP AND LISTEN TO THE GOVERNMENT AND SCIENCE” isn’t a logical, scientific or data driven counter-argument.

What to do next.

I would close out with two additional reading exercises, one, I would go look at The Great Barrington Declaration and if you think they’re approach of focused protection makes sense, sign it. Number two: have a look at the comparison of The Great Barrington Declaration with what’s called “The John Snow Memorandum“.

If you want to follow my work, and I seem to be covering more about the lockdowns lately, then sign up for the mailing list here, or follow me on Twitter here.

Footnote on Comorbidities

(*The number you see bandied around a lot is 94% of all COVID-19 fatalities had comorbidities. This number largely keys off CDC data that only 6% of fatalities list only COVID-19 as a c.o.d. If you look at the CDC data on what the comorbidities are, the biggest one accounting for close to half of all fatalities, especially in the elderly, is pneumonia and influenza.  I think it’s inaccurate to just net-out all of those cases and dismiss them as comorbidities because that is one of the most common ways respiratory viruses manifest. But that said, the data, when you consider comorbidities and the looseness with which COVID gets added to c.o.d’s, what all this means is that the headline number for fatalities is the top boundary. They aren’t higher, and they are probably for all practical purposes, lower).

We hear a lot of talk in financial and economic circles about “reversion to the mean” or some variation: reversion through the mean or that reversion typically overshoots the mean. If you believe in cycles or oscillations, when you see something get wayyyyy out of whack, you may not know how much further out of whack it’ll go (“the market can remain irrational longer than you can stay solvent”), or when it’ll stop. But the typical belief, based largely on historical observations, is that when a move to an extreme finally exhausts itself and begins the countermove in the other direction, it will revert to, and then overshoot the mean.

How far will it overshoot the mean? To the extent whatever you are measuring had extremely overshot to one side, or the upside, it is generally expected to overcompensate to a comparable extent in other direction. Most of the time when we talk about this, we’re thinking about financial markets and it is most poignantly reflected in The Hype Cycle or some other variation of the wild gyrations between Irrational Exuberance and Maximum Pessimism.

To the shrewd speculator or contrarian investor, you can become exceedingly rich if you just know when everything has either peaked or bottomed. But, of course, that’s easier said than done.

There are people who think gold and silver, with investment portfolios holding somewhere around 0.5% globally and near universally reviled by the financial press, are in a bubble.

…and then there are people who think that TSLA, at 1000X carbon credits “earnings” is some kind of bombed-out value play.

Warren Buffet is credited with saying to be fearful when everybody else is greedy, and greedy when everybody else is fearful. I always thought he was channelling Jesse Livermore, who said as much back in the 1920’s….

“The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. ” – Edwin Lefévre, Reminiscences of a Stock Operator

“It is a human trait to to be hopeful and equally so to be fearful, but when you inject hope and fear into the business of speculation, you are faced with a very formidable hazard, because you are apt to get the two confused and in reverse positions” – Jesse Livermore, How To Trade in Stocks

Where are we today? Well like I said, that’s hard to say exactly, and it’s been hard to say for a long time.

Another old expression is that “the graveyards of Wall Street are littered with the skulls of those who were too early.” Betting against the extreme sentiment of these last few years hasn’t gone well.

Me: trying to short tech unicorns… pic.twitter.com/ItiIXZoit2

— https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpg E. Jeftovic (@StuntPope) August 31, 2020

We are obviously somewhere out the extreme sentiment side of something, but the point of today’s piece is to make the case that it’s not just stonks that are teeing up for some kind mean reversion. Central banks think inflation has been too low for too long, and for most of that time interest rates have been squashed at zero, in some places negative. Trying to go long volatility has been the widowmaker trade for years, while value guys have entire podcasts devoting a lot of airtime to how lousy value has been doing. While entertaining, I feel bad for them.

I look at all this and wonder what the world looks like if all of this snaps back other way in some kind of cascading Great Reversion.

Extremes in finance brings extremes in side effects: including things like hysteria, alarmism, political intolerance, media concentration, partisanship and just overall hypocrisy and hypernormalization. Although these are all difficult intangibles to measure and quantify.

I’ve cited the Pew Research on political polarization before, where they show how it is no longer possible to gain a plurality in the middle – centrism is dead and moderates are reprobates. The result would be a pendulum beat between ever increasing extremes – far left, hard right, until the centre literally cannot hold.

In Ronald Baily & Marian L. Tupy’s “Ten Global Trends Every Smart Person Should Know”, they distinguish between extractive and inclusive societies and make the case that an exogenous shock to one, like The Great Depression or a global war, would finish off an extractive society while inclusive ones weather the storm and perhaps even grow stronger.

An extractive society is one where a cadre of elites operates the system in a manner that strips wealth from the wider population and concentrates it within the ruling class. A lot of people are writing about this dynamic lately and I’ve long suspected the structure of the monetary system and the Cantillon Effect as being the primary driver of it. Contrast with an inclusive society, which they don’t mean in a “woke” sense but rather:

“Inclusive economic institutions that enforce property rights, create a level playing field, and encourage investments in new technologies and skills are more conducive to economic growth than extractive economic institutions that are structured to extract resources from the many by the few,…They include democratic politics, strong private property rights, the rule of law, enforcement of contracts, freedom of movement, and a free press. Inclusive institutions are the bases of the technological and entrepreneurial innovations that produced a historically unprecedented rise in living standards in those countries that embraced them”

To me, that sounds like a pretty good framework for free market capitalism. Something Charles, Jesse and I were trying to articulate in our last AxisOfEasy podcast. When Jesse contrasted what I call capitalism with “Neoliberalism”, I wondered afterward if there was a enough of a distinction between the two terms. But since I started reading Ten Global Trends I realized the significance of this distinction between inclusive and extractive societies.

If what we call (free market) Capitalism is inclusive, I would argue that what we Neoliberalism (or Globalism) is extractive.

And the reason I mention it all here is because I think this is another axis along which we are out on the far end of the tail, and we may even have a way to measure it. Central Bank intervention and monetary policy has transformed our society from an inclusive free market capitalist one into an extractive, neoliberal, globalist one.

Many people quibble over when this started, looking at the creation of The Fed in 1913 or Nixon’s shutdown of Breton Woods in ‘71, I think even those developments didn’t necessarily make this swing from inclusive to extractive inevitable until we started making bail-outs the expected outcome every time a bunch of banksters and  financiers over-extended themselves and blew themselves up.

With the bailouts of 2020, when innumerable small businesses were ordered closed, by edict, many of whom will never reopen, while central banks directly support superhuge businesses, and lucrative government contracts are awarded to cronies, what was a slow, seemingly inexorable slide into this extractionist regime was suddenly and dramatically pushed into overdrive.

(Note that 4 of the 5 billionaires depicted in this info graphic own companies whose bonds are being purchased by The Fed as part of the SCCMF)

When the types of things that are too far out the extreme end of the tail snap back it won’t just feel like another financial crisis, because this time I think, all the underlying factors that baked in the next crisis will also revert, including this reaction against our newfound extractionist overlords.

What would mean reversion and overshoot look like?

While some of it is financial and economic and would look like a meltdown, these other aspects are cultural, even geopolitical. When it all snaps the other way it will affect economies, financial markets, but also system fragility, supply chains, social cohesion, even living standards.

I just think things have gotten so fugly, and so polarized, contentious to the point where being a centrist is considered an extremist position in itself, that it’s all going to snap back in the other direction so fast and so hard it’s going to rip everybody’s faces off. It may be so disorderly it will even disorient those who were presumably positioned on “the correct side” of the move.

We are at a kind of hinge moment in history, just imagine where things will have to go for you to remember recent years as some kind of bygone era. That’s where The Great Reversion will take us. Nobody can say for sure what it will look like, or when it will happen, but I do fear one thing in particular.

The reversion, will be mean.

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On Cantillionaires, Sycophants and Losers

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”

— Henry Ford

“The ultimate crisis will occur when the situation is so thoroughly perverted that the defenders of the status quo can no longer resurrect confidence in the system”

— Vincent LoCascio, Special Privilege: How the Monetary Elite Benefit at Your Expense

Over several previous blog incarnations I’ve been writing about a couple of core themes. When I started writing about artificially low interest rates and the bad outcomes they would produce, I didn’t even know the economic terms for some of the things I was writing about.

But I knew keeping interest rates artificially low, or even negative would act like a type of event horizon that would be impossible to normalize from. I knew keeping interest rates too low for too long would force fiduciaries and capital allocators out the risk curve in search of yield, and that the most vulnerable among us, such as senior citizens, were the least able to absorb the inevitable drawdowns that would entail.

I also realized early on that hot money and credit expansion would spur an explosion of money losing unicorns, who would suck up all the oxygen in all the markets cannibalizing entire markets at a loss in order to get that Series E or F up-round. That one became apparent to me when I started seeing billboards for one of my largest competitors every 1/4 mile across the entire city of Toronto on my daily commute, and every other place else I ever travelled to in North America. I knew that they were losing about $300,000,000 a year at the time. They also had some pretty kick-ass Super Bowl commercials.

I only learned about Richard Cantillon and his early economic treatise a couple years ago and since then I’ve never been able to shut up about The Cantillon Effect, which is what all this describes and what I think is the single most divisive, corrupting and toxic dynamic shaping our world today.

Max Keiser recently coined the phrase “Cantillionaires”, and that’s an accurate demarcation line between the elites and everybody else. It isn’t “the 1%”, it isn’t white privilege, it isn’t capitalism or managers vs labour.

This helps the trend of ‘taking America private’ in a multi-trillion LBO by a few PE firms.

Before neo-feudalism can begin, the S&P must be delisted and controlled by a few cantillionaires.

Cloaking these PE firms in darkness will speed up the process of neo-feudalism https://t.co/xaIDsUQF4Y

— Max Keiser (@maxkeiser) July 17, 2020

It’s this:

When the Fed, or the ECB or the JCB or any other central bank prints money out of thin air, and then deploys that “liquidity” into the market, are you, or the firm you work for, among the first, second or third order recipients of that fresh injection of money? If so, then you’re a Cantillionaire.

And the rest of us? We’re losers. Remember this old Hugh McLeod ditty? It was priceless….

Let me correct it to depict the capital structure of the world.

An odd kind of reverse alchemy occurs as the newly created “money” flows downward toward the masses.

At the top we have the capstone class, the Cantillionaires, the superrich politicians and the Uber-rich financiers and conglomerators.

After this is the “The Sycophant Class”. In this layer are the spin doctors and support apparatus of the überclass of the Cantillionaires. In his book “The Coming Neo-Feudalism”, Joel Kotkin called them The Clerisy and described them as “the New Legitimizers”. Their job it is to hone the narratives that rationalize why this cap table makes sense for the losers below, as well run the actual infrastructure that perpetuates it.

As the newly created “money” flows down The Global Cap Table, it undergoes that inverse alchemy and the nature of the newly created money experiences a state transition.

The nature of the change is this: After it gets a few iterations out from the money spigot at the top, it stops boosting asset prices and starts raising the cost of living. At the top end of the funnel it makes everybody in proximity wealthier, and then down at ass end of the funnel, where the rabble resides, it makes it more expensive to stay alive.

That’s The Cantillon Effect and I’ve been searching for ways to explain it so more people would understand it for quite some time now. But lately, I came across a pretty stark manifestation of it that should, I hope, finally make this clear.

The epiphany occurred as I was reviewing the Federal Reserve disclosures listing the recipients of the SCCMF Program. The SCCMF is the Secondary Corporate Credit Facility to buy up corporate bonds in an effort to shore up the credit markets:

“The Federal Reserve established the Secondary Corporate Credit Facility (SMCCF) on March 23, 2020, to support credit to employers by providing liquidity to the market for outstanding corporate bonds.”

It later expanded the program to add junk bonds.

The SMCCF is supposed to be some mechanism to preserve jobs in the wake of the economic meltdown, but when you look at the companies whose bonds are being purchased, they don’t exactly look like they were in danger of going under throughout the course of 2020:

Berkshire Hathaway (three seperate entities), Cisco Systems, Exxon Mobile, Fox Corp, Halliburton, Intel, IBM.

All companies that are worth billions, Billions. With “B”s.  You can see a full list is here. 

Then what really got me was seeing Amazon, a company worth over One Trillion Dollars, a company whose business is up so much over 2020 that they had to hire 100,000 more people to keep up with demand, and the Fed is out there using a program justified as a job saver by buying Amazon bonds (some of which actually trade at a lower interest rate than US treasury debt was wrong, it’s narrower spreads – mjr) under the SMCCF?

AMAZON.COM INC Consumer Cyclical 023135BP0 0.400 06/03/2023 4,000,000 $3,994,878

The thing about Amazon that hit home for me, is that among other things, Amazon is also a domain registrar, and Amazon is a DNS provider, which means that Amazon is a direct competitor to my own business, easyDNS.

So not only am I competing, head-to-head, with literally the world’s biggest company, the Fed has to put their thumb on the scale by buying their fucking bonds?

But wait, there’s still more, as I perused the list I found other companies I have to compete with, directly, head to head:

MICROSOFT CORP Technology 594918BA1 2.375 02/12/2022 5,500,000 $5,678,039
MICROSOFT CORP Technology 594918BP8 1.550 08/08/2021 3,000,000 $3,040,837
MICROSOFT CORP Technology 594918BQ6 2.000 08/08/2023 5,000,000 $5,228,349
MICROSOFT CORP Technology 594918BW3 2.400 02/06/2022 3,000,000 $3,098,973
MICROSOFT CORP Technology 594918BX1 2.875 02/06/2024 2,000,000 $2,157,622

easyDNS competes with Microsoft’s Azure. The Fed is buying Microsoft’s bonds.

ORACLE CORP Technology 68389XBB0 2.500 05/15/2022 2,000,000 $2,066,967
ORACLE CORP Technology 68389XBK0 1.900 09/15/2021 8,000,000 $8,133,006
ORACLE CORP Technology 68389XBT1 2.500 04/01/2025 4,000,000 $4,275,958

Oracle owns Dynect, who easyDNS competes with directly again. The Fed is buying Oracle’s bonds.

And from the June 29th disclosure I saw that the Fed was buying Google’s bonds, and Google is also in the DNS and domain registration business, yet another head-to-head competitor.

It’s tough enough running a small business when you have to compete with an 800 lb gorilla in your space. Especially when there’s a half dozen of them now and since everybody else who has to compete with these companies (not a single one with a market cap under 100 billion dollars) doesn’t get propped up by a central bank, printing up money out of thin air, it puts all other companies at a clear competitive disadvantage.

Isn’t this a little bit like picking winners and losers?

One might point out that small businesses were eligible for Federal funds as well. They sure were, they were eligible for loans and although loans and bond issues live on the same side of the balance sheet, the resemblance ends there.

In the US, any PPP loan over 25K is full recourse, and anything over 200K requires a personal guarantee. It’s similar up here in Canada. It means the business owner has to collateralize the loans, most often with his or her principal residence, and they have to be able to demonstrate that their business has been materially impacted by the pandemic.

I doubt Jeff Bezos has to personally guarantee those Amazon bonds, and if the Fed had a similar requirement to demonstrate business impairment to qualify I don’t know how Amazon would be able to make that claim with a straight face having just hired those 100,000 additional workers just to keep up with increased demand.

This is another example of that inverse alchemy we see as the new money trickles down the Global Cap Table:

At the top, it props up non-recourse bond issues and buoys the corporations who issue them. And when those bonds come due they can probably just do what every corporate behemoth does and roll them over.

At the bottom, the small business owner has to pledge his house and his personal assets as collateral and then those loan payments get added straight onto the monthly nut.

Referring back to the Global Cap Table, above The Loser Line megacorps can externalize their bad outcomes and in many cases, literally lose money for a living. Everybody up there makes their money on financial events

Below the loser line reside all the small businesses. The ones every politician says “are the backbone of the economy!” yet they enact policies that make it harder for them to remain open and as we’re exploring here, cultivate policies that make it near impossible to compete.

If all this wasn’t bad enough, everybody knows where this is headed next, once this economic depression asserts itself over the current blow-off top in stocks: eventually the Fed will probably step into the equities markets and prop those up too. So not only is the Fed buying my largest direct competitors bonds now, down the road they’ll be buying up their shares.

…with money they pulled out of their ass.

Does it make a mockery so-called free markets when the smallest businesses have to deal with the vagaries competition while the largest ones get propped up with the full faith and credit of the central banks?

This isn’t capitalism. I used to call it “crapitalism” or you sometimes hear it called “crony capitalism”, but extending Max Keisers’ label of “Cantillionaires”, I finally know what this is and what to call it. What we have here folks, is your good ole fashioned, centrally planned Cantillionism.

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After the 9/11 terror attacks, when our privacies were permanently revoked, and we entered into “a war which would never end in our lifetimes”, Bush II proclaimed “They hate us because of our freedoms”.

Some critics thought that was an almost nonsensical statement to make, while the credulous took it at face value. It framed whoever perpetrated the attacks as some inhuman “other” that despised happiness itself. It was unthinkable anybody could have an actual foreign-policy derived reason for doing it, and anybody who suggested as much was usually hounded out of the public eye.

However I always thought that utterance did have a kernel of truth to it. If you looked at the United States as a global empire, and that the freedoms “they” hated were not actually the ones to assemble, or worship or to vote, as Bush intimated, but rather the ones where America acted unilaterally in its own interest observing American Exceptionalism as a type of infallible axiom, then Bush would have been closer to the substance of the matter.

Here was world hegemon who claimed the freedom to overthrow governments, the freedom to bomb or invade any country it pleased, the freedom to support brutal dictators, assassinate enemies, interfere in elections and basically do whatever it wanted. Seen in that light, then yes, the 9/11 attackers did hate our “freedoms”.

But from where do those “freedoms” derive? How did the US become so powerful? The recurring theme throughout a lot of my writing has been echoing some criminally obscure writers (such as Stepehen Zarlenga and Vincent LoCascio) who have documented in their works how whoever controls a society’s monetary system, controls the society.

On the world stage it follows that whoever controls the world reserve currency, effectively controls the world.

In this era that means that under the current monetary system where the USD is the world’s reserve currency, it’s the USA by and large that controls the global stage.

As long as the USD is the global reserve currency, the USA will enjoy “freedoms” that enable it to impose its own rules based order on the entire world.

And it is that structure that affords every single American,  a type of systemic, structural, unearned, privilege.

The most divisive privilege going is Dollar Privilege.

Dollar privilege is what enables nearly every single person in America to access a standard of living that for the majority is vastly beyond the means of their own productive or economic capability, and light years beyond what nearly half the world’s population has to maintain itself on.

It’s why zombie companies can borrow money at artificially low interest rates to buy back their own shares trading at all time highs, and why barstool prophets can follow the momo simply by plucking stock tickers out of scrabble bags.

$RTX comes out of the scrabble bag. Smush letters and buy it. Give it a try Ron, you might not bankrupt your clients. #DDTG pic.twitter.com/semLRi6yBF

— Dave Portnoy (@stoolpresidente) June 19, 2020

Dollar privilege is why almost half of US households can receive some form of subsidy from the government and still have flat screen TVs, refrigerators, stoves, mobile phones, internet and quite possibly, cars, while the bottom half of the global population lives on less than $2.50/day.

It’s why every single congressman and senator is a millionaire.

It’s why American’s for the most part don’t save. Why should they? When they can borrow money to finance their lifestyles, instead of working, investing and earning in order to fund their lifestyle, and when savings pay zero or negative rates anyway, what’s the point?

Dollar privilege subsidizes Silicon Valley and every money losing unicorn in it and every money losing service each one of those unicorns “provides” on every single money-losing transaction you do with them every day. Dollar privilege is why those same companies can successfully exit via IPO and why legions of Robinhooders can make money trading them.

Dollar privilege is what enables legions of petulant, empty-headed permachilds to run up student debt at over-priced universities to major in phantasmagorical non-topics.

Dollar privilege is the secret sauce that every Marxist and Democratic Socialist must possess before they can bemoan capitalism from their iPhones and MacBook Pros.

Dollar privilege is what every blue check journalist on Twitter gets paid with from their woke-and-broke media outlets.

All of that is privilege, all of those unearned advantages and perks, that entire, elevated standard of living is derived from being citizens of a country who gets to mint the world reserve currency out of thin air, as much as they want, in ever escalating amounts.

None of this is to deny that there is injustice and vestiges of bigotry and intolerance here in the West. Rather, this is all to point out that what enables us to tear ourselves apart over it from the comparative luxury of digital communications, well stocked refrigerators within modern-day housing is this dollar privilege, the institutional ability to print “value” out of thin air, that the rest of the world then uses to backstop their entire currency systems.

What has changed, why people are more sensitive to the consequences of privilege, is because the periphery of dollar privilege (the “Privilege Perimeter”) used to circumscribe the entire country, and we simply externalized the marginalization it caused overseas. The US military enforced the dollar supremacy globally and the rest of the world essentially traded their wealth and labour for US debt.

After the end of Bretton Woods, when Nixon closed the gold window (temporarily) in 1972 (it’s still closed), the Privilege Perimeter began an inexorable process of constricting.

It crossed a kind of Rubicon after the Dotcom crash, when the policy choice was to blow up a housing bubble, and then it entered the endgame after the 2008 GFC, when the banksters were bailed out.

None of the bailed-out financiers here at #Davos2016 who live in Greenwich & collect Lamborghinis can understand why US voters are unhappy.

— Rudy Havenstein goes brrrrr. (@RudyHavenstein) January 21, 2016

The result is that now, in the USA, the middle class is finding themselves for the first time outside  of the Privilege Perimeter. This is especially acute now that policy makers are literally picking economic winners and losers, with the winners usually being well connected,  albeit often insolvent zombies, and the losers being small businesses, independents, and anybody who works for one.

The Cantillon Effect, which I’ve talked about before, of newly created money benefiting those who are closest to the spigot, turns out to have a reciprocal effect of constricting the circle of beneficiaries over time. It’s like a black hole for economic value.

Eventually black holes collapse in on themselves

Once all the economic value has been leeched away from everybody outside the Privilege Perimeter, once all future prospects have been monetized in the here and now, the blackhole of financialization begins to collapse in on itself. It doesn’t feel like a financial crisis as much as it may present as civil unrest, internecine fighting amongst competing factions of elites and external brinksmanship reminiscent of early 1914 Europe.

It feels like that’s where we are today, in some weird quantum superposition between Maximum Pessimism and Irrational Exuberance. 

So to all of you who detest privilege and structural inequality, fear not. That era is coming to an end.

But I dare say that most of you don’t recognize the exact nature of the kind of privilege that is ending, and I think once you do understand the epochal change that is underway, you aren’t going to like it.

It means the vast majority of Americans are going to have to endure a massive reduction in their standard of living. At the same time, as long as “The Establishment” holds together, they will continue their breakaway trajectory of opulence, and wealth accumulation, plundering the last of the privilege to go around.

Eventually it will break, but it won’t be just, it won’t be fair, it won’t be inclusive or equitable.

It’ll just be ugly.

If you don’t want to get run over by this tectonic shift in history, then save money, buy gold, earn crypto, eliminate debts, invest in income producing businesses and assets, and sign up for Out Of The Cave.

 

“Few trials have been more ludicrous both as regarded the charges and the kind of evidence admitted. Convictions and impressions were solemnly listened to, real arguments accorded no weight whatsoever.

Brissot interrupted a witness by declaring that he had never uttered any such calumnies against Paris as were imputed to him.

‘But did your ever deny those calumnies?’ asked the president of the tribunal, as if that settled the question.”

— Ernest F. Henderson, Symbol and Satire in the French Revolution, 1922

There’s never been a more dangerous time to take issue with the mob. I thought we’d hit peak outrage sometime in 2019 and that it would taper off from there. I actually thought that by the time I’d put out my book, Unassailable, in January that I had missed the crescendo. But then coronavirus hit, and deplatformings were back with a vengeance and by April I thought it had gotten so bad I decided to make my book available for free in order to help heterodox voices get their messages out.

But I was remiss in not anticipating how much cancel-culture would ramp back up ahead of the 2020 election, fuelled by widespread angst over the lockdowns and then detonated by the murder of George Floyd. All hell is breaking loose and while there are much needed reforms occurring rapidly, at least amongst policing (mandatory body cam recordings banning of choke holds, a Senate bill to end no-knock warrants, pressure to end Qualified Immunity, and if we’re lucky, a final abolition of civil asset forfeiture), there is also a vast ideological overshoot which somehow reminds me of an intellectual analog of The Terrors phase of the French Revolution.

Emotions are running high, “people are pissed”, and the system itself appears to be in danger of breaking down. Unfortunately, the acceptable frames of discourse are now held to be obvious, and only moral reprobates would dare deviate from them.

Toxic virtue is what I define as an abrogation of the first principals of actual virtue, and a regression into a dumbed-down caricature of itself.

Virtue, is of course an ideal, to be cultivated by the enlightened leader and thoughtful citizen alike. Virtue is the beneficent cultivation of optimal character traits in oneself. In “The Conduct of Life”, Confucius stated

“To be able to practise five things everywhere under heaven constitutes perfect virtue: Gravity, magnanimity, sincerity, earnestness and kindness”.

Toxic virtue, or “virtue-mongering” or “weaponized virtue”, is devoid of these traits. It is the assertion that merely staking claim to the higher moral ground makes one virtuous, and that one’s own belief system is universal. From that vantage point, all non-conforming viewpoints are by definition illegitimate and immoral.

Objectively speaking, all disagreements are at their core a difference in priorities. How could anybody else possibly tell you what your priorities should be?

Any parent of a teenager knows, you can try to explain to them how they may get farther in life if they reordered their priorities, but trying to do so for them, or to them is an exercise in futility. How on earth would it work at scale with strangers from on high telling everybody else how to reorder their own priorities?

Accepting this reality, one then comes to grips that solving disagreements in a civil society is a matter of coming to an understanding of what each party’s priorities are, and why they are that way. The next step is then coming to an arrangement that serves all parties priorities.

To arrive at a place where these orthogonal priorities can co-exist requires dialogue and discourse. People have to be able to say what they have to say, and if they don’t, then it’s going to come out one way or another.

Virtue-mongers don’t allow this because in their mind there is only one set of priorities and one set of ideals: theirs. Yours sucks and it’s not even a thing.

In the past couple weeks careers have been destroyed for trying to articulate inconsistencies in certain narratives or attempting to report on events in a non-conforming way.

Which is why, I am noticing lately, that more people are beginning to circulate articles and videos that echo a sentiment that resonates with them, privately instead of posting them in the public squares like Facebook or on Twitter.

After all, if all it takes is one tweet to ruin your career, but you still feel like you have something you want to say, then the remedy is to say it behind closed doors to people who, even if they don’t agree with you, aren’t going to try to wreck your life for saying it.

One such reader sent me this article, on Robespierre, which is what got me thinking of the historical parallels to The Terrors of the French Revolution. After he posted it to Hackernews, it made the front page until it was flagged as inappropriate (the same thing has happened to the last few articles I’ve posted there).  It’s long but I read the entire thing this morning because as I said, I find the historical parallel between the ideological certainty of the Committee for Public Safety and the same surety of today’s “woke” movement.

“The source of Robespierre’s deepest convictions and of his certainty about them was his unquestioning commitment to an ideology he had largely derived from Rousseau, whom he regarded as “the tutor of the human race.” This ideology led him to believe that politics was an application of morality and that a good government was based on moral principles that ineluctably cause the interests of individuals to become indistinguishable from the general interest. Put another way, uncorrupted human beings intuitively recognize and act in the general interest. Any divergence between individual and general interest indicates the individual’s immorality and irrationality. If any individual fails to see that his true interests are the same as the general interest, he must be forced to act as if he did see it, for his own good.“

Another friend sent me a video this morning, and you know, I had it embedded in this post but then, and to my point, I thought better of it. Even more to my point, while the immigrant, person-of-colour didn’t express any allegiance to the “alt-right”, he called out certain never-Trumpers for being hypocrites inconsistent in their positions. Once I had it embedded here,  it turned out the instagram account that shared it was some Maga/Qanon thing (which I couldn’t see in my Facebook messenger) and realized I was flirting with disaster.

And finally, for our purposes there is this open letter purported to be from a professor at UC Berkeley who sent it anonymously, fearing reprisals should they attach their name to it.

His or her fears are not unfounded…

An anonymous letter has been circulating, purportedly written by a @UCBHistory professor. We have no evidence that this letter was written by a History faculty member. We condemn this letter: it goes against our values as a department and our commitment to equity and inclusion.

— UC Berkeley History (@UCBHistory) June 13, 2020

If the author of that letter is unmasked or outed, their career is over. Whoever they are, it took enormous courage to write it.

These are just a partial example of the whole: people are uneasy and generally disenfranchised, but they aren’t comfortable voicing their objections about it lest it impact their career and their livelihood.

We’re all so viscerally aware of the never-ending cancel-culture shit-list that most of us are afraid to speak our minds about what is going on or offer any kind of nuance or criticism or suggest alternatives. We may have something useful to add, but many of us won’t. We know that doing so could very well mean the end of a career or a business that we put our heart and soul into over years, decades, or even a lifetime.

We are all just one miscue away from being a trending hashtag. Frankly, I don’t even know if I’m going to post this and I’ve been working on it most of the weekend.

Vocal Minority vs Silent Majority

But there is a palpable uptick in people who used to post publicly in open forums like Facebook and Twitter, are now sending me links via private message, DM’s, email and closed, private groups. The trend now is to keep one’s opinions to themselves in the public sphere and to not share heterodox material on the public sections of the tech platforms any more.

They’re sharing them privately, and when I get the same piece from multiple people, I suspect that a lot of these are going viral, behind the scenes. This emergent phenomenon is the new incarnation of samizdat from the Soviet era. It’s digital samizdat, if you will.

I think this has been happening for awhile now and why the pollsters were so shocked when unthinkable outcomes such as Trump’s election victory or Brexit occurred.

People were shame-fatigued, so sick of being called racist, immoral, deplorable, misogynistic, privileged, intolerant or were accused of dog whistling every time they disputed the prevailing narrative. Fearing reprisals for not fully embracing toxic virtue-ism they simply toed the line of virtue-mongers in public, then turned around and walked into the voting booth and pulled the other lever.

The voting booth and the private communications channels are the last vestiges of individual autonomy and free expression and it is to here that the rational, moderate centrists, both left and right, have to beat a strategic retreat until The Virtue Terrors of the early 21st century burn themselves out.

Why this matters

I think I understand why there is so much rage in the world. I suspect it’s because the governing, one-party system is every bit as corrupt, and their enforcement arms in the police and military are every bit as brutal as the people who are protesting and revolting here and abroad assert it is. Qualified Immunity and Civil Asset Forfeiture here, War on Terror every place else, and Patriot Act, Five-Eyes Surveillance on everybody, and now Robespierre like enforcement of ideological purity, it all becomes overwhelming.

However, as I alluded in the last #AxisOfEasy podcast  I think there is a fundamental misunderstanding around the underpinnings of that corruption that defines the establishment. It is understandable why that confusion exists. There is pervasive injustice, and there is an imbalance in power and there is unimaginable wealth inequality. But redistributing wealth or power isn’t the primary issue.

Max Keiser totally nailed it when he said “Forget wealth redistribution, what we need to redistribute is risk”.

Risk asymmetry means a two-tier system. Rule makers, and rule followers.

Risk asymmetry is differentiated into those who can borrow billions of dollars in freshly printed currency at no cost, and those who pay 22% on their credit cards (Keiser calls this “interest rate apartheid”).

Risk asymmetry is when the bank fails, or some public corp that levered up to buy back its own shares fails, they get bailed out in the latter, and maybe even bailed-in, with your money, if the former. But when your small business fails, or your job gets eliminated, well tough titties, that’s capitalism.

Important point from Powell. What’s true at the micro (that business failure is an important part of capitalism) doesn’t apply to the macro (that mass business failure is good for capitalism)

— Joe Weisenthal (@TheStalwart) June 10, 2020

That is the class distinction of our age. That is the nature of privilege. And until that is widely understood, nothing will improve. Until that is understood, then all social justice efforts are doomed to be co-opted by those who directly benefit from that risk asymmetry and class distinction, or hijacked by new Robespierres, who will springboard this angst to their own, ideologically extreme ends.

Of course, this will never be widely understood unless discourse is permitted. When people do step up to sound heterodox views on current events it is important that they not be demonized and destroyed. Otherwise, to the back channels and the back alleys these impulses will go, and when they are pushed underground like that, they tend to mutate and then emerge in widely unanticipated ways. This is where things like 4chan come from.

When the Girondists were led up the scaffolds to the guillotine, one of them yelled at Robespierre “you will follow us up these steps!”.

He was eventually correct, and Robespierre did indeed lose his head. The French Revolution, ignited to overthrow a repressive caste of oligarchs, devolved into The Terrors and later gave rise to Napoleon, who would crown himself Emperor and plunge Europe into war, killing millions. It took about 10 years.

We’ll know when this phase is over today when a few of the shrillest, most radical, uncompromising gasbags of virtue-mongering are found to be offside on some byzantine moral criterion or in possession of some inexcusable form of privilege and devoured by their own minions in a crescendo of sanctimony.

But what it will lead to next is anybody’s guess. If we allow open discourse and free thought, perhaps we can avoid a similar outcome. If we don’t, maybe not.

In the meantime, the virtue-mongers should take heed:

If it’s unsafe, or career threatening to participate in public discourse, then the counter narratives will diffuse behind the scenes. Nobody is going to be aware of them until they boil over into real world consequences, at which point the guardians of the narratives will lament how unprecedented and surprising it was. They may then construct some intelligence insulting mythology to explain what has happened, typically involving racism and alt-right tropes, then attack and demonize anybody who dares call out their folly.

Rinse.

Lather.

Repeat.

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This is the second instalment of The Jackpot Chronicles: Four Possible Post-Coronavirus Scenarios.

Force Majeure means:

a chance occurrence or superior force that renders a contract unenforceable and frees all parties from their obligations under it.

We are frequently told that there exists some manner of “Social Contract” to which we are implicitly bound by virtue of being alive. This implied Social Contract confers legitimacy upon the institutions that order our world, the national governments, the central banks, the miltary and police. And by extension certain communication outlets and media are endowed with a status of official curators over the narratives around institutional power.

Under the Force Majeure Scenario, the first of four possible Coronavirus aftermaths posited in “Welcome to the Jackpot”, the overwhelming or superior force is not the pandemic itself, but rather the collapse of the debt supercycle, the monetary system that derives from it, and the structure of nation states that are burgeoned by it.

The last time we were here, when a systemic crisis has shaken the foundation of the social order, the policy response was favourable to one party of the social contract at the expense of the others.

The GFC, which I now call GFC 1.0 or GFC ‘08, saw the financialized class, those closest to the monetary spigots of the Central Banks enjoy accelerating prosperity as their asset values rose, whilst the rest of the population endured stagnation and a steadily increasing cost-of-living (which mainstream commentators refused to acknowledge as inflation).

The policy response from the last crisis has led us directly, in a straight line to this one. The only surprise being the exact nature of the catalyst which would pop the Everything Bubble, and perhaps the ferocity with which the air began to let out once it did.

The signs were certainly there that we were nearing some kind of archetypical “shoeshine boy”moment or phenomenon. Complacency in passive investing, extreme overabundance in the unicorn population, the fact that there exists (existed) an entire industry around arbitraging long term leases with short term rentals via AirBnB, there was a sense of Roaring 20’s around it all and all those vile contrarians were wondering “just how long can this go on?”

Under Force Majeure the public begins to understand that the people who populate institutions are just that, people. Despite specialized training perhaps, they are not endowed with any superhuman intellect or wisdom. Success within the matrix of the institutional elite comes from proxemics and adroitly navigating the system itself, not much more.

“An era can be considered over when its basic illusions have been exhausted”
— Arthur Miller

 

An era like this comes to an end when the public realizes that their betters aren’t intellectually superior but rather institutionally privileged. Now facing an existential crisis of their own making, they are completely out of touch with the public mind and out of their depth to deal with it.

Then The System Finally Comes Unglued. Now what?

The central banks and national governments have fired their bazookas in unison yet despite a typical relief rally in the form of a standard issue dead cat bounce, reality continues to insist on asserting itself. On a recent Jelly Donuts podcast, Grant Williams talks about forthcoming GDP numbers coming off 30% “truly apocalyptic”.

Yet, the incumbent institutional custodians will continue to deny reality and to discredit themselves, what will it look like then the populace comes to realize that the old social order, and the institutions that curate it are being deprecated?

Breaking: A new bull market has begun. The Dow has rallied more than 20% since hitting a low three days ago, ending the shortest bear market ever. https://t.co/06YS0XqWGP

— The Wall Street Journal (@WSJ) March 26, 2020

Ontario Premier Doug Ford recently advised citizens who couldn’t pay their looming rent bills at the first of the month to simply “not pay”. He later tried walking that back, but when this sentiment gets writ large, with governments printing money and sending out cheques, what happens when people and businesses simply decide not to pay their taxes either?

Can political leaders say, with a straight face, that citizens should stiff their landlords or mortgage lenders but not the State?

And if the State can simply print up money and send out cheques, why do we need taxes anyway? Have we arrived at full MMT?

All of the central bank and fiscal stimulus portends a secular shift from deflation to inflation and I don’t think very many people understand what that means.

It means a whole lot of broken clocks are gonna be right for once, but at a time it counts the most.

Now, every company that levered up on debt to buy back their own shares over the last 10 years wants a bailout. Grant Williams points out in Things That Make You Go Hmmm that the airline industry spent 47B on buybacks since 2010, they want a 50B bailout.

What the chart, right, doesn’t show is the total dollar amount spent by the airlines on buying back their own shares between 2010 and 2019.

That number is $47.3 billion (of which American Airlines – whose negative cumulative free cash flow between those dates was $7.9 bln – contributed $13 bln).

Even the private jet industry wants a bailout.

And what will public citizens get? Those whose businesses have been ordered to close, whose jobs have already been lost? They’ll get a check for $1,200, or a tax deferral until August. Bfd.

Charles Hugh Smith’s books speak a lot about this type of secular wane in institutional relevancy, which we discussed on our podcast once and it bears repeating here:

MJ: when I look at  Pathfinding [Our Destiny] like part seven where where we’re talking about what the way forward looks like, that it’s outside of the control of the of the establishment, that it’s outside of the system I get this sense that for society to flourish and adapt around this and evolve. I guess that’s the key word, we’re going do this around the institutionalized hierarchies.

They’re not going to get religion one day, we’re not going to elect the right candidate, we’re not going to have the right party gain power that’s suddenly going to say “I read this great book by Charles Hugh Smith and this is how we’re going to do it”.

It’s going to be something like institutionalized hierarchies will just lose more and more relevance as these new social and business and financial configurations start gaining more and more relevance.

CHS: That’s an excellent point and I think if anything I didn’t emphasize that enough. That really what we’re talking about is kind of like hacking the system in in the old time sense that a hack was a workaround. It wasn’t like you were breaking into the system to steal something, you’d created a workaround for a kludgy system that just didn’t work anymore.

And so I think you’re absolutely right, it’s going to be working around us and and Bitcoin is one example of how workarounds are manifesting and of course the status quo is going try to suppress those and/or co-opt them but what we’re really talking about is when systems fail at a systemic level you can’t reform them. You’re not going to make a policy tweak that’s going to fix higher education or the health care system. It just isn’t going work.

People are going to start working around that and they’re going be starting to pay cash for for medical care from pop up providers or remote physicians. Or there’s lots of different solutions to that in education. What I see the model that’s going to emerge whether people like it or not and is that students are going to start taking control of their own education and they’re going start organizing their own education.

They don’t need this bloated structure that charges them $70,000 a year and so that’s where technology, the internet and networking has really enabled a whole suite of solutions that basically bypass all the institutions that now hold the wealth and power, that have all this as you say institutionalized lethargy as as their their model.

It’s actually quite an exciting time but for those who are dependent on the system within these institutions it’s a very disturbing time

Under Force Majeure as the institutions become understood to be out of touch with both the causes and remedies to the immediate crisis, they begin to signal their own hypocrisy and irrelevance more intensely.

It will not be long before citizens will face the dilemma of continuing to observe the edicts of their governments, whose policies inexorably stripped them of their ability to weather any kind of economic speed bump. They will come to realize that despite what the government decrees, especially if that means keeping their businesses closed or their jobs on hold for much longer, they may be better off working around that.

That’s when myriad alternative economies and ecosystems will explode, black markets, grey markets, Local Exchange Currencies, private blockchains, invisible agoras.

As governments at all levels teeter on insolvency and their inability to control their own populace everywhere or to be in a position to guarantee security and order, I could envision neighbourhood watch groups morphing into localized militias. I would anticipate an explosion in private security and ex-military contractors.

Don’t be surprised to see Facebook resurrect their Libra, either under that monicker or some rebranded version as the large corporations, the ones that have revenues larger than most national GDPs begin to reassert some of their plans which may have been impeded earlier.

However it plays out, the key points to bear in mind are that:

• It would be a mistake to think of the next 20 years as a linear, albeit accelerated version of the previous 20 years (a la Chris Martenson)
• We are about to undergo a change in secularity from deflation to inflation (a la Grant Williams, Peter Schiff and many others)
• The incumbent institutions of the fiat currency era are about to be swept away, akin to the way the royal houses of Europe were after World War 1 (the last major “Force Majeure” transition period that comes to mind for me).

It will all be very reminiscent of Neal Stephenson’s “Snow Crash”

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