When Hope Dies

In markets, greed can quickly turn to fear, and fear can turn to greed. They are the most fickle of emotions, sending markets up one day and down the other.

However, greed and fear are not the only emotions reflected in the price of assets. Hope is also present, sometimes in such quantities that it dominates the price action. It can give a great deal of stability to what would otherwise be completely out of control.

The reason hope is such a stable emotion, despite being no more rational than greed, is that the opposite of hope is despair, a far more sinister emotion than fear. Despair leads to depression, suicide and death. It is a truly dangerous emotion.

While an over-priced asset governed by greed can quickly fall from its peek, assets governed by hope follow a much slower route. People will cling onto hope for a very long time before giving up. The journey is slow and painful with the occasional relief rally to stoke the hopes of the destitute.

This is what we have seen in Bitcoin since its peek in 2017. People are in Bitcoin, not so much out of greed as out of hope. They see it as their best chance of getting ahead in a world where opportunities are scarce. This is why Bitcoin still fetches a price way above its value as a medium of exchange. The greedy may have left, but the hopeful remain.

Hope will keep Bitcoin elevated for a long while yet, but reality kicks in at some point. When hope finally dies, there will be widespread depression and even suicides among the Bitcoin hopefuls. The final leg of Bitcoin's decline will be sharp, scary and very depressing.

The best thing to do in this situation is to sell and write it all off as a lesson learned. However, that may be too painful to do. A less painful approach is to sell some fraction, or simply stop buying. In any event, do not buy more. It is the ones that keep buying all the way down that ultimately succumb to depression and despair.

By George Frederic Watts and workshop - CgGv3RqPFUZk4A at Google Cultural Institute, zoom level maximum Tate Images (http://www.tate-images.com/results.asp?image=N01640&wwwflag=3&imagepos=1), Public Domain, Link

Gold Asteroid

There is allegedly an asteroid full of gold residing somewhere between Mars and Jupiter. If it was brought to Earth, it would make everyone a billionaire.

This, of course, ignores the fact that minerals in the ground, or in space, are not the same as minerals mined and refined. Space may be full of rare minerals, but that is of no value as long as it is impossible to get hold of. Likewise, enormous amounts of minerals remain in Earth's crust. None of it can be mined at a profit.

To talk about mineral reserves without also mentioning the cost of mining, transportation and refinement is plain stupid. The idea that the mere existence of minerals in space or deep in the crust of our planet has value is nonsense. It takes energy and capital to mine and refine minerals. It is only when that work has been done that those minerals can be added to our stock of resources.

As things stand, mining asteroids for minerals is so expensive that it will not be done, and this state of affairs is likely to remain for a very long time to come.

By NASA - http://nssdc.gsfc.nasa.gov/imgcat/html/object_page/nea_19970627_mos.html, Public Domain, Link

Unbacked Currencies

Unbacked currencies are creations of the devil. By this, I mean that they are designed to trick or coerce people into parting with what has value in favor of that which doesn't.

The devil is clever, deceitful and manipulative. To the casual observer, he comes across as a smart and trustworthy guy. However, it does not require all that much thinking to reveal him for who he really is. What prevents us from seeing what should have been obvious from the start is usually greed and intellectual laziness.

The fact that fiat currencies come with a large number of laws, requiring people to accept them, is an immediate red flag. How can such currencies be good for us if they have to be forced upon us? They are quite clearly the work of the devil, but laziness and greed have most people accepting fiat as the way things are, a necessity in a modern society.

Unbacked crypto is deceptive in a similar manner. It too is seen as modern, and therefore progressive. Furthermore, it purports to be the antithesis of government fiat, when in reality it is merely an extension of the same mindset. It too has no intrinsic use. Unbacked cryptos, like fiat, are numbers pretending to be real things of value.

What is particularly revealing about unbacked crypto is that it does not hold what it promises. Such currencies are not limited, safe or secret. Nor are they assets with a value that can be stored. They are clunky energy consuming tokens that imitate some of the features of gold.

This has led crypto enthusiasts to change their narrative at several occasions. Every time they are unmasked as charlatans, they change their story. When it became clear that Bitcoin was impossible to use efficiently in commerce, Bitcoin went from being a currency to an asset. When this asset suddenly dropped by 80% in price, it was labeled a "speculative" asset, great for traders.

Then they spun the latest story about Bitcoin, namely that institutional buyers are now coming in in droves. However, the latest price action has revealed that this too is a lie. If pension funds and central banks were lining up to buy this asset, how could it drop by more than 10 % in a matter of minutes? Clearly, no large institution was ready to pick up the Bitcoin tokens that suddenly appeared for sale.

By Eliphas Levi - Eliphas Levi, Public Domain, Link

How Bitcoin Affects Gold

Bitcoin was born during the financial crisis of 2008 in response to money printing by central banks. Its goal was to become something akin to electronic gold. Impossible to control, impossible to duplicate, and highly liquid.

As it turned out, Bitcoin was neither of the above. There are thousands of Bitcoin variants, of which a dozen or so are serious rivals to the original. Most Bitcoin is held in exchanges, making it easy to control and track, and Bitcoin transactions are slow and expensive.

Bitcoin never delivered on its original promise, yet here we are some ten years later with single tokens transacting above 10000 dollars. Despite its flaws it is widely regarded as the electronic equivalent of gold.

Some believe that the rise of Bitcoin put a damper on gold. With Bitcoin getting all the attention, gold remained subdued. Retail investors got sidetracked. Instead of buying physical gold coins and bars, they piled into the supposed safety and modernity of Bitcoin tokens.

While this may have delayed the breakout of gold by a few years, it is unlikely to have permanently damaged the future trajectory of the gold price. In fact, Bitcoin may turn out to be a good thing for gold. The reason for this is that when patient Bitcoin holders finally start selling their tokens, they are unlikely to want to hold their windfall exclusively in fiat currencies. Their rational for piling into Bitcoin was after all based on a distrust of central banks. Having held on to Bitcoin, and profited from this, they have become accustomed to the idea that fiat is bad.

While people who buy Bitcoin do so with fiat money, people who sell Bitcoin will quickly exchange their fiat for gold. As the number of transactions in Bitcoin increase, the demand for physical gold goes up. Gold is therefore likely to be positively influenced by Bitcoin in the future, regardless of which way Bitcoin goes from here.

By Alchemist-hp (talk) www.pse-mendelejew.de - Own work, CC BY-SA 3.0 de, Link

Inherent Instability of Financial Bubbles

The renowned investor and economist, Irving Fisher, famously declared that the stock market had reached "a permanently high plateau" only nine days before the great crash of 1929. His statement was made in regards to a topping off pattern that he mistakenly identified as stability.

What is particularly ironic about this is that the statement contained within itself the very needle that popped the financial bubble, and Irving Fisher should have realized this at the time he spoke. The reason for this is that there cannot be such a thing as a permanently high plateau in finance. If prices are high, they are per definition decoupled from underlying fundamentals. People are only holding onto such assets in the anticipation that they will go even higher. By declaring that prices no longer will go up, Irving Fisher was in effect calling the top. With no more gains to be expected, the rational thing to do was to sell.

Irving Fisher was a man that many people listened to. Speculators, with their leveraged bets on ever higher prices were suddenly in a rush to unwind their positions. They had to cover their debt. Prices were not going to go any higher, what then was the point in holding on to the assets? Without any fundamentals to support the price level, none of the speculators could afford to hang onto their investments. Dividend from their stock portfolios were nowhere close to covering the cost of their debt.

This, in short, explain why financial bubbles always pop. They never unwind gracefully because the fundamentals are incapable of sustaining such a process. Once speculators head for the exists, there is a rush to get out of positions. No one can afford to ride out the storm. Suddenly, everybody is a seller and there are no buyers. Only when prices are chap relative to the fundamentals, do the buyers reappear, and that price level is per definition very far down when prices are at "a high plateau."

Panic

By Unknown - w:Harper's Weekly available at Library of Congress, Public Domain, Link

Secret Transactions

As stated earlier, there is no way to make a transaction more private than through physical face to face interaction. Cash, silver or gold can be slipped into another person's hand without any third party involvement whatsoever.

This is not the case for electronic payments. All such transactions, including crypto transactions, involve some sort of ledger or third party where details are stored. In the case of Bitcoin, all transactions are recorded and kept for all eternity on a public ledger open for all to view and inspect. There is no secrecy at all unless the ownership of the wallets involved is kept secret. However, most wallets are opened and filled at exchanges where full name and identity is required.

This means that there is nothing secret about the typical Bitcoin transaction. The identities of the parties involved are fully available to anyone who cares to investigate. In fact, the Bitcoin ledger has already been used as evidence in court in order to get people convicted for various crimes, including tax evasion.

Only an idiot would use crypto to make secret transactions. Instead, there will be physical face to face transactions and credit. The parties involved will agree on a certain amount of credit and get together every now and again to clear any debt by physical means. This is how I will deal with my business partner in cases where transactions need to be secret. Whenever we feel that we've reached the limit of our credit, we get together to settle our accounts in physical payment.

This again raises the question about what crypto is really worth. Their only practical value is their ability to be used as a medium of exchange. However, the typical transactions is neither secret nor cheap, so how is this technology worth hundreds of billions of dollars?

Neither secret nor cheap

By John Schanlaub from Lafayette,IN, USA - Wallace Study-Telegraph, CC BY 2.0, Link

A Sponsored Facebook Post

Bitcoin topped 10,000 dollar today. I was informed of this milestone by a sponsored Facebook post, which made me think that the top must now be in for this latest rally in Bitcoin. The reason for this is that someone with a lot of Bitcoin clearly thought that now was an opportune moment to start passing Bitcoin tokens onto gullible investors. Why else would anyone pay Facebook for the opportunity to spread this news?

By Open Source - http://bitaddress.org, MIT, Link

Currency, Capital and Privacy

The introduction of the alternative currency Libra by Facebook has sparked renewed debate relating to currencies, capital and privacy. Critics have been quick to point out that the Libra lacks privacy. Every transaction will be registered by Facebook, who at any moment have the power to shut down individual accounts.

It is easy to imagine how this can evolve into a social credit system in which undesirables and delinquents can be denied access to their accounts. However, this does not mean that it will fail. As a means of electronic micro-payments, the Libra is likely to become the cheapest service provider. People will use it as a convenient and cheap alternative to credit cards and PayPal.

The privacy issue is only a problem when it comes to large cash holdings, but very few will store a significant portion of their savings in Libra. For the purpose of storing value, people buy assets such as real-estate, shares and gold.

The purpose of currency is to be a means of payment and a unit of account. For this to work, it requires short term price stability and convenience. Both are attributes of the Libra. Money, on the other hand is a form of capital. Money is a long term store of value that can also act as currency.

There is no competition between the Libra and gold. For privacy and as a store of value, gold is unrivaled, and as long as the Libra remains just one of many alternatives, there is no real danger associated with its lack of privacy. The Libra and its competitors, such as Visa and PayPal, will be used in electronic transactions whenever privacy is of little or no concern.

When privacy is an issue, nothing beats face to face transactions involving cash, gold or silver, so it is only in cases where there is a need for secret electronic transfers that Bitcoin and other crypto-currencies will be of practical use. The question then remains whether that segment of the transaction industry is correctly valued at its current level of hundreds of billions of dollars.

By Felix Nussbaum - http://www.felix-nussbaum.de, Public Domain, Link

Unique Personal Network

I met a fellow Norwegian here in Porto the other day. He lives here for similar reasons that I do, and it turns out that we have rather a lot in common.

One thing that we had both noted was the large difference in salaries between Portugal and Norway. An engineer in Norway is about three times as expensive as a comparable one in Portugal. We had therefore both played with the idea of starting some sort of outsourcing business.

An outsourcing business does not require much in investments. However, it does require more skills and insights than a typical individual can cope with on his own. Neither my friend nor I had therefore made any serious attempt at setting up such a business. But now that we are two, the task seems doable. Especially since my newfound friend is an economist, while I'm an engineer. Our skills and insights complement each other perfectly.

Being pretty much the only Norwegians in Porto, we are uniquely positioned to broker deals between engineering companies in Portugal and customers in Norway, and the idea is so simple that everyone gets it. Only two weeks into this project, my friend and I already have an option on a large number of engineers, as well as a number of clients ready to buy services.

This has the potential of becoming a great success, and it perfectly illustrates the value of having a unique personal network. On their own, the Norwegian clients would never have found the Portuguese engineers. However, now that the door has been opened, a whole lot of business that was previously impossible has suddenly become possible, and people are willing to pay for the opportunity to pass through that door.

By Pierre Rousseau - https://clevelandart.org/art/1942.2.12.a, CC0, Link

The IKEA Coin

With Facebook launching the Libra, a privately issued coin backed by a basket of currencies, my old IKEA coin idea, which I floated a few years back, seems a good deal less wacky. The basic idea of the IKEA coin was that IKEA could issue a private currency backed by its inventory. Any large retailer could do this, so IKEA serves simply as an example.

The beauty of this would be that such a coin would be redeemable in IKEA products. This would be an advantage over irredeemable currencies such as state issued fiat. Furthermore, if IKEA was to expand its product offerings to include gold coins, the IKEA coin would be redeemable in gold. It could even be made directly convertible to gold if IKEA was to stock up on sufficient gold coins. Rather than a floating price relative to gold, the IKEA coin could be made equivalent to it, effectively reintroducing the gold standard.

If IKEA does this correctly, prices in IKEA coin will be very stable regardless of any price inflation going on in the rest of the economy. IKEA can in this way avoid much of the pain associated with weak currencies. Prices can be set in IKEA coin, and payment in other currencies will be made based on whatever the exchange rate happens to be when the customer arrives at the check out.

Once IKEA coin proves itself trustworthy, employees can be paid in it, and other stores will accept it. It will start circulating in the wider economy. The IKEA coin can in this way replace the currency of entire nations.

Now that Facebook has announced that it will issue its own private currency, it seems likely that other companies will do the same. This may well lead to a market driven race for domination, meaning that only the best and most convenient coins will survive. My guess is that if this happens, retailers like IKEA stand to win, certainly if they include gold and silver coins in their inventory.

Gold Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link

Comparing Libra to Bitcoin

Facebook is about to launch a new payment system. Like Bitcoin, it will be based on electronic tokens and a network of distributed computers. However, the similarities pretty much end with this.

Here's a list of some major differences:

1. Bitcoin is not directly tied to fiat currencies. Libra is tied to a basket of government backed currencies.
2. Bitcoin transactions are final. Libra transactions can be rolled back.
3. The Bitcoin network is decentralized. The Libra network is centrally controlled.
4. Transactions in Bitcoin is slow. Transactions in Libra are fast.
5. Small transactions in Bitcoin are expensive. Small transactions in Libra are cheap.

From this it is clear that the Libra will be superior to Bitcoin as a means of exchange. Libra will also be stable enough for people to write contracts and set future prices based on it.

It appears that the Libra might have a great deal of success in many of the areas where Bitcoin has failed. Bitcoin is likely to remain a highly speculative asset with little to no practical use, while the Libra is going to see both adaption and use.

A literal basket of currencies

By Upupa4me - https://www.flickr.com/photos/meanderingwa/8490245097, CC BY-SA 2.0, Link

Outrage Trolls

My wife is a knitter. She loves all sorts of handicrafts, and she follows a number of handicraft groups on social media.

One would think that knitting and handicraft would be fairly free of politics. However, that is not the case. Lately, there's been a lot of talk about cultural appropriation and racism on these forums. Outrage trolls are out in force, demanding that people say and act in certain ways. They find racism and cultural appropriation everywhere, and they are very vocal about their disgust. No one is free from criticism. Especially if they have some visibility. Promotional material that does not contain the right mix of races, genders, body shapes and cultural sensitivity, are viciously attacked.

The result of this is that several highly profiled individuals have been forced to shut up. Unable to placate the trolls, they have retreated from the public space.

The knitting community is in other words just as infected by outrage trolls as every other area of society. There's nowhere to hide from them, and no one dares standing up to them for fear of repercussions.

By Johntex - Own work, CC BY 2.5, Link

Intelligent Design

Standard Darwinian evolution theory has random chance as the only driver of evolution. Organisms produce a random selection of offspring, and nature selects winners and losers by letting some grow to maturity, producing offspring themselves, while others die without offspring.

However, there is nothing in Darwin's thinking that precludes a layer of intelligence. If DNA is modified over time to produce offspring of various types, why not have DNA evolve some simple decision making mechanisms?

Once we realize that DNA may itself have a layer of intelligence, we see that evolution may in fact be intelligent without the need of a god to make this come true. To illustrate, we can consider some examples where a layer of intelligence may be involved in the production of offspring.

Let us say that one or both parents of an offspring suffered multiple starvation episodes in the past. Wouldn't this information be useful in the production process performed by the DNA? Offspring from such parents should be conservative, with a desire to save for rainy days. If the mother has but one child and that child is born at a late age, wouldn't it make sense for the DNA to respond by producing offspring that age slowly?

There are all sort of lived experiences that would aid in the production process if taken into account. This would greatly speed up the rate at which organisms can evolve, so it would be a great benefit to the DNA to develop this kind of sensitivity.

Taking this one step further, we can imagine a DNA in which a detailed historic record is kept. This or that ancestor survived starvation. Another ancestor was one of at least ten children. Yet another one got pregnant at a very advanced age. Etc. With this kind of record, DNA can mix and match available attributes so as to maximize the chance of survival.

Once we start seriously considering the alternatives to pure chance as the only driver of evolution, we see that all sorts of possibilities exist, and no god is needed for this to work.

Charles Darwin

By Charles_Darwin_seated.jpg: Henry Maull (1829–1914) and John Fox (1832–1907) (Maull & Fox) [2] derivative work: Beao - Charles_Darwin_seated.jpg, Public Domain, Link

Price is What You Pay; Value is What You Get

Warren Buffet once said that price is what you pay; value is what you get.

This embodies perfectly the difference between the two concepts. We must never confuse price for value. The fact that some marginal buyer is willing to give 8000 dollar for a Bitcoin does not make it worth this much. It merely means that there is a marginal buyer who thinks this is a good deal.

To understand value, we have to look at what something is. We have to understand its qualities. Bitcoin is a token that gives access to the Bitcoin network. There are 21 million Bitcoins, meaning that the Bitcoin network is currently priced at about 160 billion dollars. But is the network really worth this much? I don't think so.

Gold, on the other hand, is a metal. It can be fashioned into jewelry. A gold ring containing 3 grams of gold will fetch a price upwards of 120 dollar. Is this a reasonable price? I personally think so. Others may disagree. However, the point here is not to sell Bitcoin or gold but to illustrate how value is determined.

The trick to investing is to judge value relative to price. When prices are low relative to what something is worth, it's time to buy. When prices are high relative to what something is worth, it's time to sell.

Warren Buffett

By Mark Hirschey - Work of Mark Hirschey, CC BY-SA 2.0, Link

I Told You So

Talk is cheap. Being able to say "I told you so" means nothing unless there's some skin in the game.

An excellent example of this is those who now claim that the Midwest floods this spring are due to man-made global warming. If they are sincere and truly believing what they are preaching, every one of them would have taken steps to mitigate the problems they see coming. They would have put aside some savings for the express purpose of getting through the rainy day. However, very few have taken any precautions. All they have done is talk, talk, talk...

This tells us that their worries have been greatly exaggerated. They have not really believed any of it.

On the other hand, there are people like myself who act according to what we see. I see the troubles in the Midwest as affirmation of a grand solar minimum. There are some dark clouds on the horizon, and I have taken the precaution of getting my ship to shore. I have sold what I do not need, and I've put much of the proceeds into gold as a hedge against inflation, social unrest and war.

Midwest flood 2019

By U.S. Air Force photo by TSgt. Rachelle Blake - https://www.offutt.af.mil/News/Photos/igphoto/2002102304/, Public Domain, Link

Tokens and Networks

Two years have now passed since the libertarian author and Bitcoin enthusiast, Jeffrey Tucker, pointed out the true value of Bitcoin. His argument was that Bitcoin derives it value from the network it resides on. Bitcoin tokens give access to the Bitcoin network. The tokens can therefore be seen as a special kind of network ownership that can be transferred from one person to another.

This is in my mind the correct view, and I have used it in my own reasoning ever since. However, this does not mean that I share Tucker's enthusiasm. On the contrary, once Bitcoin reached 7500 dollars, I felt confident that it had become vastly overpriced. There was no reason to believe that the Bitcoin network was worth tens of billions of dollars.

Since then, it has become increasingly clear that the Bitcoin network is both slow and inefficient. Furthermore, there's the unresolved issue of time decay. It's unclear how the network will survive once the miners no longer turn a profit on their activities. Unless resolved, the network will decay, dragging the value of Bitcoin down with it. Yet Bitcoin is again trading above 7500.

Jeffrey Tucker

By Gage Skidmore, CC BY-SA 3.0, Link

Counter-Party Risk for Bitcoin

One of the original selling points for Bitcoin was that it had no counter-party risk. Bitcoins were held in private wallets, and exchange would happen directly between wallets. No third party would be involved. However, most people currently holding Bitcoin have at least some portion of this residing on an exchange. Instead of trading directly with other Bitcoin holders, exchange is made via a broker.

This introduces counter-party risk. There has to be trust in the exchange, that it is both honest and safe against hackers. Unfortunately, this is not always justified. Loss of Bitcoin due to dishonest or unsafe exchanges runs in the millions of dollars.

The way to mitigate this problem is to keep a majority of ones Bitcoin savings on a private wallet, or in cold storage.

However, this does not remove all counter-party risk. There is one counter-party that will for ever be of vital importance for the value of all Bitcoin, namely the network. Without the Bitcoin network, Bitcoin is worthless. The reason for this is that Bitcoin has no use outside the network. It can neither be turned into jewelry nor consumed. It is merely a token, and its value is derived entirely from the fact that it gives access to the network.

As long as the Bitcoin network expands, with new users coming online, there is potential for price appreciation. However, once the network ceases to grow, the game is up, because the network is a constant drain on resources. It must be perpetually maintained and fed in order to exist. With no revenues coming in from outside the network, Bitcoin owners must pay to keep the network alive.

The problem here is that if third party owners of Bitcoin refuse to pay, or leave the network, things unravel. Yet, this will eventually happen, because very few will be prepared to pay for the cost of keeping the network alive through any prolonged period of price stagnation. People will leave the network, and once this starts to happen, there is nothing to stop the process from accelerating.

The network binds everybody together, making everybody dependent on everybody else, and herein lies the true counter-party risk associated with Bitcoin. It does not matter that Bitcoin can be safely stored away in a private wallet or cold storage. If the network deteriorates, the value of Bitcoin will deteriorate. Without the option of turning Bitcoin into jewelry or consumables, its value will go to zero the moment the network deteriorates to a point where Bitcoin no longer functions properly.

Network

By The Opte Project - Originally from the English Wikipedia; description page is/was here., CC BY 2.5, Link

Why Bitcoin is Doomed

When it comes to the ravages of time and the ultimate destruction of all things, the only distinction is that some things decay faster than other things. Some things decay so slowly that we can ignore the process altogether, while other things decay so quickly that they are almost immediately rendered worthless unless resources are employed to keep the deterioration at bay.

Gold is an example of something that decays so slowly that it can be completely ignored. A fish, on the other hand, will decay in a matter of hours unless it is put into a freezer. Yet even a fish is better than Bitcoin in this respect, because Bitcoin will decay in a matter of milliseconds if electricity is turned off. Furthermore, the computers on which Bitcoin depend are themselves in constant need of maintenance, repair and replacement. The life span of a typical computer is no more than ten years.

This adds up to a considerable cost that has to be shouldered by the Bitcoin community. It is therefore incorrect to label Bitcoin a store of value. It is a consumer of resources in much the same way that a fish is a consumer of resources as long as it remains unsold. However, unlike a fish, Bitcoin will never itself be consumed. It is a perpetual drain with no ultimate purpose.

While this can go on for a long time, it will not go on for ever. The constant diversion of resources from consumption to mere preservation is no way to live a life. People will give up on Bitcoin in favor of moneys that do not require energy to keep alive.

By Marco Krohn - Own work, CC BY-SA 4.0, Link

The Ravages of Time

Nidhogg is one of the great monsters of Norse mythology. It is a dragon that relentlessly gnaws at the root of the world ash, Ygdrasil. With Ygdrasil representing order and harmony, it is clear that Nidhogg represents chaos and the ultimate destruction of all things. Nidhogg is the embodiment of what we refer to as the ravages of time, and the wisdom embodied in this is that all things decay. Without repairs they fall apart.

One way of hiding this relentless force of nature is to create a more permanent abstraction in which we can deal. Instead of thinking of companies in terms of machines, labor and infrastructure, we think of them as shares on a stock exchange. Instead of thinking of Bitcoin as energy consuming bits of data residing on computer racks, we think of them as neat little abstractions. However, none of this changes the fact that the underlying assets are decaying and constantly in need of repair. It merely makes it less evident.

It would be a mistake to think of assets without any regard to this decay. Yet, this mistake is frequently made. When calculating our profits on an investment, monetary inflation is often overlooked. So are repairs, fees and taxes. For instance, when I sold my house in Norway in 2017, I could have made the claim that it had appreciated by a staggering 150% over the 12 year period that I owned it. However, when factoring in inflation, repair, fees and taxes, the actual appreciation was more like zero.

Of all the assets we can own, only precious metals undergo so little decay that it can be ignored, and it is for this reason that gold should be used as the yardstick of success when it comes to investments. It is only when we manage to beat gold that we can say that our efforts and risk taking have paid off.

In this respect, it's interesting to note that the stock market has under-performed gold so far this century. The house I sold in Norway came in equal to gold, only if I ignore repairs, taxes and fees. Had I not had the pleasure of living in the house, it would have been a loss. So far this century, it appears that Nidhogg is winning. Most things are running at a loss.

Public Domain, Link

Gold Suppression

There is a popular conspiracy theory related to gold, that its price is systematically manipulated lower in order to mask inherent weaknesses in our current financial system. This manipulation takes on three forms:

1. There is direct intervention in the gold market
2. There is the suppression of positive news related to gold
3. Disincentives keep people from buying physical gold

This is not some crazy over the top idea. Governments sell and buy gold, and there is a definite tendency to portray gold as somehow antiquated and quaint in mainstream media.

As of late, financial papers have replaced their gold ticker with a Bitcoin ticker, which is odd because Bitcoin is a true feather weight compared to gold. While the gold market is bigger than all the companies traded in the S&P, Bitcoin is comparable to a single company in that same index.

Another global trend is the shutting down of safety deposit boxes. Banks are contacting their customers, telling them to take their valuables home. Some may react to this by selling their gold. Others may be dissuaded from buying physical gold, choosing the apparent safety of paper contracts over the apparent risk associated with physical ownership.

The overall effect of all this has no doubt led to lower prices than would otherwise have been expected. Physical gold is made invisible, and as the saying goes: what's out of sight is also out of mind.

However, there is no good alternative to physical gold. A paper contract is merely a promise that can be defaulted on. Its price can easily be manipulated lower through naked shorts. Having a contract is not the same thing as having the thing itself.

My personal take on this is that it doesn't matter, certainly not at present. The reason for this is that the price of gold is likely to be close to where it cannot be suppressed farther down. Daily price movements are therefore similar to what they would otherwise be, only at a lower level. In this perspective, price suppression is actually to the benefit of the investor. The price is artificially low. There is therefore tremendous upside potential in case of systemic collapse, while at the same time very little downward risk due to the fact that the downward potential is already taken out.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link

Bitcoin is Heavier than Gold

It may sound strange at first, but an argument can be made that Bitcoin is heavier than gold. This is because Bitcoin requires computer equipment and physical space in order to exist.

It follows from this that an honest comparison between Bitcoin and gold must include the equipment required to keep Bitcoin alive, and when such a comparison is made, we get that Bitcoin is both heavier and more voluminous than gold.

Furthermore, the equipment required to validate the existence of Bitcoin has to be up and running. There is a continuous drain of energy associated with the very existence of Bitcoin.

Compared to gold, Bitcoin is big, clunky and demanding of energy.

Bitcoin validation and processing units

By Marco Krohn - Own work, CC BY-SA 4.0, Link

Origin of Prevailing Winds

Conventional theory on prevailing winds has terrestrial heating from solar radiation as the main driver. Secondly, we have Earth's rotation as an additional engine. However, this cannot explain why winds high up in our atmosphere are both stronger and more orderly than they are closer to the surface of our planet.

The way things work in fluid dynamics is that the source of a movement is both the strongest and most orderly. This decays as we get farther away from the source, leading to turbulence and a weakening of the overall strength.

It follows that only local weather phenomena, relatively close to the surface of our planet can be attributed to solar radiation. Prevailing winds, higher up, must be due to something else because turbulent and relatively weak winds at the surface cannot generate strong and orderly winds higher up.

Furthermore, Earth's rotation cannot generate strong winds on its own. It must be coupled with something above or below. Something must connect onto the atmosphere to produce the prevailing winds. Additionally, we have the fact that winds close to the poles go west to east, while they go east to west closer to the equator. If Earth's rotation is a major factor, prevailing winds should go in one direction only.

It appears then that the source of prevailing winds cannot be Earth's surface. On the contrary, it must be external to Earth. A prime candidate for this would be the Birkeland currents connecting Earth to the Sun, visible as auroras at the poles of our planets. If the auroras are but a small fraction of the overall currents, and these currents connect to the atmosphere, then we would have strong orderly winds high up and weaker, more chaotic winds closer to Earth's surface.

The fact that such currents consist of counter rotating layers also explain why prevailing winds go in a different direction at the poles, relative to the equator. If the current rotates west to east close to the poles and east to west farther away, prevailing winds will do the same, as explained by Donald Scott in his latest video.

Prevailing winds on Earth

By KVDP - Own work, Public Domain, Link

Solar Cycles

Planets move around the Sun like clockwork. The exact position of planets can be worked out for thousand of years. When it comes to predictability, there's nothing quite like the planets and their relative position. It is therefore natural to assume that anything that happens with clockwork precision in our solar system has some relation to this.

Solar cycles which repeat every 11 years, and magnetic reversals on the Sun which follow a 22 year cycle, are both examples of predictable events that would naturally be ascribed to planetary positions. However, this idea has been largely rejected due to the fact that planets are very small relative to the Sun. The dominant idea has therefore been that the Sun is its own clock. Solar cycles are not due to the position of planets, but something coming from the Sun itself.

Yet, it cannot be completely ignored that there are plenty of 11 year cycles to be found in the way our planets move around the Sun. For instance, Earth, Venus, and Jupiter align every 11.07 years, coinciding with solar minimums.

There is therefore a growing consensus that the Sun's energy output is somehow modulated by its planets. Tidal forces are suggested as a mechanism for this. But this brings back the problem of relative size. The tidal forces due to planets are minuscule. It seems inconceivable that something so insignificant can have an impact on the Sun.

However, once we consider the possibility that our Sun is an electric component in the universe, we can model the entire solar system as a grand electric circuits, with electric resistance and capacitance varying in harmony with relative distances between planets. Certain configurations will draw current away from the Sun, while other configurations will focus more current onto the Sun.

The fact that solar cycles act in harmony with planetary positions can therefore be seen as supporting evidence for the idea that our Sun is an electric component in an electric universe.

The current prediction for Sunspot Cycle 24

By David Hathaway, NASA, Marshall Space Flight Center – http://solarscience.msfc.nasa.gov/predict.shtml, Public Domain, https://commons.wikimedia.org/w/index.php?curid=28557779