Sellers and Buyers

This article about the latest pullback in the price of Bitcoin makes it sound like Bitcoin is some kind of epic battle ground where superhuman forces slog it out for dominance. There are institutional buyers, super-rich whales, and Bitcoin miners. Everybody but the miners are buyers. Reading between the lines, we're supposed to conclude that institutions and whales are bigger and stronger than miners, and that the battle will be won by the buyers, sending the price of Bitcoin to new highs. However, the article reveals a truth that I pointed out back in 2017. Bitcoin requires energy for its mere existence. Miners aren't selling Bitcoin for no good reasons. They are sellers because they have to pay the bills.

The fatal flaw of Bitcoin is its dependence on energy. But the cost of this isn't carried equally within the Bitcoin community. The miners are stuck with bills while Bitcoin investors can hold Bitcoin virtually free of charge. It's no surprise then that it's the miners that are driving the price down. Energy is getting more expensive. They have to sell for millions of dollars every month just to stay in business.

One might argue that this need to sell Bitcoin is no different from gold miners needing to sell gold in order to stay in business. But this is a false equivalence. Bitcoin miners double as transaction enablers. Without Bitcoin miners, the network goes down and Bitcoin becomes worthless. This is not the case with gold. If gold miners go belly up, gold will not only remain valuable, it's likely to go up in price.

Bitcoin is completely dependent on its network, and this must be paid for by people who have two options only. They can sell Bitcoin or they can hike transaction costs. But transaction costs would have to go up a lot in order to pay the bills, so much so that it would crush the attractiveness of Bitcoin as an investment. Furthermore, jacking up transaction costs by a meaningful amount might stop so many people from transacting in Bitcoin that the miners end up no better off.

For Bitcoin to remain up and running, miners have to sell Bitcoin. Miners constitute in this way a permanent pool of sellers. However, Bitcoin is not used for anything outside of speculation. There's no industry that require it for its operations. Bitcoin has a permanent pool of sellers, with no corresponding pool of buyers. Bitcoin can go bid-less, in which case its price goes to zero.

This is in stark contrast to gold which has a permanent pool of buyers in industries ranging from jewellery to high tech medical equipment and computers. But there's no guaranteed pool of sellers. If gold miners go belly up, there will be no guaranteed supply. Gold has a permanent pool of buyers, with no guaranteed pool of sellers. Gold can go offer-less, in which case its price goes to infinity.

Cryptocurrency mining farm

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

Real or Imagined, it's Here to Stay

My great grandfather Harald died at a relatively young age of what started out as nothing but a sniffle and a cough. He was fit and strong. He never caught a cold. He had no medical condition that could explain it, yet he died. I remember my grandmother talking about it regularly. It was such a mystery. But that's how life is. Suddenly and unexpectedly something happens and somebody dies, very much to everybody's surprise.

These things are rare, but they happen, and until recently nobody made a big deal out of them. However, talking to my twin brother on the phone the other day, he could tell me that the current plague is very dangerous indeed because he himself knows a guy who died from it. This guy was not even sixty years old, had no medical condition, and was in good shape, yet he died. To my astonishment, my brother took this as proof confirming the hype.

My wife's aunt Augusta is sometimes mentioned in a similar manner by her family here in Portugal. The fact that she was morbidly obese and would have died of pretty much any severe cold doesn't matter. She died from the plague. That's the verdict, and hence, the plague is super dangerous.

We're not all coming to this conclusion, but a surprisingly large number of people are reacting to incidents like these as if they are more meaningful than the statistics that show the plague to be nothing more than a severe cold. Opinion on this matter is clearly driven more by emotion than intellect. Even intelligent people are falling for the propaganda. As a result, rationally inclined people are driven out of all discourse. Emotionally driven idiots are taking over, and it looks to me like this state of affairs is likely to remain for a long time to come.

Only when the consequences of all this nonsense is clear for all to see, and felt intensely by a clear majority of the population, is there any chance of a radical change back to how things used to be a year ago. The reason for this being the great comforts that can be had from the imagined struggle against the plague. The collective fight against this imagined danger has a religious fever to it. There's passion and suffering, all imagined, and all greatly enjoyed by those engaging wholeheartedly in it. The plague is the ultimate excuse for failure and suffering. It gives rationale to what is otherwise difficult to explain. As an example of this, I can mention my wife's nephew who's positively revelling in his own misery.

Life has not been kind to my nephew. His mother died from cancer a few months back, he lost his job, and his girlfriend left him. I don't know much about him as a person, but I think he's a bit of a loner. He's a little too shy for his own good. The situation is complex and not very pretty. The plague is therefore convenient in that it settles things without much need for analysis. Just about everything can be blamed on the plague. His life isn't a mess because of subtle and complex mechanisms within his psyche, it's a mess due to this overwhelming external force that threatens to crush us all. But the problem with this kind of thinking is that it very much requires us to believe our own delusions. As a consequence, our nephew has become completely paranoid and obsessed. He refuses to take off his mask, even in private.

My wife and I have invited our nephew over for an informal talk about the state of the world and how we plan to navigate through the current storm, and this is how I first became aware of his obsession. In his messages, he's clearly drawn to the idea of a frank talk, but he frets about it too. In his mind, he's concerned about our health. He doesn't want to infect us. But in reality, I'm sure it's his own delusion that he's afraid to loose. He knows in the back of his mind that he can only get out of his difficult situation by confronting the complexities of his life in an open and frank manner, and he's very much reluctant to do so.

In my latest message to him, I told him quite honestly that I don't think the plague is going away anytime soon. It's here to stay, and therefore something to accept and live with, just like any other inconvenience and danger in life. Predictably, our nephew has not responded to this latest bit of frankness from his uncle, because it exposes the lie that he lives. Truth is that if the plague is here to stay, we might as well get on with our lives. He has no excuse for his paranoid hunkering down. Only if the plague can somehow be mitigated by the lockdown and mask wearing does it make any sense to stay inactive at home. Yet the news, that I'm sure he follows closely, indicate that we're likely to see this plague come and go for decades to come. Is he really going to wear a mask for the rest of his life?

While I hope otherwise, I suspect our nephew will remain in hiding as long as it's possible for him to somehow glean a living from welfare programs of various kinds. Only a complete meltdown of the economy will lure him out in daylight in search of work, and he is far from the only one thinking like this. From what I can gather, a clear majority of the population has fully embraced the new religion of lockdowns, mask wearing and social control.

The mask of the beast

Subversive Gifts

I was invited into a local gift-economy group on Facebook the other day. It was suggested to me by a neighbour up the road, and I figured I might as well join. Checking out their about page, it was clear that this group is a strict gift giving group. No barter and no credit is allowed. Gifts have to be given without any expectation of any return favour, which limits its economic value to only that which can be given away without pain.

I can't think of an awful lot of stuff that can be given away in this way, but there are a few things that fit this bill. There's good quality stuff that can no longer be used by, such as children's clothes, miss-purchases, and tools or kitchenware that is no longer in use. Also, any kind of stuff that serves as personal promotion, be it product samples, gimmicks or books. Finally, there's surplus food that must either be given away or thrown away.

Of all these things, the only items worth giving away to strangers were in my case two paper copies of a book I helped author. This fits into the personal promotion category. My work on gravity is mentioned in the book together with some of my views on astronomy and geology. The two copies I received from Andrew Johnson were from the start meant to be given away. However, the book is such a deviation from orthodox thinking related to Earth and gravity that I could not think of anyone to give it to. The paper copies ended up in my bookshelf where they have been collecting dust for more than a year. But that has now changed.

The response to my offer to give away two copies of this particular book was immediate, and two individuals are soon coming over, each to get their own copy. Part of the reason for the quick response may be the fact that this book has done rather well. It has good reviews. As a fringe science book, it's quite a hit, and I think I know why.

Fringe views are often associated with politics. This is especially true for Andrew Johnson who has unorthodox views on everything from 9/11 to the climate. This means that his books are only read by those who already believe in his conclusions. Very few people read this kind of books for the sheer enjoyment of the alternative view. However, in the case of gravity and geology there's no obvious political message attached. People can read the book for themselves, follow Johnson's logic and check the evidence for themselves, without ever having to deal with a voice in the back of their minds that either agrees or disagrees purely on principle. But paradoxically, this very fact makes the book all the more subversive.

Andrew Johnson is very thorough, has a great story telling voice and a logical mind. He's nothing like the stereotypic conspiracy theorist presented in the media. Furthermore, the evidence in support of a hollow and expanding Earth are numerous and compelling. The reader cannot avoid thinking that there might be some truth to this alternative view, and if this is the case for gravity and geology, why not other things as well?

The book is an eye-opener. It reveals the fact that much that we are taught as facts are mere opinions, some of which are demonstrably false. We know that gravity cannot pull matter together to form stars and planets. We know that dinosaurs couldn't roam the Earth under today's gravity, and we know that continents are much older than sea-beds. The list of facts that are under-communicated and contrary to dogma is surprisingly long. Once this is realized by readers, other more controversial views may also find a hearing, and therein lies the subversive power of this book.

Tin foil hat

By Rory112233 - Own work, CC BY-SA 4.0, Link

The Great Reset

The great reset is an idea much touted by the media and their political and economic backers. However, it's also shrouded in a lot of nonsense. It's not immediately clear what's at stake. A bit of clear thinking is required to sort the facts from the hype.

To get a meaningful insight into what's going on, we must remember that the elites in government and corporations view the general population as cattle to be controlled. They also think very highly of themselves. They believe that their view of the world is superior to that of their subjects. When they say things like "you'll own nothing and you'll be happy", they believe this to be so. Furthermore, they believe it to be inevitable. Not only is their vision something to be applauded, it's also destiny. In their delusional view of things, only evil operates outside their control. They are the benevolent gods that will set humanity free under their watchful eye.

This delusion makes them blind to the fact that they cannot possibly know anything close to what they think they know. They are also profoundly incapable of seeing things from more than one perspective. They confuse self interest for benevolence. They find it extremely hard to comprehend the fact that what's in their personal interests are not necessarily in the best interest of everyone else, especially when they are constantly surrounded by people who live under this same delusion, as is the case at the very highest level of this hierarchy.

I know this to be true because I've been at times on the inside of this sort of circle. Everyone feels both important and benevolent while it should be quite obvious that the only thing everyone in the room cares about is the money to be had from their political meddling. They hold self congratulating speeches. They remind everyone of their importance and benevolence. Everybody strokes everybody else's backs and everyone goes home happy and convinced that the money they just made is due to benevolence rather than grift.

The great reset is a plan to have the entire world controlled by this kind of unelected individuals, and James Rickards makes an excellent job of laying the plan out in this article. However, apart from advocating owning gold and silver, he doesn't make any suggestions as to what should be done to avoid it, so I'll add a few ideas of my own.

First off, we mustn't forget that moves towards centralized governance is hardy a new thing, and it has never worked. The tower of Babel is the archetypical example of this, and history have plenty of examples. Every time the elite push for centralization, things fall apart. Their projects never complete, and there are good reasons as to why this is so. The foremost of these is the fact that the elite is delusional. They don't know half as much as they think they do. They may be good at power games, but they don't know how to run a factory or a farm.

As an example, we can imagine a world where the elite has managed to capture control of all manufacturing and all farming. However, none of these people are farmers or factory foremen, and even if they were, they wouldn't be able to keep an eye on all their factories and farmland. For this, they must rely on agents, and herein lies the paradox in their thinking. They fail to recognize the distinction between formal ownership and control.

Bill Gates is currently the biggest land owner in the US, but he's no farmer. His farms are managed by agents, and these agents will tend to put their own interests above those of Gates. The more remote the farm is from Gates' watchful eye, the more likely it is that things are done more to the liking of the agent than to the benefit of Gates. It's the agents that control the farms. Gates is merely the formal owner.

Bill Gates' only means of control over his farms is through audits, also done by agents. But the auditors, like the farmers, work primarily for themselves. They are not as reliable as direct ownership would be. Furthermore, they don't know every little thing going on at the farm. They audit the books, but if the farmer is doing business on the side, there's no way of telling that from the books alone. The farms are effectively in the hands of agents, operating primarily in their own interest.

The agents arrange things in such a way that they benefit themselves, as well as family and friends. This, rather than centralized control, becomes the default configuration of a fully centralized society. A myriad of small family-centred enterprises spring up, first at the fringes, and subsequently in the heart of the system as it crumbles under its impossible design.

Living relatively remotely from global centres of commerce and politics is therefore an additional step that we can take in preparation for the coming collapse. A small town with an independent minded citizenry is ideal. The more accustomed people are to doing business outside of the system, the better.

I live in Porto which has this kind of culture. Short supply lines from surrounding farmland and factories makes it relatively easy to strike off book deals. In the event of a future ban on cash, gold and silver coins will no doubt be accepted. It's not for nothing that James Rickards urges us to own some physical gold and silver.

Tower of Babel

By Pieter Bruegel the Elder - Levels adjusted from File:Pieter_Bruegel_the_Elder_-_The_Tower_of_Babel_(Vienna)_-_Google_Art_Project.jpg, originally from Google Art Project., Public Domain, Link

A Perfect Cup of Tea

Every now and again, I find myself obsessing about things to the point of making myself nervous or depressed. One of my vices in this respect is the price action in Bitcoin, the stock market and gold. I follow these things closely for no good reasons at all, and it ends up affecting my mood. I hate seeing things move against me, even if only temporarily, and I take too much pleasure in seeing things move to my advantage.

Part of my problem may be my early retirement. I got a lot of time on my hands, and it's tempting to spend it online. However, I obsessed about things even before I retired. My obsessions are not entirely a function of available time. It's more a matter of mind-set. In either event, it's a terrible waste of time to roam the web. There really isn't anything worth spending hours upon hours doing online, and that's why I make an effort to reduce my online time.

In my effort to improve my daily routines, I've identified things that make me nervous, and other things that calm me down. The point is not to cut out internet all together, but to use it more mindfully. Social media is like poison, so I've stopped reading other people's posts. I've also stopped posting things on Facebook. Obsessing about price action is similarly destructive. There's no point to it. No insight of any value is gained. However, writing a blog post or two, checking for messages and going through news headlines makes sense. A few games of solitaire to idle away spare time is also quite calming. Beyond that, I'm making a point of doing things around the house. Jokingly, I tell my wife that doing the ironing and vacuum cleaning the apartment gives me purpose.

Other things worth doing is home schooling for our boy, and tending the plants and micro-composts on our balcony. Then there's the exploration of simple pleasures like making a perfect cup of tea.

My wife and I have of late started buying loose tea, high end coffees and fine wines. None of this is over the top expensive. We're merely exploring original flavours that haven't been tampered with too much, and in doing this we're becoming increasingly aware of how messed up many of our favourite foods have become. Tea in particular has been reduced to something barely drinkable.

It's been a long and steady decline when it comes to tea, so much so that it's gone pretty much unnoticed. But once we started buying loose tea, there was no way back to the paper wrapped dust sold as tea in supermarkets. We now brew our tea the old way. Two topped teaspoons of tealeaves go into our tea infuser. This goes into our tea pot. One litre of boiling hot water is poured over it. This is left to brew for about five minutes. The tea infuser is then pulled out to prevent the tea from turning bitter and overly strong. What we have is then a truly refreshing drink, strong without being bitter. Invigorating rather than nauseating as is commonly the case with teas tampered with.

Similarly with coffee, meat, bread, and cakes. It's no longer what it used to be, and my wife and I are currently on a crusade to find our way back to the way things used to be. Luckily for us, Porto is a town where the old way of doing things still exists. There are delicatessens, and special shops for tea, coffee, meat, fish and cheese. Considering how much better some of this stuff is than what is generally sold in supermarkets, it can be argued that the products bought in special shops are cheaper. In the case of tea, it's not even an issue of quality over quantity. Loose tea sold by the kilo is cheaper than teas from typical brands, and when it comes to quality, nothing compares to loose tea straight from the producers.

Rococo Cup with handle

By Vincennes Porcelain (France, circa 1739–1756), Francois Binet (France, active 1750-1775, born 1731) - Image: http://collections.lacma.org/sites/default/files/remote_images/piction/ma-31852871-O3.jpg Gallery: http://collections.lacma.org/node/229367 archive copy, Public Domain, Link

Spreads and Other Costs

I've made it a rule for myself to make long term investments rather than opportunistic short term trades. This has several advantages, the main one being that it frees me from having to pay attention to short term moves. I can do other things while I wait for the long term trend to play out. One way to look at this is that time is a valuable resource that shouldn't be wasted. It should be enjoyed. Spending too much time following market action is therefore a cost to be avoided.

Another advantage to my strategy is the fact that spreads and other costs associated with transactions become less important. While the spread is a major cost to a day trader, it's of little importance to those holding onto an asset for years before selling. This allows us to consider a wider range of assets. We can buy real-estate and physical gold rather than their related paper versions.

The cost of buying a house is so high that it only makes sense to buy and hold for years. The same is true for physical gold. A day trader is therefore limited to paper versions of these asset types. They can buy real-estate related companies, they can trade gold futures, and they can trade shares of gold mines. But they cannot lay their hands on the actual underlying good. Only those with a long time horizon can do this.

Being limited to paper assets is a cost to those with a short time horizon, because paper assets can default. Real-estate companies and gold mines can go bankrupt. Future markets may break. Gains seen in physical assets may not translate into corresponding gains in paper counterparts.

This is not to say that spreads are irrelevant to those with a long time horizon. It's a cost worth avoiding as much as possible. The point is that spreads shouldn't prevent us from buying physical assets. The fact that physical gold trades at a premium to paper counterparts is not a reason to avoid it as a long term investment.

Rather than comparing physical gold to its paper equivalent, the right way to view it is to compare it to owning real-estate. If we buy a second home as an investment, we do so with a long time horizon in mind. We do so knowing that there are all sorts of expenses associated with both buying and selling. There are fees and taxes to be paid while we hold it. If we intend to rent it out, there's overhead and costs associated with that too. Furthermore, it cannot be bought or sold in pieces. It's all or nothing.

Compared to real-estate, physical gold has all sorts of advantages. The spread is smaller, storage cost is very low, and there's no demand on us for maintenance. Physical gold is a perfect alternative to real-estate, especially for lazy people like myself. Furthermore, the cost of owning physical gold can be lower than that of owning paper assets. There are no inherent annual fees associated with physical gold. This becomes all the more appealing during times of increasing taxes. Real-estate and paper assets can be taxed. Physical gold, on the other hand, cannot be taxed without our willingness to inform the taxman about our holdings.

Over a long enough time span, physical gold comes out very cheap to hold, so much so that it dwarfs the transaction costs. But this requires planning from our side. We mustn't buy so much gold that we'll be forced to sell within a year or two. Here again, we must view our physical gold as being similar to real-estate. We mustn't buy too much. Our purchases should be such that we get the benefits of ownership without the stress and anguish associated with stretched positions.

Cottage

By Valtov at fi:wikipedia - Originally from fi:wikipedia, Public Domain, Link

Do the Right Thing

We all want to be one of the good guys. We want to do the right thing. However, it's far from clear what this means in practical terms. All we have as a guiding principle is the golden rule. We should do to others what we would like to have them do to us. But that's awfully vague. What exactly is it that we would like others to do? Surely, this is something that varies quite a lot from one person to another. However, there are some things we can all agree on. We don't want people to hurt us, steal from us, or defraud us. By and large, we want to be left alone to take care of our own affairs. We don't want people to nose around in our personal lives, even if the intent is to help us in some way. Unless we're in a desperate situation, we'd rather take care of ourselves.

This sort of guideline works well in our daily lives. It comes naturally to us. We don't think about it. We simply act this way out of intuition and habit. But what about bigger things, like solidarity beyond our immediate circle of family and friends. We are told that there are things that are greater than ourselves. As examples, we are told that family, and especially children, need our protection. We are also told that our nation is something worth our sacrifice. As John F. Kennedy once said: "Ask not what your country can do for you, but what you can do for your country." But is this good advice?

First off, we must recognize the fallacy in the above reasoning. While it's true that family, and especially children, deserve our protection, it doesn't follow that we must support our national government. Rather, the opposite is true. One of the greatest threats to our family's wellbeing is the national government. Listening to the advice of politicians has been the ruin of many a family. Sending children to war and putting savings into government bonds was hardly the right thing to do during the great war of 1914 to 1918, regardless of which side of the border the families lived. The same can be said about pretty much every war. Certainly any war fought abroad.

Contrary to popular belief, national interests rarely coincides with the interests of ordinary people. National interests align with the interests of a few individuals in government and their corporate friends. For the rest, government is a burden and a net loss, especially during times of crisis. When Weimar Germany was in the midst of its hyperinflationary melt down, politicians of all colours would urge people to keep their savings in the bank. Above all, people were urged not to buy gold. The right thing to do was of course the opposite of what the politicians were saying.

However, this doesn't mean that we should always do the opposite of whatever is in the interest of government and their corporate backers. Taking advice from radicals hell bent on inflicting pain on government and corporations will land us in just as much trouble as if we listened blindly to government advice. A lot of pigs got slaughtered during the latest wild moves in Game Stop and silver.

It's not only government authority that we should be wary of. Blindly following any kind of authority will lead us astray. There's simply no way around the fact that we must think for ourselves or risk having others take advantage of our trust. As a general rule, we must be sceptical to any call for action beyond our personal affairs. If something is of no direct danger or concern to us in our neighbourhood, family or circle of friends, why should we risk blood and treasure in dealing with it? In what way does it make our lives better to fight wars in distant lands, or pay for policies that benefit others rather than us?

John F. Kennedy

By Cecil Stoughton, White House - This media is available in the holdings of the National Archives and Records Administration, cataloged under the National Archives Identifier (NAID) 194255., Public Domain, Link

Doing Business in a High Inflation Environment

One of the lessons from Weimar Germany is that business goes on also when inflation becomes so high that no-one can say what the local currency will buy at a future time. Under such circumstances, local currency can no longer be use for budgeting and contracts. Instead, some other currency is used.

Gold and dollars were popular alternatives to the Mark in Germany during the Weimar hyperinflation of 1922 to 1923. Similarly in Yugoslavia, Zimbabwe, Iran and Venezuela in more recent times, business was conducted in dollars when local currencies failed. But what will happen in the event of high inflation in the world as a whole? How will business be conducted in the absence of any reliable national currency?

The obvious answer to this is gold. But some may argue that a cryptocurrency like Bitcoin will be used instead. However, for that to happen, such currencies must make the transition from speculative assets to money, and there are at least eight reasons why this won't happen. Cryptocurrencies will continue to be volatile assets priced in dollars even in the event of a dollar collapse.

Should the collapse be total, gold will continue to be used until governments of the world either accept it as the standard, or some other standard is chosen. In either event, Bitcoin and other non-government currencies will be ruled out. Gold will either become money once again, or remain a coveted commodity. Crypto on the other hand, will be revealed to be an inferior store of value, and of no use in business.

Wallpaper

By Bundesarchiv, Bild 102-00104 / Pahl, Georg / CC-BY-SA 3.0, CC BY-SA 3.0 de, Link

Lessons From Weimar

We live in an inflationary era that was established shortly before the great war of 1914 to 1918. Bring up a 100 year gold chart measured in any western currency, and we can see the effect of this. Every single currency has lost about 99% of its purchasing power over that time period. In the case of the Norwegian Krone (NOK), there's been a fall of more than 99% just in my lifetime. I remember buying a sweet treat for myself for 0.02 NOK as a kid. Today, 50 years later, 2 NOK buys nothing at all.

The erosion of purchasing power has been remarkably well managed over the past 100 years. Inflation has been tolerable in all but a few counties, with the collapse of the German Mark during the Weimar republic as the most notable example of how inflation can suddenly get out of hand.

This raises the question as to what the Germans did differently from other western nations to end up with hyperinflation. Also, what signs, if any, were there of an imminent collapse? What were the right and the wrong moves? What can we learn from the Weimar republic?

Luckily for us, there's no lack of history books on the subject. I just read Jens O. Parsson analysis, a 15 page introduction to his book about inflation in America, which I found quite enlightening. Not least because it mentioned a number of things that are currently being repeated all over the world, and in the US in particular.

First thing to note is that Weimar Germany didn't do things all that differently from other countries. Their mistake was merely that they went too far. Second, there was a persistent delay between the monetary debasement and its effect on the economy. What was visible were the effects of earlier decisions. The collapse from 1922 to 1923 was a result of bad decisions made in 1920 to 1921, which in turn were based on the decision to finance the war of 1914 to 1918 through deficit spending.

The delay between monetary inflation and price inflation meant that current prices didn't fully reflect the debasement. This effect worked to the state's advantage since they were first in line to spend the freshly printed money. As a consequence, there was little political will to stop. There was no opposition to deficit spending. Furthermore, monetary inflation sustained a financial boom that gave the economy a veneer of health. Politicians could point to new all time highs in the stock marked as a sign of strength. But outside the financial markets there were signs of decay everywhere.

The quality of German industrial production deteriorated noticeably. Things that used to work fine started to fall apart. In society at large, speculators got richer while just about everybody else got poorer. A class of conspicuous super rich speculators emerged. While some were in awe of these clever ones who were able to game the system so perfectly, others resented them for their smug disregard for sound business practices. Businesses didn't have to make money, and they didn't have to make sense. All sorts of Mickey Mouse companies popped up, mostly centred around financial services. There were legions of nonsensical paper shuffling jobs. There were also huge conglomerates of companies with little to no synergies between them. Leveraged to their eyeballs, these companies invested heavily in all the latest and greatest in technology.

Instead of dealing with the heart of the problem, politicians focused on rules and regulations, hoping in that way to reign in the consequences of their own irresponsible monetary policies. There was rent control, preventing landlords from raising rents in response to inflationary pressures. There were minimum wage laws and limits to legal working hours. Huge inefficiencies of commerce arose as a consequence.

This went on until there was a stock market crash, followed by hyperinflation. This crash pulled the valuation of all industries down by about 25%. Good quality companies went down just as much as the Mickey Mouse ones. When hyperinflation kicked in, stocks remained at their low level in German Marks, but relative to foreign currencies and gold, the fall continued until the money printing stopped cold turkey in 1923.

The sudden stop in credit expansion killed off all the Mickey Mouse companies. Only top quality companies survived, and they were dirt cheap. The total price of the Mercedes motor company was about 300 cars of their own brand. Anyone who flipped their gold for an index fund of good quality German companies back then would have made an absolute fortune.

Reading Parsson's analysis, I couldn't help feeling we're currently living through times similar to Weimar Germany 1921. Time will tell if we'll see 1922 and 1923 as well, but if we do, I'm confident I'm correctly positioned for the turmoil to come.

Paper money

By Bundesarchiv, Bild 183-R1215-506 / CC-BY-SA 3.0, CC BY-SA 3.0 de, Link

Where to Store It

I trust bankers about as much as I trust government bureaucrats. First and foremost, they follow government rules and regulations, then they serve themselves, and finally they'll take care of me and my needs. Seen in this perspective, keeping valuables in a safety deposit box is about as safe as keeping them with the state. Everything is safe and sound until the law changes against us, and we're suddenly without access to our own valuables. I had a safety deposit box for a while, and I didn't like it. There was always this creepy feeling that something could go seriously wrong, and with both the bankers and the state between me and my valuables, I felt positively exposed.

Beyond this, I'm not going to tell anyone where we keep our valuables today. All that I'll say is that if anyone enters our apartment and trashes it completely in search of valuables, they won't find anything. The valuables are either not in our apartment, or so well hidden that no-one finds it even after hours of searching. That's much longer than a typical burglar feels comfortable roaming around in an apartment, especially one in a building full of neighbours who keep an eye out for each other. Furthermore, I have no trouble smashing in the skull of an intruder with a frying pan or other blunt instrument. The burglar runs a very real risk of being carried out of our apartment with his feet first.

Even the completely insane scenario of someone coming into our apartment with a gun, demanding our valuables at gunpoint, won't work. The answer to such a person is that the valuables aren't in our house. They are hidden in a box underneath a loose floorboard, in the attic of my wife's mother's house out in the country. We'll have to go for a walk, and ounce out in the street, I'll call attention to the situation.

I very much doubt that there's anyone willing to take this kind of risk in order to get hold of a very uncertain amount of valuables, especially since there are a couple of PCs and a TV readily available for the burglar to steal.

Apart from my wife and I, there's only one other person who knows where the valuables are stored. That's a relative in Norway, two thousand miles away from where we live, and this person is not prone to talk about secrets. This person knows about the valuables in case there's an accident and both my wife and I die. Had I trusted this person less, I would have left instructions in an envelope, only to be opened in case of our death. That would make it easier for the trusted relative to keep the secret.

When valuables are used as security for a loan internal to the family, the loan provider and the security provider both know where the security is stored. That may be at a third person's place, in which case a total of three people know the location. Assuming that none of them are stupid enough to talk about it, three remains the grand total of knowing heads.

With this all said and done, there's this link for inspiration as to where to hide valuables. Deception and inaccessibility are keywords. Think in terms of lofts and basements, sheds and boxes of knick knack. Remember that a small fortune can be hidden in a box less than a litre. Even a small place has plenty of nooks and corners for such a small volume to completely disappear into its surroundings.

Fort

By Albrecht Dürer - Collection privee, Public Domain, Link

A Strategic Savings Plan

After some deliberation, I've come up with a strategic savings plan that will help both my son and my stepdaughter. It solves several problems particular to our family as well as the general problems of inflation hedging and premiums. The particulars of this plan are as follows:

1. My wife and I buy one sovereign for my son every month here in Porto.
2. We send the bill for this to my son who credits our account from where he lives in Norway.
3. Once my son has at least 30 sovereigns, we let him borrow 1000 Euros per sovereign, or twice their total worth, whichever is greater. This loan is financed in our bank in Porto, with our apartment as security.
4. My son pays down on the loan until the remainder of the loan equals the value of the security.
5. My wife and I take full possession of the security and full responsibility for the remainder of our bank loan.
6. My stepdaughter is then encouraged to buy the security from us in monthly instalments in the exact same way that my son did.
7. My stepdaughter gets a loan from us when she has full ownership of the security, and the above process repeats.

The above scheme will take about ten years to complete. Monthly fluctuations in the price of gold will thus be drowned out by the general price trend. With the security in gold rather than cash, we don't have to worry about currency debasement and inflation. Even hyperinflation will do nothing to wipe out our savings. Furthermore, premiums are only paid during the initial purchase done for my son. When the security passes on to my stepdaughter, we save on premiums.

The timespan involved means that the above plan must be understood loosely. It's a general outline, not an exact plan. Should gold become so overvalued that it is better sold for something else, we'll have to arrange for that. There's also no telling what sort of income our children will have. All sorts of things may pop up, and must naturally be dealt with there and then, when it happens. However, as an outline, it's specific enough to serve as road map. It can be implemented exactly as is.

Finally, it's worth noting that there's very little risk in this for my wife and I. We'll have 50% security in gold and the benefit of social control by virtue of being the parents of the lenders. This fact will no doubt become apparent to our children who will hopefully do this type of planning for their own children, thereby turning this into a permanent feature of our family's saving habits.

Sovereign

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

Enticing My Son to Save in Gold

One of my two sons in Norway is not on board with my strategy. He thinks he can do better, and I'm worried he'll get himself fleeced at the casino. Instead of getting closer to his goal of buying an apartment, he'll find himself farther away. Gambling is simply no alternative to saving.

Then it occurred to me that my strategy gives me plenty of leverage when it comes to control over my son's investment habits. I can promise him a sweet deal on a future loan. Instead of saving for his first down payment for an apartment in Norwegian Kroner, I can promise to cover it with a cheap loan, provided he saves one half of the required amount in gold. I get the gold as security, and he gets to buy an apartment a few years sooner than he would otherwise get it.

Gold will no doubt outperform the Norwegian Kroner over the next six years, so the deal will illustrate the value of this type of savings. The gold may already have appreciated a lot by the time he's ready to buy an apartment, and it will most certainly have appreciated substantially by the time he gets his gold back three years later in return for having paid down his loan to me. That should teach him the value of my strategy because it will be clear by example that it works to everybody's advantage.

There's also the possibility that it will be one of my other children, rather than I, who provides him with a loan. They have their own apartments. Three years from now, they may be able to borrow more on their apartments. They can then lend this forward to him in return for security in gold, and I'll be no more than a guarantor in case something should go wrong.

There are other possibilities as well. I have a brother who's on board with my strategy, and he has several children. They will no doubt insist on 100% security. But the fact that this is a possibility will further illustrate the strength of this strategy. Gold can be used as security, something speculative assets can't due to their volatility.

I've briefly mentioned this sweet deal to my son, and he was predictably happy about my proposal. He might object to the part about gold rather than Kroner, which I haven't yet mentioned, but I don't expect it to be a major hurdle. The deal is likely on, and I can notch down another victory for my strategy. Not only will I help my son get an apartment a few years earlier than he would otherwise get it. I've greatly reduced the danger of him taking on too much risk. His regular gold purchases will ensure that there won't be much money left for him to waste in the casino.

Sovereign

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

Another Lesson in Supply and Demand

Money markets are again in turmoil, and once again it's hard to figure out exactly what's going on. However, the example I used back in September 2019 serves to explain things rather well this time too.

Back then, there was an effort by the Fed to keep interest rates low and withdraw liquidity at one and the same time, which is comparable to a warehouse deciding to lower prices while at the same time reducing supply. Naturally, this didn't work. Demand for credit exploded higher at the the very same time that supply was reduced, with dramatically higher interest rates in the overnight REPO market as a result.

Then we got the Covid plague just in time to rescue the Fed. Main Street demand for credit was crushed, and interest rates could be kept low for another year. Coupled with a flood of credit to Wall Street, all sorts of asset prices exploded higher while the average Joe was locked down at home, scared and confused.

But of late, interest rates at the long end have crept higher. People are increasingly reluctant to lend money for more than a few years to a government that spends money as if there's no tomorrow. This is problematic for an economy levered up to their eyeballs in debt. But something equally troubling is also happening at the short end. Overnight rates are about to go negative.

This latest development seems at first absurd. How can long rates go up and short rates go down at one and the same time? However, this too can be explained in terms of our warehouse once we recognize that this warehouse only serves the short end of the credit curve. It's an overnight facility, and as such it serves the sort of banks that the average Joe uses for his affairs. When Joe feels confident enough to borrow some money, banks go to the warehouse for cash. When Joe is more inclined to save, banks go to the warehouse to deposit their excess cash.

With Joe still reluctant to go out and borrow, stimulus money coming from the US treasury go directly into savings accounts. This cash is then handed over to the warehouse which tries its best to discourage this behaviour. Interest rates go down to the point of going negative. Joe has gone from overly confident to overly cautious, and the Fed is now trying to change his sentiment once again. But Joe is already in the grip of a manic depressed anxiety. This latest push will likely aggravate his condition further, and the net result may turn into a hyperinflationary melt down.

It appears that the Fed is once again close to the breaking point and only inches away from loosing control. What happens next is anyone's guess.

By U.S. Government - Extracted from PDF version of the Federal Reserve's Purposes & Functions document (direct PDF URL [1])., Public Domain, Link

The 5th Empire - Be the Change

There are two things to note about transition periods:

1. They can go on for a very long time
2. They are dangerous

Waiting around for things to unfold by themselves can be frustrating, while taking an overly active part in the transition may prove deadly. There's no telling how things will turn out, so it's important to play things safe. I've told my children to stay away from the armed forces, and to keep politics to themselves. In their private affairs, I've urged them to stay away from gambling. Overt risk taking in finance can get us slaughtered just as much as overly heroic action can get us killed in war.

One further thing to note about transition periods is that their outcomes are entirely a function of action. If we fail to act ourselves, somebody else will take charge and define the outcome.

Changes are made by people acting out plans and visions. Powerful people can do this from a resort club house, while ordinary people do this by being the change they want to see. To have control of our destiny we must have a plan of our own and act accordingly. Otherwise, we're likely to end up as pawns in somebody else's plan. Either willingly in their trenches, or unwillingly as collateral damage on the battle field.

Luckily for us, we don't need anyone's permission to make a plan and act it out. All it takes is a vision of a better future and the will to act it out in the present. Our personal transition into a better future can thus be done long before everybody else.

My personal vision is embodied in the myth of the 5th empire (aka God's kingdom on earth.) It's a place governed entirely by the golden rule. There is no central government. Law and order is carried out through voluntary arrangements. All of this is explained in my book on the subject.

Our first step towards a better future is therefore to declare ourselves part of that future. We must then act rationally and consistently in accordance to our vision, otherwise our declaration is meaningless.

In the case of my particular vision of the future, I make a point of being civil. I also make a point of being prudent and conservative in my lifestyle and investment strategy. The aim is to do well for myself while being of help and inspiration to others, because this sort of success is not only good for me, it inspires others to follow suite as well.

When we are successful in this way, we get followers. The network effect kicks in, and pretty soon there are others acting and living in ways similar to our own. A community emerges, all living in tune with our vision of the future. If this persists and spreads, the result will be that of a complete transition from the current era to a new one, largely or wholly in tune with our vision.

Important in this is a general avoidance of the system we want to get away from. If we fall for the temptation to try our luck in their rigged casino, we'll fail even if we manage to make a quick buck. There's no winning on the battle field of our opponents. We're either slaughtered, or we're merely an example of the old. Only by doing things according to our own vision will we inspire change around us.

My vision is that of a world based on sound money and the rule of natural law, derived directly from the golden rule. That means that I will keep away from banks and bank credit as much as possible. I'll save in gold and silver, and encourage others to do the same. To avoid premiums on gold and silver, I will encourage circulation of this within my circle of influence.

Furthermore, disputes should be settled outside of the current legal system. To avoid conflicts, deals should be settled immediately, or be backed by gold or silver as security. Heads of families or trusted friends should act as arbitrators. There should be a general return to simplicity in all our dealings.

With money matters and legal matters both under control by family and friends, secession is achieved. We become sovereign individuals with no rulers except for God (aka nature) and his golden rule.

Sovereign

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

Eight Reasons Why Bitcoin Isn't a Superior Form of Money

Bitcoin keeps going up in price. It may be tempting to jump on the bandwagon. But before we do that, let's consider why Bitcoin isn't a superior form of money. Why in fact, it isn't money at all:

1. Volatility - Bitcoin is so volatile that no-one can make a budget based on it, and no contract can be written in it without huge risk.
2. Transaction costs - Bitcoin is slow and hopelessly expensive to use for everyday transactions.
3. Energy requirement - Bitcoin requires energy for its existence. While it's true that Bitcoin can be held without cost, Bitcoin is worthless without its associated network. That network has to be up an running at all times. This generates electricity bills that have to be paid, and those bills must necessarily be paid by the Bitcoin community.
4. No secrecy - Bitcoin transactions are stored on a public ledger. There's no secrecy. Once the owner of a wallet is known, that person's transactions are also known. People have gone to jail based on information found on the public ledger.
5. Not unique - Bitcoin is neither unique nor superior in its properties relative to alternative crypto-currencies.
6. Aging technology - Bitcoin is technology and technology tends to go obsolete within a decade or two.
7. Kill switch - Bitcoin depends on ports 8333 and 18333. If these get outlawed by internet regulators, the Bitcoin network goes down. 
8. Not anchored in reality - Bitcoin is not a commodity good nor a productive asset. It's not used to pay taxes. Its price is based entirely on sentiment. Without an anchor in reality, its price can be anything. Hence its volatility.

Given the above list, it's clear that Bitcoin isn't money. Nor is it a commodity or an income generating asset. It's a lottery ticket. There's no telling how high or low it will go, so it's perfect for gambling.

Trade accordingly.

Brass token currently priced at about $50,000

By Steve Jurvetson - https://secure.flickr.com/photos/jurvetson/8410385932/in/photostream/, CC BY 2.0, Link

The 5th Empire - Transition Periods

Transition periodsare by definition periods in which one system of thinking is replaced by another system. That's why everything from fashion and architecture to science and commerce looks so different from one era to another.

This means that if we're currently in a transition period, we should see evidence of the old system falling apart and the new system emerging. The old will be easily recognisable due to the fact that it's a continuation of something that's been around for decades. However, the new may not be all that easy to see, at least not to start with, because it has no past. It's not clearly defined. It's an emerging thing, and it can be changed while it develops. It may even be controlled. There's certainly a lot of effort being currently spent on a controlled transition from the 20th to the 21st century.

The Great Reset is frequently being mentioned as the inevitable transition. Seen from the perspective of those currently in power, this is the desired outcome, and hence it's presented as both inevitable and desirable to the masses. However, it looks and feels like more of the same. It's a progressive idea, where the elite manages everything, precisely the way things have been throughout the 20th century. The Great Reset is not a change from the old, but a continuation of it, and this can be clearly seen by the way it's already failing on its promise of sustainable growth.

The new cannot be a mere continuation. It must either be a return to something that existed in a previous era, or something completely untried and untested. As such, radical liberty may be the way of the future. A system of little to no state authority would certainly be a change from the current authoritarian progressivism. But there is very little evidence for this at the moment. The overwhelming majority of people are still very much in favour of expert advice as public policy. If radical liberty is in our future, it's still a long way off.

Looking around, we see evidence of systemic decay. There's a restlessness and sense of futility. Nothing is real. Everything is just a game, and there's no consequences for bad behaviour. But reality is about to poke a finger in our eyes. People in Texas and Germany have had some cold days. There's all sorts of nasty things on the horizon. The current era has run its course. Collapse seems inevitable, and something new must therefore take its place, even if deeply unpopular with a large portion of the population.

Change rarely comes about by popular demand. Radical changes force themselves onto people. The people behind these changes are always a minority, and their popularity is not an issue. The 20th century was engineered in large part by a handful of men on Jekyll Island back in 1913. That's clear evidence that great changes don't require popular backing.

The transition from 19th century liberty to 20th century progressivism was swift and visionary. The engineers knew exactly what they wanted and how to get it. Once the transition was in place, they let their plan grow organically into what we have today.

One year after their meeting at Jekyll Island, there was a great war financed through central banking. After this exhausting experience, people were ready for the state to take on more control. The welfare state was born together with the new financially leveraged warfare state. The transition took no more than five years, and its continuation has lasted until now. However, the system is very much in decay. The fourth horseman of central banking is knocking on our door.

The transition from 18th century monarchy to 19th century liberty was much less coordinated. In some places like England, the transition was largely one of inconvenience due to the Napoleonic wars. The English didn't depose their king. They kept all the old institutions. The changes were subtle. But the effect of these changes were far reaching. In the US, there was a swift revolution with similar far reaching consequences. But in France, the financial and cultural hub of the world at the time, things got positively wild. The transition period as a global phenomenon lasted from 1776 in the US until 1820s in places like Portugal and Spain. A whopping 44 years.

The engineered transition into progressivism lasted five years while the more uncontrolled transition to liberty lasted 44 years before coming into full global effect. Assuming that we're headed towards liberty once again, we're more likely to see the sort of length transition, much resisted by the elite, that happened in France at the end of the 18th century than the quick transition that happened in the US at the beginning of the 20th century. We're not going to get the swift reset that the elite is hoping for. We're going to get a messy revolution, and it will be particularly messy at the financial and cultural centres of the world. Washington DC, New York, London and Paris will be hotbeds of unrest going forward.

As a reminder, the French Revolution ushered in seven years of political and economic chaos under the first republic, followed by fifteen years of war and turbulence under Napoleon. Something similar may well happen this time around with progressivism first going into hyper-drive, followed by years of military overreach. Only when all this turmoil comes to an end will we be firmly into the next era. Hopefully, it will be one in which civility and common sense is once again the order of the day.

Execution of Robespierre

By Unknown author - This image comes from Gallica Digital Library and is available under the digital ID btv1b6950750j, Public Domain, Link

The 5th Empire - Civil Revolution

I've long had the sense that we're living through the end of an era, and one thing that distinguishes one era from another is a difference in style, both in fashion and architecture. Style reflects in turn the general order of things. Open any history book, and we see pictures of people wearing clothing that pin point the era in which they lived. The same with architecture. Buildings look different.

I mentioned this to my brothers while on a family outing in Prague back in 2014. While they didn't share my sense of an oncoming storm, they agreed that fashion and architecture has remained fairly steady ever since the first world war. My architect brother pointed out some changes that have been enabled through computer modelling and new materials, but he agreed that the overall style of simplicity, void of ornamentation, has been a constant theme throughout this time period.

The same can be said about science, which is still dominated by ideas dating back to the early nineteen hundreds. Political economy is likewise dominated by ideas dating back to this time. Styles in art, music and culture can also be traced back to those years, so we're most definitely still in this era. But things are starting to fall apart. There are changes afoot, and we should prepare ourselves for a bumpy ride because the transition from one era to another has had a tendency to be dramatic.

The 18th century ended with revolution. Power passed from royalty to gentry. The 19th century ended in a world war, after which everyone got to vote regardless of gender or social standing. A similar change is likely to happen as we transition from the 20th to the 21st century, and it appears that the battle for control has already begun.

The virus scare we're currently living through has the general feel of a psyop. There's a constant repetition of a narrative meant to scare us into submission so that those in control will remain in control as we transition into the new era. There's also ample evidence that news is no longer news but scripted narrative. Only that which fits the narrative is allowed out of the local news context, and into global news. Furthermore, local news that doesn't fit the narrative is always presented as odd and unusual, and in no way representative for a general trend.

This has been fully illustrated by the way the latest cold spell in the Mid-West has been completely ignored outside the US, and simultaneously presented as if nothing like this is happening in other places. TV news in Portugal has not given the cold spell in Germany or the Mid-West any attention. Yesterday's headlines were limited to the announcement of a new royal baby in England, a locust plague in Kenya, snow in Moscow, and the latest numbers of Covid deaths and vaccines.

Immediately after the news, Bill Gates was given an hour to explain the need for a complete transform of society in response to Covid and climate change. Not only is this man eager to give everyone a shot and a Covid passport, he has plans to cool the planet, and he looks forward to having us all eat bugs instead of proper foods. Record breaking cold in Germany and the Mid-West wouldn't fit into this narrative, so it was no wonder that three million people freezing their socks off due to a lack of electricity and natural gas had to be tossed into the editorial waste bin.

Rolling black out and nobody caring if millions freeze or starve used to be the very definition of a third world country. Seen in that perspective, the Mid-West just made it into this category, but this is not going entirely unnoticed. The likes of Bill Gates and Joe Biden who stubbornly stick to the scripted narrative in face of overwhelming evidence that it's all a big lie, should be careful. There's definitely some resentment building against them and their arrogant dismissal of the plight of ordinary people.

The problem with scripted narratives is that God (aka nature) has a tendency to do things his own way. It's almost as if he has a will of his own. He comes up with all sorts of inconvenient truths just to poke fun of the script writers. How the climate refuses to play along with the script is evidence of this. There's also a lack of dead bodies related to the Covid virus, which is nothing like the plague that God sometimes tosses upon us, especially when we think ourselves better than him. It would not surprise me if God gave us a round of a truly horrific disease just to put the virus scare into perspective.

Pretending to be God has never worked out well in the past, and I'll be surprised if this latest attempt at controlling the narrative is going to work much better. I can already see the outline of some unintended idiocy coming our way. There's a hearing planned in Washington DC related to the Game Stop debacle that happened a few weeks back, and it would be particularly humorous if this were to coincide with an epic crash of the stock market due to the cold spell in the Mid-West.

There's a disaster waiting to happen due to bills that will have to be paid. A lot of people will be hard pressed to pay these bills, and will therefore have to sell something. While it's possible that this can be done without affecting the current speculative mania, it's more likely to be a wake up call. People will learn the hard way that speculative assets don't necessarily command a bid. Only that which is required as a commodity to produce real things, or generate an income through the production of such things, are assured a bid. Everything else can have bid disappear in an instance.

If enough speculators suddenly have to sell something that isn't required in real life, others can simply refuse to bid, and the price will collapse. Bitcoin can drop 90%. Tesla, which is now tied up to Bitcoin through Elon Musk's latest bit of financial trickery, can drop 70%, and the S&P 500 which is tied up to Tesla can drop 50%, all in the space of a few days.

A further effect of high energy bills will be a general increase in the price of all things necessary in life. Speculative assets will drop at the same time that life necessities go up. If this happens while people in Washington DC are discussing Game Stop, people will get more than a little frustrated. They will see these people as the clowns that they are. There will be more than just talk of secession. Communities will stop paying tribute up the ladder and start doing things their own way.

Some people think that such a series of events must necessarily lead to civil war, but history tells us otherwise. Rome had its civil war. But that was not how it ended. When Rome finally fell to the Goths, nothing much happened. Rome simply transformed itself over the following centuries into what was first referred to as Christendom, and is now known as the West.

This is the more likely path forward for the US, especially if we avoid a civil war. If everyone with influence to change things for the better in their community refrain from gloating over the misery of adversaries, there's a good chance that Washington DC ends up irrelevant in the same way that the city of Rome ended up irrelevant. What remains would be the idea that the US represents, namely the spirit of Liberty.

The US can in this way transform itself into a spiritual empire. The collapse of Washington DC will herald in an era similar to that outlined in the myth of the 5th Empire. There will be focus on community and liberty, and law will be derived from the golden rule. This would be a fantastic transformation, and it's within reach, provided we remain civil and level headed through the transition.

Café de Flore

By Arnaud 25 - Own work, Public Domain, Link

My Parasol

We're having a fine spring day in Portugal, with a strong sun and temperatures pushing 20C. It's the perfect day for a walk, so I went out in my eccentric outfit, with my umbrella open to protect my head against the sun.

Again, I was proven right in my thesis. The outfit deflected attention away from the fact that I'm wearing my mask under my chin. No-one commented on me wearing my mask wrong. But three random strangers asked about my umbrella, to which I replied that it isn't an umbrella but a parasol. My response was both unexpected and logical, so they started laughing. What else could they do? This kind of unexpected logic is after all the nuts and bolts of all jokes.

One guy who wasn't wearing a mask himself called out a friendly good day as he passed me by. This was particularly pleasing because one of the great strengths of Portuguese culture is the friendly manner in which complete strangers interact with each other, and I've noticed that this has been greatly reduced after mask wearing rules came into effect.

I suspect that one of the more sinister motives behind the mask wearing rules is the desire to stop people from interacting in this friendly manner. There is a desire to divide and conquer. They want us confused and angry rather than happy and polite. Seen in this light, the random interactions I encountered were all little victories. There was no antagonism, only light hearted chatter and curiosity.

Sun

By DracoLumina17 - Own work, CC BY-SA 4.0, Link

Paying the Bills

There's something odd going on in the US energy market. The distribution of gas and electricity seems to have clogged up. The cold weather is too much for the infrastructure to handle. Taking the blame for this is the unusual severity of the current chill. However, there's nothing new about cold weather in the US during winter. The fact that the infrastructure is struggling to keep up with demand indicates that something is amiss.

The headlines remind me of conditions in the Soviet union before and during its collapse. There was no lack of energy. Their problem was distribution. Their infrastructure had been underfunded and neglected for decades to the point that it finally collapsed. Similarly in the US today, infrastructure is being neglected.

The result of this is that gas and electricity prices are off the charts. The energy bills distributed to consumers over the next months will be unusually big. A lot of money will be required, and the question is where all this money will come from. Those entitled to a stimulus check may see it all used on energy. Others might have to sell something. In all cases, there will be a need to cut down on discretionary spending. The iPhone will have to wait.

The impact of the cold weather, combined with failing infrastructure, is likely to cause harm to the US economy. Especially hard hit, will be industries that consume a lot of energy. Mining Bitcoin in the US is probably not a great business at the moment. Miners will either have to shut down their machines or sell more Bitcoin than usual.

Depending on how bad this gets, the impact may be widespread. Everyone needs to stay warm. There are bills to be paid. If the bills go up a lot, other expenses will have to wait. Small time speculators will have to delay their next bet. They may even sell a few shares just to stay warm. People will all of a sudden become more cost conscious, and they may start to view their possessions in a different light.

This happened to me back in the summer of 2016. Faced with increasingly expensive bills on my house in Norway, I was forced to reconsider the true value of ownership. The fact that house prices had been going up had blinded me to the fact that the house was actually a drain on my personal finances. It was only a question of time before I would be out of cash. Unless I realized my paper gains there and then, I would be forced to do so at some later point.

That's when I realized the true beauty of owning gold rather than real-estate. While real-estate and gold were both going up in nominal terms relative to the Norwegian Krone, only gold did so without any expenses attached. My house had all sorts of fixed costs associated with it. The fact that it had outperformed gold was masking the expenses. When subtracting the expenses of owning the house from its nominal price increase, it was underperforming gold.

Simply sitting on real-estate is a terrible alternative to owning gold. If not rented out, real-estate should be sold. But owning gold is greatly discouraged in Norway. Most people choose to buy summer houses and cabins with surplus money. My brother owns two summer houses, one next to the other. The only logic in this is that it's better than owning cash in Krone.

Central banks are leading people into this kind of investments, with bills having to be paid every month, through monetary debasement. It's a trap that drains the financial resources of the saver. Instead of a nice little stash of sound money, people sit on assets that drain their purchasing power. Real-estate does this. So does Bitcoin, which requires someone to cough up money every month for the electricity bills. Its a hidden cost to most Bitcoin owners who simply sit on their tokens with no cost. But this is deceptive. Bitcoin is nothing without its associated network. The maintenance of this network requires someone to sell Bitcoin just to cover the electricity bills. The network as a whole is a liability to the Bitcoin community. Seen in this light, Bitcoin is a Ponzi scheme. It requires a constant flow of money into the community in order to pay for the cost of maintaining it. Without this constant flow of money from investors to energy suppliers, Bitcoin will collapse into nothing.

Neither real-estate nor Bitcoin are sound money alternatives, because sound money don't have fixed bills associated with them.

A cottage for the husmann

By Valtov at fi:wikipedia - Originally from fi:wikipedia, Public Domain, Link