Blowing up European Infrastructure

Someone blew up Russia's two main gas pipelines to Germany. This means that Russia can no longer turn their gas deliveries to Germany back on. Putin's leverage in that respect is gone. He can no longer entice the German people with the promise of normality if they simply accept his demands.

From this fact alone, we know that it's highly unlikely that the Russians blew up the pipelines.

Meanwhile in the North Sea, mysterious drones are flying around the Norwegian production platforms, making it clear to everyone that these platforms can easily be knocked out if so desired.

On the face of it, we might expect Russian escalation in the North Sea. They may choose to knock out a pipeline or two in retaliation. However, this will not benefit anyone but the US who sell LNG gas to Europe. Destroying European infrastructure will do nothing to end the war, and only play into the hands of those who want to divide and conquer. The Russians are therefore unlikely to blow anything up in the North Sea. The response is more likely to come in the form of propaganda.

Putin can again claim that he has the interest of the common people in mind. He has nothing against ordinary hard-working Germans, or the downtrodden Englishman, or ill-treated US citizen. He will go to extraordinary lengths to avoid hurting them. But as long as the elite in these countries insist on poking the Russian bear, he has no choice but to protect his own people.

Putin can further lay the blame on the American for the destruction wrought upon European infrastructure. It will be easy to convince a large swath of Germans that it is the Americans that are at war with them, and that the Russians are their true friends.

Putin can mention the North Sea infrastructure and point out that if he truly wanted to hurt the Germans, there would be no gas coming to Germany from that side either. The destructive capabilities of the Russians are immense, but they are restraining themselves out of love for the common people.

Whoever blew up the pipelines in the Baltic Sea handed Putin a golden opportunity to come across as the rational leader while painting the US as a demonic entity hellbent on destruction.

Vladimir Putin

By Kremlin.ru, CC BY 4.0, Link

Covering my Children's Expenses

I haven't been to Norway in over four years, so it was quite a treat to be back for ten days to visit friends and family. Among other things, I got to see how my three adult children are doing.

One is living in Bergen, another in Oslo, and a third in Drammen, so I got to see them separately as I moved between town. As a gesture of generosity, I told each of them that I'll cover any expenses related to eating out.

This resulted in an interesting dilemma that I hadn't expected, because the bills were not of the same size. My daughter in Bergen did a lot of cooking at home, and we hardly spent any money in restaurants. My son in Oslo took me to a burger place, and my son in Drammen took me to a fancy restaurant.

My original idea was to cover these bills according to what each had spent, but that would mean that my daughter would be compensated with a small amount for all her efforts. My son in Oslo would be compensated for a burger and a beer, and my son in Drammen would be compensated for a lavish meal. That's hardly fair. Moreover, it would generate a perverse incentive in the future, if I was to stick with this type of compensation.

Compensating any expense, however large or small, as if they were equal, incentivises indulgence. The smart thing to do when I come visiting will be to take me to expensive restaurants and spend no time preparing food at home.

The ones who host me at home with home-made food will feel unfairly treated relative to those who go out spending lavishly at my expense. I risk both incentivising indulgence and stoking resentment among my children. However, the solution to this dilemma isn't hard to find. Instead of covering every bill as if they were the same, I compensate everyone with an equal amount.

My plan is to take the biggest bill and pay everyone that amount. My daughter in Bergen will in this way end up with a monetary compensation for her frugality and homely generosity. My son in Oslo will get some spare cash for his modest and sensible choice, and my son in Drammen will get fully compensated for our indulgence.

This will come across as fair and generous towards everyone, and it will encourage everyone to spend according to their preference. My daughter will continue to be her natural homely and frugal self. My son in Oslo will continue to look for good inexpensive places, and my son in Drammen will continue to seek out fancy restaurants because that's what he likes. No-one will be incentivised to change their behaviour or feel unfairly treated.

A roast lamb dinner

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

KISS

My wife doesn't like the tax evasion plan I came up with yesterday. It's too elaborate and contrived, and I agree. There has to be something more straight forward that we can do.

This touches upon a general principle when it comes to systems and schemes: Keep It Short and Simple. That's KISS for short.

A good plan deviates only marginally from the truth, and it involves as few people as possible. Ideally, only a single person is at risk of interrogation, and that person should be the one who has thought up the scheme in the first place. That would be me in my case.

My original plan was not KISS. However, this alternative plan falls into this category:

The first thing to recognize is my overall goal which is to avoid a 10% transaction tax on money that is already taxed in Norway. The simplest way to do this is to refuse to see the money as a gift in the first place.

The next thing to recognize is that only gifts require recipients to report to tax authorities. Since the money coming from Norway isn't a gift, nothing needs to be declared. It isn't up to me to report my private affairs to them. It's up to them to start an investigation into whether or not the money can be categorized as a gift.

Since we know that taxmen are in the business of extracting as much money as possible from their subjects at as low a cost to them as possible, we know that they are unlikely to investigate anything that isn't either easy to verify or involving a lot of money with a high potential pay-out for them.

Ten percent of the money coming to me from Norway is a lot of money for me and my family, but hardly worth an investigation from the perspective of the tax authorities. Hence, the most likely outcome of doing nothing on my part is that there will be no investigation and the money will flow unhindered.

However, there has to be a story that I can present in the off chance of an investigation. We can't have a situation where we struggle to explain what's going on.

If there is an investigation, I imagine that it will start with a quick call and grow from there until they either give up or come to the conclusion that I have to pay the ten percent. However, I don't think I'll be fined for my conduct because my story is sufficiently close to the truth to argue that I misinterpreted the law with no ill intent.

This is how I imagine an investigation by the taxman may evolve:

1. My wife receives a phone call related to the money coming into her account from Norway. She tells them that the money isn't hers, it's mine. I'm a Norwegian, taxing to Norway, and the money is merely transferred to her account for convenience. The taxman can now choose to talk to me or give up, satisfied that the money is not a gift.
2. The taxman decides to talk to me. I tell him that the money comes from the accounts of my children in Norway because I don't have a personal account there anymore. However, I have capital income, taxed in Norway, that flows through my children's accounts for convenience. The taxman can now choose to talk to Norwegian tax authorities or give up, satisfied that the money is not a gift.
3. The taxman decides to talk to Norwegian tax authorities. He learns that I have no registered income or capital in Norway, and that I owe them money. It appears that the money may be a gift from my children. He decides to call me again.
4. I tell the taxman that it's true that I technically don't own anything in Norway, because I have passed ownership to my children against a private agreement that they pay me money every year.
5. The taxman tells me that this looks like a gift rather than a payment. I tell him that I think he's wrong and that I'm prepared to hire lawyers to prove my case. The taxman can now choose to call my bluff or give up.
6. Seeing that the money in question is flowing into Portugal as opposed to out of Portugal, the taxman will most likely give up, because a victory in court by the taxman may stop the flow and produce no benefit.

Keeping in mind that the above exchange is unlikely to take place, and that the outcome is unlikely to be more severe than a slap on my wrist, I see no reason to report anything to anybody related to my fixed income coming from Norway.

Schloss Vaduz

By Michael Gredenberg - Own work, CC BY-SA 3.0, Link

65,000 Cases of Monkeypox Worldwide

It's September 27, and we've reached 65,000 cases of Monkeypox worldwide. That's 2,000 more cases than predicted 17 days ago. Instead of a drop down to 250 new cases per day, we remained at 500 new cases. However, the downward trajectory remains in place. The outbreak may still be over by Christmas.

The worldwide number of cases currently in hospitals can be estimated to be 5,000 based on an assumption that patients are released within 10 days.

Assuming that this trend persists, we can make the following projection going forward:

• July 24 - 17,500 cases, 700 new cases per day, 7,000 inpatients
• August 1 - 24,000 cases, 750 new cases per day, 7,500 inpatients
• August 9 - 32,000 cases, 1,000 new cases per day, 10,000 inpatients
• August 17 - 39,000 cases, 875 new cases per day, 8,750 inpatients
• August 25 - 46,000 cases, 875 new cases per day, 8,750 inpatients
• September 2 - 53,000 cases, 875 new cases per day, 8,750 inpatients
• September 10 - 57,000 cases, 500 new cases per day, 5,000 inpatients
• September 18 - 61,000 cases, 500 new cases per day, 5,000 inpatients
• September 26 - 65,000 cases, 500 new cases per day, 5,000 inpatients
• October 4 - 67,000 cases, 250 new cases per day, 2,500 inpatients
• October 12 - 69,000 cases, 250 new cases per day, 2,500 inpatients
• October 20 - 70,000 cases, 125 new cases per day, 1,250 inpatients
• October 28 - 71,000 cases, 125 new cases per day, 1,250 inpatients

Pride flag

By Gilbert Baker (Vector graphics by Fibonacci) - SVG based on this image, Public Domain, Link

Doing the Impossible

Fresh back from a ten-day break in Norway, I was told by my wife to take a look at an article in a local financial paper. A new tax law has been introduced where gifts above €500 are being taxed at 10% when not received from a parent or grandparent.

This affects the way my wife and I have arranged our affairs. My children have been sending me money every year as a gift in return for an early inheritance I bestowed upon them. From the article, it appears that we have no option but to subject ourselves to a 10% tax. However, I wasn't much bothered by this news. I felt intuitively that it was but another law that cannot be properly enforced.

I didn't immediately see a solution to the problem, but I know that a similar law was rolled back in Norway a few years ago due to the impossibility of enforcing it. I also have some experience with tax evasion, and I have what some would call a criminal mind. I don't pay much attention to the laws of the land. The details don't interest me. What draws my attention is whether or not a law can in fact be enforced.

This particular law may have some loopholes for people in my situation, so we will look into the exact letter of the law to see if we are in fact affected by it. However, I can't help dreaming up schemes that will work regardless.

The basis of my thinking is that we're dealing with something that's man-made, as opposed to that which exists in nature. Tax laws are not natural. They are man-made. Hence, we have nature on our side.

The state tends to lean towards Lucifer, which is the antithesis of God, aka nature. As such, we have an advantage due to the way God has constructed the universe. Elements that play to our advantage are time, complexity, size and physical laws of nature. Any man-made law that requires omnipotent powers in relation to these obstacles is impossible to enforce with any degree of success. To believe otherwise is to believe in the state as somehow equivalent to God.

As a staggering example of hubris that I recently came across, I can mention a law passed in Sweden. Its enforcement will result in the establishment of many small electrical generators, and the winding down of large power-plants. The fact that this is physically impossible to achieve because power grids need a large base load to operate, didn't bother the politicians one bit. They passed the law, nevertheless.

It appears that politicians these days see themselves as elevated above God Himself. Even obstacles that exist physical in nature can now be bypassed by one of their laws. However, this is not something to fear. Quite the opposite, the fact that they consider nature irrelevant makes it easier to evade their attention.

In the case of the law related to gifts, now operating in Portugal, there's another aspect of nature that's being ignored, namely the fact that a gift is no different in principle than any other payment. Using an analogy from physics, it's as if the politicians decided to tax potential energy while letting kinetic energy pass without taxation. The result of such an idea would be the production of flywheels where excess energy is stored in a kinetic rather than potential form.

The fact that we have different names for different types of energy doesn't mean that there's any real distinction between them, and the same holds for payments which can come in all sorts of forms, ranging from gifts and discretionary purchases to investments and speculation.

The key to tax evasion is to recognize that most things described by politicians are merely word. They are not part of nature. A gift is a payment. All that's required in order to evade a tax on it is to find some other type of payment that carries little or no tax.

When this insight is combined with the recognition that God's own money, namely gold, is impossible to tax due to the ease with which we can hide and transact in it in secret, we find a solution to my particular problem.

My children will no longer send me any gifts. They are going to invest in my gold. The money coming from them will be declared as an investment, and the price they will pay will be such that no profit is made by me. Hence, there will be a gift of sorts flowing from me to my children. However, that's a direction that is tax free according to the man-made law.

This is preferable to the ultimate evasion which would involve smuggling of cash and/or gold.

My scheme breaks no law in the here and now. I get time on my side. I also avoid the physical hassle and danger related to smuggling. This is how the scheme will work:

• My children in Norway send money to me in Portugal
• The money is declared as investment in gold held by me
• No purchase of gold is necessary on my side because I already own gold
• No gold is sent to Norway because we take care of it in Portugal
• If anyone asks, I can show them the receipts for the gold purchased for my children
• There're enough such receipts to keep the scheme going for years
• Physical possession is real ownership, hence there's no real transfer of gold
• The gold remains an inheritance to my son in Portugal, as originally intended

The only time when this scheme may break a law is when everybody involved forget that the gold was purchased by my children in Norway. However, this is unlikely to be a problem because no records are going to be kept by anyone. There will only be some vague declarations of intent every time money is sent from Norway to Portugal. This is not sufficient to null the fact that it's my son in Portugal that owns the gold.

This is the beauty of time. Things are forgotten. With little to no record keeping, nobody but the involved parties will know what went on, and no-one will bother to dig into the details on a vague suspicion that something dodgy may have taken place.

Nature is complex, big and powerful. Tax offices are small and staffed with people with no motivation to look into something that took place years back in time. Hence, there's little danger of any investigation, and even less danger of anyone finding anything illegal.

The most likely outcome of this, if we choose to implement it, is that there will be no investigation whatsoever, and if there is one, it will happen at a time when no law has been broken.

Sovereign

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

Hammered by the Dollar

Gold is being hammered by a strong dollar. It's down almost two percent just today. Paper contracts are currently being traded at $1,667. If the support line at this point breaks, we're heading down to the next support line at about $1,600. It's nerve-racking and depressing.

Monthly chart captured July 14, 2022

However, we're still up about 5% on the year in euros, even if we're down relative to the dollar. We're also doing better than the S&P 500 or Bitcoin.

This illustrates the importance of perspective when it comes to savings. The first thing we should do when we feel uncomfortable with short-term moves is to zoom out. What happens in a day, or a week isn't important. We need to look at monthly charts to get a proper view of things.

Furthermore, we should make fair comparisons out of fairness to ourselves. What else could we have been saving except for cash? Bitcoin comes to mind. S&P 500 is another alternative. Let's see how they have fared over the last 12 months in terms of dollars:

• Bitcoin is down 59%
• S&P 500 is down 12%
• Gold is down 7%

Relative to holding Bitcoin, savers in gold look like geniuses, and we're also better off than savers in stocks. We have an unusual situation on our hands, where saving in cash is the best option, but that's not likely to persist for very long. Besides, the prudent saver has some cash savings as well. Seen in this perspective, what is there not to like about our position in cash and gold?

British gold sovereign

By Benedetto Pistrucci - Own work, Public Domain, Link

The Benevolent Volunteer

Wikipedia is supposedly a community of benevolent volunteers who spend their free time writing factually balanced articles for the benefit of mankind. It's held up as an example of what people are willing to do simply to serve their fellow men. However, when we look closer at what's being written, and how it's written, we see that the authors are not as altruistic as it may seem.

This has been particularly noticeable in the way the 2022 Monkeypox outbreak has been covered. The page came about only days into the outbreak, and it was immediately equipped with sophisticated data gathering mechanisms that were able to procure information from all over the world. Only a large corporation would be able to put something like that into place in such a short time.

Once put into place, the page was updated multiple times every day, indicating full time dedication to the page by whoever was operating it. One or more person acted as if they were in full time employment.

When the outbreak peaked some ten days into August, there was a noticeable change in focus. Data was no longer presented in easy to comprehend charts. Instead, we got a series of pictures illustrating how ugly and painful the disease is. There was no mention of the fact that things were looking up, and that we would most likely see the end of the outbreak by Christmas.

The page is now only updated sporadically. Data on Portugal, which was updated every week, hasn't been updated since the end of August. Only countries where there have been deaths get their data updated.

The authors are focusing on bad news, and the only good news they are willing to talk about is the vaccine that was developed shortly before the outbreak. The page appears to be a marketing vehicle developed in the spirit of Edward Bernays' Propaganda.

It's remarkable that Edward Bernays was able to foresee this type of development as early as 1928, when he wrote his book, but this is the exact thing he suggested as a way to sell products and services.

Wikipedia is a marketing vehicle dressed up as an information resource, and the marketing is ubiquitous because all things require marketing.

Everyone who wants to influence the public for various reasons needs to have someone dedicated to propaganda. This is obvious when it comes to products of various kinds. But it's also true for political parties. No serious political party should be without someone dedicated to propaganda, and that person must necessarily be paid by the party.

The need for propaganda doesn't stop at products and politics. It extends into all aspects of civil society, including the sciences. Universities need to promote themselves. The theories that they teach must be promoted. The theories that they oppose must be marginalized. Science articles found on Wikipedia are therefore produced by people working for universities.

This makes Wikipedia a reliable source when it comes to what's currently being promoted by the status quo. It's also a pretty good source when it comes to raw data. But it's not a neutral platform. Data that don't correspond well with the narrative is hidden or obscured. Opinions are projected and facts are presented selectively.

All articles on Wikipedia are written by paid professionals, or by people with an agenda to promote themselves and their ideas. There's no such thing as a benevolent volunteer.

Wikipedia

CC BY-SA 3.0, Link

The Psychology of Savers

We're only savers if there's no credit involved in our investments. The moment we include credit into our schemes, we are either investors or speculators. The distinction between investors and speculators is that investors look at revenues and costs, while speculators buys things merely out of a belief that they will go up in price.

By this definition, hardly anyone these days is a saver. They are either investors or speculators.

Some may argue that they are part investors and part savers. Their bank loan is connected to their house. Shares and other valuables are bought free of credit. However, this obscures the fact that people who do this choose to buy shares and the like instead of paying down loans. They are speculating with part of their bank loan.

Once there's credit involved, savers become either speculators or investors. Speculators pile into whatever looks like it's on its way up, while investors focus more on revenue streams and profitability.

When we buy a house with bank credit, we tend to do so based on the fact that it's cheaper than renting a place. That's the the mentality of an investor. To buy a place merely because it's on its way up is the mentality of a speculator.

Interestingly, both mentalities are present in savers. As savers, we look to get in on things at the cheap, and we love a good dividend. However, we're not using bank credit. We're using real savings. The big difference between the investor/speculator and the saver lies in the presence of credit.

The reason most people end up either investing or speculating is that reliable saving strategies are boring.

This is clear from my book: It's possible to obtain great returns on savings by moving between real-estate, stocks, productive land, and gold. However, this requires long perspectives. We ride cycles that can take decades to pan out, and we do nothing with our savings while this goes on.

One cycle can deliver a tenfold return, so we stand to make a fantastic profit with this strategy, but we won't always hit the tops and bottoms perfectly. We can't expect to make a tenfold profit every decade. We might be treading water for decades.

But life is long. We're likely to catch at least one good wave. That will tenfold our savings. If we manage two such waves, we end up hundred times richer than we started. With a bit of luck we end up a lot richer at the end of our lives than we were when we started, and all we ever did was two big trades.

And that's where the problem lies. Two big trades in a lifetime means that we do nothing with our savings for decades on end, only to make massive moves at the end of mega-cycles.

This requires a special type of personality. Not only must we be patient, but when we move, trades are enormous, which is nerve-wrecking even if it's done in parts over several years.

This is so contrary to how most people are put together that the majority go for other strategies. Leverage is brought in to speed things up. Bets are smaller, but with bigger return/losses, and they run over shorter time spans.

The problem with this is that it comes with a cost. The bank loan isn't free. Speculators are also prone to make more bets than necessary and place their bets at inopportune moments. Not only do they lose to the banks. They lose to professional speculators as well.

Patient savers will almost always win in the end, and the reason for this can be found in nature, aka God. Nature moves at a gradual pace. A small tree becomes a massive structure over time. But it takes decades for this to happen.

Real savings are like this. They too start small, but grow over decades with little to no care from our side. All we need to know is when to harvest, and where to find the next thing to invest in.

The message is clear: If we keep an eye out for opportunities, and plant our seeds carefully and with an understanding of when to harvest, we can spend our lives doing completely other things than looking at charts and making wagered bets on short term price movements.

Enjoying a cup of coffee

Large Ukranian City Plunged into Darkness

After a few relatively uneventful months, things are heating up in Ukraine again. There's been a counteroffensive against Russian forces in the east of the country. After a period of little progress, the Russian line broke, allowing Ukranian forces to take control of the area around Ukraine's second largest city.

The response by the Russians has been to plunge the city into darkness by disrupting its electricity supply.

This is the first time that Russian forces have directly targeted civilians in this way, so the move must be seen as an escalation. But the purpose of this escalation is unclear. Is it the Russians lashing out in anger and frustration, or are we looking at a sound military manoeuvre?

I suspect it's the latter because the situation in and around the darkened city must be confusing and desperate. Without electricity, water and sewages systems stop functioning. Transportation and telecommunication become difficult as well. This in turn, provides an opportunity for Russian forces to encircle the area and capture the Ukranian forces.

However, if the Russians don't take advantage of the chaos relatively soon, we'll know that the Russians are giving up on their campaign in the area, and simply destroying things as they retreat in order to dish out as much misery as possible on their way back to the Russian border.

Mark Esper with Jens Stoltenberg

By U.S. Secretary of Defense - 200212-D-AP390-6107, CC BY 2.0, Link

The 5th Empire - Civil War

There's been some talk of civil war lately, as if this is the inevitable end station we're heading towards now that pretty much every aspect of civil society is up for political debate. But there are other ways to react to political overreach than to resort to violence, and the public has so far remained calm. If anyone is trying to spark unrest, they aren't succeeding.

Civil war only happens when a political faction is pushing policies onto another faction in such a way that violence is seen as a legitimate and necessary reaction. Hence, all civil wars are political creations. They don't come about in societies where people are allowed autonomy over their own affairs.

The sensible response to political overreach is therefore to stay away from it as much as possible. Never get too worked up in politics. If something doesn't directly affect us, we let it be. If something is becoming burdensome, we look for ways around it.

Our attitude towards civil war should be no different than our attitude towards war. Only if our community is directly endangered by some intolerable evil does it make sense to take up arms. Our only moral duty is to protect ourselves and our family.

Storming of the Bastille

Revolution - By Jean-Pierre Houël - Bibliothèque nationale de France, Public Domain, Link

57,000 Cases of Monkeypox Worldwide

It's September 10, and we've reached 57,000 cases of Monkeypox worldwide. That's 2,000 fewer cases than predicted eight days ago. Instead of 750 new cases per day, we got 500 new cases. This is a remarkable drop in new cases, indicating that the outbreak may be over by Christmas.

The worldwide number of cases currently in hospitals can be estimated to be 5,000 based on an assumption that patients are released within 10 days.

The downward trajectory we've predicted based on data from Portugal is materializing. Assuming that this trend persists, we can make the following projection going forward:

• July 24 - 17,500 cases, 700 new cases per day, 7,000 inpatients
• August 1 - 24,000 cases, 750 new cases per day, 7,500 inpatients
• August 9 - 32,000 cases, 1,000 new cases per day, 10,000 inpatients
• August 17 - 39,000 cases, 875 new cases per day, 8,750 inpatients
• August 25 - 46,000 cases, 875 new cases per day, 8,750 inpatients
• September 2 - 53,000 cases, 875 new cases per day, 8,750 inpatients
• September 10 - 57,000 cases, 500 new cases per day, 5,000 inpatients
• September 18 - 61,000 cases, 500 new cases per day, 5,000 inpatients
• September 26 - 63,000 cases, 250 new cases per day, 2,500 inpatients
• October 4 - 65,000 cases, 250 new cases per day, 2,500 inpatients
• October 12 - 66,000 cases, 125 new cases per day, 1,250 inpatients
• October 20 - 67,000 cases, 125 new cases per day, 1,250 inpatients

Pride flag

By Gilbert Baker (Vector graphics by Fibonacci) - SVG based on this image, Public Domain, Link

A Convenient Truth

Piers Corbyn is described by Wikipedia as an English weather forecaster, businessman, anti-vaxxer and conspiracy theorist. With this in mind, it's hardly surprising that he thinks that climate change has nothing to do with human activity. Yet, Zerohedge spins this into a big deal, citing the man's credentials as a physicist and weather forecaster.

We're supposed to believe that the interviewer was genuinely surprised by Mr. Corbyn's position, and we must completely ignore the fact that this interview was aired by RT, one of Putin's favourite propaganda outlets.

Russia is the world biggest exporter of hydrocarbons, so this revelation by Mr. Corbyn is hardly inconvenient. The interview was almost certainly staged. It's not an argument for or against man made global warming. But it may mark the beginning of a counter-offensive in the battle between green energy and hydrocarbons; a battle that's likely to intensify as we move into the coming winter.

Vladimir Putin

By Kremlin.ru, CC BY 4.0, Link

Necessities, Luxuries and Savings

Personal finance is about finding the right balance between necessities, luxuries and saving, and to know how to do this in a manner that maximizes profits. If done correctly, we can achieve a great deal of affluence even at a modest income.

The first thing to realize is that necessities are not savings and should not be treated as such. This is obvious when it comes to everyday consumption, but not so obvious when it comes to shelter. We need a place to live, and this is no luxury, nor is it savings.

When we buy a place to live, we do so because it's a better deal than to rent. We do our calculations. We figure we're better off buying a place, and we go ahead with our purchase. This calculation shouldn't be measured up against alternative investments, because we're looking at a necessity.

However, if we're considering a house that's larger than what we need in order to be comfortable, we're moving into the realm of luxury. If we can afford it, this kind of luxury enhances our wellbeing. It's also a great way to save if we manage to buy the luxurious house at a good price.

It's only at this point that buying a house becomes an investment. If our dwelling is merely comfortable and well kept, it's not a saving but a necessity.

My book on personal finance assumes that we're already at this point. It's about savings. Necessities are only mentioned initially as the foundation from which we build our wealth.

When my wife and I bought separate dwellings back in 2004 and 2005, we did so out of necessity. The alternative would've been to rent places to live. The fact that I ended up making a lot of money from my purchase wasn't due to some clever insight. Rather, it was due to good luck.

Furthermore, most of the profit from the sale went directly into other necessities. My wife's flat required refurbishing, which I paid for. My financial situation was precarious, so we decided to pay down all debt and put aside cash. What remained after this is what I'd describe as savings, and it wasn't all that much. However, if managed correctly, it should be possible to grow my savings significantly without ever resorting to bank credit.

The strategy I've decided on uses historic ratios for real-estate, land, stocks and gold. I move from one asset class to another only when this is likely to benefit me greatly over the next ten years or so. I'm currently in gold, because that is the asset class that seems the most under-appreciated. I'll move into stocks, land or real-estate if any of these become cheap relative to gold. As long as that doesn't happen, I'll remain in gold.

However, this strategy only makes sense when necessities are already covered. Two of my children in Norway bought their separate flats back in 2020. They bought it with bank credit. Their calculations didn't relate prices up against gold, or any other asset, because their purchases were based on necessity.

New York house

By Raysonho @ Open Grid Scheduler / Grid Engine - Own work, CC0, Link

People We don't Need

The idea that there's a common good is at the root of many evils. One such evil is to speak of other people in terms of utility. We define two groups of people: one being us, and the other being them. Then we start discussing them as if their purpose for existing is to serve us.

This type of thinking was on full display in a recent TED talk by Yuval Noah Harari the other day. After some back and forth, he concluded that we don't need the vast majority of people. There's a surplus population that we don't know what to do about.

Having talked about people in terms of their utility for politicians and industry owners, we must assume that the common good is whatever serves this class of people the best. Mr. Harari is also part of this protected group. After all, it's thinkers like himself who have to sit down and decide what to do with the surplus population. Harari is one of the important guys.

This illustrates how the word we, when used by politicians and the likes of Mr. Harari, only applies to us when some sacrifice is implied. When they tell us that we have to give up comforts for some reason or other, it's about us. When they say that we must come up with ways to make the world a better place, it's about them thinking and us doing whatever they come up with.

One way to counter this kind of evil is to use the same structure to our own language. We should consistently talk of politicians and their hired intellectuals as they and speak of ourselves as us. When they say that we must make sacrifices, we should ask ourselves what are they up to now? When there's a war, we should never refer to the war as our war. Wars belongs exclusively to them.

The fact that Mr. Harari thinks of us as surplus that needs to be managed should be an eyeopener to us all. If they already think in these terms, why should we trust them with anything? How likely is it that they will act to our advantage when they think of us as useless eaters? Aren't they more likely to come up with ways to cull the surplus?

Yuval Noah Harari

By Daniel Naber - File:Yuval_Noah_Harari.jpg, CC BY-SA 4.0, Link

Notable Deaths in August

With August behind us, we now have another month of notable deaths to analyze.

August 2022 saw 726 deaths, which is well below August 2020 with 933 deaths, but still well above August 2019 with 585 deaths and August 2018 with 576 deaths:

• 576 in August 2018
• 585 in August 2019
• 933 in August 2020
• 832 in August 2021
• 726 in August 2022

August is a month that tends to see high death rates among those younger than 70 years of age. This is due to accidents related to summer activities. But August 2022 was different than normal in this respect, with 21.5% of deaths among those younger than 70 years of age. This is in line with what we had in August 2020 and 2021 when travel restrictions were at their most intrusive. Relative to young people, this August saw an unusual high death rate among the elderly:

• 24.13% in August 2018
• 24.27% in August 2019
• 20.26% in August 2020
• 22.23% in August 2021
• 21.49% in August 2022

Using a severity formula that divides old deaths by 10 and multiplies young deaths by 4 we get the following:

• 604 in August 2018
• 612 in August 2019
• 830 in August 2020
• 804 in August 2021
• 681 in August 2022

August 2022 came in at 681, which is a big improvement over August 2020 with 830, but still substantially higher than 2018 and 2019 with 604 and 612 respectively.

Notable deaths according to Wikipedia

Here are the numbers:

---

August 2022:

• 20s = 9 = 1.24%
• 30s = 11 = 1.52%
• 40s = 15 = 2.07%
• 50s = 44 = 6.06%
• 60s = 77 = 10.61%
• 70s = 169 = 23.28%
• 80s = 217 = 29.89%
• 90s = 163 = 22.45%
• 100+ = 21 = 2.89%

Total = 726; Younger than 70 = 21.49%

August 2021:

• 20s = 10 = 1.20%
• 30s = 15 = 1.80%
• 40s = 22 = 2.64%
• 50s = 42 = 5.05%
• 60s = 96 = 11.54%
• 70s = 195 = 23.44%
• 80s = 268 = 32.21%
• 90s = 165 = 19.71%
• 100+ = 19 = 2.28%

Total = 832; Younger than 70 = 22.23%

August 2020:

• 20s = 7 = 0.75%
• 30s = 12 = 1.29%
• 40s = 18 = 1.93%
• 50s = 50 = 5.36%
• 60s = 102 = 10.93%
• 70s = 190 = 20.36%
• 80s = 244 = 26.15%
• 90s = 188 = 20.15%
• 100+ = 20 = 2.14%

Total = 933; Younger than 70 = 20.26%

August 2019:

• 20s = 4 = 0.63%
• 30s = 10 = 1.71%
• 40s = 17 = 2.91%
• 50s = 36 = 6.15%
• 60s = 75 = 12.82%
• 70s = 123 = 21.03%
• 80s = 191 = 32.65%
• 90s = 120 = 20.51%
• 100+ = 9 = 1.54%

Total = 585; Younger than 70 = 24.27%

August 2018:

• 20s = 1 = 0.00%
• 30s = 11 = 1.91%
• 40s = 22 = 3.82%
• 50s = 33 = 5.73%
• 60s = 72 = 12.50%
• 70s = 116 = 20.14%
• 80s = 180 = 31.25%
• 90s = 129 = 22.40%
• 100+ = 12 = 2.08%

Total = 576; Younger than 70 = 24.13%

Wikipedia

CC BY-SA 3.0, Link

Misconceptions about Glaciers

It's common to think of glaciers as rivers of ice. The image conjured up is that of valleys full of ice. However, glaciers never form in valleys. They form on top of mountains, and ice filled valley are but tiny outlets.

The better way to think of glaciers, if we insist of using the image of slow moving water, is that they are frozen lakes on top of mountains. Ice filled valleys are minor features.

To illustrate, we have Hardangerjøkulen, which sits on top of a 1,800 meter tall mountain in Norway. The ice is about 350 meter thick at its thickest, and it comes down to 1,050 at the sides of the mountain.

Hardangerjøkulen viewed from Hårteigen

By Berland - Own work, CC BY 2.5, Link

This glacier doesn't have any famous outlet. It just sits there as a giant frozen lake. It's also easily visible from afar, and therefore a good example of a glacier the way we should think of them.

By contrast, we have the Jostedal glacier. This glacier is more than 6 times larger than Hardangerjøkulen by extent. It sits on top of a mountain plateau that's about 2,000 meter high. It's 600 meter thick at its thickets, and its outlets come down into valleys only 350 meter above sea level.

The Jostedal glacier is more than ten times larger than Hardangerjøkulen by volume. Yet the typical image presented to us is this:

Outlet of the Jostedal glacier

By G.Lanting - Own work, CC BY 3.0, Link

We get the impression that the Justedal glacier is little more than this outlet. Making the deception even stronger is the fact that Jostedal means Joste-valley. The name of the glacier conjures up this image. However, this is but a tiny fraction of the glacier.

The lake of frozen water lies behind the mountain top in the distance, and the ice-lake is enormous. But it's rarely photographed, because it's neither visible in all its glory from the side, nor accessible to the typical hiker.

When photographed from up close, its true dimensions is lost in that there's no good reference points to compare it with. There's a lot of ice, and that's it. Satellite images are not of much help either, because they too are hard to relate to in terms of relative sizes.

This set's the stage for the deceptive notion that we're in some kind of climate crisis. The Briksdal glacier and the Nigard glacier, both outlets of the Jostedal glacier, are all but gone. It's as if all the ice is about to disappear altogether. However, as this scientific paper tells us, the Jostedal glacier is in no danger of disappearing over the next hundred years or so.

The major glacier that the scientists are worried about is Hardangerjøkulen. They think it quite plausible that this glacier, which is 350 meter thick at its thickest, will shrink in thickness by 3.5 meters every year.

Anyone with any experience of ice and how slowly it melts, will find this conclusion rather astonishing, and the scientists must themselves have been a little embarrassed with their conclusion, because they added this caveat: Summer temperatures would have to rise by 2-3 C, without any increase in winter precipitation.

The scientists managed in this way to conclude that Hardangerjøkulen is in danger of melting away, and at the same time tell us that it's not going to happen. We're now sixteen years into their hundred year forecast, and summers are no warmer than they were when they wrote their paper. Winter precipitation is also unchanged. The conditions required to make the glacier disappear are not materializing.

The caveat that the scientists put into their conclusion is no small point. It's fundamental.

Glaciers require two things in order to form:

• Low average temperatures
• High winter precipitation

These are the conditions that exist in the west of Norway, and the reason this area of Europe has so many glaciers. There are many meters of snow falling every winter. This compacts into ice, and the glacier only shrinks if summers are warm enough to melt away as much ice as is added.

Glaciers descend from above. They don't come crawling out of valleys. The real danger to Norway isn't what may happen if temperatures go up 2-3 C with no increase in winter precipitation, but what would happen if temperatures were to drop without any corresponding drop in precipitation. If the drop is about 1 C, we're back to the little ice age. If the drop is more than that, we might see the return of the great Scandinavian ice sheet.

The great Scandinavian ice sheet

By Ulamm - File:Europe topography map.png, 2 April 2006 by San Jose, based on the Generic Mapping Tools and ETOPO2, CC BY-SA 3.0, Link

This possibility is hardly ever mentioned, and seems absurd in light of the current focus on heat waves and forest fires. However, this is what Europe looked like for most of the past 100,000 years. It's our current climate that's the anomaly. The mild temperatures and stable seasons that we take for granted came about some 10,000 years ago.

We're told that higher temperatures will melt the great ice sheets on Greenland and Antarctica, and that this will cause sea levels to rise by 100 meter. Just about every major city will sink into the oceans. But this will require average temperatures in these places to go up much more than 2-3 C, because the average temperature on Greenland is very low, and it's even colder on Antarctica.

It doesn't matter to these ice sheets if temperatures go up by 2-3 C. What matters is how much precipitation these places get, and no-one is predicting a sharp drop. Even the most hardened climate alarmist believes that we'll see more precipitation. That means that the ice sheets aren't going to disappear. They may well grow, even if temperatures go up, because there's no direct link between temperature and the size of ice sheets. It's the combination of temperature and precipitation that matters.

Hardangerjøkulen disappeared some 8,000 years ago, but staged a 1,000 year comeback when temperatures were at their warmest from 7,000 to 6,000 years ago. The glacier that the scientists are so concerned about was doing fine during a time when temperatures were 2-3 C above what they are today. The reason for this is that the period was unusually wet.

The idea that the ice sheets on Greenland and Antarctica will melt away over the next few hundred years is absurd. It would take thousands of years to do such a thing, and it would require much more than an increase in temperature of 2-3 C. It would also require winter precipitation in these areas to stop. That would mean no precipitation on Greenland from September to July, and no precipitation at all on most of Antarctica where winter temperatures prevail all year round.

We can rest assured that sea levels aren't going to rise by more than a few centimeters per decade, and that's hardly anything to lose any sleep over. Even the most unhinged climate alarmist can take comfort in this, because that's what the science that we all can agree on is saying.

Greta Thunberg

Eco-anxiety - By Anders Hellberg - Own work, CC BY-SA 4.0, Link

A Normal Summer in Porto

If I hadn't been corrected by some friends the other day, I would have titled this post "Another Cool Summer in Porto" like this post from a year ago.

My friends grew up in Porto, and told me that the summers we've been having haven't been different from normal. If anything, they've been warmer than normal. People going out at night without putting a jacket on never happened when they were young. Such warm nights are a new phenomenon.

This was news to me, because in my sixteen years in Porto, going out at night without a jacket has been the norm during summers. It's only in recent years that this has become less normal.

I found this difference in perspective interesting, because it illustrates a few things when it comes to the climate debate. We tend to view as normal whatever the conditions were during our formative years in a place. Recent variations are compared to those times, and any deviations are seen as abnormal. In the case of my friends, the 1980s are their reference frame. In my case, it's the late 2000s.

Another factor that plays into this is what we learned as kids regarding the climate. I'm old enough to have been taught that we're heading into a grand ice age, similar to what we had for about 100,000 years until the Holocene. We were taught climate history, and the things we were told were the sort of stories that can be found in this online resource. With no stories nearly as compelling in defence of man made global warming, I've stuck with the prevalent thinking from the 1970s.

Then, there's confirmation bias. We tend to look for evidence that supports our preconceive notion of things. People who believe in man made climate change latch onto evidence for it. I look for the opposite.

There's nothing wrong with confirmation bias, by the way. It only becomes a problem when some people think themselves immune to it. Once a group of people declare their view as correct and without any kind of confirmation bias, we know we're dealing with charlatans. Such people aren't interested in truth. They're only concerned about being right.

So I admit openly that my views are skewed by confirmation bias. I remain convinced that another grand ice age is inevitable, and relatively close at hand. We're at the end of a warm period that has lasted 10,000 years, and we're heading into a cold period that will last 100,000 years. The Holocene has been a period of unusual climate stability and warmth. However, the trend has been towards a colder climate over the last several thousand years. The warm peak happened at the beginning of the period, some 8,000 years ago.

At the start of the Holocene, all glaciers in Norway melted away, and the land was covered in the sort of forest that we associate with Germany rather than Norway. But the glaciers came back about 6,000 years ago. The Jostedal glacier appeared. It lies on top of a forest that used to grow there. We know this because bits and pieces of forest emerges from it every now and again, and these pieces are dated to be 6,000 years old.

The Jostedal glacier is the mother of minor side arms such as the Nigard glacier and the Briksdal glacier. These are tiny in comparison. They come and go, but the Jostedal glacier persists. The Nigard glacier consumed a farm a few hundred years back, but is now pretty much gone. The Briksdal glacier is also gone. The melting period that started back in the 1750s has continued to this day. But I'm nevertheless sure that these minor glaciers will come back. That's my confirmation bias kicking in.

Another interesting fact is that Hardangervidda was covered in a lush forest as recently as the Medieval warm period. There are some paintings made by a painter back in the early 1800s that depict the remnants of such a forest decomposing in a bog.

Hardangervidda is today a barren plain with only moss and grass growing here and there. However, I've spent many summers at a cabin in the area, and trees are reappearing at the fringes of Hardangervidda. Looking at pictures from the cabin that were taken a hundred years ago, it's as if the cabin was situated in the centre of Hardangervidda. Today, the cabin is surrounded by five meter tall birch trees. There's thick turf on the ground, lush grass and wildlife everywhere. Yet, I'm convinced that this too will pass.

We're looking at relatively minor cycles, typical of the Holocene, and to make a big deal out of this is silly. There's nothing out of the ordinary going on. The climate is nowhere near as warm as it was at the beginning of the Holocene, some 10,000 years ago. It's not even close to being as warm as it was during the medieval warm period. But it's warmer by quite a bit since the 1750s, and this has some people worked up in a frenzy as if the end of the world is near.

Sidearm of the Jostedal glacier

By G.Lanting - Own work, CC BY 3.0, Link

A Tale of Two Dwellings

I bought a house in Asker, Norway for 1.7 mill NOK in 2004. This was financed with 1.2 mill NOK in bank credit and 0.5 mill NOK of savings. The price of gold was at the time around 120 NOK per gram. The money put up for the house was about 14 kg, where 10 kg was borrowed and 4 kg was savings.

I sold the house again in 2017 for 4.7 mill NOK. The price of gold was at the time roughly 300 NOK per gram. The money received from the sale was about 16 kg. My bank loan was down to 0.9 mill NOK, corresponding to 3 kg. The remaining 13 kg was my cut of the sale.

Meanwhile in Porto, my wife bought a flat for €140.000 in 2005. This was financed entirely with bank credit. The price of gold was at the time at around €11 per gram. The money put up for the flat was in other words 12.7 kg.

When I sold my house in 2017, my wife's flat was priced at €120,000. My wife's loan was still at €140,000. The price of gold was €36 per gram. My wife's flat was no longer 12.7 kg, but 3.3 kg. Her debt was also down. It was no longer 12.7 kg, but 3.9 kg.

The situation in 2017 was as follows:

• Asker: house = 16 kg, loan = 3 kg => 13 kg realized gain
• Porto: flat = 3.3 kg, loan = 3.9 kg => 0.6 kg unrealized loss

Note that my wife didn't suffer much from the drop in her flat's value. The fact that she forked over what amounts to 12.7 kg of gold for her flat back in 2005, didn't translate into any great loss because she financed her purchase with bank credit.

Similarly for me, my profit was not primarily due to the fact that I got 2 kg more for my house when I sold it. It was due to the fact that my bank loan was reduced from 10 kg to 3 kg, with me only paying down 1 kg of this.

My wife was lightly burned by her credit financed purchase while I was greatly advantaged. Our combined profit ended up at about 12 kg.

However, if we had both paid in gold, the situation would have been different. The only benefit to us would have been the money saved by the fact that we wouldn't be paying any interest.

Assuming that my wife paid 4% on her €140,000 loan and that the average gold price was about €20 for the 12 year period, my wife would have saved herself a total of €67,000, corresponding to about 3.5 kg of gold.

My loan was at about 5% on a 1.2 mill NOK loan. The average price of gold for the 13 years was about 200 NOK per gram. My saving on interest payments would have been 780,000 NOK, corresponding to about 4 kg of gold.

The situation in 2017 would have been as follows:

• Asker: profit on house = 2 kg, interest saved = 4 kg => 6 kg realized gain
• Porto: loss on flat = 9.4 kg, interest saved = 3.5 kg => 5.9 kg unrealized loss

Our combined profit would have been zero rather than 12 kg.

The lesson we can draw from this is that we should never buy anything with our gold unless we get a lot for it. We should instead use bank credit. Our gold should serve as our personal security, only to be used in extreme situations.

By extreme situations, we're talking about Dow/gold ratios below 4 and three-bedroom apartments selling for less than 2 kg. Such conditions indicate that gold is in bubble territory. It may also be difficult to get hold of credit when such bargains abound, so we sell our gold in order to finance our purchases.

The value of gold as personal security becomes apparent in situations where financial conditions suddenly tighten to the point of squeezing us financially.

Imagine buying an apartment for 6 kg of credit at an interest rate of 4%, only to be caught up in a financial crisis with interest rates suddenly at 20% and our apartment not fetching any bids higher than 1 kg. People will be forced to sell to cover their debt. However, those with a gold holding can use that to cover part or all of their debt.

To illustrate, we can return to my wife's situation in 2005 and 2017. Let's say that she had 6 kg of gold in savings that she kept as security when she procured a loan corresponding to 12.7 kg for her flat. That security could then have been used in 2017 if she had been caught in a squeeze. My wife's loan had at that point been reduced to 3.9 kg. Her gold savings would have covered this, and she would have gotten through the squeeze without having to sell her flat.

Navigating through a storm

By maybe Allan C. Green or George Schutze or maybe Alexander Harper Turner - This image is available from the Our Collections of the State Library of Victoria under the Accession Number:, Public Domain, Link

Using Bank Credit to buy a House

I'm not a fan of bank credit. I advice against it in my book because most people get burned by it. The typical borrower gets in late in a credit cycle. They end up paying too much for things, and if they're particularly unlucky, they get slammed with high interest rates and forced to sell at the worst possible moment.

This happened to many during the housing bust that took place between 2004 and 2014. At its peak, typical houses were priced at 10 kg of gold. At the bottom in 2014 the same houses went for 2 kg. There's a lot of misery hidden in those numbers. However, the person that bought a flat in our building for 2 kg back in 2014 can now sell that same flat for 4.4 kg. That's a profit of 2.4 kg based on 2 kg of capital put down up front.

In terms of Euros, the buyer in 2014 has done even better. The price has gone from €66,000 to €240,000.

If the €66,000 required to buy the flat were all borrowed from a bank at 4%, the cost to the buyer would be €21,000 over the eight year period. That translates to about 0.7 kg of gold in running costs. When we subtract this from the profit of 2.4 kg, we get a profit of 1.7 kg based on 0 kg of capital put up front.

Instead of a profit of 2.4 kg made on 2 kg, the buyer has a profit of 1.7 kg made from 0 kg. If the buyer borrowed 100% from the bank, 1.7 kg was made from nothing.

Buying real-estate with credit when prices are down and interest rates are low is clearly a winning strategy because money can be made from nothing. However, this combination is rare.

To see how things pan out when house prices are high, but interest rates remain low, we can use the house I sold in Norway in 2017 as an example. Measured in gold, the house went for 16 kg, and it now commands a price of 14 kg. It's down 2 kg. However, the buyer almost certainly used bank credit. We must therefore look at the prices measured in Norwegian Krone.

The house was sold for 4.7 mill NOK in 2017. It now commands a price of 7.2 mill NOK. If financed with credit at 5%, the buyer has paid 1.2 mill NOK over the 5 years since 2017. This translates to a cost of about 3 kg.

On the other hand, there's a profit in NOK to the buyer of 2.5 mill NOK. That translates to 4 kg. If the buyer used 100% credit, that buyer is now up 1 kg.

The use of credit makes it possible to make money even when prices in terms of gold are falling, provided the fall isn't too sharp, and the interest rates aren't too high. In the case of my house in Norway, the buyer has made 1 kg of profit from 0 kg of capital if the house was financed 100% from bank credit.

However, if the buyer in Norway paid with real savings rather than bank credit, that buyer is now down 2 kg, because the 16 kg paid is now 14 kg. But this same person enjoyed a bonus in that there was no interest bearing debt to carry over the five years. That's 3 kg of liquidity that the prudent saver could enjoy that the ones using bank credit had to forego in order to make a paper profit of 1 kg.

The prudent saver sees a paper loss of 2 kg at no cost. The bank credit speculator sees a paper gain of 4 kg at a cost of 3 kg over the same five year period.

Interestingly, if the prudent saver decided to put aside 3 kg in savings over the five years, corresponding to the 3 kg in costs incurred by the speculator. The net result would be a gain of 1 kg to the prudent saver. When everything is added up, the speculator is no better off than the prudent saver in absolute terms. The big difference lies in the fact that the speculator gets 1 kg from nothing, while the prudent saver put 16 kg up front for the same gain. But that advantage to the speculator comes at a price; namely risk.

Imagine now a drop in house prices in Norway down to 11 kg over the next five years, and that this corresponds to no change in nominal house prices and no change in interest rates. The speculator will in that case continue to pay interest rates corresponding to about 3 kg of gold while the prudent saver can add another 3 kg of gold to savings.

This scenario results in no change to the prudent saver's gold + real-estate holding. It remains at 17 kg when all added up. However, the speculator is now down from having a paper profit of 1 kg to a paper loss of 2 kg.

If this trend continues for another five years, the house will be at 8 kg. The prudent saver will have another 3 kg of gold, totalling 9 kg, which makes a total of 17 kg together with the house. The speculator, on the other hand, has a house worth 8 kg, at a cost of 9 kg over fifteen years.

Considering that none of this is particularly extreme, the prudent saver may end up being able to buy the speculator's house after fifteen years, using no credit. The speculator, on the other hand, will have spent 9 kg over the same period with only 4 kg of gold to show for it.

British gold sovereign

By Benedetto Pistrucci - Own work, Public Domain, Link

Historic House Prices Measured in Gold

House prices measured in gold vary significantly depending on time and place. This article on the subject illustrates this perfectly, and contains some charts worth studying.

The focus is on house prices in New Zealand, UK and US. These prices will typically be elevated relative to places with less affluence because the median price of a house must reflect the ability of the median worker to pay. However, it's probably fair to compare the median house price in NZ to the median price of a flat in Porto, because Porto is a town and NZ is a country.

Looking at the first chart, which has NZ house prices going back 60 years to 1962, we note the following:

• The lowest price was in 1980 at about 1,5 kg
• The average price during the period was about 5 kg
• The highest price was in 2004 at almost 10 kg.

This can be compared to a historic chart of UK house prices going back to 1950:

• The lowest price was in 1980 at about 2 kg
• The average price during the period was about 5 kg
• The highest price was in 2003 at 20 kg

US house prices going back to 1960:

• The lowest price was in 1980 at about 3 kg
• The average price during the period was about 12 kg
• The highest price was in 2004 at 20 kg

The prices in NZ are based on median houses, while prices in the UK and US are based on average houses. This explains the elevated prices in the UK and US relative to NZ because the NZ prices filter out the most expensive houses. However, the correlation is nevertheless striking.

We see that the typical house becomes expensive when it commands a price higher than 5 kg of gold. This is true for the US as well where super-mansions push the average price higher than in other places. Take out the mansions, and we get prices more in line with the UK and NZ.

We can add to the above that a small place should be priced somewhere between 1 kg and 6 kg, with 3 kg a reasonable average.

On a final note, we see from price charts going more than hundred years back in time that the average price of a house was remarkably stable at around 3 kg. The classical gold standard didn't only prevent wild fluctuations in the stock market, it prevented such fluctuations in the house market as well. It also made houses more affordable on average than what we've seen since 1913.

New York house

By Raysonho @ Open Grid Scheduler / Grid Engine - Own work, CC0, Link

House Prices in Porto and Asker Measured in Gold

Gold trades currently at about €55 per gram. That's up from about €36 back in 2017. Gold was at €30 back in 2014, after having reached a temporary high of €44 back in 2013. This can be established by consulting a gold chart.

Historic house prices, on the other hand, are not so easy to find. Here, I have to go by memory. I remember an apartment in our building going for something like €66,000 back in 2014. This changed to about €120,000 in 2017, and the price is now at about €240,000.

Going farther back in time, we can note that my wife bought her flat in 2005 for €140,000. That translates to 12.7 kg, with the price at the time at €11,000 per kg.

When we relate these prices against gold we get the following for a three bedroom apartment in a quiet neighbourhood of Porto:

• 2005 - 12.7 kg
• 2014 - 2.2 kg
• 2017 - 3.3 kg
• 2022 - 4.4 kg

Measured in gold, the price of my wife's apartment is still down 2/3 since she bought it, even if it's up by 80% in nominal terms.

However, prices of apartments in Porto have outperformed gold since 2014. But house prices aren't 3.6 times higher than they were in 2014, as it may seem from the nominal price of apartments. The current price of an apartment is two times what it was back in 2014.

Where prices are heading from here on is not self evident. I sold my house in Asker, Norway for 16 kilogram of gold back in 2017. It wasn't a fantastic house. A fair swap would be for a good three bedroom apartment in Porto which traded for about 3.3 kg back in 2017.

This means that my house was about 13 kg overpriced relative to prices in Porto when I sold it. However, I didn't profit wildly from this. I bought my house for 1.7 mill NOK back in 2004, which translated at the time to 14 kg. My profit was no more than 2 kg.

A corresponding house in Asker is currently going for about 14 kg. Prices in terms of gold are back to where they were in 2004. They are still in bubble territory, and they haven't continued up, as it may seem from looking at nominal prices. The trend has been downwards over the past five years.

We have the following data points for a modest house in Asker, Norway:

• 2004 - 14 kg
• 2017 - 16 kg
• 2022 - 14 kg

On the face of it, I'm only 2 kg better off having sold my house in 2017 rather than now. However, this ignores the fees and taxes associated with the house. These fees amount to about 200 gram every year, which I would have to somehow cover. Since I wasn't renting the house out, and would probably struggle to do so if I tried, we can add 1 kilogram of savings into the above calculation. That puts my profit at 3 kilograms of savings that I would otherwise have lost out on.

It's clear from this that house prices wary greatly depending on place and time. It's also clear that house prices aren't going up as fast as it may appear by comparing nominal prices. Prices in Norway are down from all time highs, even if nominally higher by quite a lot. Prices in Porto on the other hand are up by 30% since 2017, and 100% since 2014, while remaining down by 60% since 2005.

The historic norm is for prices of houses in the above category to fluctuate between 1,5 and 9 kg . But Norway proves that prices can go well above this range, and stay there for a long time.

If our sole goal of buying a house is to profit from it in real terms, it's probably wise to avoid purchasing a typical three bedroom flat for more than 5 kg. However, if the goal is to live in the house, other factors play in. The house we live in is not merely an investment. It's a lifestyle. Seeing that we may have to wait twenty years or more for a good deal to come along, we might risk never buying the house we want for ourselves out of greed and/or fear.

Reflection in a soap bubble

By Brocken Inaglory. The image was edited by user:Alvesgaspar - Own work, CC BY-SA 3.0, Link