Friday, June 4, 2021

This Is Beyond Nuts

Forget everything you know about bubbles, delusions and manias. Today’s “free markets” (forgive me Adam Smith) are psychotic, at the very least. They are no longer economic, social or even psychological mechanisms or phenomena, but case studies in clinical neuropsychiatry. Case in point: DubaiCoin (chart below). Within just four (4) days from May 26-29 it went from $0.08 to $1.80 and back to $0.20. That’s a gain of 2,250%, followed by a drop of 84%, all in four days. And as of this posting it is at $0.30, a subsequent gain of 50%.

Heavy Meds Needed, STAT!!

Yet, that’s almost rational when compared to the invisible sculpture that was auctioned for 15,000 euro last month.  That’s right, invisible as in empty space, thin air, niente, nada, nothing.  It even comes with instructions on how it should be properly displayed. I’m not kidding, read and laugh - or weep.

Money For Nothing- Literally

I said that there’s too much money around chasing all kinds of “stuff”.  Now, money is even chasing nothing and is used to price nothing. Ergo, what is the value of money? Yup, it ain’t what it used to be...

Taking this a bit further, if nothing is priced at €15,000 it follows that something’s price should be higher. A cup of coffee for $1,000,000? A dozen eggs for a barrow-full? Why not, it’s not like we haven’t seen it before,.  But, hey, let’s keep printing it can’t happen here, right?

One Dozen Eggs, And Keep The Change -PLEASE!

We have become so accustomed to cheap money that the very oxymoron “cheap money” no longer rings alarm bells. Zero interest rates? No problem. Negative interest rates? No problem. Seriously??? Money should not be “cheap”, it should not be free (as in pouring down on everyone) and it most definitely should not have an absolute negative “carry” (as in negative interest rates).  Otherwise.. why should we even possess it, hold it, amass it? 

Get this straight: when (mind you, not if) someone comes up with the realistic reserve currency alternative, the dollar is history, and most likely so is the euro.  And by realistic I definitely do not mean cryptos, NFTs, imaginary art or even precious metals.  I mean the Chinese yuan, which is very carefully and deliberately being prepared to dethrone the dollar.

I don’t know when China will pull the trigger - but pull it will. Pay careful attention to what China is doing. It is banning cryptos, tightening credit conditions, warning of asset bubbles. Contrast that with the Fed and, sadly, the ECB.  China is preparing the yuan as reserve currency of choice; it already has ready customers fit it, since its trade surplus is gargantuan. All it has to do is make the yuan freely tradeable and require payment in yuan for its exports.  It’s going to happen...

Meanwhile, back in Rome - sorry, I meant Washington - politicians are bathing in hubris, never for a moment worrying about a sudden collapse. Hint: ask Gorbachev what he thinks...


  1. the Chinese have a lot of difficulty believing in the idea of human rights... i think asking them to believe in property rights is a bridge too far... =)

    1. I agree... I don't think Asians ever understood the motivation underlying humans rights... I suspect I am about as Westernized as an Asian gets; and I don't quite get it either.

      Anyway, I was sort of saying that China will not respect property rights, largely for the same reason, it (or I) cannot understand what there is to respect; which means it will probably not take the U.S. place as a region to store private wealth.

      Also, I don't think China would want people to give it Yuan that it can print. If it ever has that level of pricing power, it would be asking people to give it gold/ assets. Actually, I suspect China (and most trade surplus countries) are converting their money into assets as fast as possible.

      Indeed, I would guess most people are trying to hold as little cash as possible... hence all those asset bubbles; which, as you pointed out, may not actually be bubbles... scary right...

      It is also why I think the Fed must keep printing; no one, (unless compelled) is going to buy a Treasury... which means, if the Fed does not buy them, the interest rate will be sky-high.... how is the Fed supposed to buy them? print money... all those fancy theories are just a cover. =)

    2. to summarize... China desires an empire; yes.

      but I don't think it is looking to create a finance based empire in the model of Britain or the U.S.

    3. I think China is an excellent student of History - and rightly so, since it created lots of it. unlike GB EU and US it has a very long experience in empire building. I agree, it doesn’t want to create a finance-based empire. Instead, it wants a “real” empire, closer to the Roman model.

      Still, a global currency is essential for Empire, so it will be (is) establishing it. And why do they want assets instead of dollars or euro? Because they will soon be worth much less - time to get rid of them…

    4. Hi Hell,

      Since you ask...

      What does China want? Short answer is no one knows, not even the Chinese; this is just my best guess.

      CCP: It wants to stay in power. To do that, it must do what the vast majority of Chinese want; as the Chinese say, the wave that floats the ship can also sink it.
      China is not a democracy but a reasonably competent ruler does not need a polling box to know what the people want... And anyone who can't figure it out will end up dead.

      Chinese people: They want a better life, they want some fairness; unlike many other people on earth, the Chinese don't need absolute fairness... but here comes the problem...

      If 1.4 billion people are to have a western or even a tenth of a western life, there will be nothing left for anyone else... therefore... empire it is... If you can find another solution to this, I think the Chinese will be happy to live forever under American hegemony... but I don't really see a solution...

      Money wise, sure if China is great and rich, the Yuan will become valuable by default... but (at least I) view that as a side effect. Money flows from power, not the other way round.

      Why not dollars or euros? Foreign exchange is for national security. If your enemy is the U.S., U.S. dollars are not security... can you imagine trying to spend U.S. dollars during a war with the U.S.?

      Or to put it more succinctly, there is no real point in holding U.S. dollars. If China wins, they are worthless; if China losses, they are useless (cause we are all dead).

  2. Hi Guys,

    Would you agree with this summary of America's position?

    Best Regards,

    1. *America is an entire continent, not just the US :) The name of the country says it: The United States OF America. OF = belonging to America, America the continent named after Amerigo Vespucci :)

    2. right... =)

      but would you go with Chris Hedges position?

      I kind of like his mechanical explanation of how the good men have been eliminated; I have seen more or less the same thing happen in academia; its all careerist now, there are no real researchers any more.

      btw, he was predicting the current collapse long, long before.... and he is an award wining journalist...

    3. Good interview akoc, thanks

    4. aye... very persuasive, changed some of my views on blm...

      btw, how about we try to ensure that the next president is someone sane like him... i.e. neither biden (or biden like) nor trump (or trump like)

      think the odds are quite reasonable by chinese standards (maybe 0.1%) ... =)