Nothing is so permanent as a temporary government program.
-Milton Friedman
The best way to convince someone to do something crazy is to tell them it’s only for a little bit. Don’t throw the frog into boiling water - make it a little warm and even cozy at first, then slowly raise up the temperature. This meme captures the current climate well:
The word of the year in 2021 is “transitory”. Perhaps labeling major shifts in behavior as temporary is one way to avoid pitchforks in the streets.
Restrictions on movement? It’s only for a little bit more.
Higher food, energy and shelter prices? It’s just “transitory”.
Mandates? Only a little longer, for your safety.
It’s clear that there is no going back to “normal”, similar to how there is a pre- and post- 9/11, and we never went back. Here are three “temporary” things we can expect to be permanent in 2022 and beyond:
increasing debt, then a great jubilee
Given the amount debt in the system, it appears we’re reaching a point where we can never repay it. At some point, we simply become insolvent, and a great debt jubilee becomes necessary.
The only way this is sustainable is if interest rates are near zero. People forget that in the 80’s the average mortgage had an interest rate as high as 16%. Savings account also made a good amount of interest, unlike today.
But interest cuts both ways, and if you’re majorly indebted like the US, increasing the rate even a few percentage points can essentially bankrupt it. The US budget would be consumed by interest payments to our creditors (China and others).
It is for this reason that the Fed can’t really raise rates too much to try to control inflation. Paul Volcker famously crushed uncontrollable inflation in the 70’s by raising interest rates and which was a very difficult decision at the time. But he was able to get the inflation numbers back on track. Today, given the level of indebtedness, I don’t think we have that luxury.
Jubilees can come in a few flavors:
Outright default. This would anger our creditors, and America can “never” default. I remember in college the Finance professor told us the US treasury market is the most secure because the US will always be solvent. So outright default is probably not gonna happen (I hope).
Inflate our debts away. If we inflate the money supply, the dollar-denominated debt decreases in value. A 100k loan isn’t so bad when the dollar loses half its value in the duration of the loan.
The jubilee is not a new idea. In Leviticus 25, the House of Israel is commanded to observe a year of Jubilee every 50 years. The Jubilee year was to be a year of rest, including the forgiveness of all debts, and the liberation of slaves and servants to their native lands.
In the secular world, one way or another, we are trending towards some sort of debt jubilee. For instance, it’s likely coming for student loans via outright forgiveness. The latest student loan relief pauses payments and has 0% interest to all federal loan holders. (I continue to think the greatest trade for those highly indebted in federal student loans is to divert those potential payments to acquire hard assets while the loan is “temporarily” at 0%.)
Likewise, some sort of jubilee is also coming for the US, probably through devaluation of the dollar. Inflation is already happening at the rate of at least 10% inflation, and should be expected to continue unless the Fed suddenly decides to raise rates and crash the economy. They probably won’t do that. The easiest thing to do is keep inflation high enough to reduce our real debt without making too many people angry.
Let’s see how long that lasts.
increase in control
The next trend we’re seeing play out is a ramp up in government control. As things start to go off the rails with our financial system, governments will want to control as much as possible to make it a soft landing.
We have already been conditioned to “shelter in place” when we are told, and “show our papers” in order to grab dinner with family. We have been conditioned to obey commands from higher ups without regard to common sense, even when they have repeatedly shown themselves to be unreliable.
“Conspiracy Theorists” have been screaming since the beginning of the pandemic that this ends in a form of totalitarianism. If the border closures have seemed excessive lately, it is not unreasonable to look for another explanation than the virus, which is spreading everywhere anyway. The Sovereign Individual, written in 1997, predicts the coming desperation from nations experiencing bleeding of its most productive forms of revenue.
The thesis of the book is that the Information Age will effectively render useless the idea of man-made borders. We are already seeing this as people within the US have begun a mass-exodus from high-income tax states to no-income tax states. Governments everywhere, large and small, are losing the monopoly on physical space as things move “from atoms to bytes”.
There’s no reason to think this doesn’t apply between countries as well. The trend is clear to anyone paying attention: everything is trending towards decentralization. Physical residency, media, energy, information, money—everything.
decentralization
This brings me to the broader thesis that I’ve been fascinated with for the past few years. When centralized forces are incompetent (at best) or abuse their power (at worst), people find alternatives. And now they finally have the ability to.
When the US tries to devalue its currency, people will escape to a harder asset that cannot be printed away: whether this is gold, real estate, or bitcoin. One way or another, individuals will gravitate to the one asset that proves itself to be the most resilient to state seizure.
The internet was supposed to bring about decentralization, but all it has created are centralized fiefdoms controlled by a few in Silicon Valley. But once things get bad enough, and they likely will, people will use the countless tools at their disposal. ProtonMail instead of Gmail. Signal instead of WhatsApp. DuckDuckGo instead of Google, and so on. Even Silicon Valley itself is being disintegrated and decentralized, as countless tech firms move to more friendly jurisdictions.
After Twitter blocked the inventor of mRNA vaccines, Joe Rogan had him on the podcast, and it will likely be the biggest episode he’s ever had on Spotify. The fact checkers at twitter have apparently never heard of the Streisand Effect.
Here’s the big idea of the 2020s: Decentralization + Encryption = Freedom. These forces minimize the state’s monopoly on violence, and make it extremely inconvenient to be a tyrant. That is the thesis behind The Sovereign Individual and that is what appears to be playing out.
However this resolves itself, I can’t shake the feeling that this is going to be a turbulent decade. Trends we thought are merely temporary will become permanent without most of us realizing it. Things will likely get crazier before they get better. All we can do is try to discern the times and prepare for what’s to come.
Though I think a lot of these trends are permanent, the “transitory” narrative is right if you zoom out far enough.
In the end, it’s all transitory.
Lord, what is man, that You take knowledge of him?
Or the son of man, that You are mindful of him?
Man is like a breath;
His days are like a passing shadow.-Psalm 144: 3-4
Happy New Year,
mina
narratives falling apart
Here’s the inventor of the mRNA vaccine talking freely and openly about his beliefs. Agree or disagree, it’s wild that big tech thinks it is in the position to censor viewpoints held by a credentialed doctor.
Not sure if the allegations here are true, but might explain the push to recommend the vaccine for children:
Mainstream finally starting to begin a balanced conversation around the topic:
A sign of things to come?