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This line of thinking is what will ultimately end us as a species.

There are a number of systems that must run in a loop. When that loop stalls, because labor is part of that loop, and illiquidity occurs, and people can't get food. You get a deflationary spiral, and everything breaks down from there. The only offset would be printing a massive amount of money, but then you have rational pricing (that cost vs the product) go out the window. Rational pricing is required to properly allocate resources in a scarce world. Its a very fine balance keeping enough liquidity in the economy so this doesn't happen, and we've all see how well that's turned out.

This leads to the economic calculation problem where the policy maker has to balance on a knifes edge using lagging indicators (without futuresight), where you either get hyper-inflationary currency death spiral, or you get a deflationary death spiral from the ever closer margins over time.

This has been a known problem for over 100 years, with no solution found. Several non-market socialist economies based on this have failed in that time, each time caused death on a large scale, what do you think will happen when its the reserve currency of the world and you do this?

This would also legitimize fraud, and other unfair business tactics which are currently illegal under the law but are not being enforced under the reasoning that if an algorithm does it its not what it is. So people can design algorithms to do it and claim it wasn't intentional (when it was), how can you prove a negative?. IMO, Anyone who approved the algorithm for such use constitutes approval of the practice, even when it wasn't known, they should have had constructive knowledge to know about it as part of their duty of care.

Things like bait and switch will be called something else like 'dynamic pricing'.

Oh wait that's already being done ... (see amazon).

Then there's the societal mechanics, what 'good' happens from stalling the economic engine (i.e. eliminating the bottom 2/3 of the factor markets)?

Also don't forget, violation of constitutional rights, under false positives, and the crazy maker algorithms that drive insanity (social credit like).

The requirements to use AI are negligible compared to an atom bomb. Comparing it thus is a poor comparison because its so much worse.

This sounds more like hopium to me. I'd sure like some of what they are smoking, but that doesn't make the reality any better.

You would think these people would be educated enough to know how supply and demand actually works, and how if inflation goes up, you are paying your workers less. Completely disingenuous.

You get what you pay for, and arbitrarily abusing your staff by changing the metric goalposts every few months to justify churn to pound pennies breaks trust, as much if not more than making them RTO during the pandemic, risking their lives on a job role that can be done completely remotely because you believe workers work best in the office when you really just want to justify the outlays you're stuck with having an office.

I know people who died because of that.

This line of thinking is just flat out wrong, and uneducated.

Price discovery is critical to any system, and money is the shared store of value of those that hold it so long as it retains that store of value.

Producers set prices to make a profit, if they can't do that they stop producing. Factor markets, same things happen, as an employee you don't do $1000 of work in exchange for $1 in purchasing power by the time you get paid.

When government debases currency, unproductive efforts unwind into losses at the individual level, and inflation at the macro level. You can't print money out of air and use it to pay for things without issues that result in cascade collapses over time. The more you do it, the bigger the bubble, deflation, and crash/collapse from a combination of interest rates (that need to raise to fight inflation) and bubble pressure.

If it continues, eventually credibility is lost, and the currency is abandoned. This usually happens sometime after a 3:1 debt to GDP ratio, though it can be much higher, anything after 3:1 is where the smaller effects become noticeable.

I'd suggest you educate yourself a bit more on this. I'd recommend Debt, the first 5,000 years by David Graeber as a starting point, and then Big Debt Crises by Bridgewater/Ray Dalio for case studies of how these things actually play out.

If pricing becomes irrational, you run into economic calculation problem, breakdown, shortages ensue, then death (its been tried in non-market socialist systems).

There's a good reason central banks were not allowed during our countries early years. Quite simply, its well known in a historic context that money printing can end civilizations.

Two mechanisms,

* Basel 3 counts capitalization as capital reserves instead of the normal deposit reserves we expect in fractional banking, this was adopted just recently (which is why the Fed site shows 0% deposit requirements).

If your reserves dip under the requirements you have 1-2 months to correct (from what I've read, although I'm not an expert and its very legalese, and dense so don't take that as advice). Basel is very opaque compared to Federal Reserve reporting in my opinion.

* Aggregate Indebtedness violations have to do with the SEC and market's net capital rules. In the case of SBLOCs or Securities backed loans, sudden drops in capitalization from price action can trigger illiquidity as any existing revolving credit can be frozen, and interest on utilization can balloon in addition to any further ballooning that might occur as a result of rating downgrades (S&P/Moodies).

Either are directly impacted by the company capitalization which is based on current ticker price and the shares outstanding.

While it is true there is no political appetite to eliminate it, that has little to do with whether you'll get a reasonable amount of benefit from it.

Currently, mandatory spending which includes Medicare and Social Security go over a cliff where the interest exceeds projected GDP ~2032 (before factoring in inflation; it gets worse with inflation).

There was a congressman trying to bring attention to the issue for newly elected politicians who did a C-SPAN presentation on it.

Link: https://www.youtube.com/watch?v=6ut1yQg2qA4&ab_channel=Forbe...

Yes, this was the general sentiment.

There may be loopholes and financial engineering that can be done, but its generally not available to the average joe.

I looked into this as a possibility not too long ago, and the professionals we spoke with basically said you'd either need them to take care of the taxes or be co-signer.

Co-signer rights effectively negate the point of getting 'your' house, and can lead to a lot of drama.

I agree, its a tradeoff wherever you go and takes careful planning.

You can either have high overall income taxes, or you have high property taxes (and low overall cost of living).

Ironically, for those who won't retire before 2030, we'll probably never see social security benefits despite paying into it for most of our life (15% tax).

Not really an option near; or in Silicon Valley.

You pay the savings in sanity points when you get roommates or family. No amount of savings is worth it.

Downpayments for houses in that area with a 740+ credit score is at least 200k and only goes up from there, don't know many parents that could help that much given the high amount taxable event, that's also not taking into account most homes have significant maintenance the first year, you never know what you'll find.

I've seen some places where they found out they had to fix the foundation after opening up to do some safety fixes, ended up costing around 120k. Involved a hillside sliding too so geotechnical engineer had to come in, no clue how much that cost after all was said and done. Wasn't found during the normal pre-sale inspection.

Any bank with a ticker on a market. Technically no security on the market is safe from this mechanism. Banks are particularly vulnerable.

With a properly timed news drop, shorting, and forcing the market maker to exit delta-hedging (due to volatility) you end up having them create synthetic shares that in addition to the loaned shorted shares push the price downwards (because there will always be more shares since they were created via the contracts and are not constrained by short limits/availability and float). The market maker may even participate to offset losses.

Once the capitalization rate falls below a certain threshold you get aggregate indebtedness violations. At which point any loans they might have had create a liquidity event (i.e. frozen), which must be paid back and price levels returned to normal within 30 days (Basel 3), or 2 months (Nasdaq).

It creates a spiral which can't be recovered from, they will bleed deposits, and then the regulator will seize them, and sell their assets to one of the survivor banks for pennies on the dollar (with guarantees). Another form of bailout.

This is what largely happened with FRC, and now its starting to a lesser degree (a/o last night) other regional banks.

Bobby,

If you take that statement you just made, and take it just one step further, asking a why is that when they haven't really innovated in 20+ years?

The realistic answer to that is exactly what I just said. Alternate revenue streams.

Almost every solution I've seen in this space can be decrypted fairly easily because of a similar issue found years ago with SSL compression.

I think it was the CRIME attack on SSL iirc. Same issue is found across most consumer-based systems (including drones), pretty much anything that uses compression can run into this issue if care is not taken to pad. At least from what I recall about it.

That's because they have backroom deals with the manufacturers.

Its impossible to compete when the manufacturers are actively hostile and don't provide the firmware/code/specs in a way that the hardware can be supported independently. Some even use this to spy under an umbrella of plausible deniability, there was an article just recently about Qualcomm chips that did this (checked in) at the firmware level.

Microsoft is no better than an accounting firm at this point. The only reason they are still around is because of the data collection from spying on their users, and malign and coercive practices that are illegal but remain unenforced probably due to some backroom deal they made regarding the former.

They had a few good ideas early on, and now that open source isn't patent bound (not gonna get into the rediculousness of UI software patents that have been granted where they never met that bar of novel, useful, and non-obvious [grouping items is somehow non-obvious?]).,

Anything which collateralizes in the currency would be exposed. Additionally, you may want to re-watch the China Hustle.

They have no laws protecting foreigners from theft/fraud. Its encouraged.

The yuan also has its own issues.

I agree the corruption of language is an ongoing problem, and its often done to mislead and is easy to come to incorrect conclusions, which makes communicating about these things tangibly all the more difficult.

As for the ratcheting mechanism you speak of, that is simply tax revenue, but it only ratchets when taxes are collected, and if you have tax loopholes where you don't pay taxes it doesn't necessarily ratchet (i.e. inheritance, income, etc). In terms of math, a percentage of a percentage never actually gets to 0, it approaches a limit over time, so there is always a certain degree of expansion, and that expansion is often offset by population growth. Hitting the limits of growth (for the planet) adds additional complications.

From what you've said, I think you don't really understand how deflation occurs aside from the theory which there's a lot of crap out there, so that's understandable.

Anytime the debt % of GDP exceeds a certain point, a bubble is created, and when rates tighten coupled with the bubble pressures you get deflation. There is often a period of reflation afterwards, if the issues that sustained the downward pressure are corrected but sometimes they aren't. Japan for example has been in a self-sustaining deflationary cycle for decades, and has only kept it under control through foreign investment and debasing their currency via yield control (effectively negative rates against their future).

There's a book series of case studies called Big Debt Crises by Bridgewater, it thoroughly covers inflationary, deflationary, and hyper-inflationary debt crises, it covers the specific mechanics and has accurate charts for the periods of these crises, where they actually happened. I think you'd cut through a lot of the misunderstanding from reading it.

The lever to print money to buy stressed assets only works up to a point (debt as a percentage of GDP), then it typically breaks down as the store of value loses credibility and value in the eyes of those holding it (usually sometime after reaching a 3:1 ratio which is where effects start to become noticeable to the average person).

The Great Depression was a deflationary depression, and it was caused by a bubble that was created, where debt reached 125% of GDP at its peak. A minor 250bp rate tightening (because leverage ratios were smaller back then), triggered the deflation. Initially it was bad, but they managed (in the reflation stage) largely by unpegging the currency from gold, buying stressed assets with domestic debt, and negative interest rates over many years. The banks loaning assets were also tightly controlled at that time.

Currently banks are not very controlled, the depository requirements have been removed (see FDIC website, its at 0%), technically its no longer fractional reserve, and the reporting indicates they are loaning more debt into existence than they have assets (for the past several years).

When they fail (when the bubble pops), the government makes the survivors whole and divvies up the assets to the survivors. Assuming of course there are survivor banks. They are too big to fail, and while the Fed is supposed to be the only money printer, the large banking institutions are so centralized that they've effectively usurped this indirectly.

The shortfall in returns and production is always paid in inflation. There's a part of that curve where this is manageable, once you exceed that part (as a % of GDP), you get into those self-sustaining cycles similar to Weimar or Argentina, or deflation, or a little of both from a whipsaw.

Actions are taken based on lagging indicators; so effectively this becomes just another form of the economic calculation problem (which remains unsolved), where the knifes edge gets closer and closer until you miscalculate (because futuresight doesn't exist).

I thought it was an interesting observation that a problem normally only found non-market socialism systems can be seen in unbacked fiat based monetary systems.

I'm always on the hunt for more articles to read.

Scarcity is just a given in a scarce world. The perception of shortages on the other hand acts similar to static versus dynamic friction. Once things get moving they become less sticky.

Most of the issues originate in one industry, that says it doesn't pick winners and losers, but consistently does at the tax-payer's expense. They also have a very sordid history as a private institution and to date have never met their chartered mandate. I've read a lot about the history of the Fed.

The supply chain issues rely on cheap labor and cheap transportation that were optimized in many respects for single points of failure due to cost savings. If your an authoritarian regime you usually have both. I've worked as a System's Engineer, and we always look for these in any system for improved resilience in the design.

The lack of silicon processing is a special case, and underlies the complexity of manufacturer; the same issue affected both electronics and automobile shortages. The methods of manufacturing are much more specialized and fault intolerant in the former (because only 1 company supplies the dependencies, ASML) than the latter (paper).

While an interesting read, there were a few problems I had with it.

Specifically, it appears they didn't really do any research into what caused the Penn Railroad collapse, which was not caused by high interest rates but instead by a combination of actions which would be considered fraud today (due to conflicts of interest that would never be allowed and exceptions to financial reporting in the rail legislation).

They basically couldn't raise prices due to regulation, and no bank would loan to them. The one bank that would loan to them required they have seats on the board of directors. They loaned money at high interest rates, bought up the senior bonds with the interest payments, took control of the board, loaned money to themselves (effectively), paying dividends out of debt, and then forced bankruptcy and let it all collapse in the hope of a government bailout (which they got because rail is critical to food security and energy).

It also neglects stagflation but does mention Volcker, drawing the wrong conclusions of what really happened, doesn't mention the S&L debacle aside from a brief mention (which was huge as well), neglected the whipsaw effect.

The biggest problem I have with it, is it neglects a lot of important factors and only focuses on policy which doesn't match up with reality and largely only what fits their narrative if you didn't know better. There was also no mention of taking the currency off the gold standard in 1971. Most importantly, they don't use any of the M2 or velocity of money data. Its available from the Fed website but it doesn't support much of what they said, and shows how expansion of the money supply drives inflation in cost push or demand pull inflation.

MMT suffers from major problems. The people that subscribe to it largely only see these large sums in a very narrow context which leads to poor conclusions, and an idea that you can print money continuously into the future with no consequence. It largely was what led to quantitative easing (or money printing).

Graeber has a great book on Debt, which goes into the historical examples of what happens when you debase currency like this (no matter what you call it), and there's some very interesting research in how the Economic Calculation Problem related effects can be seen as rational pricing and price discovery fail in markets denominated in unbacked fiat. The latter being most commonly known for its historic roots as an intractable problem with non-market socialist systems where the means of production are held by a single entity. The debate/problem still isn't solved 100 years later.

Additionally, the people making policy can't control what people choose to buy and sell goods at. Inevitably you get shortages when they try, business sectors concentrate, points of failures are introduced, and people leave the business when its not profitable. Then you get things like the baby formula crisis where the only factory remaining is shut down for safety reasons (as a result of cost cutting) and no one can get baby food in Florida. Once sector concentration reaches a certain point, its a short step away from nationalization in furtherance of solving the shortages through greater regulation.

Needless to say it doesn't work, and I'd expect at least some of that to be addressed, but it wasn't. What's covered seems misleading, and very much divorced from the reality.

I largely agree.

People generally miss fundamentals and don't account for a moving store of value, they often assume its constant. Economics is marginally only used to sell something often with deceit in mind on someones part.

As for what's driving inflation, its obvious its the fact that government is spending more than they have each year, printing the difference, and have now gone gangbusters with manufacturing spending to offset china imports.

They are also printing money to buy back bonds to control yield curve in lockstep with other central bank currencies (you see these fluctuations in the relative value of the currency).

The corruption, fraud, and graft that this money is funneling to have become so large that its inflating the dollar as its not necessarily creating economic activity. Rising interest rates have stressed the already overleveraged companies to the point they are shutting down or massively laying off.

Some producers base their prices off a business as usual approach. Others project profit sufficient to normalize against changes in the currency price level and any additional expenses/shortfalls in supply chain problems during the short term. While prices may be inflexible for some things, that's only if there's no shortage and the product is available.

Also, you have distributors refusing to do business with smaller companies (as has been seen with a couple of the small time farmers). They want shortages, so they can have an excuse to charge more. Classic characteristic of stagflation and lack of antitrust.

All of this can only get up to a point before food becomes relatively unavailable, and then everything hits the fan.

There's a lot of garbage out there about de-dollarization. MMT for example, magical monetary thinking is more appropriate since it lacks any rationality or understanding of the fundamentals of who sets prices for produced goods.

Generally speaking, it turns into free assets. The people involved usually don't acquire the assets/associated debt without some kind of guarantee.

OneWest Bank for example after 2008 had a guarantee where if the assets defaulted above a certain amount they would receive full value of the loans in a payout from the government. They were actively foreclosing on people to justify catastrophic losses to get the bailout. Not sure how that ended up since I was only marginally aware of the start of that and everything went silent once the news got wind of the perverse incentives.

In terms of trends, the bailout game has been played consistently since the the dollar went off the gold standard (1971 iirc).

The ponzi is starting to unwind now that inflationary pressures are out of control. I expect concentration to eventually lead to nationalization followed by a new currency which will fail because they lost all credibility from their mismanagement as a private entity.

That's what's happened historically with every country that debases its store of value above the point macro effects become noticable which are around 3:1 ratio).

Safety and Liability will always be an issue.

Monopolistic and malign practices always creep in. Say you miss and are late on rent, and then walk in to find you've been terminated. They won't say its because you were late on rent, but its not outside the possibility that they'll have some other manufactured excuse.

Maybe the buildings have ongoing recording that isn't disclosed, Wayward Pines style.

The incentives for this only make sense when you factor in the additional malign control the company gets over the employee.

Reminds me of that one TV series "The Colony" (not a post-apocalypse type movie).

Am I wrong in thinking that all banks should have no exposure to the stock market period?

The whole being able to trigger aggregate indebtedness violations through synthetic shares (options), seems like a systemic risk that no ones paying attention to.

Also, its hard to say we still have a fractional reserve system when required deposits have been set at 0% since the pandemic. There's no fraction, its 0 unless you change the definition (i.e. Basel III which uses capitalization as deposits).

There are a lot of good reasons for it.

First, centralization and consolidation increase the risk of fraud and corruption, and malign influence with regards to antitrust.

Second, almost no new banks are being chartered. What do you think typically happens when you go from Many -> Few (single digits) -> 1.

If something happens because they play the bailout game, the only real option is for nationalization.

Third, their sector mandate is to loan money to businesses that can use that money to turn a profit and feed the economy. They've stopped doing that outside a few corrupt friends(entities).

What you often don't hear about is what happens when they are the only game in town, they know your business is stressed, and they refuse to loan to you on arbitrary grounds (behind closed doors) knowing they can buy it up in bankruptcy for pennies on the dollar for a larger profit.

Like what Amazon did to the baby diaper companies.

https://arstechnica.com/tech-policy/2020/07/emails-detail-am...

People haven't done it recently because it simply doesn't work for many of the same reasons that nonmarket socialism doesn't work.

You inevitably have people with notions that everyone should work as hard as they can and only be paid based on need. Claims that its an extended family. Everyone belongs to each other, yada yada yada.

It gets real twisted real quick, and the only people to benefit are those that lie at everyone elses expense. The ones that are exploited the most are the ones that produce the most, so it drives any kind of efficiencies out of the business. There's no incentive to do anything productive, and you get the same inefficiencies of bureaucracy and corruption with negative production value. Those that are better get socially punished for being better and making everyone else look bad.

You also can't have that dynamic when you are using other people's money (investors) unless you want to lose everything.

Anyone happen to archive this article before they took it down? Its showing up as a 404 resource now.

Yet the toggle is automatically on for a number of applications even when it says its turned off.

That still makes its existence a misleading coercive lie giving you the illusion of control; for those that don't already know better. These dark patterns should be illegal (and in fact are if you take a strict constructional meaning from deceptive and unfair business practices already codified in law).

Its just effective enforcement of antitrust, and FTC violations simply isn't occurring at these monoliths.

Moto, I have to point out that line of reasoning is seriously flawed.

The assumptions you make at the beginning are just that, assumptions with no rational backing.

Communication is necessary to have any kind of intelligent discussion, and taking part in a discussion doesn't accept anything by mere participation. Saying so doesn't make it so, and that argumentation structure tends towards inflexible dogmatic thought and polarizing psychological spirals.

At its core, in order to think you must risk being offensive, and in order to learn something you must risk being offended. Anything that interferes with that will often lead you to irrational thought and false conclusions.

Additionally, being able to discuss subjects which you do not agree with, while maintaining communication in a rational way is a very good indicator of intelligence, and anyone can do this if they want to.

Ideological indoctrination comes in all forms, and most importantly most of us don't have a choice about that since its inherent wherever we grew up.

If you can debate the merits and downsides, in an influential way that turns someone to your view point isn't that a win?

Aside from this, I agree with your sentiment, but you would have a much stronger argument if you don't give others such easy targets to discredit you.

If they can't win on rational grounds, they don't have any legs to stand on. Irrationality is after all not superior in any way to rational thought, and self-interest and necessity are the mother of all invention.

History has not been kind to socialism, and its been directly responsible for more death than any other form of economy in recent history.

It is rare that something like this gets written with actually correct details, and refreshing when it actually lines up with history correctly.

It would have been a near perfect piece covering these historic issues, if only .... That last paragraph... If only they didn't falsely asserts a broad generalization that is easily and provably incorrect. Its mistaken in its naivete, and the provided information doesn't support it.

Those of limited intelligence, when they can't win an argument on rational grounds tend to fall back to malign influence and flawed thinking and the conclusion is no different from a straw-man.

As a reader, do yourself a favor, and just skip that last conclusion paragraph. Everything else looks mostly correct.

Well, almost all fathers mean well and by that point I mean, you can mean well, and still have poor outcomes (i.e. be bad at parenting).

Mine certainly did, but he still ended up using the money set aside for my college education to buy a Porsche and then sell it at a complete loss years later. He meant well because he thought of it as an investment, but it really wasn't. He believed it though, even though any reasonable person would not classify that as an investment.

As for playing games and not being able to find jobs. There's something to be said for creating a livable future which almost every parent today has failed.

There's a growing body of research that the number of jobs today that would normally have been available during critical time periods were reduced, where older workers, who were more productive because of their experience, ended up taking positions that would normally be held by people developing entry-level skills in careers when they couldn't find the skilled jobs they'd trained for.

In the book, 'The Pinch'; this references a lot of material and is discussed in great detail. Its arguably much more difficult today to get by than it has ever been; and its been driven by changes that were largely outside the current generations control (political power is supposed to transfer every 20 years, but in many places hasn't and is still dominated in majority by the boomer generation).

As for not being able to find a job, that has more to do with the jobs not being available; and potentially other ways monopolistic behavior have created for limiting the job pools to drive wages down.

This behavior is actually a common trend in capitalism when wages fall below certain key thresholds; and I don't mean any specific amount of wages, but the cost of living (in purchasing power) and mobility. It historically has kept to a ratio, but fiat has cause this to deviate like any great ponzi creating this disadvantaged environment today (which was predictable).

You also see these issues in any highly regulated society like in China with the Bailan (摆烂), let it rot movement. Yes its socialist, but the difference between capitalism and socialism when both have high regulation is almost negligible. Socialism relies on exploitative labor force, and elements of a centralized power structure, and lack of property rights; they also have concentrated business sectors (oligopoly) in terms of the means of production.

The main difference between the two is the division of labor, which breaks down under heavy regulation and lack of price discovery/stable store of value.

Ironically, if you have no hope of being able to do any of the major life milestones you're taught at a young age, you get your enjoyment where you can; and limit suffering.

Capitalism knows what they need to do (get out of people's way), but they don't do it because it would involve ceding power and control.

This has happened before, just not on such a global scale; and its fairly predictable what happens next (given a certain level of study in historic subjects).