Broadly speaking RPI is CPI + mortgages & rent prices, but actually there's a newer one that's exactly that which tracks lower. They're different 'baskets of goods', used in differnt cases, but generally CPI is what's meant. (RPI is used for student loan repayments for example.)
How on Earth is providing short-term liquidity[1] until the long-term low-yield bonds owned by those banks mature translates into double-digit inflation?
And why should we listen to this [2] prediction of double-digit inflation?
[1] At least in the US. Switzerland is doing its own thing with the UBS/CS merger, good luck to those folks, that sounds like a fun garbage dump to dig through.
[2] Similar comments predicted 15 of the past ~1 years of double-digit inflation.
The fed knows this. They should make it explicit to the common, ~100 IQ, joe six pack American. It's infuriating watching them act so carefully as to pretend to try and not spook anyone.
And there is no indication of either of these suppositions.
Show me anyone that predicted two consecutive macroeconomic trends, ever.
dollar collapse, $5k+ gold, emerging markets boom, bitcoin crash, hyperinflation, bear market, recession, etc. every year
He never deviated from his predictions or view even when shown to be wrong. He never stopped to consider maybe he was wrong, not that the economy is wrong.
The dollar has never been at a more precarious position (on a hyper-inflation course and the BRICS are pondering about adopting the Yuan).
Bitcoin (who knows what's coming next, but for sure never seeing 70K again)
Hyperinflation (pretty obvious)
Bear market (most of 2022 was in one, and most probably this year will follow)
Recession (high certainty this will happen. Fed's soft landing is a mirage, history shows a rate cut after aggressive hiking usually leads into one)
Schiff is not outright wrong on his predictions. He just never gave time stipulations for his predictions.
February US inflation is 6% year over year. This is orders of magnitude below "hyper".
Is inflation for you better now than it was in 2019?
It what? Also if you predict a recession every year you'll eventually get one right, but that doesn't make you right about recession predictions in general.
> Is inflation for you better now than it was in 2019?
Did he predict "higher than 2019"? If "higher than 2019" wasn't his prediction then I don't see why it matters that "higher than 2019" happened.
And that's not much of a prediction. 2019's inflation was below target.
Muddied the definition of a recession when the question came up.
> Also if you predict a recession every year you'll eventually get one right, but that doesn't make you right about recession predictions in general.
Yep. That's pretty much the game of predictions.
> 2019's inflation was below target.
Which target? The one the Fed determines? Consumer inflation at the moment (~7%) is rivalling rates witnessed back in the 80s. Add the new money the Fed has printed over time (since 2008) and now expected to continue (covid stimulus, bailouts for banks etc.), anyone can see where the trend for inflation is going. No predictions are even needed for that.
So you agree the recession prediction is not evidence for Shiff's competence?
> Which target?
2%
> Consumer inflation at the moment (~7%) is rivalling rates witnessed back in the 80s. Add the new money the Fed has printed over time (since 2008) and now expected to continue (covid stimulus, bailouts for banks etc.), anyone can see where the trend for inflation is going. No predictions are even needed for that.
...have you looked at the trend, though? Inflation was climbing higher and higher until last June, and then it dropped by more than half. For the last 3-8 months the inflation rate has been about 4%.
Economists make wrong predictions all the time. Am saying Schiff is not exactly entirely wrong on some of the ones he's made in the past.
> ...have you looked at the trend, though? Inflation was climbing higher and higher until last June, and then it dropped by more than half. For the last 3-8 months the inflation rate has been about 4%.
Have you? The last time the inflation rate was even near 4% was in April 2021 [0].
The peak was in June, so it's still dragging the yearly number up. The last 8 months were much lower than the previous several.
https://tradingeconomics.com/united-states/inflation-rate-mo...
https://i.imgur.com/MBwyLjJ.png
Though that chart also shows inflation dropping...
You are obviously trolling at this point.
When inflation changes rapidly, it gives you outdated information.
When you look at the underlying data for each month compared to the previous month, you can see that the spike was higher than 9% and we are currently lower than 6%.
The FED cannot win the inflation fight (confirmed by their recent soft pivot back to QE) and gold will not go up until the traders realize this fact.
Literally every economic misprediction can be blamed on not accounting for the way people actually behave in real-world economies, but…that’s not something that adds credibility for the next prediction by the same predictor.
We have gotten 1 and 2 but we haven't gotten to 3 because traders believe that the FED can win the inflation fight. The FED abandoned the inflation fight with a soft pivot yet traders are still not buying gold. This is what Peter couldn't foresee...traders' unwillingness to go against the FED.
This is not a misprediction because in any sane world, the prospects of very high inflation would result in a spike of the gold price.
Describing any part of the financial system as sane (rational) is laughable. The system is built on the irrational nature of people.
In some absurd way, bank runs are an expression of actual rationality - give me my cold hard cash now, I don't trust you lot anymore.
Keynes mentioned "animal spirits" and "the market can stay irrational longer than you can stay solvent" almost a hundred years ago. If your prediction doesn't account for reality and well know facts it's a bad prediction.
It would be like guessing that the next election will favor candidate X and when they don't win explaining it away with "well but people are dumb".
Since it was a prediction of the behavior in the real world, and it doesn’t reflect what actually occurred, it is a misprediction.
The fact that the predictor (or you) believes that a world in which the prediction was accurate would be more sane doesn’t make the wrong prediction better, since it wasn’t offered as a prediction of what would occur in some hypothetical sane world.
Gold is not a store (or measure) of value. Nobody cares about gold. Sure, some people might like to have a gold ring or necklace, but that’s a tiny amount of material for a small number of people and it’s demand (like diamonds) is primarily marketing driven, and easily satisfied by a side effect of copper mining. Until the average Joe demands that his life savings be spent on a gold sarcophagus, it just won’t matter.
People tend to prefer fancy cars and houses and electronics and vacations and food and drink.
And you can see the cost of all those things has more than doubled in recent years, a clear indicator of inflation cause by (practically) zero percent interest rates.
Simple heuristic: if it’s easily digestible, it probably doesn’t serve true understanding. I think that especially true for newspaper articles related to economics.
If he is as smart or knowledgeable as he claims or held up to be, then he should have factored that into his forecast and advice. IF the fed is going to do everything in its power to save the economy, why fight it?
This is a popular sentiment among traders...why fight the FED? Because there is nothing they can do to bring inflation back to 2%. They all but admitted this with their return to QE. When the masses realize this...gold will surge.
Alas if, for some inexplicable reason, those unwashed masses don't realize that the gold I bought cheap, isn't the only thing worth buying (at my inflated price) then I will be most disappointed.
I guess it doesn't help that gold-hawking is looking more and more scammy everyday, like when c-level political celebrities with large followings seem happy to flog their "sponsors gold" during political messaging.
I love how confident people are with their predictions.
Since you're so confident about what's going to happen, why does CPI matter to you? You can invest in the market in such a way you're going to be rich anyway.
Anyway, I'll happily help make you richer: do you want to make a long term bet that there won't be double digit inflation for the next decade (let's say there won't be annualized inflation >= 10% over the period from March 25th, 2023 to March 24th, 2033)?
When it keeps going down, same - until it becomes obvious to everyone there is no further down to go.
With lots of head fakes along the way of course.
Humans tend to be kind of terrible at being consistent over long periods of time.
My understanding this time around is the depositors rightfully got bailed out (both to maintain peoples' trust in banking, and because losing your money to others' failures fucking sucks), but the banks themselves were left out to dry.
For even a "small" business though it's quite small. We're small (<50 employees) but payroll is around 1.5m per month. We keep about 2m as "working capital". This is cash that is literally flowing all the time.
In this context 250k is tiny, and wouldn't cover our day to day balance.
If the FED didn't step in, every regional bank in the country would experience a bank run as people would withdraw everything and deposit in the "too big to fail" banks for safety.
Why I think the depositors should've suffered a haircut: What the FED did, was implicitly guarantee the deposits, this incentivize banks to become even riskier with deposits as they get to keep the profits if their risky bets payoff and get bailed out if they fail. This is like a real life cheat code for bankers and unfair to the rest of us regular folks who has to suffer the consequences of our actions.
This isn't true, is it? While they do get to keep profits, if the bets don't pay off, the bankers - shareholders, bondholders, employees, executives - all get wiped out (as happened with SI, Signature and SVB). The depositors get bailed out.
They get to keep profits if they win, but lose everything if they don't. No moral hazard, right?
Indeed, in the SVB case there is probably an interesting story around why all these startups were banking with this one bank. It suggests complex relationships between entities and it wouldn't be that weird if it turns out the people being bailed out and the equity holders going broke are the same physical people.
I'd start by stopping any securitization and having the banks keep all their loan assets on their own balance sheets.
If sensible people made the rules the financial industry would be stable and boring, inequality would be far lower than it is, prosperity would be far wider, and life would generally be more pleasant and financially successful - not just for a small cadre of middle class programmers, but for everyone.
I concur...While this might be true for smaller banks, the same cannot be said about the "too big to fail" banks.
And are you talking about people with more than 250k, or everyone else?
The former wouldn't destroy banks, and if you think insurance for everyone else is a problem then why has it taken 90 years to be such an issue?
Citibank equity holders (one of the the more egregious bailouts from the GFC) 15 years later are still down 90%. So it’s not like in the bad old days of 2008 investors were getting off scot free.
Depositors don't stand to benefit from a bank engaging in stupid risky bets with depositor money.
Investors do (on the upside of those bets).
This is why depositors should (and do) have moral priority for their money.
Investors also are able to directly control the degree of stupid risk-taking behaviour taken by the bank, by virtue of their control of the board. Depositors have no such leverage.
If you make depositors (or the public at large) pay for the sins of the bank's management, you get a classic conflict of interest problem. If you make investors pay, it goes a long way towards aligning their interests with keeping the bank running well.
If depositors know that their money is fully covered, you incentivise them to move their money from responsible banks to irresponsible ones. It's easy to imagine a knock-on effect where responsible banks are incentivised to behave less so in order to retain custom, with the whole system becoming more fragile as a result.
* Ports on both the Atlantic and Pacific
* A very effective transportation system in between
* In the big growth sector where points 1 and 2 don't matter, tech, it's still #1 in the world anyway
* A market of 350 million high income people (by global standards) under one regulatory framework
No other country can compare. No one else has this. These in-built advantages are incredibly hard to beat.
There will be crises but the key insight for me was that because of these advantages the US is almost always going to be better prepared to weather those crises than the rest of the world. That is why it enjoys such a huge inflow of capital and immigration (currently #1 recipient of FDI in the world, most immigrants of any country in the world).
It's just a big risk to bet your money against the success of the US, no matter how dumb its leaders get.
It probably also helps that Americans tend to flip out and go full doomsday mode when anything goes wrong inside of their borders, I mean it's stressful, it's not very well planned, but it does make problems hard to ignore.
It's why it's on our currency - "e pluribus unum".
It's also why Russia and China are constantly working to erode the unity of the American people, whether it's through false narratives that "we're more divided than ever", driving a wedge into political parties, fomenting rage-mode across social media, utilizing Twitter for propaganda or TikTok to keep American minds drained of their creative motivation while they ban the apps in their own countries... the list really goes on.
A cord of many stands is not easily broken, but others will do their damnedest to try.
It's been a while, but I translate that as "From many, one".
I think it's an allusion to the thirteen British colonies becoming one United States.
> It's why it's on our currency - "e pluribus unum".
For example, South Korea’s USD reserves has been sharply going down as they’ve been trying to resist following the recent rate hikes to soften the blow to the economy. This is happening all across the globe.
However, US can do (and seems to be doing) whatever they want.
When Korea buys something from Japan, they don’t have to pay in USD. They can use whatever currency they want.
[1] https://finance.yahoo.com/news/putin-strengthening-yuan-role...
Money flees China now despite the capital controls.
Even the Chinese would rather keep their money in Singapore, Switzerland or the US than at home.
It's not inconceivable China could take over. Russia won't (lol...) and the EU doesn't have much interest in becoming militarised.
China almost has the same number of millionaires. Per capita it’s not as good, but in terms of volume. And I’d say they’re closer to a single regulatory framework than the US which has all sorts of conflicting state laws which get in the way of interstate commerce (despite the commerce clause). Sure there are a lot of advantages as you say. But they’re not indefinitely insurmountable.
And it lacks all the other inbuilt advantages I mentioned.
Remember, the USA can ship goods back and forth between itself and what... 90% of the ex-US global economy? With very little geopolitical interference.
This is largely a function of geography, plop a cargo ship in the water, sail it, boom you arrive in Western Europe, or East Asia, without getting anywhere near some other country's sphere of influence.
China can't say the same. To ship cargo to America they have to sail near multiple political rivals (and they seem to enjoy antagonizing America itself as well). To ship cargo to Europe they need to do the same. So there are all these countries and political forces that could disrupt Chinese trade at any time. In the long run they have inbuilt geographic risk, the US has inbuilt geographic immunity.
By itself China won't be able to feed its people in case of a US naval blockade, but that's where the alliance with Russia comes into place. Transporting grains by rail instead of by sea is not as cost effective but will do the trick, and Russia has lots of grains. The same Russia has also lots of raw minerals.
That's why throwing Russia into China's open arms is such a geo-strategic stupid thing to do from the West's point of view, really, really stupid.
Russia could have been Westernised with a little more effort, and turned into an ally and partner. (Which is not to say it would have been easy, but it would have been possible.)
Instead Russia was neoliberalised, turned into a mafia economy with huge concentrations of wealth on top of raging poverty, and its imperial pretensions were tolerated for two decades.
Ukraine and Russia are both direct US foreign policy failures.
> Instead Russia was neoliberalised
The West has also been neoliberalised.
Sadly I think that's why nothing better happened to Russia; everybody was comfortable with having a strongman to deal with and oligarchs to take money from. Even to the extent of overlooking crimes like the Salisbury poisonings and the airliner shootdown. It's a common pattern in US partner states.
Most of the former USSR and Yugoslavian states have sought freedom, although there are questions about Serbia, Hungary and to a lesser extent Poland.
I think you underestimate the importance of "plasticky trinkets." Exports are the backbone of the Chinese economy. Without them it can't afford to import food, and millions of Chinese starve. If China declares war and isolates itself so that Russia is its primary remaining trade partner, millions of Chinese starve.
The biggest importers of food to China today are the US, Brazil, Australia, and a handful of Southeast Asian countries - basically that's all gone if China goes to war or isolates itself in some other way.
Now I mean sure anything can happen in a war and the CCP might very well choose to let millions of Chinese starve, they've done it before. My point here was that isolation would inflict terrible and permanent damage to China. A war is unlikely to happen in the first place because not only is this damage so great, but China would probably lose any battle that wasn't very close to their home theatre.
By the way, Chinese food security is a great topic for illustrating how dysfunctional they are as a country. Here's an article on the topic - https://www.cfr.org/article/china-increasingly-relies-import... - basically they don't have food security, achieving it is one of their top priorities, and they are failing to achieve that priority. The cost to grow soybeans in China is 30% higher than in the US, and the yield is 60% lower!
Clearly a lead that can be overcome, but now with China’s turn back to proper communism, they will probably never get there.
[0] Page 27: https://www.credit-suisse.com/media/assets/corporate/docs/ab...
Anywhere but China. It is a failing state with a plummeting economy and subject to even more arbitrary control over the money, its citizens own than the USA.
Thanks for inserting that comma, Siri
China has a larger domestic market. The downside is the domestic market is still relatively poor and its state controlled by a uniparty government. When tough decisions need to be made, the CCP will protect the CCP over China.
You left out the most important advantage: the US has plenty of oil and gas;
Quite frankly, I always knew oil / gas was big in US, when I realized it's THE largest petrostate, it felt weird.
42% of Saudi GDP is petroleum. 35% of Kazakh GDP is petroleum. 8% of US GDP is petroleum.
* Issues the global reserve currency
* Maintains the largest military
* Has the widest media reach
* Has significant natural resources
There are problems too, but the unfair advantages are quite strong, and self-perpetuating.
Which is fortunate for Americans, because very few countries could be so haphazardly managed, without failing.
I lived through two growing up, and both times almost everyone lost almost all money. I will take the risk on my US bank account over those any time. My 2c.
It just makes headlines.
That only works when the US has to fight military super-powers that rely on sea-transport in order to feed their people and their military, like Japan had to do in WW2.
The moment another super-power stops depending on sea routes in order to provide basic needs for its people and its military then things start getting more complicated. Case in point, the current Russia + China alliance. They could basically sustain a conventional war against the West while avoiding sea routes basically forever, thanks to Russia's fertile lands and minerals and with the help of China's human capital. There's no US aircraft carrier that would be able to stop the logistic links going through Central Asia.
If Russia and China decide they're going to get together and be super trade buddies but the US denies them the trade lanes with everyone else, that's fine, they can share food and oil which are certainly important, but they'll still be broke and their economies will still collapse, especially China's which is super export dependent and seemingly approaching collapse right now anyway. China needs huge exports to survive in its current state and Russia doesn't have that much purchasing capacity.
China imports a fuckton of it. But not from Russia, but the Middle East (by sea) because it’s cheaper and easier.
It’s actually very difficult to move that much oil over land. The best way is by pipeline but that takes many years and is fairly easy to disrupt. And it still leaves you with the problem of having to distribute it at the other end.
Now consider grain can’t flow in a pipe.
In case of a war starting I do think China won't look at the money getting spent anymore, so at that point importing oil from Iran via train [1] or from Russia (again, via train) won't be a problem for them in terms of money.
I also do think they'll switch to "war economy" mode pretty soon after the war starting, so no more private cars on the roads and such, which will greatly alleviate China's oil-related needs.
Later edit: And there's also the Northern route. I don't think any US aircraft career will be brave/stupid enough (depending on how you look at it) to position itself close to the Sakhalin Island or close to Kamchatka, that's prime hunting ground for the Russian subs. Never mind going into the Arctic Sea itself.
The utility they provide is the ability to deploy a US airbase and a full air wing within strike distance of any foreign capital.
I’d argue the real power are the US underwater assets.
It can not be overstated how good this is for an economy, and it's something emerging markets struggle with, and even some of the advanced economics.
It'll always be easier to start and run a business where you can rely on tribunals to solve problems quickly and somewhat fairly.
Contenders, in my mind:
- China, second largest economy, but generally still considered developing, so I don't think it counts as "advanced"
- Russia? They've been a big player in the world economy long enough it is hard to call it a developing country.
[1] https://data.worldbank.org/indicator/NE.EXP.GNFS.KD?location...
[2] https://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?location...
But the total net worth per person in the States is even further ahead of the rest of the world. Only Switzerland is ahead of the US in per-capita net worth (only by a hair though) and one suspects that’s partly due to so many Americans parking their money there.
Having had the biggest GDP for decades led to a amazing amount of wealth being concentrated in the USA.
While I agree that the U.S. has an enormous built-in advantage over other countries, I would really highlight one other piece of data: In terms of median wealth, the U.S. is eclipsed by half the E.U. and many Asian countries including diverse economies like France. This points to a terrifying concentration of wealth, which has also been highlighted by researchers like Picketty and this could (or arguably already does) put the social fabric of the U.S. under enormous strain.
I'm currently in the EU, in a country that outperforms the US in median wealth by about 20%. While it's clear that life here is good, I'm also struck by how much worse everything looks here, from the rental real estate where I'm staying, to the generally unprofessional standard of business.
So just looking at the slightly-higher median and ignoring the 2-3x higher mean also skews the picture.
Where America is great, it is great. But for the rest of it, it can be a very differently life for most of the inhabitants.
There's no comparison. It's hugely, vastly better in the States. The only other places that have large backwater areas that can compete are maybe Canada and Australia. This is due to investment by rich people in rental real estate and businesses such as Walmart, Costco, Amazon, etc.
When a family like the Waltons have a net worth in the 100's of $Bn's, this money isn't kept in gold bars in a safe. It's actively deployed in a variety of businesses. So the poor don't get a cut of the 100's of $Bn's, but they do benefit from the investment. And in very equal countries, the opposite is true. Everybody's OK, but there aren't really any systems that stand out as being amazing.
Personally I would absolutely not want to be a poor person in the US. High crime, police violence, abusive work conditions, random shooters, health care bankruptcy, Fentanyl being pushed by medical professionals, zero Covid protections - it's a dystopian horror show.
This may surprise you, but there are locations around the world with much lower GDP and much happier people.
A poor person in the US will show up to work sick because they know their boss can let them go. Their colleagues might then get sick.
While I'm not sure how common it is, I've seen US news articles lauding co-workers for donating sick days to a colleague with a life threatening illness. While they're obviously doing a good thing, the necessity of the act honestly comes across as barbaric.
Yes, there are many countries where being poor is even worse. But among developed economies (so about a quarter of all countries), it is hard to come up with a worse place for being poor than the U.S.
https://www.justfacts.com/news_poorest_americans_richer_than...
First of all, it compares figures from two different data sets. That is usually something that is quite hard to do correctly, because different data sets usually use different definitions for stuff like "household consumption" etc. Without a peer review it is really hard to tell if they've done it correctly and given the intricacies of economic statistics, my guess is they didn't.
But maybe even more importantly, the data concentrates on "private consumption" and thus leaves out all the goods and services that governments pay for – which is the entire point of public services like a public health care system. I.e. when a poor person in the U.S. visits a doctor, they pay for it out of pocket, the transaction will be registered as "private consumption". If I (in Germany) visit the doctor, no money ever changes hands. My contributions to the public health care system are deducted from my income before it ever reaches my account and about half don't come out of my own paycheck anyway, they are the responsibility of my employer.
So my guess would be that this "study" undercounts exactly what it professes to account for: Goods and services consumed (but not necessarily paid for) by the poor.
But how about we measure outcomes? For example in terms of life expectancy, the U.S. is much more "unequal" (if you are poorer, your are more likely to die younger) than other developed economies: https://ourworldindata.org/life-expectancy#inequality-of-lif...
And because the U.S. has worse life expectancy than other developed economies in general, poor people are likely to die younger in the U.S. than in, say, Germany in absolute terms as well. That is just one indicator but if you accept that "the number of years you live" is an important indicator for general quality of life, the U.S. seems to score quite badly on this.
(then ended moving back again, because Florida)
The individual taxpayer was paying ~hundreds of millions per year into an $86 billion dollar budget. It's kind of wild that an individual would be paying a tenth of a percent (or so) of a state's income taxes, but it's maybe not a substantial fraction.
So now there are banks that will never take an American customer, and banks that specialize in Americans.
Swiss and British bankers should be hanged
Seems like in economics it’s also useful to analyze qualitatively. Of course you cannot run doomsday headlines with that.
Indeed. American doomerists are just ridiculously parochial. Panicking about the dollar when it's the currency that everyone else runs to as a safe haven. The biggest risk to America is its debt ceiling mechanism; the opportunity to completely destroy America's credit and economy to own the libs is very tempting to some people.
Except canada. The coasts. The transportation system, the tech industry... and canada has a far better-regulated banking sector, one that surfed past 2008 almost without incident. And for every natural resource, from water to uranium, Canada has more than it will ever need. I would far rather ride out the comming climate/economic crisis in calgary/vancouver than LA/SF.
He predicted dollar collapse, hyperinflation for 11 years, and a bunch of other stuff the didn't come true. Major broken clock syndrome on his part. Inflation finally spiked, but after being wrong since 2008. Gold still has not done much in a decade. The inflation was from the post-covid recovery, which was so strong that supply chain could not keep up, not as a consequence of 2008.
It's very easy to predict something will eventually happen. Anyone can do that. Way harder to predict when,
The fundamental problem is that price controls never work and the interest rate is the price of money. If you understand this, then it's easy to predict the endgame, whether it takes 10 or 20 yrs to fail, you will still be right once you position yourself for the windfall.
Nothing bad happened due to Peter Schiff being wrong for 9 out of the last 10 years because he's not the one deciding monetary policy. For all we know, if he had his way, the US would be in a perma-recession and made into a vassal state of China by now.
Also, the business cycle is something acknowledged by literally every economist. The fact that we have mild economic turmoil after a global pandemic shouldn't be a prediction that Peter Schiff is proud of.
Let's say Alice will be wrong several times and then right once, and Bob will be right several times and wrong once. Both of them start with $10k.
To give Alice every advantage, let's say her bets pay out 10x or nothing, and Bob's bets pay out 4x or nothing. We'll also say Alice magically knows which time she'll be right, but Bob won't know which time he'll be wrong.
Alice will obviously bet all her money on the time she's right, and come out with $100k.
Bob can invest 2/3 of his money each time, repeating every time he's right. Let's say he happens to be right 8 times, then is wrong. After those 8 right bets, he'll have $6.6M. After he makes his wrong bet, his fortune will drop to $2.2M. Then he'll retire.
Looks like Bob has a much better windfall to me.
The issue (using your analogy) is that Bob is exposed to profound, unseen risks that are deeply discounted in the marketplace - he is "picking up nickels in front of a steamroller" as Taleb puts it.
At the same time, you have the Alice strategy wrong: Alice makes regular, extremely leveraged hedge purchases - perhaps even 500:1 or more - and just ignores the steady outflow of her premia.
Eventually, Bob gets hit by a black swan event and loses 80 or 90 percent of his principal and Alice has a 500:1 return on her hedge.
These are the two strategies that are interesting to compare.
It may interest you to know that Taleb performed this in real life with his own money at risk[1]:
"A tail-risk hedge fund advised by Nassim Taleb, author of “The Black Swan,” returned 3,612% in March, paying off massively for clients who invested in it as protection against a plunge in stock prices."
[1] https://www.bloomberg.com/news/articles/2020-04-08/taleb-adv...
If Alice wins after 10 bets, with 200:1 return, and she bets the same percent each time, the absolute best she can get is an 8x return on her initial bankroll.
> The issue (using your analogy) is that Bob is exposed to profound, unseen risks that are deeply discounted in the marketplace - he is "picking up nickels in front of a steamroller" as Taleb puts it.
For Bob to be "picking up nickels" that means Bob is getting ripped off on the things he's right about. If "right until you're wrong" involves tiny little rights and an enormous wrong, then sure it's not very appealing. But that needs to be stated explicitly. Without a qualifier, I expect "being right" to be at least coin flip odds. Because who cares if you can predict something that's 95% likely to happen?
Oh and Bob did not save 1/3 of his gains. To be fair, he spent it, living high on the irrational market all these years.
Meanwhile, Alice scrimped and saved and warned and was mocked.
She turned out to be right all along, and now she’s the queen of Barter town. Which isn’t a great place to be.
But the little guy who controls the resources and his muscle don’t need Alice, and want her wealth.
Who said that? I was just responding to "It's better to be wrong until you're right than right until you're wrong...because you will get the last laugh."
I assumed that "right" in the first half is at least somewhat similar to "right" in the second half. And that "wrong" in the first half is at least somewhat similar to "wrong" in the second half.
If they're supposed to have inverse odds, then that wording is very misleading.
> Last I checked, Bob’s investments so closely tracked inflation, its indistinguishable.
???
Please elaborate on who you think Bob is, because whatever you think it was not my intent.
if Peter Schiff was any good at predicting this type of stuff, Peter Schiff wouldn't have to work for a living.
Living standards are going to drop unless the AI hype is real and AI actually manages to improve productivity dramatically
also laughed at this line from the post
>While there is tremendous uncertainty, given that the banking sector drives credit creation and subsequent economic growth
bankers really think they are the drivers of growth, that's how you end up with all your manufacturing in China. These people are clowns
What constitutes a bad decision in your view?
My perspective is that Capitalism actively encourages and rewards the kind of behaviour most would consider to be morally and ethically bankrupt. The simplest example would be monopolising control of a limited but necessary resource, thereby granting you what is effectively absolute power over those who need it. Think oxygen supply on a moon base or fresh water on deserted island.
Take cigarette companies also. The "good" decision under capitalism was for them to knowingly deceive society on the health risks of their product. All so they could continue to profit.
Where did you get that idea?
Capitalism is based on people who have more money/wealth (aka capital) making more money.
In our system as it exists today, the capital owners have managed to use their vastly disproportionate wealth to influence the government to prioritize their needs over all others. This is a nearly inevitable outcome of unfettered capitalism, combined with legalized bribery of elected officials (lobbying, PACs, etc).
Now, it's certainly true that no system is going to remain in balance long if people can make decisions that hurt the system and suffer no negative consequences themselves—all the moreso if those decisions actually benefit them. But that's not at all the same as saying that capitalism—or any economic system—is based around those kinds of feedback loops.
Peter Schiff is always predicting doom. It's not that he's talking complete nonsense, but objectively he is more wrong than right. His opinions corelate less to being correct and more to the fact that he invests a lot in gold, and his interest is that everyone else gets scared and does too.
As for the first part - yes, it would count. Timing of things is impossible to predict of course. But being right in the first place, shouldn't be underestimated !
Let's take crypto as an example - one can predict it's going to 0, and one can say it will go to 1M$. Even though you don't know when, being right is the only chance you make something out of it.
0% interest can work just fine, but not in the trickle down model.
Got any names or search terms for the 0 interest point? What political economy does it work with?
I'm asking because I've had these thoughts on my mind ever since Ray Dalio uploaded his video Principles for Dealing with the Changing World Order [0].
[0] (Video length: 43:43) https://youtu.be/xguam0TKMw8
See the big oil and its record profits last year for an example.
If crypto isn't the answer, what is? I think inflation and deflation are awful levers of monetary policy and should not be wielded by government institutions like the fed. They've proven themselves time and again bad stewards.
It's more like asking why patients think they know more about hospital processes when management is making (perceived) bad decisions that don't solve real problems
We are users of the service, not people who work within the financial system
My understanding is that it’s a standardized basket of goods that supposedly represent the average household, and it calculates inflation on this basket on a regular basis.
This doesn’t reflect anyone’s reality however and I think a quick and dirty way to calculate your own CPI would be to check the difference year on year for all your rent and living expenses (including fuel if relevant etc) + your groceries (food toiletries etc), and figure out how has this changed year on year.
Correct.
Someone doesn't understand how averages work...
We cannot have a decade of 0% interest rates and expect no consequences. Peter Schiff predicted this from the moment the fed bailouted the banks in 2008.
There's nothing the fed can do to escape this one, it's either massive inflation or massive recession. The fed has avoided the latter by bailing out the banks again so expect double digit inflation for the next decade.
PS: My personal CPI (rent + food) is 23% so I'm already experiencing this. I would advise everyone to calculate their personal CPI because that's what affects your standard of living...The government numbers are rigged and everyone's reality differs...