sure nice to take a break from the news and just rant on Bygone Relics for a minute about a simpler country and use a couple expletives from time to time. There is too much news to contend with so we had better just have a talk about Zambonis. If you have ever been a a hockey game you will see the magical Zambonis come out between periods to clean the ice. These are large trucks that add water to the freezing surface of the ice and it creates a beautiful smooth playing surface. The nicks, cuts, gashes from the previous period of skating disappear and a smooth surface appears. Once play begins it gradually becomes less smooth and full of skating tracks, the sliding footprints of the two teams. The Zambonis make things better because the passes slide better and more accurately, there is less friction, and the ice surface is healthier without the thousand cuts done by the skates.
Recessions are like zambonis because without a refresh of the surface the skating becomes bumpy and when you are gliding around at speed on top of knives that becomes dangerous. When an economy gets bailed out and there is no recession it becomes dangerous. Instead of the economy taking its medicine in 2020, the government sent out checks. People bought some of the dumbest things you can imagine because the money was free. You want an Ipad on a bike, here is a $4k Peloton, revenge travel as Europe hadn’t seen this many Americans on that side of the pond since the invasion of Normandy and jpeg unique crypto assets called nfts. Do you remember the NFT? I now own the unique code behind the photo of a bored ape so I will always have it and it only cost me $10 grand. Congratulations nimrod, that and $6 will get you a lavender Starbucks drink made by a barista with a nose ring. This is how people spent their money when it was free.
Let’s think back to what happened to 2008, the rich got bailed out. There was a recession for lots of poor people as they lost their jobs and they lost their houses, the houses they never should have been in in the first place I might add. Banks got bailed out, bankers got their bonuses instead of a pink slip, and AIG was too big to fail. The rich that got bailed out in 2008 just gave themselves bonuses. The Fed went to Congress and begged for a bailout, and they got it. Taxpayer money to bailout the big boys. People used the strawman that the economic system would fail. No, their economic system would fail. Argentina still has an economic system, Cuba still has an economic system, and even Venezuela still has an economic system. They just have a whole lot less people giving themselves raises and protecting their cronies. America would have been different, but America is and was in a far better situation than any of those countries. Neither scenario is good, 2020 or 2008.
The difference between our policy options then and now is now we have inflation. There is no bailout without inflation. It is over. We must bring out the Zambonis or we won’t be able to afford macaroni. Inflation will return and make 2022 look like a warm slow soft kiss that lasted 3 days. The difference for us is that we used to be a rich nation. We used to produce items for sale. We sold our things to the world. Now we buy and consume. We only print money and war. That shaky foundation will not hold our increasing weight much longer. Here is a fine synopsis of inflation.
“One of the privileges of a rich man is that he can afford to be foolish much longer than a poor man.” And this is the situation of the United States. The financial policy of the United States is very bad and is getting worse. Perhaps the United States can afford to be foolish a bit longer than some other countries.
The most important thing to remember is that inflation is not an act of God; inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy—a deliberate policy of people who resort to inflation because they consider it to be a lesser evil than unemployment. But the fact is that, in the not very long run, inflation does not cure unemployment.
Inflation is a policy. And a policy can be changed. Therefore, there is no reason to give in to inflation. If one regards inflation as an evil, then one has to stop inflating. One has to balance the budget of the government. Of course, public opinion must support this; the intellectuals must help the people to understand. Given the support of public opinion, it is certainly possible for the people’s elected representatives to abandon the policy of inflation.” Ludwig von Mises, 4th lecture on inflation
One of these days we are going to have to bring the Zamboni out of the shed. It needs to clean out the malinvestment of EV companies, green energy, AI posers, zombie companies, zombie banks, and all of the people that made bad bets need to crap out. They need to stop. This is common everywhere in the world except the US. We think that we can stop recessions and it only makes it worse. Think about when you have to sneeze. If you just relax and let it go it passes without much trouble. However, if you try to hold back the tide and plug your nose or cover your mouth, the force of nature hits you with a fury. As trapped air moves at 200mph desperately looking for a way out, your left eye bulges out a little, your hair stand on end, and you pass gas a little, a little squeaker. Your back cracks, your head threatens to pop off the top of your head, and you somehow end up in a calf raise position. All because you wanted to fight the sneeze. The aftermath is similar to checking the damage after a tornado. You have to see if your back still works, if your eyes have receded back into your head, and you might even have to check your drawers. This is what we risk by not having a recession.
What are we risking now. We have a commercial real estate debacle that is taking down banks. Hundreds and hundreds of community banks because the big banks are too big to fail. The toxic debt is still sitting there on bank balance sheets for all to see and they are fighting, trying to hold back the sneeze. The consumer, used to spending $300 a day to go watch grown people dress up as mice and call it the happiest place in the world, now realize that they had no business spending like a Vanderbilt. They are still trying to live the lifestyle to which they were unaccustomed or unfit financially to partake in. The national government, the states, the cities, the households, they are all in debt. If misery loves company, then America is about to have lots of company. Other countries are just about as bad. No one has any money; they just have pieces of paper with pictures on it or 1s and 0s in a computer. This is like an NFT of money. It means I can buy something. Only if the other person has shit for brains will that work. If you think computer digits are going to be money, then great. You will need a Star Trek spaceplane full of other believers and if you all agree that digits are money then they can be in your circle. Money can be almost anything. That group will likely not be populated by many farmers, mechanics, traders or welders. However, if you need to chop off a sorcerer’s head off in a computer game, then by golly you can charge for that and be paid digits on delivery, DOD.
Meanwhile the rest of the world is building an alternative trading system based on commodities and backed by gold. There will be dozens of countries in the BRICS, all wanting to seek out a trading partner and not be bullied by the US. These countries want to trade real products like oil, natural gas, coal, corn, and soybeans. These are simply much lower on the Maslow’s hierarchy of needs. Heat, shelter, food and not blue hair dye, nipple guns, and Obi Won Kenobi action figures which is totally ridiculous because they have seen about as much action as their owners. These collectors who keep the action figures sealed and they never take them out of the box, which is probably why they don’t spend any time in a ….nevermind.
The point I am trying to make is that there are necessities and frivolities and sometimes that line gets lost. America has completely lost that line because our money isn’t real. Let me close with this last example of how people talk about money. Let’s say someone’s house has doubled in value. They are wow, the price of my house has doubled. I’m like great. Sell it and go buy another house just like it and put the other half of the money in the bank and earn some interest. They usually pause and say wait a second… Your house didn’t go up in value, your money went down in value. It takes twice as many George Washingtons to buy this house. When I see gold go up 20% last month or so, I don’t think gold went up. I think it takes 400 more George Washingtons to buy the same ounce of gold that was there 30 days ago. The gold is identical. What really changed?
That is 240% annualized inflation if it drops 20% of its value in a month. Which is about what Argentina has. Now, is this happening every month, no not yet. But it has to happen once in order to happen twice and the once is out of the way. This is why we need to have some recessions. We need to stop the spending of money recklessly, we need people to save for awhile out of a little bit of fear, and we need people that screw up to get their financial asses kicked. Publicly, and for all to see to provide stability back in the system to show that no one is too big to fail, no one gets bailed out in America. This isn’t some socialist banana republic but the greatest example of capitalism there is, or do we simply say it used to be. Me? I’m looking for a Zamboni.
Sincerely Yours,
C Thomas Printer
On this date in history… 79 years ago to be exact, the war in Europe was over marking an end to World War II for the continent.
Also born on this date … Nobel winning economist and student of Ludwig von Mises, Friederich von Hayek.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.