➤ This ๐งต was prompted by an article in an official ๐จ๐ณ#dd_cn news source. A professor laments the Chinese demographic crisis and offers the usual platitudes. Article
His suggestion: Maybe the birth crisis can be "solved" with tax breaks for parents.
Um, no. ๐คฆ
➤ Government #dd_incentives for baby-making can take the form of—
① Tax breaks
② Direct cash payments ("baby bonus")
③ Subsidized daycare and other family-friendly services.
Nearly all such "solutions" require tons of ๐ฐ that most governments don't have.
➤ Incentives don't work because people aren't dumb. Given the huge costs, risks and lost freedom of raising a child, anything the government can offer is a pittance.
What might work: Paying mothers a full salary for childrearing. But no government can afford that.
➤ Anyone who WAS swayed by a financial incentive might not be an appropriate parent.
e.g. ๐ท๐บ#dd_RU offers a $8K bonus for a 2nd child. What is to prevent parents doing it for the money and neglecting the child thereafter?
➤ Evidence that incentives work is dubious, because there is no control group. There is only cherrypicking coincidences.
e.g. Incentive offered in 2013; birth rates rose in 2014
There's no proof one caused the other.
If rates fell in 2014, the government would have kept quiet.
➤ Couples who were ALREADY planning to have a second ๐ถ are happy to take the government's money, but there is little evidence that the incentive actually changed anyone's mind.
Many articles on various government efforts to encourage births. Quite a collection! (Includes some unrelated #dd_perverse incentives.)
Standard hashtag: #dd_incentives ๐ด#ddoom_incentives
➤ The useless attempts continue...
๐จ๐ณ Chinese government to create a “good matchmaking environment" ๐คฆ Article
๐บ๐ป #dd_incentives #dd_cn #dd_scmp
➤ ๐จ๐ณ One thing China could do that other countries can't is abduct women, inseminate them and force them to have babies. The children could be raised in ☭#BabyFarm's.
I wish I could say they would never do a thing like that, but their track record suggests they are capable.
➤ Short of forced childbearing, any incentive program is likely to fail in China like it has failed everywhere else.
➤ ๐จ๐ณ๐ถ๐ญ #BabyFactories are real in China, but they are criminal enterprises producing babies for adoption. No indication yet of state sponsorship. Daily Mail Article
{Formatting completed: {This blog post referenced in Tweet essay: 1/25/21} {This blog post backed up to email: 1/25/21} {This blog post visual backup to Twitter: 1/25/21}
Below is an ongoing index of all my (non-podcast) YouTube videos in the Demographic Doom project, latest first. A #Hashtag indicates a hashtag on Twitter. A j.mp references means there's a short link for this video.
Can other people use my special "#dd_" hashtags? I have no strong feelings about this right now, but I have created a this blog entry in case I do have any strong feelings later.
No one can "own" a hashtag on Twitter, so I can't tell anyone to not use the hashtags I invented. It sounds like a good idea in principle: other people can add their own references to the database so that is remains alive even without me. I would only ask that you use my hashtags according to the rules I have demonstrated. (You'll have to devine most of the rules because I can never put them all into words.)
What is to prevent a Troll๐บ from trying to corrupt my system with spurrious hashtags? Nothing really, but this troll would have boundless energy and care an awful lot about what I am doing. If nothing else, I can overwhelm him with sheer volume.
If all else fails, a user can restrict their hashtag search to just my Twitter accounts. To search only for the hashtags I've used, insert this string in the Twitter search box along with your desired hashtag (#dd_sample below).
(from:demographicdoom OR from:baddalailama OR from:bdlnotes) #dd_sample
➤ ๐ช๐ฌ Cairo traffic is ๐๐๐๐๐๐!๐ฑ #dd_eg
Cairo has 2 million cars and ๐ฃ๐ค [๐ด๐ก๐ข]s! (At least I saw none.) At intersections ๐๐ just push in and sort themselves out.
I will ๐ฃ๐๐ซ๐๐ง return to ๐ช๐ฌ. Not just traffic but the general sense of lawlessness & chaos. ๐๐#kcpc04
➤ ๐ซ๐ท It sounds like Paris๐ผ will soon be suffering the #dd_Exodus disease, like NYC, SFO & Chicago.
Liberated from their offices by the ๐ฆ , many Parisians may flee the high costs of ๐ผ for the gentle life of the provinces๐ท๐๐ง, leaving ๐ผ in dire economic straits. #dd_fr
➤ ๐ซ๐ท We'll always have Paris... or will we?
If enough people leave, it may start a #dd_DoomLoop of urban decline. Remember the ๐ผ riots of Dec. 2019? They could be back if economics get more out of whack.
➤ ๐ What passes for #UrbanPlanning in a dying city is often desperate and expensive taxpayer-funded redevelopment projects intended to reverse the #dd_Exodus. The blind faith is "Build it and they will come," but no one has a clue if they will, and they probably won't.
➤Case in point: Dying Gary, Indiana ๐ built a gleaming convention center to try to revitalize its downtown. Didn't work, and it's been a burden to the city ever since. #dd_usIN
...Like the Mayor of graying & shrinking #Toyama, Japan—mentioned in the ๐—who wants to shut down the expensive suburbs and move the ๐ด๐ต to the center city. That makes sense.
➤ ๐ Demographic trends:
⸻ ๐ถ๐
⸻ ๐ด๐ต๐
⸻ Young people fleeing provinces for city
⸻ Lucrative taxpayers fleeing headline cities for smaller, cheaper ones
Losers: headline cities, small towns, rural areas
No so losers: mid-size cities
➤ ๐ ๐ Suburbs are in a weird place. They're still desirable places to live, but they are infrastructure ๐ฅ๐๐๐๐๐ฅ because there is so much space between buildings. Cost to maintain aging roads/sewers/etc is huge.
{Formatting complete: 1/23/21} {This blog post referenced in Tweet essay: 1/23/21} {This blog post backed up to email: 1/23/21} {This blog post visual backup to Twitter: 1/23/21}
Below is a reformatted version of my Tweet Essay started on the morning of Joe Biden's ๐⁴⁶ Inauguaration (20 January 2021). Begun before dawn in Key West and continued as Biden was sworn in. See Index of All My Tweet Essays
Red ➤ indicates later tweet inserts out of its original order.
➤ ⦕ ๐๐ธ๐ท๐๐ฒ ๐ข๐ฌ๐ฑ๐ฎ๐ถ๐ฎ๐ผ ⦖ at the time of the Biden Inauguration - #de_ponzi
➤ ๐ Today we’ll get a normal President, and soon—we hope—a normal post-pandemic world…
And then we’ll find that “normal” isn’t normal anymore. No economy, market or monetary system is sustainable. All the Ponzi schemes will start collapsing, and the bills will be coming due.๐งต⇩
➤ ๐ This is a terrible time to be a responsible president. There are no “solutions” to anything, only costly no-win mechanisms to delay the inevitable. ๐
➤ ๐ The world is now an interlocking system of #Ponzi schemes: stocks, gov't debt, etc.
A #PonziScheme ▲ is a false investment where early investors are paid off by later ones. All these schemes collapse eventually—but when?
In this ๐งต I will try to inventory some of them...
➤ ๐ In my latest podcast #DDpc52, I discuss the general mechanism of "overpromises", or selling more chickens than you produce ๐ http://youtu.be/RiO0MadMlo0
If you sell more future ๐s than you can deliver, eventually someone gets stiffed, and in this case "someone"="everyone". ✂️↓
▲ The Ponzi schemes and overpromises range far and wide in the current economy.
In fact, it's hard to find any corner of the economy that ๐๐จ๐ฃ'๐ฉ infected by a ▲ scheme. They're interrelated and one often ๐ฉธs into another.
Here are the main ▲s I've identified. ๐งต⇩
▲№1⸻Stocks
A stock is the promise of a ๐ of the future profits of a company. As of now, US markets are at ALL-TIME HIGHS despite a ๐ฆ that has devastated the real economy. Pure๐ฆ๐ฉ๐คช!
Argue about "why" all you want. US stocks are in a massive ๐ and have to ๐ฃ๐ฅ eventually.
๐ One way to judge the relative #dd_Bubble of #dd_Stocks is #MarketCapToGDP. Today it’s a massive 190%. If stocks were overpriced when ๐คก⁴⁵ took office, they are 50% more overpriced now.
In 2020, 2021 & maybe beyond, the US Gov't is spending ~2x what it collects in taxes. Even in pre-๐ฆ "good times" of 2019, it was ๐ฐ๐ค >25% more than ๐ฐ๐ฅ. The rest is borrowed and can never, ever, EVER be repaid or even paid down. It only GROWS. ๐น
▲№2.1
The US Gov't can ๐ฃ๐๐ซ๐๐ง again balance its budget because—
① Demographics: Too many costly ๐ด๐ต. Not enough active ๐ท๐จ๐ณ๐ง๐๐ง๐ญ paying taxes. Few ๐ถs in pipeline.
② Politics: Balancing the budget would mean cuts to "essential" programs that voters wouldn't accept.
▲№2.2
The budget was balanced 1998-2001 only because the #BabyBoomers were at the peak of their earning power. Now they're ๐ด๐ต๐ฆฝ and draining gov't resources.
The happy #DemographicDividend of many taxpaying ๐ท️๐จ๐ณ๐ง๐๐ง๐ญ and few taxdraining ๐ด๐ต will never again be repeated.
▲№2.3
Technically, the US Gov't can never "default" on its debt because it can print more ๐ตs, but that's not a real solution. It only screws up the rest of the economy—and the gov't itself—in ways we're only beginning to understand.
๐คInflation? Yes, but it's a twisted road.
▲№2.4
Bottom Line เดง____
If you buy a 10-year Gov't bond today (at ~1%) it won't be worth what you think it will upon maturity. Either through inflation or default, this paper will not return full value. Once the market assimilates this, all hell will break loose.
▲№2.5
All it would take to bring down the government would be a modest rise in bond rates to their historical norm of 5%. The gov't couldn't pay even the interest costs.
The #FederalReserve avoids this by holding rates low and printing new money to buy bonds—which leads to...
▲№3⸻Currency Bubble
In any ๐ republic, printing as much ๐ตs as the Fed has would lead to rampant consumer inflation. The fact that it hasn't so far should not be reassuring.
Something will go bad. It has to. No government can print new money indefinitely to pay its bills.
▲№3.1
I'm not gonna go down the ๐๐ณ️ of #MMT. That's ๐คช-talk.
If unlimited ๐ต printing were possible, you have to ask, "Why pay taxes at all?"
⚙️⚡ There is ๐ป๐ผ ๐ณ๐ฟ๐ฒ๐ฒ ๐ฒ๐ป๐ฒ๐ฟ๐ด๐. Every #PerpetualMotionMachine has its fatal flaw, and it will be known soon enough.
▲№4⸻Residential Real Estate
As of this writing, commercial real estate is taking a bath but ๐ s, like stocks, are flying high.
Commercial ๐ reason: ๐ -bound workers during ๐ฆ don't need offices.
Residential ๐ reason: ๐คท
Won't go on forever. Something has to break.
➤ Re: ▲№4
Chart shows ๐คช surge in ๐ prices since mid-2020.
until whatever you built wears out and needs to be repaired.
Lots of those projects are coming due, and if the work isn't done soon, stuff will start falling down. ๐s collapse. ๐ฃ️s turn to rubble.
▲№5.1
Infrastructure is easy to skimp on because it can always be put off. Roads only ๐จ๐ณ๐ข๐ฅ๐ถ๐ข๐ญ๐ญ๐บ deteriorate until something really bad happens.
Local gov'ts don't have the ๐ฐ for repairs, so the Feds must step in, using—you guessed it—borrowed money. (See ▲№2)
▲№5.2
The single-family suburbs are a special kind of infrastructure ๐ฅ๐๐๐๐๐ฅ because their streets and sewer lines are long relative to tax revenues.
New subdivisions <20 years old are all gravy. Older ones—like ๐ด๐ต—are a net drain on local government resources.
▲№6⸻Urban Flight
Many workers who have been freed of a fixed office by the ๐ฆ are fleeing Big๐ฐ cities like NYC, LA, SFO, Chicago for lower cost ones, leaving them in dire straits.
Local gov'ts can't print ๐ต like the Fed, while raising taxes just ⇧s the ๐ซ. No way out!
▲№6.1
Premiere cities are facing a #dd_DoomLoop: The more people move out, the worse life gets, encouraging more to flee. (This may not ๐ฒ with ▲№4 yet, but it will.)
These cities have huge debts, which will become unpayable as tax base shrinks. They'll need Fed bailouts...
▲№6.2
…with borrowed money, of course, and the urban decline will be chronic.
Even if the ๐ฆ ๐ท ends tomorrow, the damage is done. Freed now to "phone it in", few knowledge workers need a Manhattan apartment anymore๐️
Or a California pad๐️ Who needs it? You can always visit.
▲№7⸻Wealth Inequality
More a ⏳๐ฃ than a ▲ scheme. In the computer era, efficiencies of scale have made the rich richer and poor poorer.
e.g. Once there were 1000s of inefficient but profitable ๐co's. Now there's hyperefficient Uber/Lyft. Only execs make money. ...
▲№7.1
The ๐ฆ has widened the wealth gap. 1000s of small businesses have been wiped out while many big ones have thrived. Jobs are still available from the big guys, but they are mostly low-paying "fulfillment" positions—like Uber/Lyft drivers, fast food, etc—with few benefits.
▲№7.2
As of now, jobs are available everywhere in USA! I see it as a traveler. ๐๐ซ๐๐ง๐ฎ fast food restaurant, everywhere in ๐บ๐ธ, has Help Wanted signs—but these are unhappy jobs to those who have built their lives on a higher wage. A whole nation can't live like this. ๐๐คฎ
▲№7.3
Unhappy workers are bad for society.
They get ๐คฌ.
They cause unrest.
They vote for populist charlatans.
Perilous to democracy is a populace whose personal lives are consistently getting worse.
Workers are another form of infrastructure we're not adequately maintaining.
If you've got a ๐ of ๐s and you sell one to a ๐ถ for $1, it doesn't imply you can sell the whole ๐ for $1 each. Every sale is unique and limited. It depends on the market at the time and may not predict the price when you come to sell.
➤ Investors make this mistake all the time. They look in the ๐ฐ to see the latest sale price of whatever asset they hold and treat it as "money in the bank" when it's not.
Today's prices reflect a small volume of sales and the mindset of the handful people doing the deal.
➤ For your ๐ of ๐s, a lot of things can happen before you sell—
① Your๐s can go ๐คฎ
② ๐s can ๐ due to short supply
③ ๐s can ๐ due to surplus
④ You selling all your ๐s at once can flood the market, ๐ the price.
⑤ People lose their taste for ๐s
⑥ A better ๐ comes along
➤ You selling one ๐ to one ๐ถ for one ๐ต suggests that there may be a demand for your product, but it doesn't prove the value of your whole ๐load.
The only thing that proves the value of your whole ๐ is actually selling it.
➤ ๐คฆCommon mistake:
Day1: You sell an ๐ for $1
Day2: You sell an ๐ for $2
Day3: You sell an ๐ for $3
Day4: You hoard your ๐s, waiting for $4 ๐
Day5: No sales
Day6: No sales
Day7: Your ๐s go bad
๐ฉ๐ Lesson: Most "trends" are a lie. Just like in ๐ฒ๐ฐ
➤ I might buy the whole ๐ of ๐s from you, but certainly not at $1 each, even if recent verified sales were $1. That's because I am considering all the risks above. I am expecting a "risk discount" (or #RiskPremium) to compensate me for my gamble. Otherwise, you can keep them ๐s.
➤ ๐คฆ Another mistake:
Elon #dd_Musk is said to be the "richest man in the world" right now, "worth" ~$185 trillion, but most of his "wealth" is $TSLA stock, which is—um—a bit speculative.๐คช In 1 year it rose ~8x with little change in business fundamentals. Forbes Article on Musk's Wealth
➤ It's a long road from #dd_Musk being wealthy "on paper" and wealthy in cash he can do something with. In fact, he acknowledges being #CashPoor. He supports his lifestyle by borrowing against his $TSLA stock—which sounds a little scammy and bubblicious. What if $TSLA tanks? ๐ฑ
➤ Who determines that $TSLA is worth 8x what it was a year ago? Investors who trade it. This is limited to people who FERVENTLY BELIEVE IN $TSLA ๐. Those who DON'T BELIEVE ๐ don't trade it. IOW: Only the True Believers are setting the price of $TSLA. ...
➤ Trading by True Believers can be sustained for a while, especially if volumes are small, but ultimately every business must be proven by PROFITS, which are currently scarce at $TSLA.
To prove its price, not only must $TSLA sell it's ๐ of ๐s, but each must be golden.๐ฐ๐ฐ๐ฐ
➤ Gentle reminder: I'm sure #CharlesPonzi and #BernieMadoff would have been considered among the "richest in the world" at the peak of their scams.
This is the script for my Demographic Doom podcast episode #52 recorded in Key West on 18 January 2021 and released on 19 January 2021. It may differ slightly from the final broadcast. This episode is available on major podcast platforms like iTunesand Google Podcasts. The audio master for this episode is found at Podbeanand a video version is on YouTube (below). See the description on the YouTube version for extensive annotations, links and corrections. You can also comment on this episode there. The main website for this project is DemographicDoom.com
I'm Glenn Campbell. I call myself a demographic philosopher. I'm looking at life and trying to predict the future through the lens of demography or the study of human populations. I'm trying to view humanity from a distance like aliens would see us from space.
In this episode, I want to take another stab at explaining the messed up macroeconomics of the world in the simplest possible terms. I've tried to do it before on other episodes, but it's so important that I'm going to try it again from a different angle.
This time around, I want you to imagine a world without any money. That's my rhetorical device of the day. If we lived in a world without hard currency, like dollars or yen, would the economy be as screwed up as it is today, and the answer is, Yes, it could be, because there are other things that stand in for money, and they can become just as distorted as money can.
Imagining a world without money shouldn't be too hard, because humanity has lived most of its existence without it. In a medieval village, for exampl, most people might not have had access to currency, so what did they do? They bartered, of course. Barter is the only truly honest monetary system. If one farmer has an excess of chickens and another an excess of beets, they can trade with each other and both parties win, at least gaining a more balanced diet.
You can barter anything for anything, like goods for services. For example, you can work in the fields for a farmer, and he might pay you one chicken for each day of your labor. If you don't happen to need a chicken right now, you can trade it to some other villager for something you do need. If you're a blacksmith, you take raw metal and add value to it by turning it into a useful tool, which you can then sell for chickens or beets. Whether you grow a vegetable, raise an animal or form a raw material into a tool, you are creating value that that can be traded for other things.
I call this an honest monetary system because you always know the value of things, and the objects you are bartering are right in front of you and can't easily be faked. The only problem, of course, is that trading chickens and beets and tools can get really awkward, given all the merchandise you got to carry around with you. It would be much easier if you could trade your chickens and beets for something more compact, like little disks of various kinds of metal. Then you wouldn't have to carry around all those chickens.
And that's how money was born. Initially, it still would have been an honest system, because the disks of metal would have had value in themselves. In the days before mass production, copper and iron would have been mined and smelted by hand and would have been quite valuable even as a small disk. Those disks of metal in your pocket could be melted down to make nails or hinges. Even when being used for trade, the metal itself was worth what it was being traded for. It was just more convenient than the chickens or beets.
This isn't really "money" yet, at least not as we now know it, because those disks being traded were intrinsically worth something. There is a long history of how metal disks inherently worth their face value turned into paper bills and computer entries worth nothing at all, but we're going to skip that history in this episode. We are assuming, for the sake of argument, that money was never invented.
So if you have a civilized society and no money, how do you trade with others—that is, without carrying around a lot of chickens. A chicken has intrinsic value, in that you can eat it, but it's hard to to use as a medium of exchange, at least in its physical form. You can't stick chickens in your pocket, and they're a pain to maintain. So how do you remedy this problem? How do you make a chicken more portable.
Well, it's pretty easy. Let's say you know you're going to need to a chicken in the future, say for a chicken soup party you're having a month from now, but you don't want to house and feed the chicken for a month. You just want to assure a future supply of chicken, so you pay a bushel of beets to the chicken farmer, and the farmer gives you a piece of paper promising to give the bearer of that paper a chicken one month from now,
So what can you do with that piece of paper? Well, you could cash it in a month from now for a physical chicken, or you can trade it to someone else for something else you might need right now, like a sword. The sword maker can then turn the paper for a chicken.
So you don't really need a government issuing a currency, which is the standard definition of "money". Any merchant or product manufacturer can issue a promise, a sort of de-facto currency that can be traded just like it was money. Merchants used to do this all the time in the 20th Century: issuing various coupons or gift certificates that consumers could trade among themselves and eventually redeem for stuff. For example, McDonald's only had gift certificates that could be redeemed for hamburgers, which kids can trade with other kids to get other things they wanted.
Even there is no money in the world, in the traditional sense, you can still have a vibrant economy just dealing in these paper promises of things. Here's a piece of paper; it can be redeemed for one chicken. Once you have this coupon in your hands, you can trade it like a dollar bill for the things you really want. I call this a "representative economy", which is when you trade symbolic tokens that represent other things. You don't need government money because the token is the money, with no government involved.
An this is essentially how most of our present economy works. What financial markets do is not trade things, per se; they trade the promises of things. That's what a stock is. It's a piece of paper that says you own a certain share of the future profits of a company. It used to be that you'd physically own a piece of paper, a stock certificate, that you kept in a safe and that proved your ownership. Nowadays, we've dispensed with the paper itself, but the same ownership system still holds. If you own a company's stock, you're holding a promise of future profits—or future chicken—that's eventually going to come your way.
Money is just an intermediate medium to facilitate these transactions. Most investors don't hold onto their money for very long. Instead they turn it into promises for things. They can buy a stock, which is a promise of future profits, or they can buy commercial real estate, which also promises future profit. A bond or other debt instrument is a promise that someone will pay you its face value at a certain future date. Even if you deposit your money in a bank, you are exchanging cash for the promise that the bank will eventually pay you back.
All this representative trade in the promises of things doesn't need a currency. A currency is certainly convenient but not essential. I can trade chicken futures for beet futures without any intermediate currency involved. If currency didn't exist, we could just hand pieces of paper to each other. And this is what would probably happen if the US dollar or other major currencies broke down. Someone would set up an online clearinghouse where promised of chickens could be traded for promised of beets or anything else you wanted. Anyone could create a promise of something, like future chickens, and trade it for a promise of something else. Merchants would be expected to actually deliver on their promises, or they'd be booted off the platform. In fact, this could very well be where things are headed if currencies collapse.
But before we get to that stage, we need to think about how this system could possibly go bad. What could be wrong with trading the promises of things. The problem is actually quite simple. It had happens again and again throughout human history, wherever a market has sprung up for promises. The inherent risk of any promise-based system is that people promise more than they can deliver.
Think of the chicken farmer, issuing promises of future chicken. If he finds himself in a financial bind and needs resources right away, it is going to be very tempting to him to issue more promises than he has chickens. At the least, he may use the most optimistic estimate when predicting his future chicken production, which assumes that everything goes right in the chicken business. At worst, he can just make up imaginary chickens that he know he can't deliver, maybe because he hopes to flee the country or come up with another plan before the promises come due.
Wherever a system of promises exists, overpromising is bound to creep in, because the temptations are huge. This is especially true when there are big financial pressures in the present and the promises don't have to be fulfilled for years. And that's exactly the problem with the economy today. There are far more paper promises in the world than can possibly be fulfilled.
In other words, in a variety of realms, there are far more chicken futures in the world than there are chickens, and sooner or later, the people holding those futures will realize the chickens can't be delivered, and the market for these futures is going to crash. And this is going to happen all over the economy, because everywhere you look, there are too many promises.
This overpromising is obvious in the stock market which, at the time of this episode, is flying higher than ever before in spite of the pandemic. Those stocks are a promise of future profit that, in most cases, will never justify the current price. It is not necessarily true that anyone has lied. Companies are required by law to be honest about their profits. It's just that naรฏve investors have bid up the prices too high.
There are all manner of other debts and assets in the world that can't possibly fulfill their promise, but the one example I keep coming back to is government debt. To talk about government debt, I should probably throw in some currency, because everything ultimately gets valued in terms of dollars or euros or yen. To avoid complicating things, let's just assume there's no inflation. A dollar will always be worth a dollar and will always buy you, I don't know, a hamburger or something.
Any debt, be it a consumer loan or a government bond, is a promise to pay dollars in the future. And these paper promises are a sort of currency that can be traded between investors as though they were cash. Technically, only the Federal Reserve can issue currency, but in practice, the US Government does it whenever it issues a bond. The bond is traded among investors as though it were cash. When an investor buys a 10-year bond at something around 1%, they are buying into the belief that 10 years from now, the government will pay off on that debt and that inflation won't erode its value—both of which are huge assumptions.
The fact is, there's no way the U.S. government can pay off its debts—ever. Even if there's no inflation ever again and interest rates remain close to zero, no paydown is ever possible, because there's no way the government can ever again balance its budget. Things are too far gone. Like the chicken farmer promising more chickens than he has, the government has promised more future value to bond holders than it can possibly generate.
The government's chicken is called "taxes" and in 2020 and probably 2021, the government is spending roughly twice as much as the taxes it is taking in. Think of it as taking in 3 trillion chickens a year but spending 6 or 7 trillion chickens. This isn't just a result of the pandemic. In 2019, in nominally the best of times, the government was borrowing one of every 4 dollars it spent—or one in every four chickens, to use our analogy. So even if we get back to 2019 normalcy, the debt is still impossible to service. The government just can't pull a trillion chickens out of a hat. The best it can do is promise people a trillion chickens they can never deliver
All around the world are people and institutions who hold this debt, who think they have a $10,000 bond that they can redeem for $10,000, but they really hold nothing but paper promises, promises of chicken that can never be delivered. So far, the government has been able to make good on its debt. Every maturing bond has been paid off—so far—but that's only because the Ponzi scheme hasn't collapsed yet. And that's what this is, a Ponzi scheme: earlier investors being paid off by later ones. Like any other Ponzi scheme, there's not viable business plan in the works. There's no plan just to break even, let alone make a profit that can start paying down this debt.
Investors say, "The government can never default because it owns the printing presses and can print as much money as it wants." Well, yeah, but what are we talking about here: chickens or the promises of chickens. The government can always print more promises. What it can't do is print more chickens. The chicken inflow—meaning the actual value coming into the government—is limited to the actual number of chickens collected in taxes, which is limited to the number of chickens the economy actually produces.
I don't know how to count chickens here, but it is basically the core output of the economy that can be taxed, and that remains fairly constant over time. The government has income of about $3 trillion a year no matter how much it promises.
Printing more chicken promises than that $3 trillion encourages just a different kind of default, called inflation. The risk here is, you buy your $10,000 bond now, turn it in and get your $10,000 back, but that $10,000 buys only what $2,000 buys now. Maybe $10,000 only buys you a hamburger.
I take no comfort from the fact that, at the moment, $10,000 still buys 10,000 hamburgers. It will not always be so. The fact that there's little consumer inflation right now doesn't comfort me. You can't just keep printing money forever. Someday, the dam will break and all the inflation will come spewing out.
A representative economy, an economy of paper promises, is a relatively recent thing. It's been supercharged by the computer revolution which has made the trading of promises incredibly fast and easy. Humanity just hasn't had the time to develop the wisdom to manage it. You can't keep the farmers from selling more chicken than they've got, and in the case of government bonds, you've got the government regulating itself with no hope of restraint.
It's just so easy to sell paper promises. That's what every politician in the world is doing right now. Many of them won't even be around with the bills come due, so there's no incentive to balance the books. No one's addressing the debt right now. They're trying to save lives during the pandemic, which is admirable. It's just that those saved lives will be living in a very bleak world.
So what does it mean, in a practical sense, when there are too many promises in the world. It means that the perceived wealth of the world is much greater than the actual wealth.
Think about how someone measures their own wealth. To figure out how wealthy they are, they're going to inventory all their assets—all their stocks, bonds, real estate, gold, etc.—and then they are going to look on the internet to see what the current market value of each of those things are worth. You see that the value of a stock is currently "X" dollars a share, and you look at Zillow, and you see that a house in your neighborhood similar to yours recently sold for "Y" dollars. And you add it all up, and you get a net worth of eleventy-seven million dollars.
That's what you think you're worth, but it's an illusion, because it's only what you'd get if you sold everything today and the value of a dollar remains fixed. What can happen almost overnight is that the bottom falls out of an asset market, so maybe you can get only half of what you expected to get, and you're really only half as wealthy as you thought you were. That's an evaporation of wealth, and it can happen almost in an instant, as soon as people realize, "This promise isn't worth what I thought it was."
And with every oversold promise, they day of reckoning always comes, sooner or later. You don't know when, but it will come. Every Ponzi scheme collapses, and the world is an interlocking system of them right now, starting with the government Ponzi scheme of selling far more bonds than it can ever repay.
In a world without any money, you know the system has collapsed when you take your chicken coupon to the farmer, and he can't redeem it because he's run of chickens. In a modern economy, it might happen in a variety of different ways. A formerly high-flying stock can collapse to zero. Inflation can eat away at the value of an asset, even if the nominal prices doesn't change. Certain unique assets like real estate might not be sellable at all.
The only thing certain when promises collapse is that the holders of those promises—the owners of the stocks, bonds and real estate—will find they've lost all or part of their wealth.
There were just too many chicken promises and not enough chickens to pay them off.
———
Written, recorded and edited by Glenn Campbell. For annotations, links and corrections, see the description on the video version of this podcast. You can also leave comments there. See herefor all my podcast scripts on this blog.
Below is a reformatted version of my tweet essay called #de_BigOne, starting on 16 Jan 2021, . This long series of tweets is merged into a single document here for ease of reading. The beginning of most tweets is marked by ➤. Text in [brackets] was added after the original tweets.
I can’t tell you when it will happen, how it will happen or what it will look like. I can only offer the humble #dd_TweetEssay below. ๐งต…
➤ The biggest story on the ๐ right now is not the ๐ฆ . It is unrestrained money printing by the #dd_Fed and other central banks, partly in response to the ๐ฆ .
➤ The ๐ฆ has broken the back of any fiscal restraint. The US Government no longer has any hope of balancing its budget or paying its debts—ever! The debts are too large and the shortfall too great.
➤ The debts of the US Government are transferred to the #dd_Fed:
The government issues bonds.
The Fed is obligated to buy those bonds to keep markets from tanking, “printing” money to pay for them.
➤ In effect, the government is funding its operations by printing money—either money created by the Fed or bonds traded by investors as though they were money.
In 2020 and probably 2021, roughly half the government budget is “printed” instead of collected in taxes.
➤ This system can’t work forever.
If it could, it would be a sort or perpetual motion machine providing “free energy” without any energy input.
If the government can print its way out of any crisis, the logical question arises: “Why pay taxes at all?”
➤ Money has no value in itself. It is “representative” of value. It’s an intermediary device instead of directly trading, say, bread for chickens.
You can’t create more ๐ or ๐s just by printing more ๐ต. Instead, you are devaluing the ๐ต...
Eventually.
➤ The traditional equation is: money printing = inflation. That’s what happens in any ๐ republic.
Our situation is more complex. We’ll get inflation at the store someday, but in the meantime we are passing through some unexpected intermediate steps, like asset inflation.
➤ The greatest economic absurdity of the Microbe era is that US stock markets have ๐ not ๐ ⸺ reaching ALL TIME HIGHS!
It’s ๐คช!
Even an attempted coup on #dd_Jan6 caused markets to rise, not fall. ๐คฆ
This is not normal investor behavior.
➤ For now, stock valuations seem to bear no relation to the profit-generating capacity of the represented companies.
They are speculative assets propped up solely by Fed intervention in the economy.
Stocks rise on bad news because investors assume it means more Fed intervention.
➤ To try to keep the economy afloat, the Fed (and #dd_ECB) has vowed to keep interest rates near 0% for the foreseeable future.
This has the perverse effect of forcing investors out of “safe” investments like bonds and into speculative ones like stocks, inflating asset values.
➤ There is no conspiracy here.
The Fed and ECB aren’t part of some omniscient cabal manipulating the economy in favor of a ruling elite. That’s giving them too much credit.
They are as helpless and incompetent as everyone else.
One rule rules them all: NOBODY KNOWS ANYTHING.
➤ Fed ๐ต-printing is a #dd_Ponzi scheme that WILL fail, but no one knows when or how.
The saying goes: “Markets can remain irrational longer than you can stay solvent.“
➤ Like any other Ponzi scheme, the endgames for the economy and government are knowable. What is not knowable is how we get there.
➤ The Endgame๐ for government bonds is they can’t be redeemed for their full value. Either—
① The government defaults, or
② Inflation erodes their value
Government debt is a true #PonziScheme where early investors are repaid by later ones until ๐ฃ๐ฅ
➤ The Endgame๐ for assets like stocks or real estate is that they collapse at least to a value consistent with the realistic future profits of the underlying business. ๐
➤ The Endgame๐ for currencies ๐ต๐ถ๐ท๐ด is inflation, even #hyperinflation, as the value of money is rationalized with the growing money supply.
➤ The Endgame๐ for large governments is either—
① They collapse entirely, or
② They learn to function at a greatly reduced level on the taxes actually collected.
The latter is hard because there’s no political will for the Draconian cuts required.
๐ฒ I’m betting on ①
➤ If large governments collapse, humanity will persist, just as it did after the Fall of Rome™, but many services we take for granted could be lost.
We can only speculate about what those lost services may be. Aqueducts? ๐ฐ Roads? ๐ฃ Public order? ๐ฑ
➤ The economic "Big One" is like the coming Big One on the San Andreas Fault. Every year, it builds up tensions. You know it has to snap sooner or later, but you don't know when.
This tweet essay, like others, could resume in the future.
This page is intended to be an index of all my social media resources from Africa and the Middle East, including about 13 countries. This page is an ongoing project that will be built over time.
For all Facebook albums, always check the "Feed View" for hidden posts.
Below is a Script for my Kilroy Cafe Podcast, Episode #5, released on 13 Jan 2021. It may differ slightly from the final broadcast.
This episode is available on major podcast platforms, including Podbean and a video version on YouTube. See the description on the YouTube version for extensive annotations, links and corrections. You can also comment on this episode there.
I'm Glenn Campbell, and my Tweet of the Day is this:
There is no ideology that won't eventually lead to tyranny.
This tweet that I just posted was inspired by events of recent days. This is January 13, 2021. On January 6, a week ago, President Donald Trump incited a riot at the US Capitol. You know about it. It's in all the history books.
In the ensuing days, Trump, with only a few days left in his term, was banned from Twitter and virtually all other mainstream social media—along with many of the groups that were touting his claims. I think even PornHub banned him, theatrically at least. This has raised concerns among free speech advocates that this sets a dangerous precedent. You can't ban speech just because it is distasteful. All opinions deserve a platform.
And my position is, No, not all positions deserve a platform. Everyone has the right to free speech but not the right to be heard or broadcast. If Trump had been banned back in 2015, the country might have avoided the four disastrous years of his reign.
But I can also see the free-speech position. Once you start censoring people, where do you stop? When a government or a giant social media company censors information in the name of "safety", there's a huge potential for abuse.
For example, in another news story today, the government of Uganda has blocked all social media in the run-up to their elections. I haven't looked into this in detail, but I'm pretty sure the government has some kind of self-serving motive for this, and I'm also pretty sure that they're using Trump's Twitter ban to bolster their position. The free-speech advocates will say, "You see, this precedent is already having a chilling effect around the world," but I suspect that the Uganda government was already prepared to censor social media. Trump's Twitter ban just gave them a new excuse.
My higher-level take on this is that there's no ideology that won't eventually lead you into trouble, be it free speech or free markets or globalization or any other theory that people get hooked into. There's always a point where you've gone too far and you have to pull back.
There has to be a good term for this, and I don't really have a good one yet. It's related to the Cobra Effect: No matter what your theoretical framework is, there's a good chance it is going to go bad when it's put into practice, because the real world is complex and can easily subvert you intentions.
In the case of free speech, it works pretty well among intelligent people, who should be able to evaluate ideas on their own and choose the one that works best for their. They naturally want an open marketplace of ideas, with none of them excluded.
But then you have the non-intelligent people who believe everything they're told. Instead of evaluating information on its own merits, they evaluate the person providing the information. If the person is perceived as part of their tribe, they're going to believe everything that comes out of that person's mouth. That's why some people believe Trump no matter what he says. He's perceived as part of their tribe.
And you can see the evolutionary value in this. early humans survived because they pulled together with tribe. They defended their tribal leader, whether he was right or wrong, and this may have given you an advantage in passing on your own genes to the next generation.
So any modern society has to accommodate not only for the intelligent people who can evaluate information and the idiots who can't, and that's why free speech can never be absolute. At a certain point, those who control social media have to say, "That's enough. You can't say that here."
Frankly, I think it should have been done long ago, back in 2015, because we came perilously close to the abyss this time. Joe Biden won the 2020 election by only a very thin margin, and if only a few votes had changed, our country would have been in a terrible place.
Free speech is important but its not worth losing your life or country for.
———
Written, recorded and edited by Glenn Campbell. For annotations, links and corrections, see the description on the video version of this podcast. You can also leave comments there. See herefor all my podcast scripts on this blog.
I have produced so much stuff over the years, that I have forgotten where I put it all. This page will keep track of the forgotten corners of my oeuvre as I rediscover them.
Facebook Notes — Around 2008 through 2018, Facebook has a primitive blogging system called "Notes". I produced dozens of them over the years, especially around the time of my first cancer treatment in 2018. The system was discontinued in October 2020, and there is no longer any public index of all of my notes. Notes are still viewable by URL aren't changeable. Fortunately, I tweeted links to many of my notes on @BadDalaiLama, knowing that they could be hard to find later. Try searching for "note" on my account. I can access all my notes through this link, but you can't. (1/12/2021)
Photosynth — This website from Microsoft knitted together individual photos into 360° panoramas. I took 100s of them, but they are all lost now. My only record of them are the low-resolution thumbnails appearing in my Facebook album. Each one has a link to the now-defunct Photosynth site. In retrospect, I shouldn't have been wasting my time on things like that anyway. (1/12/2021)
Abandoned Twitter Accounts — The following are Twitter accounts I have abandoned but that still might be useful to browse...
@BadLamaFunny — A place where I retweeted the funniest of my posts between 0000 and 000.
@PopeyesSpinach
@BadLamaEureka
@BadLamaNirvana
@BadLamaWisdom — Repurposed in Jan. 2021 as @DoomLite. Previously, it was used to retweet the my best philosophical content from @BadDalaiLama and @KilroyCafe (see here)
Below is a master index of all my known Tweet Essays on @DemographicDoomand@BadDalaiLama, starting in December 2021 and going back as far as I can. Each link below leads to the top-node tweet of the series.
Notes:A ✓ means this index has been added to the thread, along with a link to a Twitter index (and confirming added to DoomLite). The date 2012-01-20specifies the date the thread was started (may still be active). The hashtag (e.g. #de_ponzi) allows you to find the starting tweet without its address. ๐ means the thread is now ended (but still useful). Most Tweet Essays are never "finished", only abandoned. I may resume a thread if you comment on it and give me something new to respond to. See the bottom of this post for more notes. ↓
The above list is the most comprehensive available. #dd_TweetEssay covers many but not all of them. #dL_essays is no longer maintained.
Notes On My Tweet Essays
Sometimes I know when I'm going to start an essay. Other times, they just evolve organically and I go with it. If I know I'm creating an essay, I start off with the ⦕ Proper Header ⦖. If it evolved organically, I add the header later by quote-tweeting the top of the thread.
All Tweet Essays are tagged with #dd_TweetEssay on the top node only (only once for each essay). The top node also contains a unique hashtag starting with #de_ (for "doom essay"). All Tweet Albums, consisting mainly of photos and videos, are tagged with #gpc_TweetAlbumbut are still labeled with #de_
If #dd_TweetEssay／#gpc_TweetAlbum and the #de_ tag don't appear in the tweeted link above, they appear in a quote-tweet for that tweet.
Every entry in the list above includes a hashtag so that you can find the header node even if you have only a printed or screenshot version of this index. (I regularly back up this index on Twitter at #dd_BlogBackup)
The only firm rule of Tweet Essays is that I can't "break the chain". Once a tweet is added and another is added after it, I can't delete the first tweet. I have to live with it forever. (However, if a tweet is the last post on the thread, I can delete and repost it as many times as I want, and I might go back to rewrite the tweet before that.) The fact the each tweet in the chain is permanent and unchangeable has a profound effect on how I write.
I may add more posts to a Tweet Essay whenever I am inspired to do so—even years later—so no essay is ever "finished".
A Tweet Essay is usually hierarchical, starting with the most important information first and drilling down to the details.
My first use of the #dd_TweetEssay hashtag was 4 July 2020, but I didn't start using it comprehensively until 2021. Old tweet threads will be repackaged as Tweet Essays and retweeted to @DoomLite as I rediscover them.
If any link above is broken, please let me know. (As a fail-safe alternative, search for the given hashtag instead.)
If you would like me to resume a particular thread, feel free to comment on any tweet in it. If you make a good point or ask a good question, it may prompt me to return to the subject.
I would want to turn each of these Tweet Essays into a blog entry, like I did for The Post-Nuclear Family Explained and six others at the top of this list. Unfortunately, the transcription process is just too time-consuming. If you want to turn any of these Tweet Essays into a more readable format on your own blog or website, you have my blessings. You don't need my permission, so long as you follow these rules:
Reproduce the tweets as accurately as you can, including emoji, links and images. (See my six existing examples above for ideas.)
Give me appropriate credit and include in your post a link to the top node of original Tweet Essay.
On Twitter, add a comment on my top node with a link to your blog entry.
