The price of fish
Back in the 1990s a survey was conducted in fishing villages on the West coast of Africa. The idea was to measure the impact of mobile phones on supply curves for fish.
Pre phones, if a fisherman at a port had too much of a particular fish, he would simply drop his prices until all the fish was sold and vice versa for smaller catches. Prices were invariably volatile.
On the introduction of phones, almost immediately behaviour changed. The fisherman would call other local markets to check on the catch there and move the excess stock between locations to achieve a better clearing price. You could take a risk doing this pre-phones but if you transport fish somewhere only to find that prices are even lower, then you risk losing. The effect of the change on the volatility of prices was profound and much better for both consumer and fisherman.
Firstly, some of you will say “yes, that’s obvious”. I suspect it is less obvious how immediate the change would be and how powerful the price mechanism is. It is very hard to create environments in which to test how price behaves other than when a new technology is introduced in a market with a dominant product.
The massive economic benefit in the stability of the price of fish (which is a staple of the diet in West Africa) is obvious. If you extend that across all nations and all products, and then consider the complexity of the products with many inputs and variable prices, it quickly becomes apparent what a miracle the price mechanism is.
It should also be obvious that a price mechanism which people seek to control is highly destructive to human progress. This whole 2% inflation target thing is an enormous and laughable fraud from a group of vested interests. It’s a giant tax on the human population and one day it will be swept away and confined to the shelves of history alongside witchcraft.
The man who understood this first and best was Friedrich Hayek who laid it out in 1945 in his paper The Use of Knowledge in Society. It’s long and hard to read, so I will paraphrase:
The price mechanism embodies our knowledge as a society, do not interfere with it because if you do the costs outweigh the benefits.
The experiment in West Africa proves it. Next time you hear someone talk about “our 2% inflation target” you can dismiss that person as a fraud. It is entirely pretend, needless and its economic cost is enormous, particularly on the people with the least. Under questioning, no economist or central banker has been able to come up with a solid argument for why the target is necessary or good.
The proof of my assertion will be when the target is changed to 3% which it inevitably and subtly will be over the next few years.
Willy Woo
Early investors in our funds will remember the weekly reports from Will Woo, the on-chain analyst. Willy has been back on the scene recently including a visit to Sydney a few weeks back. He explained the impact of having a futures ETF without a spot ETF.
Personally I have no doubt the futures market has suppressed the BTC price, but the idea that there is an infinite amount of hedge fund capability to provide short positions is a stretch.
If you want to go bankrupt, there are several ways to do it and some of them are no doubt tremendous fun. A boring and sure way to do it though is to write short bitcoin positions. For a long time you will look like a genius until the day you don’t.
Anyway, welcome back Willy Woo.
Mind capture
“It is a fantastic commentary on the inhumanity of our times that for thousands and thousands of people a piece of paper with a stamp on it is the difference between life and death.”
That was English author Dorothy Thompson in 1938 referring to travel documents. The more I think about that sentence, the more true it seems.
Passports themselves are only 100 years old. Prior to that you could pretty much come and go as you pleased and you accepted all the risks that came with doing so. Hundreds of years ago merchants would travel with letters from the Regent “allow safe passage for this person … or else” pretty much like the first page of your passport says today. They were not required though.
I would think in most countries passports have nearly universal support from the public. They have become part of the furniture of the permissioned modern life. Needing a piece of paper to go to a different country is one thing. Needing one to walk down the street is another.
Being brought up in the UK, the idea of ID Cards came up again and again from politicians. Supposedly it would save fortunes in health care because people without a card would be denied benefits and treatment, as though that were a huge win. It was a massive vote loser though. There was general outrage about “why should I have to prove who I am for walking down the street?”. The story here summarises the UK experience rather nicely.
Failed because it was voluntary. No, it failed because people didn’t want it.
It surprises most Australians that in the UK you do not need to carry your driving licence even when you are driving. You have one week to produce it at a police station if you are asked to do so. The principle that I do not need to prove who I am exists. Unlike here, where one must park rear to the curb while carrying a license or incur a fine.
In any event, the prospect of a more permissioned life looms large everywhere. The Commonwealth Bank recently announced they would be removing cash from most of their banks in Sydney. Just use your phone or your card, right? That leaves you within the permissioned ecosystem. It is cheaper for them and better for you because “safety” or “convenience” or “terrorists”. It also requires you to have a bank account.
It is absolutely the same as saying, if you want to spend money you need a passport.
You see! He’s saving you money. It’s going to be so good for you. $40 every year, which you will not actually receive but will certainly land in the coffers of CommBank.
There was minimal outcry on all of this. I had the misfortune of watching Channel 7 News whose analysis did not extend beyond ‘the elderly will struggle with the change’. That was their sole objection. It is probably true but absolutely no news outlet said “people have been forced from a non-permissioned system into a permissioned one”. Essentially passports for money are being introduced in Australia (and everywhere else) under the usual narrative that only terrorists use cash.
It’s not just the inhumanity of passports that are not challenged, it is true for most of our framework for existence. For example, it will be good for you to hand $250,000 to a bunch of mid-wits at a university, they will give you another piece of paper with a stamp on it. It will be good for you if the government issues money, that paper has stamps on it too. It will also be good for you if you always carry a driving licence.
There is nothing you can do about passports, you’re stuck I’m afraid. Same for driving licences, and the removal of cash. There is nothing you can do about the slow slide into a permissioned life which will be safe, joyless and inescapable.
On the other hand there is something you can do about money. There is a permissionless system and you can participate in its benefits now.
The inhumanity of our times extends far beyond passports, but tens of thousands of people are hard at work (including me) making sure alternatives are available or at least, are understood.
The catchphrase used to be that “open source will win”. I believe that permissionless systems will win much more though.
Bond update
Goodness me people are excited about 5% ‘risk free’. They tell me ‘literally all you have to do if you have any money now is buy the 10 year and sit back; see you in Brazil’.
There is merit in the argument too but it presupposes that you are buying bonds now. Our 60/40 portfolio persons are not doing that. They already own the bonds and are sitting on quite the capital haircut. The premium risk-free asset of our lifetimes, the US 10-Year Treasury, is set for its third negative year for the first time ever.
Some of the bond ETFs in the US have had a tough time too. Pick your timescale either 1,3 5 and shortly 10 years too.
So those of you who bought your bonds this year might ‘see me in Brazil’.
Those of you who unknowingly bought them via your super fund 10 years ago will probably be getting a letter explaining the underperformance of the fund and how it’s all Vladimir Putin’s fault, oh and here’s some smoke and mirrors about how we‘re carbon neutral.
Euro-Trash
Explaining things is hard. Examples are always better.
To the delight of EU lovers, this little graphic is actually not true. There is no EU directive on cabbage. The whole thing is a myth and the EU delights in explaining it:
“Three cabbage-related regulations did exist in the past: one from 1966 on ‘quality standards for cabbages, brussels sprouts and ribbed celery’; its successor from 1987 on “quality standards for cabbages, Brussels sprouts, ribbed celery, spinach and plums”, and one from 2006 governing the “marketing standard applicable to headed cabbages”.
To be clear then, it’s outright lies to suggest the EU is inefficient and over regulated. All the cabbage regulation they did have has been repealed and replaced with more generic vegetable-based legislation covering green vegetables and legumes and not specifically cabbages.
It’s clear to any EU regulator that vegetable-specific regulation is hard to enforce across multilingual populations with different soil types.
Meanwhile, I have become quite accomplished at using Artificial Intelligence to make pictures, although the AI is better at drawing Lagarde than cabbages. Yes I know the ECB is not the EU, thank you.
