Archive for July, 2018

To state the obvious about finance

July 30, 2018

The collapse is coming! we read every year the year round. It simply isn’t true, it is just a story being told.

The entire financial circus is disconnected from anything physical. Therefore it can not collapse. The only things that can collapse are wages, ability to buy food and ability to rent or buy housing. The financial system wont be affected until it runs out of workers willing to work for wages that can not sustain them. (While that happens, if it does, already existing automation can be phased in.)

Try think of the financial system like this: You, me and 18 other guys are each worth 10 million. We gather in a poorly lit room in the basement of a night club and sit at a large round table. We each write out a note that is technically an IOU. The note says “I will pay 1 million to whoever owns this note” then, between the 20 of us we use these notes as if money. You can use them to pay outsiders as well but the rest of us will strongly dislike you for doing so.

Now imagine that 10 million is entirely made up out of similar deals for 19 of the 20 participants. Further more as a result there of and so on be it known this means that after the deal you are not 1 million in debt, in stead you are worth 21 million. We can play this game until the end of time. If at any time you dare to doubt the formula [out loud] you are simply purged from the system.

This if course is an oversimplification. The “reality” involves many exotic documents and fancy terminology all designed to keep things as confusing as possible. People doing things in the physical world have close to zero leverage over the formula. They simply work for these digital coupons that can be “produced” in unlimited quantities.

Just look how the US dollar inflated over the last 118 years. Prices in 2017 simply were 2814% higher. A hundred dollars in 1900 buys the same amount of goods as 2914 dollars did in 2017. This is only the tip of the iceberg since the stuff made in 1900 was largely made by people. It didn’t pop out of machines.

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