Unleashed Value

Or, what is a SPAC Jack?

You’re free when no one can buy your time. -- Shane Parrish

If you are thinking about retiring, or about living independently, then of course you are taking a look at your finances.

Did I really spend that much on my credit card last month? What exactly did I buy? And let's check my subscriptions. What am I paying for each month and is it worth it?

Spending details are hard to grapple with. Habits are created that require money and then things tend to go into autopilot mode from then on.

To complicate life even more, these days there are entirely new forms of money. It's both intriguing and somewhat baffling.

In Max Read's recent article about the strange twists to 21st century money, he points out a key moment when money became a little "funny:" Ben Bernanke, (Federal Reserve chair) in 2009, was asked, “... if the money the Fed was injecting into banks in the wake of the global financial crisis was “taxpayer money,” Bernanke shook his head and grinned sheepishly. “To lend to a bank,” he said, “we simply use the computer to mark up the size of the account that they have with the Fed.”

Even though everyone knows that money is disconnected from hard assets such as gold, it may come as a surprise that astounding sums of money can be created with a few keystrokes on a computer.

Given the temptations, you might ask, are there restrictions, such as the total tax income for a given year, that limits how much Federal Reserve bankers can type into their computers? Not!

When such is the case, it's not much of a stretch to see how people can be swayed by cryptocurrencies and other new forms of money. The pro argument is that at least with crypto there's a public ledger where every transaction is accounted for and a finite limit to the total number of coins in circulation. The con argument is that it's all a fad.

Given the trillions of dollars that have been "typed" into circulation by governments around the world, society is no longer depending on the relationship between spending and income. Therefore money "... is abundant but safe long-term investments are rare and where “getting rich quick” is less an American pathology and more the best bet for a stable life," according to Max Read.

What does this mean? Mr. Read sums it up nicely here, "What’s the point of investing safely when Elon Musk can create and destroy millions of dollars of value with a couple of tweets?"

This world of unleashed value is at best distorting and at worst miserable.

Given a future where bit / alt coins are minted out of thin air and Federal Reserve bankers have itchy fingers, what are folks who are thinking of retiring or living independently going to do?

Is there a danger of hyperinflation if governments continue to print money? Yes, but at some point the financial "floor" that was created artificially during the covid-19 pandemic will no longer be necessary. Inevitably a capitalist society requires governments to back off from extreme fiscal intervention.

If you watch (9 minutes) economist Andrew Lo you will learn how the pandemic crisis was not a financial crisis like in 2008. It was a health crisis with financial consequences.

Mr. Lo cautions that every new upwards financial trajectory carries with it seeds of decline. After the pandemic of 1918 we had the "roaring 20s," unabated economic growth for a decade, but then the crash of 1929. In modern times, with better data and understanding of human behavior, we can be more prepared for the next crisis — whether it be health, environmental, or financial.

What we have been witnessing these past few months is that even before covid-19 is crushed, the future has arrived, turbocharged. Bitcoin, alt coins, NFTs, SPACs or otherwise, keep sane and plan accordingly.

What up…

Later,

Neill