Jim's Blog

The Global American Empire thought sanctions would ruin Russia. Still think that, though they now think it will take a little longer. Formerly talking weeks, now talking years.

The Russian economy has, according to statistics, been knocked down ten or twenty percent. Seeing a Youtuber chatting to Russians on the ground, sounds roughly accurate. The question is, is it, like the ruble, bouncing back, or going over a cliff? The ruble bounce back came as a shock to the Global American Empire, and they are still in denial, though the denial is getting mighty thin. I rather think that the effect of sanctions on the Russian economy is going to be similar, is already becoming similar.

The effect of the sanctions has been to impose National Capitalism on Russia from outside.

A modest dose of national capitalism worked great for the Trump economy. It spectacularly industrialized South Korea.

National Capitalism defined

National Capitalism is self sufficiency in the organization of people for production, and self sufficiency in the skills and equipment needed for production, that relies on internal free markets and supports local businessmen.

If your people are being organized for production under a businessman subject to a foreign sovereign, that foreign sovereign is going to make him pursue the interests of that sovereign rather than your sovereign, such as exporting his state religion to you, and the interests of that sovereign’s people, not your people.

If the skills and equipment needed for producing one thing are in your country, rather than in a foreign country, production of that thing has large beneficial externalities, making it easier for others of your people to produce other things, creating opportunity and incentive for the talented among your people. These externalities are not part of the profit and loss of the business, so businesses are apt to make decisions to offshore stuff where the offshoring has harmful externalities onshore. And if the business is run by a foreigner subject to a foreign corporate headquarters, he is going to keep critical skills and equipment close to his foreign headquarters. Hence close to a foreign sovereign, and far from your people, who are thus unable to take advantage of those skills and equipment to compete with that business, or start other businesses producing related products.

So how is this working out for Russia

A builder in the middle of a one horse town found that nails and screws were unobtainable or absurdly expensive, because they had formerly been imported from the west. He also found that metals, which had formerly been exported to the west, were now considerably cheaper.

According to Global America Economists, that builder is now going to stop building. And for a little while he did stop building. What he did instead of building was go to China and buy a self contained computer controlled machine that turns metal into nails and screws, and now he is back to building, and also in the business of selling nails and screws.

If millions of Russians are doing something similar, then the short term effect is that the sanctions will have rapidly diminishing impact, and the long term effect will be to create Russian skills and jobs repairing, maintaining, upgrading, and eventually building those machines.

Similarly when the McDonalds franchise pulled out of Russia. The former franchisees organized a new franchise, and their burger joints ripped down their McDonald’s signs and put up the new signs. They also renamed, and slightly altered, their menu. Which means that Russians are a whole lot less likely to be forced to watch black people, mixed race couples, transexuals, and faggots, eating burgers on television.

Your grandfathers could enjoy a house, a garden, children, and stay at home wife looking after the kids. Their grandchildren are dual income no kids, but live in a little box with Ikea furniture Not only did we land on the moon in the 1970s, we had nicer cars, nicer toilets, and better clothes washing machines, though today we have nicer phones and computers.

But Americans can no longer make the cpus and ram for those computers, which come from Taiwan and South Korea, and our war planes cannot fly as far, as high and as fast as the warplanes of the seventies.

The US and Europe have thrown many billions at the collapse of chip technology problem, and repeatedly had the leading chipmakers in the US empire come here and to Europe to give us their technology, and they attempt to do so, and are strangely unable to do so. Their smarties cannot cross the IQ gap between themselves and the normies running our chip foundries.

“China’s top chipmaker SMIC has successfully advanced its chip manufacturing by two generations and is now exporting 7nm chips, despite US sanctions attempting to block its rise, a reverse engineering analysis from techinsights on its products has found.” This puts China four years behind the current state of the art. Close enough to support modern information epoch warfare weaponry, while the US is utterly dependent upon Taiwan and South Korea.

Compare the old malls with the new shopping centers. These are places built for poor people. I recently revisited San Francisco, having been away for a decade or so. That the streets are full of human shit and crime is governmental failure caused by browns in government, but that the buildings need some maintenance and a coat of paint indicates everyone is getting poorer.

I recently visited a high end jewelry shop. It was a shop built to serve people poorer than the people of my youth. Prosperous people demand nicer surroundings. The ambience was a lot more Walmart than the places people shopped long ago. Compare our shopping centers with the old malls. Obviously built to serve poor people.

“The mall was big and beautiful and comfortable and even a little overwhelming. All of the wide passages, lined by stores, were multi-level – two in most places, but three at the food court and the movie theater. Everything there was new and gleaming and clean and safe, and automatic sliding doors and escalators were all around the place. There were walkways suspended in midair over wide indoor plazas and courtyards.”

“The decline of the mall coincided not only with the rise of the internet, but also with the rise in earnest of Walmart and other big-box warehouse stores. There are no skate parks or indoor waterfalls at Walmart. The increasingly impoverished remnants of what was once our middle class shuffle in to buy cheap junk”

Biden tells us everyone is getting more prosperous. That lie comes from the same people who are denying space travel and arguing for flat earth, and is as plausible as that the earth is flat. I can see that ordinary people are poorer, for middle class is a wife, a house, a garden, and children.

“Don’t you know that it’s 2015? That means gay marriage! Women in combat! Even the first rumblings of the normalization of pedophilia! Say what you will about the Classical Marxists of the past – Lenin, Stalin, Mao – but they built massive hydroelectric dams, intercontinental missiles, skyscrapers, and atom bombs. Yet in The Current Year, they and their grand projects have been replaced by the Cultural Marxism of Gramsci, Marcuse, and Alinsky. To the leftists of The Current Year, global warming means we can’t build big impressive things anymore, so now we simply declare the cutting edge to be increasingly degenerate sexual and cultural practices. There is nothing of The Future in The Current Year – any caveman could have smoked dope, had weird sex, or dressed up like a girl.”

A holiness spiral peaks suddenly, and then it is over. Sometimes no one survives, but usually it is abruptly terminated by a Hitler or a Stalin before it gets to that point.

A dark age sets in slowly, at about one percent a year for centuries, From time to time there are dramatic crises, and even turnarounds, but these make little difference to the long term trend. We have a holiness spiral and a dark age setting in.

Walmart reports it is selling less stuff, and is going to have to raise prices further.

If it is selling less stuff, everyone is buying less stuff. Meaning everyone is poorer, living standards are falling

If everyone is buying less stuff, and yet stuff is still in short supply, then production of value is falling. As has been obvious from holding a finger to the wind for some time, but this is a concrete confirmation. Official cpi and gdp statistics have, as I have said before, long been fraudulent and are approaching Soviet levels of mendacity.

I attribute the decline to three main factors

1. Unstable price levels foul up business planning. Your books become meaningless.

2. Unstable price levels disrupt relationships between businesses. Things have to be renegotiated.

3. ESG. Environmental, Social, and Governance. The state is weaponizing your accounting department to impose holiness on you. This accelerates the existing disruption caused by the Human Resources Department and women in the workforce.

Accelerating levels of holiness are characteristic of a left singularity, which usually blows up pretty fast, and then it is over, and your society very likely recovers. Sometimes it does not.

We have long had technological decline in an increasing number of fields. Now we have economic decline. This may pass in time, probably will pass, but long term economic decline is a possibility, in which case we may heading into a dark age. Dark ages set in slowly, and last for a long time. I think this merely the effects of the holiness spiral, and after the holiness spiral self destructs, technological and economic progress will resume. Which one it is, however, will not be apparent for some considerable time. Depends on how the left singularity ends. Deng fixed China, but Xi is returning to the Marxist ideology that Deng theoretically left in place, while ignoring in actual practice.

A medium, a measure, a standard, a store.

1. Medium of exchange

The US centered financial system has become less and less functional for exchange, with international bank transfers becoming ever more dangerous and difficult. Cutting Russia out of SWIFT was a huge additional blow to this functionality. Countries now need to keep some foreign reserves in the Yuan or the Ruble, in order to enable transactions, and are starting to do so. Israel, among others, has added a tiny amount of Yuan to its foreign reserves, and correspondingly decreased its dollar and EU holdings by a tiny amount.

I was expecting far bigger moves, far faster, but it begins. Slower than I expected. Markets can remain irrational longer than you can remain solvent, but they correct eventually.

In the commodity markets, someone who is making preparations and spending money with the intent of delivering a commodity, such as ingots of copper, sells a on the commodity exchange a promise to deliver, in return for a promise to pay a certain price, thus he knows when he is spending money to dig and smelt the copper, how much he is going to be paid. Similarly, someone who is preparing to build something, for which he will need a great deal of copper, buys a promise of delivery at a certain price, and these promises are traded on the commodity exchanges. When the time comes for both parties to fulfill the contract, the supplier delivers the commodity to somewhere ten thousand miles away from the commodity exchange, and gets paid the agreed sum by a speculator on the commodity exchange, and the buyer pays a different agreed sum to a different speculator on the commodity exchange. This makes the entries on both parties books meaningful, connects the paper book keeping to reality, and ensures your books accurately depict activities that will deliver a stream of fiat money.

Reality now is that commodity exchanges are defaulting on contracts right, left, and sideways.

“Sorry, sanctions” says the commodity speculator as he pockets your money.

“Also Anthropogenic Climate Change, Covid, Environmental, Social, and Governance” he says as he pockets some more. We are seeing a collapse of trust and trustworthiness among the elite operating the financial system.

In order to move goods over distance, you need financial system you can trust. And lately the elites operating the financial system have been acting in a conspicuously untrustworthy fashion.

“You contracted for delivery of urea, and it was not delivered, and in consequence your corn crop failed? Sorry. Can’t be helped. Environmental, Social, and Governance.”

To move goods over distance, particularly commodity goods with fluctuating prices, we are going to need a blockchain, an immutable append only data structure. But to connect a blockchain to physical things, like land or urea deliveries, would require a stationary bandit who enforces property rights witnessed by a blockchain, so that he can tax those property rights and so that his military logistics works. Need the social technology, as well as the software.

2. A measure of value

You look at dollar prices to see if something is too expensive or a good buy, but with rapid inflation your past experience and your intuition is worthless.

The US dollar has become disastrously less useful as a measure of value, and the physical shortages you are seeing are a reflection of this.

As I posted previously: A business is built on its books, and when you have rapid inflation, the books are meaningless. It is like trying to build a house using rubber tape measures and silly putty set squares. Normality bias is built into the way a business operates, so they get hit first and hardest when the seigniorage tax approaches and exceeds the Laffer limit.

3. A standard of value

You contract in dollars for future payments, as when buying real estate with a fixed interest mortgage.

Mortgage rates are rising rapidly, but are well below inflation, and so far, are rising substantially slower than inflation. So real estate at ridiculously high prices with a high interest mortgage is likely a very good buy.

The financial risk of buying real estate at a high price with a high fixed interest rate, is that the government will successfully check inflation. Last time the government successfully checked inflation was the Reagan era, which required a long period of real interest rates that reflected real inflation. If the government has the will to raise interest rates to match real inflation, and if it has the financial capacity to do that without defaulting on the national debt, then real estate might well be a bad buy. What are the chances that the government has the will and financial capacity to do what had to be done last time?

The big risk with real estate, as a great many wealthy people in blue state America are discovering right now, is not that government might suddenly discover the will and capability to halt inflation. It is that government might well lack the will and capability to defend your property rights. All those lily white people in lily white neighborhoods full of three million dollar mansions put out their socially required Black Lives Matter signs, and voted to defund the police to prove that they were good persons, and, surprise surprise …

4. A store of value

If you store value in US dollars, you are paying a very high seigniorage tax.

As investment advice, this post represents rumor, speculation, and incomplete information. Keep an eye on the bad weather I speak of, and make your own judgment about the storm. I have lost a great deal of money, and made a great deal of money. Future performance may not reflect past performance.

I am long on land, stocks, and crypto currency. Will soon no longer be long on stocks.

We are now a time of high inflation, though the CPI and general public are still in stubborn denial. To accurately assess real inflation, look at the prices of spot traded base commodities: Oil, natural gas, copper, silver (not gold, it is demonetizing) wheat, soybeans, corn, coffee, cotton, rice, cocoa, and the used vehicle index. The apartments for rent index is not useful, as it differs radically in different locations as order and safety collapse in some locations far more than in others.

Commodity prices are soaring, and they are all soaring in roughly the same way at the same time

It looks like the underlying inflation rate for commodities is around fifty to a hundred percent. Commodities are the primary leading indicator for inflation. List prices are a lagging indicator, reflecting the inherent detachment from reality of book keeping denominated in fiat currency.

Last time we had high inflation, stocks were an absolutely terrible investment. Once Reagan checked inflation, they were a terrific investment.

It is difficult to operate a business during rapid inflation. A business is built on its books, and when you have rapid inflation, the books are meaningless. It is like trying to build a house using rubber tape measures and silly putty set squares. This is another issue that future crypto currency wallets must address.

Businesses were an accounting fiction before they were a legal fiction, and they still are primarily an accounting fiction imagined into reality, rather than a legal fiction pretended by the state.

Normality bias is built into the way a business operates, so they get hit first and hardest when the seigniorage tax approaches and exceeds the Laffer limit.

Last time we had high inflation, you should have invested in gold. I was late into gold.

This time, crypto currency. Gold is being spontaneously demonetized as silver was. In a time short as measured in decades, will fall to its value as an industrial metal, as silver did. Though if the grid goes down and you are stuck in an area where the grid has gone down and stayed down, and have no plans to move, being nestled with like minded and like armed people, gold will be mighty handy. On the other hand, the situation may well arrive when it is move or die, in which case gold will be useless, and crypto currency mighty handy.

But which crypto currency?

The nature of the Cathedral is to assimilate, rather than to intentionally destroy, though they usually wind up unintentionally destroying. And they are assimilating crypto currency, or attempting to, for example WBTC, an enemy institution run by people who hate us and intend us harm.They are assimilating through KYC, with the result that the KYC exchanges are suffering a downturn, which will eventually be fatal. The KYC exchanges will die with fiat.

KYC exchanges are, and will remain, the path from fiat to bitcoin, but in order for this to work for our enemies, they have to demonetize “dirty” bitcoins. Some of our enemies have made a start on this, and I am becoming very worried, but Shaniqua is in charge, the game plan remains assimilation. The threat looms, but is likely to go on quietly looming for some time.

Because miners are few, well known, and immobile, the blood diamonds attack (demonetization of “dirty” bitcoins) is likely to work. I am writing code for preparations for this eventuality, for the use of crypto currency in a considerably more hostile environment, but my preparations are very far from ready. For the moment, safe harbor from the blood diamonds attack is Monero. Not moving into Monero yet, but getting ready to jump. Probably going to jump soon, depending on how the wind blows. Some people are jumping already, and this may be behind the recent rise in Monero. If you jump late, you will be buying Monero at a higher price, but if you jump early, you are acting on rumor, speculation, and incomplete information, which is always bad.

When allocating capital to its highest and best use it is generally wiser to jump in late, and miss out of some of the appreciation that you wisely anticipated, rather than to jump in early and be totally wrong.

Monero faces even worse scaling problems than bitcoin. It is not going to be the one. The one will have the capacity to scale to being a world currency, and will have its privacy system and most of its contract system in the lightning layer, not in the primary blockchain. Monero has inherent problems implementing a contract system and a lightning layer. But Monero may well be a safe harbor in the coming storm.

The one will have a sophisticated and flexible lightning contract layer, and simple, inflexible, and seldom changing contract system in its primary layer.

The bitcoin lightning layer is theory capable of being a better shield than Monero, but we will have to see how things develop. It does not seem adequately weaponized to resist the blood diamonds attack, though it can be and should be.

Weaponization means you don’t just have to worry about individual bad apples and screwups doing bad things out of self interest or incompetence, but brigading, entire highly organized groups saying “we are your side, we are here to help”, with the intention of doing you harm, even at their own expense, as for example WBTC.

The chief flaw in all existing crypto currencies, including Monero and Grin, is that the metadata about a transaction goes through outside your wallet, and, of course, gets integrated with blockchain analysis data. Which blockchain analysis causes considerably less damage to fungibility in Monero and Grin, but does not do zero damage. We need a system where the social net through which you transact, and the reputations of business and financial institutions, are inside the wallet. The wallet has to be a chat and messaging system, in which messages can carry money, but do not need to. So when you pay someone, your data about the transaction and his data about the transaction are rendered immutable and linked to each other, but linked only by hashes existing in your wallet and his wallet, which therefore has to be frequently backed up, and therefore can contain no secret keys, just the information about how the secret keys are derived from the master secret. It should be possible to enter additional master secrets and secret keys, but they should be used once, then the wallet immediately discards them.

This means that the wallet is potentially capable of being a business book, in which which case we will eventually have to separate the value of transaction at the time it was made from the current value of the currency in which it was made. Bitpay does this by representing everything in American dollars at the time of transaction and Bitcoin beach wallet gives you your choice of fiat currency to represent the value of a transaction, a solution that with rapid inflation now, the likelihood of hyperinflation looming, and the role of the dollar as an international medium of exchange, measure of value, standard of value, and store of value collapsing, is no longer satisfactory and likely to rapidly become less satisfactory. Some people are proposing a commodity index as a replacement for the measure and standard of value roles of money, separating those two roles from the medium and store roles of money. Thus one should have the option of representing transactions and making promises of transactions in terms of the commodity value that the crypto currency had at the time of the transaction.

If we rely upon the existing eco system of networks, it is likely to be applied against us as it was against Russia. All existing networks will be weaponized, resulting in fragmentation. The internet is becoming the splinternet. When blood diamonds attack comes through, lightning servers that do not comply are going to lose their domain names. So, we have to have a reputation system where a server’s reputation is attached to a public key, whose master secret is not hot anywhere, and similarly, a proof of stake has to function as a replacement for the corporate form, or else we get what happened to bitpay

Bitpay did great work of immense value to all bitcoiners by making it easy for a business to accept payment in bitcoin. Unfortunately it organized itself as a limited liability corporation, and the state became pissed when people used bitcoin to do what bitcoin was designed to do, and the boot of the state is now on Bitpay’s back.

Crypto currency corporations, to resist the kind of pressure that crippled Bitpay’s functionality, need to be organized as sovereign corporations, with a proof of stake blockchain in place of shares. And they need to support a lightning wallet with a lightning wallet style transaction that exchanges their shares for lightning layer bitcoin off chain.

We will likely see what happened to SWIFT – as existing networks become weaponized against privacy and freedom, demand for alternatives will rise. There has been a big rise in bitcoin-ruble transactions.

Russia was utterly unprepared for being thrown out of SWIFT, and still has not organized any satisfactory replacement, but as people and governments found ad hoc, messy, complicated, and unsatisfactory workarounds, this is having an effect less and less damaging for Russia and Russians, and more and more damaging for the US dollar and the international banking system. The ruble has now recovered against the US dollar, while the US dollar is falling like a stone again commodities and losing primacy as the currency in which goods and services are valued internationally.

If all goes well, by the time that existing networks are fully weaponized against crypto currency and blockchain based technologies, we will manage to stumble our way to bringing up a counter system of networks, and something similar will happen. By weaponizing the network, the state will bring about splinternet, and thus makes its networks less useful, as it has made SWIFT less useful.

This is a very late response to Neurotoxin’s excellent review of Yarvin on finance.

But I don’t care that it is late. The Dark Enlightenment does not need an accurate understanding of the existing finance system until it is time to eat their lunch, which will not be for a few years, and I am writing for the ages, not for this week, this year, this decade, or even this century.

The key takeaway from Neurotoxin’s post is:

most of the assets they hold – thinking mainly of hedge funds here – are already included in the “market-priced financial assets” that Moldbug mentioned in his previous paragraph. That he doesn’t grasp this should by itself make his fanbois question his guru status.

Yes, Yarvin does not understand how the finance sector works. Albeit accurately understanding how it works is impossible, because a game of three card monte is under way, but to eat their lunch, going to need a rather better understanding of it than Yarvin possesses.

The finance system is a quasi state, nominally private system, with a whole lot of people, mostly located in skyscrapers in the blue state megalopoli, who are on the revolving door between regulators and regulated, getting obscenely rich looting, smashing, and burning those parts of America that are still producing actual wealth.

The Yarvin program for fixing the financial system is pretty much the Cultural Marxist program for fixing capitalism, applied to finance in particular, rather than to the actually productive sector. It has the same flaws, but a better excuse, in that it proposes to smash up something that is confiscating wealth, rather than to smash up something that is actually producing wealth.

Short of the Yarvin plan is confiscate everything, print up sackloads of money, then genuinely reprivatize, only now with the right people owning stuff. Which means you have not genuinely reprivatized, and you still have your revolving door between regulators and regulated, plus you have set a precedent for printing sackloads of money and abolishing debts, which means that no one is going to trust the money and debt issued by your brand new finance system. (Which is going to be staffed by people on the same revolving door as your old corrupt finance system, who have a vested interest in issuing worthless money and worthless debt.)

The basic problem with the existing finance system is that it cannot work except with a virtuous ruling elite. We lack a virtuous ruling elite, and there is no way to produce a virtuous ruling elite unless you have a virtuous King, who backs and is backed by a virtuous state religion, plus a couple of generations of elite raised in this system. We need to fix the financial system rather sooner that that.

So, we need a system based on blockchains, triple entry accounting and what our enemies are calling Web 3.0, which is to say, we need a system where identity of servers is rooted in secrets controlled by the person behind the identity, rather than on secrets controlled by certificate authorities, because the metadata about transactions needs to go over the same system as the transactions themselves, and the reputational information regarding transactions needs to be secured by that system, rather than our enemies.

Then we will be able to eat our enemies’ lunch.

The most advanced, best, and complete implementation of web 3.0 is Yarvin’s Urbit. Which is not to say it is very complete or very good, but it is what is there.

The trouble with Urbit is that even when he was Moldbug, he was careful not to piss off our enemies too plainly, and now that he is Namefag Yarvin, will not go within a hundred miles of pissing off our enemies.

So Urbit is not designed to eat our enemies’ lunch. It is closely integrated with the most enemy controlled blockchain of them all, Ether, and a large part of the considerable difficulty, inconvenience, and expense of getting onto Urbit is its integration with Ether.

Namefag Yarvin is content to lick crumbs and trampled fragments of chicken from the floor, while a banquet is being consumed on a table above his head. Something rather like Urbit could be a very great threat to our enemies, but so far they have successfully made sure that it is not. He should have pursued integration with the lightning network, which would not have given him so many breadcrumbs and trampled bits of chicken as integrating with Ether, but would have given him a path to grabbing the whole banquet.

Gold has been great insurance against crisis and collapse for five thousand years.

Now it ends.

The gold bugs are whistling in the dark.

Currently there is about ten trillion in gold value held in private hands, about one trillion in crypto currency, primarily bitcoin. So gold still dominates crypto currency by capital value. But volume of crypto currency transactions dominates volume of gold transactions, because it is a lot easier and safer to move crypto currency around than to move gold around.

If technology collapses, if the grid goes down, as well it might, you will be able to buy stuff with gold and you will not be able to buy stuff with crypto currency.

But you will be able to move to some place where technology has not collapsed, and take your assets with you in your head. Try doing that with gold, and it will be confiscated.

Gold is a hedge against social and societal collapse, and crypto currency is a hedge against social and societal collapse. Social and societal collapse looms, but gold is going down, and crypto currency going up.

This is going to continue. Gold is going to be demonetized, because crypto currency is simply better money. When gold is demonetized, its value will fall to its industrial and decorative value, which I would guess to be something like ten percent of its current value. Though by that time a Big Mac will probably cost a few billion US fiats. It will take gold a long time to demonetize, as it took silver a long time to demonetize.

For the past fourteen or so years, the US government has been going hog wild on printing money, and people have been prophesying monetary doom. I expected them to be correct, but I did not prophesy doom, because I figured I would wait to see some signs that doom was actually arriving. There is a lot of ruin in a nation. Well, I have been waiting longer than I expected, but now I see signs of monetary doom. But probably not till 2023, 2025, or so. Could be 2022, but I don’t really expect it in 2022.

The likely sequence will probably be long drawn out. People who are hanging on to their fiat money waiting for prices to return to “normal” will slowly give up, and when enough of them have given up things will get wild. And after things have been wild for a while the government will take some drastic actions, and announce normality has returned. And enough people will believe them that for a short while it will seem that normality has returned – at a much higher, but seemingly stable, price level. And then roller coaster will suddenly take another dip. After a few such dips, the increasingly frequent announcements of normality will cease to have the desired effect and we get full on hypeinflation where you just cannot buy stuff for US dollars, and if you can you are uncertain about the number of zeroes that are appropriate.

The US dollar and British pound have had a very long run – compared to all other fiat currencies. But the life expectancy of fiat currencies is not very good. The anglo social order is ending. What replaces it, is up for grabs.

Namefag Yarvin predicts fifty years of the Brezhnevian stagnation.

I predicted that that revolutionary change would ensue as fast as Russia, where the Kadets were in power and then out of power so fast it gave them whiplash. I predicted that the Republicans would never win another election in America, and they just won some, falsifying my prediction.

But …

This is free money being handed out to friends of the federal reserve.

We are not currently on the course the Russian revolution took. The American deep staters are not the Russian deep staters and the Democrats are not the Kadets, to my surprise and contrary to my predictions. We are however on the course the French Revolution took, and the Democrats may well be the Girondists. The Girondists lasted a lot longer than the Kadets – but they went to the guillotine soon enough.

Naturally the politicians want to hand out a whole lot more free money. This is the path the French Revolution walked, for with with the removal of the King, power fell into far too many hands. Far too many people could stick their hands into the till.

The spending part of the “Build it back better” bill will spend about four trillion a year, about 20% of M2 per year.

The taxes that are supposed to pay for this are a soak to the rich package similar to disastrous soak the rich packages that have been tried over and over during the last sixty years in country after country.

There are plenty of unproductive rich whom you would really rather not have around, for example the friends of the federal reserve, and most of the FIRE economy, the blue state economy composed of Finance, Insurance, Real Estate, and Education. The dissolution of the monasteries was a really great and highly successful soak the rich program, and we urgently need another along the same lines, but, needless to say, this program is going after the productive rich, primarily Musk and people like Musk, rather than unproductive and useless rich, and the record of similar programs over the past sixty years is that they result in a major drop in revenue, so the taxes that are supposed to pay for this, rather than raising money, will probably,set us back another trillion or two. They are based on hatred and envy, not rational economic calculation.

Even on static analysis, ignoring the fact that you always get more of what you subsidize and less of what you tax, they don’t pay for the program, but on static analysis, they will raise about two trillion a year for a four trillion program, meaning that if the fed puts its friends on short rations, and static analysis was correct, you would only have the money supply increasing at about ten percent a year. Which is still considerably more than siegnorage will bear. But if, as is more likely, they lose money rather than raising money, and if, as is likely, the fed is unable to put its friends on short rations, then the money supply will grow at about forty five percent a year, which is roughly similar to what happened following the French Revolution.

What happens when a government tries to rely on seignorage, on printing money, more than seignorage will bear?

Well at first people think the shortages and scalper prices are a temporary abnormality, and they horde money, intending to buy stuff when prices and supply returns to normal. After a while inflationary expectations set in, they realize prices are never going to return to “normal”, and they start treating money as radioactive. As soon as they get some money, they immediately convert it into something real, for example brandname goods in sealed boxes that they can sell on ebay, or something that is not being rapidly debased, such as bitcoin. And when this happens, the government can no longer benefit by debasing the stock of money, because the real value of the stock of money collapses, and there is not much left to debase. Then you get hyperinflation.

Will we get hyperinflation? Maybe not, but if we don’t, it will be because power that is at present dispersed into far too many hands is grabbed by a single hand. Which single hand will likely have power grabbed from it in due course by another single hand.