What If I Told You This Is All A Scam?

Would you believe me?

For the record I hate all of this. I want to make that clear. But with bailout after bailout after bailout, you become desensitized to money printing. I mean, let’s go back just the last 15 years and list some bailouts off the top of the dome;

• banks

• auto sector

• airlines

• sMalL bUsiNeSSEs after mandated lockdowns

• banks (again)

Of course, all of this has unintended consequences and the first critique of this that you may read somewhere else might mention moral hazard. The idea that other people will take on more risk with the expectation of a bailout if they’re wrong is a valid one. We should be angry about that. But the bigger problem is that bailing out failures at the expense of others has very clearly lead to the inflationary pressure that we’re feeling today and have been experiencing for years either consciously or unconsciously. Why?

Well, because these bailouts have to come from somewhere and since it’s been 4 presidents since the federal government operated at anything resembling a balanced budget, these bailouts actually come from money printing not “honest” taxes. The problem for the powers that be is paying for everything through clearly defined tax increases is a non-starter politically. Instead, inflation has been the tax that has been hidden in plain site for decades. The only problem is that tax is paid through currency debasement in perpetuity.

Maybe it hasn’t been overtly evident in a CPI that has been manipulated AF for years (always lower), but it’s been clear where a lot of this printed money has been going - asset prices. Home prices. Stock prices.

We have a paper wealth crisis

Those of you who have been with me here at this little publication for some time may remember my August post about student loan forgiveness. To this day, it’s the most “ratio’d” article I’ve written and I knew it might be before hitting send. It landed about as well as I expected and it prompted a more well thought out sequel post called The Spending Will Continue Until Morale Improves.

The Spending Will Continue Until Morale Improves

If you haven’t read that article, please do. It draws a comparison to a classic scene in Breaking Bad and makes the argument that the death of the dollar has already been decided - fighting it is futile. Whether it’s small businesses, student debt, or banks in California, my view has been the same; the real moral hazard hasn’t been bailing out failure after failure. It’s that we bailout failure after failure provided they’re important enough. Important to who exactly? Who gets to decide?

Invariably it’s the gangster friends of friends between Wall Street and Washington who are always determined to be important enough for the free money. The corporate, well-connected elite get the socialist monopoly money delivered with an Andes mint on their pillows. The rest of us get cold hard capitalism. This is a brazen criminal enterprise. Stop what you’re doing and watch this:

unusual_whales @unusual_whales

This is truly incredible. Here is an exchange with Senator James Lankford & Yellen. He asks, "Will every community bank ... get the same treatment as SVB?" Yellen: "Banks only get the treatment if ... the failure to protected uninsured depositors would create systemic risk."

Janet Yellen isn’t dumb. She’s just terrible at navigating real questions and it shows. She’s not unaware, she’s in on it. As is Jerome Powell.

Call me crazy, but taking actions that have a high likelihood of creating 5 behemoth banks with the understood collateral damage of essentially eliminating smaller competition doesn’t seem like an unforced error. This feels a bit too close to the moves one would make in setting the board to take the king. By that I mean if you were going to put your programmatic CBDC through by hook or crook, the steps you would take to set up the implementation are the exact steps that are being taken right now:

• Closing crypto-friendly banks? Check

• Incentives for deposit migration to regulatory captured SIBs? Check

• Launch date for rollout of FedNow digital payments system? … Check.

Checkmate isn’t too far now.

---

The reason I was fine with student loan forgiveness is the same reason I’m not screaming bloody murder right now about yet another bank bailout despite every fiber of my being despising it. These decisions have all been made already. The way this giant math problem ends is entirely obvious if you’re willing to see it for what it has always been. Ponzi scheme. Pyramid scheme. Whatever you want to call it doesn’t really matter. This entire system has been a scam from the word ‘go’ and we can waste our time bickering who the recipients of the fake money should be if we like; but it won’t change that the original sin has always been that we allowed a centralized entity to control the cost of borrowing money that doesn’t have any intrinsic value whatsoever.

I’ve shared the clip of Jeremy Irons explaining what real panicking is and isn’t in the film Margin Call a couple of times in the past. It’s one of my favorite scenes in any finance movie. In my opinion, it’s not even the best scene in that movie. This one is:

Perfection.

Paper wealth crisis.

If you’re looking for any wisdom from a 36 year-old douchebag asshole like me, it’s this; the digits on your computer screen are not real. Money is a construct. What is real? Your loved ones. The food you put in your mouth. Your home. The music or books that you get enjoyment from. I’m a big believer that the simple things in life are what matter. Protect those things and you’ll be fine. And if you want to protect the digits on the screen as well you have to take them off the screen.