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Musings Report 2021-1 1-2-21 They Can Always Print More Money But We Can't Print More Time
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They Can Always Print More Money But We Can't Print More Time
The first Musings of 2021 dwells on an insight that may appear obvious at first glance, but which I see as becoming increasingly profound as the decade unfolds:
"No matter how much money I make, they will always print more. I can't print anymore time."
The source of this quote is correspondent T.D., who shared the story of an acquaintance of his, a physician who was offered a high-paying and very demanding corporate position that would have left the physician nominally wealthier in terms of money but much poorer in terms of time and energy remaining after trading away the bulk of his time and energy for the higher pay.
The acquaintance turned the position down and cut the number of hours he was working, with this explanation: "No matter how much money I make, they will always print more. I can't print anymore time."
The point here is that central banks and state treasuries can always print more money, a process which reduces the purchasing power of the money they've issued. We can trade more hours for more of this devalued money, but this additional money buys less than it did in the past.
No matter how much more of our time we trade for more of this money, we will never be able to overcome their power to create near-infinite sums of currency, which put another way is the power to devalue the value of the money we trade our time for, and thus of our time itself.
There is an asymmetry here that should inform our decisions going forward: They Can Always Print More Money But We Can't Print More Time.
In other words, they can devalue the money we trade our time for at will but we can't create more time.
Last week I mentioned a history I'm avidly reading: Global Crisis: War, Climate Change and Catastrophe in the 17th Century.
While there may be a few exceptions sprinkled throughout history, the history of governments' response to crisis is depressingly repetitive: virtually without exception, every government devalues its currency in response to the soaring costs of conflict (and placating elites) and the concurrent plunge in tax revenues.
The common experience seems to be that the government-issued money loses 90% or more of its value by the time the crisis has passed.
In the era before central banks could create trillions of dollars with a few keystrokes, this was accomplished by recalling coins and replacing them with coins with little or no intrinsic value (silver or gold).
In the case of the mighty Ottoman Empire of the 1600s, the empire recalled all copper coins ("small money" used for everyday transactions) and restamped it at a face value triple the old value, in effect wiping out two-thirds of its purchasing power.
Diaries of commoners in every regime not shredded by war record that the 90% devaluation of the money was just as devastating as the floods, droughts, food shortages and soaring taxes that were part and parcel of the official response to crisis.
That money may lose its value faster than we can earn more of it is a change from the past 75 years.
In our lifetimes, making 25% more money still added purchasing power to our incomes, even after deducting 5% for inflation (laughingly estimated at 1%-2%) and another 10% in higher taxes paid because the extra income pushed us into a higher tax bracket.
We still netted an additional 10% of purchasing power.
But if history is any guide, then we can anticipate 20% inflation (grossly underestimated by authorities to avoid outright revolt) and 20% higher taxes (often hidden in higher "user taxes" and other flim-flam) on our additional earnings, leaving us with less purchasing power even after we traded every available hour for the additional income.
We will be poorer in what really counts--our time and energy--and poorer in the purchasing power of our income.
The temptation is to gamble whatever money one has to outrace the authorities' devaluation, and indeed, 2020's rampant speculative bubbles generated a widespread illusion that the agile gambler could easily outrace the devaluation.
For example, take $2,000, gamble it all on the highest-volatility stocks, and turn it into $200,000.
Oops, and then run the fortune to zero.
That's the problem with relying on a hot hand in the casino to avoid trading time for money: the vast majority of punters lose in the casino, especially when the tide that's been raising all boats ebbs away.
(Governments love gamblers who win, of course; if you live in a high-income tax state, add 9% to the federal tax rate of 32%, and be prepared to "share" 40+% of your casino winnings.)
The other approach is to reduce our need for money to a very low level so we're not forced to trade what we cannot create more of--time--for something that's rapidly losing value.
A related approach is to own and generate goods and services which can be traded for what we need without having to go through the middleman of government-devalued money. Barter eliminates the government's ability to devalue the purchasing power of our time to near-zero.
A second related approach is to trade our time for time-honored forms of money that have intrinsic value. While I have been on record since 2016 as saying positive things about bitcoin and cryptocurrencies, including my own proposal for a labor-backed cryptocurrency, the historic stalwarts in the intrinsic value camp are gold and silver.
But anything with intrinsic value will do: grain, food, tools, nails, screws, shelter, etc.
Having the skills to generate goods and services of intrinsic value is very much like "printing money with our time" because our skills make our time valuable, not in terms of what government currency is worth but in terms of the value others find in the goods and services we generate with our skills / time.
If I were to make a wager on what happens in the next few months, I would wager not on inflation, which everyone else assumes will explode soon because it's inevitable given all the trillions being printed with a few keystrokes, but on a deflationary crash in assets, partly because all bubbles pop, and partly because the herd does not see such a crash as even remotely possible.
Everyone's putting their money on bubbles inflating forever and rapid inflation, and so the trade is extremely asymmetric.
Contrarian that I am, I'll take the 1% against the 99%.
But whether this short-term guess is right or wrong, history informs us that governments inevitably respond to crisis by devaluing their currency and by raising taxes. In the current era, the more money commoners earn, the more taxes they pay, as taxes are progressive. The less we earn, the less taxes we pay because the tax rate on modest incomes is much lower than the tax rates on high incomes. (In the U.S., 10% on modest incomes and 35% on high incomes.)
Politically, this cannot change much, for as people become poorer, their ability to pay taxes diminishes. So taxes will rise on high earners, not on those earning relatively little.
It may well be that every dollar of nominal gain in income earned by working more hours will simply go to paying higher taxes. Is that really what you want to spend your time doing, paying more taxes?
They Can Always Print More Money But We Can't Print More Time. So what do we spend our precious time doing? Running the Red Queen's Race with devaluing currencies, or lessening our exposure to the theft of our time by currency devaluation and taxes?
It's not an asymmetry we will have to address tomorrow, but the time will come when it presses on us like gravity itself.
Highlights of the Blog
Podcasts:
Jay Taylor: The Fourth Estate's Role in Thrusting America into Fascism (27 minutes)
Posts:
The Top 10%'s Bubble Is About to Burst 12/30/20
2020 the "Worst Year Ever"--You're Joking, Right? 12/28/20
Best Thing That Happened To Me This Week
Some of our neighbors kindly invested hundreds of dollars in aerial fireworks for our viewing pleasure in the first half-hour of 1/1/21.
From Left Field
Here's To A Bright New Year (3:39) (via John F.) -- happy animals make for happy people....
The Search for the Greatest Sports Car of All Time (via Maoxian) -- this kind of writing only exists in auto magazines... most fun sporty car I ever drove was a 1967 Austin-Healey...
World's rarest turtle could avoid extinction after potential mate found in Vietnam lake (via CNF) -- finally, some good news....
20 Reasons to Prefer Degrowth to the Green New Deal (as a political option to address the collapse of civilization)
The crisis in Brazil’s Amapa state is a warning for the world
As climate change, species extinction and ecological breakdown worsen due to industrial capitalism, crises such as the weeks-long electricity outage in Amapa will multiply and accelerate.
Olduvai theory -- "transient-pulse theory of industrial civilization"
Another Piece of the Puzzle of Plunging Credit Card Balances
The good old ways: can we still farm like our grandparents? Against the odds, small-scale farmers are learning new ways to survive in an age of industrial-scale competition
Mobility is NOT a business: Why the pandemic-induced collapse of mass transit should concern us all
Globalization in Retreat: World trade continued to fall in 2020. And it may shrink even more in the years ahead.
Italy Will Rebuild the Colosseum's Floor, Restoring Arena to Its Gladiator-Era Glory
Building the Middle Class of the Creator Economy: The American Dream exists, but what is the reality? (via Maoxian)
"On Patreon, only 2% of creators made the federal minimum wage of $1,160 per month in 2017. On Spotify, artists need 3.5 million streams per year to achieve the annual earnings for a full-time minimum-wage worker of $15,080."
"When copies are free, you need to sell things that cannot be copied. Well, what can't be copied? Trust, for instance." Kevin Kelly
Thanks for reading--
charles |
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