🔋The Real Climate Catastrophe Pt. 1

Laying the framework of the economic sub-structure that has guided our societies unconscious thoughts, behaviors, and actions.

Apr 27, 2022

This is the first of a three-part series where I argue the bigger climate catastrophe is the reaction to the problem, not the problem itself. This week lays the framework of the underlaying monetary policy that incentivizes many of our issues. If you press the heart button above or below I would greatly appreciate it!

Part 1

Part 2

Part 3

TALES OF HYPERINFLATION: Here's What Germany's so Freaked Out About... — Excess money during hyperinflation of Weimar Republic: Business Insider

One theme obvious for example in the disconnect between modern media and typical family structures, is the balance between creating a better life for our children and enjoying life today. Media runs in short daily to weekly news cycles, which lay in stark contrast to our actual lives which represent jobs with long projects, families to raise, and relationships to cultivate and foster over the long term. The future is frighteningly uncertain, but generally the longer the time horizon people have, the better world we are able to create for ourselves and children in the long run. But what about now? Certainty we shouldn’t all go be monks or forgo some incredible experience — where is the line?

In Marshmallow Size Elephant In The Room, I detailed how personality traits are embedded in climate change outlook which is quite fascinating, but piece started with the famous Stanford marshmallow experiment. Kids able to discount present satisfaction for a better outcome in the uncertain future were typically more successful when they got older. Similarly, the conscientiousness personality trait is a very good indicator of overall life success up there behind IQ for example. It is a balancing act, and like in every good story, the hero can be a guiding light when the path remains uncertain. We are all hero’s of our own story, forging a path forward through the uncertainty of the future. At the end of the day, the only time present satisfaction may be sacrificed is when the future is sufficiently secure…

So is the future secure? Depends on who you ask. One more question — do you think politicians/global leaders have short or long time horizons? I doubt anyone would have to really think about it too hard as they are hoping to get re-elected, meeting their constituents and lobbyists demands, and often not thinking about long term consequences of their policies. Que the famous line, “show me the incentives, I’ll show you the outcome.”

In 1971 Nixon notably severed the tie of the monetary system with the gold standard once and for all which on the surface level people may not think much about since life is way better now than it was then… right? Okay for sure it is, but this signaled to the world that money could be manipulated without limit, with no say from the people (what happened to no taxation without representation, which our country was built on, and monetary inflation is the most regressive and dishonest tax of them all). Correlation does not always equal causation, but 1971 marked a structural change in the framework of the world, and I’ll wait for a rebuttal of the laundry list of negative consequences seen at WTF Happened In 1971.

Money is a primary gauge of value, meaning that every transaction (or not) is a sign of what each individual assigns value to. It can be a humbling thought experiment to reflect on what you buy and how it is a marker of what you truly care about. The government can increase the money supply at a whim thereby destroying it as a store of value and devaluing the currency holders in the process. They can essentially do this for whatever purpose that they deem necessary (assuming the people don’t revolt). People do not have a say in monetary policy as the federal reserve is not elected and can act independently from congress, even though it is acting in conjunction with and for the benefit of US government in general. Its inception was quite pervasive as it is technically a private company since the creation of a central bank under the government is unconstitutional. It is a fun fact that the founding fathers had direct lessons in the dangers of fiat money when forming the constitution because they witnessed various colonies destroy their respective currencies for selfish gain and cause hardship in the process. The selfish game of soft money is a game that has ended the same way every time it has been played throughout history… collapse. It is for that reason that money is the ultimate sign of value — and in today’s age, the value of discounting the future for the present.

Each time the government increases the money supply they need a reason like some emergency, conflict, or crisis. This is to convince the general public that their actions are necessary and justified. This is why everything these days is an emergency or crisis no matter the cost-benefit analysis. Any means are justified in the present if it is to defeat a enemy, crisis, or emergency in the short term. We are on the 41st year of this incentive structure of unlimited “money printing”/credit expansion/quantitative easing/government spending which has only intensified in terms of volume, propaganda, and unintended consequence severity.

The federal reserve is the central bank responsible for monetary policy. Their main tools are adjusting money supply and interest rates to stimulate/slow the economy. Since COVID began, the most intense stimulus in history was applied to prop up the economy. In that time frame of just over two years the fed balance sheet has more than doubled and the M2 money supply has increased by 41% while both continue to increase. For comparison, the 2008 recession caused a 120% increase in fed balance sheet and 8% increase in M2 before leveling off (Aug 08-Aug 09).

If you don’t think the central bank monetary policy has any impact on your personal monetary decision making you may want to think again. In an inflationary environment people are more inclined to spend now before your money devalues and you can’t buy as much next month. Check out what occurred in Weimar Germany or Zimbabwe, as well as modern Turkey, Venezuela, and Argentina. The government loves having the central bank authority because their tools allow them to influence aggregate demand which to them is what keeps the wheels turning in the economy. I would argue real productivity is what drives the economy, and excess money and inflation cause people to spend, invest, and create things that could be considered malinvestments. This is the Austrian school of economics in simplistic terms and what they posit causes the business cycle. Those malinvestments are useless, liquidated, or bankrupt during the inevitable recession.

Are there any companies/products that leave you shaking your head these days? During quantitative easing/increasing money supply, people tend to branch out the risk curve and behave more speculatively. Everything tends to make money during times of stimulus. We saw demand for consumer goods increase as people felt like they had extra money to spend and nothing to do. As I spoke about recently, the government using the DPA/executive powers for increasingly less severe things. The misallocations of money and resources have left us panicking over more and more trivial problems. In a similar tone, the central bank has been consistently increasing the balance sheet over time. In a world of easy money it is exactly what it sounds like — easy to make money in almost anything. We should be careful though because as Mordo says in the first Dr. Strange film, “the bill always comes due.” Soon we will not only find out what consequences Dr. Strange must deal with for abusing the power of the time stone in the Multiverse of Madness, but also the consequences of the abuse of central bank power and ripple effect of poor capital allocation in the last few years.