We could also have entitled this essay How to Measure Your Own Capital Destruction. But this headline would not have set expectations correctly. As always, when looking at the phenomenon of a credit-fueled boom, the destruction does not occur when prices crash. It occurs while they’re rising. But people don’t realize it, then, because rising […]
The Baby Boom generation may be the first generation to leave less to their children than they inherited. Or to leave nothing at all. We hear lots—often from Baby Boomers—about the propensities of their children’s generation. The millennials don’t have good jobs, don’t save, don’t buy houses in the same proportions as their parents, etc. […]
Last week, we shined a spotlight on a crack in the monetary system that few people outside of Switzerland (and not many inside either) were aware of. There is permanent gold backwardation measured in Swiss francs. Everyone knows that the Swiss franc has a negative interest rate, but so far as we know, Keith is […]
Last week, we talked about the capital consumed by Netflix—$8 billion to produce 700 shows. They’re spending more than two thirds of their gross revenue generating content. And this content has so little value, that a quarter of their audience would stop watching if Netflix adds ads (sorry, we couldn’t resist a little fun with […]
For about ten bucks a month, Netflix will give you all the movies you can watch, plus tons of TV show series and other programs, such as one-off science documentaries. They don’t offer all movies, merely more than you can watch. Oh, and there are no commercials. They don’t just give you old BBC reruns, […]
This week, we are back to our ongoing series on capital destruction. Let’s consider the simple transaction of issuing a bond. Party X sells a bond to Party Y. We will first offer something entirely uncontroversial. If the interest rate rises after Y buys the bond, then Y takes a loss. Or if the interest […]
Explaining a new paradigm can be both simple and impossible at the same time. For example, Copernicus taught that the other planets and Sun do not revolve around the Earth. He said that all the planets revolve around the Sun, including Earth. It isn’t hard to say, and it isn’t especially hard to grasp. Indeed, […]
We have been writing about capital destruction. This week let’s look at an event which is currently making news. Social Security will begin tapping into its trust fund this year. This happens, as the Social Security Board of Trustees states antiseptically, “four years earlier than projected in last year’s report.” In other words, the economy […]
Picture a scene in one of those action moves. Two guys are fighting for control over the steering wheel. The car is going 75mph, the road is narrow, and there is a drop over a cliff on one side. And there are lots of sharp curves. Central Planning This is a pretty good picture of […]
Since 1981, interest rates have been in a falling trend. Last week, we said this trend will continue, and the present blip up in rates is just a correction. We did not argue technical analysis, nor quantity of dollars, nor the general price level. Instead, we asked a question: …It seems obvious that if one […]
