Decision-Makers

Shortly after I left Intel, a former colleague sent me a message.

I don’t like it here either, she wrote. I would rather work for a cool startup, but I’m worried I won’t be able to find opportunities outside of my field. What should I do?

I didn’t know her that well. How the hell would I know what she should do? Maybe she had to pay for her mother’s dialysis treatments and needed job security. Maybe her Restricted Stock Units were about to vest. I don’t know. I gave her the advice I would have given myself.

Quit, I replied. Lots of other jobs out there. You’ll be fine.

She didn’t quit.

I’m sure I’m not the only person she asked. Someone else probably told her that she should stay at her job, so she went with that one, because it was in line with what she already wanted to do. She wasn’t looking for life advice so much as seeking confirmation.

When I was miserable at my job, I must have asked over 30 people what I should do. The answers ranged from “Give it more time, you’ll learn to like it” to “Find yourself a rich husband” (thanks Mom!).

I kept asking more people for advice because I wasn’t getting the answer I really wanted, which was “Quit and run like hell.”

People who are unsure of themselves like being told what to do. Major life decisions are easier if it feels like someone else made the choice for you. Then you don’t have to accept responsibility if your life ends up sucking. Blame it on the person who made the decision for you.

6 months later, that same colleague sent me another message. I am really seriously considering leaving, she said. Do you think I should?

Nah, I replied. Stay where you are. Intel gives you a free backpack after 20 years of service. You wouldn’t want to miss that.

intel backpack

Nothing Gold Can Stay

After more than four years of quantitative easing in the United States, the inflation rate as measured by the consumer price index is just 2%. (According to other measures, it may be even lower.) And XAU is tanking.

What happened to the trillions of dollars in global liquidity injected by central banks across the world? Where is the hyperinflation?

Printing Money

Under Quantitative Easing, the Fed buys Treasury Notes or Mortgage-backed securities for bank reserves in the private sector. This changes the composition of private sector financial assets (swapping low-interest T-bonds for even-lower-interest reserves) but does not add to the supply of private-bank issued money [1].

The private sector will not be able to access more capital, nor does QE necessarily lead to more lending. It just lowers interest rates and makes riskier assets more attractive.

On the other hand, government bond sales and deficit spending result in the creation of a net financial asset.

Unlike a private loan issuance, which creates both a private sector liability and an asset, government deficit spending results in no corresponding private sector liability (the US Treasury will never default), only a private sector asset (the government bond).

Just how much money has been created ex nihilo? A lot.

Hyperinflation

It won’t happen as a result of Quantitative Easing or Deficit Spending.

Hyperinflation is caused by the complete rejection of a nation’s money. Throughout history, hyperinflations have tended to occur not because the money supply expands, but because of unusual exogenous factors such as a decline in production, corruption, regime changes, ceding of monetary sovereignty or loss of a war [2].

Gold has done very well when denominated in Zimbabwean Dollars
Gold has done very well when denominated in Zimbabwean Dollars

So Where Did the Money Go?

Probably the bond market.

The Price of Gold

Nobody knows. What are you going to look at, cash flow and earnings?

Central banks control most of the gold in the world and have been net buyers since 2008. Right now rumor has it that Cyprus may sell gold to fund its bailout, but their €400m sale is nothing compared to what Paulson might be holding.

The Value of Fiat Money

Fiat money has acceptance value because the government and people deem it as an accepted medium of exchange. It has no intrinsic value. But you know what else has no intrinsic value? Gold. Oh, and Bitcoin.

bitcoins

See Also:

1. Understanding the Modern Monetary System –PragCap via SSRN

2. Hyperinflations, Hysteria, and False Memories –GMO

3. 12 Rules of Goldbuggery — When we have a red hot economy, Gold is your hedge against inflation. When we have a bad economy, Gold is a safe harbor against collapse. It is a one way trade that never fails!

4. The death of inflation –The Economist

Fisherman

JH told me this story today.

A businessman was traveling in Southeast Asia when he met a fisherman. The fisherman would be kw with his line for a few hours every morning, catch some fish, sell them at the market, go home to his wife, take a siesta, and then sit on the beach watching the waves until the sun set. A completely hedonistic life, the businessman thought.

The businessman asked, “Why don’t you work harder to catch more fish so you can earn more money?”

The fisherman asked, “And then what?”

“And then you could buy bigger nets and catch more fish!”

“And then what?” asked the fisherman.

“You will make more money, and you’ll be able to buy a boat, and bring back larger catches of fish!”

“And then what?” asked the fisherman again.

“You could buy an even bigger boat and hire employees to work for you!”

“And then what?”

“You could make a lot of money running this business and become rich enough to retire!”

“And then what?”

“Then you’ll be free to do whatever you want! You could spend the rest of your days fishing for a few hours every morning, then sit on the beach watching the waves until the sun set…”

IMG_6596

A Human Stock Exchange

This guy in Portland created his own stock exchange to sell shares of himself.

kmikeym1

His 160 shareholders vote on his life decisions like whether or not he should start a relationship or get a vasectomy.

But wait, what happens to all those shares if he dies? There needs to be a derivatives market for this guy. I could buy up a bunch of shares, take out a life insurance policy on him, and then vote for him to take up skydiving.

How One Man Turned Himself Into a Publicly Owned Company –the Atlantic