Inflation Rate Quotes

Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich. [...] "But we have also," continued the management consultant, "run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying on ship's peanut." [...] "So in order to obviate this problem," he continued, "and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and...er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances.

Bond holders have to account for a variety of risks including interest rate risk and inflation risk.

To try to cure unemployment by inflation rather than by adjustment of specific wage-rates is like trying to adjust the piano to the stool rather than the stool to the piano.

If," ["the management consultant"] said tersely, “we could for a moment move on to the subject of fiscal policy. . .” “Fiscal policy!" whooped Ford Prefect. “Fiscal policy!" The management consultant gave him a look that only a lungfish could have copied. “Fiscal policy. . .” he repeated, “that is what I said.” “How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.” “If you would allow me to continue.. .” Ford nodded dejectedly. “Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.” Ford stared in disbelief at the crowd who were murmuring appreciatively at this and greedily fingering the wads of leaves with which their track suits were stuffed. “But we have also,” continued the management consultant, “run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut." Murmurs of alarm came from the crowd. The management consultant waved them down. “So in order to obviate this problem,” he continued, “and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and. . .er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances." The crowd seemed a little uncertain about this for a second or two until someone pointed out how much this would increase the value of the leaves in their pockets whereupon they let out whoops of delight and gave the management consultant a standing ovation. The accountants among them looked forward to a profitable autumn aloft and it got an appreciative round from the crowd.

So just out of curiosity, what do you think I'm worth?" he asked when he just couldn't help himself. "I mean, it isn't often a person's put on the open market. What is the going rate for presidents' sons these days? Is it more or less than what you guys were going to get for my mother? Accounting for inflation, of course.

You have the legs and other also have it; they have the brain and you have it! Stop thinking you can't transact the business that others can. If you do, you are raising your inflation rate!

We’re not in control. So we learn to pretend, all the time, about our jobs and our marriages and our children and everything else. We pretend we’re normal, that we’re reasonably well educated, that we understand ‘amortization levels’ and ‘inflation rates’. That we know how sex works. In truth, we know as much about sex as we do about USB leads, and it always takes us four tries to get those little buggers in. (Wrong way round, wrong way round, wrong way round, there! In!)

For individuals whose only capital is a small balance in a checking account, the return is negative, because such balances yield no interest and are eaten away by inflation. Savings accounts often yield little more than the inflation rate.

If ordinary citizens knew or ever really [understood] how our political leaders have allowed unemployment to be used as a tool for fine-tuning the inflation rate, they would throw the rascals out and demand a thorough purging of the ranks of government economists.

So much of what we hear today about courage is inflated and empty rhetoric that camouflages personal fears about one’s likability, ratings, and ability to maintain a level of comfort and status. We need more people who are willing to demonstrate what it looks like to risk and endure failure, disappointment, and regret—people willing to feel their own hurt instead of working it out on other people, people willing to own their stories, live their values, and keep showing up. I feel so lucky to have spent the past couple of years working with some true badasses, from teachers and parents to CEOs, filmmakers, veterans, human-resource professionals, school counselors, and therapists. We’ll explore what they have in common as we move through the book, but here’s a teaser: They’re curious about the emotional world and they face discomfort straight-on.

One of the worst results of the retention of the Keynesian myths is that it not only promotes greater and greater inflation, but that it systematically diverts attention from the real causes of our unemployment, such as excessive union wage-rates, minimum wage laws, excessive and prolonged unemployment insurance, and overgenerous relief payments.

Almost every Fed chairman in the past 60 years has manipulated interest rates to brighten the economic outlook for incumbent presidents or newly elected presidents who won by large margins. The purchasing power of the U.S. dollar has fallen 94 percent in the past 100 years. The only way you can create inflation is by creating more money that is backed by the same reserve assets; the Fed is the only entity that can create more money. Ben Bernanke’s quantitative easing (QE) programs have pumped billions of unfunded dollars into the economy, thereby setting us up for massive inflation in the very near future. If this isn’t a form of financial terrorism, it is incompetence of the highest order.

To accumulate any wealth, you must invest at a growth rate higher than inflation.

short-term interest rates above long-term rates (which was called “inverting the yield curve”). Every time that happened, inflation-hedged assets and the economy went down. But Bunker

How often does it occur that information provided you on morning radio or television, or in the morning newspaper, causes you to alter your plans for the day, or to take some action you would not otherwise have taken, or provides insight into some problem you are required to solve? For most of us, news of the weather will sometimes have consequences; for investors, news of the stock market; perhaps an occasional story about crime will do it, if by chance it occurred near where you live or involved someone you know. But most of our daily news is inert, consisting of information that gives us something to talk about but cannot lead to any meaningful action...You may get a sense of what this means by asking yourself another series of questions: What steps do you plan to take to reduce the conflict in the Middle East? Or the rates of inflation, crime and unemployment? What are your plans for preserving the environment or reducing the risk of nuclear war? What do you plan to do about NATO, OPEC, the CIA, affirmative action, and the monstrous treatment of the Baha’is in Iran? I shall take the liberty of answering for you: You plan to do nothing about them. You may, of course, cast a ballot for someone who claims to have some plans, as well as the power to act. But this you can do only once every two or four years by giving one hour of your time, hardly a satisfying means of expressing the broad range of opinions you hold. Voting, we might even say, is the next to last refuge of the politically impotent. The last refuge is, of course, giving your opinion to a pollster, who will get a version of it through a desiccated question, and then will submerge it in a Niagara of similar opinions, and convert them into—what else?—another piece of news. Thus, we have here a great loop of impotence: The news elicits from you a variety of opinions about which you can do nothing except to offer them as more news, about which you can do nothing.

Because there’s such an unbelievable amount that we’re all supposed to be able to cope with these days. You’re supposed to have a job, and somewhere to live, and a family, and you’re supposed to pay taxes and have clean underwear and remember the password to your damn Wi-Fi. Some of us never manage to get the chaos under control, so our lives simply carry on, the world spinning through space at two million miles an hour while we bounce about on its surface like so many lost socks. Our hearts are bars of soap that we keep losing hold of; the moment we relax, they drift off and fall in love and get broken, all in the wink of an eye. We’re not in control. So we learn to pretend, all the time, about our jobs and our marriages and our children and everything else. We pretend we’re normal, that we’re reasonably well educated, that we understand “amortization levels” and “inflation rates.” That we know how sex works. In truth, we know as much about sex as we do about USB leads, and it always takes us four tries to get those little buggers in. (Wrong way round, wrong way round, wrong way round, there! In!) We pretend to be good parents when all we really do is provide our kids with food and clothing and tell them off when they put chewing gum they find on the ground in their mouths. We tried keeping tropical fish once and they all died. And we really don’t know more about children than tropical fish, so the responsibility frightens the life out of us each morning. We don’t have a plan, we just do our best to get through the day, because there’ll be another one coming along tomorrow.

Perhaps the creeping effort to restrict civil liberties wouldn’t have brought people into the streets, at least not immediately. But Allende’s economic programs hit them directly. His announced policy of “first consumption, then accumulation” was an economic disaster waiting to happen. In 1971, the inflation rate was 20 percent, kept somewhat in check by the expenditure of the government’s foreign reserves, but in 1972, with the government spending lavishly to support its social and economic policies, it jumped to 78 percent, and in 1973 to an unprecedented 353 percent. No country in the world had a higher rate. Then the attempt to rein in prices through government controls led to shortages of basic consumer goods and the rise of black markets. People were waiting in line to buy toothpaste.

It is not the poverty of individuals and the community, not indebtedness to foreign nations, not the unfavourableness of the conditions of production, that force up the rate of exchange, but inflation.

If not interest rates or monetary policy, then what? Most research on the origins of the bubble has focused on three factors: mass psychology; financial innovations that reduced the incentive for careful lending;

Where did this whole thing begin? If what we think of as reality is just a pattern that somebody brought Outside, and the universe just popped into bring, then whoever it was is probably still wandering around giving off universes wherever she goes So where did she come from? And what was there before she started doing it? And how did Outside come to exist, for that matter?” That's Inspace thinking,” said Olhado. “That's the way you conceive of things when you still believe in space and time as absolutes. You think of everything starting and stopping, of things having origins, because that's the way it is in the observable universe. The thing is, Outside there's no rules like that at all. Outside was always there and always will be there. The number of philotes there is infinite, and all of them always existed. No mater how many of them you pull out and put into organized universes, there'll be just as many left as there always were” But somebody had to start making universes.” Why?” asked Olhado. Because-because I-“ Nobody ever started. It's always been going on. I mean, if it weren’t already going on, it couldn’t start. Outside where there weren’t any patterns, it would be impossible to conceive of a pattern. They can’t act, by definition, because they literally can’t even find themselves.” But how could it have always been going on?” Think of it as this moment in time, the reality we live in at this moment, this condition of the entire universe-of all the universes-” You mean now.” Right. Think of it as if now were the surface of a sphere. Time is moving forward through the chaos of Outside like the surface of an expanding sphere, a balloon inflating. On the outside, chaos. On the inside, reality. Always growing-like you said, Valentine. Popping up new universes all the time.” But where did this balloon come from?” OK, you’ve got the balloon. The expanding sphere. Only now think of it as a sphere with an infinite radius.” Valentine tried to think of what that would mean. “The surface would be completely flat.” That’s right” And you could never go all the way around it” That’s right, too. Infinitely large. Impossible even to count all the universes that exist on the reality side. And now, starting from the edge, you get on a starship and start heading inward toward the center. The farther in you go, the older everything is. All the old universes back and back. When do you get to the first one?” You don’t” said Valentine. “Not it you’re traveling at a finate rate.” You don’t reach the center of a sphere on infinite radius, if you’re starting at the surface, because no matter how far you go, no matter how quickly, the center, the beginning, is always infinitely far away.” And that’s where the universe began.

The “German problem” after 1970 became how to keep up with the Germans in terms of efficiency and productivity. One way, as above, was to serially devalue, but that was beginning to hurt. The other way was to tie your currency to the deutsche mark and thereby make your price and inflation rate the same as the Germans, which it turned out would also hurt, but in a different way. The problem with keeping up with the Germans is that German industrial exports have the lowest price elasticities in the world. In plain English, Germany makes really great stuff that everyone wants and will pay more for in comparison to all the alternatives. So when you tie your currency to the deutsche mark, you are making a one-way bet that your industry can be as competitive as the Germans in terms of quality and price. That would be difficult enough if the deutsche mark hadn’t been undervalued for most of the postwar period and both German labor costs and inflation rates were lower than average, but unfortunately for everyone else, they were. That gave the German economy the advantage in producing less-than-great stuff too, thereby undercutting competitors in products lower down, as well as higher up the value-added chain. Add to this contemporary German wages, which have seen real declines over the 2000s, and you have an economy that is extremely hard to keep up with. On the other side of this one-way bet were the financial markets. They looked at less dynamic economies, such as the United Kingdom and Italy, that were tying themselves to the deutsche mark and saw a way to make money. The only way to maintain a currency peg is to either defend it with foreign exchange reserves or deflate your wages and prices to accommodate it. To defend a peg you need lots of foreign currency so that when your currency loses value (as it will if you are trying to keep up with the Germans), you can sell your foreign currency reserves and buy back your own currency to maintain the desired rate. But if the markets can figure out how much foreign currency you have in reserve, they can bet against you, force a devaluation of your currency, and pocket the difference between the peg and the new market value in a short sale. George Soros (and a lot of other hedge funds) famously did this to the European Exchange Rate Mechanism in 1992, blowing the United Kingdom and Italy out of the system. Soros could do this because he knew that there was no way the United Kingdom or Italy could be as competitive as Germany without serious price deflation to increase cost competitiveness, and that there would be only so much deflation and unemployment these countries could take before they either ran out of foreign exchange reserves or lost the next election. Indeed, the European Exchange Rate Mechanism was sometimes referred to as the European “Eternal Recession Mechanism,” such was its deflationary impact. In short, attempts to maintain an anti-inflationary currency peg fail because they are not credible on the following point: you cannot run a gold standard (where the only way to adjust is through internal deflation) in a democracy.

firms do not borrow as much to invest when rates are higher and individuals stop buying durable goods against credit and, instead, turn to save. Lower demand growth leads to a better match between demand and supply, and thus lower inflation for the goods being produced.

The history of black workers in the United States illustrates the point. As already noted, from the late nineteenth-century on through the middle of the twentieth century, the labor force participation rate of American blacks was slightly higher than that of American whites. In other words, blacks were just as employable at the wages they received as whites were at their very different wages. The minimum wage law changed that. Before federal minimum wage laws were instituted in the 1930s, the black unemployment rate was slightly lower than the white unemployment rate in 1930. But then followed the Davis-Bacon Act of 1931, the National Industrial Recovery Act of 1933 and the Fair Labor Standards Act of 1938—all of which imposed government-mandated minimum wages, either on a particular sector or more broadly. The National Labor Relations Act of 1935, which promoted unionization, also tended to price black workers out of jobs, in addition to union rules that kept blacks from jobs by barring them from union membership. The National Industrial Recovery Act raised wage rates in the Southern textile industry by 70 percent in just five months and its impact nationwide was estimated to have cost blacks half a million jobs. While this Act was later declared unconstitutional by the Supreme Court, the Fair Labor Standards Act of 1938 was upheld by the High Court and became the major force establishing a national minimum wage. As already noted, the inflation of the 1940s largely nullified the effect of the Fair Labor Standards Act, until it was amended in 1950 to raise minimum wages to a level that would have some actual effect on current wages. By 1954, black unemployment rates were double those of whites and have continued to be at that level or higher. Those particularly hard hit by the resulting unemployment have been black teenage males. Even though 1949—the year before a series of minimum wage escalations began—was a recession year, black teenage male unemployment that year was lower than it was to be at any time during the later boom years of the 1960s. The wide gap between the unemployment rates of black and white teenagers dates from the escalation of the minimum wage and the spread of its coverage in the 1950s. The usual explanations of high unemployment among black teenagers—inexperience, less education, lack of skills, racism—cannot explain their rising unemployment, since all these things were worse during the earlier period when black teenage unemployment was much lower. Taking the more normal year of 1948 as a basis for comparison, black male teenage unemployment then was less than half of what it would be at any time during the decade of the 1960s and less than one-third of what it would be in the 1970s. Unemployment among 16 and 17-year-old black males was no higher than among white males of the same age in 1948. It was only after a series of minimum wage escalations began that black male teenage unemployment not only skyrocketed but became more than double the unemployment rates among white male teenagers. In the early twenty-first century, the unemployment rate for black teenagers exceeded 30 percent. After the American economy turned down in the wake of the housing and financial crises, unemployment among black teenagers reached 40 percent.

As we’ll see, the 4% Roman rate of return is about the same as the aggregate return on capital (when stocks and bonds are considered together) in the U.S. in the twentieth century, and perhaps even a bit more than the aggregate return expected in the next century. (The 4% Roman rate was gold-based, so the return was a real, that is, after-inflation, return.) The

Early on in the top, some parts of the credit system suffer, but others remain robust, so it isn’t clear that the economy is weakening. So while the central bank is still raising interest rates and tightening credit, the seeds of the recession are being sown. The fastest rate of tightening typically comes about five months prior to the top of the stock market. The economy is then operating at a high rate, with demand pressing up against the capacity to produce. Unemployment is normally at cyclical lows and inflation rates are rising. The increase in short-term interest rates makes holding cash more attractive, and it raises the interest rate used to discount the future cash flows of assets, weakening riskier asset prices and slowing lending.

An American home has not, historically speaking, been a lucrative investment. In fact, according to an index developed by Robert Shiller and his colleague Karl Case, the market price of an American home has barely increased at all over the long run. After adjusting for inflation, a $10,000 investment made in a home in 1896 would be worth just $10,600 in 1996. The rate of return had been less in a century than the stock market typically produces in a single year.

The fact that new coins are produced means the money supply increases by a planned amount, but this does not necessarily result in inflation. If the supply of money increases at the same rate that the number of people using it increases, prices remain stable. If it does not increase as fast as demand, there will be deflation and early holders of money will see its value increase. Coins have to get initially distributed somehow, and a constant rate seems like the best formula.

Since we decided a few weeks ago to adopt leaves as legal tender, we have of course all become immensely rich. . . . But, we have also run into a small inflation problem on account of the high level of leaf availability. Which means that I gather the current going rate has something like three major deciduous forests buying one ship’s peanut. So, um, in order to obviate this problem and effectively revalue the leaf, we are about to embark on an extensive defoliation campaign, and um, burn down all the forests. DOUGLAS

The depressives, far from seeing themselves through dark lenses as we had presumed, were cursed by twenty-twenty vision: compared with other groups, their self-ratings of positive qualities most closely matched how the observers rated them. In contrast, both the nondepressed psychiatric patients and the control group had inflated self-ratings, seeing themselves more positively than the observers saw them. The depressive patients simply did not see themselves through the rose-colored glasses that the others used when evaluating themselves.

Most of the crime-ridden minority neighborhoods in New York City, especially areas like East New York, where many of the characters in Eric Garner’s story grew up, had been artificially created by a series of criminal real estate scams. One of the most infamous had involved a company called the Eastern Service Corporation, which in the sixties ran a huge predatory lending operation all over the city, but particularly in Brooklyn. Scam artists like ESC would first clear white residents out of certain neighborhoods with scare campaigns. They’d slip leaflets through mail slots warning of an incoming black plague, with messages like, “Don’t wait until it’s too late!” Investors would then come in and buy their houses at depressed rates. Once this “blockbusting” technique cleared the properties, a company like ESC would bring in a new set of homeowners, often minorities, and often with bad credit and shaky job profiles. They bribed officials in the FHA to approve mortgages for anyone and everyone. Appraisals would be inflated. Loans would be approved for repairs, but repairs would never be done. The typical target homeowner in the con was a black family moving to New York to escape racism in the South. The family would be shown a house in a place like East New York that in reality was only worth about $15,000. But the appraisal would be faked and a loan would be approved for $17,000. The family would move in and instantly find themselves in a house worth $2,000 less than its purchase price, and maybe with faulty toilets, lighting, heat, and (ironically) broken windows besides. Meanwhile, the government-backed loan created by a lender like Eastern Service by then had been sold off to some sucker on the secondary market: a savings bank, a pension fund, or perhaps to Fannie Mae, the government-sponsored mortgage corporation. Before long, the family would default and be foreclosed upon. Investors would swoop in and buy the property at a distressed price one more time. Next, the one-family home would be converted into a three- or four-family rental property, which would of course quickly fall into even greater disrepair. This process created ghettos almost instantly. Racial blockbusting is how East New York went from 90 percent white in 1960 to 80 percent black and Hispanic in 1966.

Five simple truths embody most of what we know about inflation: Inflation is a monetary phenomenon arising from a more rapid increase in the quantity of money than in output (though, of course, the reasons for the increase in money may be various). In today’s world government determines—or can determine—the quantity of money. There is only one cure for inflation: a slower rate of increase in the quantity of money. It takes time—measured in years, not months—for inflation to develop; it takes time for inflation to be cured. Unpleasant side effects of the cure are unavoidable.

It should be immediately clear that this could be brought about more directly and honestly by a reduction in unworkable wage rates. But the more sophisticated proponents of inflation believe that this is now politically impossible. Sometimes they go further, and charge that all proposals under any circumstances to reduce particular wage rates directly in order to reduce unemployment are “antilabor.” But what they are themselves proposing, stated in bald terms, is to deceive labor by reducing real wage rates (that is, wage rates in terms of purchasing power) through an increase in prices.

The answer, in short, is that the expectation that work will always be fulfilling can lead to suffering. Studies show that an “obsessive passion” for work leads to higher rates of burnout and work-related stress. Researchers have also found that lifestyles that revolve around work in countries like Japan are a key contributor to record-low fertility rates. And for young people in the United States, inflated expectations of professional success help explain record-high rates of depression and anxiety. Globally, more people die each year from symptoms related to overwork than from malaria.

A “beautiful deleveraging” happens when the four levers are moved in a balanced way so as to reduce intolerable shocks and produce positive growth with falling debt burdens and acceptable inflation. More specifically, deleveragings become beautiful when there is enough stimulation (i.e., through “printing of money”/debt monetization and currency devaluation) to offset the deflationary deleveraging forces (austerity/defaults) and bring the nominal growth rate above the nominal interest rate—but not so much stimulation that inflation is accelerated, the currency is devaluated, and a new debt bubble arises.

Who could I turn to? Around that time, a colleague in another office told me about some weird digital currency called Bitcoin, which Argentines were using to get around this problem. I decided to write about it. The people I talked with for my article had been living with some form of inflation and/or currency controls all their lives and so had their parents. They understood right away how significant it was to be able to buy a currency that’s not controlled by anyone and, therefore, can’t be stopped or seized. Its issuance rate was dictated by algorithms and computer code, not by the whims of politicians and central bankers.

In a similar study conducted at Yale University, undergraduate participants were offered the opportunity to use the same kind of casuistry to maintain the occupational status quo. The students evaluated one of two applicants (Michael or Michelle) for the position of police chief. One applicant was streetwise, a tough risk-taker, popular with other officers, but poorly educated. By contrast, the educated applicant was well schooled, media savvy, and family oriented, but lacked street experience and was less popular with the other officers. The undergraduate participants judged the job applicant on various streetwise and education criteria, and then rated the importance of each criterion for success as a police chief. Participants who rated Michael inflated the importance of being an educated, media-savvy family man when these were qualities Michael possessed, but devalued these qualities when he happened to lack them. No such helpful shifting of criteria took place for Michelle. As a consequence, regardless of whether he was streetwise or educated, the demands of the social world were shaped to ensure that Michael had more of what it took to be a successful police chief. As the authors put it, participants may have ‘felt that they had chosen the right man for the job, when in fact they had chosen the right job criteria for the man.’21 Ironically, the people who were most convinced of their own objectivity discriminated the most.

One can even imagine that inflation tends to improve the relative position of the wealthiest individuals compared to the least wealthy, in that it enhances the importance of financial managers and intermediaries. A person with 10 or 50 million euros cannot afford the money managers that Harvard has but can nevertheless pay financial advisors and stockbrokers to mitigate the effects of inflation. By contrast, a person with only 10 or 50 thousand euros to invest will not be offered the same choices by her broker (if she has one): contacts with financial advisors are briefer, and many people in this category keep most of their savings in checking accounts that pay little or nothing and/or savings accounts that pay little more than the rate of inflation.

Michael Ward knows. Ward loves railroads. His loves his own railroad company, CSX, which traces its origins to 1827 when the Baltimore & Ohio Railroad was formed as the nation’s first common carrier. He traces his own origins at CSX back thirty-seven years, when he took an analyst job as a newly minted Harvard Business School M.B.A., rising to become chairman, president, and CEO in 2003. And he loves the whole American freight rail industry. “Railroaders are like farmers,” Ward declares. “You heard about the farmer that won the lottery? They said to him, ‘Oh my gosh, you won the lottery; what are you going to do with all that money?’ He said, ‘I’m a farmer and I love farming, and I’m going to farm until every penny of it is gone.’ And I say railroaders are like that. When we make more money, we’re going to invest more back into the infrastructure, so we can strengthen the railroad and grow the business.” Ward may sound like a press release, but that’s exactly how he talks, and why he’s a major industry spokesman. He lavishes praise on industry performance: “While we’ve improved the profitability of the industry, we’ve also cut rates in half of what they were in 1980 for our customers, on an inflation-adjusted basis. We’re providing a more economical product to them, and it’s safer and more reliable. Over the years, as an industry, our train accident rate is down 80 percent; our personal injury rate is down 85 percent; and we’re doing this with about one-third of the workforce we had in 1980.” He calls the industry “the envy of the world.

found myself constantly drawn to the subject of narcissistic personality disorder (NPD), which I have concluded is inextricably linked to psychopathy, although this link is rarely mentioned in medical papers or among the psychiatric profession generally. As with psychopathy, people with NPD make up approximately 1 per cent of the population with rates greater in men. Another direct comparison between those suffering with NPD and psychopathy/sociopathy is that both types are characterised by exaggerated feelings of self-importance. In its moderate to extreme forms these people are excessively preoccupied with personal adequacy, power, prestige and vanity; mentally unable to see the destructive damage they are causing themselves and others. Symptoms of the NPD disorder include seeking constant approval from others who are successful in positions of power in whatever form it may be. Many are selfish, grandiose pathological liars; their egos and sense of self-esteem over-inflated, while at once they are torn between exaggerated self-appraisal and the reality that they might never amount to much.

So it needs saying from the outset that it’s always very easy to declare that other people are idiots, but only if you forget how idiotically difficult being human is. Especially if you have other people you’re trying to be a reasonably good human being for. Because there’s such an unbelievable amount that we’re all supposed to be able to cope with these days. You’re supposed to have a job, and somewhere to live, and a family, and you’re supposed to pay taxes and have clean underwear and remember the password to your damn Wi-Fi. Some of us never manage to get the chaos under control, so our lives simply carry on, the world spinning through space at two million miles an hour while we bounce about on its surface like so many lost socks. Our hearts are bars of soap that we keep losing hold of; the moment we relax, they drift off and fall in love and get broken, all in the wink of an eye. We’re not in control. So we learn to pretend, all the time, about our jobs and our marriages and our children and everything else. We pretend we’re normal, that we’re reasonably well educated, that we understand “amortization levels” and “inflation rates.” That we know how sex works. In truth, we know as much about sex as we do about USB leads, and it always takes us four tries to get those little buggers in. (Wrong way round, wrong way round, wrong way round, there! In!) We pretend to be good parents when all we really do is provide our kids with food and clothing and tell them off when they put chewing gum they find on the ground in their mouths. We tried keeping tropical fish once and they all died. And we really don’t know more about children than tropical fish, so the responsibility frightens the life out of us each morning. We don’t have a plan, we just do our best to get through the day, because there’ll be another one coming along tomorrow. Sometimes it hurts, it really hurts, for no other reason than the fact that our skin doesn’t feel like it’s ours. Sometimes we panic, because the bills need paying and we have to be grown-up and we don’t know how, because it’s so horribly, desperately easy to fail at being grown-up. Because everyone loves someone, and anyone who loves someone has had those desperate nights where we lie awake trying to figure out how we can afford to carry on being human beings. Sometimes that makes us do things that seem ridiculous in hindsight, but which felt like the only way out at the time.

Jacques Ellul has a word for this instrumentalizing attitude: technique. His analysis helps us to appreciate just how deep and wide the n-shaped dynamic runs in our society. He defines technique as “the totality of methods rationally arrived at and having absolute efficiency in every field of human activity.”14 It is “never anything but a collection of means and the search for the most efficient means” in any given situation,15 with its origin in Cain’s city-building and Lamech’s polygamy.16 Up until the eighteenth century, Ellul argues, technique was largely absent from all areas of society apart from the mechanical, but in the industrial revolution, technical progress suddenly exploded and began to reconfigure every area of life, from industrial production through politics to the family. The result is that today technique is not a thing out there in the world; it is how we do everything we do in the world: “The Third World, Europe, militarization, etc., are all political matters. Inflation, exchange rates, standards of living, and growth are all economic matters. Yet technique has a part in all of them. It is like a key, like a substance underlying all problems and situations. It is ultimately the decisive factor.

Here are the main facts:1 Between 1980 and 2016, average national income per adult, expressed in 2016 euros, rose from 25,000 euros to just over 33,000 euros, or a rise of approximately 30%. At the same time, the average wealth held derived from property per adult doubled, rising from 90,000 to 190,000 euros. Yet more striking: the wealth of the richest 1%, 70% of which is in financial assets, rose from 1.4 to 4.5 million euros, or increased more than threefold. As to the 0.1% of the wealthiest, 90% of whose wealth is held in financial assets, and who will be the main beneficiaries of the abolition of the wealth tax, their fortunes rose from 4 to 20 million euros, that is, they increased fivefold. In other words, the biggest fortunes in financial assets rose even more rapidly than property assets, whereas the opposite should have been the case if the hypothesis of a fiscal flight were true. Moreover, this type of finding is a characteristic in the ranking of fortunes, in France as in all countries. According to Forbes, the top world fortunes, which are almost exclusively held in financial assets—have risen at a rate of 6% to 7% per year (on top of inflation) since the 1980s, or 3–4 times more rapidly than growth in GDP and of world per capita wealth.

A few years ago my friend Jon Brooks supplied this great illustration of skewed interpretation at work. Here’s how investors react to events when they’re feeling good about life (which usually means the market has been rising): Strong data: economy strengthening—stocks rally Weak data: Fed likely to ease—stocks rally Data as expected: low volatility—stocks rally Banks make $4 billion: business conditions favorable—stocks rally Banks lose $4 billion: bad news out of the way—stocks rally Oil spikes: growing global economy contributing to demand—stocks rally Oil drops: more purchasing power for the consumer—stocks rally Dollar plunges: great for exporters—stocks rally Dollar strengthens: great for companies that buy from abroad—stocks rally Inflation spikes: will cause assets to appreciate—stocks rally Inflation drops: improves quality of earnings—stocks rally Of course, the same behavior also applies in the opposite direction. When psychology is negative and markets have been falling for a while, everything is capable of being interpreted negatively. Strong economic data is seen as likely to make the Fed withdraw stimulus by raising interest rates, and weak data is taken to mean companies will have trouble meeting earnings forecasts. In other words, it’s not the data or events; it’s the interpretation. And that fluctuates with swings in psychology.

A confidential report delivered in June 1965 by Abel Aganbegyan, director of the Novobirsk Institute of Economics, highlighted the difficulties. Aganbegyan noted that the growth rate of the Soviet economy was beginning to decline, just as the rival US economy seemed particularly buoyant; at the same time, some sectors of the Soviet economy - housing, agriculture, services, retail trade - remained very backward, and were failing to develop at an adequate rate. The root causes of this poor performance he saw in the enormous commitment of resources to defense (in human terms, 30-40 million people out of a working population of 100 million, he reckoned), and the 'extreme centralism and lack of democracy in economic matters' which had survived from the past. In a complex modern society, he argued, not everything could be planned, since it was impossible to foresee all possible contingencies and their potential effects. So the plan amounted to central command, and even that could not be properly implemented for lack of information and of modern data-processing equipment. 'The Central Statistical Administration ... does not have a single computer, and is not planning to acquire any,' he commented acidly. Economic administration was also impeded by excessive secrecy: 'We obtain many figures... from American journals sooner than they are released by the Central Statistical Administration.' Hence the economy suffered from inbuilt distortions: the hoarding of goods and labour to provide for unforeseen contingencies, the production of shoddy goods to fulfill planning targets expressed in crude quantitative terms, the accumulation of unused money by a public reluctant to buy substandard products, with resultant inflation and a flourishing black market.

In both oral and typographic cultures, information derives its importance from the possibilities of action. Of course, in any communication environment, input (what one is informed about) always exceeds output (the possibilities of action based on information. But the situation created by telegraphy, and then exacerbated by later technologies, made the relationship between information and action both abstract and remote. For the first time in human history, people were faced with the problem of information glut, which means that simultaneously they were faced with the problem of a diminished social and political potency. You may get a sense of what this means by asking yourself another series of questions: What steps do you plan to take to reduce the conflict in the Middle East? Or the rates of inflation, crime and unemployment? What are your plans for preserving the environment or reducing the risk of nuclear war? What do you plan to do about NATO, OPEC, the CIA, affirmative action, and the monstrous treatment of the Baha'is in Iran? I shall take the liberty of answering for you: You plan to do nothing about them. You may, of course, cast a ballot for someone who claims to have some plans, as well as the power to act. But this you can do only once every two or four years by giving one hour of your time, hardly a satisfying means of expressing the broad range of opinions you hold. Voting, we might even say, is the next to last refuge of the politically impotent. The last refuge is, of course, giving your opinion to a pollster, who will get a version of it through a desiccated question, and then will submerge it in a Niagara of similar opinions, and convert them into--what else?--another piece of news. Thus, we have here a great loop of impotence: The news elicits from you a variety of opinions about which you can do nothing except to offer them as more news, about which you can do nothing.

As I saw it, there was a 75 percent chance the Fed’s efforts would fall short and the economy would move into failure; a 20 percent chance it would initially succeed at stimulating the economy but still ultimately fail; and a 5 percent chance it would provide enough stimulus to save the economy but trigger hyperinflation. To hedge against the worst possibilities, I bought gold and T-bill futures as a spread against eurodollars, which was a limited-risk way of betting on credit problems increasing. I was dead wrong. After a delay, the economy responded to the Fed’s efforts, rebounding in a noninflationary way. In other words, inflation fell while growth accelerated. The stock market began a big bull run, and over the next eighteen years the U.S. economy enjoyed the greatest noninflationary growth period in its history. How was that possible? Eventually, I figured it out. As money poured out of these borrower countries and into the U.S., it changed everything. It drove the dollar up, which produced deflationary pressures in the U.S., which allowed the Fed to ease interest rates without raising inflation. This fueled a boom. The banks were protected both because the Federal Reserve loaned them cash and the creditors’ committees and international financial restructuring organizations such as the International Monetary Fund (IMF) and the Bank for International Settlements arranged things so that the debtor nations could pay their debt service from new loans. That way everyone could pretend everything was fine and write down those loans over many years. My experience over this period was like a series of blows to the head with a baseball bat. Being so wrong—and especially so publicly wrong—was incredibly humbling and cost me just about everything I had built at Bridgewater. I saw that I had been an arrogant jerk who was totally confident in a totally incorrect view. So there I was after eight years in business, with nothing to show for it. Though I’d been right much more than I’d been wrong, I was all the way back to square one.

KEYNESIAN ECONOMICS AND STIMULUS Keynesian economics is based on the notion that unemployment arises when total or aggregate demand in an economy falls short of the economy’s ability to supply goods and services. When products go unsold, jobs are lost. Aggregate demand, in turn, comes from two sources: the private sector (which is the majority) and the government. At times, aggregate demand is too buoyant—goods fly off the shelves and labor is in great demand—and we get rising inflation. At other times, aggregate demand is inadequate—goods are hard to sell and jobs are hard to find. In those cases, Keynes argued in the 1930s, governments can boost employment by cutting interest rates (what we now call looser monetary policy), raising their own spending, or cutting people’s taxes (what we now call looser fiscal policy). By the same logic, when there is too much demand, governments can fight actual or incipient inflation by raising interest rates (tightening monetary policy), increasing taxes, or reducing its own spending (thus tightening fiscal policy). That’s part of standard Keynesian economics, too, although Keynes, writing during the Great Depression, did not emphasize it. Setting aside the underlying theory, the central Keynesian policy idea is that the government can—and, Keynes argued, should—act as a kind of balance wheel, stimulating aggregate demand when it’s too weak and restraining aggregate demand when it’s too strong. For decades, American economists took for granted that most of that job should and would be done by monetary policy. Fiscal policy, they thought, was too slow, too cumbersome, and too political. And in the months after the Lehman Brothers failure, the Federal Reserve did, indeed, pull out all the stops—while fiscal policy did nothing. But what happens when, as was more or less the case by December 2008, the central bank has done almost everything it can, and yet the economy is still sinking? That’s why eyes started turning toward Congress and the president—that is, toward fiscal stimulus—after the 2008 election.

Between 2003 and 2008, Iceland’s three main banks, Glitnir, Kaupthing and Landsbanki, borrowed over $140 billion, a figure equal to ten times the country’s GDP, dwarfing its central bank’s $2.5 billion reserves. A handful of entrepreneurs, egged on by their then government, embarked on an unprecedented international spending binge, buying everything from Danish department stores to West Ham Football Club, while a sizeable proportion of the rest of the adult population enthusiastically embraced the kind of cockamamie financial strategies usually only mooted in Nigerian spam emails – taking out loans in Japanese Yen, for example, or mortgaging their houses in Swiss francs. One minute the Icelanders were up to their waists in fish guts, the next they they were weighing up the options lists on their new Porsche Cayennes. The tales of un-Nordic excess are legion: Elton John was flown in to sing one song at a birthday party; private jets were booked like they were taxis; people thought nothing of spending £5,000 on bottles of single malt whisky, or £100,000 on hunting weekends in the English countryside. The chief executive of the London arm of Kaupthing hired the Natural History Museum for a party, with Tom Jones providing the entertainment, and, by all accounts, Reykjavik’s actual snow was augmented by a blizzard of the Colombian variety. The collapse of Lehman Brothers in late 2008 exposed Iceland’s debts which, at one point, were said to be around 850 per cent of GDP (compared with the US’s 350 per cent), and set off a chain reaction which resulted in the krona plummeting to almost half its value. By this stage Iceland’s banks were lending money to their own shareholders so that they could buy shares in . . . those very same Icelandic banks. I am no Paul Krugman, but even I can see that this was hardly a sustainable business model. The government didn’t have the money to cover its banks’ debts. It was forced to withdraw the krona from currency markets and accept loans totalling £4 billion from the IMF, and from other countries. Even the little Faroe Islands forked out £33 million, which must have been especially humiliating for the Icelanders. Interest rates peaked at 18 per cent. The stock market dropped 77 per cent; inflation hit 20 per cent; and the krona dropped 80 per cent. Depending who you listen to, the country’s total debt ended up somewhere between £13 billion and £63 billion, or, to put it another way, anything from £38,000 to £210,000 for each and every Icelander.

After months of calling for inflation of housing prices, Krugman in 2002 came right out and said the Fed needed to create a housing bubble. Since 2007, Krugman has repeatedly and angrily denied that was what he was saying, so let me run his comments in their full context: A few months ago the vast majority of business economists mocked concerns about a “double dip,” a second leg to the downturn. But there were a few dogged iconoclasts out there, most notably Stephen Roach at Morgan Stanley. As I’ve repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever. The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.6 Well, Krugman got exactly what he wanted.

In January 1971 he startled the newsman Howard K. Smith by telling him, "I am now a Keynesian in economics," and in August he jolted the nation by announcing a New Economic Policy. This entailed fighting inflation by imposing a ninety-day freeze on wages and prices. Nixon also sought to lower the cost of American exports by ending the convertibility of dollars into gold, thereby allowing the dollar to float in world markets. This action transformed with dramatic suddenness an international monetary system of fixed exchange rates that had been established, with the dollar as the reserve currency, in 1946.

The Fed forecasts core inflation of 1.5 per cent this year, 1.85 per cent in 2015 and 1.9 per cent in 2016, as it thinks unemployment will keep downward pressure on wages. The behaviour of inflation is crucial: if wages and price rises start to accelerate, it will be evidence of lower spare capacity than the Fed thought, forcing it to consider earlier and faster rate rises.

If we understand how a person’s body influences risk taking, we can learn how to better manage risk takers. We can also recognize that mistakes governments have made have contributed to excessive risk taking. Consider the most important risk manager of them all — the Federal Reserve. Over the past 20 years, the Fed has pioneered a new technique of influencing Wall Street. Where before the Fed shrouded its activities in secrecy, it now informs the street in as clear terms as possible of what it intends to do with short-term interest rates, and when. Janet L. Yellen, the chairwoman of the Fed, declared this new transparency, called forward guidance, a revolution; Ben S. Bernanke, her predecessor, claimed it reduced uncertainty and calmed the markets. But does it really calm the markets? Or has eliminating uncertainty in policy spread complacency among the financial community and actually helped inflate market bubbles?

Labor is sacrificed on the inflation rates altar of oblation.

The ECB in June became the first of the world’s main central banks to push a key policy rate below zero. But after Thursday’s cuts Mr Draghi said he saw no scope for further reductions. While yields on shorter-dated bond yields typically held by banks have fallen, the impact of the ECB’s latest measures on longer-term debt is less certain. Yields on benchmark 10-year bonds should rise if the ECB succeeds in raising expectations about future growth and inflation rates. However, speculation that the ECB could still launch a full-blown “quantitative easing” programme and buy government bonds would have the opposite effect. Analysts said even the asset purchase programme announced on Thursday could have QE-type effects.

The Fed is still on the same track.” Whatever you call it, the benign economic environment has supported a bull market since 2009, and though there were a few rocky days last week, the main market ingredients seemed to remain in place. For example, on Wednesday a government report on gross domestic product in the second quarter showed that the economy was growing smartly, even rapidly, at a 4 percent annualized rate; yet the Federal Reserve declared that inflation was low enough to allow the slowly moderating pace of its expansive monetary policy to remain on track. In a statement on Wednesday, the Federal Open Market Committee said the central bank would continue to ratchet down its bond purchases as planned, yet it also said its policies would “maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.” The Fed already holds more than $4 trillion in bonds, up from less than $1 billion when the financial crisis started, and it’s still buying more.

For those still looking for a real-world example of how a minimum wage destroys jobs, there is no better example than American Samoa. In 2007 the U.S. Congress applied the federal minimum wage to Samoa, a U.S. territory. The increases walloped the Samoan economy, with the unemployed rate soaring to 30 percent and inflation hitting double digits. Its largest employer, Chicken of the Sea, shut down its Samoan canning operation completely in 2009, laying off 2,041 employees. The island’s second largest employer, StarKist, laid off 400 workers the following year with plans to lay off 400 more.

The gold standard had its advantages, no doubt. Exchange rate stability made for predictable pricing in trade and reduced transaction costs, while the long-run stability of prices acted as an anchor for inflation expectations. Being on gold may also have reduced the costs of borrowing by committing governments to pursue prudent fiscal and monetary policies.

Why should bricks and mortar, wood and paint, increase in price even faster than inflation? It is because not only is the currency diminishing in its worth relative to fixed objects, but belief in the currency is diminishing even faster, at a geometric rate. Thus the conventional wisdom, that what goes up must come down, may be false physics

The S&Ls were simultaneously losing money on long-term fixed-rate mortgages, because of inflation, and haemorrhaging deposits to higher-interest money market funds.

Meanwhile, property prices roughly trebled between 1963 and 1979, while consumer prices rose by a factor of just 2.5. But there was a sting in the tail. The same governments that avowed their faith in the ‘property-owning democracy’ also turned out to believe in price stability, or at least lower inflation. Achieving that meant higher interest rates.

Moreover, these changes occurred when most American households actually found their real incomes stagnant or declining. Median household income for the last four decades is shown in the chart above. But this graph, disturbing as it is, conceals a far worse reality. The top 10 percent did much better than everyone else; if you remove them, the numbers change dramatically. Economic analysis has found that “only the top 10 percent of the income distribution had real compensation growth equal to or above . . . productivity growth.”14 In fact, most gains went to the top 1 percent, while people in the bottom 90 percent either had declining household incomes or were able to increase their family incomes only by working longer hours. The productivity of workers continued to grow, particularly with the Internet revolution that began in the mid-1990s. But the benefits of productivity growth went almost entirely into the incomes of the top 1 percent and into corporate profits, both of which have grown to record highs as a fraction of GNP. In 2010 and 2011 corporate profits accounted for over 14 percent of total GNP, a historical record. In contrast, the share of US GNP paid as wages and salaries is at a historical low and has not kept pace with inflation since 2006.15 As I was working on this manuscript in late 2011, the US Census Bureau published the income statistics for 2010, when the US recovery officially began. The national poverty rate rose to 15.1 percent, its highest level in nearly twenty years; median household income declined by 2.3 percent. This decline, however, was very unequally distributed. The top tenth experienced a 1 percent decline; the bottom tenth, already desperately poor, saw its income decline 12 percent. America’s median household income peaked in 1999; by 2010 it had declined 7 percent. Average hourly income, which corrects for the number of hours worked, has barely changed in the last thirty years. Ranked by income equality, the US is now ninety-fifth in the world, just behind Nigeria, Iran, Cameroon, and the Ivory Coast. The UK has mimicked the US; even countries with low levels of inequality—including Denmark and Sweden—have seen an increasing gap since the crisis. This is not a distinguished record. And it’s not a statistical fluke. There is now a true, increasingly permanent underclass living in near-subsistence conditions in many wealthy states. There are now tens of millions of people in the US alone whose condition is little better than many people in much poorer nations. If you add up lifetime urban ghetto residents, illegal immigrants, migrant farm-workers, those whose criminal convictions sharply limit their ability to find work, those actually in prison, those with chronic drug-abuse problems, crippled veterans of America’s recently botched wars, children in foster care, the homeless, the long-term unemployed, and other severely disadvantaged groups, you get to tens of millions of people trapped in very harsh, very unfair conditions, in what is supposedly the wealthiest, fairest society on earth. At any given time, there are over two million people in US prisons; over ten million Americans have felony records and have served prison time for non-traffic offences. Many millions more now must work very long hours, and very hard, at minimum-wage jobs in agriculture, retailing, cleaning, and other low-wage service industries. Several million have been unemployed for years, exhausting their savings and morale. Twenty or thirty years ago, many of these people would have had—and some did have—high-wage jobs in manufacturing or construction. No more. But in addition to growing inequalities in income and wealth, America exhibits

Our economy is still reeling from the worst financial crisis in generations. Our jobless rate is too high and income growth is too low. But the U.S. recovery has outperformed expectations, history, and most of the developed world. So far, the prophets of doom who have predicted runaway inflation, runaway interest rates, a double-dip recession, a collapse in demand for U.S. government securities, and other horrors for America have been false prophets. I remember half-joking to the President that we had two types of critics attacking us for failing to produce a stronger recovery—people who were blocking our proposals to produce a stronger recovery, and people who believed in unicorns.

If the interest rate the country pays on its debt is higher than the growth of nominal GDP (that’s real GDP plus inflation) that debt ratio automatically goes up—unless the government runs a surplus in the budget excluding interest. Conversely, when the interest rate a country pays on its debt is below its growth rate, the ratio automatically drops, unless there’s a deficit in the budget, excluding interest. The latter scenario—having interest rates below the growth rate—is like having the wind at your back. And that’s the situation Spain, Ireland and Portugal should all be in this year. Italy is close.

The halving of crude prices since the summer has brought US and eurozone inflation below zero. Prices in Britain are rising at the slowest rate in decades. Even in Japan, where a programme of quantitative easing had succeeded in pushing up inflation, price pressures have come down sharply compared with last spring. But despite pessimists’ predictions, there is little evidence of a negative spiral of falling prices and weak demand tainting the world economy. Indeed, in January, annual retail sales in the world’s most advanced economies rose at their most rapid pace since 2006 according to Capital Economics, a consultancy. Sliding oil prices have put $250bn in the pockets of consumers in the world’s four largest economies and shoppers seem determined to spend it.

China: feeding the animals China bears are getting fat dining on headlines; but details feed the bulls. Yesterday China announced weak trade data. March exports fell a jarring 15 per cent year on year, when a solid increase was expected; imports dropped 12 per cent, a shade worse than hoped. Sceptics could only shake their heads as mainland China “A” and Hong Kong “H” share indices shrugged and continued their ascent. The explanation is familiar. China has made clear its intention to keep its economy growing, so weak data and low inflation signal more rate cuts ahead.

For Fed officials, it poses a policy conundrum. The higher dollar will have an impact on US growth and inflation just as the Fed contemplates revising its signals on the interest rate outlook, intensifying the debate among rate-setters as to whether June is the right time to push the button on the first rate rise in nearly a decade.

currency, interest rates, already 20%, will rise further. That will make it more difficult to repay loans. Added to all that is government austerity, on which the IMF is insisting. By 2017 domestic gas prices will have increased to five times the level of 2013. The government is freezing pensions. With such high inflation, that amounts to a substantial cut. Even if the war stopped tomorrow, there would be a lot more pain to come.

There is also a clear, demonstrated relationship between the cost of alcohol and the number of drunk-driving deaths. Research has shown that raising social awareness around drunk driving—as groups like Mothers Against Drunk Driving have done—is not enough. In most Western European countries, the sales tax on alcohol ranges between sixteen and twenty-five per cent. In the United States, it is somewhere between one-half and a third of the European rate—and because the federal excise is a flat amount (not a percentage of the sales price) it falls every year with inflation.

Suppose that we believe that in 200 years, people would be prepared to pay a million dollars (that's in today's dollars, not inflated ones) to be able to have an unspoilt valley. Now imagine that today we can profit by cutting down the forest in the valley, which will never regrow. If we apply an annual discount rate of 5 percent, compounded exponentially, how big would that profit have to be to justify the loss of a million dollars in 2210? The answer, surprisingly, is just sixty dollars! That's all that a million dollars in 200 years is worth, at that rate of discount. Obviously, then, if we use a 5 percent discount rate, values gained one thousand years in the future scarcely count at all. This is not because of any uncertainty about whether there will be human beings or other sentient creatures inhabiting this planet at that time, but merely because of the compounding effect of the rate of return on money invested now.

Credit expansion results in the recurrence of economic crisis and periods of depression. Inflation makes the prices of all commodities and services soar. The attempts to enforce wage rates higher than those the unhampered market would have determined produce mass unemployment prolonged year after year. Price ceilings result in a drop in the supply of commodities affected. The economists have proved these theorems in an irrefutable way. No

Probably the most daunting challenge in delivering growth is that if you fail once to deliver it, the odds that you ever will be able to deliver in the future are very low. This is the conclusion of a remarkable study, Stall Points, that the Corporate Strategy Board published in 1998.8 It examined the 172 companies that had spent time on Fortune’s list of the 50 largest companies between 1955 and 1995. Only 5 percent of these companies were able to sustain a real, inflation-adjusted growth rate of more than 6 percent across their entire tenure in this group. The other 95 percent reached a point at which their growth simply stalled, to rates at or below the rate of growth of the gross national product (GNP). Stalling is understandable, given our expectations that all growth markets become saturated and mature. What is scary is that of all these companies whose growth had stalled, only 4 percent were able to successfully reignite their growth even to a rate of 1 percent above GNP growth. Once growth had stalled, in other words, it proved nearly impossible to restart it.

Inflation differential: Higher inflation in one county results in discount of that country’s currency in future. If the rate of inflation in India and USA are 8% and 4%, respectively, INR would depreciate and USD would appreciate by 4% per year. For

To achieve typical longer-term financial goals, such as retiring, the money that you save and invest generally needs to grow at a rate much faster than the rate of inflation.

One of the benefits of the national police force was the inception of national crime statistics. Although these represent only crimes recorded by the police, they offer real figures to work with, if only to map trends. Despite all the usual caveats about their unreliability, most historians have endorsed the official picture. The homicide rate for England and Wales was as high as 2 per 100,000 only once during the century, in 1865; otherwise it was about 1.5 per 100,000 and occasionally as low as i per 100,000, a record low.81 Between 1857 and 189o there were rarely more than 400 homicides reported each year, and in the 189os the average was below 350.82 In 1835-1837 9 percent of all English crimes were violent crimes, and from 1837 through 1845 the share declined to 8 percent.83 Even that 8 percent is inflated by the fact that of the crimes against the person some 25-33 percent were cases of infanticide, which would not have involved firearms. Crimes committed with guns were rare. Between 1878 and 1886 the average number of burglaries in London in which firearms were used was two per year; from 1887 to 18g1 this rose to 3.6 cases a year.84 "It was a rough society," David Philips concluded after examining Victorian crime, "but it was not a notably homicidal society. The manslaughter cases do not show a free use of lethal weapons."85 On the other hand, ordinary citizens were free to use lethal weapons to defend themselves. And as the difficulties of imposing restrictions on private firearms indicate, members of Parliament and their constituents were vigorously opposed to such attempts.

As a general rule, then, while evaluating our investments we must remind ourselves to adjust them for inflation, because that gives us what is called ‘the real rate of return’. Even if your investments have grown at 20 per cent per annum last year, if the inflation rate for that year was 25 per cent, it means you’ve lost money. Too

It is impossible indeed not to look with considerable uneasiness at the type of the "modern economist" as he developed after Keynes' revolutionary book, whom Keynes himself regarded with alarm at the end of his days. It is the type of man who is obsessed by one thing, i.e. "effective demand," which he thinks must be kept up at whatever cost, while he forgets the working of the mechanism of prices, wages, interest and exchange rates.

Not surprisingly, nearly all Greeks think poorly of their public administration. In a 2012 EU survey, 96 percent of polled Greeks characterized it as “bad”—the worst result in the EU. The sentiment is so pervasive that one can assume most of the public administrators share it. The poll result was similar in the years preceding the financial crisis, and therefore cannot be attributed to subsequent cuts in services. Despite Greeks’ dissatisfaction with the way their government works, public employees in the decade leading up to the crisis received very large pay raises. During that time, public sector wages per employee grew by over 100 percent, near the highest increase in the eurozone, according to a report published by the European Central Bank. By contrast, in Germany, where people were satisfied with the way the state bureaucracy functioned, public wages grew around 13 percent. (That low rate, when one factors in inflation, essentially meant a pay cut.) Greek civil servants also received an array of benefits that sweetened their jobs. Until 2013, when the Greek government put an end to it, those working in front of computers—a condition considered a hardship—received an extra six days off a year in order to provide them some relief.

for most political leaders the warnings of the experts counted for little when compared with the immediate advantages of monetary union. As soon as a country adopted the euro, its public debt received the highest rating by the international agencies, and consequently its government could borrow at about the same interest rate as the most virtuous members of the bloc. This meant that countries like Greece, Portugal, Spain, or Italy could borrow at rates well below the double-digit rates they had to pay before adopting the euro. In particular, the possibility of borrowing at low cost in the international financial markets is what made possible the Spanish real-estate boom. As a result of the euro-induced boom, wages and inflation grew much faster in Spain than in Germany or France. At the same time, the ECB, being mainly concerned with the level of inflation in the largest economies of the euro zone – Germany, France, and Italy – allowed the interest rate to remain low – too low for the conditions prevailing in Spain.

The unprecedented bull market in Treasury bonds, supported by the belief that Treasury bonds are “insurance policies” in the case of financial collapse, could end as badly as the bull market in technology stocks did at the turn of the century. When economic growth increases, Treasury bondholders will receive the double blow of rising interest rates and loss of safe-haven status. One of the prime lessons learned from long-term analysis is that no asset class can stay permanently detached from fundamentals. Stocks had their comeuppance when the technology bubble burst and the financial system crashed. It is quite likely that bondholders will suffer a similar fate as the liquidity created by the world’s central banks turns into stronger economic growth and higher inflation.

And all you have to do is stay alive and those Social Security payments will keep coming each and every month—payments guaranteed by the United States government and protected against inflation. That’s because every January, you get, by law, annual benefit raises that equal the prior year’s rate of inflation.1

The prize itself—an elite college admission—comes at a steep price. The cost of a four-year college degree from any of the top-twenty private colleges in the United States now exceeds a quarter of a million dollars, including room, board, books, and fees. The top-twenty public universities cost less, but even they average between $100,000 and $200,000 for a four-year degree, including room, board, books, and fees, depending on one’s state resident status. Society’s desire for early-blooming validation has led to—let’s be honest—price gouging by those official scorekeepers of early achievement, colleges and universities. The rest of us are stuck with big bills and massive debt. Since 1970, college tuition costs have risen three times faster than the rate of inflation. College debt in the United States is now $1.3 trillion, with an 11.5 percent default rate. By all measures, the rush to bloom early has helped create a potential bust bigger than the 2008 housing bubble.

However, when we step back and take a longer-term perspective, bitcoin’s supply trajectory looks anything but linear (see Figure 4.2). In fact, by the end of the 2020s it will approach a horizontal asymptote, with annual supply inflation less than 0.5 percent. In other words, Satoshi rewarded early adopters with the most new bitcoin to get sufficient support, and in so doing created a big enough base of monetary liquidity for the network to use. He understood that if bitcoin was a success over time its dollar value would increase, and therefore he could decrease the rate of issuance while still rewarding its supporters.

High inflation rates may come along and diminish purchasing power.

Did you know that even if you have been saving 1 Naira daily since 1st of January, you won't still have 1 Dollar by 31st of December? That is how bad the Naira had feared against other currencies of the world. The union called Nigeria doesn't seems to be working, but the government aren't happy to hear that.

To grow the value of our Naira, the government needs to stop borrowing and start looking inward for value propositions within the country itself. We have alternatives to oil and gas, but it is not going to be the fastest way to raise funds that will be siphoned by the government officials. That is why borrowing from China, Brazil and others is seemingly becoming the norm. That works faster and it is the easiest means of raising money than investing in agriculture and others alternatives we have.

Bitcoin provides for a maximum of 21 million units by 2140, and it gets there by cutting the rate of supply inflation every four years.

In Riyadh, King Saud’s brothers became convinced that his foreign policy bungling, combined with his economic mismanagement, was putting their family at risk. The elder brothers agreed that Saud should keep his throne but relinquish all executive authority to Faisal. King Saud accepted this arrangement in March 1958. Crown Prince Faisal became prime minister, appointed himself finance minister, and began to balance the kingdom’s budget. He cut spending across the board, suspended development projects, canceled agriculture subsidies, delayed payments to contractors and tribal sheikhs, imposed import controls on luxury goods, and devalued the riyal. He reduced stipends for royal family members and obtained new loans from Aramco as well as leading merchants, including Osama bin Laden’s father Mohammed.24 At the same time, oil production increased by more than 50 percent from 1 million barrels a day in 1957 to 1.6 million barrels a day in 1962.25 The kingdom’s budget was balanced and its currency stabilized. The inflation rate fell sharply. By 1960, Faisal’s austerity had reduced not only the national debt, but also his own popularity with the tribes, merchants, and princes.

Ethereum initially planned to issue 18 million ether each year in perpetuity. The thinking was that as the underlying base of ether grew, these 18 million units would become an increasingly small percentage of the monetary base. As a result, the rate of supply inflation would ultimately converge on 0 percent. The Ethereum team is currently rethinking that issuance strategy due to an intended change in its consensus mechanism. Choosing to change the issuance schedule of a cryptoasset from the plan at time of launch is more the exception than the norm, though since the asset class is still young we are not surprised by such experimentation.

Buffett says it’s a political phenomena, not an economic one. As long as politicians lack self-restraint, they will print a lot of money at some point. Though it is probably two years or more down the road, Buffett sees “substantial inflation” and “rates we’ve never seen before.

As I travel around the financial services industry today, the most interesting trend I see is the one toward relationship consolidation. Now that Glass-Steagall has been repealed, and all financial services providers can provide just about all financial services, there's a tendency - particularly as people get older - to want to tie everything up... to develop a plan, which implies having a planner. A planner, not a whole bunch of 'em... You've got basically two options. One is that you can sit here and wait for a major investment firm, which handles your client's investment portfolio while you handle the insurance, to bring their developing financial and estate planning capabilities to your client's door. And to take over the whole relationship. In this case, you have chosen to be the Consolidatee. A better option is for you to be the Consolidator. That is, you go out and consolidate the clients' financial lives pursuant to a really great plan - the kind you pride yourselves on. And of course that would involve your taking over management of the investment portfolio. Let's start with the classic Ibbotson data [Stocks, Bonds, Bills and Inflation Yearbook, Ibbotson Associates]. In the only terms that matter to the long-term investor - the real rate of return - he [the stockholder] got paid more like three times what the bondholder did. Why would an efficient market, over more than three quarters of a centry, pay the holders of one asset class anything like three times what it paid the holders of the other major asset class? Most people would say: risk. Is it really risk that's driving the premium returns, or is it volatility? It's volatility.... I invite you to look carefully at these dirty dozen disasters: the twelve bear markets of roughly 20% or more in the S&P 500 since the end of WWII. For the record, the average decline took about thirteen months from peak to trough, and carried the index down just about 30%. And since there've been twelve of these "disasters" in the roughly sixty years since war's end, we can fairly say that, on average, the stock market in this country has gone down about 30% about one year in five.... So while the market was going up nearly forty times - not counting dividends, remember - what do we feel was the major risk to the long-term investor? Panic. 'The secret to making money in stocks is not getting scared out of them' Peter Lynch.

Since inflation results from economic strength, the efforts of central bankers to control it amount to trying to take some of the steam out of the economy. They can include reducing the money supply, raising interest rates and selling securities. When the private sector purchases securities from the central bank, money is taken out of circulation; this tends to reduce the demand for goods and thus discourages inflation. Central bankers who are strongly dedicated to keeping inflation under control are called “hawks.” They tend to do the things listed above sooner and to a greater extent. The problem, of course, is that actions of this kind are anti-stimulative. They can accomplish the goal of keeping inflation under control, but they also restrain the growth of the economy, with effects that can be less than beneficial. The issue is complicated by the fact that in the last few decades, many central banks have been given a second responsibility. In addition to controlling inflation, they are expected to support employment, and, of course, employment does better when the economy is stronger. So central banks encourage this through stimulative actions such as increasing the money supply, decreasing interest rates, and injecting liquidity into the economy by buying securities—as in the recent program of “quantitative easing.” Central bankers who focus strongly on encouraging employment and lean toward these actions are called “doves.

The effects of slavery and the lack of generational wealth are still felt in every black community today. Gentrification, lack of black-owned businesses in our own neighborhoods, disparity in higher-education rates, the unraveling of the black family, and much more can all be traced back to slavery. Entire civilizations were destroyed to build this country on our backs. Black people never received the forty acres and a mule we were promised in the Emancipation Proclamation. If we did today, that would change the entire American landscape. It would be $6.4 trillion with inflation today.

The burden of countering weak demand has thus been placed on the U.S. Federal Reserve, whose mandate is to maintain low inflation, high growth, and full employment. The Fed does this by lowering interest rates and providing money to banks, which, in normal times, lend it to households and firms. The greater availability of credit at lower interest rates often spurs investment. But things can go wrong. Rather than spurring real investments that lead to higher long-term growth, the greater availability of credit can lead to bubbles.

A Good Start in Financial History You really can’t learn enough financial history. The following, listed in descending order of importance, are landmarks in the field. Edward Chancellor. Devil Take the Hindmost. New York: Farrar, Straus, and Giroux, 1999. What manias look like; how to recognize—and hopefully avoid—irrational exuberance. Benjamin Roth. The Great Depression: A Diary. New York: PublicAffairs, 2009. What the bottoms look like; how to keep your courage and your cash up. Roger G. Ibbotson and Gary P. Brinson. Global Investing. New York: McGraw-Hill, 1993. Five hundred years of hard and fiat money, inflation, and security returns in a small, easy-to-read package. Adam Fergusson. When Money Dies. New York: PublicAffairs, 2010; Frederick Taylor. The Downfall of Money. New York: Bloomsbury Press, 2013. What real inflation looks like. Be afraid, very afraid. Benjamin Graham. Security Analysis. New York: McGraw-Hill, 1996. You’re not a pro until you’ve read Graham “in the original”—the first edition, published in 1934. An authentic copy in decent condition will run you at least a grand. Fortunately, McGraw-Hill brought out a facsimile reprint in 1996. Charles Mackay. Extraordinary Popular Delusions and the Madness of Crowds. Petersfield, U.K.: Harriman House Ltd., 2003. If you were smitten with Devil Take the Hindmost, you’ll love this nineteenth-century look at earlier manias. Sydney Homer and Richard Sylla. A History of Interest Rates, 4th ed. Hoboken, NJ: John Wiley & Sons, 2005. Loan markets from 35th-century B.C. Sumer to the present.

By then the conglomerate boom had just about peaked. The problems with merger accounting were obvious, and many investors had realized that conglomerate profits were inflated. The end came in 1969, when the market plunged, making it hard for conglomerates to issue the debt or stocks they needed for new acquisitions. A conglomerateur who runs out of acquisitions is a very unhappy conglomerateur. He’s stuck managing the companies he has already bought, which are all too often third-rate companies in slow-growth industries. Winners buy; losers manage. Worse, the skills that make a successful conglomerateur—salesmanship, impatience with details, and a huge ego—are more or less the opposite of the skills needed to successfully manage a company.

Sticking with the $2 trillion infrastructure proposal, MMT would have us begin by asking if it would be safe for Congress to authorize $2 trillion in new spending without offsets. A careful analysis of the economy’s existing (and anticipated) slack would guide lawmakers in making that determination. If the CBO and other independent analysts concluded it would risk pushing inflation above some desired inflation rate, then lawmakers could begin to assemble a menu of options to identify the most effective ways to mitigate that risk. Perhaps one-third, one-half, or three-fourths of the spending would need to be offset. It’s also possible that none would require offsets. Or perhaps the economy is so close to its full employment potential that PAYGO is the right policy. The point is, Congress should work backward to arrive at the answer rather than beginning with the presumption that every new dollar of spending needs to be fully offset. That helps to protect us from unwarranted tax increases and undesired inflation. It also ensures that there is always a check on any new spending. The best way to fight inflation is before it happens. In one sense, we have gotten lucky. Congress routinely makes large fiscal commitments without pausing to evaluate inflation risks. It can add hundreds of billions of dollars to the defense budget or pass tax cuts that add trillions to the fiscal deficit over time, and for the most part, we come out unscathed—at least in terms of inflation. That’s because there’s normally enough slack to absorb bigger deficits. Although excess capacity has served as a sort of insurance policy against a Congress that ignores inflation risk, maintaining idle resources comes at a price. It depresses our collective well-being by depriving us of the array of things we could have enjoyed if we had put our resources to good use. MMT aims to change that. MMT is about harnessing the power of the public purse to build an economy that lives up to its full potential while maintaining appropriate checks on that power. No one would think of Spider-Man as a superhero if he refused to use his powers to protect and serve. With great power comes great responsibility. The power of the purse belongs to all of us. It is wielded by democratically elected members of Congress, but we should think of it as a power that exists to serve us all. Overspending is an abuse of power, but so is refusing to act when more can be done to elevate the human condition without risking inflation.

With such draconian measures in academic settings, we must ask some serious questions. First, how can an educator give students the right tools of critical thinking, and encourage them to work hard if most students expect to receive high grades simply because they are paying customers? Second, can we say in good faith that academics living under such precarious conditions and contingent employment are free to teach, write, and think? More importantly, can we trust the competency and the critical thinking abilities of students graduating from elite private universities knowing that many of them expect to and do get inflated grades because they are paying customers? It is perhaps no wonder why we have so many disqualified, incompetent, and corrupt people at the top of every American institution. Some students no longer see the professor or the instructor with high respect. They see them as service providers whose role is to help pave their way into their next step, be it getting into a graduate school, getting a highly paid job, and so on. Likewise, many educators start acting almost like celebrities who are more concerned about their ratings, reviews, and student evaluations (their public image) than they are in delivering knowledge and critical tools for students take home. After all, what should we expect from a customer-service provider relationship that is primarily for profit?

If the Fed had curbed leverage and raised interest rates in the mid 2000s, there would have been less craziness up and down the chain. American households would not have increased their borrowing from 66 percent of GDP in 1997 to 100 percent a decade later. Housing finance companies would not have sold so many mortgages regardless of borrowers’ ability to repay. Fannie Mae and Freddie Mac, the two government-chartered home lenders, would almost certainly not have collapsed into the arms of the government. Banks like Citigroup and broker-dealers like Merrill Lynch would not have gorged so greedily on mortgage-backed securities that ultimately went bad, squandering their capital. The Fed allowed this binge of borrowing because it was focused resolutely on consumer-price inflation, and because it believed it could ignore bubbles safely. The carnage of 2007–2009 demonstrated how wrong that was. Presented with an opportunity to borrow at near zero cost, people borrowed unsustainably.

Old people vote. You know who votes in the swing states where this election will be fought? Really old people. Instead of high-profile videos with Cardi B (no disrespect to Cardi, who famously once threatened to dog-walk the egregious Tomi Lahren), maybe focus on registering and reaching more of those old-fart voters in counties in swing states. If your celebrity and music-industry friends want to flood social media with GOTV messages, let them. It makes them feel important and it’s the cheapest outsourcing you can get. Just don’t build your models on the idea that you’re going to spike young voter turnout beyond 20 percent. The problem with chasing the youth vote is threefold: First, they’re unlikely to be registered. You have to devote a lot of work to going out, grabbing them, registering them, educating them, and motivating them to go out and vote. If they were established but less active voters, you’d have voter history and other data to work with. There are lower-effort, lower-cost ways to make this work. Second, they’re not conditioned to vote; that November morning is much more likely to involve regret at not finishing a paper than missing a vote. Third, and finally, a meaningful fraction of the national youth vote overall is located in California. Its gigantic population skews the number, and since the Golden State’s Electoral College outcome is never in doubt, it doesn’t matter. What’s our motto, kids? “The Electoral College is the only game in town.” This year, the Democrats have been racing to win the Free Shit election with young voters by promising to make college “free” (a word that makes any economic conservative lower their glasses, put down the brandy snifter, and arch an eyebrow) and to forgive $1.53 trillion gazillion dollars of student loan debt. Set aside that the rising price of college is what happens to everything subsidized or guaranteed by the government.17 Set aside that those subsidies cause college costs to wildly exceed the rate of inflation across the board, and that it sucks to have $200k in student loan debt for your degree in Intersectional Yodeling. Set aside that the college loan system is run by predatory asswipes. The big miss here is a massive policy disconnect—a student-loan jubilee would be a massive subsidy to white, upper-middle-class people in their mid-thirties to late forties. I’m not saying Democrats shouldn’t try to appeal to young voters on some level, but I want them to have a realistic expectation about just how hard it is to move those numbers in sufficient volume in the key Electoral College states. When I asked one of the smartest electoral modeling brains in the business about this issue, he flooded me with an inbox of spreadsheets and data points. But the key answer he gave me was this: “The EC states in play are mostly old as fuck. If your models assume young voter magic, you’re gonna have a bad day.

This is exactly what conservative economist Marvin Goodfriend had in mind when he warned in 2012 that if the Fed allowed the unemployment rate to dip below 7 percent, it would “give rise to a rising inflation rate in the next few years, which would just be disastrous for the economy.” But Goodfriend was wrong. Three years after his warning, unemployment had dropped to 5 percent, yet inflation was lower than it was when he made his initial prediction. Why did he (and others) get it so wrong? One problem is that the natural rate of unemployment