Sentences (#45)

Opening an outstanding post by Joshua M. Brown:

The only way to save the economy is to crash it.

“You can blame the Federal Reserve’s loose money policies if you’d like” — a torrent of devalued-capital that gets turned into ubiquitous glut and the ruination of selective intelligence:

Here’s the perfect business idea for this environment: Open a Hundred Dollar Bill Store™. You sell hundred dollar bills for ninety dollars each. You’ll lose ten dollars per transaction but you’ll do a trillion in revenues in year one. Maybe you show an ad to everyone who walks into the store and you break even. User growth with be on the order of 1000% per month. A billion users. You’ll be the biggest IPO of all time when Goldman’s underwriters get wind of that growth rate. Go public and let someone else worry about a competitor selling hundred dollar bills for eighty-five.

Brown’s conclusion is close to a definition of economic sanity:

I don’t have any answers other than what I began with – we need a washout. A recession would be plenty, no need for anything worse [hmmm]. It’s got to be flushed from the system. Bad business models that were never designed to succeed outside of raising capital to continue must not be allowed to continue. No need for legislation, the cycle will clean it up. It always does. The best thing that could happen here is for a return of the cycle. We’re in year seven of an “expansion” and no one is happy. It’s time for a contraction. It’s long overdue.

February 27, 2016admin 14 Comments »
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14 Responses to this entry

  • Sentences (#45) | Neoreactive Says:

    […] By admin […]

    Posted on February 27th, 2016 at 1:43 pm Reply | Quote
  • Anomaly UK Says:

    Not sure how important this is, but under the growing consciousness of “financialization”, it is not widely known how much the actual number of traders is decreasing.

    When I was in the industry, there were two software developers to each trader, directly working for the trading desk, not including all the more general systems behind them. People get all hung up on HFT, which is a niche with minor economic significance, but whole markets are now provided by a tiny number of human traders supported by enormous automation.


    existoon Reply:

    30-50% of jobs in financial industry will be automated away in a decade, from the bottom to the top.

    Slow and expensive human CEOs are next.


    Posted on February 27th, 2016 at 1:43 pm Reply | Quote
  • frank Says:

    How do you flush a system whose signaling medium causes the very clog that needs to be flushed — without crashing the system with no survivors that is? Is this the year of reckoning for fiat currency?


    Posted on February 27th, 2016 at 2:02 pm Reply | Quote
  • Brett Stevens Says:

    Bad business models that were never designed to succeed outside of raising capital to continue must not be allowed to continue.

    The end results of the popularity contest: business which sell popularity, or at least hipness, take over your economy like parasitic tumors.


    Posted on February 27th, 2016 at 2:12 pm Reply | Quote
  • Kgaard Says:

    He is conflating two problems: monetary deflation and accelerating technological rate of change. Other than that some decent thoughts here (though I can’t say original).


    vimothy Reply:

    What he’s conflating is wealth and the unit that wealth is accounted in.


    Posted on February 27th, 2016 at 4:18 pm Reply | Quote
  • grey enlightenment Says:

    Facebook is free. Twitter is free. Snapchat is free. Instagram is free. Youtube is free. Video game apps are free. Texting is free. Sexting is free. Skyping is free. Chatting is free. Why would you spend money on anything? Where do you think people spend their time now? Endless entertainment and content, for almost nothing.

    Kinda…but the internet service and cable bill is certainly not free. The money is still going to be spent. Not through hardware (which is getting cheaper) but by services (which are becoming more expensive).

    Automate everything, outsource the rest – it’s cheaper for the customers. “But now there are no customers left, no one has the money to be a customer anymore.”

    hmmm…yet the new Star Wars movie grossed $2 billion, a record haul. Obviously there are customers and they are buying stuff.

    Interesting world we live in. A lot of people are tired of the ‘status quo’, where their voices are drowned out, and this could explain the rise of Trump and Sanders.


    Tom Reply:

    The top 10% are the winners. No one pays the rest.


    Posted on February 27th, 2016 at 4:19 pm Reply | Quote
  • Oliver Cromwell Says:

    Dotcom bubbles are benign, merely representing the fact that the technology progresses faster in this field than the investors’ understanding of it, making some investors easy marks. This is self-correcting in the medium term. There is also no superior regulatory solution, since regulators understanding of technology is even further behind that of investors, and regulators’ mistakes are not self-correcting.

    However 2009 was not a dotcom bubble. It was a regulatory bubble


    Posted on February 27th, 2016 at 5:04 pm Reply | Quote
  • Alrenous Says:

    Confused guy is confused. Quoted paragraph is really good, though.
    Cheap oil is great. Probably one of the most important recession-mitigating factors by far. Cheap money is horrible and is what is causing the recession pressure in the first place.

    Real inflation is probably 15%. So, get loan, buy stuff with it now, sell it later and pay back the loan, which is roughly 5% interest. It’s doing exactly his example, but in reverse. Price of the stuff goes up 15%, price of the loan goes up 5%, you pocket the leftover 10%. Repeat until the middle class is poor. There’s also lots of ventures that should be losing money that aren’t, which is even better than uselessly arbitraging. In other words, they buy stuff, lose 5% value on it, sell it for a mere 110% later, pocket 5%. Guys, why duz ur reflected-sound-of-underground-spirits keepz crazhingz. I dunnoz gaiz.


    Alrenous Reply:

    Oh, even I got suckered into the misleading terms.

    Cheap oil is fine because it’s still the market price for oil.
    Cheap money is not fine because it’s price-fixed.


    Posted on February 28th, 2016 at 12:02 am Reply | Quote
  • SVErshov Says:

    surprising results is a part of every great plan.

    “The trouble . . . is that we are terrifyingly ignorant. The most learned of us are ignorant. . . . The acquisition of knowledge always involves the revelation of ignorance—almost is the revelation of ignorance. Our knowledge of the world instructs us first of all that the world is greater than our knowledge of it. —Wendell Berry, writer and Kentucky farmer


    Posted on February 28th, 2016 at 3:06 am Reply | Quote
  • jack arcalon Says:

    It would also require a symbolic settling of accounts.
    The worst banksters responsible for the most suffering need to be tried, found guilty, and put in front of a firing squad.


    Posted on February 28th, 2016 at 1:59 pm Reply | Quote

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