Most people think in terms of purchasing power. How much can one’s cash buy? I reject this view on two grounds. One, it encourages a liquidation mindset. If your life savings consists of 100,000 dollars in the bank, plus a house and some shares of AAPL and INTC, how many years’ worth of groceries can you buy?

If the grocery-value goes up, people cheer.

Life savings is not supposed to be about liquidation. People used to be able to earn a yield on their money. We should think of an estate as a business, with assets that generate income (as people once did). In this view, you don’t think of selling the business every minute of every day, cheering when its price goes up.

You think of its profits. You think of how many groceries you can buy–by operating a business to generate profit.

You don’t think of the purchasing power of the business, but its Yield Purchasing Power.

The conventional purchasing power paradigm paints a rosy picture. That may help explain why apologists for the regime of the irredeemable dollar promote it.

The yield purchasing power view shows something altogether different.

I have written eight short articles on Yield Purchasing Power. I gave a talk about it, in fall 2016 at the American Institute for Economic Research, which was recorded on video. Below are the links, gathered here in one landing page (which will be updated as I add more material).

Yield Purchasing Power: Think Different About Purchasing Power
Falling Yields, Rising Asset Prices -Rising Yields,Falling Prices
Interest – Inflation = #REF
THERE’S Your Hyperinflation!
Yield Purchasing Power: $100M Today Matches $100K in 1979
The Economy is in Liquidation Mode
Who the Heck Consumes Capital?!
Move Over Entrepreneurs, Make Way for Speculation!
Who Is Worth More: Some Hedge Funds or All our Kindergartens?

Video of my talk at AIER

2016 was a phenomenal year! Most of my focus over this year was on my company, Monetary Metals. That is appropriate for the founder and CEO of any early-stage company. Doubly so in this case, as Monetary Metals is a company with a vision to change the world for the better. People need a path towards the use of gold as money. Monetary Metals provides that path, a way to earn gold on your gold.

I raised a small amount of capital in February, sufficient to bring on board Bron Suchecki, formerly of the Perth Mint. And to begin working with Arie Levy-Cohen, formerly of Morgan Stanley, on defining the value proposition and branding.

In the Spring, I visited Hong Kong and Singapore for the first time. I was there to give keynotes at two gold-related conferences. I expected to really love the food in HK, as I seek out Chinese restaurants wherever I go. I did find two good places, but much of what I ate there was bland and starchy. I also may have eaten something bad there, because when I flew on to Singapore I felt unwell. I spoke and went to many meetings, only by the grace of being medicated. I stayed in the Marina Bay Sands, and did not even go up to its world-famous roof deck and negative-edge swimming pool. I got better when I returned home. Need to return…

This summer, I spoke at FredomFest. While at the conference, Monetary Metals announced its first gold fixed-income deal with another company who was there, Valaurum. We provide the gold they need to manufacture the Aurum®, a gold currency unit containing one tenth of one gram of gold in a clear plastic film about the size of a dollar bill. It is gold you can fold.

Interest on gold will change the world.

I am a member of the Arizona House Ad Hoc Committee on Gold Bonds. Arizona is considering my idea of issuing a gold bond, which gives the state a fiscal benefit, and attracts capital from all over the world. Here is the video of my proposal.

What do you do if you are invited to give keynote addresses in Great Barrington, Massachusetts and Kuala Lumpur, Malaysia? Less than one week apart?

If you’re crazy, you agree to both. If you’re insane (in a good way), you book an around-the-world ticket on the One World Alliance, and fly to Auckland, Sydney, Singapore, KL, London, New York, and home. You spend over three weeks on the road, meeting with partners and prospective clients. You also see some friends, hang out in Auckland, have some great beer, attempt to stay for the Australian Rules Football but get overcome by jet lag and bail out early. Then you spend 45 minutes walking up hill, uphill, and uphill some more, to get to the Langham Hotel at the top. And crash.

You have lunch with an investor at Aqua Dining, overlooking the water and a great swimming pool in Sydney. In Singapore, you have some good food and good meetings. This time I felt well and could enjoy. Then I flew on to KL. At the conference, they brought new meaning to the concept of serving tea. They had a noodle dish that was out of this world, plus little pastries. And, of course, tea and coffee. I am not a coffee drinker, but I am developing a love of tea.

In KL, I spoke about the Fed’s falling interest rate, and how nothing in the world is immune from its pernicious effects. Including even an Islamic finance program for homebuyers. It does not charge interest, and yet its rate of return has been falling since inception in the 1980’s.

From KL, took a redeye to London Heathrow. Checked in to the Sofitel in T5 to crash for a few hours. Had my first investor meeting Sunday evening in Chelsea by the Thames. Later that week, I had a small private tour of Westminster Palace and dinner in a private dining room.

I also had a chance to take a train two hours north of London, catch up with a friend and have lunch in what I suspect was a Medieval pub. The ceiling in places was too low for me to stand up! Across the street was an old castle, much smaller than I expected. I missed an event at the Institute for Economic Affairs on Lord North Street. I was looking forward to it, but jet lag struck again.

Then I flew on to JFK. Luckily, a hired car took me up to Massachusetts, where the American Institute for Economics Research has its headquarters in an old mansion. I was in no condition to drive. I realized something. By continually traveling west, I forced my body to stay away later and later. However, it’s hard to get up later and later. So I ended up with jet lag of increasing severity. I crashed a few hours when I arrived, and gave the keynote at their annual meeting (video here). Most excitingly, the audience was very excited by my ideas. I think my talk was different than others they’d heard.

The grounds are gorgeous, and I was there at the perfect time of year.

Right after I got home, I closed another investment round. I set out to raise $400K. Ended up with over $500K, from investors not just in America, but Europe, China, and down under.

In November, I had a flat tire on my Porsche 911. So I called the Porsche Roadside Assistance 800 number (the car does not have a spare tire). Why do they make you go through the process of finding your Vehicle Identification Number, only to put you on with an agent who does not know your name, car, or anything else. His first question was did I try to install the spare tire (the car does not have a spare tire). Next, he asked me if I have the tow hooks (the car does not have tow hooks). OK, we will try to get a tow truck to you in 60 minutes or less.

Hours and several phone calls in which they lied to me later, the tow truck shows up. Do I have tow hooks? (no, it’s a 911, it doesn’t have tow hooks). OK, we’ll have to winch it up onto the flat bed. *CRUNCH*, the rear banged into the ground when the angle of the car changed as it began rolling up the bed.

Then followed a series of unrelated, unforced errors by various Porsche people. For example, inviting me to come to the dealership for a loaner car. I got there, no loaners. But we can give you a ride to Enterprise to get one. After the ride, waited on two lines. We’re out of cars, but we have a pickup truck.

At the end, I get a letter from my service adviser. “Soon, you will receive an emailed survey from Porsche… Unfortunately, anything short of Complete Satisfied [bold, underlined, and yellow highlighter in original] counts as a Zero score. The survey is very important to my career….”

In what universe does management allow an employee to give a letter like that to a customer?!

Despite that, I gave lots of feedback, not venting my emotions but specific criticisms of systems and processes which did not recognize the value of the customer or his time. I said bad systems beat good people. My salesman called me, to try to make me feel better and get me excited about a 2017 911 turbo. Unfortunately, the general manager called me the next day to undo whatever goodwill was created by the salesman. “Your car is in good mechanical order.” Yes, they got the car working, but that was never my complaint.

Now, I am thinking about the Audi R8 and Chevrolet Corvette Z06. Or maybe the hot Mercedes AMG coupe. No rush, my 911 has only 15,000 miles and right now I am focused on building a great company! 🙂

I address this essay to two groups. One group is those among the liberty movement, who believe that there’s nothing wrong with inequality. These are often Objectivists, who unknowingly defend a regime that artificially suppresses working people. The other group is those among the Left who still call themselves liberals. They say they don’t like inequality, but nevertheless continue to support this regime, and they often demand more of its interventions.

I am talking, of course, about our regime of the Federal Reserve and its zero-interest policy.

I have written before about how falling interest rates have pushed up the prices of stocks, bonds, and real estate (also artwork, antique cars, etc.) This is seemingly good for those who own capital assets (it’s not, but go try to tell someone it’s not good that his house doubled). At the same time, falling interest causes falling wages if not mass layoffs.

In other words, the Fed drives down interest. This drives up asset prices and drives down wages. The minority who own assets seemingly get richer (an illusion) and everyone else suffers.

That is not the only way that falling interest rates cause inequality. Nor is it the only way that it targets certain groups for greater harm than it brings to others. Consider that zero interest makes it impossible to save. I don’t mean hard to save. I don’t mean excuse-making for lazy people who don’t plan for their futures. I mean impossible in the full context. Let me explain.

When I started my career in 1990, the standard advice was to set aside 10% of your salary and put it in the bank. By the time you reached 65, you would have a big nest egg. The key to this strategy was earning interest. Every bank had brochures showing that by age 65 most of your nest egg would be the accumulation of compounded interest.

Let’s put it in human terms. Suppose you’re a young worker, just starting out. You make the median income of $52,000 a year. You set aside 10% of your gross paycheck before tax. Over 45 years, your salary set-aside adds up to $234K.

Back in 1990, a 1-year Certificate of Deposit paid 8.1 percent. At this rate, you would have about $2.4M by the time you retired at age 65. Over 90% of that total is the compounded interest.

However, today, the same 1-year CD yields less than ¼ percent. At this scant rate, you can expect to have only $246K. Over your entire career. Of that sum, just $12,000 is interest. Let that sink in.

Needless to say, $246K is not enough to live in retirement. If you can’t keep working, you’re going to have to go on the dole. And this leads us to an underappreciated point.

Business consultants, writers, deal makers, and many other white-collar professionals can easily continue to work for 10 or 20 years past the conventional retirement age. So long as you’re healthy, why not keep working? Aside from the money, it gives you something to do, keeps your mind engaged, and you’re contributing to society.

However, there are many jobs where you cannot keep working. Think about brick layers, plumbers, and roofers. These jobs both take a toll on the body and demand more than most 75-year olds can give. Whereas a business consultant may continue to grow his network and expertise even as he gets older, a worker in a physical job is slowing down as well as wearing out.

There is never a good reason for government to intervene and attempt to prevent people from experiencing the consequences of their actions (whether good or bad). Many of those crying about income inequality, just use it as a rationalization to move America down the socialist road.

That said, there is an inequality problem. It is not due to lack of government intervention, as the socialists would have you believe. It cannot be cured by yet more taxes and interventions. Its cause is intervention. I refer to the most pernicious and least-appreciated kind of intervention.

Monetary policy.

“There is nobody in this country who got rich on his own — nobody.” – Elizabeth Warren, campaign speech 2011

“If you’ve got a business – you didn’t build that. Somebody else made that happen.” – Barack Obama, campaign speech 2012

The Left is clear about their view. You do not get credit, and you do not own your business by right. When the government taxes you, taxes you some more, regulates you, and licenses you, it has the right. Because you didn’t build that.

As with so many issues, the Right seemingly opposes the Left. Certainly, there was outrage at the outright, open expressions of communist ideology from Warren and Obama. But let’s drill a bit deeper. Let’s look at a litmus test to see if conservatives really believe that you own your business. Or perhaps they accept that you are a mere steward of the people’s resources, for the good of the people.

Can you hire or not hire anyone? After all, if you did build that, then it’s yours by right. And as a matter of right, you can decide who to hire. Right?

Not so fast. Here is what President George Bush, considered to be a conservative, said at the signing of the Americans With Disabilities Act in 1990.

“It will guarantee fair and just access to the fruits of American life which we all must be able to enjoy.”

This is a law forcing businesses to do what they did not agree to do. Who built that business again, Mr. Bush? But this conservative does not think that way. He thinks of it as “access” to the “fruits of American life.”. Access to what? Fruits grown by whom, Mr. Bush??

He continued:

“And then, specifically, first the ADA ensures that employers covered by the act cannot discriminate against qualified individuals with disabilities.”

Clearly a mere steward has no right to hire based on his own preferences.

Then he made it even more clear:

“Second, the ADA ensures access to public accommodations such as restaurants, hotels, shopping centers, and offices.”

Who built that? No matter! Mr. Bush declared your business to be “public accommodations.” And in his view, it’s the role of the government to grant people “access”—to force you to give it to them. How far is the view of Mr. Bush from that of Ms. Warren and Mr. Obama?

OK who else, aside from the Conservatives and the Left, thinks you didn’t build that? Consider the following recent dialog:

“If we discriminate on the basis of religion, to me, that’s doing harm to a big class of people.” – politician
“The Jewish baker should have to bake the cake for the Nazi wedding?” – Moderator
“That would be my contention.” – politician

The politician is, of course, Libertarian Gary Johnson. He does not necessarily think that you built that business any more than Bush thinks it or Obama thinks it. Johnson sees the question in terms of whether “we” should discriminate.

Who is this “we”? One is left to conclude that he means those people who really built your business. The public, presumably.

The Left may be more brazen, more willing to go there, more shameless in taking your business away from you. First in theory, morally, by declaring that you are not a creator or hard worker or whatever it takes to build a business. The in practice, by setting no limits to taxation, regulation, permits, and compliance.

However, the Right and even the Libertarians are on board the same boat. They may stick to humanitarian imagery. They typically prefer to couch their desire to control your business in more palatable terms. But government control of your business stinks all the same.

At root, it necessarily comes back to the same principle. The only way to justify coercing you to “grant access”, the only justification to force a Jewish baker to serve a Nazi cake, is on grounds that it’s not really yours.

You didn’t build that, so shut up and let the government manage it for the benefit of others!

This essay is a followup to my previous post, Antidiscrimination Law.

“We need to make it illegal for companies to discriminate.” This applies to employees, and even customers.

Well, either such discrimination—really bigotry—is good for the company, or it isn’t. Either companies benefit from racial or gender preferences in employees, or they don’t. Either bakers benefit from turning away paying customers who want cakes, or not (without discussing those rare cases where someone wants to force the baker to bake a cake with a hateful message on it).

If you believe that corporate decisions made by bigotry are good for companies, then that would seem to justify laws to ban it. Well, it would justify it if you believe that the proper purpose of law is to force people to act against their own interest for the sake of someone else’s good…

…Wait, why is it in the interest of employers to fire the blacks (to name one legally protected group)? If you want go there, then realize that there is no way to make this case without promoting overt racism. Think about it. Take as long as you need.

Perhaps you believe that corporate decisions made by bigotry are not good for companies. Then why the need for a law at all? Do you seriously argue that people need to be forced to use cars rather than horses, to use computers rather than do their books using paper ledgers, and to live in houses rather than be exposed to the elements? Self-interest is its own motivator.

And if the purpose of this law is to help companies, how do you justify fining them, punishing them, and or even bankrupting them?

Antidiscrimination law is entirely uncontroversial. It’s universally supported by the Left, nearly universally on the Right, and even some Libertarians promote it. Yet it’s based on logic so flawed that in a rational culture that actually taught logic in school, middle school students would all be able to write essays explaining why such law is contradictory.

Everyone supports it, yet it’s simple to show it’s bad. Hmm, think about that for a while.

Regulation has several inherent flaws.

1. One agency acts as legislative, judicial, and executive branch. It makes the rules, decides who is breaking them, and punishes offenders.

2. Regulation is based on the doctrine of prior restraint. Instead of retaliating by force against criminals, the government initiates the use of force against innocents–because they might commit a crime. So it criminalizes non-crimes.

3. Regulation forces businesses to prove a negative–often at great expense.

4. It ossifies the status quo. It is easy (well relatively) to get permission to do the same thing that everyone else is doing. Much harder to get permission to change how business is done.

5. It is an engraved invitation for cronies to use regulation and regulators to suppress competitors.

6. It gives the unscrupulous a place to hide. Bernie Madoff was highly regulated. Regulation didn’t stop him.

7. It prevents startups from forming in the first place (doubly so because raising capital is itself highly regulated, and startup founders don’t typically have the capital and legal sophistication to navigate the regulations).

8. Regulation makes it impossible to know in advance what is legal and what is not. This is because regulation attempts to control actions A, B, and C in an indirect way to prevent crime X. So it can make arbitrary distinctions between two essentially similar things–but one is illegal.

9. Regulation makes it illegal for you to do something that someone else can do legally.

An argument against absolutely free markets comes up often. What about so called natural monopolies? So called infrastructure (e.g. sewage plants) have high barriers to entry, and are a challenge to true competition. Therefore if left to private companies, they would become bad monopolies. So it is best for government to provide them.

I think there are answers on several levels.

1. Moral. The argument is saying that men need to be forced, like brutes. Horses will do no work unless harnessed, and led around by a bit in their mouth (if not whipped). Haven’t we proven beyond a shadow of a doubt that this is wrong?
2. Economic. The question of how men coordinate their actions–how they CAN coordinate–is one of the major questions of economics. The answer is: each must pursue his own interest, which in an economics context means profit. Pursuit of profit and only this pursuit leads men to work together. Adam Smith may have used an unfortunate phrase “the invisible hand”. I describe in my dissertation the mechanics of it. But no matter how you slice it, economics is about people coordinating based on their individual interests and individual knowledge. Central planning is about the negation of coordination, and the destruction of economics as such.
3. Scope. There is an analogy to when people demand of philosophy to explain the latest observation from astronomy or a particle accelerator. It is outside the scope of philosophy. It is not the job of the philosopher to answer what it means when you see a super massive black hole. Similarly, it is not the job of the economist to envision every business model in a free market. It is the job of a million entrepreneurs, each developing his own unique business model. Indeed, economists often make lousy entrepreneurs.
4. The 8th grader. I love using the standard of a precocious 13 yr old. “So you’re saying that government is smarter than the people, and only government is smart enough to figure out how to build a sewer!?”

The rhetoric from the Left is intransigent in its denunciation of wealth. As long as someone is wealthy, there is inequality. This is because there has always been and will always be someone who is poor. So the very existence of a rich man serves as a rebuke to the Left’s worldview, and a fly in the social justice ointment.

However, Leftists in power behave differently than their rhetoric would lead us to expect. They enact legislation and regulation which actually helps enrich crony businesses, such as big banks. The common refrain is that these politicians are corrupt, and on the take. Wall Street is simply buying their favor.

While this is true to some extent—certainly Wall Street spends a lot on lobbying—it’s not a satisfying answer. How do we fully explain the seeming anomaly between ideas and action on the Left?

It is no anomaly at all. To see why, look at it from the Left’s point of view. It has to be frustrating when the voters reject the policies of Marxism. Unlike in many other parts of the world, the American people do not hate wealth—not yet. If you were a Leftist, how would you go about changing this?

Even today, many Americans if not most of them, feel at a basic gut level that if you work hard you can get rich, and you deserve it. The Left has to find a way to undermine this. The Left wants to migrate Americans to the attitude held in socialist countries: the feeling that if someone is rich then he must be on the take.

If you wanted to devise a strategy to get the population on board your socialist agenda, I can think of no better way than to create a class of very rich people who get their riches off the backs of the people. Create thousands of real-life fat cats whose villainy is infamous. Show the people that this is what it means to be rich: to be on the take. That the rich do not produce, but amass a fortune at the expense of others, at your expense. Put that in the public spotlight.

Once the voters believe this, deep down in their hearts, it’s over. The free market is done. Stick a fork in it. Support for the rights of property or contract will fade away. Then, the path is paved for some kind of socialist takeover and totalitarianism.

Seattle has imposed a $15/hour minimum wage.

Of course, this will kill jobs. It is basic economics: you cannot pay someone $15 to produce $10 worth of value. However, this essay is not about that. Nor is it about the impact on prices.

This essay is about the impact on goodwill. I am developing a series about the concept of goodwill. America once had lots of it. It is now being dribbled down the drain, dripping away, one drop at a time. This new minimum wage hike helps.

How?

This picture of a card helps explain. This may be just one angry dude, or it could be a big movement. I see it as another notch taken out of goodwill.

As with the cops and perps I wrote about previously, both sides have a legitimate gripe. Emotions are running high. And no one sees the merit in the other side, only in their own.

It’s the perfect toxic cocktail for killing goodwill all around.

Think on it for a moment. What cultural backdrop is necessary for a whole industry to pay near zero in wages, and workers earn the majority of their compensation from tips given voluntarily by total strangers? It is remarkable how much trust and goodwill must be there. This is not typical in the third world, and it was not typical through most of history.

Will people continue to tip, and tip generously, if they feel workers are overpaid? What if they feel that these workers lobbied the government to mandate their overly rich compensation? And suppose the patron resents that his favorite restaurants have closed, and now in any survivors, he pays a lot more than he used to.

Of course, the workers feel that they are falling farther behind, as real wages are lagging everything else in the economy. They resent their bosses for being too greedy, and they resent politicians for not setting the wage high enough. They are angry and resentful at lots of things, except the root cause: the failing dollar.

What do you get when you cross worker resentment with restaurant patron resentment?

We could be one coercive wage hike away from killing tipping in America.