Economics: The Federal Reserve Set Course For Deflation

(Drivebycuriosity) -  Inflation rates are collapsing, following the shrinking money volume (image scottgrannis). But the Federal Reserve hiked her interest rate hikes again - stubbornly ignoring the facts. It seems that the Fed set course for deflation.

 

                      Helicopter Money

The high inflation rates of the recent months were caused by a flood of money in the past. In 2020/21 the US government - supported by massive bond purchases by the Federal Reserve -  flooded the US economy with trillions of dollars, giving the Americans enormous purchasing power. Friedman called this action prophetically helicopter money (cato ). The government money landed directly on the bank accounts of the Americans, blowing up the money volume M2 (bank notes & coins & liquid deposits at banks).

As a result in 2020 & 2021 the US money supply M2, the engine of the inflation, jumped 40% (image below). The money deluge met a constraint supply of goods & services, partly because of COVID-19 which disturbed the supply chains.  

"Inflation is caused by too much money chasing too few goods and services", notice the economists at fisherinvestments. "It is no surprise that prices increased so much", comments Tyler Cowen, Professor at George Mason University (marginalrevolution).

 

 ( source )

 

                            Causal Connection

The causal connection between money and inflation is known since the 16th century at least. Nicolaus Copernicus described already in the year 1522 how "too much money" causes inflation. Copernicus` "quantity theory of money" is based on observations: 

Early in the 16th century Spain conquered today`s Latin America and looted the silver stocks. The Spaniards send the precious metal to Europe where is was printed into coins and used as money. 

As a result the European money supply jumped. The flood of money raised suddenly the demand for scarce goods & services and caused a jump of the price level. 

Elaborated studies by Milton Friedman, Karl Brunner, Allan Meltzer and many other economists (known as Monetarists) described already in the 1960s how and why the inflation rate follows the growth rate of money with a time lag (causal connection).

 

(source )

The  monetary growth already peaked in February 2021 (with plus 27%). Since then the monetary growth rates have been falling and turned negative in December 2022. In the recent months the money volume has been shrinking! In June M2 dropped 4% YoY ( fred.stlouisfed). 

 

 

The so-called wholesale inflation, the change rate of the producer price index, followed the pull of the shrinking money supply and dropped to 0.1% YoY and might turn negative in the coming months (source ). The online prices are already falling. Adobe reports: "Online prices continued to drop, falling 2.6% compared with June 2022 and 1.3% below May 2023" ( adobe)

The Fed ignores these inflation rates and focuses on the so-called Core PCE price inflation (plus 4.1% YoY source ). This number excludes energy costs & food prices.The number is artificial inflated by including a component for shelter, a mix of rents & house prices, which counts for 42% of the core-inflation (americanprogress fisher)! Unfortunately the shelter component does not show current house prices and has a time lag of 12-18 months ( aier). As a result the so-called core-inflation is from yesterday. 

 

                  Keynesian Kabbalah

Apparently the Federal Reserve does not care about history and the elaborated studies by the monetarists. Instead the agency follows a kind of Keynesian Kabbalah and believes in mystical phenomena, like wage spirals & cost-push-fallacy (brookings).

The collapse of the inflation rates follows the monetarist playbook and proves the Fed wrong. It is highly likely that the recent interest rate hike are driving inflation rates further south. Inflation might even turn into deflation - following the shrinking money volume (negative growth rates).
 

 

Economics: Winning By Losing - How The Biden Administration Is Burning The Money Of Tax Payers Big Time

  (Drivebycuriosity) -  The Biden administration is throwing sand into the gears of well running businesses. Biden protege Lina Khan, chair of the powerful antitrust agency Federal Trade Commission (FTC) & Jonathan Kanter, leader of the Antitrust Division of the Justice Department, another Biden protege, are suing companies whenever these don ´t do what the government likes. 

Fortunately America has courts. Judges finally decide if a company behaves lawful or not. That´s the difference to Xi´s China. Last November the New York Times reported that "under the Biden administration, the Justice Department has sued to block eight mergers and an alliance between American Airlines and JetBlue, while the F.T.C. has filed eight lawsuits challenging corporate mergers" (nytimes ). They lost their cases.

More losses followed this year. Khan´s FTC failed to prevent Meta Platforms` (formerly known a Facebook) to purchase Within Unlimited – a tiny virtual reality (VR) App developer. The Khan also lost a mega lawsuit against Microsoft (theverge ). The Khan tried to stop the software giant to purchase the game designer Activision Blizzard. The Khan claimed that the acquisition "may" harm competition in the future, even though both companies compete against Sony and other companies. Judge Corley disagreed and stated that the merger could even intensify the global competition.

The New York Times is siding with the Khan and tried to explain her bad track record with the motto:"winning by losing". According to the New York Times Khan`s court losses could signal to Congress the need for new antitrust laws.

During a hearing at the House Judiciary Committee members criticized that the FTC is losing the money of tax payers with her failed law suits. Chair Jim Jordan described Khan’s approach with the  antitrust reform as a “disaster” and a “costly” departure from decades of bipartisan consensus ( adlawaccess). And Representative Kevin Kiley described Khan as 0-for-4 record in merger trials in Federal Court and asked her, “Why are you losing so much?…Are you losing on purpose?” 

Congressman Darrel Issa accused Khan of turning the FTC into a bully that would make America less competitive. Citing the failed case against Microsoft, he argued that FTC challenges were undermining American companies that had to compete worldwide. FTC overreach could ultimately end up hurting consumers.

The Khan - unfazed by critic and her court loses - is continuing the costly crusade. The FTC is now suing Amazon, claiming that Amazon Prime is a trap (stratechery twitter. netchoice). The Khan calls Amazon`s Prime practices as "deceptive" and alleges customers have enormous difficulties to sign out ( twitter). Several observers reported - independent from each other - that they were able to cancel Prime in less than 90 seconds (twitter twitter). How long will it take a judge?

According to the media the Khan, who built her career on Amazon harassing ( driveby), is preparing another attack on Amazon ("The Big One"), trying to break up Amazon`s Marketplace, where other companies can sell, and to make Prime illegal (politico realclearmarkets  twitter).

Conclusion: The FTC is not only burning more and more money of the tax payers. The sued companies have enormous costs. Mergers get many months delayed, causing additional costs, and the defendants have to employ armies of expensive lawyers. The consumers are losers too, because they have to bear these costs by paying higher prices and reduced selection of goods & services. Winners are law firms and foreign competitors, like Sony in the Microsoft/Activison case, or Alibaba in the Amazon case.

Cosmology: Should We Be Afraid Of Aliens?

 (Drivebycuriosity) - Are you afraid of aliens? Some scientists say, we shouldn´t yell at aliens, "because there is a chance of alerting aliens to come destroy us" (overcomingbias  cato). These alerters refer to SETI, the Search for Extraterrestrial Intelligence, and other systems of radio signals to contact alien beings beyond Earth.

chance of alerting aliens to come destroy us

chance of alerting aliens to come destroy us

I believe that these fears are way overblown. Aliens won`t attack us. There are at least 3 reasons that we have nothing to fear from them.


1. If aliens exist they are far, far, far away. The nearest habitable planets, where other intelligent life forms could have evolved, are many light years away. Searcher didn´t detect any signal which could have been emitted by intelligent beings yet. I am still convinced there is somewhere intelligent life because the universe is so vast - and possibly infinite. But the next advanced life form could be thousands of light years away, maybe even millions or billions.

Nothing can travel faster than light. Even if some evil being would send harmful radiation waves - or other dangerous electronic signals - this could need thousands of years or more to hit us. There is no sense in it.

2. Conducting a war over a distance of many light years doesn´t make any economic sense. Neither attacking or occupying a far away region. Aliens would have nothing to gain if they would harm us. They cannot slave us or steal our belongings. On the other hand they would have nothing to fear from us. There is no need for a prophylactic strike over distances of many light years.

3. Aliens who are able to travel interstellar distances would be highly developed. The history of our world shows the societies become less violent when they advance and become wealthier.

 Europe and other regions were highly violent places in the middle ages. There were a lot of devastating wars between countries, regions and cities like the "Thirty Years War" in Central Europe  (wikipedia) and the "Hundred Years War" between England and France (wikipedia). "Violence played a major role in family disputes, in the justice system, and even in education and entertainment" (getty). In the 19th century the US suffered a bloody civil war and fought against England, Spain & Mexico. In the recent decades advanced regions like North America, Europe and East Asia became peaceful as a result of a painful political learning curve. This is not just the absence of war, the number of murders and deadly bar fights haven been falling too.

I believe that evolution in other regions of space follows similar learning curves which lead to civilized and organized political and social systems which are peaceful.

Far advanced alien might have reached a state of blissful enlightenment like Zen Buddhists. Maybe those alien would be happy with themselves and ignore us. No need to be afraid of aliens.

Economics: Is China Really At The Peak?

(Drivebycuriosity) - There is a cult around the term "peak" and pundits make the headlines by claiming that something had "peaked". We heard about peak oil, peak stuff, peak innovations, peak car, peak life expectancy and even peak craft beer ( driveby  thedailybeast ).

Now Noah Smith, a popular blog writer, entertains his subscribers with the claim that China is "at the peak" (noahpinion ). He boasts "we thus have the privilege of seeing a great civilization at its peak". How arrogant you are, Noah!

China skeptic Smith is not alone. China´s economy grew about 6.3% in Q2 2023 - three times as fast as the American - but the media lament that the country missed expectations (which were at 7.3% growth cnbc ).

I am aware that "emperor" Xi is sabotaging his own economy by curtailing China´s big tech (I wrote about that here ). But competitors Europe & the US are not really free market places. America`s & Europe´s antitrust zealots are following Beijing`s  crusade against Big Tech and are throwing sand in their gears when ever they can ( zealots). But, neither Xi nor Biden can stop technological progress.

                      Perpetual catching up

China is still at the begin of a perpetual catching up process, which is fueled by extreme income & wealth differences to the US and other Western nation. In 2022 China had about $12,720 income per capita, the US number was $76.400 (worldbank). Lots of room for growth. China is following other countries which had - at least partially - caught up to the leading economies. China`s per capita income needs to triple to reach today´s at least half of the American income.

The country has a huge natural resource which is fueling the growth. There is a gigantic amount of human capital: About 1.4 billion people, four times as many as the United States.  

More people means that there are more creative minds with new ideas. Thanks to the sheer size China has potentially about 4-times as many artists, entrepreneurs, inventors, scientists, coders and geniuses like Elon Musk or Steve Jobs as the US. 

China`s ascent is fueled by people who are smart, hard working & well educated. The Chinese education system is more rigorous, competitive and success focused than the American and the British (americanaffairs ). 

 International Mathematical Olympiad 2023 results:

(twitter )

 

 

Wikipedia counted in 2021 already 3,012 colleges and universities, with over 40 million students enrolled in mainland China (wikipedia). Chinese corporations, think tanks & administrations can employ a large number of highly dedicated & educated people. The country already leads the world with mathematical skills, the basis for science & software development.

China´s vast human capital is not only the engine for fast expanding knowledge. It is the driving force for science & innovation and so fostering economic growth (washingtonpost scottsumner). Elon Musk criticized the “entitled” and “complacent” character of people in the United States, and lauded the “smart” and “hard working people” of China ( cnbc)

               Dense & Productive

China`s ascent gets supported by the fact that a large part of the population lives in very big cities. China has over 160 cities that have a population of over 1 million people, which include at least 14 mega cities, with each has more than 10 million citizen ( worldpopulation). These big cities contain altogether more people than the whole US, where a large part of the population spreads over vast areas.

The density gives China another advantage. "Packed city centers are correlated with economic growth, talent levels, and diversity" notices city lab, a think tank (citylab).  They add that "clusters of talented and ambitious people increase one another’s productivity" and "the increased productivity of the broader community spures economic growth". Project Syndicate, another think tank, says "80% of economic output originates in cities: urbanization is the engine of economic growth" (project-syndicate).

China`s cities are connected by a cutting-edge network  (trains, subways, harbors, airports) beating the rotten American infrastructure by far. And Beijing is pumping trillions to expand and modernize the net, the country has already some of the fastest trains of the world. 

Skeptics take notice. China`s ascent will boost the global progress of medicine, robotics, artificial intelligence, nanotechnology and more - and so the standard of living everywhere. It is a gain for the whole world. 
 
 

Economics: Some Thoughts About Inequality

 (Drivebycuriosity) - It seems that the media is obsessed with income inequality. There is a deluge of articles about the "rising inequality" in the US & Europe. Often I read the rant "the rich get richer and the poor get poorer". And Thomas Piketty’s inequality bible "Capital in the Twenty-First Century" is on the top of the bestseller lists.

I believe that the obsession with other people`s wealth  is merely a media hype. Rapper Jay-Z has a net-worth of $2.5 billion, his annual income exceeds $150 million (knowledge ). Rihanna is worth a staggering $1.4 billion. Taylor Swift has a net worth of $740 million, and Beyonce is at $540 million ( google). Hollywood stars, top football, soccer & baseball players also collect huge amounts of money. So what?

 

                     Outrageous Rich

I don´t see any complaints about the outrageous rich rappers, movie stars & sports celebrities in the media. The public seems to see just the wealth of company CEOs and the bonuses and fees collected by top-bankers and hedge fund managers, even though not many are in the league of rapper Jay-Z. And people pay a lot of money to experience a Beyonce show.

Hollywood pays Dwayne Johnson, Ryan Reynolds, Mark Wahlberg & Co. tons of money because the studios believe that these superstars can attract so many movie goers that they will gain more money than they spend for them. The names of some megastars can create blockbusters (but not guarantee them of course). 

Investors grant the CEOs of their companies extremely high bonuses because they hope that the company leaders raise the value of their stocks more than they cost. Often managers get paid with stock options and success & failure of their companies define their wealth. Apple reached a market capitalization of $3 billion, partly because of the work and the talents of Steve Jobs & his successor Tim Cook.

Many liberals claim that inequality is not simply unfair but harmful. I don`t agree. Do you and I get poorer when Jay-Z, Rihanna, Beyonce & Co. inflate their banking accounts? I don`t think so. 

I  don´t believe that the wealth of the majority will shrink even when some people get absurdly rich and the number of billionaires rises. Quite contrary, a high & rising inequality might even be necessary for economic growth and therefore create more wealth for everyone.

Capitalist countries with a high income inequality like the US, Switzerland, Singapore, Hong Kong and others have been growing much faster than their more equally balanced neighbors and their average populations are wealthier than the citizens of the rest of the world. The US for instance has a higher income inequality then France, but the US economy does better than the French. The US might have more billionaires then France (relative to the whole population) but the US unemployment rate dropped below 4% while the French unemployment rates floats at 7%. Countries with the highest equality - Cuba, Venezuela, North Korea -  also belong to the poorest nations in the world.

                                             

                Big Experiment

In the last century a gigantic economic experiment happened: A whole country got divided  in 2 different parts. One part was communist organized, with a low income inequality, the other became more or less capitalist, with a high inequality. After around 40 years the experiment got aborted. Guess in which part the masses (average population) got much richer and in which the average citizen stayed poor?

The experiment was the division of Germany into the (more or less) capitalist Western Germany (Bundesrepublik Deutschland) and the communist part (Deutsche Demokratische Republik = DDR) in the  late 1940s. In the year 1990 Germany re-united. Then the Western part (and its whole population) was much wealthier than the Eastern part. Even the population of Western Berlin, which had been a capitalist island in a socialist ocean, was much wealthier than the residents in the former socialist Eastern Berlin.

I agree with James Pethokoukis from the American Enterprise Institute who writes that "dynamic, prosperous economies that push the technological frontier are likely to have a relatively high level in income inequality" (aei). Maybe "dynamic, prosperous economies" need a high income inequality as an incentive. I think the chance to become outrageous rich could be a motivation to invest and to take high risks. Someone who sacrifices time and energy and takes high risks wants a reward. 

Scott Winhsip from Manhattan Institute writes:" The prospect of vast economic returns might, for instance, incentivize more innovation and investment, producing stronger economic growth and higher incomes even among those who do not amass fortunes. By rewarding work and human capital investment, inequality between the upper middle class and the poor could also promote stronger earnings growth for everyone over time." (manhattan).


                                                    

                Rewards For Taking Risks 

The possibility to amass huge fortunes - which exists in the US but did not in the late Soviet Union - creates a climate for entrepreneurs like Bill Gates, Mark Zuckerberg, Elon Musk, Jeff Bezos and more. These people aren`t robber barons, often they provide useful services for the society. 

I doubt that companies like Microsoft, Google, Amazon, Meta could have evolved in countries where high risks are not appropriately rewarded. By taking risks Musk & Co. are driving innovation and economic growth, creating wealth for everybody. The innovators generate new products, services and jobs. America`s rise was driven by inventors & entrepreneurs who often became billionaires (in today´s money).

 

                      Social Returns

Prof. Nordhaus, winner of Economics Nobel Prizes 2018, wrote in his 2004 paper “Schumpeterian Profits in the American Economy: Theory and Measurement,” : “Only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.” (aier.org). 

According to Nordhaus "producers, on average, capture a mere 2.2% of the total benefits of their successful introduction into markets of technological advances. A whopping 97.8 % of those benefits are enjoyed by people each of whom as a consumer did nothing other than exercise his right to spend his money on those options that he judges best for himself".  

Today millions of Americans benefit from Sam Walton, who founded Walmart in 1962, by being able to purchase a lot of things for very low prices, especially people with a tight budget are better off thanks to him. Millions of Germans - and some Americans & British - buy cheap things @ the  supermarket chains Aldi Nord & Aldi Süd, founded & owned by brothers Karl and Theo Albrecht. Millions enjoy the comfort to have a huge variety of goods delivered fast & cheap to their homes - thanks to Jeff Bezos & Amazon. Bezos` obsession with customer service, low costs & prices forces the whole retail industry to get more efficient and customer friendly.

 

                Outrageous Consumption 

 
The media is also obsessed with the outrageous consumption of the one percent, their yachts, their mansions, their art collections and so on. But does anybody get hurt when Wall Street moguls own mansions stuffed with Picassos and Warhols (billionaires)? Do we get poorer when a hedge fund manager buys a Rothko for $50,000 million? (wsj). The consumption expenditures of the one percent usually don´t compete with the consumption of the average people, they might eat more beluga caviar, but they don`t eat more bread, rice and noodles.

Often the rich donate their fortune to museums, universities and other public institutions. Collections like the Guggenheim, New York`s MoMa and other  museums in the US are usually financed by donations and often show art work which is loaned by some rich people. The majority of US cultural institutions depends on charities financed by billionaires. At the end of 19th century people who had build great fortunes - like Henry Clay Frick, John d. Rockefeller &J.P. Morgan - began to found or endow museums, concert halls, orchestras, colleges, hospitals, and libraries in astonishing numbers in every major city (driveby ). The billionaire Carnegie - one of these donators - wrote, that "a man who dies rich, dies disgraced" and gave away  nearly his entire fortune. Cultural landmarks like Manhattan`s Carnegie Hall are financed by philanthropists.

 
It think the cult around Piketty and the bluster about income income equality are based on envy. The aversion against the extreme wealth of Musk, Zuckerberg, Gates, Buffett and likes obstructs the fact that the average person in the West is much richer than people in emerging countries or our ancestors  (chicagomag). There might be rising inequality worldwide but it is clear that life for everyone got better in the recent decades.




PS: For illustration I chose Daniela Rossel`s portrait: "Inge and her mother Ema in the living room" (from "Rica and famosas" series, 2000, Chromogenic print)  The artist is known for her portraits of the rich and famous in Mexico

Books: Edgar Wallace`s The Door With Seven Locks Is Still An Easy Beach Read

 

(Drivebycuriosity) - Edgar Wallace belonged to the most successful English book authors in the 20th century. He created more than 170 novels and about 1,000 short stories, mostly crime mysteries (wikipedia). In the 1960s a row of funny Edgar Wallace films, featuring the peerless Klaus Kinski, became huge hits in Germany.

I enjoyed his novels  - and films - decades ago and decided to reread "The Door with seven Locks" ( about 200 pages amazon ). The book, written around 1920, shows its age, you can call it old fashioned, but it has a charming patina and it is a lot of fun. 

The novel starts slowly and humorous, but gains speed and becomes fast, mysterious & almost a bit scary (written for an audience who could not imagine today`s horror flicks). 

The plot is about a smart detective, a young women, an absent lord & the name giving door with the associated seven keys. The lead characters have to deal with evil people and even worse subjects. There are quite a lot twists & turns and it gets a bit topsy-turvy & spooky, but there is also a romance.

"The Door" is an easy read for the beach. In the moment of writing the Kindle version cost just 99 cents. 

Economics: When Will Inflation Turn Into Deflation?

  (Drivebycuriosity) - The inflation rates are collapsing. Above you can see the so-called wholesale inflation, the change rate of the producer price index ( source). It dropped to 0.1% in June, the lowest since deflation in 2020.

 

 (source )

Above follows the so-called head inflation, the change rate of the consumer prices. It`s called so because it make the headlines in the media. This index adds services which are around 70% of the economy, including rents & house prices. This measure dropped to 3% in June, a drop of 6.1. percentage points in 12 months.

 

 

 (source )

 

Above you can see online prices, which are already falling. Adobe reports: "Online prices continued to drop, falling 2.6% compared with June 2022 and 1.3% below May 2023" ( adobe)

 

 ( source)

The collapse of the inflation rates is no surprise. I have been blogging about this topic since March ( driveby). Inflation follows the money supply (above the growth of money volume: M2 fred.stlouisfed).

 

 

(source )

                      Helicopter Money

In 2020/21 the US government - supported by massive bond purchases by the Federal Reserve -  flooded the US economy with trillions of dollars, giving the Americans (buyers) enormous buying power. Friedman called this action prophetically helicopter money.

As a result in 2020 & 2021 the US money supply M2, the engine of the inflation, jumped 40%. The money deluge met a constraint supply of goods & services, partly because of COVID-19 which disturbed the supply chains. "Inflation is caused by too much money chasing too few goods and services", notice the  economists at fisherinvestments. "It is no surprise that prices increased so much", comments Tyler Cowen, Professor at George Mason University. 

 

                            Causal Connection

The causal connection between money and inflation is known since the 16th century at least. Nicolaus Copernicus described already in the year 1522 how "too much money" causes inflation. Copernicus` "quantity theory of money" is based on observations: 

Early in the 16th century Spain conquered today`s Latin America and looted the silver stocks. The Spaniards send the precious metal to Europe where is was printed into coins and used as money. 

As a result the European money volume jumped. The flood of money raised suddenly the demand for scarce goods & services and caused a jump of the price level. I am convinced that the flood of monetary silver hiked the profits of many weavers, potters, bathers & traders in the 16th century.

Elaborated studies by Milton Friedman, Karl Brunner, Allan Meltzer and many other economists (known as Monetarists) described already in the 1960s how and why the inflation rate follows the growth rate of money with a time lag (causal connection).

 

( source)

The evidence (charts above) shows that the up-and-downs of the inflation rates are following the monetary wave from 2020/21, confirming Copernicus & the monetarists from the 20th century.

If the Federal Reserve continues with her interest rate hikes - as already announced - it is likely that the inflation rates continue their sharp fall and turn negative. Maybe then the skeptics will have something new to worry about.

 

Books: The Selfish Gene by Richard Dawkins - Revisited

 (Drivebycuriosity) - Some books changed public thinking, the way we see the world around us. One of them is "The Selfish Gene" by Richard Dawkins, a follower of Charles Darwin (amazon.com). The author describes how evolution works and how this selection & adaptation process informs our behavior. Although this book was first published in 1976 it still gives valuable and precise insights into the basics of life.

Dawkins likes to provoke his readers. He confronts us with a challenging thesis: Humans, animals and plants exist just for the survival of their genes. We, animals & plants too, are just survival machines for our genes, claims the scientist.

 

                 Competing Molecules

Yes, that´s hard to swallow. But Dawkins develops his thesis step by step and he has a lot of good arguments & evidence for it. He starts with the youth of the earth, as molecules developed, which became more and more complex. Some of these molecules began to copy themselves. This was the start of a long chain of reproduction which shapes our lives until today. These self-reproducing molecules had to compete which each other to win more space and energy. The most successful molecules survived this natural selection process and now shape the lives of people, animals and plants.

As the earth got older some of the self-reproducing molecules developed further into complex chains of molecules, our genes. These genes built constructions around themselves to protect themselves and to survive. First they built bacterias, later more complex shapes like plants, animals and - finally - us.  

Dawkins sees us (and animals and plants) as machines formed for the success and the survival of the genes. 

 

                      Huge Library

Our bodies contain teams of genes working together, with the common aim to survive and to reproduce. Dawkins describes this as a huge library, which consists of books, called the chromosomes, which contain a lot of pages, called the genes. This library, the DNA, contains all the information which is needed to shape us. DNA is the blueprint of our bodies.

Genes, which survived millions of years, are successful by definition. Many of them are just identical copies of the genes which existed a long time ago. Others are the successors of mutations, which are just mistakes which happen in the process of copying. 

Both groups gave us successful strategies, like running fast while hunting for food, being handsome while competing for sex (for reproduction). For example, genes are the reason that we crave fat & sugar, because both store a lot of energy, which was highly welcome in the frugal stone ages. Genes which make us more likable & eloquent might help our careers as tribal chiefs, lawyers and politicians.

The book describes a lot of strategies employed by our genes, because such strategies were in the past very often successful in out-competing rivals. Genes that developed less successful strategies are now much less common or extinct.

Even if you don`t want to follow Dawkins` argument everywhere, reading this book sharpens your mind and refreshes your picture of the world. Therefore "The Selfish Gene" should be an essential part of every advanced school education, an element of the curriculum.

Books: How Life Imitates Chess by Garry Kasparov

 (Drivebycuriosity) -  Life is ruled by strategies. Our future depends on the decisions we make today and the present is shaped by our moves in the past. It`s almost like chess, but much more complicated. Therefore I enjoyed the book "How Life Imitates Chess: Making the Right Moves, from the Board to the Boardroom", by Garry Kasparov ( amazon). 

The former world champion in chess (from 1985 until 2000) writes about his career & chess, but also about strategies in business, politics, military and daily life, therefore about "strategy and the art of living", the title of the German edition (Garri Kasparow: Strategie und die Kunst zu leben  www.amazon.de).

The book is very smart and intriguingly written, as you can expect from a long time world champion in this smart game. Kasparov`s writing shows the stringency he needed to rule the game such a long time. The Russian master describes how he discovered his own weaknesses, and how he learned to delete or at least to alter them and to gain strength. He concluded that to be successful one had to ask "why" things happen. 

This separates the strategist from the tactician, who just reacts (maneuvers). The successful strategist uses his knowledge about the nature of people to predict the strategies of the enemy and to counteract.

One of the strengths of the book is that the author uses a lot of historical examples from politics, military and business. Kasparov describes how politicians like Clinton, Churchill, Bismarck or entrepreneurs like William Boeing & Jack Welch (General Electric) succeeded or failed. These examples make his arguments more lively and more remarkable.

I got also the message that taking the initiative, meaning to be a bit more aggressive, is the way to success. Kasparov himself is famous for his aggressive way of playing chess and is now an ambitious Russian opposition politician.

Highly recommended - not only for connoisseurs of the royal game.

Economics: Sellers` Inflation - Old Marxist Wine In New Bottles

 

(Drivebycuriosity) - Inflation is collapsing. But Elizabeth Warren & Bernie Sanders still claim that inflation is caused by corporate greet and the media coined the term "greedflation"  (twitter thehill). They get support from 2 academics from Massachusetts: Isabella M. Weber & Evan Wasner published a paper called "Sellers’ Inflation, Profits and Conflict" (umass ). Sellers`! What about buyers`?

The authors asked "Why can Large Firms Hike Prices in an Emergency?" and answer: Large firms with market power have the "ability to hike prices". Weber & Wasner limit their thesis to 2 situations: Emergencies, like COVID-19, and to firms which "are price makers, but they only engage in price hikes if they expect their competitors to do the same".

Their arguments are mainly based on Marxist literature from the 20th century. They quote for instance the Polish Marxian economist Michael Kalecki, who presumed a "tacit agreement among firms of an industry to ´protect` profits, and consequently to increase prices" ( umass   page 5   wikipedia).

 

                  Helicopter Money

I have already a problem with the term "market power". Can Coca Cola - one of Weber´s culprits - really force me to buy their product? I avoided it for decades. And in 2009 the "powerful" General Motors (another one of Weber`s culprits) went bankrupt. 

I can image being on a station on the moon where just one supplier of oxygen exists, a monopolist. When I want to breath I have to purchase oxygen from him for his price. "Market power" is a term made up by lefties who despise private enterprise and who have no idea how an economy functions.

 

 (source )

But the Weber/Wasner paper has a much more severe fallacy. How could these academics overlook that in 2020/21 the US government - supported by massive bond purchases by the Federal Reserve -  flooded the US economy with trillions of dollars, giving the Americans (buyers) enormous buying power. Friedman called this action prophetically helicopter money.

As a result in 2020 & 2021 the US money supply M2, the engine of the inflation, jumped 40%. The money deluge met a constraint supply of goods & services, partly because of COVID-19 which disturbed the supply chains. "Inflation is caused by too much money chasing too few goods and services", notice the  economists at fisherinvestments. "It is no surprise that prices increased so much", comments Tyler Cowen, Professor at George Mason University (marginalrevolution ). 

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                            Causal Connection

The causal connection between money and inflation is known since the 16th century at least. Nicolaus Copernicus described already in the year 1522 how "too much money" causes inflation. Copernicus` "quantity theory of money" is based on observations: 

Early in the 16th century the Spaniards conquered today`s Latin America and looted the silver stocks. They send the precious metal to Europe where is was printed into coins and used as money. 

As a result the European money volume jumped. The flood of money raised suddenly the demand for scarce goods & services and caused a jump of the price level. I am convinced that the flood of monetary silver hiked the profits of many weavers, potters, bathers & traders in the 16th century.

Elaborated studies by Milton Friedman, Karl Brunner, Allan Meltzer and many other economists (known as Monetarists) described already in the 1960s how and why the inflation rate follows the growth rate of money with a time lag (causal connection).

The evidence (charts above) shows that inflation is following the monetary wave from 2020/21, confirming Copernicus & the monetarists from the 20th century.

 

            Excuse For Government Intervention

Apparently Weber/Wasner ignore history as much as they neglect basic economics. Instead the authors try to support their outdated thesis with an impressive amount of statistics & graphics. Germans call this Fleissarbeit (diligent piece of work). I suppose the statistics are just a red herring to distract from the biased ideological & anti-business approach of the paper. 

The references display an exposing list of Marxists and other left-wing authors, including Labor party advisor Nicolas Kaldor, Polish Marxian economist Michael Kalecki, central planning advocate A.P. Lerner, John Kenneth Galbraith & Paul Krugman. The authors ignored Milton Friedman and Brunner & Meltzer, the leading monetarists. 

Unfortunately the paper can be used as an excuse for more government intervention & regulation and might support FTC chair Lina Khan`s crusade against free enterprise (driveby ). Maybe this is the purpose of the paper.