Dylan Grice is a brilliant man. Based on this picture, he’s about 17-years-old, but he’s also Société Générale’s Cross Asset Research strategist whose learning branches far beyond investments and economics.
Consider carefully his most recent piece (much of which you can find here), in which he says that, priced after all the recent money printing, gold should be at $10,000 per ounce right now. The piece in general serves as a great primer of the deceptive evil of money printing and, at the same time, penetrates into psychological and historical truths. Consider this outstanding passage:
By issuing bonds to itself the government seems to have miraculously raised revenue without burdening anyone else. This is probably why the mechanism is universally adopted throughout the world’s financial system. Yet free money does not, and cannot, exist. Since there can be no such thing as a government, or anyone else for that matter, raising revenue “at no cost” simple logic tells us that someone, somewhere has to pay.
But who? This is where the subtle dishonesty resides, because the answer is that no-one knows. If the money printing creates inflation in the product market, the consumers in that product market will pay. If the money printing creates inflation in asset markets, the purchaser of the more elevated asset price pays. Of course, if the printed money ends up in asset markets even less is known about who ultimately pays for the government’s ‘free lunch’, because in this case the money printing sets off its own dynamic via the perpetual Ponzi machine that is the global financial system. The ‘free lunch’ providers will be the late entrants into whatever asset-bubble or investment fad the money printing inflates.
The point is we can’t know who will pay, only that someone will pay. Thus the government has raised revenues without even knowing upon whom the burden falls, let alone telling them. Compare this to raising explicit ‘honest’ taxes, which are at least transparent. We know who levied the sales tax or the income tax, when it was levied, when it is payable, and how much has to be paid. The burden of this money printing, in contrast, seeps silently into the economy, falling indiscriminately but indubitably on unseen, unknowing victims.
The economic hardships this clandestine tax operation imposes are real and keenly felt. But because no one knows from where it comes the enemy is unseen. Thus, during great inflations, societies turn on themselves with each faction blaming another for its malaise: the third century inflation crisis in ancient Rome coincided with Diocletian’s infamous persecution of the Christians; the medieval European debasements coincided with surging witchcraft trials; the extreme Central European hyperinflations following WW1 saw whole societies blaming their Jewish communities. More recently, the aftermath of the historically modest asset inflations in the tech market and the US real estate market have seen society turn on “fat-cat CEOs” and “greedy bankers” respectively.
The guy should publish a book. I’d stand in line to buy it, and then I’d stand in another line to get him to sign it. And I hate lines.Bookmark it: del.icio.us | Reddit | Slashdot | Digg | Facebook | Technorati | Google | StumbleUpon | Window Live | Tailrank | Furl | Netscape | Yahoo | BlinkList