Understanding the New Era of Economics and Politics
When I’m on the road I find Daily Prophecies crowding into my mind and MacBook.
Last night I had dinner at Morton’s on Connecticut Avenue with my counsel Ralph Benko and consummate DC sage Anne Carlisle, who writes a blog on disruptive technology in Washington.
Anne tells me that while the SEC stomps on blockchain companies and the Trump Administration disparages the technology, the Department of Health & Human Services is saving $795 million this year by streamlined blockchain record keeping.
I was exhilarated to hear the news that Xi Jinping is not the only blockchain enthusiast in government.
But this morning I opened my daily email from the scintillating Bill Bonner and get splashed on my face a full pail of the elegantly penned icy douse of his “Diary.”
What is $795 million saved on healthcare “paperwork” compared to the colossal issues of federal paper by the US government, with $3 trillion in new federal debt since 2017?
As Bonner recounts, the Department of Education got a 64% raise and Commerce 15%. The Pentagon garnered an additional $654 billion, and the Department of Agriculture got enough to account for some 40% of all farm profits.
That doesn’t even include widespread state subsidies for windmills and druidical sun-henges across the country in the bizarre retro-religion of “climate change.” It doesn’t include the gross abuses of predatory green law, bringing down almost the entire US chemical industry with chemophobic suits. As Monsanto goes, watch out DuPont!
Nor does this accounting include the repeated federal raids on US high tech companies, such as a $5 billion bill for Facebook from the FTC for trumped-up “privacy” violations.
But to Bill Bonner, and me, all these federal gouges and grabs are mere symptoms of a gigantic governmental extortion and redistribution of time.
Money is Time… Gold is Time
As my readers understand, money is most essentially time. Measuring the worth of any good or service is the number of hours and minutes a typical worker has to labor to buy it. As I wrote in The Scandal of Money, just now being released in a Chinese translation, the government has been engaged in a rebellion against time.
While most workers are confined to the world of real-time, trading their hours of labor for goods and services — the world’s governments, central banks, and crony financiers print counterfeit currencies. Trading them around the globe at a rate of $5.1 trillion a day, roughly 25 times global GDP, they rebel against the inexorable constraints of time.
It is a hypertrophy of finance and it generates as much as 40% of corporate profits without even offering a stable currency to guide investments. It doesn’t even prevent trade wars and beggar-thy-neighbor monetary bezzles.
Bonner explains some of the class implications: “If you work by the hour, the guy with money can buy your time. That’s what it really means to say someone is ‘rich’ — he has more time because he can control not only his own but yours too.”
Going back to the portentous year of 1971 when President Nixon ended the dollar’s last tie to gold, Bonner writes: “The guy who had a thousand dollars of stocks… could buy 260 of a working man’s hours. Today that thousand-dollars-worth of stocks is worth about $32 thousand… which at today’s $28 per hour average wage will buy 1,140 hours of the typical working man’s time — about four times as much as in 1971.”
I could cavil about these numbers, but they capture a profound truth.
Bonner concludes: “Compared to the wage earner, the capitalist is four times as rich… He has more time because he can control not only his own, but yours too.”
Money is time.
Bonner ascribes Trump’s election and the polarizing tensions in our society largely to this version of the scandal of money. The politicians of various guises want to blame China or Trump or Mexicans or “billionaires” or the deep state or Facebook or whatever fashion plate bogeyman jangles their synapses.
In his dispositive Diary, “How Executive Order 6102 Doomed America,” Bonner drills into the real cause of the crisis: President Roosevelt’s Executive Order in 1933 that made it illegal for citizens to own any significant quantities of gold. This executive order enabled him to devalue the dollar roughly 75% against an ounce of gold from $20 an ounce to $35.
Gold is essentially time — the time to mine it has hardly changed in a thousand years. As mining gear improves and mining capital increases, the gold becomes proportionately harder to extract from ever deeper and more attenuated lodes. In the past, gold-rushers could pan ingots from streams in California. Today a new high-tech gold mine takes roughly a decade to develop and open.
The gold standard prevented governments and central banks from stealing from savers by debauching the currency. The Fed can print money but it cannot print gold. It cannot print time. But today, through quantitative easing and other speculations that steal from the future, governments can rob some citizens and bribe others and crown cronies in castles.
But what is missing from Bonner’s brilliant and mostly definitive screed?
He downplays the technological revolution of the last four decades. By focusing on the Dow and its appreciation, he misses the radical changes in the value of the companies in the index as measured by the time-prices that workers have to pay for its ever more abundant goods and services.
While the “capitalist” was getting four times richer compared to the “worker,” both still had a rigid cap of 24 hours a day. The real capitalists were investors, with mostly illiquid wealth, and worked more hours than their “workers.”
By 1971, even the self-indulgent inheritor had already maxed out his free time.
But the worker in 1971 had to spend nearly four times as many hours to buy basic goods and services, food, clothing, and lodging. Today, because of an explosion of innovations, the worker has time for vacations, entertainment, and other options such as home businesses.
Bonner’s class observations are less compelling than his devastating charges against governments and central banks that are stealing these fruits of innovation, raiding the worker’s retirement savings and depleting their investment opportunities.
The numbers expound the scandal of money. The fruits of innovation are being passed on to guaranteed banks too-big-to-fail, tenured professors of leftist can’t, giant agricultural conglomerates, and Luddite fashion-plates of doomsday green politics.
As a result, governments are wildly distorting the crucial price signals that guide innovators and inventors. Future innovations are being driven out of America to other countries, led by China, which according to time prices has been growing more than 11% a year for two decades.
The implications of time-prices continue to mount. They provide a codebook to interpret the economics and politics of the new era.
Editor, Gilder’s Daily Prophecy