What’s the price of order, you ask. Spoiler alert: it ends in “iolence”…
Now, depending on the phase of the dynastic cycle we happen to be discussing (or experiencing), this expression of domination can be more passive (ie. feminine, psychological, financial), or more active (ie. masculine, conscriptive, kinetic).
As is happens, we’re currently in the process of historically transitioning from the former category defined by the bezzlei and its associated perversions, towards the latter defined by the outbreak of WW3 in Feburary 2022. But why? Why can’t we just keep floating dreamily through the passive(-aggressive) wonderland of the late 20th and early 21st centuries?
Well, Timmy, it’s because every thermodynamic system has an inflection point, whether its cyanobacteria-driven algal blooms in freshwater lakes, or socioeconomic systems where the bezzle can no longer expand fast enough to maintain its illusory power, they can all be understood like a film’s frame rate dragging into strobe-light staccato, snapping over its knee fragile states of belief. The net result, certainly in the socioeconomic context, is that the mask slips and overt force (ie. war, confiscation, default) is required to reset balance sheets, which is to say reconcile over-inflated debts with cold hard reality. This is why “the great reset” is scheduled (or at least administered) periodically by WEF et al. so as to channel excessively chaotic entropy into hierarchical order, which can later be harvested as productive surplus.
Dmitry goes into these macro ebbs and flows in more mechanical detail, if you’re interested, but anecdotally we see these same forces at play at the micro level. Take, for example, the lovely little semi-suburban house that we’re just about to put on the market. It’s the white picket fence dream. Quiet street. Peaceful, pleasant neighbours. Professional class values. Two-minute walk to a French immersion school. No homelessness in sight. No need to lock your garage overnight for fear of having your bicycle stolen. It’s even an “investment“!
Y’see, we bought the house 9 years ago for $595,000 with $150,000 down at 3.75% interest rate, and this summer it’ll go for sale for a nominal $700,000. Talk about making money while you sleep! Add to that the tax-free capital gains treatment for primary residences and voila, mucho dinero en mis pantalones. Right??!
Well, perhaps not… for starters, it’s a relatively modest 1,200 sqft bungalow of 1960-era vintage, upon which we lavished $120,000 in upgrades and repairs: completely renovating the basement, installing air conditioning and water purifier, adding an electric car charger and gas-powered heater to the garage, and upgrading to fibreglass-framed triple-glazed windows and doors; not to mention insurance, property taxes, costs of borrowing, the staggering opportunity cost of the downpaymentii and closing/transaction costs required before handing the keys over to the next sod lovely young family. In short, it was a bit of a bath compared to renting!iii So surely Pete regrets his “mistake”? Surely he wishes he’d moved his whole family to Costa Rica to live off beans and rice while his early coins mooned?
No, Timmy, nothing could be farther from the truth. Because in exchange for getting absolutely rinsed in real termsiv – which is to say getting absolutely crushed in the purchasing power of the jumbo-dollars that went into the house relative to the micro-dollars pulled out nine years later – we walked our boys to preschool and elementary school every morning, played street hockey with the neighbours, bicycled to the nearby convenience store for slurpees, harvested sour cherries from our backyard to make traditional Romanian liqueur, nested into and improved our home, and slept well thanks to the stability of ownership, all while living in the same city we grew up in, with all four of grandparents within 15 minutes drive. What’s that worth? Turns out, quite a lot.v
So perhaps it’s all a price worth paying, which it might as well be, because pay it we will; in the last phase with our sweat, in the next with our blood.vi For violence is the father, order the mother, and hierarchy the holy spirit. Amen.
- None less than Michael Pettis of the Carnegie Endowment has opined on “the bezzle” in 2021:
Munger’s insight was that rising stock or real estate prices can generate income and wealth effects whether or not these rising prices reflect real increases in the earning capacity of these assets, that is to say in their real fundamental values. When they do reflect real increases in wealth, the increase in the investor’s wealth is matched by an increase in the real productive capacity of the economy. There is no false or distorted sense of wealth.
But when asset prices increase for reasons other than real increases in their productive capacity, something very different happens. The overall economy is no better off because there will be no corresponding increase in the productive capacity of that economy. The owner of such assets, however, feels richer—although only temporarily—because over the long term, asset prices eventually converge to a value that represents their real contribution to the production of goods and services.
When the perceived value of assets outpaces their actual economic utility, the psychic wealth of the economy once again rises, and because this rise is not associated with any corresponding rise in real wealth, it is only temporary.
But of course honest students of recent economic and financial history know full well that it was the late great MP who popularized the term in 2014:
there’s a virtual economy, denominated in bezzle-USD. There’s also a real economy, denominated in tide-USD. These both pretend to be using the same unit of account, the USD, but in point of fact they do not. On the basis of this pretense of identity some de facto convertibility between bUSD and tUSD does exist, but it displays limitations which are often unexpected surprises for the naive (as the equivalency breaks down in practice causing fault lines in the convertibility that seem to come “out of nowhere”).
And further in 2015:
the treadmill of sublimated violence that is the bezzle
- The house downpayment in 2016 was equivalent to 150 BTC at the time… but even if it was “just” invested in something obvious and banal like $AAPL or physical gold, it’s not hard to see that renting a house was a DRAMATICALLY better value proposition than buying. The exercise of calculating the size of this delta is left to the alert reader. ↩
- You might be interested to learn that the numbers between owning and renting actually balance out completely if you do a 0% down mortgage, but post-2008 those are rare unless you’re leveraging the excess savings of your boomer parents (which honestly you absolutely should be). ↩
- ~50% loss in gold-backed bucks. ↩
- Does that make me an “investor”? You’d better believe it! But not in the way you’re thinking, which is more a damnation of your limited understanding than my limited ability. Recall, I enrichment-maxx, not spreadsheet-maxx. I don’t wake up thinking about how to make money, I mostly run my businesses, stay fit, enjoy family time, explore random rabbit holes, and then once a decade or so make a mint for sport. ↩
- To quote Pettis again:
it is mainly ordinary households who pay for the reversal of the bezzle, either directly through taxes or indirectly through repressed deposit rates or even unemployment. Unfortunately, the history of bezzle suggests that, while ordinary households and workers absorb few of the benefits from the creation of bezzle, they tend to absorb most of the costs of its reversal: it is probably not just a coincidence that periods in which large amounts of bezzle are created and then destroyed seem almost always to experience rising income inequality.
To which we can see the unvarnished roots again from MP in 2015:
The Chinese may build a different fiat out of the Shanghai Co-op. But by and large, currency as a thing may well go away altogether. Consider : why do most people need to touch currency ? They work for the government. They get their daily ratios in government-run canteens (McDonalds/we). They dress in government run shops, by government designs. Everything they do is government, why give them money at all ? Let them have scrip, will be good enough for them (that’s where things are going anyway, with the ever increasing restrictions on derp-in-the-street banking, and general handling of currency). […]
Mind that looks never price one out of the whore market (if you don’t believe me, go to the ghetto and look around). Only price that does, and desperate mothers / junkies looking for a fix have no fixed lower price. They’ll work hard for very little money doing disgusting things that absolutely kill their life expectancy. Like losers should, like losers always have.