An Experiment in Scotch

"I write to discover what I believe." Michael Lopp on Twitter

Waffles And Clotted Cream — An Epilogue

Editor’s note: Four months ago, I wrote an arti­cle about infla­tion couched in terms I thought any­one could under­stand. My good friend Jim E. has writ­ten an epi­logue to the story, a story with­out a par­tic­u­larly happy end­ing unless you hap­pen to work for the fed­eral gov­ern­ment. I never knew Jim was such an elo­quent writer. This isn’t the first time there’s been a guest writer at the Exper­i­ment but cer­tainly one of the best. — Brett

Cur­rency Wars Part … redux. Or how I stopped wor­ry­ing and learned to love deflation.

In the Land of Peo­ple with Below Aver­age Den­tal Hygiene, Hermione has worked her whole life and man­aged to save a waf­fle for her retire­ment. The waf­fle was impor­tant to Hermione because Hermione planned on buying-and eating-organic but­ter and clot­ted cream to make up for all the years of work­ing and doing with less so that she could save. It is not quite time to retire, so Hermione is look­ing for a “risk free” place to keep her waffle.

A gov­ern­ment offi­cial, who will by tra­di­tion remain face­less and name­less, decided that the gov­ern­ment could do more … well, gov­ern­ing … if only the gov­ern­ment had more waf­fles. So, this face­less and name­less gov­ern­ment offi­cial deter­mined that the gov­ern­ment could bor­row waf­fles. That way, the gov­ern­ment could have more waf­fles and, con­se­quently, gov­ern more, with­out the pesky prob­lem of wait­ing to accu­mu­late waffles.

Only one prob­lem. How to repay the waf­fles? Bor­row­ing can be expen­sive. Then, Bob — you remem­ber Bob who makes the excel­lent organic grass fed but­ter — shows up in Carl’s office. And, our face­less and name­less gov­ern­ment offi­cial see’s Carl’s plan of dou­bling the num­ber of waf­fles and our face­less and name­less offi­cial has an epiphany. Wait for it. It is coming.

So, with his epiphany, our face­less and name­less offi­cial decides that he can bor­row waf­fles by sell­ing gov­ern­ment backed bonds. And, he decides to call these bonds a “risk free” invest­ment because, well, it is the gov­ern­ment. Who can you trust if you can­not trust your own gov­ern­ment? (Don’t answer that. That would be skip­ping ahead). With his plan in hand, our face­less and name­less offi­cial prints up gov­ern­ment bonds and offers them for sale: one bond for one waf­fle. Like a match made in … the other place. Hermione buys a “risk free” bond from the face­less and name­less offi­cial with full expec­ta­tion of being repaid her waf­fle next year. And, Hermione will receive a very small amount of Bob’s organic but­ter to com­pen­sate her for lend­ing the gov­ern­ment her waffle.

If you remem­ber in the orig­i­nal story, Carl then dou­bles the num­ber of waf­fles. And, at that point, our face­less and name­less official’s epiphany is almost real­ity. The fol­low­ing year, after the num­ber of waf­fles had dou­bled, Hermione redeems her bond and receives her one waf­fle. A freshly baked waf­fle. Unfor­tu­nately, her waf­fle will now only buy half the organic but­ter and clot­ted cream that the same waf­fle would have bought a year ago. Hermione’s dream of liv­ing on organic but­ter and clot­ted cream is shat­tered. She is dismayed.

But our face­less and name­less offi­cial has man­aged to keep one waf­fle after repay­ing one to Hermione. Our face­less and name­less offi­cial is elated (that would be the big word for happy). Some­one is happy, so this must be the happy end­ing? Not exactly.

When the num­ber of waf­fles is dou­bled, the gov­ern­ment became the big win­ner and the hard work­ing, hard sav­ing Hermione … well not so much. A long time ago, in a galaxy far away from waf­fles and crum­pets, this was called steal­ing. Here. Now. It is called Fed policy.

And, the above is not some fan­ci­ful story. If you bought a US 1984 30 year bond in 1984 (and that would be with 1984 dol­lars), that bond would be worth about 40 cents on the 1984 dol­lar in 2014 — last year — when it was repaid. Not some far off future date. Last year. For some­one who retired in 1984 on a “fixed income”, they face Hermione’s prob­lem and have 40 cents of buy­ing power com­pared to the day that they retired.

And, that 40 cents on the dol­lar? That is found using the US government’s own offi­cial infla­tion num­bers. For some rea­son, I am not so trust­ing that the gov­ern­ment cor­rectly cal­cu­lates infla­tion. It is not in the government’s best inter­est to cor­rectly cal­cu­late infla­tion. I sus­pect that the 40 cents on the dol­lar is much worse: maybe even 10 or 20 cents on the dol­lar. But, maybe that is just me.

The above is a sim­ple story with­out much of the detail. But, it illus­trates the effects of infla­tion even when using the offi­cial gov­ern­ment infla­tion num­bers.
All gov­ern­ments use taxes to col­lect rev­enue. As illus­trated, infla­tion has the same effect on the gov­ern­ment finances as rais­ing taxes. Caus­ing infla­tion — an offi­cial pol­icy of the US gov­ern­ment — taxes the old and the poor. It is a hid­den tax. Hid­den in plain sight. But, you never hear it called a tax for some rea­son. All the unnum­bered face­less and name­less gov­ern­ment offi­cials as well as the elected with actual faces and names sim­ply keep quiet about it.
As an excer­cise, re-read the above and instead of dou­bling the num­ber of waf­fles, cut the num­ber of waf­fles in half. That would be called defla­tion. And, with defla­tion, our face­less and name­less offi­cial would have a real prob­lem repay­ing Hermione. And, that would be excep­tion­ally painful for this face­less and name­less official.

The Fed and the rest of the gov­ern­ment rec­og­nizes that defla­tion might be so bad that the face­less and name­less would have to find some­thing else to do and maybe actu­ally get a face and a name. And, that is never going to hap­pen if they can help it.

The Wilderness Warrior

I recently fin­ished read­ing Theodore Roosevelt’s biog­ra­phy, The Wilder­ness War­rior writ­ten by Dou­glas Brink­ley. The book is focused on the con­ser­va­tion cru­sade that Roo­sevelt embarked on to save mil­lions of acres through­out the United States from log­ging, min­ing and pri­vate hold­ings. I had no idea the scope of the man­dates Roo­sevelt handed down over his two terms. Many of the national forests and parks were set aside with exec­u­tive orders dur­ing Roosevelt’s tenure. He strongly held that a life lived out­doors in the wilder­ness was the way to hap­pi­ness. He called it the stren­u­ous life and he was deter­mined to pro­vide places that future gen­er­a­tions of Amer­i­cans could lead lead that life among Nature’s beauty. I was struck through­out the book by TR’s under­stand­ing of the nat­ural world.

He was a mas­ter orinthol­o­gist before he went to col­lege at Har­vard, able to rec­og­nize hun­dreds of birds not only by sight but also by the songs and sounds they made. He wrote papers on wolves and elk. Roo­sevelt essen­tially was the father of con­ser­va­tion in Amer­ica from a polit­i­cal stand­point (there were many nat­u­ral­ists at the time like Bur­roughs or Muir but they were hardly in the posi­tion to imple­ment change that TR was). He was also the first Pres­i­dent to use the Exec­u­tive Order as a pol­icy means, imple­ment­ing hun­dreds of fed­eral bird reserves, national parks and national mon­u­ments with­out ever hav­ing to deal with Con­gres­sional approval. The next time you hear some polit­i­cal wag com­plain­ing about Obama’s or Bush’s usage of the Exec­u­tive Order to imple­ment pol­icy, remem­ber that TR used the EO a stag­ger­ing 1081 times, a full 864 more times than the record at that time, Ulysses Grant (217).

Exist­ing in a time before a 24 hour news cycle, TR was able to imple­ment pol­icy he deemed impor­tant and that pol­icy was largely focused on set­ting aside mil­lions of acres of for­est through­out the west­ern states of Cal­i­for­nia, Col­orado, Wyoming, Mon­tana and Utah. On one day in 1908 (July 1st), he cre­ated 45 national forests just by sign­ing his name with a pen. Of course it was a dif­fer­ent time and place but today, even the slight­est pol­icy change effected by EO is railed against by the oppos­ing party as if it were a per­sonal attack. In an envi­ron­ment of increas­ing polit­i­cal divi­sive­ness, I’m sur­prised Pres­i­dents, espe­cially out­go­ing ones, don’t use the EO more to imple­ment policy.

Roosevelt’s idea of the stren­u­ous life is another idea miss­ing from our world today. So lit­tle of what we do could be con­sid­ered stren­u­ous and this was one of TR’s great­est fears. He saw the increased urban­iza­tion of Amer­ica as a scourge to fight against at all costs. Today in our world of ease and com­fort, there is lit­tle that is stren­u­ous. Man­ual labor, even skilled man­ual labor, is dis­cour­aged across all spec­trums which Matthew Craw­ford wrote about in Shop Class as Soul­craft, another book I recently read. We choose leisurely careers, at least from a phys­i­cal view­point, and we spend our leisure time doing mostly leisurely activ­i­ties (says the guy writ­ing a blog post on a com­puter). Roo­sevelt advo­cated the oppo­site, leisure time spent in the wilder­ness hunt­ing, camp­ing, ranch­ing or bird­ing. He reg­u­larly went on expe­di­tions through the woods that were dif­fi­cult. In fact, he seemed to grow hap­pier dur­ing times of dif­fi­culty like hik­ing moun­tains dur­ing a snow storm or hunt­ing bears in Louisiana.

The book is long, per­haps too long at 800 odd pages, but it’s eye open­ing for some­one like me who long ago for­got the power of our 26th Pres­i­dent. It’s also an excel­lent reminder of a time when a strong per­son­al­ity in the Pres­i­den­tial office resulted in sweep­ing changes that affected gen­er­a­tions for years. TR’s empha­sis on con­ser­va­tion changed both the phys­i­cal and polit­i­cal land­scape of Amer­ica. As I go through the Texas Mas­ter Nat­u­ral­ist pro­gram, I see the effects of his poli­cies even today with the focus on con­ser­va­tion of range­lands and prairies in Texas. I hope to con­tinue liv­ing a stren­u­ous life in honor of Theodore Roosevelt.

On Naming A Cat

With def­er­ence to Eliot
And that Mis­ter Mistof­felees
Can you choose to name your cat
A sobri­quet like Socrates?
Or maybe since there is a cat
Already in the house who’s named
Vin­cent, you fig­ure surely that
Picasso for the newly tamed.
His eyes are blue like oceans bay
So you could call him Frankie, too.
He croons and purrs both night and day
And seems to get a kick outta you.
But if T.S were truly right
And two monikers are required
The pres­sure weighs and causes fright
In hope­less tur­moil I am mired.
A name is fixed and per­ma­nent
For­ever by it he will go.
I’ll hope for help from heaven sent
Bar­ring that I’ll just call him Mo.

On A Longer Fast

As I men­tioned in my Lenten 2015 post, I kicked things off with a 48 hour fast, my longest one yet. I had pre­vi­ously done a 24 and a 36 hour fast but most of the stud­ies out there point to the min­i­mum nec­es­sary as 48 hours (and the stem cell regen­er­a­tion stuff is say­ing at least 72). My last meal pre-fast was Tues­day night at around 9:30 after Mas­ter Nat­u­ral­ist class. Before start­ing, I did a lit­tle research on longer fasts and as with any­thing on the Inter­net, advice was con­flict­ing at best. This site seemed the most infor­ma­tive but also made it sound like fast­ing bestowed super human pow­ers on you. In my pre­vi­ous 36 hour fast, I did not turn into Super­man but after day 1, I did notice an increased abil­ity to focus up until about the time I ate. I don’t think this was observer bias since I wasn’t aware of the pos­si­ble benefits.

For this fast, day 1 was def­i­nitely the hard­est though noth­ing ter­ri­ble. I had my first tem­po­rary hunger pains around noon on Wednes­day. In my lim­ited expe­ri­ence, these are almost always minor and can be mit­i­gated with cof­fee and sub­stan­tial water. The more dif­fi­cult hunger hap­pens for me around 20–24 hours. In the arti­cle linked above, the author says this is your body try­ing to stay in home­osta­sis. This makes a lot of sense in our mod­ern world where for most of us (at least the ones read­ing my blog), hunger is a very abstract con­cept. Our bod­ies are used to eat­ing every 6 hours and when we miss a cou­ple of cycles, minor panic sets in at a nutri­tional level. But in the grand scheme of things, long term home­osta­sis with­out any stress to the sys­tem results in frailty. Think about sit­ting on your couch for a week. Your body doesn’t like that. There is some evi­dence that expo­sure to cold brings the body out of home­osta­sis and increases metab­o­lism. A reg­u­lar feed­ing cycle con­di­tions your body to never feel hunger and there­fore never acti­vate impor­tant mech­a­nisms like attack­ing free rad­i­cals which hap­pens dur­ing fasts. What I did to make the 20 hour hunger pains eas­ier was drink more water and imag­ine my body destroy­ing can­cer caus­ing free rad­i­cal cells. Obvi­ously this is likely a stretch but it helped with will power.

On day 2, I found it much eas­ier to ignore being on a fast. I was never actu­ally hun­gry in a phys­i­cal sense. What I did encounter was my brain try­ing to con­vince me to stuff some­thing in my mouth. Again, I think this was as much habit/homeostasis as any­thing. We have a cat that if you don’t feed her every 6 hours, she turns into a meow­ing kitchen timer. The thing is, she’s prob­a­bly 3 pounds over­weight and could go 4 days with­out food just fine. That’s what I thought about my brain on day 2. Of course, it didn’t help that some­one brought fresh fruit and donut holes for break­fast to work along with a work­ing lunch that would have included free sand­wiches if I had par­taken. Temp­ta­tions aside, the real strug­gle was just mak­ing the real­iza­tion that my hunger seemed to be largely psy­cho­log­i­cal men­tal panic and not true “I may die” hunger.

Mid­day, I started tak­ing half a tea­spoon of glu­t­a­mine in my water every 4 hours or so. This came on the rec­om­men­da­tion of the site linked above. I’m not sure if it helped but I’ll def­i­nitely use it more con­sis­tently on future fasts, espe­cially since I have 8 ounces of the stuff. He sug­gests daily use and I’ve heard other peo­ple talk about amino acid usage dur­ing inter­mit­tent fast­ing. I’ll prob­a­bly play around with it and report back.

My goal was a 48 hour fast but I was kind of hop­ing to make it 60 hours into Fri­day morn­ing. How­ever, even­tu­ally the men­tal hunger panic won out at the 47 hour mark. I ate pretty healthy start­ing out with an orange and then lean turkey. Hav­ing a lit­tle more expe­ri­ence with fast­ing helps avoid going crazy com­ing off of it. Not to men­tion, most sources say to go easy com­ing off longer fasts.

In the end, I didn’t achieve Super pow­ers. How­ever, I did notice that get­ting out of bed this morn­ing with only 6.5 hours of sleep was pretty easy. One of the sup­posed ben­e­fits of fast­ing is less sleep is nec­es­sary though that’s entirely anec­do­tal. I don’t have any­thing mea­sur­able at this point. I’m 45 days into a 90 day reset hop­ing to vastly improve my lipid pan­els so that will be the first mea­sur­able moment. The proof will be in the pud­ding. Now I want pudding.

Lent 2015

I don’t have a lot of tra­di­tions but Lent seems to be a con­sis­tent one that I uphold. For me it’s a jour­ney of both sac­ri­fice and growth. I give some­thing up to expe­ri­ence the sac­ri­fice inher­ent to the orig­i­nal Lent and I try to find some­thing cre­ative to do each day as a way of grow­ing. Last year, I chose to write a blog post every day. That wasn’t only a growth goal, it turned out to be quite a sac­ri­fice as it takes a lot of ded­i­ca­tion and time to write even a banal few para­graphs. Towards the end, I resorted sev­eral times to haikus or com­plaints about how hard it is to write every day. I’m not sure that’s in the spirit of the goal.

This year, we have a fam­ily Lenten sac­ri­fice. We have strug­gled some over the last year or so with finan­cial issues from a “we’re in a new rela­tion­ship and there are some things to ham­mer out” view, from a “we’re spend­ing too much money on bowel move­ments and hang­overs” view and not to men­tion from a “we had a really awe­some wed­ding in Savan­nah” view. Some of these were con­scious choices we made. I wouldn’t trade the wed­ding for any­thing. Oth­ers were habit, the habit of just pulling out a card. Pay­ing for some aver­age food and a cou­ple of drinks with a card is pain­less. Pay­ing for aver­age food and a few drinks with a $50 bill isn’t so pain­less. If you read any of the main­stream “no-debt” resources, almost all of them advo­cate pay­ing with cash to make you aware of your spend­ing, painfully aware in some cases. From this awe­some post at Get Rich Slowly

  • Pay­ing in cash forces you to con­sider the real pur­chase price — No mat­ter what you’re buy­ing, the fact that you’re pay­ing in cash turns it into an entirely dif­fer­ent expe­ri­ence. That’s because you have no choice but to con­sider how much money you’re pay­ing over­all, and not just what you’ll have to pay on a monthly or yearly basis.
  • Pay­ing in cash might help you spend less – When you force your­self to pay in cash, big ticket items start to lose their appeal. Try walk­ing into a deal­er­ship with the inten­tion of pay­ing $15,000 or $20,000 for a newer car. All of a sud­den, the prospect of keep­ing your old paid-off junker becomes an incred­i­bly attrac­tive option. Am I wrong?
  • Pay­ing in cash keeps you out of debt — The best thing about refus­ing to finance things is that it keeps you out of debt in the first place. We all know what a slip­pery slope that can be. There are so many ben­e­fits to being debt-free, includ­ing the option to save more of your income, less stress, and of course, the feel­ing of not really being beholden to any­one. It’s a free­ing feel­ing, and it’s one that I will never, ever sur­ren­der with­out a fight.

Dave Ram­sey says much the same thing. The pow­ers that be tricked us when when they gave us all credit and debit cards and taught us that we could afford any­thing. Any­time some­thing is eas­ier, it should imme­di­ately arouse sus­pi­cion espe­cially when it comes to spend­ing money. So we’re embark­ing on a Lenten jour­ney of pay­ing cash for every­thing out­side of bills and auto fuel. I’m toy­ing with shut­ting down even the bills and send­ing in actual checks like peo­ple in the Stone Ages did (no offense, Mom). The upside of all of this is that come April 1st, we won’t have to lis­ten to the suck­ing sound of a $1000 or more black hole com­ing from the bank account as our credit cards swal­low money.

For a pos­i­tive fam­ily Lenten chal­lenge, we’re going to spend one night a week ded­i­cated to just us. We’ll have din­ner and then play a game or read a com­mon book. The goal is for it to be inter­ac­tive, to avoid the pas­siv­ity of the com­puter or the TV. I’ve been want­ing to learn Go for a long time so if we just trade off every week between that and Rum­mikub, maybe I’ll only get my tail kicked every other week.

On a per­sonal side, I’m going to repeat last year’s sac­ri­fice of sugar. I started this year with some new per­sonal record blood work (where the per­sonal record is cho­les­terol through the roof). I have some per­sonal ideas about car­bo­hy­drate intake and cho­les­terol that are, umm, not main­stream. Last year, I had my LDL lev­els down to 164 which is pretty good for me. In Jan­u­ary, they were back up to 245. Obvi­ously, that’s a heart attack wait­ing to hap­pen accord­ing to the main­stream med­ical media. I’m pretty sure it’s a result of 4 months of eat­ing like I was get­ting mar­ried and next to zero exer­cise. That 164 value came in May last year when I was eat­ing well, had just come off of giv­ing up sugar for Lent and was exer­cis­ing a rea­son­able amount. I don’t think that’s a fluke. To really kick things off with a bang, I’m going to do my longest fast ever, 48 hours. There is a wealth of infor­ma­tion out there in sup­port of reg­u­lar and inter­mit­tent fast­ing as a healthy prac­tice. I’ve been doing inter­mit­tent fast­ing (food intake only between 12 and 8ish) for a cou­ple of weeks. But the health ben­e­fits of a 48 hour fast are hard to ignore so I’d like to start inte­grat­ing that into my eat­ing. So start­ing today, until Thurs­day night, it’s water and cof­fee and tea only.

On the growth side, I’m going to think about it some today but I’m lean­ing towards some­thing sim­i­lar to last year as well when I wrote every day. If I did that, I’d expand it out to “write, draw or play the saxophone/piano” every day. On the upside, I miss those right brain cre­ative type things. On the down side, I have some goals for 2015 that would likely suf­fer because there are only so many hours in the day. Things like Span­ish and read­ing would go to the back­burner. I have ways to mit­i­gate this because I have a 2 hour train ride each day. But writ­ing more per­sonal code or exer­cis­ing would be harder and harder to fit in. So that’s going to be a medi­a­tion for today to try and iden­tify what I really want to focus on and what’s important.

Fast­ing Resources for those so inclined:

On Exporting Deflation

Return­ing to our char­ac­ters of a few weeks ago, we remem­ber that Bob and his coun­try had increased the sup­ply of waf­fles thus mak­ing the export of Bob’s organic grass-fed but­ter cheaper. This hap­pens because other coun­tries like Nigel’s can now get more waf­fles on the pas­try cur­rency mar­ket and can buy more of Bob’s but­ter. There is a slight (or not so slight in our exam­ple of dou­bling the waf­fle sup­ply just so Bob could sell more but­ter) infla­tion­ary pres­sure in The Land of Guns and Large Bor­der Fences. Another effect of this deci­sion is a slight defla­tion­ary pres­sure in Nigel’s Land of Peo­ple With Below Aver­age Den­tal Hygiene (LOPWBADH).. The rea­son this is so is because of the con­nect­ed­ness of the two coun­tries via the pas­try exchange mar­ket. The Nigel’s clot­ted cream now costs more to export it to Bob’s coun­try. On the sur­face this looks infla­tion­ary because the prices went up. But when think­ing about infla­tion or defla­tion, it’s impor­tant to con­sider both prices and demand. Because Nigel will now sell less clot­ted cream, he may have to lay off Colin, his dairy man­ager. Colin may then have to get a lower pay­ing job which means he has fewer crum­pets to spend. This lack of demand on a broader scale leads to defla­tion­ary pressures.

This lack in aggre­gate demand is a side of the inflation-deflation dis­cuss that you’ll rarely see in finan­cial press because it’s the part of the equa­tion cen­tral banks have almost no con­trol over. We’re cur­rently see­ing this in Euroland where the economies of the mon­e­tary union have been under sig­nif­i­cant down­ward pres­sure for months as unem­ploy­ment remains stub­bornly high in many coun­tries. When you don’t have a job, you don’t buy either clot­ted cream or expen­sive imported grass fed but­ter. The con­tin­ued defla­tion­ary pres­sure can quickly spi­ral down­wards. Once upon a time, defla­tion was a nor­mal part of the eco­nomic cycle and when every major cur­rency in the world was tied to a hard asset, typ­i­cally gold, there was a gen­eral defla­tion­ary pres­sure because you can’t increase the money sup­ply with­out increas­ing the pro­duc­tion of the hard asset. These days, with no coun­try tied to a hard asset, defla­tion is sup­pos­edly a thing of the past (though the time may be return­ing as the Chi­nese gov­ern­ment has been buy­ing gold in large quan­ti­ties, another fact you won’t see men­tioned in the finan­cial press). And in fact, defla­tion is a ter­ri­fy­ing prospect for gov­ern­ments and cit­i­zens that are heav­ily indebted. Dur­ing defla­tion, the cost of debt rises as the cur­rency appreciates.

Imag­ine a sce­nario where 50% of your income goes to ser­vic­ing your credit card debt. What hap­pens if you sud­denly make less money or if the inter­est rates rise? Big trou­ble, that’s what hap­pens. Now your debt to income ratio goes up and you either have to do with­out things or begin to think about default­ing on the debt. Our reliance on debt as a soci­ety both con­sumer and gov­ern­ment means defla­tion is extra­or­di­nar­ily dan­ger­ous. For exam­ple, it takes half the tax rev­enue of the coun­try of Japan to ser­vice their pub­lic debt. What hap­pens if inter­est rates rise in Japan? Sud­denly, they strug­gle to pay their oblig­a­tions. That’s why they (and many other coun­tries) can’t afford to let inter­est rates rise. Their answer is to adopt a pol­icy of zero inter­est rates by manip­u­lat­ing the mar­ket with made up money.

Europe is cur­rently on the precipice of defla­tion. To fight it, the Euro­pean Cen­tral Bank has announced a $1.3 tril­lion (give or take a euro or two) stim­u­lus pro­gram aimed at increas­ing the infla­tion rate and sta­bi­liz­ing the fall in prices. Leav­ing aside whether this will even work, what effect does this have on other coun­tries? This inten­tional devalu­ing of the Euro will lead to stronger cur­ren­cies in the trad­ing part­ners of Europe. Those stronger cur­ren­cies now have to con­tend with the defla­tion­ary aspects which is exactly what is hoped for by the Euro­zone. This beg­gar thy neigh­bour approach even­tu­ally causes other coun­tries to retal­i­ate lead­ing to a cur­rency war which many peo­ple think we are cur­rently in. This is the mean­ing of export­ing deflation.

So how is the prob­lem actu­ally solved? A decreas­ing reliance on debt is the first start. In nor­mal times (like the 1800s) defla­tion was part of the busi­ness cycle. As defla­tion would occur, peo­ple, busi­nesses and coun­tries would delever­age, reduc­ing their debt. Even­tu­ally, the economies would cycle back to infla­tion. In today’s world, defla­tion can’t even be allowed to occur because of the debt lev­els of coun­tries. The goal is per­ma­nent growth because with­out it, we can’t pay our debts. But per­ma­nent growth funded by increas­ing debts is a fan­tasy world that doesn’t have a happy end­ing. A coun­try like Japan has no choice but to try and print money (the Bank of Japan cur­rently buys almost all of the country’s pub­lic debt) to ser­vice their debt and increase infla­tion. This is a grand exper­i­ment of our cen­tral banks unseen before in his­tory. In the short term, it means the Japan­ese yen will con­tinue to lose value to the dol­lar and the Euro­pean stock mar­kets are likely to increase just like the US stock mar­ket went up over the past sev­eral years dur­ing our own quan­ti­ta­tive eas­ing. In the long term, it’s anyone’s guess. What hap­pens if Japan defaults? What hap­pens if the ECB’s tril­lion euro pack­age doesn’t work? At some point, the lev­els of debt have to be reduced either by the dif­fi­cult process of delever­ag­ing or by default. Nei­ther will be pleas­ing and the far­ther down the road we kick the can, the harder it will get. Even­tu­ally, the road will end on a cliff and we may all just tum­ble over it.

What I’ve Been Reading

Part of my morn­ing com­mute usu­ally involves catch­ing up on Twit­ter and most recently the finan­cial infor­ma­tion com­ing out of Zero Hedge along with a cou­ple of other sources from Maudlin Eco­nom­ics. Many of these arti­cles prob­a­bly don’t war­rant a full blog post but I thought I might start aggre­gat­ing them on Sun­day morn­ings with any thoughts I had. This has the poten­tial to hap­pen only this Sun­day but it’s good to have goals.


Mara has appar­ently been read­ing every arti­cle on the Atlantic lately based on my inbox but this one caught my eye. A cer­tain fac­tion of con­ser­v­a­tives, namely goody goody two shoes in Nebraska and Okla­homa are fight­ing Colorado’s mar­i­juana legal­iza­tion say­ing that the states have no right to pre­empt fed­eral drug laws, the irony being that it’s almost always the con­ser­v­a­tives who yell the loud­est about fed­eral encroach­ment on their rights when it comes down to health care, wel­fare or any­thing else that might help peo­ple who actu­ally need it. In this instance, the issue is being fought brought by law and order type con­ser­v­a­tives who don’t like that cit­i­zens of those two fine states are going to Col­orado to buy their pot. The issue here that the arti­cle high­lights is that the states are under no oblig­a­tion to enforce fed­eral laws passed by Con­gress that are too sweep­ing for the feds to enforce on their own.

Fed­eral drug law has always relied on the states for enforce­ment because the feds don’t have the man­power to enforce it. States go after lit­tle deal­ers in the sys­tem (which is why our incar­cer­a­tion rate has quin­tu­pled since Reagan’s mis­guided and dis­as­trous drug war went into effect. States throw peo­ple in jail for non-violent pos­ses­sion crimes while the Feds can go after the traf­fick­ers. How­ever, the states are under no oblig­a­tion to actu­ally do this and in the case of states like Col­orado, can actu­ally pass laws that are incon­sis­tent with that. Think­ing of it another way, if Con­gress passes laws that are too broad in scope, the states are in no way oblig­ated to fill in the gaps. This is actu­ally a good thing for democ­racy as it keeps an impor­tant check on fed­eral power. It will be inter­est­ing to see how the suit of Nebraska and Okla­homa against Col­orado pro­ceeds. If the con­ser­v­a­tive side wins, we will have set a prece­dent for remov­ing one of the last checks on Fed­eral power and take a big step far­ther down the path of cen­tral­ized government.


This week, the Swiss National Bank (SNB) decided to end its 3 year old cap on the franc to the euro and let the mar­ket move freely in rela­tion to the franc’s value. In response, the franc soared in value related to most major cur­ren­cies, the euro being the biggest move where it appre­ci­ated 17% or so. The cap was orig­i­nally put in place back dur­ing the last finan­cial cri­sis when the SNB decided to limit the volatil­ity of its cur­rency. And so for years, the franc has been excep­tion­ally sta­ble against the euro. The mech­a­nism for how this was done is beyond the scope of this post but the short ver­sion is that the Swiss would print francs and buy Euros to sup­port the cap. By doing this they acquire lots of Euros in their for­eign asset fund which seemed like a good idea at the time because the Euro was one of the strongest cur­ren­cies around.

Fast for­ward to 2015 and sud­denly the Euro is a mess. We’re talk­ing more and more about a Greek exit from the euro which is a total unknown. Defla­tion is sweep­ing Europe which is a BAD THING in the grand scheme of things for an increas­ingly indebted world. On Thurs­day, the Euro­pean Cen­tral Bank (ECB) will almost assuredly begin its own qual­i­ta­tive eas­ing where it floods the mar­ket with Euros to fight the defla­tion. All signs are point­ing to a weak­en­ing Euro and there is no end in sight. Imag­ine you are the SNB hold­ing a buck­et­ful of Euros and you might see why they want to bail out on drag­ging their own cur­rency down with the Euro. Of course, this move has lots of impli­ca­tions. On a imme­di­ate level, allow­ing the franc to appre­ci­ate is bad for Swiss exports. In the ongo­ing cur­rency wars, coun­tries try to improve their economies by weak­en­ing their cur­rency which typ­i­cally increases exports. So why would the Swiss do some­thing to actively hurt their own exporters? For one, they may have decided they don’t export that much stuff to the EU any­more and in fact they don’t. With the excep­tion of Ger­many, the only coun­try in the EU doing well (also a topic for an entirely dif­fer­ent post), Euro dom­i­nated coun­tries don’t account for a big chunk of Swiss exports. Instead, economies like Japan, the US and China are the ones buy­ing expen­sive Swiss watches and fancy cheese.

Because Switzer­land never joined the EU, they now have the flex­i­bil­ity to pivot their econ­omy and make it less depen­dent on the dis­as­ter that is unfold­ing across Europe. That is what they are prob­a­bly doing. One of the inter­est­ing side effects of this move is how it can roil mar­kets. That’s because in our over lever­aged, low inter­est rate finan­cial sys­tem, investors are always reach­ing for yield. One strat­egy is to trade in a cur­rency that has low volatil­ity like the franc. Firms were happy to loan francs to day traders at highly lever­aged rates (loan­ing 50 francs with only 1 franc as col­lat­eral is lever­age). They could do this because over the last two years, the franc had an aver­age volatil­ity of .1 per­cent. It seemed totally safe. Until it wasn’t when the franc got really volatile this week. Ever­est Cap­i­tal, a hedge fund in Miami, shut down a $830 mil­lion fund that hem­or­rhaged cash. Other hedge funds are in the same boat.

The take­away from all this is that times, they are a changin’ in 2015. The dol­lar looks to get stronger as the EU begins fight­ing defla­tion. Even in the US, prices are falling and retail sales aren’t too great. In look­ing at retail sales, if you remove auto sales, this Christ­mas sea­son was the third worst this cen­tury mean­ing only the Christ­mases of 2001 and 2008 were worse. Mmm, that doesn’t sound like a recov­ery to me. That sounds more like the US con­sumer is con­tin­u­ing to delever­age in an attempt to get their finan­cial house in order. And when the US con­sumer doesn’t buy cheap Chi­nese crap, China’s econ­omy gets slug­gish. And when that hap­pens, well, who knows what the end result is.

If you have a per­verse affin­ity to mon­e­tary pol­icy and its effects on our global finan­cial sys­tem, it should be a fun year.


Appar­ently the peo­ple who lived in our house for the last 50 years didn’t ever want a back yard and had no fence. With a road behind us that cuts through from one major street to the other, it felt like we lived next to a free­way at times. This week, we had a fence put in which has also allowed the garage to be cleaned out since it was hold­ing all the lawn fur­ni­ture. It’s start­ing to feel more and more like we don’t live in a home­less shelter.


On Maintenance And Repair

When I was a kid, not so many years ago geo­log­i­cally speak­ing, I found a .22 rifle in the barn at my grand­par­ents farm. It didn’t really work and it was hard for me to ascer­tain exactly why given my rudi­men­tary gun­smith skills as a 13 year old. But I didn’t have a .22 rifle and it seemed to me that if I could only fig­ure out how to make it work, that omis­sion in fate’s plan could be altered. So I asked my grand­fa­ther if it was ok if I tried to make it work again. To his credit (though the over­pro­tec­tive par­ents and gov­ern­men­tal agen­cies of today would prob­a­bly dis­agree), he agreed telling me only to “be care­ful where you point it.” So I went about find­ing the screws that held it together, took it apart, cleaned things, put it back together, loaded it, pointed it in the gen­eral direc­tion of an inno­cent tin can and pulled the trig­ger. Much to my sur­prise, it went off with that sat­is­fy­ing .22 plink though I’m sure the can emerged unscathed. How­ever, the action did not feed a new round into the chamber.

So I unloaded it and went about try­ing to fig­ure out how to make that work. Again hav­ing no idea what I was doing but with gen­eral 13 year old’s under­stand­ing of fric­tion, I took the bolt out and oiled what I assumed to be a mech­a­nism related to the stuck bolt. Some­how all the pieces went back together, the gun was reloaded, the trig­ger pulled and this time the bolt got the sec­ond round loaded about halfway. I repeated the process, toy­ing with some­thing new, repeat­ing it about 3 times if I recall cor­rectly. Finally, I fig­ured out some­thing through trial and error and upon fir­ing a round, the bolt slid back and for­ward com­pletely with a solid click. Sud­denly, I had a .22 rifle.

I recall that event as an excep­tion­ally sat­is­fy­ing moment. Some­thing had been bro­ken and I had fixed it. I seem to have a strong incli­na­tion for fix­ing. Bro­ken things offend my sense of real­ity. I have a par­tic­u­larly chal­leng­ing time at Christ­mas when I pull light strings out of the box know­ing half of them will be worth­less. Tak­ing some­thing that is bro­ken and mak­ing it work again is an exer­cise in obser­va­tion, atten­tive­ness, trial and error, patience and an atti­tude unwill­ing to accept that fact that things break.

This all comes up as I read Shop Class as Soul­craft: An Inquiry Into The Value Of Work. Like so many of the beau­ti­ful things in life, I ran into this book serendip­i­tously as I browsed in the Dal­las Pub­lic Library online cat­a­log. The book is a philo­soph­i­cal exam­i­na­tion of our deval­u­a­tion of the man­ual trades seen through the lens of remov­ing shop class from the pub­lic edu­ca­tion. For those of my read­ers who don’t even know what shop class is or was, once upon a time in a land not so far away, our edu­ca­tion sys­tem was more ratio­nal. Know­ing that not every stu­dent was bound or even suited for col­lege, classes were taught in sec­ondary school that read­ied stu­dents for other careers. I took home eco­nom­ics and shop class in junior high, two classes the kids of today prob­a­bly have no con­cep­tion of. I dis­tinctly remem­ber build­ing a flour scoop out of tin that my mother uses TO THIS DAY. I built a tack ham­mer out of steel rods in shop that 25 years later hangs on a peg in my garage and is at least occa­sion­ally used. I remem­ber learn­ing how to bal­ance a check book and make bis­cuits in home eco­nom­ics. Appar­ently, these crit­i­cal skills aren’t even taught in our edu­ca­tion sys­tem any­more. Shop was a way for the mechan­i­cally inclined to learn about drill presses and table saws and lathes. It pro­vided the foun­da­tions of the man­ual trades like plumb­ing or elec­tri­cian. Some­where along the way, we decided that those trades weren’t fit for our kids and we are sys­tem­at­i­cally remov­ing the classes of shop and home eco­nom­ics from our edu­ca­tional sys­tem. We look upon blue col­lar jobs with a mix­ture of dis­dain and pity until our toi­let over­flows and then we just des­per­ately want some­one to make it go away.

One of the first ideas in this book is the ethics of main­te­nance and repair. We live in a con­sumerist soci­ety where every­thing bro­ken (and many things that aren’t!) are thrown away. We rush out to find a replace­ment to take its place and soothe the exis­ten­tial anx­i­ety in our psy­che. The idea of main­tain­ing some­thing through reg­u­lar care and atten­tion is a lost art. This value loss is evi­dent through­out our soci­ety not only in our con­stant need for some­thing new to buy but in our inabil­ity to main­tain our bod­ies, our gov­ern­ment, our finan­cial state and our psy­cho­log­i­cal well-being. My grand­fa­ther would have no more thrown away some­thing bro­ken that might be fix­able than he would have bought water in a bot­tle at a con­ve­nience store. Of course, this meant there was a lot of bro­ken shit around the farm but it also meant that his 13 year old grand­son would have the chance to fix a .22 rifle that had sat in the cor­ner of the barn for years. It also meant that he could run into a prob­lem and through self-reliance, come up with a solu­tion because he was attuned to the inner work­ings of things as well as the true cost of replac­ing them. We no longer have that atten­u­a­tion nor that self-reliance as val­ues. In fact, we are bom­barded daily about replac­ing the things we already have and that func­tion per­fectly well. The ethic of imme­di­ate grat­i­fi­ca­tion has been drilled into us and we have begun to accept it as fact. It is dif­fi­cult to log­i­cally ques­tion the slightly uncom­fort­able feel­ing I get watch­ing a Ford F-150 ad that sub­con­sciously encour­ages me to replace a per­fectly work­ing car. It is even more dif­fi­cult to enjoy what we have and nur­ture it.

Yet the sat­is­fac­tion that comes from fix­ing some­thing bro­ken or cre­at­ing some­thing new out of exist­ing parts is qual­i­ta­tively dif­fer­ent than the sat­is­fac­tion of replac­ing it. Buy­ing some­thing pro­vides a brief surge of dopamine and plea­sure that fades rapidly as we grow accus­tomed to the item. Fix­ing some­thing boosts esteem, con­fi­dence and under­stand­ing. Throw­ing things away is a per­va­sive new ethic we have only recently acquired, one dri­ven by an omnipresent adver­tis­ing indus­try and an econ­omy that can only func­tion with reg­u­lar and exten­sive con­sump­tion. We are told that con­sum­ing leads to hap­pi­ness and many of us no longer are even capa­ble of fix­ing some­thing bro­ken. Even when we desire to, we’re often thwarted by the object in ques­tion that has been designed in a way to pre­vent main­te­nance or repair. As an exam­ple, there at least some mod­els of Mer­cedes Benz with no oil dip­stick.

This con­sump­tion ethic runs deeply in our moral sys­tem as we now find it eas­ier and eas­ier to throw almost any­thing away from TVs to spouses. We don’t even notice that we do it many times. I recently went to lunch with Mara and some friends and we poked fun at the idea our grand­par­ents would wash ziploc bags with­out con­sid­er­ing the impli­ca­tions of our readi­ness to cast aside some­thing used a sin­gle time. We do this because we think it makes our life eas­ier and in fact, it prob­a­bly does. But noth­ing ful­fill­ing was ever easy and we do not replace the time gained from throw­ing away ziploc bags or bro­ken lawn­mow­ers or per­fectly good TVs with time spent on activ­i­ties or rela­tion­ships that ful­fill our soul. And then we com­plain on social media about our inabil­ity to be happy. The irony is immense.

In my indus­try of soft­ware devel­op­ment, the job no one wants is “main­te­nance devel­oper”. You’ll never see that on a resume or a job list­ing. You try not to tell can­di­dates there may be a great deal of main­te­nance involved with the posi­tion while at the same time try­ing to dis­cover in the inter­view if the poten­tial can­di­date has dif­fi­culty doing main­te­nance. Main­te­nance and repair of any thing whether it’s a car or a soft­ware sys­tem or a firearm requires the curios­ity to dis­cover how the sys­tem works, the patience to fight through all the things that don’t fix the prob­lem, the vision to put your­self in the shoes of the orig­i­nal cre­ator and an appre­ci­a­tion for exist­ing work that many peo­ple no longer carry. Soft­ware devel­op­ers from the con­sumerist soci­ety dis­dain main­te­nance work and are quick to push for a rewrite or devel­op­ment of a new sys­tem. Main­te­nance is dirty, dif­fi­cult work that has been less­ened in my indus­try and our cul­ture, not nec­es­sar­ily in that order. Yet the devel­oper who can apply a mechanic’s mind­set to exist­ing sys­tems is almost always in demand much like mechan­ics or plumbers or elec­tri­cians in the mate­r­ial world. Every­thing around us will con­tinue to require main­te­nance and even­tu­ally, the mind­set and cul­ture focused on replac­ing that which works per­fectly well will break down irreparably.

Our cul­tural and per­sonal ethos, whether con­sid­ered or silently adopted, is a func­tion of our belief sys­tem where the inputs are what we con­sider valu­able and the out­puts are hap­pi­ness and ful­fill­ment. Our cur­rent ethos is max­i­mized to pro­vide the most short term hap­pi­ness while build­ing up phys­i­cal, finan­cial, psy­cho­log­i­cal and soci­etal debt we hope to never deal with. Our belief sys­tem has changed over the past 40 years for a plethora of rea­sons. We no longer are a rural soci­ety where each fam­ily had to be capa­ble of pro­vid­ing for itself. We cre­ated a con­sumerist soci­ety by mov­ing man­u­fac­tur­ing jobs over­seas in pur­suit of the cheap­est method of pro­duc­tion. We pushed for a one size fits all edu­ca­tion sys­tem where a col­lege degree is the path­way to a career which deval­ued an appren­tice or trades school path. The cost of things is our only value func­tion where we decide on every­thing based on its price never con­sid­er­ing the long term attrib­utes of qual­ity, ease of main­te­nance or effect on the soci­ety at large. We have a laser-like focus on the short term and our own imme­di­ate hap­pi­ness which has tremen­dous neg­a­tive effects on the debt we carry per­son­ally, emo­tion­ally and societally.

What can we do to change this? For one we need to recon­sider our atti­tudes towards the future of work and our dis­in­ter­est in the man­ual trades. We will always need peo­ple who work with their hands and allow­ing kids to find their way into those careers should not be dis­cour­aged. Instead of free junior col­lege for every­one, the Pres­i­dent could pro­vide pri­mary fund­ing for appren­tice­ships and shop classes. Of course, that’s never going to hap­pen but con­tin­u­ing to push a model that believes every­one is fit for col­lege and should get a degree solves noth­ing. Our prob­lem isn’t that we’re under­e­d­u­cated, it’s that many of our young peo­ple are loaded with debt with no hope of ever pay­ing it off, all for a piece of paper that they are dis­cov­er­ing does lit­tle for them in a world where the mid­dle class is slowly being eroded.

Sec­ond, from a per­sonal level, we could be more aware of what we throw away. Adopt­ing a more Stoic phi­los­o­phy and focus­ing on being happy with what we have will go a long way towards elim­i­nat­ing the trash cul­ture we have. It will have neg­a­tive impacts on our con­sumerist soci­ety but we need to change that as well if we hope to ever have a real recov­ery that isn’t just the stock mar­ket going up.

Last, develop an appre­ci­a­tion for what is required to main­tain and repair those things we have cho­sen to bring into our lives. Begin to notice the desire to replace our pos­ses­sions with newer shiny pos­ses­sions and ques­tion it. What causes me to want a new TV when I have a per­fectly good one? What causes me to pay $70 for an oil change when I know exactly how to do it myself and it requires only slightly more time?

In an unhappy, nar­cis­sis­tic world focused on con­sump­tion, one of the fastest ways to find­ing mean­ing lies in a return to an ethic of main­te­nance. Replac­ing the fleet­ing, ephemeral plea­sure of the new with the long last­ing sat­is­fac­tion derived from fix­ing or cre­at­ing some­thing is a lofty and noble goal. It requires more time, effort and ded­i­ca­tion but in return pro­vides long last­ing rela­tion­ships and a greater under­stand­ing of those things we choose to bring into our lives. And maybe, just maybe, it will give us fod­der to write blog posts about a curi­ous kid with a bro­ken gun and a grand­fa­ther with a mechanic’s mind­set. I think I’ll go pull out that old .22 and see if I can’t give it a good clean­ing. It’s squir­rel sea­son and a walk in the woods with my grandfather’s gun might go a long way towards eas­ing the soul.

On Defining Goals

I recently read an arti­cle in Gar­den & Gun (an excel­lent mag­a­zine if you love the cul­ture of the South) on three women who returned to their fam­ily farm to make a liv­ing off what they could grow and cre­ate from their own labors. One of the women was a musi­cian who had strug­gled through a large part of her life and found upon return­ing to a sim­pler life that she could escape from what the author called “hob­bling intro­spec­tion”. This phrase struck a pow­er­ful chord with me as I often times find myself hob­bled by intro­spec­tion and navel gaz­ing. Over the past few days, I’ve been think­ing about goals and res­o­lu­tions and growth and the means to accom­plish things. I find that occa­sion­ally the focus on such things lapses into hob­bling intro­spec­tion and lit­tle or noth­ing comes from the exer­cise. The ques­tion is “how best to avoid that?”

In the arti­cle, the woman returned to the land which can eas­ily be trans­lated into “started hav­ing to get up at 5 in the morn­ing to milk the damn cows”. Wak­ing at 5 AM for the phys­i­cal labors of a farm leaves lit­tle time to worry about the exis­ten­tial mean­ing in your life. Hav­ing just moved back into the big city, I prob­a­bly won’t be able to get a cow that needs milk­ing any­time soon. Other peo­ple know that hav­ing a fam­ily pro­vides. A cry­ing child is just a pow­er­ful moti­va­tor as a full udder depend­ing on the per­spec­tive. While that’s still an option, it’s prob­a­bly not hap­pen­ing in the next 9 months for sure. And so those of us with no farm and no kids but a desire to quit navel gaz­ing and wast­ing time intro­spect­ing are left to fill the time on our own.

Which is why some of us define goals/resolutions I think. My goals for the new year have almost always been about grow­ing and learn­ing as well as gain­ing new expe­ri­ences. Two main prob­lems come up with goals like that. One is mak­ing them spe­cific enough to be action­able. Goals that are neb­u­lous are typ­i­cally dif­fi­cult to imple­ment so over the past few years, I have started hav­ing goals like “Spend 180 hours on lan­guages”. This is an action­able goal but it brings up the sec­ond prob­lem and that is track­ing progress. Growth requires direc­tion and if you can’t know that you are mov­ing in the right direc­tion the effects are less­ened. Because so many of my goals are count­able, it would help to have an activ­ity track­ing tool. A quick Google search gives me 85 mil­lion pos­si­bil­i­ties so that should fill my time for the next cen­tury. Still, it’s impor­tant to have a way to know you are on the right track. Last year, one of my goals was to spend 180 hours on The Sports Pool Hub. I didn’t track my time at all but I’m pretty sure I accom­plished that. Still, it would be nice at the end of 2014 to say “I actu­ally spent 200 hours on it and my, that sure is reward­ing”. With­out the con­fir­ma­tion that the goal has been reached, we lose the largest effect of estab­lish­ing goals, the feel­ing of reward.

This makes me think of a book I read last year (2014 goal: read 12 books. I made it to 11), The Power of Habit. It’s an inter­est­ing book that looks at the habits of indi­vid­u­als, com­pa­nies and soci­eties. The devel­op­ment of habits in indi­vid­u­als was the most inter­est­ing to me and is most rel­e­vant to accom­plish­ing goals. In the book, author Charles Duhigg details what it is that causes us to develop habits, good and bad. By ana­lyz­ing this devel­op­ment, he gives us tools for break­ing bad habits and replac­ing them with good ones. This also leads to notic­ing how more and more of your behav­iors are actu­ally just habits that you have fallen into. There are three main com­po­nents to a habit.

The first is the cue. Every habit starts with a cue. For a smoker, it might be stress or a drink. For a run­ner, it might be the alarm going off at 5:30. All habits have a cue. Find­ing the cue or estab­lish­ing a new one is a key to break­ing or cre­at­ing new habits. The sec­ond is reward. We get a reward when we do the behav­ior that the cue kicks off. Puff­ing on a cig­a­rette gives us the hit of nico­tine that low­ers the stress (though not really, it just trans­fers the stress from our mind to our car­dio­vas­cu­lar sys­tem but we don’t have to worry about that until we drop dead of a heart attack). Fin­ish­ing a run gives us the reward of feel­ing strong. This is a crit­i­cal part of estab­lish­ing a new habit and the reward at first often needs to be exter­nal in nature. Want to estab­lish a new exer­cise rou­tine? Make the reward some­thing you like such as a smoothie or cookie. When you fin­ish a run, have that smoothie and soon your mind will asso­ciate the reward with the cue and the habit mak­ing it more likely you will continue.

The third com­po­nent of habits is the most impor­tant. Every­one knows that habits are easy to develop when things are going well. When life is smooth, we can all get out of bed and go for a run. How­ever, often bad habits were devel­oped in times of stress and in times of stress, we fall back into a rou­tine that solved that stress before. It’s the crav­ing that causes that and that’s the third com­po­nent. Crav­ing is the inter­nal­iza­tion of the habit. You have to find ways to crave the new behav­ior. If you are replac­ing smok­ing with run­ning, the crav­ing for nico­tine must be replaced with the crav­ing and desire to be stronger and health­ier. I’m reminded of an idea from The Hap­pi­ness Hypoth­e­sis. In that book, Jonathan Haidt talks about the rider and the ele­phant. The rider is our con­scious mind. The ele­phant is our sub and un con­scious mind. The rider on an ele­phant can­not con­trol the behav­ior or direc­tion of the ele­phant by force. He must have other meth­ods for that con­trol. Crav­ing is one of them. If we can cause our sub and uncon­scious minds to crave new behav­iors related to our goals, we can suc­ceed at them.

So for my goals this year, I’m hop­ing to find ways to estab­lish habits through new cues, rewards and crav­ings to accom­plish them. My first way of doing this is to set up a sched­ule for the activ­i­ties. Estab­lish­ing a sched­ule is ben­e­fi­cial because it can pro­vide the cue. If at 5:30 AM, the first thing you do is lace up your sneak­ers to run, that alarm becomes not a cue for wak­ing up but a cue for run­ning. Many of us know that we are most pro­duc­tive with a sched­ule. The sec­ond way is to more accu­rately track effort on the goals as that becomes a reward. Run­ning a faster mile than you did last month pro­vides reward and leads to crav­ing. The com­bi­na­tion of these two things should estab­lish a base for build­ing crav­ings for the new goals at times when life is off sched­ule or stress­ful. This will help to keep the ele­phant on the path towards the goal while the rider even­tu­ally reaps the benefits.

My Mea­sur­able Goals for 2015
Spend 180 hours on Span­ish
Spend 180 hours on The Sports Pool Hub
See 12 movies
Read 12 books
Write 26 let­ters
Write 52 things (blog posts, sto­ries, whatever)

My Goals that the mea­sur­able goals come from
Most of these boil down to Pro­duce More, Con­sume Less which might be the motto for 2015.
Write more
Code more
Hunt more
Save more
Read more
Grow more
Buy less
Want Less
Com­plain less

On Understanding Currency Wars

Imag­ine if you will the fol­low­ing sce­nario: Nigel lives in the Land of Peo­ple with Below Aver­age Den­tal Hygiene (LOPWBADH). Bob lives in a neigh­bor­ing coun­try, the Land of Guns and Large Bor­der Fences (LOGALBF). Both Nigel and Bob own dairies. Nigel makes excep­tion­ally good clot­ted cream in his dairy while Bob makes organic grass fed but­ter in his. Both men sell their prod­ucts domes­ti­cally as well as inter­na­tion­ally. In Nigel’s coun­try, the method of mon­e­tary exchange is the crum­pet. He sells one pound of clot­ted cream for one crum­pet. In Bob’s coun­try, it’s the waf­fle and he sells a pound of but­ter for one waf­fle. One of the most inter­est­ing things about each man’s coun­try is that there are a strictly defined num­ber of crum­pets and waf­fles respec­tively. In fact, there are only 10 crum­pets in all of Nigel’s coun­try and 10 waf­fles in all of Bob’s (yes, this greatly restricts the num­ber of any­thing that gets sold in the coun­try but bear with me).

The benef­i­cent gov­ern­ments of the two lands have a set exchange rate for crum­pets and waf­fles of one to one. When some­one trav­els from either land to the other, they can exchange their respec­tive pas­try cur­rency eas­ily. Exports of all goods are sta­ble. Both coun­tries are strong. But one day, the winds of change come to Bob’s LOGALBF and the local econ­omy takes a turn for the worse. A reces­sion hap­pens. A few peo­ple lose their jobs. And sud­denly, Bob isn’t sell­ing as much organic but­ter as he once was. Bob has a friend, Carl, in the gov­ern­ment who sits on the Com­mit­tee For Using Waf­fles As Cur­rency and Bob hatches a plan. He knows that his fel­low LOGALBFers will not be able to buy much fancy organic but­ter because they are strug­gling to get by. How­ever, he knows that there is still demand for fancy but­ter in the LOPWBADH and that demand could increase if only they could buy more of his but­ter some­how. Bob goes to Carl and explains that if there were only a few more waf­fles around, he could sell more but­ter to peo­ple in Nigel’s coun­try. If the sup­ply of waf­fles dou­bled to 20, peo­ple with 1 crum­pet could buy twice as much but­ter as they could before. Carl, being a good pro­tec­tive friend, agrees and whips up 10 more waf­fles. But­ter exports to LOPWBADH go up and every­one is happy.

Well, not every­one. Nigel won’t be very happy because his clot­ted cream is now a lot more expen­sive to peo­ple in Bob’s coun­try after the waf­fle increase. This is because waf­fles are now worth half as much and peo­ple in LOGALBF won’t buy as much clot­ted cream because it costs more. If Nigel has a friend that con­trols the quan­tity of crum­pets, he might try to get more crum­pets cre­ated to level out the play­ing field again. This in turn might cause LOGALBF to cre­ate more waf­fles and every­one ends up in a pastry/currency war in a race to the bottom.

This fan­ci­ful story leaves out a bunch of details in order to show what can hap­pen when coun­tries start devalu­ing their cur­ren­cies in an effort to jump start their economies. The result is a cur­rency war where every coun­try tries to devalue their cur­rency to increase exports. This essen­tially steals growth from neigh­bor­ing coun­tries whose cur­ren­cies are stronger. The most recent cur­rency war in his­tory hap­pened in the 60s and 70s cul­mi­nat­ing in the Nixon Shock when Pres­i­dent Nixon effec­tively took the dol­lar off the gold stan­dard in an attempt to jump start the Amer­i­can economy.

Like most polit­i­cal moves, the drive to devalue a national cur­rency is always the expe­di­ent deci­sion but rarely the best long term solu­tion. There is a floor to how much deval­u­a­tion can occur before a break down in con­fi­dence in the cur­rency starts to hap­pen. When Ger­many went off the gold stan­dard at the begin­ning of WWI to make it eas­ier to pay for the costs of the war, the result was a hyper­in­fla­tion 8 years later that resulted in an entirely new cur­rency being created.

Lots of smart peo­ple think we’re in a cur­rency war now. Even though the dol­lar has strength­ened of late, the long term goals of the Fed are aimed at a cheaper dol­lar with their QE and QE2 and other fancy new tricks at increas­ing liq­uid­ity. The prob­lem is, none of those tricks have made much of a dif­fer­ence except to the rich who own stock (see the last chart on that page). We are stum­bling towards another crash because none of the prob­lems that brought us the last two have been fixed. We still have mas­sive banks play­ing with tax­payer money and zero down side risk (because we’ll just bail them out again). The more we debase our cur­rency, the longer we kick the can down the road but even­tu­ally, there is a wall at the end where we can’t kick it any far­ther. Until we have an econ­omy focused on the mid­dle class again, some­thing we haven’t had in 20 years, we’ll con­tinue to stum­ble along from crash to bub­ble to crash.

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