Ask HN: Are We in a Bubble?

Are we certain this is a bad thing? Looking over the last couple decades of American politics, the politicians typically optimize for short term outcomes, and not necessarily optimal outcomes for their constituents but whatever it is that will best accommodate their own careers.

One could argue that you absolutely need specialists/technocrats running the Fed, if you’re going to have a Fed at all.

One data point - a key takeaway from Michael Lewis’s book The Premonition was a damning assessment of the CDC and the top leadership in California’s public health. And while Lewis isn’t a Trump fan, he didn’t spare Democrats.

As COVID spreading across America, California’s politically appointed top public health expert literally did nothing and squashed any attempt by her team from devising any policy. She downplayed the seriousness of the virus, and as Lewis calls out, she had no significant background in infectious disease or specific qualifications for the job other than being given that role by the California governor because of goals around non white women in leadership positions.

Meanwhile, the CDC provided zero leadership, simply because the head is appointed by the President, and was afraid of upsetting Trump.

You could argue that instead of political appointees, you want constituents to directly vote for these roles. Given the typical Americans apathy or general lack of knowledge around some of these complex topics, I’m not convinced that’s a great idea.

My definition of inflation is simple: dollars to gold. If you measure things in grams of gold, our current situation makes a lot of sense. A random basket of good subject to complicate macro trends makes no sense. Pretty much everything takes less gold to purchase these days. Assets like property, health care, and education actually require less gold to acquire than 50 years ago but not that much less. Products like consumer goods, require much much less gold now. This makes sense. We can develop property faster and cheaper but we can't make land so it's only a bit less gold. Mass produced goods are an order of magnitude cheaper due to automation.

Now let's go back to dollars. Every time the US prints dollars, it taxes the system. The total value of the system is the same but now the US government has some spending cash and everyone else holds a bit less. Why would any want to hold dollars?

Partly, no one does. The richer you are, the less of your net worth you hold in dollars. But the world is forced to use dollars. Originally, the US & England came together to create an international gold backed currency system to logistically enable transactions without shipping tons of gold. In 1970, President Nixon abandoned this system (1). Please really do look at this chart and it's impossible to ignore when it happened.

Our military & economic momentum are the only reason any uses dollars. It's complicated to describe all the ways but the biggest is that our navy guarantees safe global trade without piracy and fragmentation. If the US Navy disappeared, international shipping would quickly dissolve to squabbles on laws and borders. Small military conflicts would break out around the world. China's already hinted at as much in the South China sea. The Strait of Hormuz would become a war zone. We can argue about specifics but long story short, the world uses dollars heavily and doesn't want to. Every country would of course rather have everyone else use their currency. I think we can agree that the world uses dollars despite not wanting to.

Domestically, the move away from gold is killing the middle class. It's a disgusting trick the wealthy have pulled. Essentially by creating the dollar, forcing everyone to use it, and then printing more, the owner class has stolen gold. Cheaper consumer goods from automation & global supply chains has lessened the impact but this newest generation is finally realizing they never afford a house or education for their children. The fact that the average life expectancy has gone down in the US is the craziest thing ever and should be a source of deep shame.

To fix this, we only need two things: Fix the dollar to a specific amount of gold & Transfer a massive amount of wealth from the rich to the poor. It's obviously complicated and a bit fuzzy to describe but any denial of the general situation is like denying climate change. Gold was $40 and now it's $1800. The numbers are right there and pricing everything in gold makes it simpler to see.

(1) https://www.macrotrends.net/1333/historical-gold-prices-100-...

- my parents bought one of those homes back in 1980 for just under 25k!!

- in the 80s the busiest intersection (200 st and bypass) where the chapters, milestones, etc is now, was a giant field full of cows haha :)

But not everyone has to be, because the supply of housing is so limited. The number of new homes is still way below population growth, and it's increasingly becoming a trend for boomers to "age in place" instead of downsizing as they age. That means a large number of would be home buyers are competing for a tiny pool of available homes. In that kind of scenario the price of housing can become completely untethered from what the "average family" can afford, and totally driven the wealth of a small elite.

I guess my point is maybe that we’re in a fragile system rather then a bubble. It’s self sustainable in the steady state (to your point) but if it breaks it’s going to completely collapse and we just have to hope that we never reach the point where it could break. It’s a Similar line of thinking to controlled burns to manage forest fire before they get uncontrollably big. But in the USA at least, the safety net isn’t there to allow for controlled burns in the economy.

My point is that there’s nothing artificial about crypto. These are real people buying real assets from other real people. Not some banks hawking bullshit assets that are artificially rated by some corrupt pseudo government entities.