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sdholloway56
Senior Advisor

Stein's Law

"if something can't go on forever, it won't."

The 40 year downtrend in interest rates is coming to a close. It required increasingly exceptional measures to keep the game going the past 20 or so of those.

That will change everything, but like on the way down- on a glacial pace (with occasional violent calving of icebergs) along the way.

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4 Replies
sdholloway56
Senior Advisor

Re: Stein's Law

What appeared to be inflation- primarily in assets, was just the continued leveraging with the tide of a falling capitalization rate.

If leverage can't fill the hole any longer, then government will have to.

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erikjohnson61y
Advisor

Re: Stein's Law

"Filling the hole" is NOT the governments job. The government is the least efficient at properly allocating resources, and invariably makes any problem it tries to solve worse. Which of the following wars has the government won?

 - The War on Poverty
 - The War on Drugs
 - The War on Terror

If you think the government is the answer, then you'd like this conversation:

"Mr. Holloway - thanks for stopping at the FSA office this morning. Please double-mask for everyone's safety. Now, since soybeans are in shorter supply this year, you will plant 62.7% of your ground to soybeans, half Enlist and half Extend to support our various seed companies, and you will raise at least 60 bushels per acre to be delivered to this facility."

SD: "But sir, my fields are such that I can't plant 62.7%. If I did some corn on corn and on beans, I could get close, like maybe 65.2%"

FSA: "Are you saying you won't comply with our requests?? Are you saying you think you're special or something, and don't have to do your fair share?"

SD: "No, sir, of course not. It's just that..."

FSA: "You will plant and produce as directed. Split your fields as you must, we don't care. Just deliver your quota at harvest, or your medical account may not be fully funded.... NEXT!"

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sdholloway56
Senior Advisor

Re: Stein's Law

Well, I guess the gamble is that in a future broad credit default crisis the gubmint remembers that farmers are naturally at the front of the line, and makes up the diff.

 

 

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sdholloway56
Senior Advisor

Re: Stein's Law

Like Ken's accounting paradigm, or your whackjob ideological one (now depressingly mainstream) the same applies.

Macro is a different deal. Fill the hole or the debt mountain will fall in on you.

That's mostly a private debt issue. Governments that issue debt in their own currency don't so much.

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