Gensler vs Bitcoin

Just watched this interview with embattled SEC chair Gary Gensler on CNBC.

Yet again he is very careful to disclaim that the spot Bitcoin ETF approval does not constitute an endorsement of Bitcoin.

He also reiterates the well-rehearsed arguments that Bitcoin has no use-case, apart from being the preferred medium of exchange for ransomware payments, and that all other non-criminal use of Bitcoin is pure financial speculation.

He is categorically unwilling to entertain the idea that millions of (non-criminal) people choose to hold Bitcoin as an alternative store of value to the dollar and other state-issued currencies. He is not hearing any of it.

The SEC is an independent agency of the United States federal government, with a triple mandate to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.

The part about independence is of course meaningless.

The SEC is supposed to be a neutral aka “independent” regulator of financial markets.

But the SEC is an arm of the State.

Gensler is an agent of the State

Bitcoin is an attack on the State.

Bitcoin and the State are inherently in conflict. Bitcoin and the SEC are inherently in conflict.

Through the Treasury the State spends money.

Through the Federal Reserve the State prints money.

Without constraint.

Over time the State’s money loses all its purchasing power.

That is not consistent with protecting investors; not consistent with maintaining fair, orderly, and efficient markets; and not consistent with facilitating capital formation.

Yet, the SEC aids and abets the State in the conspiracy to debase its own currency.

The SEC is intrinsically biased in favour of the State and against Bitcoin.

Gensler will bash Bitcoin all day long.

But he will not say a word against eternal government deficit spending, against spiralling government interest expenditure, against the mountain of government debt that is growing out of control.

The only way out of this mess for the State is via inflation. The State needs the currency to lose its value. The State is dependent on the people losing their purchasing power.

To inflate its way out of indebtedness the State needs to control the currency, to leave the people with no alternative to state-issued money.

Bitcoin was created as the antithesis to state-controlled money, the antidote to state abuse of the money supply. Bitcoin gives people an alternative.

Thus the State and Bitcoin are locked in conflict, forever, as eternal enemies.

The State needs Bitcoin to fail.

The SEC wants Bitcoin to fail.

Gensler does all in his power to make Bitcoin fail.

Had it not been for the multiple court decisions that found that Gensler’s SEC had been acting “arbitrarily and capriciously” in its “regulation by enforcement” approach towards Bitcoin, the ETFs would in all likelihood not have been approved. The courts forced the agency’s hand. Gensler’s bitterness about that fact is palpable.

The over-hyped(?) ark of AI

Cathie Wood’s team at ARK Invest has published their Big Ideas 2024. The slide deck is interesting throughout.

But,

Do any serious people seriously believe this?

That AI can accelerate global real GDP growth from 3% to 7%?

That seems wildly optimistic, even in techno optimist circles.

Compare that to the more sober assessment from PwC’s oft-cited report, that AI can add $15,7 trillion to the global economy by 2030. Given that global GDP today is approximately $100 trillion, that is approximately another 15% on top.

Alternativ Nyttårstale

Når regnskapet for 2023 skal gjøres opp er det klart at «vanlige folk» ble sittende med svarteper. Det er ikke første gang og neppe siste.

Det er ingen grunn til å forvente at 2024 vil bli bedre. Velgere i vestlige land må stille seg bak minimum tre interessegrupper når politikerne fordeler nasjonenes velstand.

Evighetskriger
- Senest i Ukraina, der NATO-landene har gått hodestups inn i en konflikt mot Russland, uten noen strategi for å vinne eller komme seg ut av den. Motivet kan være både edelt og nobelt, men det betyr ikke at misjonen vil lykkes. I første halvår var nyhetene fylte av proklamasjoner om at Ukrainas våroffensiv ville feie de russiske styrkene ut av ukrainsk territorium. Mens Putins krigsmaskineri visstnok var på randen av sammenbrudd.
- Den gang ei. Storoffensiven materialiserte seg aldri. Og Russlands hærstyrker gjorde som de har gjort i tidligere kriger, trosset spådommer om kollaps og vist standhaftighet og seighet som har overrasket vestlige Eksperter. På slutten av året har tonen i overskriftene endret seg, og NATO-generalsekretær Stoltenberg har advart om «bad news» i vente fra den ukrainske fronten.
- I 2023 har vestlige lands støtte til Ukraina beløpt seg til 35 milliarder dollar. Siden krigens start har støtten fra EU-landene nådd 85 milliarder euro, mens støtten fra USA har oversteget 75 milliarder dollar.
- På begge sider av Atlanteren møter de hittil ubegrensede kredittkortene voksende politiske og konstitusjonelle hindringer. Det ufravikelige faktum er at skalaen på NATO-landenes støtte til Ukraina mangler demokratisk forankring.
- Vestlige ledere gjentar til stadighet at Ukrainas territorielle suverenitet må bevares. Faktum dog, er at det i 2024 vil være ti år siden Russland annekterte Krim. Om en skal forholde seg til virkelige forhold er ergo et suverent Ukraina et forlengst forbigått kapittel. Med økende folkelig motstand mot vestlig innblanding i konflikten vil denne virkelighetserkjennelsen sakte synke inn også blant vestlige ledere, som ikke vil ha mulighet til å kjempe til siste ukrainer om de har mistet sin siste hjemlige velger.
- Stoltenberg fremholder at jo mer støtte Vesten gir til Ukraina, desto fortere vil konflikten ende. Han er formodentlig programforpliktet til å si dette, men det har ingen basis i virkelighet.
- Drømmen om en ukrainsk seier er intet annet enn ønsketenkning, som ingen er tjent med. Men vestlige leder vil etter alt å dømme fortsette å gjenta dette fantasifulle budskapet helt til de, i 2024 eller senere, trekker seg ut i hui og hast med halen mellom bena som fra Kabul i 2021, eller fra Saigon i 1975.
Det grønne skiftet
- Da Bismarck ble spurt hvorfor han ikke var mer opptatt av å skaffe Tyskland kolonier i Afrika, svarte han med sedvanlig bravado: «Her er Russland, her er Frankrike, og her i midten, ligger vi, Tyskland. Det er mitt kart over Afrika!» I motsetning til dagens folkevalgte politikere hadde Bismarck evnen til å tenke strategisk. Han ville snudd seg i graven av at hans etterkommere var dumme nok til å gå til krig mot Russland, uten å ha et klart alternativ til energiforsyningen fra nettopp Russland—som Europa hadde gjort seg avhengig av.
- Norske husholdninger og bedrifter har fått lide under skyhøye strømpriser, takket være den politiske beslutningen om å hyperkoble det norske strømnettet sammen med det europeiske. For hver dårlige beslutning av Angela Merkel i Tysklands Energiewende har norske husstander måttet betale.
- En velkommen konsekvens av høye renter er dog at en del grønne luftslott er blitt avslørt som nettopp det. Vestlige politikere og medier har blitt tvunget til en erkjennelse av at man ikke kan subsidiere seg frem til et karbonfritt nullutslippssamfunn.
- Likefullt må en forvente at politikere vil fortsette å la seg forføre av dresskledde direktører med fantastiske planer om havvind og banebrytende batterifabrikker.
Masseinnvandring
- Idet innvandringsregnskapet gjøres opp ligger det an til at 2023 vil tangere kriseåret 2015 i antall nyankomne flyktninger til Europa, da 1,35 millioner søkte asyl i Europa. Inn i det nye året fortsetter folkevandringen fra Midtøsten og Afrika til Europa i uforminsket styrke. Krigen i Ukraina og situasjonen i Gaza må forventes å bidra til ytterligere tilstrømming.
- I ettertid er det klart at 2015 ikke representerte noen unntakstilstand, men snarere en ny normal. En permanent masseinnvandringskrise.
- Den politiske viljen til å gjøre noe med situasjonen er fullstendig fraværende, selv blant partier på høyresiden. I Italia har Giorgia Melonis eksempel vist at en høyrepopulist kan vinne valg på en plattform mot innvandring. Men straks regjeringskontorene inntas er alle lovnadene fra valgkampen enten glemt eller bortforklart, og innvandringen slår stadig nye rekorder—opp over 50 prosent til over 155.000 i året som gikk.

Europeiske politikere har et skyhøyt—for ikke å si utopisk—ambisjonsnivå for Europas evne til å føre krig mot Russland i Ukraina, i parallell med et fantasifullt grønt skifte, samtidig som at kontinentet forventes å kunne absorbere en endeløs strøm av uintegrerbare flyktninger fra den tredje verden.

Når den politiske eliten går så høyt ut på banen skulle en tro at bakteppet var en sterk økonomi og sosial harmoni på hjemmebane. Sannheten er den rake motsetning. Europas sklerotiske økonomi er i stagnasjon—med nullvekst i bruttonasjonalprodukt. Folks lønninger holder ikke tritt med prisveksten. Med utfasing av fossile energikilder og skyhøye strømpriser må millioner av husstander fryse gjennom vinteren. Samtidig som masseinnvandringen fortsetter å tære på det sosiale limet i samfunnet.

I Norge fikk vi det illustrert i julen da en innvandrerungdom knivdrepte en 26 år gammel krigsflyktning på bussen i Bærum lille julaften, uten at noen så mye som hever et øyenbryn. Hendelser som for bare 10, eller til og med fem år siden ville vært sensasjonelle, er blitt dagligdagse.

Bakteppet for Europas storsatsning på idealistisk krigføring, grønn energitransisjon og multikulturell masseinnvandring er med andre ord temmelig dystert, om ikke direkte dystopisk. Dette er ikke lenger Europa fra 100 år siden, med en ung og vital befolkning, kulturelt enfold og økonomisk styrke. Dette er et gammelt og grått Europa. Med en gammel og grå politisk elite, med stormannsgale visjoner og politisk vilje ute av proporsjon med kontinentets, og folkets, politiske evne.

Samtidig er den politiske eliten, massestrømsmedia og det statlige skolevesenet på god vei til å helt og holdent frastøte seg den demografiske gruppen som er mest avgjørende for Europas fremtidige ve og vel, nemlig unge menn.

At stadig flere unge menn ikke lenger identifiserer seg meg, eller føler seg investert i det politiske prosjektet Europa, burde være dypt foruroligende. Det er de som er morgendagens gründere og skattebetalere. Politikere kan dagdrømme om en fremtid der nye bedrifter blir skapt av kvinner og flyktninger, men det vil aldri bli mer enn unntakene, og aldri i nærheten av nok til å kunne bære morgendagens oppsvulmede velferdsstat.

Politikere og prateklasse burde derfor ikke ta så lett på å avfeie og latterliggjøre unge menns legitime og høyst berettigede bekymringer. Istedenfor å lese Jordan Peterson eller Andrew Tate som fanden leser bibelen, burde man søke å forstå hvorfor deres budskap får større gjenklang hos gutter, enn indoktrineringen som serveres i skolen og fra medias liberale kommentariat.

Kombinasjonen av to motstridende grupper unge menn; vertsbefolkningens gutter som føler seg frastøtt og den nye befolkningens gutter som ikke kan assimileres i et åpent og liberalt samfunn, er naturligvis eksplosiv. Europa har blitt en kruttønne og politikerne leker med fyrstikkene. De burde vokte seg vel, om de ikke skal bli hjemsøkt av Vergil, og Enoch Powells ord:

«Når jeg ser fremover, blir jeg fylt med bange anelser; i likhet med romeren ser jeg elven Tiber skumme av blod.»

Godt nytt år!

Støres store «Vi»

«Det konkrete politiske skillet som politiske handlinger og motiver kan reduseres til, er skillet mellom venn og fiende.»

Det sa den famøse tyske juristen Carl Schmitt.

Schmitts postulat er problematisk. Ikke fordi påstanden er usann, men fordi den er sann. En ubehagelig sannhet.

Statsminister Jonas Gahr Støre, i sitt tilsvar til Karpe Diems Magdi Abdelmaguid, maner derimot til å tro på et større «vi». I motsetning til Magdi, som uten å sitere Schmitt, ikke lenger identifiserer seg med Støres «vi».

Mange (til og med sedvanlig Støre-kritiske stemmer) har latt seg røre av Støres tekst. Jeg vil snarere si Støres tekst er røre. Full av patos, men svak på logos.

Mens Schmitt var en mester til å konkretisere det abstrakte, trives Støre best blant abstraksjoner og vegrer seg for det konkrete.

Krigen som nå utspiller seg i Midtøsten krystalliserer skillet mellom Hamas og Israel, mellom venn og fiende. Fiendskapet mellom jøder og palestinere har ligget latent i over 1000 år. Etter 7. oktober har konflikten atter en gang blusset opp, antagonismen har nådd sitt mest intense, og det mest ekstreme politiske middelet, krig, har blitt tatt i bruk som en eksistensiell negasjon av fienden.

Støres ord, om at «Dypest sett, så er verden også et «vi»; i stadig sterkere grad knyttet sammen», blir da meningsløse. Hamas og Israel er ikke del av et felles «vi». Tvert om er sannsynligheten for fredelig sameksistens mellom Israel og palestinerne mindre enn noen gang. Det er rett at «vi» alle trekkes inn i konflikten. Men ikke «vi» som en felles politisk enhet, men på en side av «oss» mot «dem»—slik man da også ser at diskursen om konflikten har hardnet til i Norge, tilsynelatende langt fra konfliktens episentrum.

Som sådan treffer Magdis virkelighetsbeskrivelse langt mer presist enn statsministerens: «Hver eneste bombe som slippes over Gaza, skaper en dypere kløft i Europa, og snart står vi på hver vår side av krateret og ser ikke lenger verden fra samme sted.»

Støres store «vi» er intet mer enn en selvmotsigende abstraksjon. I den ene setningen sier han at alle i verden er del av et globalt «vi». I den neste sier han at: «Du og jeg, med ulik familiehistorie, har ulike minner, men nok felles til at vi både kan snakke om og ta ansvar for et «vi» i Norge.» Hvis det finnes et norsk «vi», så følger det nødvendigvis derav at det også finnes et «dem» som ikke er norsk.

Som Schmitt sa: «Den politiske enheten forutsetter den reelle eksistensen av en fiende og derfor sameksistens med en annen politisk enhet.» Den politiske enheten Norge oppstod og eksisterer i opposisjon til territoriene rundt seg som ikke er norske. I dag nyter Norge fredelig sameksistens med sine naboland. Men det hører med til saken at svenskene og danskene, landene som ligger oss nærest, historisk også har vært våre argeste fiender—akkurat slik israelerne og palestinerne finner fiendskap i naboskap.

Vi definerer det norske mot det ikke norske, ikke nødvendigvis fiendtlig, men annerledes. De fleste nordmenn, med Støre som unntak, kan relatere seg mer til et norsk «vi», enn et europeisk eller globalt «vi». Jo mer globalt og abstrakt man definerer et «vi», desto svakere og mer meningsløst blir det. Det er heller ikke slik at det ikke finnes antagonisme mellom Norge og naboland. Men der israelerne og palestinerne tyr til raketter og maskingevær, nøyer vi oss med svenskevitser og langrennsstafett.

Støre ramser videre opp de egenskapene som han mener «binder oss sammen i et «vi» i Norge; som menneskeverd, likeverd, demokrati, ytringsfrihet, religionsfrihet og tillit.» Felles for alle disse størrelsene er at de har blitt svekket av det større «vi» som masseinnvandringen til Norge har gitt.

Det blir også bare tullball når Støre benekter at den pågående konflikten i Midtøsten ikke er en krig mellom religioner, noe det i aller høyeste grad er. En slik realitetsbenektelse er ingen tjent med. Joda, jødedommen, kristendommen og islam har flere ting til felles. For eksempel at de alle er monoteistiske religioner, og som sådan gjensidig utelukkende. Kristendommen skilte seg fra jødedommen for 2.000 år siden og Muhammed gikk sin egen vei for snart 1.400 år siden, og det faktum at alle tre har sine helligste steder i Midtøsten er mer en kilde til konflikt enn forsoning og fellesskap.

Konflikten mellom Israel og Hamas er en religiøs konflikt mellom jødedom og islam. Det er også en konflikt mellom Iran og Israel, og i forlengelse en konflikt mellom Vesten og Iran, mellom kristendom og Islam. Hva Støre mener konflikten er forblir tåkelagt.

Statsmannen Støre ser seg som alltid forpliktet til å nyansere. Dette er tross alt den samme Støre som løy om at han hadde holdt hemmelige samtaler med Hamas.

I likhet med Magdi ser ikke jeg lenger behovet for eller verdien av nyanse. Jeg står urokkelig på en side av kløften, bare motsatt side av ham.

For meg er valget enkelt. Sivilisasjon eller barbari. Da velger jeg sivilisasjon. Den amerikanske filosofen Sam Harris har kokt spørsmålet ned til essensen. Hva ville hver av partene ha gjort hvis de hadde makt til å gjøre hva de ville? I begge tilfeller vet vi svaret. Israel har overlegen militærmakt og bruker den i så begrenset omfang som mulig, og gjør alt i sin makt for å skjerme sivile—på begge sider. Hva ville Hamas gjort? Det fikk vi svaret på den 7. oktober, da Israels vanligvis vanntette forsvar sviktet. Rundt 1.200 mennesker ble drept, hvorav hundrevis ble torturert, lemlestet, paradert og likskjendet på de med bestialske vis. Å holde Hamas og Israel som moralske ekvivalenter er derfor en synd.

Israel kunne Norge hatt et felles «vi» med, slik de to landene i etterkrigstiden hadde et godt og nært forhold. Med Hamas vil det alltid være «dem» og «oss». Mange nordmenn, de fleste på venstresiden og forbausende mange feminister har ikke nølt med å ta palestinernes side, og har gått langt for å rasjonalisere og bortforklare Hamas’ terrorhandlinger. Sympatien er neppe gjensidig. Om de hadde havnet i Hamas´ hender, ville de vært heldig om de slapp fri med hodet i behold. I motsetning til den tyske kvinnen Shani Louk, som mange på sosiale medier først argumenterte for at var i live og bare lå i en litt keitete positur på lasteplanet til en gjeng ganske ålreite karer fra Hamas. Den gang ei.

Bedømt fra oppmøte i gatene i europeiske storbyer og amerikanske college-campuser så er det en voldsom folkelig støtte for Hamas i Vesten i dag, især blant den delen av befolkningen med bakgrunn fra muslimske land. Ironisk nok har mange flyktet fra den type regimer som de nå bejubler, på trygg avstand. Om de utgjør flertallet av befolkningen er lite trolig. Men det er ihvertfall en veldig vokal minoritet. Jødiske minoriteter derimot, har få allierte og må ligge lavt for å ikke bli lynsjet.

Forrige uke var jeg på vei til middagsselskap i London da jeg selv plutselig havnet midt i en pro-palestinsk parademarsj like ved Piccadilly. «From the river to the sea, Palestine will be free». Hvor skal jødene gjøres av? Denne uken er jeg i Dubai. Et emirat som vel å merke er muslimsk. Her er det ikke et palestinsk flagg å finne noe sted. Ikke én eneste plakat med «Free Palestine» eller at kloden må renses for jøder.

De arabiske landene er ikke hevet over å spille Palestinakortet hvis det gagner dem. Men alt tyder på at emiratene og Saudi-Arabia i realiteten stiller seg likegyldige til palestinernes skjebne. Bevisene på det finner man i at de hverken sender penger eller tar imot flyktninger. Den makten som har interesse av å bruke Hamas og Palestina som proxyer i sin krigføring mot Vesten er Iran. Tyrkia sitter foreløpig på sidelinjen som en joker.

Så Magdis uforbeholdne støtte til palestinerne, og derav de facto Hamas, fremstår for meg som forunderlig og lite reflektert. At mer ekstreme varianter av holdningene hans har stor utbredelse blant den muslimske minoritetsbefolkningen i mange europeiske land er direkte skremmende. For jøder er det ironisk nok blitt tryggere i emiratene enn i Vesten.

Men det jeg kan være enig med Magdi i er at det ikke er noe «vi». Tilspissingen av Midtøsten-konflikten har tydeligggjort venn-fiende-aksen, også i debatten her hjemme. Det er et faktum man ikke kan ønsketenke seg vekk fra, særlig ikke om man er statsminister.

Game of Bonds

To paraphrase Mike Tyson and Harold Macmillan: In financial markets everybody has a forecast until events punch them in the face.

So, I am probably wrong but this is how I forecast that the situation in the bond markets will play out.

First a brief recap.

For the past year and a half the Federal Reserve—tasked with its dual mandate of price stability and full employment—has hiked interest rates aggressively to combat inflation, which had spiralled out of control following the pandemic. (I am firmly in the camp who believe inflation accelerated more as a result of the Feds massive money printing experiment rather than supply side constraints in the pandemic years. But leave that aside for now).

By all appearances the Fed (and other central banks) kept interest rates at the zero bound for too long, was too late to start hiking rates and could probably have front-loaded more of the hikes in a “shock and awe” way.

Whether the Fed is to thank or not, inflation has now decelerated quite a bit, from a high of 8,9% year over year in June 2022 to 3,7% in August, (somewhat worryingly up from 3,1% the month before). Somewhat disturbingly the core inflation rate is proving to be rather sticky.

The problem for the Fed is that the lever it is using to control inflation, i.e. the interest rate, is causing severe collateral damage in the form of higher government borrowing costs—which is fast approaching an annual rate of one trillion dollars.

With the low average maturity of the US debt stock this might easily double again to two trillion dollars already in the next year or two. Running budget deficits at banana republic levels as far as the eye can see does not brighten the outlook.

These levels of interest expenditure are obviously not sustainable. The bond market seems to agree. Since the summer the yields on both 10- and 30-year Treasury bonds have increased at a brisk pace—to levels not seen since before the Great Financial Crisis—and talk about “bond market vigilantes” is suddenly all the rage again—always an ominous sign.

So, we have at the one hand the Fed approaching the end of its interest rate increasing campaign, as evidenced by plateauing rates at the short end of the curve. And on the other hand increasing rates at the long end of the maturity curve.

And voila, all of a sudden the interest rate curve is a lot less inverted than it was back in the summer a few months ago.

This is causing the warning lights to flash that a recession may be around the corner, or perhaps already here—the softening macro data of late does not rule that out. As bond investor Jeffrey Gundlach tweeted yesterday, it is time to “buckle up”.

My view is that we are at, or close to an inflection point. The curve will continue to de-invert and eventually steepen, as the economy slows down and the US Treasuries market starts to crack under increasing pressure.

The Fed itself forecast that the funds rate will come down smoothly and gradually over the next two years.

I don’t believe that will be the case at all. If history is any guide it never happens this way. The Fed never cuts interest rates smoothly and gradually. As soon as a real or perceived crisis hits the FOMC in the face, they panic and cut rates abruptly and steeply.

Just look at the chart, (the only possible exception was in the mid-90s).

The Fed is continuing to painstakingly talk the talk about “higher for longer”. The market has always taken this with a grain of salt, as evidenced by consistently pricing the implied future funds rate lower than the median forecast in the Fed’s own dot plot. The market only believes the Fed’s tough talk until something snaps. Then everybody knows that Jay Powell & co will chicken out.

So far the US economy has proved remarkably resilient in the face of rising rates. The banking crisis in the spring (with the fall of Signature Bank and Silicon Valley Bank) was a shot across the bow, but the Fed managed to contain the crisis quickly before any escalation to the wider banking sector.

The fact that nothing has broken yet, does not mean that it will not break eventually though. I believe a breaking point is fast approaching. It is impossible to foresee exactly how it will unfold. But the imbalances are piling up, to such a degree that it is hard to see how either government and/or household finances can withstand the pressure for much longer.

The Fed is struck between a rock and a hard place. The fight against inflation is far from won. But the medicine is proving to have too severe side effects for the indebted US government.

My belief is therefore that the Fed will cave before the war against inflation is conclusively won. The Fed funds rate will be slashed in half, not over the course of two years but in a matter of months.

When will that happen and what will the trigger be? That is of course impossible to say, and renders any advance analysis incomplete. But I will go out on the limb and predict that developments in the longer end of the bond market will force the Fed’s hand much sooner than the majority of market participant currently believe. I assume that Powell will try to find another pretext for his coming course correction, be it a soft employment report, another bank failure or a sudden stop in some obscure corner of the credit markets. But he will chicken out, sometime between here and before Easter next year, I hazard to guess.

It is not without irony. But the only thing that can save the US from a government bond crisis is a slowdown in the economy or a financial crisis that will give the Fed the pretext it needs to bail out the bond market.

Late Democracy

Democracy has long been hailed as the pinnacle of political systems, but perhaps it’s time to reevaluate this assumption.

“Democracy is the worst form of Government except for all those other forms that have been tried from time to time”. For three-quarters of a century, Churchill’s famous maxim has been invoked to shut down any discussion and debate about the merits of alternative political systems. While his quote seemed unquestionable for a long time, history may no longer be on his side.

The Western Triumph

Churchill’s remark, delivered in the aftermath of World War II, seemed justified as Western democracies emerged victorious against the anti-democratic forces of Nazi Germany, and as Stalin rung down the Iron Curtain from Stettin in the Baltic to Trieste in the Adriatic, dividing the autocratic and communist Eastern Bloc from the democratic and capitalist West.

The subsequent decades further solidified the belief in democracy’s superiority over totalitarianism. The Western countries’ blend of democracy and capitalism increasingly appeared as a winning recipe, compared to the Soviet Union’s stale combination of communism, planned economy, Gulag and poverty. When the Cold War ended with the fall of the Soviet Union, it implicitly marked the ultimate triumph of democracy. The story had reached its end — as Fukuyama and other gleeful liberal professors would have it.

But hubris took hold. Riding high on their own success, the Western powers, led by America, embarked on ill-fated crusades to export their supposedly universal values of democracy and human rights to all the illiberal corners of the world. Korea, Vietnam, the former Yugoslavia, Afghanistan, Iraq, Libya and Syria. With very little success, it must be concluded in retrospect — with the jury still being out on the latest adventure in Ukraine.

The Chinese Challenge

Meanwhile, China quietly transformed itself into an economic powerhouse, leaving the Soviet Union’s stagnant economy in the dust. The rise of China as a manufacturing and technological juggernaut has challenged Western assumptions of their inherent supremacy.

Having been preoccupied with spreading democracy abroad, Western elites allowed democracy to rot at home, and turned a blind eye to this new threat arising in the East. China today presents an existential challenge to the liberal democracies on a completely different level than the Soviet Union ever did. Already in the 1960s, the Soviet Union’s economic stagnation was a fact. Khrushchev could threaten the West with missiles and shoe-banging rhetoric, but the quality of Russian cars, kitchen appliances and television sets was nowhere near matching the standard of their western counterparts.

Today there are few things the Chinese are not making better than us Westerners. Since Deng Xiaoping’s late 1970s reforms, China saved, studied and invested, strategically transforming itself into the factory of the world, whereas the West became decadent, offshored its manufacturing production, outsourced its know-how and indebted itself to finance mass consumption and mass immigration at home.

The re-integration of China and the Eastern bloc into the global economy contributed to a global savings glut that sent interest rates to historic lows. Alas, the Western democracies could not resist to abuse this opportunity. One of the greatest ironies of the last 50 years is that the savings of poor Chinese with a low time preference financed the overconsumption of affluent Westerners with a high time preference.

Previously, the notion persisted that China produced only inexpensive hardware, with the West leading in design and software. However, this changed with TikTok’s emergence as a transformative platform. Western youth adopting Chinese social media like TikTok over Western alternatives signifies a paradigm shift. Similarly, Elon Musk’s aspirations for Twitter (now X) to emulate WeChat – the Chinese “everything app” – highlight China’s increasing technological influence. China has transitioned from imitating the West to being emulated by it. China has gone from copying the West, to being copied by the West.

Consequently, Chinese wolf warriors have become much more assertive vis-à-vis the West in recent years. Whereas it is doubtful that anyone but the most ideologically blinded of Communist apparatchiks ever truly believed that the Soviet system could deliver better living standards for Soviet citizens than the capitalist countries, the Chinese propagandists are openly challenging the presumed supremacy of the Washington Consensus. Sure, China’s GDP per capita remains only a fraction of those in OECD countries, but the gap has been closing precipitously. And with 1,35 billion inhabitants, that means that several hundred million Chinese are already enjoying living standards comparable with or even superior to those of Westerners. That is a marked change from the Maoist era when even the top party brass suffered under poorer living conditions than average workers in the West.

But China is not exactly a paragon of civil liberties, one might logically interject. True. If a Chinese citizen has the temerity to compare great Chairman Xi to Winnie the Pooh for example, he would have to dispel any notions of habeas corpus or rights to a fair trial and be prepared to rot in a prison cell as long as the regime deems necessary for the harmony of the kingdom. If a billionaire who has spent too much time in the West starts to make politically problematic statements, his body will disappear along with his fortune. Perhaps in a few years’ time his body, stripped of its former personality might re-appear to express deep contrition for wrongs committed against party doctrine, but his wealth will have been distributed to more pliable comrades. And don’t even think of mentioning the one or two million Uyghurs who have been enslaved in concentration camps in Xinjiang province and subjected to everything from intense surveillance to forced labour and involuntary sterilisations. If we are to take the Party line, as expressed by the governor of the province, at face value, these 380 re-education camps either do not exist or the Uyghurs have “graduated” from them.

The Covid Challenge

When the Covid-19 pandemic struck the CCP decided to extend its Uyghur policy nationwide. Across the Middle Kingdom people were universally being enclosed in their apartments, in the most draconian lockdown the world has ever seen, courtesy of the 21^st century surveillance system the sinister Orwellians of the communist regime have devised and implemented to perfection. It offered little relief for the Uyghurs, except perhaps in the sense of equal treatment with their fellow citizens.

The Chinese lockdown presented a glittering opportunity for the West to showcase its unique value proposition differentiating it from the despotism of the Orient: an open society. What a pity then that the democratic governments of the West decided to copy the totalitarian Chinese pandemic policies, lock, stock and barrel, throwing all the principles of liberty and freedom out of the window.

With the benefit of hindsight we know that the coronavirus was not nearly as severe as the Black Death or the Spanish flu. Nobody could know that at the time however, so Nassim Taleb and others invoked the precautionary principle in favour of instituting mediaeval-style curfews to stop the working classes from going about their daily business and spreading the virus to colleagues, friends and family. At first not much happened as governments hesitated in the face of this unfathomable foe. It took the morbid scenes emerging from the morgues of Lombardy to whip politicians and plebeians alike into a state of panic. Like clockwork, Western capitals began shutting down their societies in the gloomy days of March 2020.

People who cite the precautionary principle always sound very clever, perhaps too clever by half. It is a hard principle to argue against. But it was not the principle Western civilisation was built on. Yes, Covid could have been more deadly. But shutting down societies is not risk-free either. We still don’t know the long term collateral damage from the lockdown years.

In the rush to beat the virus, executive powers were abused, constitutions were forgotten and fundamental rights of a free society were infringed. Lord Sumption has fittingly described this “radical experiment” as a “complete failure of government”. The principal problem, as Sumption put his finger on, is that once an open society relinquishes the very freedoms and liberties that made it an open society, there is ipso facto no possible path back to the status quo ex ante. The spell is broken. No more than eggs can be unscrambled or Eve could have unpicked the forbidden fruit, can freedom be fully restored to its original when the threat of it being arbitrarily taken away is not only theoretical but lies implicit in the historical precedence. The formerly unthinkable has become repeatable.

It will remain a riddle, wrapped in mystery why the Western governments decided to base their pandemic policies on coercion and not on volition. In doing so the British government, for example, acted in direct contradiction of SAGE, its panel of expert scientific advisers, which advised that: “Citizens should be treated as rational actors, capable of taking decisions for themselves and managing personal risk”. Instead, the government chose coercion.

I won’t delve into the details of the UK government’s pandemic response, which, in my view, Lord Sumption has extensively and damningly criticised; how the Johnson government overstepped the powers vested in it under the Coronavirus Act and the Public Health Act 1984; how the courts did nothing to intervene; and how Parliament went into recess in the crucial months of March and April, and thereby effectively abdicating from its constitutional role as a check on executive (abuse of) power — an opinion seconded by retired Supreme Court president Lady Hale.

While many Western countries adopted the Chinese pandemic policy template, it is bemusing that the most ancient of the European democracies, Britain, along with its colonial offshoots Australia and Canada, went to the extreme of resembling a police state with stringent and even unreasonable lockdown enforcement.

It is also not without irony that Donald Trump would more likely have won re-election in 2020, if he had embraced more authoritarian lockdown measures and become the tyrant his critics promised he would be but which he ultimately did not become. Instead he stayed true to his freedom-loving instincts and lost.

In the UK Boris Johnson’s downfall was both deserved and self-inflicted. On the one hand it is absurd that a prime minister should be forced to resign for having enjoyed cheese and wine with staff in No. 10. But he was the one who made these absurd rules and restrictions on social gatherings that he expected his voters to follow but could not comply with himself. He is now relieved of political duties and free to cash in on the speaking circuit, hobnobbing with plutocrats and potentates.

His political legacy might have fared better had he not chosen to lock down the kingdom and instead focused on delivering Brexit. If he had surrendered to the virus back in March of 2020 that could even have given him the tragic death of one of his favoured Greek heroes, instead of the highly lucrative but dishonourable way he now leads his life.

The lone holdout of common sense throughout the pandemic was Sweden — which might come as a surprise given that common sense has not been in high supply in Sweden the past few decades. The answer might be because it was not the democratically elected government that was running the show, but a technocrat. Anders Tegnell, the state epidemiologist, at times seemed to fight a one-man battle to keep Swedish society open. Against the forces that wanted to shut societies down. The media made him an object of ridicule. The governments of other countries tried to shame Sweden into submission. The hapless Löfven government effectively went into hiding, preparing to sacrifice Tegnell as its fall guy. Still, Tegnell refused to budge to the orthodoxy of the day.

I visited Stockholm during the pandemic. The streets and restaurants were certainly less crowded than they would normally be. The Swedes were obviously taking the virus seriously. The only difference was that Tegnell trusted his countrymen to make the best decisions for their own self-interest, rather than using the coercive powers of the state to order people to act in the interest of the public health service. Here it is worth remembering that the original purpose of having a public health service is to protect the population. But what the pandemic revealed is that this concept has been turned on its head in most Western countries; the health service must be protected from the people — as exemplified by the Johnson government’s Orwellian slogan: “Stay Home, Protect the NHS, Save Lives”.

Sweden did suffer higher excess mortality than the other Scandinavian countries in the early stages of the pandemic, mainly due to deaths in homes for the elderly. But in the end Sweden fared no worse but better than the European average in terms of covid death rates per capita, and significantly better than both the UK and the US.

More importantly, the Swedish experience demonstrates that it was not only wrong and possibly illegal to lock down society, but unnecessary. In the words of Talleyrand, it was worse than a crime, it was a blunder. Tegnell did not have the benefit of hindsight anymore than other Western leaders. And he was of course as mindful of the precautionary principle as anyone else. What separated him from the others was that he had the wisdom to confront a then unknown enemy without an unproportional use of the coercive powers of the State.

Tegnell was much vilified, but ultimately vindicated. Other Western governments however, were so fearful of overburdening their public health services that they were willing to sacrifice the open society.

Aristocracy in theory, Mediocracy in reality

Thomas Jefferson envisaged democracy as true aristocracy. Government by the best and brightest, decided on merit, not by birthright. It was a fine idea in theory, but a quarter of a millennium later we have to conclude that it has come way short of promise in practice.

Jefferson might not have been surprised. After all, the founding fathers were battle-hardened men and not nearly as naive as the liberals of today. They shared a certain pessimism about the long-term prospects for democracy. Jefferson’s predecessor, John Adams, never expected democracy to last long. “It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide”. Jefferson himself quite darkly remarked that: “The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure”.

Jefferson wanted meritocracy. What we have ended up with is mediocracy. Government not by the best and the brightest, but by the most mediocre among us. As the electorate expanded over time, the competence of the elected declined. Democracy promised leaders who are the first among equals, but ended up with politicians who are simply more equal than others.

In a bizarre perversion of Jefferson’s democratic ideal some, such as the Communist Norwegian member of parliament Mímir Kristjánsson, are even celebrating the fact that his fellow politicians have no merits or virtues distinguishing them from the average voter but that they are just as average as any random sample of the populace — as was demonstrated recently when the leader of the Red party was forced to resign after being busted for stealing a pair of Hugo Boss sunglasses.

There is also little to indicate that wider representation has led to wiser policy and better political outcomes. On the contrary, the great social reforms of the 19^th century were instituted prior to the introduction of universal suffrage. In Germany it was not the socialists but Bismarck, the Iron Chancellor, who introduced State Socialism — providing health insurance, pensions, disability benefits, workers protection and restrictions on child labour.

Contrary to popular wisdom Victorian noblemen and Prussian Junkers did as much, if not more to improve the living conditions of the working classes than the organised labour movements, whereas the modern “Labour” parties have, as Spengler predicted, been effectively co-opted by the liberal bourgeoisie.

As H. L. Mencken commented a century ago, after hyperinflation had doomed the newfangled democracy of the Weimar Republic, but before the democratic allure of Nazism seduced the German nation into Götterdammerung:

“Since the abolition of the three-class system in Prussia there has been absolutely no improvement in the government of that country; on the contrary, there has been a vast falling off in its honesty and efficiency, and it has even slackened energy in what was formerly one of its most laudable specialties: the development of legislation for the protection of the working class, i.e., the very class that benefited politically by the change.”

Mencken predicted that democracy would not only be self-limiting, but possibly also self-devouring. He wrote his critique in the days of Wilson and Roosevelt. One can only imagine what he would have thought of Biden and Trump. He would hardly have been impressed.

It is not hard to see the 2024 US presidential election as the fulfilment of Mencken’s prophecy. The final showdown of a degenerate democracy. The senile representative of the stagnant status quo versus the buccaneering billionaire con-artist portraying himself as tribune of the plain people.

The majority of the electorate in most Western countries retains a blind faith in the merits of democracy. Yet, when moving from the abstract to the concrete, people have exceedingly low expectations for democracy’s potential to solve the actual political challenges facing society.

The kind of enlightened liberal debate that characterised 19^th-century parliamentarianism now seems like a distant ideal.

The Debt Challenge

Living standards across the West today are higher than they have ever been. However, growth rates are stagnating, while wealth and income inequality have reached record levels. The degree of public immiseration is high and rising.

A prevailing outcome in modern democracies is the continual rise of debt ratios. Margaret Thatcher said that the problem with socialism is that eventually you run out of other people’s money. The problem with democracy is that you eventually run out of people to borrow money from.

In the US, for example, one of the few points of agreement between Republicans and Democrats is the acceptance of permanent deficits.The size and complexity of the modern state combined with extreme levels of political partisanship means that the scope for Congress to enact required reforms is near zero. Republicans will cut taxes where they can and Democrats will raise spending where they can. Congressional horse-trading often yields half-baked measures that add costs and complexity to an already oversized state, without addressing underlying political issues. If ever a bill is introduced that reduces complexity and cuts costs, it has zero chance of passing both houses of Congress and being signed into law by the President. And so the debt clock keeps ticking.

US government debt has now risen to 32,7 billion dollars — an astounding 119 percent of GDP (the federal debt that is, not counting state and local debt, which would bring the total to 132 percent of GDP). This debt ratio is more than double the level recorded at the beginning of the millennium. The Euro area is little better, at 91,6 percent of GDP (at the end of 2022), with the UK in between at 115 percent of GDP, (also at the end of 2022).

More worryingly, interest expenses are accelerating even faster than the debt outstanding. Interest payments on the federal debt amounted to a record 475 billion dollars in fiscal year 2022, a 35 percent increase from the prior year. It will increase even more this year.

During the second quarter, federal interest expenses nearly reached one trillion dollars on an annualised basis. That is a tripling of federal interest expenses in three years. Let that sink in. US politicians have not yet.

I might be overemphasising a single book, yet I suspect that the book on sovereign debt crises by Ken Rogoff & Carmen Reinhart published after the financial crisis had unintended and unfortunate consequences. The authors identified a 90 percent debt to GDP ratio as the threshold where economic growth would start to slow and the risk of a debt crisis increase. The book became widely influential, until somebody came along and found errors in Reinhart and Rogoff’s spreadsheets, apparently debunking the whole thesis that debt imperils growth. Even if the authors made some mistakes that perhaps led them to oversell the 90 percent threshold as the crucial line in the sand, the overall thesis was sound. To conclude that debt does not matter much would be misguided, but unfortunately that became the moral of the story — certainly for politicians.

Democratically elected politicians are simply not taking debt seriously. And why should they? They will be out of office — and richly rewarded by the special interests they represented — long before the debt comes due. Spiralling indebtedness has thus become an inherent characteristic of democratic systems. As a mode of government democracy inherently has a high time preference, prioritising the present over the long term. Only politicians with a high time preference can succeed in a democratic system. Never has a political candidate won an election on a platform to reduce the national debt. For parliamentarians or presidents serving 4-year terms, it is always more politically expedient to assume that the issue of public indebtedness can be deferred to their successors.

But can this can be indefinitely kicked down the road? Perhaps it can. After all, it has sort of worked so far. But it would not be safe to bet on. The only safe bet is that the democratically elected leaders of the West will persist in happy-go-lucky deficit spending, hoping that the threat of sovereign debt crises will not materialise on their watch.

Democratic Denouement

The zenith of democracy has passed. It has been a pretty good run, but now it has reached a dead end at last. The West is getting old and tired and so is our cherished political system. European civilisation experienced rebirth once before, but given the current demographic profile, another Dark Age seems more likely than a new Renaissance.

Western populations live more affluent lives than ever before. But that is more in spite of than because of anything the democratic process has contributed over the last half century or so. I would argue that democracy achieved peak performance when it was practised in a more limited form in between the Napoleonic wars and the First World War, when reasonable debate could and did lead to reasonable reforms, and the State did not intrude too much with man’s march of progress. In our day democracy has become a parody of itself.

China is the biggest challenger to the democratic world. Impressive as the rise of the Middle Kingdom has been since the Communist party finally stopped starving and butchering its people on a grand scale after Mao passed away, it is unlikely that Chinese GDP per capita levels will ever catch up with the West. It even remains uncertain whether the Chinese economy will surpass the US as the world’s largest economy, as long predicted, according to some as early as 2026, (measured at market exchange rates).

As such the bigger challenge for the democratic countries might come from smaller city states such as Singapore and Dubai, which are already giving the West a run for the money in the GDP per capita league tables. These city states have combined Oriental despotism and Western free-market capitalism in a way that has proved remarkably successful. The only metric they are scoring low in is democracy. Which begs the question: does a democratic system of government hold inherent value if it fails to produce better outcomes for a society than enlightened autocracy? Westerners might be biased in favour of democracy, but it is doubtful that the populace of Singapore would have traded the economic miracle under Lee Kuan Yew for free and fair elections that would have left it as impoverished as the rest of Malaysia.

I was indoctrinated in school to believe in democracy, not to question it and to consider no alternatives. Perhaps that is part of the reason why the system has become so sclerotic. People in the West have continued to sing the praises of democracy and bombed our ~~universal~~ Western values on the rest of the world, metaphorically and literally. But we have not challenged our own system. Jefferson’s tree of liberty has not been refreshed in a long time. Is democracy still the least bad form of government among all those attempted? This question demands renewed examination. The hypothesis should no longer be accepted on faith alone. If democracy shall stand a chance to revitalise itself it must be questioned and challenged.

End Times

I have been End Times by Peter Turchin, finding it to be one of the most compelling political science books I’ve come across in quite some time.

Turchin is a pioneer in the field of Cliodynamics, having made a mid-career shift from theoretical biology with the aim of applying complexity science, vast databases and more scientific rigour to the study of history.

Prior to a recent mention in a Bloomberg article by Niall Ferguson on the new Sino-American Cold War, I was not familiar with Turchin’s work. For the purpose of this discussion, I will focus solely on “End Times” and not delve into his other works.

In “End Times,” Turchin highlights a significant and in my mind the most under-communicated challenge facing Western (and fot that matter Eastern) societies: Elite overproduction. Western societies have long prided themselves on meritocracy, where individuals can rise from humble origins to positions of power and prominence through the pathway provided by the education system. The traditional aristocracy and clergy have been largely replaced by a credentialed class.

However, a problem arises when there is an excess of elite aspirants graduating into a stagnating economy. Turchin’s extensive historical database reveals that such circumstances, coupled with widespread popular immiseration and record income inequality, inevitably lead to crises. Remarkably, Turchin predicted well in advance that the 2020s would become a period of political instability.

Unfortunately, historical evidence shows that finding a smooth exit from a crisis of elite overproduction is challenging, with only a few exceptions such as the reform acts in Victorian Britain and the New Deal period in the US. Typically, the surplus elites must be culled, either non-violently or, if necessary, through violence.

While Turchin doesn’t explicitly predict how or if Western societies will escape the predicament of an increasing number of credentialed aspirants seeking to join an increasingly gerontocratic elite that controls an ever-growing share of the wealth of economies which lack the dynamism and growth potential of the past, he is not optimistic in the near term.

Turchin’s concept of Elite overproduction should serve as food for thought for policymakers who still adhere to the previous success formula of pushing as many students as possible through the higher education assembly line without fully considering the consequences when these aspiring elites realise their prospects of joining the elite may not align with reality.

Where was Michael Lewis?

If Michael Lewis was indeed embedded with SBF for 6 months, that raises a number of questions:

A) did he see through the Ponzi?
B) if so, why didn’t he break the story?
C) would it be ethical to stay silent if he knew, in order to gather a more explosive story/book sales?
D) or did he actually see SBF as Skywalker vs CZ as Vader?

Media reports seem to point towards D), which would not exactly cast Lewis in a flattering light. Did he too drink the FTX Kool-Aid?

Silver linings of the Crypto Crash

Crisis may ultimately reveal that the supply of Bitcoin is scarcer than it appears.

The tragedy of the current “Crypto” crisis is that Bitcoin is being punished for the sins of SBF — never mind that the demise of FTX does not in any way discredit the value proposition of Bitcoin. On the contrary, FTX was everything Bitcoin is not.

The crisis has triggered a wave of margin calls, liquidations and panic selling, sending the Bitcoin price sharply lower. That is a natural first-order effect, as people question the merits of cryptocurrencies and declare the death of Bitcoin.

There is widespread belief that a cascading crisis will trigger a flood of further Bitcoin liquidations, as exchanges, lenders and funds fail one after another. But how much further can it go?

3AC, Voyager, Celsius and now FTX/Alameda are all in or entering liquidation. But what they all have in common — contrary to what the layperson would intuitively believe about crypto companies — is that they all hold preciously few bitcoins on their balance sheets.

It is staggering that FTX listed 0 bitcoin on its balance sheet, against $1,4 billion of bitcoin liabilities. But, what that obviously means is that there will be no bitcoins to auction off from the ashes of FTX.

3AC was estimated to have around $4 billion worth of assets when it went bankrupt in April — at current market prices it may be half the value or less now.

I don’t know the composition of the 3AC’s remaining assets. But what is sure is that 3AC did not possess the 15,250 bitcoins it owed to Voyager, which in turn sent that firm down:

Pursuant to the 3AC Loan, Voyager agreed to lend 3AC 15,250 Bitcoins and 350 million USDC; 3AC drew down on the entire 3AC Loan. After the Luna crash in 2022, Voyager initially requested partial repayment of the 3AC Loan, and subsequently requested full repayment by June 27, 2022. 3AC did not honor either repayment request. 3AC’s nonpayment, among other things, resulted in Voyager filing its own chapter 11 case in the United States Bankruptcy Court for the Southern District of New York on July 5, 2022.

That is quoted from the bankruptcy filing of Celsius, the week after Voyager went down. Celsius’ original filing on July 14th listed a $1,2 billion gap between assets and liabilities. By August that gap had widened to $2,8 billion, as the value of assets fell and liabilities swelled.

A court filing in August showed that Celsius held only 14,578 BTC (~$250m at current prices), (+ 23,348 wrapped bitcoins, for whatever they will be worth), against 104,962 BTC (~$1,75b at current prices) that it owes to clients and creditors. The result of this is of course that people own way less actual bitcoins than they believed they owned.

On Nov. 10th Celsius filed a motion to extend the exclusivity period to work out its own reorganisation plan. So it remains unclear what will happen to the failed lender’s [smallish] stack of Bitcoin, but it is unlikely to unleash huge selling pressure on the market when Celsius’ assets are auctioned off.

On Nov. 11th Voyager announced that it is reopening the bidding process for its assets, now that the “$1,4 billion” sale to FTX is of — or $51 million, which was the actual amount of cash to be paid. What will happen with BlockFi, which was also supposed to be taken over by FTX, is also up in the air again. I don’t have the exact figures, but it appears unlikely that any of these companies hold more bitcoins on the asset side than the liability side of their balance sheets.

Of course the crisis may continue to cascade and engulf other players. Crypto.com appears to be next in line for a run on the bank. Crypto.com holds approx. $800 million worth of Bitcoin, according to Nansen, around a third of its total digital coin holdings. Further rounds of forced bitcoin selling can absolutely not be ruled out.

Still, it appears (with provisos of course) that the end result of the domino of falling crypto companies will not be too flood the market with bitcoins, but rather to demonstrate that the supply of actual bitcoins in circulation is much scarcer than the fractional reserve operations of FTX and the other ponzis have given the impression of. That may ultimately turn out to be the silver lining of the crypto crisis.

Crypto is peak Silicon Valley

The Allen Farrington piece on Sequoia’s investment in FTX and hyping of SBF is hilarious.

Moral of the story:

Next time somebody says they don’t read books, don’t make up a mumbo jumbo explanation why that makes the person a next-level genius. Take it instead as confirmation that the person is a fool.

“Wouldn’t someone with IQ points to spare realize that dismissing books — all books — as essentially worthless might rile a writer? Was he playing with me? Is this fun? Is this humor? I’m satisfied with my meta-analysis until I realize that one can always increment the level of strategic play in this sort of game. It’s like poker. Level one is just thinking about how to strengthen your own hand. Level two is thinking about what your opponent’s hand is. Level three is thinking about what your opponent thinks your hand is. And so on. And, since SBF is obviously a genius, I should simply assume that, compared with me, SBF will always be playing at level N+1. Which makes my analysis of the intent behind SBF’s “books are for losers” idea spiral into infinity and crash, like a computer program stuck in a loop.”
Sequoia