Fairy Tales
The High Priests of Sharpe World
“In a time of faith, skepticism is the most intolerable of all insults.”
Ralph Bourne
I posted this in 2017:
“Middle-Class = people not rich or poor enough to get welfare.”
So here’s a good post from Mike Green:
“We have created a system where the only way to survive is to be destitute enough to qualify for aid, or rich enough to ignore the cost. Everyone in the middle is being cannibalized. The rich know this…and they are increasingly opting out of the shared spaces…”
This is why I loathe the pro-inflationists.
“…Everything changed between 1963 and 2024.
Housing costs exploded. Healthcare became the largest household expense for many families. Employer coverage shrank while deductibles grew. Childcare became a market, and that market became ruinously expensive. College went from affordable to crippling. Transportation costs rose as cities sprawled and public transit withered under government neglect…
If you keep Orshansky’s logic—if you maintain her principle that poverty could be defined by the inverse of food’s budget share—but update the food share to reflect today’s reality, the multiplier is no longer three.
It becomes sixteen.
Which means if you measured income inadequacy today the way Orshansky measured it in 1963, the [poverty] threshold for a family of four wouldn’t be $31,200.
It would be somewhere between $130,000 and $150,000.
And remember: Orshansky was only trying to define “too little.” She was identifying crisis, not sufficiency. If the crisis threshold—the floor below which families cannot function—is honestly updated to current spending patterns, it lands at $140,000.
What does that tell you about the $31,200 line we still use?
It tells you we are measuring starvation…
The second earner isn’t working for a vacation or a boat. The second earner is working to pay the stranger watching their children so they can go to work and clear $1-2K extra a month. It’s a closed loop…
Our entire safety net is designed to catch people at the very bottom, but it sets a trap for anyone trying to climb out. As income rises from $40,000 to $100,000, benefits disappear faster than wages increase…
The family earning $65,000—the family that just lost their subsidies and is paying $32,000 for daycare and $12,000 for healthcare deductibles—is hyper-aware of the family earning $30,000 and getting subsidized food, rent, childcare, and healthcare.
They see the neighbor at the grocery store using an EBT card while they put items back on the shelf. They see the immigrant family receiving emergency housing support while they face eviction.
They are not seeing “poverty.” They are seeing people getting for free the exact things that they are working 60 hours a week to barely afford.
A good summary of the article, since there’s been so much confusion:
“The point of the article is that the range between 40k and 140k is where a family of 4 is rich enough to not get subsidies but not rich enough to not feel the effect of losing them.
As one ascends the ladder between 40-140, benefits are lost at a commensurate rate that money is made.
Below 40k the government gives you free money to hang out. Above 140 you make enough to where subsidies wouldn’t make a difference.”
“Liquidity is nothing more than a function of finding a market clearing price. At the right price there is endless liquidity. And at an unattractive price there is no liquidity at all; liquidity is searching for value, but here...there is no value, so there is no liquidity.”
“The bond market is suggesting much higher r-stars, but I would discount that a bit because they’ve tended not to be reliable.”
NY Fed President John Williams, November 2025.
“R-star is econometric academia PhD mumbo jumbo. Powell doesn’t know where the right level of reserves should be. He’s also said I have no idea what r-star should be...I mean they’re throwing darts at a wall here, which is which is scary, but that’s what they do.” - Peter Boockvar
David Dredge on Williams’ comment above:
“An absolute classic quote from one of the most esteemed High Priests of Sharpe World, President of the New York Federal Reserve and Vice Chair of the FOMC, John Williams. Ignore reality. Trust the models.”
“Mr. Williams thinks that the bond market has it all wrong. Any pricing inherent in the decisions made by bond market participants is, according to Mr. Williams, incorrectly incorporating assumptions not just about r-stars but, presumably, about future inflation expectations, about future Fed policy actions, about term premium, about fiscal debt and deficit circumstances. The bond market is not reliable because the participants couldn’t possibly know all of these things. Mr. Williams and his models, on the other hand, have perfect foresight.
Except that they don’t, obviously. This comes back to our frequent refrain of the great and mighty central planner’s uncanny ability to consistently claim perfect control of future outcomes, while explaining away current states as being the result of unforeseeable events. Today’s challenges have nothing to do with their past policy efforts to shape the future, or so they assure us.”
More Dredge
“History alone is a very poor measure of risk, because it only tells you what did happen, not what could have happened.”
“Financial repression isn’t the solution to our current problem. Financial repression is how we got here.”
“The reason things are correlated in the downturn is because of leverage, because the financial system allows leverage to accumulate based upon assumptions of low volatility as low risk, right? You know super senior tranches of subprime CDO’s are the biggest risk to the financial system when they’re priced as though they’re the least risky, right?”
“Far too often people talk about averages. Average is meaningless. The average means nothing. The average expected return is meaningless. The average correlation is meaningless.”
“If you speak to pension funds in this part of the world they’re exposed to inflation, right? These guys are still way bond-heavy. They’ve seeing the savings of their population as that population is moving into retirement with higher cost of living, because of the surge of inflation that this has created, with a smaller tax base, who’s going to have less savings because they have to pay more tax and a higher cost of living. It’s a negative feedback loop.”
“France you know doesn’t have a sustainable path that anybody can describe anywhere. How is France going to avoid the necessity of capital controls. I can’t see how they can’t trap savings and hold it in. France is very hard to fathom.”
“When I’m speaking to people whose job it should be to grow wealth for the people they’re a fiduciary for - the biggest destroyer of compounding paths: two reasons people haven’t compounded. One poor risk mitigation, and over bearishness, and the reason they’re so susceptible to number two is because of number one.”
“Own stuff that benefits from the asset inflation that they so desire, and own stuff that protects you if it goes wrong.” (Dredge is big on using options)
Dredge explains why Post-WWII financial repression likely would not work today:
“I’ve met with folks in Congress, I’ve met with the Federal Reserve, I met people connected to the Administration, and they all look at me very strangely when I talk about how bad the economy is. I believe they sincerely believe it’s strong. They just are in such denial, using a select amount of data, that they don’t even understand that a large portion of America is struggling.”
Craig Fuller of Freightwaves (great interview by the way)
Share of U.S. Unemployed with four-year degrees
How AGI became the most consequential conspiracy theory of our time
“What does it mean for technology in general if we fall so hard for the fairy tales? In a lot of ways, I think the whole idea of AGI is built on a warped view of what we should expect technology to do, and even what intelligence is in the first place. Stripped back to its essentials, the argument for AGI rests on the premise that one technology, AI, has gotten very good, very fast, and will continue to get better. But set aside the technical objections—what if it doesn’t continue to get better?—and you’re left with the claim that intelligence is a commodity you can get more of if you have the right data or compute or neural network. And it’s not.”
I asked Grok to explain how A.I. will completely change how cheeseburgers are made in backyard barbecues:
“Commercial property prices in the U.S. saw a significant uptick in October, with the RCA CPPI National All-Property Index up 4.2% from a year earlier—the most substantial annual increase in three years.”
“What is wrong with mainstream economics is not that it employs models. What is wrong is that it employs poor models. They – and the mathematical-logical tractability assumptions on which they to a large extent build – are poor because they do not bridge to the real world in which we live.
Now, in mathematics, the deductive-axiomatic method has worked just fine. But science is not mathematics. As far as I can see, conflating those two domains of knowledge has been one of the most fundamental mistakes made in modern economics. It has made economics both narrow and hopelessly irrelevant.”
I don’t know what this says about where we are in the cycle, but Trepp this week interviewed the latest WeWork CEO.
I hear a lot of dollar bears, and I always wonder against what? Clearly, yes, the dollar - like every currency - is being debased against real stuff, but the index, comparing the dollar to trashier currencies, to me is always
“All an investor needed to do to vet Theranos was to conduct a simple experiment comparing Theranos results to those from a real blood lab. Even a sample size of one would have revealed the inaccuracy and prevented them from losing money on this!”
Run the Storm, about the loss of the El Faro. This is a very American story: a ship carrying goods from Jacksonville to Puerto Rico for Wal-Mart (including fructose in tanks to give them diabetes). The ship was owned by MBA types in Seattle, by people who had never done the job of a ship captain.
My theory on this is that people who have not done the job they are asking someone else to do are unable to tell if their employees are lying when they say they cannot do something. The way they deal with this is to just demand an outcome and then see what happens.
The type of person who is an employee (not entrepreneur) does not understand this tactic and desperately tries to do the impossible. So, under pressure to meet the schedule, the master of the El Faro sailed this forty year old rustbucket right into a hurricane and killed everyone on board when it sank…
In the context of the El Faro, the high agency person would lay down the law with the suits in Seattle and refuse to sail into a hurricane. (And also refuse to sail a rustbucket or work for shipowners who wouldn’t think to cannibalize a sister ship for parts before it is scrapped.) But the real work of avoiding a situation like that happens long beforehand. Many people are not able to refuse an illegal or dangerous order because they can not live below their means and build up a surplus that would sustain them while being in between jobs or making a transition to entrepreneurship.
Could you have stopped Chernobyl?
“Precisely when should one punch the expert?”
“…when the expert’s leadership or counsel poses an imminent threat.”
“...𝘵𝘰 𝘵𝘩𝘪𝘯𝘬 𝘴𝘰𝘮𝘦𝘵𝘩𝘪𝘯𝘨 𝘪𝘴 𝘴𝘦𝘳𝘪𝘰𝘶𝘴𝘭𝘺 𝘸𝘳𝘰𝘯𝘨 𝘢𝘯𝘥 𝘺𝘦𝘵 𝘰𝘣𝘦𝘺 𝘪𝘴 𝘩𝘰𝘱𝘦𝘭𝘦𝘴𝘴𝘭𝘺 𝘢𝘬𝘳𝘢𝘵𝘪𝘤.”1
“Many “conspiracy theories” are demonstrably true & it’s weird that a movement so concerned with the unchecked power of the wealthy would be so dismissive about the idea that they would use that power covertly.”
“An unrestrained security apparatus has throughout history been one of the principal reasons that free governments have failed.”
Michael J. Glennon
Let us rehearse some recent history:
Lockdowns and mass testing and contact tracing and masking are all Asian (primarily Chinese) policies, adopted en masse and with little forethought by western countries in Spring 2020. Our public health mandarins set aside their own planning and opted for Chinese mass containment instead, because they noticed the virus was not very deadly in Asia, and they assumed this was because whatever it was the Asians were doing was the thing to do. Mass containment is a worldwide delusional rain dance: Everyone hops about trying to coax water out of the heavens, copying whatever dance was current in the first place it started to rain.
One of the great mysteries of the pandemic is why so many countries followed China’s example. In the U.S. and the U.K. especially, lockdowns went from being regarded as something that only an authoritarian government would attempt to an example of “following the science.” But there was never any science behind lockdowns — not a single study had ever been undertaken to measure their efficacy in stopping a pandemic. When you got right down to it, lockdowns were little more than a giant experiment…
The book looks at the lockdown strategy, and basically traces the fact that - despite the fact that we all talked about following the science - there was no science behind it...if it hadn’t been for the privileged people being able to work from home from Zoom we probably would not have had lockdowns...
“Stop looking for political saviors.” - Whitney Webb
I made the New York Post.
“Look at Saudi Arabia. It is the world’s biggest funder of terrorism. Saudi Arabia funnels our petrodollars—our very own money—to fund the terrorists that seek to destroy our people, while the Saudis rely on us to protect them!” (2011)
“Who blew up the World Trade Center? It wasn’t the Iraqis, it was Saudi — take a look at Saudi Arabia, open the documents.” (2017)
“A poet’s work: ’To name the unnamable, to point at frauds, to take sides, start arguments, shape the world and stop it from going to sleep.’ And if rivers of blood flow from the cuts his verses inflict, then they will nourish him. He is the satirist.”
“I think the point is to make us despair.”- Father Merrin
Thomas Massie
Why did the Obama and Biden Administrations do NOTHING about this case for 12 years?
“When we look at our political system, and we look at the people that we have the choice to vote for, I think it’s because our political system has become heavily compromised with blackmail.” - Nick Bryant
“Humor lowers the guard.” - George Carlin
“It took me decades to realize that the reason I struggled [in Economics] was because everything they were teaching me was wrong.” - Jim Rickards
“We’re like children in a fairy tale who want to believe that there’s going to be a happy ending.” - Satyajit Das
Silicon Valley enabled brutal mass detention and surveillance in China, internal documents show They will do the same here if we let them.
Akratic ”describes a person or action characterized by akrasia, which is a philosophical term for weakness of will, or acting against one’s own better judgment“
The worst part about having made any financial or economic forecasts is that if you happen live long enough to be proven wrong, you might have to explain the reasons why you were off by a mile or ten.
Krugman and many of his ilk are still happily explaining away to anyone who'd listen.
The El Faro story reminds me of the scene in Stripes when Captain Stillman (John Larroquette's character) tells the private to fire a missile on the range, and the private asks, "What coordinates, Sir?" and Stillman goes off about how the army has trained him to do his job and he should shut up and fire. So he does, and the missile goes way off the range and knocks Sargent "Our Big Toe" Hulka out of the tower.
Your AGI cheeseburger is a good one. It reminds me of a subreddit I came across recently dedicated to recreating John Frusciante's pedal board, as if having his exact gear is somehow going to magically turn these bedroom players into him. As someone who has been playing in bands for over 30 years, I can tell you the idea of having the best gear has caught on in a way I never would have imagined, even in underground music. When I started you bought whatever you could afford, and you made the best of it, maybe traded up as you got better and figured out what you liked. Now new bands that barely have enough songs to make a record (and I just mean in length, not that they are any good) show up at tiny venues with thousands of dollars of equipment for each of them.