Answering Jordan Peterson on low IQ productivity

Jordan Peterson is surfing on a wave of popularity. Within a very short time, the Canadian professor has managed to create a cult like following. This is not something he intended. All he did was to stand up for his own liberty in Canada. Nothing suggested that he would be very successful when he started protesting. In fact, he took some great personal risks. His timing, however, turned out to be very good. He evoked a silent mass, which, just like him, thought that political correctness had gone way too far.

I have a great deal of respect for someone who is fighting for his believes at the risk of personal costs. Not surprisingly, I also happen to agree with his fight for liberty. But since he is now an authority for so many people, he also deserves to be criticized whenever he gets somethings wrong. As an advocate of open debate, I am sure Peterson would agree with that.

And he does seem to get quite a few things wrong. His popularity puts him under a lot of pressure to always have an answer to everything. Because he was protesting against political correctness, he is now often interviewed about politics in general. Peterson, however, does not strike me to be particularly interested in politics. His real passion clearly is psychology and religion. This is something he shares with many of his followers. The major cause for his huge popularity appears to be his personal development advise rather than his political philosophy.

It is not necessarily a good idea to take someone as an authority on every subject, just because he is clearly smart. Like everyone else, Peterson is only an expert in things that he has spend enough time thinking about. Listening to him, I get the impression that one of the areas he knows little about is economics. I recently came across a video of an interview, in which he discusses the importance of IQ for productivity. His thesis is that people with a too low IQ are unable to contribute to the economy. This, according to Peterson, is a significant problem, because the group of people with relevantly low IQs is quite large.

This opinion is based on common misconceptions. In order to understand the mistakes in his reasoning, let us go through his argument systematically. He starts out by quoting a number of studies which show a clear correlation between IQ and success in life. In fact, Peterson claims that IQ is the most important predictor for long term success known to us. Consequently, people with a too low IQ seem to be doomed to failure.

Jordan Peterson is a clinical psychologist, so it is reasonable to assume that he knows what he is talking about. That is not to say that IQ is the only factor important for success – personality traits like high conscientiousness and low neuroticism are also important. But apparently, none of these can compensate for a low IQ. This is not just true for personal success, but is particularly true for economic success. People with low IQs apparently struggle to be productive.

Let us look at the relationship between productivity and IQ. The argument that people with low IQs struggle to succeed in a modern economy is based on the observation that intelligence helps us to complete complex tasks. In fact that is exactly what IQ test questions are all about. That means, the more complex a task, the more IQ is needed to complete it. Peterson claims that modern economies have already become very complex, with simple task being automated. And it is reasonably to assume that the trend towards more complexity is going to continue in the future. Therefore, people with low IQs will increasingly not be able to add value to such an economy. In other words “there is not a job for everyone”, as he puts it.

It is certainly true that there is not a job for everyone. Some people clearly find it difficult to produce wealth. Examples of these would be certain drug addicts or those with a mental disease like Schizophrenia. The latter distorts the view of reality and makes a person dysfunctional in the real world. However, is Peterson right that a low IQ on its own prevents people from adding value to the economy?

As proof that this is indeed the case, Peterson quotes a policy of the armed forces, to not allow recruits with an IQ lower than 83 to join. This threshold is based on long term internal studies which have apparently shown that people with such low IQs simply are incapable of performing any needed task in the military.

The reason why Peterson things this is relevant is because the military is in constant shortage of bodies, and has jobs that require very few skills. He also mentions that one of the purposes of the military is to lift people out of poverty, by giving them a good education. Therefore, he concludes, if the military isn’t capable of employing them, no one is. Having established these facts, he points out that about 10% of society have an IQ that low, clearly suggesting that 10% of society will therefore not be employable. If all of this were true, it would be a grim outlook indeed.

But there are a number of fallacies in this argument. First of all, it is questionable to take a centrally planned bureaucracy, like the military, as a good indicator of who can and who cannot be productive. For some reason, intellectuals love hierarchical bureaucratic structures, and even Peterson, who is not a socialist, does not seem to be able to resist that temptation. The real testing ground, however, should be the actual private economy. No central planner can know what is and what is not productive work. This is of course the fundamental flaw in socialism, and the reason why it can never work. Ludwig von Mises famously pointed this out in his groundbreaking 1920 article “Economic Calculation in the Social Commonwealth”.

The real economy often gives us surprising answers as to what is and what is not productive. And looking at real world economic data, we find that the free market does seem to find productive tasks for low IQ people. If it were true that people with an IQ below 83 are unproductive, and those are 10% of society, then we would not expect to find unemployment rates in any free market economy to be under 10%.

Unfortunately, we do not have any economies that are totally free of state intervention to test this. However, we can at least have a look at some of the most free and advanced economies. Two good examples for these are Singapore and Switzerland. Both, according to the Heritage Index of Economic Freedom, have been among the most advanced and productive economies in the world for a very long time. They are also two of the most free and unregulated. Singapore, a city state, even has hardly any welfare state at all. As far as I can tell, neither of these two economies has had an unemployment rate even close to 10% in the last three decades. In fact, during that period of time, the highest unemployment rate has been a little over 5%. Today it is 2% in Singapore, and 3% in Switzerland.

From this alone, it is save to conclude that, if a low IQ is a growing problem in increasingly complex societies, then, at least at the moment, the economy is clearly not complex enough for this to have a significant effect. In fact, as far as I am aware, even people with seriously low IQs can be trained to be somewhat productive. People with Down Syndrome, for example, who have an average IQ of around 50, can be trained to fulfill productive tasks. And luckily they are often exempt from damaging protective policies like the minimum wage.

But to be fair, at such low levels, the productivity is indeed strongly reduced. This does suggest that Peterson is not completely wrong. There is some relationship between IQ and productivity. But at least at the IQ 83 level, this does not seem to be significant enough to make a person unable to contribute to a modern economy.

The next question is, is this going to change in the future? Will people with low IQs increasingly struggle to be productive as the economy becomes more complex? It sure looks like strong reasoning to suggest so. The argument, however, rests on a very questionable assumption. Is the economy really getting increasingly complex? Do we therefore need better skills to handle complexity in order to be productive in the future? What is the evidence that we are witnessing such a development?

I think this is a fallacy. The exact opposite appears to be happening. Sure, being able to handle complexity, unquestionably makes people currently more productive. That is why managers and engineers have a higher salary than cleaners or garbage collectors. But this is not a new development. Managers and engineers have always earned more than workers doing simple tasks.

In order for there to be a problem one would need to argue that simple tasks are disappearing completely. And in fact, many people would argue that we have seen a shift away from simple jobs to more complex ones. Historically, the majority of people worked in farm jobs, which mainly required physical strength, and were repetitive. Whipped, uneducated slaves were able to do these jobs. Nowadays, however, we have clearly moved towards thinking office jobs.

It is true that most people have stopped making a living through physical labour. This change came with the rise of machines which were able to do the physical for us. Throughout history, whenever we saw new technology been introduced, the assumption of most people, at all times, has been that this would lead to a rise in unemployment.

Yet, people have always been wrong to assume so. As we have seen with the unemployment rates of modern economies, their concerns have so far not materialized. There are still an enormous amount of very simple jobs left. That is as long as the government does not regulate these jobs out of existence. Almost every human being, even people with low IQs, have skills that machines are unable to perform. These skills include things like common sense or the enormous fine motor skills of the human hand. The latter is still unmatched by robotics.

Has all this new technology made our work more complex? Why would it? Technology is a tool. And the better these tools are, the easier it is to use them. Usually, technology is only complex in its early development stages. This is the stage when it is not widely used yet. A simplification for the user is usually a necessary condition for a technology to spread widely.

When computers first were invented, only the most highly trained engineers could use them. Today, my three year old niece can operate an iPad. The latter, of course, is orders of magnitude more complex than the first computers that needed to be operated by experts. Advanced tools do not make things more complex, they make them easier.

There does not seem to be much evidence that our jobs have become more complex. Sure, we now have more office jobs. But thanks to increasingly sophisticated tools, we also have more idiots doing office jobs. And there is absolutely no reason to expect the situation to get worse.

A lot of people are worried about the advent of AI and robotics. These, so they think, will create machines that will be able to beat us in any skill we have. Therefore, there will be no more jobs left for us to do. No more jobs, except for the highly complex task of coordinating these machines. This will lead to a society in which there is a great divide between a small elite in control on the one hand, and all the rest of us on the other, who will be left out of the economy.

This is an absolute fallacy that I have written about before. Machines are tools and not competitors. They are not competitors, because they do not have any interests on their own. Every tool makes us more productive, and most tools are even superior to us in some way. That is why we use them. Even a very simple tool, like a hammer, is used by us, because it is superior in certain ways to our hand. It is therefore misguided to thing that machines who are better than us are a problem. We cannot have too good tools!

And the better the tools, the simpler they will make jobs. Tools help us to complete tasks more quickly, and to a higher standard. That is another way of saying, they make us more productive. The more intelligent machines get, the more they can handle complexity themselves. That is why my niece can operate a highly complex iPad. The complexity of the computer is reduced to a very simple interface. Consequently, if machines are able to handle complexity, they can be used as a tool by people, who are bad in handling complexity. And those are the people for whom these machines will be most useful.

Think about it – when machines were invented to replace our physical labour, was it clever to argue that this was a disaster for the weak? Was it clever to argue that now only the strongest would be able to compete with these machines? Of course not. The exact opposite was the case. With the advent of strong machines, it was particularly weaker people who became more productive, because machines are not competitors, they are tools.

Just like a calculator has the biggest use for people who are bad at calculating in their head, and strong machines are best for weak people, intelligent machines will be best for the not so intelligent. If anyone will get to be disrupted by intelligent machines, it will be intelligent people, who will lose their advantage to produce. They will lose their advantage, because the economy will get a lot more simple rather than complex.

It is also a fallacy that the production of wealth can be concentrated in the hands of a few. This cannot happen, at least not without the use of force. Who would the minority of producers sell their products to? Already in the early 19th century, the economist Jean-Baptiste Say famously figured out that supply creates its own demand. There will always be an advantage of having a division of labour, no matter how advanced machines get. And it will always be better that more people produce rather than fewer, no matter which tools they use.

That means there will always be an economy, and we are not going to all become self-sufficient individuals. The only difference will be, that the more tools we have, the more everyone can potentially fulfill every part of that division. Peterson says that “not everyone can be trained to do everything”. That is true. But in the future, maybe everyone can have a tool which can do everything for them.

Life will not become more complex, but it will become easier, at least economically. That is not to say that it will necessarily be easier to find a purpose in life and be happy. That, however, is a different question from productivity. Economically, technology will be a great equalizer rather than a divider. So there is no need to worry about people with low IQs. The evidence shows that, if the state lets them, they are able to produce now, and they will be even more so in the future.

Is The Electric Vehicle Revolution Real?

There is a widespread believe that we are currently witnessing the start of an electric driving revolution. Wherever I look, commentators seem to be in agreement that fossil fuels are on their way out. The only point of debate is how quickly this revolution is going to happen, and whether governments should introduce regulations to speed it up.

I, however, have my doubts that this revolution is real. Instead, I feel that this is little more than a hyped fashion, which will soon be calmed down by reality. Looking at the facts, it seems likely that a big proportion of future transportation will continue to be powered by carbon fuels. Electricity has some inherent flaws that can unlikely be overcome by engineering. The whole idea that electricity is the future of transportation is more driven by environmentalist ideology rather than facts. As such, it is not a market revolution, but one ordered from the top.

Why do people have the impression that electricity is the future? Has there been any kind of breakthrough in technology? It does not look like it. Instead, the source for the enthusiasm has a name – Elon Musk. As the CEO of Tesla, he is the mastermind behind the currently biggest electric car manufacturer.

Why is Tesla so successful? Musk does not appear to have done a lot of innovation when it comes to electric cars. His most impressive achievement is actually that he has managed to figure out how to re-use space rockets. But even Musk is powering those with fossil fuels, and we are going to see why that is.

When it comes to electric cars, Musk has done two things. Firstly, he has replaced the tank of his cars with batteries. But not special batteries, just normal batteries. The technology used has essentially been available for decades. Considering this, it might seem strange that none of the established car manufacturers had this idea before Tesla.

Except, of course, they did. Companies like BMW – with headquarters in Germany, the capital of green brain damage – have experimented with electric cars for much longer than Tesla has. But the result was always been the same – no one really was interested in buying them. Not even true greens wanted to drive one. Cars are generally too individualistic for even the modern comrade. Public trains are the politically correct choice of transport.

And non-comrades were certainly not interested in replacing their fuel engines. Electric cars have some real disadvantages. The most obvious one is that batteries will not get you as far as carbon fuels. To get to any kind of usable distance, engineers have to use a significant proportion of the car as a battery storage. But even than, Tesla cars only get to around a third to half the distance of combustion engines. The reason for that is simple – batteries cannot store nearly as much energy within the same space as carbon fuels. That is to say their energy density is a lot lower.

And once the car has run out of juice, it will take a long time to recharge. Not everyone is willing to take a longer break every 200 miles. This is another real disadvantage. Addressing that problem, Tesla, to their credit, has invented a technology that can recharge their batteries in 30 mins to 80%. Musk has created a quite impressive network of these so called super chargers. This makes batteries at least somewhat usable. But still, 30 mins is a compromise to the max 5 mins of refueling with non-electric cars.

As compensation for these disadvantages, one would hope that there would at least be an economic incentive to go electric. Unfortunately, the opposite is true. Electric cars are much more expensive than traditional carbon fuel ones. Even though combustion engines are heavily taxed, and electric cars heavily subsidized, the consumer still pays a large premium for the privilege of driving an inferior car.

And that is the reason why consumers have rejected electric cars throughout history. For most people, it does matter whether they spend $20 000 more or less on a car. That premium is real money, even for those who are scared of global warming. And in my experience, when it comes to their own money, everyone is a capitalist, no matter what other ideology people pretend to hold.

Considering this, it was very predictable that consumers would reject an inferior, more expensive product. And they have done so for a very long time. Already at the beginning of the 20th century, when cars were a new technology, many car companies offered electric models. All of them were discontinued very quickly because of their inferiority to combustion engines.

This never changed, until Tesla came along. If there is one thing that Elon Musk did right, it is that he realized that electric cars are an expensive luxury. Therefore, trying to sell them to impoverished environmentalists is not a good strategy. People who do not care about money are a much better audience. We are talking about rich people who can afford to simply buy an electric cars as another one in their collection, and therefore neglect the disadvantages. Rich people, however, do not buy toy cars, if they cannot function as a status symbol.

And so Musk designed his Tesla models as powerful luxury cars. One of the big advantages of electric motors is that, as long as the engineers allocate enough energy to it, they can be much more powerful than combustion motors. The established car manufactures, however, were most concerned with saving energy, because of the low energy density of batteries. Consequently, producing powerful cars, which consume a lot of energy, were not really on their agenda.

Tesla changed that and Bingo! It turns out environmentalist ideology has penetrated society so deeply that rich people do like to be seen driving electric cars, as long as they look cool and are fun to drive. Musk, therefore, discovered where the real market for electric cars was. However, if it is true that the reason for Tesla’s success is to sell, in many ways inferior, but powerful and very expensive, cars to rich people than how will this lead to a revolution in electric cars for everyone? After all, for most people all the disadvantages still apply.

And this is not even the full story. In reality, Tesla cannot even sell luxury electric cars profitably. The company is a creature of cheap central bank credit. Despite the fact that the Tesla’s expensive cars are very popular, and that every single one of these cars is subsidized by the government, Musk has never made a profit, not even close. In fact, Tesla is loosing money on every car it sells, and seems to try to make it up on volume.

Central banks are the only reason why Tesla could grow to this size. And they are the only reason why the company is still around. Thanks to easy money policies, there is a lot of cheap speculative investment money available. This money helped Tesla to continue manufacturing, despite the apparent unprofitability. But at this point, it should dawn on even die hard Tesla fans that their darling is unlikely to survive. One wonders, why Musk is not straight with his investors about this reality. His silence, and outright denial, does not make him a very trust worthy fellow.

One wonders, if he is hoping for a miracle. But if so, it is not going to come. Instead, Tesla is sailing with green energy into a perfect storm. It won’t be able to produce cars productively any time soon. In addition to that, credit is drying up, thanks to central banks raising interests rates. As if that was not enough, the established car manufactures, who, unlike Musk are very experienced in producing cars productively, are about to enter the market with their own luxury electric cars.

And outside the luxury car market, electric cars still face all the disadvantages they have already faced since cars were invented. For a general change to happen, we would therefore need to see these disadvantages to shrink very significantly, or ideally to disappear completely.

Firstly, there is the costs of batteries. Currently, batteries are very expensive. That should give us a clew as to how readily available the building materials are. The scarcity of materials is the main reason why Tesla has problems producing enough cars to satisfy demand. Its customers usually have to wait a long time for delivery. This illustrates that current battery technology is not very scalable. And this problem is already apparent when hardly anyone is driving electric cars.

That means that before we can all drive electrically, we need to first find a battery technology that uses more available, and therefore cheaper materials. To my knowledge, this will still have to be invented, and is therefore the first real break in the revolution. Nevertheless, this seems to be an achievable goal, at least in theory.

Next, these cheaper batteries would need to charge more quickly. For a lot of people, 30 mins is already acceptable. But particularly for commercial use, this is still too long to compete. That is particularly true given that we will soon see driverless vehicles. Therefore, drivers won’t need a break to rest anymore. That means, every extra charging time is a net economic loss. If the whole transportation industry were to go electric, this would add up to a huge loss of wealth. And again, this is an unsolved problem at the moment. But just like the cost factor, it seems conceivable that this problem will be fixed in the future.

Finally, and most importantly, there is the energy density of batteries. And it is here where we are facing a really hard problem. A few month ago I came cross a video of the youtuber thunderfoot, in which he argues that we are already at an optimum capacity for batteries. Thunderfoot is a professional chemist, and his reasoning seems very compelling.

The argument is simply this – to increase the capacity of a battery means to increase its energy density. The problem with that is that, while this is in theory possible, it will always come with a huge safety trade off. By increasing the energy density, a battery will inevitably become more dangerous.

A battery, by its very nature, needs to contain all the elements needed to release the energy. Any such compact system is at risk of releasing that energy in an uncontrolled way. By now, we are very aware of what can happen, if a battery goes into malfunction. The reaction resulting from an uncontrolled energy release is already quite violent. That, for example, is the reason why certain batteries are banned from flights.

To make matters worse, once ignited, it is very difficult to stop the reaction. That is precisely because the system does not need any external elements, like oxygen, to continue. Once a battery in an electric car starts to burn, it is difficult to extinguish it.

And that is already a problem with the current energy density of batteries. But imagine we increase that density even further. The more we increase the energy density, the less safe the system becomes. Currently, batteries have about an energy density which is 1/10 that of TNT. That means, if we were to increase the energy density of batteries by 10 fold, we would end up with a bomb in our cars, equivalent to the same weight of TNT. That does not sound like such a good idea.

But here is the thing – gasoline has about 10 times the energy density of TNT. So in order to get the energy density of batteries to match that of gasoline, we would need to create an energy system that, if anything goes wrong, would be 10 times as explosive as TNT. It seems quite crazy to put that into a car.

The reason why gasoline is so save is because it can be stored away from the element that is needed to release the energy, which is oxygen. Since oxygen is everywhere in the atmosphere, we can just use that oxygen spontaneously wherever we are. This, btw. also saves us a lot of storage space, making it even more efficient. And if anything goes wrong, we can easily extinguish an accidental fire by cutting it off from oxygen. This makes it an incredibly save system with a very high energy density. It does not look like we can get better than that, even in theory. In other words, gasoline is an optimal energy storage. That is why Musk is using it to move his rockets.

If this argument is correct, then that means we cannot hope for future battery technologies to become anywhere near as energy dense as the fossil fuels we use at the moment. The laws of thermodynamics, which are hard physics, seem to be in the way of achieving that goal. And if that is true, then obviously the idea of electricity being the future of transportation is fundamentally misguided. At least if that electric energy will come from batteries.

It very much looks like burning gas on the go is the best source of mobile energy we can hope for. That means, that anyone who needs a lot of mobile energy, like big ships, planes and even lorries will likely continue to use it, maybe forever. If this is true, then the only question remaining is where will the fuels come from? Will it be fossil fuels, or self made fuels?

It is certainly possible to indirectly use electricity as a mobile energy source. The electricity will then produce the fuel that is used for mobile energy. For that to be profitable, however, electricity would need to be significantly cheaper as it is right now, as the majority of the energy is lost in the fuel production. Nevertheless, in that scenario the vehicles would still continue to burn these fuels while they are driving. And it does not look like that this is going to change anytime soon, if ever. So I am sorry, but the electric vehicle revolution is largely an illusion.

Free Speech In The Age Of The Internet

Not too long ago, the internet used to be a very free space. It seemed out of reach from governments, and was almost entirely unregulated. Users felt free to publish almost anything they liked, and they could do so anonymously. The internet, therefore, was a hope for everyone with non-mainstream opinions that their voices could finally break through the protected consensus of the mainstream.

This hope was certainly justified. The internet still is very much a force for good. But like all forces for good, the government tends to hate them. And so Leviathan has been eager to jump on it. The state is trying to make the internet a force for its own good. The progress made in that endeavor during the last decade is very worrying.

Edward Snowden, who worked for the NSA, was the first to blow the whistle. His revelations revealed that western governments had very advanced programs to use the internet to control society. Before Snowden, few people had thought about the consequences that most of what we do these days leaves some traces on the internet. I certainly was not worried about it. But Snowden made the public aware that, by hovering up all these information, the government could potentially know about almost everything we are up to in our lives.

This is not just a problem for really bad guys, like terrorists. The secrecy of private lives has been an effective tool against a lot of government tyranny. Whenever the official rules of the state became too silly, a lot of people just secretly stopped following them. The state essentially needed to be good enough, so that most people followed the rules out of conviction. The prospect of the state being able to take away this kind of effective protest is truly frightening. For the first time, Snowden revealed that the internet did not necessarily have to be a force for good. If we are not careful, it could turn out as a tool for real enslavement.

Nevertheless, the fact that everyone can now publish their opinions cheaply, and on multiple platforms, remains extremely powerful. After all, in many western countries there are still laws in place which, at least formally, guarantee a certain amount of free speech. These laws date back to times, when it was significantly more complicated and costly to make one’s voice heard. The establishment therefore usually did not see free speech as too much of a threat.

In fact allowing people to express their opinions, while at the same time not giving them a platform, can be an effective tool for controlling opposition. The moment the government locks up dissidents, they can claim to be a victim of an oppressive regime. This tends to draw support to them. At the same time, leaving someone alone without platforming him, but giving him hope that his voice might be heard in the future, gives that person an incentive to not go too far with his opposition. As long as he believes he can make his voice heard in the future, he might still play along with the system, even though the system is very much rigged against him.

But with the internet, people now have a very real chance of finding an audience. The internet has indeed shown to be the game changer that it was promised to be at the beginning. Since the people in power often believe their own propaganda, they have been very late to realize, how much they have been loosing control over the narrative of debates.

The big wakeup call came with Brexit and the election of Trump. Both events were completely unexpected to the established forces. They were so hit by surprise that it took them a while to realize why voters had turned against them. A lot of people simply do not get their information from officially briefed sources anymore.

Since the establishment had this epiphany, we have seen frantic attempts to win back control. There has been an increase in legal speech prohibitions in almost every western country, with the possible exception of the US. Only last week we saw Scottish YouTuber Markus Meechan, who goes under the name Count Dankula, being convicted in a court of law for hate speech. His crime was to make a joke for his girlfriend, by teaching her pug to perform a Nazi salute to the words “gas the jews”. Meechan is not actually a Nazi. Far from it, he explains at the beginning of the video that he thinks Nazis are the most offensive thing he could imagine. The goal was not to spread hatred, but to teach his girlfriend wrong, who claimed that her pug could not possible do anything that is not cute.

None of that of cause matters. Free speech is meaningless if it is not allowed to offend people. Unless someone is issuing a concrete and believable thread, or is involved in planning a violent crime, everyone should be free to say whatever he or she likes. A Precedence like the Meehan case clearly shows that the government is trying to clamp down on free speech.

Last year, we saw the UK government even proposing punishments of up to 15 years in prison for people who merely watch “extremist” content online. This is allegedly targeted at supporters of terrorist groups. However, all it takes is a precedent from a judge to extend this law to cover all kinds of opposition to the government. True opposition can easily be portrayed as extremist. But if merely watching content online becomes a crime, punishable by multiple years in prison, we are truly in deep tyranny territory.

The bigger strategy to get back in control of the narrative, however, does not seem to be outright speech prohibitions. Especially in the US, these would face some serious legal hurdles. Instead, the strategy seems to be to somehow go back to the good old days of being able to deny someone a platform.

After the Trump election, a narrative has been spun to make alternative news sources look like tools for evil forces. The phrase ‘fake news’ was introduced to differentiate between legitimate, meaning establishment, information, and uncontrolled news sources. Introducing the label ‘fake news’ would be little more than amusing if it had stopped there. But unfortunately, we are seeing an outright criminalization of everything that is not approved media content.

This would usually look like a cause doomed to fail, giving how easy it is to publish anything on the internet. But unfortunately, the way the online distribution of information appears to work at the moment does give the government a chance of succeeding. While it is true that everyone can publish anything easily on the internet, that is not to say that it is easy to find an audience.

Social media has a huge effect on which content people consume. What does and does not appear in the news feed of Facebook and Twitter, or in the search results of Google and YouTube, very much influences opinions. And these few companies very much control a huge amount of the distribution, and advertisement of alternative media.

From a libertarian perspective this could sound like good news. If distribution is in the hands of private companies, then there is little to worry about, right? Private companies, for the most part, do not have political agendas. They just want to make a profit. That means, they have an economic incentive to make as many customers happy as possible.

Unfortunately, this is only true in a free market system. What we have today, however, is crony capitalism. In today’s system, whenever a company reaches a certain size, or whenever a company crosses political interests, a collusion between the government and that company can be observed. After all, the government can make business very difficult for pretty much anyone. It is therefore difficult to say no to the mob.

How do we know that this is happening? Well, first of all, it is naïve to believe that the state would simply stand bank when one of its core interests is threatened. Many people have long suspected that the reason google is the best search engine is because they get help from the intelligence community in the US.

But we don’t even need to go into conspiracy theories. The collusion is happening very overtly. Governments simply have declared the media platforms to be responsible for the content that its users post. As a result, Facebook, Twitter and YouTube, who have a quasi monopoly, have started to censorship user content. And they are not just censoring posts that are against some laws. They are keenly censoring anything that even remotely might get them any negative criticism from the establishment, just in case.

There clearly is no will to resist government influence. These companies are more than happy to go along with an established agenda. On the other hand, the pressure they are put under by the government is certainly huge. Campaigns to demonize content are being lounged very aggressively. Anyone who is on the wrong side of the news, is attacked as being an illegitimate actor.

The most prominent villain has been made out to be Russia, who is accused of “interfering” in elections by simply talking to people on social media. I wrote about this here. But there are other scapegoats. The latest scandal is the use of Facebook data by the company Cambridge Analytics. As already in the Russian scandal, there is a lot of noise, but it is actually not so easy to find out what the exact accusations are. I might be wrong, but as far as I can tell, Cambridge Analytics is not actually accused of breaking the law. Instead, the company is accused of unethically collecting user information on Facebook, by burying the agreement to share these information in the terms and conditions of its apps. And we all know that no one reads those. It then used these information to provide a superior advertisement service.

If this is true, than it is not clear what the huge scandal is about. Sure, Cambridge Analytics might have got some information about users that the users were not really happy to share. While that would not be very good, the harm done in this case does not seem to be huge. After all the company did not use these information to steal or harm users in any other way. It simply used it for tailor made advertisement.

The fact that Facebook excessively collects its user’s data, and uses it to influence people on the network, has been well know for a long time now. Many users feel uncomfortable about it. I know a number of people who have left the platform for that reason. I myself have a ‘strictly no private stuff’ policy when it comes to using Facebook. As a consequence, user numbers are declining, and the average time spend on Facebook is down 24%. That is huge. If the Cambridge Analytics scandal will turn the psychology of users against using Facebook even more, than that is certainly a net positive as far as I am concerned.

Still, one has to ask why this particular case sparks so much outrage. One cannot help but get the impression that the real “crime” of Cambridge Analytics was to work for the wrong team in the last US election. What if they had worked for the Clinton campaign, or to promote an officially accepted cause, like climate change? I am willing to bet anything that in that case, we would have never heard much about it. And if we did, the media would have presented Cambridge Analytics in a very different, much more positive, light.

In fact, we don’t really have to wonder about this. As a number of commentators have pointed out, Obama employed very similar advertisement tactics in the 2012 election. This was not a big scandal at all. No one seemed to have be bothered by it. And the difference between the two cases is clear – advertising the election of Obama is officially approved, while advertising Trump is not.

All of this makes it increasingly obvious that the domination of distributing content online by a very few big players is a real problem. It gives governments a handle on attempting to control the narrative. Making distributers of information responsible for the media content on their networks is a quite clever stroke of genius. That way, we will likely overshoot on the censorship side, without the government having to formally make it look like they are clamping down on freedom of speech. But this strategy would not be so easily possible if it wasn’t for the fact that we have quasi social media monopolies.

What can be done about it? I have heard a lot of people suggesting that we need to get the government involved in controlling these monopolistic platforms. This would apparently guarantee more fairness. At the very least there should be strict regulations.

Unsurprisingly, this seems like a really bad idea to me. I really do believe that the government is the real villain in all of this. Facebook, Twitter and YouTube were not too bother censoring information before the state threatened them, and made a lot of noise about it. Putting the state officially in charge of these platform would only make things a lot worse.

It seems that the only possible answer to this problem is more consumer responsibility. Users need to demand less interference, and move to alternative platforms if possible. This is certainly easier said than done. The reason why there are so few players in this field is, because one of the major benefits of big platforms is a network effect. As consumers, we want to have as easy as possible access to all information. More importantly, content providers want to use platforms on which they can reach a maximum amount of people. If, however, all information are in the same place, we are necessarily talking about a quasi monopoly.

So the only solution seems to be to make a compromise to reduce one’s benefits of a network effect in exchange for having fewer interferences. But this could turn out to be a too big compromise for many people to make. Still, with the degree of interference that we are seeing at the moment, it seems likely that a large enough number of people will eventually make that compromise and move to alternative platforms.

In fact, this is what we are seeing already in the last few months. As mentioned, user time on Facebook is down 24%. Market monopolies don’t tend to last forever. Very few of the biggest major companies from a century ago are still around today. I shell be very surprised if Facebook will still be the dominant platform 20 years from now. At some point users will have enough of it. If nothing else, Facebook will at some point become old and not hip anymore. All the cool kids will be on the new popular platform X.

I witnessed the speed with which such change in psychology can happen myself when I was still living in Germany. Before there was Facebook, another social network called StudiVZ was very popular there. Within a very short time, it was so popular that one had to be on it in order to maintain a normal social life. Then, suddenly, people liked Facebook more and an exodus from StudiVZ began. Within a year, the network went from being so popular that no one could afford not to be on it, to being completely dead. That is how quickly it can go. Something similar happened of course to myspace.

Meaning, if there is any major shift in psychology against Facebook, the social network could very well go from having a quasi monopoly to being out of business very quickly. This seems inconceivable to most people now, and I am not predicting this to happen within the next year. But it seems almost certain to me that social media platforms will be subject to fashions. And that means that at some point in the future the network effect will work against Facebook.

In free markets, consumers have powers and responsibilities. Simply complaining about the policies of a company, without being willing to take action and move to the competition, is usually not very effective. On markets, everyone acts according to incentives. And the big companies have no incentive to resist the influence of governments. An institution that has a monopoly on physical force has the ability to make offers that no one can refuse. We therefore need to educating internet users about their responsibilities as consumers in order to change the psychology against companies that have become too powerful. I am not saying it is easy, but it is the only way, and it can clearly be done.

The Bond Bubble Has Burst

I am calling it. What we are seeing in the markets right now is the start of the next big financial crisis. The huge bubble in government debt has begun to burst. It took a few years, but investors have finally realized that western governments in general, and the US in particular, are trapped in a low interest rate, money printing environment. As always, the downturn arrives at the peak of optimism, when hardly anyone was expecting it. So far, it appears to be just a correction in the stocks and bond market. It will take some time, before main street and the central banks will realize the scope of what is happening. At this point, however, there is no putting the genie back into the bottle.

The common narrative so far was that everything is well. The economy is strong, and growth is accelerating. We have finally managed to escape the slump of the 2009 financial crisis and everything is on its way back to normal.

This narrative is completely false. As I said before, if the economy was as rosy as government statistics would make us believe, we would have not seen things like Brexit or the election of Donald Trump. The so called recovery has not reached most people, and the masses making their frustration heard, by voting against the establishment.

In short, most economists use GDP growth to measure the strength of the economy. This is a mistake. GDP is not a good tool to assess productivity. It merely measures the amount of money being spend. But even if we were to accept GDP as an accurate tool, the official numbers are almost certain too high. That is because the official inflation numbers, which are used to deflate the GDP value, is manipulated down, through accounting tricks.

The only thing that kept the economy somewhat above water was a tsunami of fiat money. Since 2009, central banks around the world have printed more than $14 trillion to keep governments solvent and asset prices inflated. But this party is about to end. The FED is the first of the major central banks to try to normalize interest rates, and clean its balance sheet. Other central banks are expected to follow. This is why, fiat currencies are still trusted. People always assumed that printing money was a temporary policy, and not a permanent tool to finance governments.

The problem is, interest rates cannot rise, and the money printing cannot stop, without crashing the economy, and endangering the solvency of governments. Cheap money is like a drug. Once addicted, one cannot withdraw it without getting seriously ill. And more and more of it is needed, at an accelerating rate, to keep the party going. Western economies are still addicted to cheap debt. With rising interest rates, we are going to see a massive wave of private bankruptcies, which consequently will crash the economy.

That in itself would not be such a huge problem. Sure, a lot of people, who are currently indebted, would be personally hit hard. However, for the economy as a whole, if everything was left to market forces, we would only see a short, but severe, economic crises. Once the government is out of the way, however, real, free market price discovery would kick in immediately. Bad debt would be written off, and resources would be allocated to the truly best use. Within a year or two, maybe even less, the free market would have cleared all the distortion, and the economy would be booming again.

The problem, which will make this crisis most likely bigger than anything else we have seen, is that governments too are addicted to debt. And they have much more tools to defer an insolvency, until the problem is maximized. Kicking the can down the road has definitely already been the name of the game for many years.

Probably most states in Europe will not be able to pay back their debt. And things do not look better on the other side of the Atlantic. The US has already an official debt to GDP ratio way north of 100%. And that is calculated with a GDP number artificially inflated by cheap money. In addition to that, these numbers do not even include unfunded liabilities like pensions.

By any accounting standard, most western governments are factually bankrupt. That, however, is a too painful truth to sell to voters. In order to tackle the problem, governments would need to massively, and I mean really massively, cut the size of the state. In addition to that, they would probably need to think about increasing taxation to get more revenue. The ability to steal more, however, aside from being immoral, is limited by the fact that taxation most likely already is somewhere near the peak of the Laffer curve.

Neither cutting spending, nor increasing taxes can be easily done in a democracy. People do not tend to vote for their standard of living to be cut. Amazingly, raising taxes seems to be actually easier than cutting spending. What better indication that, in addition to being immoral, the state is also a completely dysfunctional organization.

President Trump, being the ruthless populist that he is, knows this full well. Therefore, he is currently doing the exact opposite of trying to avert an insolvency crisis. He has cut taxes for many people, and simultaneously seem to go bananas on new spending. And it is this which has spooking the markets last week. Investors are waking up to the fact that the party of the last few years will soon come to an end. In fiscal 2019, the US will have to borrow at least $1.2 trillion, a lot more than ever before in its history. At the same time, the FED will be a seller of about $600 billion of US treasuries. So the question arrises, who is going to buy all that debt?

In the years since 2009, governments could rely on central banks to buy a lot of their bonds. Draghi, Yellen and co., have bought them, no matter what the price. This has inflated an enormous bubble in government debt. Consequently, governments did not need to worry about how to finance themselves.

Some governments, like Germany or Switzerland, could even borrow at negative interest rates. That means, investors have paid for the privilege to lend money to Merkel. In reality, of course, this was a front running of the central banks. It was a save version of greater fool investing, since the central banks had made clear that they would always be the greatest fool. This has destroyed any honest price signaling on these markets. What a fantastic paradise for politicians, trying to buy votes.

But governments are now being driven out of this paradise. When central banks stop buying debt, and raise interest rates, governments will need to find real buyers, with real capital to buy their debt. And these real buyers are not going to invest in it at any price.

Given the enormous amount of new debt needed, and the risk involved in lending money to insolvent governments, it is inconceivable that the US government will be able to attract all that capital without significantly higher interest rates. The law of supply and demand will not be kind to politicians. In the media we can hear worst case scenario numbers of 3.5% or maybe even 4% on the US 10yr treasury.

But in what world is that a worst case scenario? Historically, the average yield on a such a bond was more around 6%. And that was at times when the US was very much solvent and did not need to borrow anywhere near as much money. When central banks now stop their price controls on government debt, it seems more likely that the bottom will drop out of that market. In other words, 6% is way too optimistic. But the US governments cannot even afford 4%.

Interest rates on US debt have already risen for month. At the beginning of February, the interest on the 10 year treasury bond hit 2.85%. That was too much for stock investors, and the sell off began. Pretty soon, one of three things is going to happen, each one of which will lead to a major crisis.

The first possibility is that governments openly default on their debt. I would say the chances of that happening in an honest, non-inflationary way are pretty much zero. No politician is going to take the responsibility for this policy, least of which Trump.

A second option is to raise taxes and massively cut spending. Since western government are democracies, and cutting spending in any meaningful way would seriously alienate a lot of voters, the chances of that to happen are also very slim.

That leaves us with the third option. Central banks call their bluff and reverse their plans to tighten. We would see another round of even bigger QE and a prolonging of low interest rates. This is the option that historically most states have picked. And it is almost certainly the one that the US government is going to pursue.

But for how long will they be able to get away with it? After all these years of QE and low interest rates, a failed attempt to exit these policies would make it very obviously that governments are trapped. They cannot exit the cheap money environment without causing a major financial crisis in the economy, and a solvency crisis of governments. A reversal of tightening will therefore cause a crisis of confidence in the central planners, which will most likely result in a currency crisis. The latter will lead to either a massive inflation in the Dollar, Euro etc, or it will force governments to eventually default after all, in order to save their currencies.

The verdict is not out yet, which of the two latter options we are going to get. But either way, buckle up, because things are about to get very rough.

Why Intrinsic Value Matters To Crypto Currencies

Crypto currencies were one of the big stories of the now ending year 2017. These once geeky little software projects have truly hit the mainstream, and exploded in price. Bitcoin valuations are now featured in pretty much any major newspaper. Some believe that cryptos will take over the world monetary system, others think it is a fraud.

I myself have gone on record twice this year, arguing that cryptos are in a classic financial bubble, which will burst eventually. Given the popularity of crypto currencies, I got a lot of criticism for my opinion. A lot of smart people think that I got this one wrong. Getting critical feedback is always helpful. Ultimately, however, the critics have not convinced me. Of course, it is possible that I am missing something, but so far I have not heard any really convincing arguments for the case, that crypto valuations are justified.

Many of the arguments made against critics are ad hominem. These range from accusing critics of simply being jealous for having missed out, to having a special interest in preserving the currently rotten world monetary system. The most common rationalization, for not having to listen to critics, probably is the accusation that they simply do not understand blockchain technology.

While these arguments might be true for some people, simply attacking the integrity of a critic is a rather weak way of arguing. Either crypto currencies work or they don’t. Whatever the motivation of a critic, they are either right or wrong. The truth can only be settled looking at the actual arguments. If we want to understand what is going on, it is not helpful to start with the conclusion, and then cherry pick the evidence accordingly. This is never a pathway to truth, and particularly in finance, it may cost you a lot of money. I am talking from experience here!

Being an anarchist, the idea of an anarchic monetary system is actually very appealing to me. It would be awesome if we had a simple, technological solution to one of the most evil state monopolies. That is why I initially loved crypto currencies. But having examined the arguments, I simply cannot believe that cryptos will be able to establishing themselves as a true alternative to government money.

To me, the key argument against computer code functioning as money is the fact that it lacks any kind of use outside of trying to be money. In other words, it does not seem to have an intrinsic value. But crypto currencies believers have come up with two arguments why this is a false criticism.

Do Cryptos Have An Intrinsic Value?

The first one is to argue that cryptos do indeed have an intrinsic value. Blockchain is an incredible useful technology. It solves the problem of having to trust a human institution to enforce rules. With blockchain, we now do not have to trust potentially corrupt humans. Instead we can trust a mathematical algorithm, which seems a lot more solid.

I actually totally agree with that. This is indeed extremely valuable. Blockchain technology will change the world. But there is a problem with this argument. It is not clear how this use will give a monetary value to a crypto currency.

For something to have a monetary value, it needs to not just be useful, but also scarce. Air is a good example. For humans, air is incredibly useful. In fact, it is one of the most useful things I can think of. It is so useful that it is the absolute last thing I would want to live without. That is because, cutting me off from a constant air supply will kill me more quickly than cutting me off from anything else. And yet, despite this extreme usefulness, it is free of charge. In everyday life, it has no monetary value, because it is not scarce.

At this point, crypto advocates will say, but Nico, crypto currencies actually are scarce. With mathematical certainty, the number of Bitcoins is limited to 21 million. So there you have it. It is useful, and it is scarce. It therefore clearly needs to have a monetary value.

I don’t find this convincing. It is true, the number of Bitcoins is limited to 21 million. But this overlooks that Bitcoin is not the blockchain. It is merely an application of the blockchain. And there are many others. That means that one does not own the useful blockchain by owning a crypto currency.

The individual crypto currency unit in itself is useless. Pictures of Bitcoins tend to portray shiny gold coins with a big B on it. But in reality, a Bitcoin is just a bit of digital code. It has no other use than being a piece of information. So we are not dealing with something that is scarce and useful. Instead, we are dealing with something that is scarce, but useless. This combination tends to result in a monetary value of zero.

The useful blockchain technology, on the other hand, is not scarce. Luckily, it is open source, and in the public domain. Everyone can, and many people are using it in thousands of applications. There are even multiple Bitcoin applications at this point.

Crypto investors have one good defense to this objection. They argue that there is a network, and prime mover, effect which makes Bitcoin unique among crypto currencies. Bitcoin was the first crypto currency, and it currently is the most highly valued in dollar terms. This gives Bitcoin an edge over other blockchain currencies. So again, there you have it, now it is useful and scarce.

This is not a bad argument, but it ultimately fails to convince me. First of all, even if there is a network effect, it is not clear to me, why the prime mover will be the one that wins this competition. There are often problems with new technologies. Therefore, it is the second or x generation which makes the race. Only in later generations all the bugs from the beginning have been fixed. Google, for example, was not the first search engine, and Apple by far not the first computer company.

Basing hopes of owning the future crypto reserve currency on a network effect, is a risky gamble. Even if cryptos ultimately were to succeed, no one yet knows which one will eventually make the race. And as I write this, the technology of the Bitcoin application in particular does seem to have some problems. It is too slow for transactions, and the mining network uses too much electricity. That is why we have already seen multiple forks. Bitcoin, therefore, might turn out to be a terrible investment, independent of whether cryptos succeed or not.

The real problem with the network argument, however, is that it confuses cause and effect. In order for a crypto currency to profit from a network effect, it first needs to be used as a currency. But how can it be used as a currency first, if all that gives it value is the network effect?

Bitcoin believers will counter this by arguing that we are simply past that point. Yes, this might have been the problem when the currency started in 2009. But, for whatever reason, Bitcoin now undeniably has a monetary value. It therefore can now profit from the network effect. Superficially, this seems correct. Bitcoins clearly sell for lots of dollars. But if we look closer, the argument becomes rather unconvincing. To explain why, we need to look at the second argument made against the lack of intrinsic value criticism.

Cryptos Do Not Need An Intrinsic Value

Many people argue that cryptos do not need an intrinsic value to have a monetary value. That is because nothing really has an intrinsic value. The theory of intrinsic value died with the marginal revolution, and the insight that value is not objective. Each person decides for himself, how to value something. In other words, if someone is willing to pay 1 million dollars for a Bitcoin than that is its monetary value.

Intrinsic value, however, is not objective value. The objective value theory, which was falsified in the marginal revolution, was the idea that everything can be objectively valued according to the amount of labour that was needed to produce it. This theory is indeed completely false.

But intrinsic value refers to something else. Something has an intrinsic value if there are multiple uses for it. It can therefore be traded on different markets. That means it can still be sold, if its demand drops on one of the markets.

For example, a business usually has an intrinsic value in the from of all its assets. Let us say a computer store goes bankrupt. That means that all the computer equipment of that store has no further use for the business, as it is discontinued. But there are other people who will still have some use for all the assets of the shop. The amount, a potential liquidator could sell all these assets for, is the intrinsic value of the business.

This intrinsic value is not objective. It is not the same for everyone. Many people will have no use for these computers. Intrinsic value is merely the market value for which you would likely be able to find a buyer, assuming a big enough market. As such, the intrinsic value is not even a precise number, but varies within a range.

Accordingly, when it comes to currencies, intrinsic value means that if something fails to function as a currency, the owner can still sell it on a different market, or use it himself. This gives the potential currency trust, as it would need to loose its usefulness on all potential markets to become completely valueless.

And trust is really the key when it comes to the value of a currency. Prices are indeed subjective. If people do not consider a currency to be valuable, then it won’t be. On the other hand, if enough people do trust a currency, they will accept it for business. Therefore, there will be a constant demand for it, and the currency stays valuable.

Crypto currency advocates correctly object to gold bug critics that most of the monetary value of gold does currently not come from its intrinsic value. Yes, gold is an incredibly useful metal, but at current prices, it does not seem to be used for much in the industry. Most of the monetary value seems to come from its use as a store of value.

I completely agree that once trust has been established for a currency, the intrinsic value does not matter anymore. An established currency does not need to have a secondary market as a commodity. State currencies, like the dollar, are a good example. Once the currency enjoys trust, all it needs to do is to not blow it. That is why a lot of people around the world accept US dollars, even though the US government does not force them to do so. And they will continue to do that, as long as the US government does not do anything stupid to undermine the trust of the dollar. Historically, the way currencies have blown trust is through a too rapid increase of the currency units.

This is where crypto currencies get it exactly right. By limiting the units of the currency, they are designed to not blow the trust once they have established it. If they ever get that far, they will not need an intrinsic value anymore. But the problem is, how will they get there?

The only way I could see them getting there is by force. If a government declared a crypto currency as legal tender, and forced everyone to pay their taxes in it, then that would create an artificial high demand for the currency. This demand would quickly stabilize prices and would make people build trust in it. In other words, the government would have created a big, artificial network effect. In that case, even if the government were to withdraw its force, people would likely continue to trust the crypto currency.

But the problem is, how can a potential currency build trust on a free market? The only real solution for it seems to be, by having an intrinsic value. That is how Gold became a currency. Only with an intrinsic value can holders of a currency be secure that if the underlying commodity does not work as a currency they can always use it for something else. This puts a floor into the price.

I do not see crypto falsifying that theory. They are currently not being used as a currency. The volatility is way too high. People who buy crypto currencies perceive them to rapidly go up in value. And since Gresham’s law tells us that bad money drives out good, crypto currencies are not being spend. In addition to that, because of the volatility, and the fact that cryptos cannot be used to pay taxes, businesses do not account in them either.

People are not buying Bitcoins, because they are longing for a reliable payment system. There are a number of very well and cheap payment systems out there, which currently work better than crypto currencies. They also don’t really buy them because they mistrust government money. No, if we are honest, the reason why the vast majority of people currently flock into Bitcoin is pretty much exclusively, because they are hoping to be able to sell that same Bitcoin, in the relatively near future, for a significantly higher price to someone else. Any other conclusion seems delusional in my view.

And this is a big problem. It is an unhealthy economic phenomenon called greater fool investing. Ponzi scheme is another word for it. As long as cryptos get their monetary value from being a speculative asset, they cannot function as a currency. In order to gain trust as a currency, cryptos would need to be as stable as possible in price, ideally only going up with the increased productivity of the economy. But they cannot stabilize their monetary value as long as they are not a currency.

In other words, cryptos, currently, get their monetary value from the projected higher future prices. They get it from the perception that, in the future, there will be a greater fool who is going to buy Bitcoins for an even higher price. But if that is the only reason why crypto currencies have a monetary value, than they will lose this same value, once it becomes clear that the market has run out of greater fools. Once that happens, far from stabilizing prices on a high plateau, subjective value starts to work against the price. The very reason, why Bitcoin had a monetary value in the first place disappears. Everyone runs to the exits to cash in their profits. But there won’t be any buyers waiting for them at those exits. At that point the currencies will fall back to their intrinsic value.

This is the outcome of every greater fool investing scheme in history, and there are many. It is not clear how crypto currencies will be able to go from being a speculative asset to being an actual currency. This would be unprecedented. Greater fool investing schemes always, always! end in a collapse, in which the underlying asset goes back to its intrinsic value. I don’t know of any exceptions. As I explained in detail in my previous article, they always have to end this way, because there is a natural scarcity of greater fools. Someone will have to be the greatest fool.

The crypto mania very much reminds me of the dot com bubble at the end of the 90th. Back then the same two arguments were made, to justify the high valuations of internet companies. The first one was the argument that the internet was this great new technology which would completely change the world. Therefore, everyone wanted to own a piece of it.

This assessment was undoubtably correct. The internet has indeed changed the world, and it has done so far beyond what was even imaginable back then. But that did not stop the stocks of many dot com companies from going to zero. What investors did not realize was that, by owning an internet address, they did not own a part of the internet. They merely owned a few, often useless, information on the internet. The same mistake is now being made with the blockchain technology. Bitcoin owners simply do not own this technology. No one owns it. What crypto investors own is a piece of one application of the blockchain. One of a potentially unlimited amount.

The second argument in the 90th was, that since the internet was so new, old economic insights did not apply anymore. Trying to understand the ‘new economy’, as it was called, with old economics would fail. Old School investors like Warren Buffet were seen as dinosaur, who should better retire. Dot com companies did not have to have any intrinsic value. In the new economy, people were clearly valuing things differently.

This turned out to be an epic miscalculation, and dinosaurs like Warren Buffet had the last laugh. All the dot com stocks eventually fell back to their intrinsic value. That meant that a lot of them went to zero, as they only were useless internet addresses. The only reason why they had a monetary value in the first place was, because people thought that prices would continue to go up. The ones that survived had real businesses with real values behind them. In other words, they had an intrinsic value.

The same argument is now being made for cryptos. Apparently, the fact that they lack intrinsic value does not matter. Old economics does not apply. It is all so new and so great. But I am not convinced. Now does not look very different from back in the 90th. I see no reason why well tested economic theories are supposed to be falsified by crypto currencies. That is why, I predict that the monetary value of crypto currencies, like all other assets, will eventually go back to their intrinsic value, which is zero. It simply seems to be the only reasonable conclusion to draw. Nevertheless, given that I like the idea of an anarchic currency, I hope I will be proven wrong. But I won’t invest my money in pure hope against reason.

The Russian Conspiracy

It has been about a year since Trump got elected President of the United States. A lot of people were shocked by this decision of the american voter. Personally, I was not shocked, I expected it. But not because I wanted him to win. In fact I have been a very vocal critic of the Donald. Trump is far from being a libertarian. He is a consequent authoritarian, with a dangerously impulsive, and immature personality. It is a real problem to have someone like him in charge of the biggest army in the world.

And yet, despite my dislike for him, I constantly find myself in the awkward position of having to defend the man. There are very good reasons to criticize Trump, but a lot of the attacks on him are simply ludicrous.

The most bizarre idea is that Trump is somehow working for the Kremlin. Ever since he defeated Hilary Clinton, The media has been full of allegations that Putin and Trump are something like a team, and that the Russians actively, and successfully interfered in the election. Allegation reach from Putin blackmailing Trump with sensitive material, to the Russians hacking files from the Clinton campaign, and manipulating the voters with fake news. The evidence for all of this? Pretty much zippo.

The complete lack of evidence, however, does not seem to bother our journalist elites in the slightest. They have been busily reporting on this “scandal” pretty much non stop for the full year since the election. The level of misinformation reported is quite extraordinary. The only comparable example that I can think of in my lifetime, was the quite obvious lie that Saddam had weapons of mass destruction (WMD). Back then too, journalists seemed to have been more than keen to uncritically spread the lies being put out by the government.

In the Russian affair, just like with the WMD propaganda, the logic clearly is that the absence of evidence is not evidence of absence. Meaning, just because there is no proof that the Russians interfered in the election, does not mean it did not happen. Simply repeating these allegations often enough will eventually convince enough people that there must be at least something to them. And this tactic is working very well. Through the constant propaganda, few seem to be bothered by the lack of evidence anymore.

What are the allegations? Very early on we were told that Putin had sensitive material about Trump, with which he could blackmail him. Apparently, the Russians had filmed the Donald, having sex with prostitutes in Moscow. At least in this case, the absence of any evidence appeared to have bothered enough people, so that it never gained any traction. It also never made much sense. How exactly do you blackmail a character like Trump with such material? Who would care about him having sex with prostitutes? It is unlikely that even his wife would.

And so eventually, the deep state settled for concentrating on allegations, that the Russians were spreading fake news, with the help of the Trump campaign.

Let us not be naïve. Of course the Kremlin cares about who is in the White House. It would be odd if they did not. And it was an open secret that Putin favored Trump over Hilary. Trump openly, not secretly, campaigned on the promise to make the US get along better with Russia.

It is beyond me, why getting along with Russia, is such a terrible idea. Sure, Putin is a psychopathic gangster, who rules Russia autocratically. I would not want to live under his rule. At the same time, however, I do not think that regime change in Russia should be part of a western foreign policy. Whenever the west tries to better regimes, they tend to make things worse. So this is simply impractical. Ultimately, only the Russians can overthrow Putin.

But maybe, or probably, Putin’s autocratic rule is not really the reason why the west cannot get along with Russia. Russia is needed as a big enemy, to justify lots of government agencies. After all, conflict is the health of the state. That means the state does not really have an interest solving all conflicts.

This becomes obvious when we look at the hypocrisy of western foreign policy. The US is friends with far worse regimes than Putin’s. Right now, Washington is helping their dear ally Saudi Arabia to commit an outright genocide in Yemen. Our governments have de facto alliances with some of the worst political groups on the planet. These are groups, like Al Qaeda, who have committed acts of Terrorism, like 911. But we hear astoundingly little about these things. Instead, we are told that what we should be worried about is that the Russians, a country with the GDP of Italy, talked to the voters in the US during the election campaign.

And that is really what the allegations come down to. Russia is accused of using the open political debate in the US, to propagate their own political agenda. May I just ask the obvious question, so what?

Russia is not the only country that is doing this. Many countries have an interest in who is in the White House. Saudi Arabia for example regularly runs advertisement in the US, and talks to politicians, without anyone protesting. And every presidential candidate is always keen to demonstrate how well they get along with AIPAC.

The idea that there could be such a thing as an unbiased political debate is nonsense. The whole thing is even more bizarre, if we consider that most commentators of the issue would describe themselves as advocates of democracy. Isn’t the whole idea of democracy that the people are sovereign, that the voters are capable of making up their own minds? Surely, if the Russian bots are placing their comments in social media, the average Joe can see through that, or can’t he?

If you don’t believe that he can, then shouldn’t we question democracy altogether? In my personal view, absolutely, let’s do that. I am not a democrat at all, I am a libertarian anarchist. So let us question the legitimate role of the government, by all means. But let’s do it in an honest debate, not hypocritically.

The attitude currently spread in the media seems to be, it is democracy if the deep state’s agenda wins. If on the other hand, the voters vote against the establishment, than that is apparently not democracy. We saw the same argument after the Brexit vote. There too, the assumption was immediately that it was a defeat of democracy. Why, because, apparently, the people had been manipulated by evil forces to vote for the wrong policy.

The truth of the matter, however, is that we do not need to bring in the Russians to explain the election defeat of Hilary Clinton. She was very much capable of achieving that all by herself. If you are running as one of the worst candidates in the history of presidential candidates, you should expect to lose. The only real surprise is that she lost by such a small margin. But that can be explained by the fact that she too was running against one of the worst candidates ever, Donald Trump.

The only time the Russians seem to be accused of really having done something illegal is the hack of the DNC emails in July of last year. Hacking into a computer system is certainly a crime. But once again, the problem with that story is that there is zero evidence that the Russians did it. In fact, all the evidence points to the contrary.

Wikileaks has long claimed that the leak came from an insider. From the meta data of the download, we know that the data could not have been downloaded over the internet. The data was simply downloaded too quickly for that. That is to say the internet connection of the server was not quick enough to allow for such a quick download. It very much looks like the data was downloaded onto a hard drive. That however suggests that it was an insider who leaked the files to Wikileaks.

But let us forget the illegality of a possible hack for a moment. What is the allegation concerning the election here? It seems to be that someone informed the voters about the truth of Hilary Clinton. And the truth, as revealed in the leak, is that she is an evil, conniving cow, who stole the democratic nomination from Bernie Sanders. Does anyone want to argue that it is damaging democracy if the voters know the truth about a presidential candidate? In other words, if Russia did this, they did nothing more than to tell the voters the truth. How evil is that?

Quite evil from the perspective of the deep state in the US. As with every election, they were running a quite sophisticated misinformation campaign themselves. And they do not like competition, especially not if the competition is telling the truth. But having run similar campaigns too many times in the past, it appears the voters finally had enough of it. That, in principle, is a good thing. The only problem was that the only alternative was Donald Trump, of all people.

This charade of blaming the defeat of Hilary all on Russia, just because for once, the deep state did not get what it wanted, is a obvious attempt to win back control. And unfortunately, it is working. Being the clueless moron that he is, Trump is right back on track of the deep state agenda. Thanks to these misinformation campaigns, he appears to now be dancing to the tune of the establishment. I have said it before, and I say it again, it is a tragedy that all that precious anti-establishment energy was wasted on the worst possible candidate, Donald Trump. The problem is the establishment in the US, not the Russians.

Are Guns The Problem

The news coming out of Las Vegas are truly disturbing. On Sunday night, a 64 old, local man, fired multiple rounds of machine gun fire into a big crowd of a country music festival. As I write this, at least 59 are dead, and 527 have been wounded. Most baffling of all, it seems difficult to attribute a clear motive for this senseless massacre. Right now, the best explanation we have is the disturbing, and unsatisfying, inside that there are some truly crazy people out there. People for whom even the best attempts to try to understand their motivation will fail.

The fact that the world is not a save place, certainly is a scary truth. Terrifying as that inside is, there are a lot of people who simply won’t accept it. In their view, the world could be an almost completely save place. The only reason why it is not is the lack of enough rules and regulations. Once we have those, eventually, the state will be able to save us all.

This idiotic idea, which goes against the empirical historic evidence, is difficult to fight. The utopia seems too attractive to let it go. In case of mass shootings, the solution of the more regulations crowd is, to simply ban the tools used, that is guns. It always amazes me how many people believe that this is a no brainer solution. It simply is assumed to be a truism that gun control, enforced by the state will make us all save.

A little bit of critical thinking however is all it takes to realize that this solution is far from being a no brainer. There are several problems with it.

The first one is that any kind of gun control has to be enforced with guns. That means, clearly we are not getting rid of guns all together. A technology can not be un-invented. We will continue to live in a world with guns in it. The only question is, who is going to be allowed to have those guns, and who is not. The answer of gun control advocates is that only people working for the state should have them.

This is not very convincing. Worst, it is in itself dangerous. The first thing to note is that it is an entirely unrealistic goal. Criminals are the people who we potentially most would like to see unarmed. State regulations, however, are not necessarily something the bad guys care too much about. This city, London, is a good example. For all practical purposes, private gun ownership is essentially outlawed. That means that no law abiding person will have a gun. But, what this clearly does not mean is that no one other than the police and the army has guns. There are literally hundreds of shootings in London every year. All of them committed by criminals.

It is difficult for gun control advocates to not admit this. But they will object that without gun control, there would almost certainly be much more shootings than that, as guns would be more readily available. That is probably true, and a fair point. However, I am more worried about the fact that currently all of the guns are in the hands of the bad guys, and none in the hands of their victims. This is not a very comfortable situation to be in. It feels more like sacrificing certain people for the sake of some nebulous greater good.

But even if we could get guns off the streets, a bigger worry of mine would still prevail. The state is on record to be the biggest weapon of mass destruction ever invented. And I am not exaggerating. In the 20th century alone, tens of millions of people have be murdered by their own government. This does not even count the people murdered in wars. A big factor of why these governments were able to commit these murders was, because they had a monopoly on violence. To me that means that the solution of exclusively giving Leviathan all the guns is at best not obvious.

It is precisely this problem that motivated the founding fathers of the US to put the second amendment into the constitution. Maybe, Europeans in particular, would be well advised to tone down the arrogance towards criticizing the lack of gun control in the US. Yes, there is clearly a lot of violence in the US, but overall, if we are actually counting accurately, and include murders committed by the state, the US does not have a bad track record at all. In fact, in the US too, the biggest mass murders were committed by the state.

But of course we are not counting accurately. This is politics, and as always in politics, we are told to only look at one side of the balance sheet. People are quick to point out that we now live in a democracy, and we can therefore trust the government. This completely ignores that the Weimar Republic, which brought the Nazis into power, also was a western democracy, with full human rights guaranteed in the constitution. This also ignores that we are currently seeing democracies in many places turning totalitarian. Turkey, Venezuela, Hungary, the Philippines, and Poland come to mind.

But it even ignores the tyrannic history of the US government. Let us not forget that in 1993 for example, the Clinton administration stormed the compound of the, completely peaceful Branch Davidians in Waco Taxas. This resulted in the brutal murder of 76 US Citizens, many of which were children. The government, till this day, has not admitted any real wrong doing. It also ignores the fact that the current President got, to some degree, into the White House by campaigning to take away rights of minorities. Finally it does not take into account that the US already has a big problem with police brutality.

But it is not just the government’s victims that we don’t count. We also often forget about those who were able to save their lives by being armed. There are a lot of criminals out there, and in many cases, those bad guys could be stopped by an armed victim. Advocating gun control is to advocate the disarmament of victims.

I said earlier that we cannot un-invent a technology. But when it comes to guns would we really want to? There are certainly some type of guns that we could really live without, but not all of them. Guns are equalizers. A world without guns would throw us back into a world, in which physical body strength is king. Sure, if you are a young 6’5” healthy guy, this might not sound as such a bad idea. But what if you are a 5′ woman, or old, or disabled etc.? Without guns, these people, to a significant degree, would be at the mercy of the good will of the people around them.

It seems to me that advocates of gun control are very short sighted in their argumentation. Their arguments appear to be more driven by wishful thinking rather than facts. Given what happened historically, I don’t feel comfortable to give all guns to the government. And I find it outright cruel to take away tools from weak people, which could help them to defends themselves.

On the other hand, I accept that freedom does not work in every single case. We will never have a perfect world. There are cases, in which a police state might have prevented a crime. Maybe, the shooting in Las Vegas is such a case. Looking at the bigger picture though, there are far more cases, in which the reverse seems to be true. Overall, advocating liberty is not just the most moral position, it is also the one that works better than anything else. Therefore, advocating gun control, on the basis of single bad events, seems irresponsible.