I read this article when it showed up on the newsstand. Eric Janszen is an interesting and intelligent guy. His Dad invented and marketed the excellent Janszen Electrostatic Speakers that were popular premium high fidelity items in the 70s.
I like this quote: FIRE is a credit-financed, asset-price-inflation machine organized around one tenet: that the value of one’s assets, which used to fluctuate in response to the business cycle and the financial markets, now goes in only one direction, up, with no more than occasional short-term reversals. With FIRE leading the way, the United States, free of the international gold standard’s limitations, now had great flexibility to finance its deficits with its own currency.
If this is true,and I believe that it is, it means that Americans with money or access to credit are coming to the same conclusion that those in Latin America, Southern Europe and many other less stable economies came to long ago: you have to own assets if you want to survive.
This is much easier for the rich, who can live well with very low cash returns, and weather downturns without coughing up assets. It is very difficult for the ordinary conscientious worker-saver who feels frightened by the risk and variability involved (and rightfully so), so either does not participate fully in asset inflations, or tends to get there just in time for the bust.
IMO the proper mental image is not of stacking bricks slowly and methodically in a pile to provide for your old age. More like hopping across a stream on slippery stones-each step risky but you have to keep moving anyway.
Here is another great quote, this time from an anonymous writer during the South Seas Bubble:
“One added to one, by any rules of vulgar arithmetic, will never make three and a half; consequently, all the fictitious value must be a loss to some persons or other, first or last. The only way to prevent it to oneself must be to sell out betimes, and so let the Devil take the hindmost.”
I this not a beautiful desciption of a zero sum game?
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