Pardon me while I give Moldbug a good beating here, but I’ve had enough. He is dangerous, because he somehow gets people to take his flatulent amateurish bloviations seriously.
On the thousand-to-one chance that Moldbug reads this: I’m sorry, man, but I believe this is for the Greater Good.
To skip directly to the main example of this post, do a search for the word “finance” (search is CTRL+F in most browsers).
The gentlest thing I can say about Moldbug’s fanboys is that they mistake style for substance. References to obscure historical episodes… florid vocabulary… a deliberately “iconoclastic” way of looking at things… These are not intelligence; they are the superficial symbolism of intelligence. It is as if Moldbug were to write a 10-page “proof” that 3 is not a prime number, complete with… ACTUAL FOOTNOTES!!! And people take him seriously because of this. The presence of ACTUAL FOOTNOTES!!! does not change the fact that what he’s saying is that 3 is not a prime number. Ignore the style, goddammit.
PAY ATTENTION TO THE SUBSTANCE, NOT THE FUCKING STYLE.
As a prolegomenon (Note fancy vocabulary! I’m awesome!) I can think of things that Moldbug gets right, but they’re obvious. One, in his oft-cited writings like http://www.thedarkenlightenment.com/moldbugs-open-letter/ and https://www.unqualified-reservations.org/2016/04/coda/, Moldbug takes thousands of words to assert that democracy doesn’t work in reality the way it does in textbooks. No shit. Everyone already knows this. Better writers could illustrate it in two words, e.g., “corporate welfare” or “unnecessary wars.” Granted, belaboring the obvious has value– the obvious needs all the belaboring it can get these days– but let us not confuse the necessary work of obviousness-belaboring with profound and brilliant insight.
(In this blog I sometimes belabor the obvious, with occasional original (I hope) insights. As far as I know, the obviousness-belaboring has not yet prompted anyone to assess me as an Einstein-level Galaxy Brain.)
Two, as I noted here, Moldbug correctly observes that leftism does not lose steam when it exacts concessions. Trying to deny it steam by partially giving in to it has never worked. But again, he is hardly the only person to have noted this.
Now to fisk two specimens of stupid Moldbug notions; they could be multiplied vastly.
First, Moldy denies that the Nazis and fascists– the real ones, from Europe in the first half of the 20th century– were left-wing; he claims they were “right-wingers” and “reactionary.” This statement is wrong, regarding the Nazis. That Moldbug asserts it is… puzzling, because his various references reveal that he understands these things well enough to know better. He knows the salient facts about the National Socialist German Worker’s Party.
About Italy’s Fascists, Moldbug’s own attempt to establish their non-leftist nature is tragically inept. He cites many facts all proving that they were leftists, but quotes one Nitti, a contemporary of Mussolini, who characterizes Mussolini as “white,” i.e. reactionary in the political color coding of that time and place. Funny. There’s a blast of facts that show Mussolini as, first a Communist, and later, apparently still a Communist but in a non-Communist costume. Then we get one person calling him an anti-Communist. Maybe some of the evidence that led to Nitti’s assessment? None that’s at all persuasive. Moldbug quotes Nitti bewailing that under Mussolini, “All form of liberty has been suppressed; press liberty, association liberty…” Does that sound left or right? And this is presumably Moldbug’s best stab at proving Mussolini was a “reactionary.” If he has more evidence, why hide it? Well, if the best you can do still paints him as a Commie, I think we’re done here.
I realize there are those who think that Moldbug uses an incredibly subtle rhetorical technique of saying things other than, perhaps the opposite of, what he means. There are two problems with this notion. One, there are places in which he plainly says what he means, e.g. when he points out that democracy in practice bears little resemblance to democracy in theory. This puts his readers in the awkward position of having to judge whether any given claim is advanced seriously or impishly.
Two, this technique cannot be used on the people who need it most. Consider the notion that Mussolini was really right-wing, argued so ineptly that it convinces you that he wasn’t right-wing. That technique would never work on the leftists whom Moldbug wants to convince. Never in a million years are they going to read that closely. They “know” that Hitler and Mussolini were right-wing, and when they see an argument to that effect they are going to accept it at face value. They are not going to carefully interrogate it to detect any flaws and then be convinced of the opposite. Sheesh.
I was in several bands when I was younger. One thing I noticed with amusement is that no matter what your band name or your song lyrics, people often interpreted them as being about sex or drugs. If the name of your band was “the Screaming Eagles” people would find a way to interpret that as being about sex or drugs. I think Moldbug’s fanbois do that: They want a clever dissection of the modern political consensus, so they “find” it. Moldbug is a Rorschach test, whatever else he is.
Now for a long-form ass-kicking. Thanks to SimplyConnected for providing me (a couple of years ago) this Moldbug link on finance. If you are still a Moldbug fanboi after reading this, I can’t help you, tovarisch.
(NOTE! Use of Russian for no particular purpose or reason! I must be “clever”! And therefore my political views must be right!)
First, he wants total “commanding heights” socialism:
Step one: Nationalize all market-priced financial assets at the present market price, exchanging them for new dollars. USG buys all publicly-traded American securities, and foreign securities held by Americans. It thus becomes the sole owner and operator of all public[ly traded] companies, and in doing so it also acquires all the banks (for the price of their common stock, which is not much these days). By acquiring all the banks, it acquires all their dodgy mortgages and other “bad” securities. Obviously, after this process, all debts USG owes to itself are cancelled.
Hedge funds, private equity, and other exotic assets held by individuals may require some appraisal…
Stop. Hedge funds and private equity are not “assets.” They are investment organizations that manage assets. Hedge funds are basically mutual funds that wear tight black leather pants and 4-inch spike heels and carry a knife. Private equity firms buy controlling interests in companies’ stock and hope to manage the company better than the current management, often with the intention of selling their stock after it has (they hope) appreciated. HFs and PE hold assets, but they are not assets. Is this a nit-pick? No, because most of the assets they hold – thinking mainly of hedge funds here – are already included in the “market-priced financial assets” that Moldbug mentioned in his previous paragraph. That he doesn’t grasp this should by itself make his fanbois question his guru status.
Hedge funds, private equity, and other exotic assets held by individuals may require some appraisal. But these are held by rich people, who are patriotic [snort, I suspect this is an example of Moldy saying the opposite of what he thinks] and don’t mind taking a bit of a haircut [LOL, ditto]. Also requiring appraisal are homes; if you are a homeowner, USG calculates your home equity (perhaps using an automated appraisal, such as Zillow’s), and buys it from you. You are now a renter; USG is your landlord. Your new rent is calculated as a percentage of your home appraisal.
The result of step one is that USG owns all financial assets, major corporations, and real estate.
The government owns the bulk of assets. What could possibly go wrong?! Historically, that has always worked out well! I imagine his fans saying, “That doesn’t matter, because if you keep reading you’ll see that his plan involves the government selling all that stuff back to us.” Yeah, about that…
Moldbug continues by telling us that he wants to basically triple a major measure of the money supply:
In return, each USG citizen has one number: how many dollars they have. Perhaps the most straightforward way to implement this is to give every American a direct account at the Federal Reserve (a privilege now held only by banks). Thus, all your portfolios are automatically sold at the current market price, and your statement is mailed from the Eccles Building. [There is no reason to mention the Eccles Building, tovarisch.] The little number at the bottom, however, is the number you care about. This number has not changed. If your portfolio was worth $250,000, you now have $250,000.
Step two: Triple each of these dollars. If your portfolio was worth $250,000, you now have $750,000.
Oh my, he’s going to (basically) triple electronic bank deposits. Sooner or later that will result in serious inflation.
Then a debt Jubilee:
Thanks to our cleanup, these debts are now held by USG itself (which acquired them from the old financial institutions). There is no reason for USG, which can print dollars, to be squeezing them out of the hides of the poor. Forgive them all. Call it a Jubilee.
I don’t know what its direct effects would be– and neither does Moldbug or anyone else– but there are serious long-run implications of baking expectations of future Jubilees into people’s beliefs.
What’s that you say? You’re a Moldbug fanboy and you can’t see a problem with setting a precedent for debt amnesties? Well, can you see any long-run problems with setting a precedent for immigration amnesties?
Please tell me that just made you go, “Um, wait a minute…”
Moldbug apparently is also afraid that tripling everyone’s money won’t cause enough inflation, so he says,
Step three: Calculate the expected shortfall in future entitlements (Medicare and Social Security), and print new dollars to fill the gap. (About 50 trillion of them, to be exact.) For extra credit, print unripe dollars (bonds) and issue them directly to the actual entitlement recipients, as per the actuarial value of their policies.
On top of all the other money printing, an additional fifty trillion dollars.
He then says,
We are going to break this printing press. But before we break it, we have to use it…
No, you’re not going to break the government’s ownership of the money printing press. If we can’t even force the current government to respect the Constitution, how are we going to force future governments to forswear the printing press? Retarded.
Step four: Auction all the financial assets previously nationalized—corporations, real estate, etc. There is certainly plenty of cash around to buy them with. Destroy the dollars received in the auction.
Why are we selling the assets we just bought? We bought them to close out a broken financial system, in which the relationship between asset prices and dollars was unstable and unhealthy. We are selling them to establish their free-market price in a stable, healthy financial system. We do not know what the right relationship between the number of dollars in the world and the net price of its financial assets should be. So we ask the market, and the market tells us.
Absurd. First of all, the market prices when the money supply is X are going to be very different from the prices after the money supply is like one-half X, or whatever it is after the government “Destroy[s] the dollars received in the auction.”
(Note: There are lots of kinds of “money” in a sophisticated financial system like the US’s, but I think I can make the important points without dwelling on that. Much.)
You see what he thinks he’s doing (and he’s explicit about it in passages I haven’t quoted): He’s trying to take all the asset values that are pyramided on a certain amount of base money and actually turn them into base money. Then sell the assets back to the private sector, destroy the money they paid for those assets, then lock in the remaining amount of base money forever.
He thinks this will “close out a broken financial system, in which the relationship between asset prices and dollars was unstable and unhealthy” and create a “stable, healthy financial system.”
This is unhinged. A simple illustration of why:
Suppose the government has printed 6 dollars (multiply this by $10 trillion if you like) and has decreed that for all time, the supply of dollars shall not be increased. (Let’s ignore the facts that (1) there’s no way for the current government to enforce this constraint on the future government, and (2) this is not how most money works– the vast majority of payments are not made in base money, which is what the government “controls,” but in other kinds of money that are supported by base money.) Now suppose that you honestly believe that the value of your house is three dollars and the value of your stock portfolio is four dollars. Someone says, “But dude, that’s a total of seven dollars, and there are only six dollars in circulation!” You shrug and say, “I’m not planning on selling all my stocks and my house today. I believe that if I did sell my house, I could get three dollars for it, and if I were to sell all my stocks, I could get four dollars for them. I understand that there are only six dollars in the economy, but since I’m not going to try to sell seven dollars worth of stuff, I don’t anticipate a problem.” And indeed, most of the time the economy is in exactly this position, and it does not, in fact, lead to any problems.
Occasionally there’s a sudden decrease in confidence about asset values and we have a market crash (in real estate, stocks, or whatever). What’s the solution?
There is none.
None that I can see, anyway. This, I believe, is just something we have to live with in a market economy. And if there is a solution, it sure as shit isn’t Moldbug’s.
He thinks, for some reason, that the total value of all assets in the economy should never exceed the amount of base money in circulation. He thinks that current asset values can exceed current base money only because everyone expects the US government to print more money in the future. He doesn’t get the private sector’s rational anticipations that most of the time, most of these assets won’t all be liquidated at once. And they’re never ALL liquidated at once. That has never happened and never will. Not to mention irrational exuberance that can send asset values into orbit for no particular reason.
(Analogy: It’s like insisting that the total supply of tacos should be enough to satisfy demand if everyone had a sudden craving for tacos at the same time. That rarely (with tacos actually never) happens, and insisting that Taco Bell maintain a large enough supply of tacos to meet such a theoretical demand is obviously absurd.)
Moldbug doesn’t get that there is no way to force the financial system to impose the aggregate constraint that (value of all assets) is less than or equal to (total amount of base money in circulation). There’s no way to even know that first quantity, the “correct” value of all assets! How are individual bond traders, or stock traders, or real estate speculators, going to price the assets they buy and sell to guarantee that the inequality always holds!? Take stocks. In order to guarantee that the total market value of all stocks plus the total market value of all other assets in the economy is no greater than 2 trillion dollars (a number Moldbug throws around several times), every individual stock portfolio manager would have to know the current asset value of literally every other asset in the economy! Then they could (in theory) refuse to buy or sell stocks for prices that would put (stock values + other assets’ values) greater than $2 trillion. It’s impossible for them to have such knowledge, of course.
And even if they had such knowledge, they’d have no reason to enforce the equality. And how could they? If the total amount of money in circulation is 2 trillion dollars, and if (value of all assets) is greater than (total amount of base money in circulation), who should take the hit? Are you going to deliberately sell your house for less than a buyer is willing to pay for it, just to help satisfy some abstract macroeconomic inequality? Or should some other home seller do so? This blatantly goes against people’s self-interest. Seriously, try to envision this: A buyer offers a house seller $200,000 for the house. The house seller says, “No, I think it’s only worth $150,000 and I won’t accept any more than that.” You see? This plan is not merely impractical; it’s completely unmoored from reality.
And what about honest differences of opinion? Back to that $6 vs. $7 example: What if I think houses are overvalued and stocks are correctly valued, and you think stocks are overvalued and houses are correctly valued? Which one of us gets to force the other to lower the price for which they’re willing to buy or sell an asset?
This is insane.
It’s insanity dreamed up by a hopeless dilettante. Moldbug should stick to something that he’s good at, if there is any such thing (writing software or whatever) and stay far, far away from areas outside his area of expertise. And unless and until he does that, people should stop giving any credence to him.