When Albert Einstein first published his paper on “special relativity” in 1905, the world didn’t like it.
In fact, most people laughed at him.
As reported in JSTOR Daily:
‘In France, Einstein was largely ignored until his visit in 1910. In the United States, a few understood him, but, in general, relativity was derided as “utterly impractical and absurd”.‘
But even as the intelligentsia of the time gradually realized the truth of Einstein’s discovery, large swaths of the public remained skeptical.
A fact that baffled Einstein.
‘This world is a strange madhouse,‘ he wrote in a letter to a close friend. ‘Every coachman and server wonders if relativity is correct.‘
A book was even published in 1931 — A One hundred authors against Einstein – which was filled with criticism from parlor philosophers, eccentric academics and other opinionated ignoramuses.
But as Einstein said when the book came out:
‘It would not have taken a hundred authors to prove me the opposite; one would have sufficed.‘
And this is the key point…
Nothing is certain, even less the opinion of an expert
We live in a world where too many people are certain of their opinions.
However, the fact is more people are not qualified to give an opinion on more topics.
And yet, ask your neighbor what he thinks about COVID, climate change, the Russian-Ukrainian conflict, the viability of quantum physics, the economy, bike lanes (!), or any other topic , and it will most likely give you a strongly held opinion.
But it gets worse…
It doesn’t matter who you are next to, a 2003 study showed that most experts aren’t very good at making accurate judgments either!
‘Very well-informed people often fail to reach very accurate judgments, a phenomenon sometimes called the “process-performance paradox.”‘
So you could ask your neighbor what he thinks the Australian dollar would be worth in a month, and his answer would be as likely to be accurate as an FX expert.
But this That’s why I like to invest.
With investing, you can have whatever opinion you want, but ultimately the truth of the matter will show up in your account balance.
It doesn’t matter who you are, what company you work for, or what university you went to (if any).
When you’re wrong, there are no excuses; only a feature of reality that you have not taken into account.
And yet, the investment industry remains filled with useless opinions, just like most things in life.
Now, most opinions are harmless if you take them as someone’s best guess and not a rock-solid guarantee.
Indeed, seeing how someone arrived at a specific conclusion can provide you with good information that you can use to compare your own judgments.
But there is one area of life where opinions have major consequences for economies, markets and, ultimately, people.
And that’s public policy…
The two main players in public policy are governments (spending and tax decisions) and central banks (monetary tools like interest rates and money creation).
It is in these places that opinions shape markets.
But what if these institutions have bad opinions?
This is the big problem we face today…
The big question I am asking today could be summed up as follows:
“What are the consequences if the chasm between what public officials believe to be reality and what is real reality has become too great?”
Quite an esoteric question, one might think, for a free daily market email!
But it’s probably one of the most important topics we all have to deal with as investors.
Central bankers thought inflation was transitory.
This was not the case.
And now we have consequences like this rippling out into the world:
When it comes to energy policy, German politicians believed that Russia was a stable partner.
This was not the case.
And now they have consequences like this to deal with the onset of winter:
And as my colleague Ryan Clarkson-Ledward pointed out on Friday, we have officials in the United States trying to tell us that two-quarters of negative growth is not a recession and the economy is “going strong.” .
This is not the case.
This chart shows the actual real wage growth right now:
We are all paying a pay cut in real terms.
This is the chart for Australia, but the same story is happening worldwide. And the poorer you are, or your country, the worse it is.
So why are we listening to the same people who helped create this mess?
Why didn’t any of them at least fall on their sword?
And why do they still have so much power?
No matter how well-intentioned their intentions may be (and many people would say they are not), their theories of how the world works are clearly wrong.
So what can we do about it?
Take back control of money
Money is at the center of it all.
When money has no value, when it can be arbitrarily created or destroyed at will by people in power, their mistakes become our mistakes.
Therefore, the first step to solving our situation (or at least mitigating it for the future) is to regain control of money.
Indeed, the founding fathers of the United States were as anti-big banking as they come.
Thomas Jefferson once wrote:
‘I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of financing, is only a swindle with a great future. ladder.‘
He also wrote:
‘The stock traders and banking companies, by the aid of a paper system, enrich themselves unto the ruin of our country, and influence the government by their possession of the printing presses, which their wealth commands and by any other means, not always honorable for the character of our compatriots.‘
It’s a story as old as the world.
Give a few people immense power over money, and eventually corrupt and/or incompetent people will take over.
Which is bad for us.
So how do you fight it?
You have two options.
Buy gold or buy Bitcoin [BTC].
Maybe a bit of both…
Both forms of money take power away from bureaucrats and politicians whose ignorance or incompetence is leading our economy down a dangerous path due to their misallocation of “fake” money.
Do they solve all our problems today?
But it is an important start.
And it prepares us for a better future by allowing “sound” money and free markets to run the economy better than centralized bureaucrats.
As economist Dr Saifedean Ammous wrote in The Bitcoin standard:
‘The relative stability of sound money, for which it is selected by the market, enables the functioning of a free market through price discovery and individual decision-making.
‘Defective money, the supply of which is centrally planned, cannot allow the emergence of accurate price signals, as it is inherently controlled. Through centuries of price controls, central planners have tried to find the elusive best price to achieve their desired goals, to no avail.‘
As Einstein said, falsifying a theory requires only one valid criticism.
Our current monetary system has been repeatedly refuted. It’s only a matter of time before people realize this has to change.
What happens next to money is the great financial question of our time…
Editor, silver morning