December, 2016: Macro Economics, Fake News, Drivers of the Future, and Blockchain

Another installment of my incomprehensibly irregular newsletter …

Macroeconomics and the Business Cycle
To understand what drives recessions and booms, you must understand the effect monetary policy has on the economy. This short primer by Scott Sumner will help, but it does take work:

http://www.themoneyillusion.com/?p=20599

The big lesson is that the business cycle is driven by monetary policy, not by real shocks. This should come as a surprise (shock) to most people who took economics in school or read Thomas Friedman, which is why I encourage you to work your way through Scott’s lessons. It’s well explained and well reasoned. It could be inferred that the gold standard caused the Great Depression and created the conditions for World War II. To understand how the US Fed turned a Wall Street banking liquidity shortage into a world-wide financial crisis, watch these videos:

https://www.youtube.com/watch?v=kNbpb1UNxWE
https://www.youtube.com/watch?v=XlYxb6c87aw
https://www.youtube.com/watch?v=3lY2OsbSj0k

Again, it takes a bit of work, but most people’s concept of the Great Recession was not grounded in the facts. This includes Michael Lewis, whose book on the topic did not explain the economics properly. It’s is going to sound strange, but we had a worldwide recession because the Fed failed to act aggressively to loosen money in 2008. That’s right, we went through five years of unemployment, increasing debt, and rock-bottom interest rates because monetary policy was too tight.

In short: it would be good for humanity to get a handle on central banking before it causes bigger problems. I just gave a talk on this topic to graduate economics students in Perm, Russia, and hope to give it more next year. It’s about 45 minutes, in case you know any interested audiences.

The Four Drivers of Change
I have also been talking about technological unemployment (I gave a total of five talks last week in Russia, and it came up in four of them). I think it will be one of the major issues of this century. In fact, I think the four major drivers of change for the next thirty years are:

  • Technology
  • The rise of cities (number of people living in cities to double in 30 years)
  • Decentralization
  • The 100-year life

This, of course, has huge implications for how we set up and live our lives. What if we turn ourselves into laboratories and wend our way through life and the economy through trial and error? This is a short summary of a future illustrated book explaining the political views of many Silicon Valley entrepreneurs. It’s short and interesting:

https://medium.com/the-ferenstein-wire/silicon-valley-s-political-endgame-summarized-1f395785f3c1

Fake News
I’m shocked — shocked! — to learn that fake news is all over the place. Like, for example, the New York Times, most days of the year. Here’s an excellent piece on how to keep the media more accountable:

https://medium.com/whither-news/a-call-for-cooperation-against-fake-news-d7d94bb6e0d4

Soon you will be one of us
Here’s a short deck I made explaining Bayesian reasoning:

http://www.slideshare.net/pullnews/understanding-bayes-theorem

Blockchain
On the blockchain front, I’m working with an amazing company called Lykke - they are building an exchange that we hope will change the world significantly. It’s a remarkable group of people bound by a common purpose to reshape the world’s financial system into something better and more useful. I recently made a series of short videos explaining the project. We’re having a contest to find people in cities around the world who want to introduce Lykke to their community.

I am now closing an initial round of funding on my new company and talking with investors about giving us the capital to open London’s first blockchain innovation center. If all goes well, I’ll be spending much of my time in London next year. We hope to launch a manifesto and an online community in January. We will also launch one of the world’s first cryptocurrency indexes. I’m currently looking for investors and volunteers who want to be part of it. Please forward this to anyone who might be interested.

I’ve given my big blockchain talk five times this year and hope to do it much more next year. Let me know if you can connect me to conference organizers who want their audiences to understand the decentralized future. I’m excited to have a chance to help build this new world.

Happy holidays from Switzerland!

David Siegel