Don't promote it.

I rarely read a post on how Rich Dad, Poor Dad motivated someone to grow rich or change their investing/finance attitude. Rich Dad, Poor Dad is a sham, though. This book isn't worth anyone's attention.

Robert Kiyosaki, the author of this garbage, doesn't deserve recognition or attention. This first finance guru wanted to build his own wealth at your expense. These charlatans only care about themselves.

The reason why Rich Dad, Poor Dad is a huge steaming piece of trash

The book's ideas are superficial, apparent, and unsurprising to entrepreneurs and investors. The book's themes may seem profound to first-time readers.

Apparently, starting a business will make you rich.

The book supports founding or buying a business, making it self-sufficient, and being rich through it. Starting a business is time-consuming, tough, and expensive. Entrepreneurship isn't for everyone. Rarely do enterprises succeed.

Robert says we should think like his mentor, a rich parent. Robert never said who or if this guy existed. He was apparently his own father. Robert proposes investing someone else's money in several enterprises and properties. The book proposes investing in:

“have returns of 100 percent to infinity. Investments that for $5,000 are soon turned into $1 million or more.”

In rare cases, a business may provide 200x returns, but 65% of US businesses fail within 10 years. Australia's first-year business failure rate is 60%. A business that lasts 10 years doesn't mean its owner is rich. These statistics only include businesses that survive and pay their owners.

Employees are depressed and broke.

The novel portrays employees as broke and sad. The author degrades workers.

I've owned and worked for a business. I was broke and miserable as a business owner, working 80 hours a week for absolutely little salary. I work 50 hours a week and make over $200,000 a year. My work is hard, intriguing, and I'm surrounded by educated individuals. Self-employed or employee?

Don't listen to a charlatan's tax advice.

From a bad advise perspective, Robert's tax methods were funny. Robert suggests forming a corporation to write off holidays as board meetings or health club costs as business expenses. These actions can land you in serious tax trouble.

Robert dismisses college and traditional schooling. Rich individuals learn by doing or living, while educated people are agitated and destitute, says Robert.

Rich dad says:

“All too often business schools train employees to become sophisticated bean-counters. Heaven forbid a bean counter takes over a business. All they do is look at the numbers, fire people, and kill the business.”

And then says:

“Accounting is possibly the most confusing, boring subject in the world, but if you want to be rich long-term, it could be the most important subject.”

Get rich by avoiding paying your debts to others.

While this book has plenty of bad advice, I'll end with this: Robert advocates paying yourself first. This man's work with Trump isn't surprising.

Rich Dad's book says:

“So you see, after paying myself, the pressure to pay my taxes and the other creditors is so great that it forces me to seek other forms of income. The pressure to pay becomes my motivation. I’ve worked extra jobs, started other companies, traded in the stock market, anything just to make sure those guys don’t start yelling at me […] If I had paid myself last, I would have felt no pressure, but I’d be broke.“

Paying yourself first shouldn't mean ignoring debt, damaging your credit score and reputation, or paying unneeded fees and interest. Good business owners pay employees, creditors, and other costs first. You can pay yourself after everyone else.

If you follow Robert Kiyosaki's financial and business advice, you might as well follow Donald Trump's, the most notoriously ineffective businessman and swindle artist.

This book's popularity is unfortunate. Robert utilized the book's fame to promote paid seminars. At these seminars, he sold more expensive seminars to the gullible. This strategy was utilized by several conmen and Trump University.

It's reasonable that many believed him. It sounded appealing because he was pushing to get rich by thinking like a rich person. Anyway. At a time when most persons addressing wealth development advised early sacrifices (such as eschewing luxury or buying expensive properties), Robert told people to act affluent now and utilize other people's money to construct their fantasy lifestyle. It's exciting and fast.

I often voice my skepticism and scorn for internet gurus now that social media and platforms like Medium make it easier to promote them. Robert Kiyosaki was a guru. Many people still preach his stuff because he was so good at pushing it.

https://tomconnor.me/wp-content/uploads/2021/08/10x-Engineer-Mental-Models.pdf

I keep returning to the same mental models and tricks after writing and reading about a wide range of topics.

Top 12 mental models

12.

Survival bias - We perceive the surviving population as remarkable, yet they may have gotten there through sheer grit.

Survivorship bias affects us in many situations. Our retirement fund; the unicorn business; the winning team. We often study and imitate the last one standing. This can lead to genuine insights and performance improvements, but it can also lead us astray because the leader may just be lucky.

11.

The Helsinki Bus Theory - How to persevere Buss up!

Always display new work, and always be compared to others. Why? Easy. Keep riding. Stay on the fucking bus.

10.

Until it sticks… Turning up every day… — Artists teach engineers plenty. Quality work over a career comes from showing up every day and starting.

9.

WRAP decision making process (Heath Brothers)

Decision-making WRAP Model:

W — Widen your Options

R — Reality test your assumptions

A — Attain Distance

P — Prepare to be wrong or Right

8.

Systems for knowledge worker excellence - Todd Henry and Cal Newport write about techniques knowledge workers can employ to build a creative rhythm and do better work.

Todd Henry's FRESH framework:

1. Focus: Keep the start in mind as you wrap up.

2. Relationships: close a loop that's open.

3. Pruning is an energy.

4. Set aside time to be inspired by stimuli.

5. Hours: Spend time thinking.

7.

Black Box Thinking…..

BBT is learning from mistakes. Science has transformed the world because it constantly updates its theories in light of failures. Complexity guarantees failure. Do we learn or self-justify?

6.

The OODA Loop - Competitive advantage

O: Observe: collect the data. Figure out exactly where you are, what’s happening.

O: Orient: analyze/synthesize the data to form an accurate picture.

D: Decide: select an action from possible options

A: Action: execute the action, and return to step (1)

Boyd's approach indicates that speed and agility are about information processing, not physical reactions. They form feedback loops. More OODA loops improve speed.

5.

Know your Domain 

Leaders who try to impose order in a complex situation fail; those who set the stage, step back, and allow patterns to develop win.

https://vimeo.com/640941172?embedded=true&source=vimeo_logo&owner=11999906

4.

The Three Critical Gaps

• Information Gap - The discrepancy between what we know and what we would like to know

• Gap in Alignment - What individuals actually do as opposed to what we wish them to do

• Effects Gap - the discrepancy between our expectations and the results of our actions

3.

Theory of Constraints — The Goal  - To maximize system production, maximize bottleneck throughput.

• Goldratt creates a five-step procedure:

1. Determine the restriction

2. Improve the restriction.

3. Everything else should be based on the limitation.

4. Increase the restriction

5. Go back to step 1 Avoid letting inertia become a limitation.

Any non-constraint improvement is an illusion.

2.

Serendipity and the Adjacent Possible - Why do several amazing ideas emerge at once? How can you foster serendipity in your work?

You need specialized abilities to reach to the edge of possibilities, where you can pursue exciting tasks that will change the world. Few people do it since it takes a lot of hard work. You'll stand out if you do.

Most people simply lack the comfort with discomfort required to tackle really hard things. At some point, in other words, there’s no way getting around the necessity to clear your calendar, shut down your phone, and spend several hard days trying to make sense of the damn proof.

1.

Boundaries of failure - Rasmussen's accident model.

Rasmussen modeled this. It has economic, workload, and performance boundaries.

The economic boundary is a company's profit zone. If the lights are on, you're within the economic boundaries, but there's pressure to cut costs and do more.

Performance limit reflects system capacity. Taking shortcuts is a human desire to minimize work. This is often necessary to survive because there's always more labor.

Both push operating points toward acceptable performance. Personal or process safety, or equipment performance.

If you exceed acceptable performance, you'll push back, typically forcefully.

Without self-control, you'll waste time chasing dopamine fixes.

I found a powerful quote in Tony Robbins' Awaken The Giant Within:

“Most of the challenges that we have in our personal lives come from a short-term focus” — Tony Robbins

Most people are short-term oriented, but highly successful people are long-term oriented.

Successful people act in line with their long-term goals and values, while the rest are distracted by short-term pleasures and dopamine fixes.

Instant gratification wrecks lives

Instant pleasure is fleeting. Quickly fading effects leave you craving more stimulation.

Before you know it, you're in a cycle of quick fixes. This explains binging on food, social media, and Netflix.

These things cause a dopamine spike, which is entertaining. This dopamine spike crashes quickly, leaving you craving more stimulation.

It's fine to watch TV or play video games occasionally. Problems arise when brain impulses aren't controlled. You waste hours chasing dopamine fixes.

Instant gratification becomes problematic when it interferes with long-term goals, happiness, and life fulfillment.

Most rewarding things require delay

Life's greatest rewards require patience and delayed gratification. They must be earned through patience, consistency, and effort.

Ex:

• A fit, healthy body

• A deep connection with your spouse

• A thriving career/business

• A healthy financial situation

These are some of life's most rewarding things, but they take work and patience. They all require the ability to delay gratification.

To have a healthy bank account, you must save (and invest) a large portion of your monthly income. This means no new tech or clothes.

If you want a fit, healthy body, you must eat better and exercise three times a week. So no fast food and Netflix.

It's a battle between what you want now and what you want most.

Successful people choose what they want most over what they want now. It's a major difference.

Instant vs. delayed gratification

Most people subconsciously prefer instant rewards over future rewards, even if the future rewards are more significant.

We humans aren't logical. Emotions and instincts drive us. So we act against our goals and values.

Fortunately, instant gratification bias can be overridden. This is a modern superpower. Effective methods include:

#1: Train your brain to handle overstimulation

Training your brain to function without constant stimulation is a powerful change. Boredom can lead to long-term rewards.

Unlike impulsive shopping, saving money is boring. Having lots of cash is amazing.

Compared to video games, deep work is boring. A successful online business is rewarding.

Reading books is boring compared to scrolling through funny videos on social media. Knowledge is invaluable.

You can't do these things if your brain is overstimulated. Your impulses will control you. To reduce overstimulation addiction, try:

• Daily meditation (10 minutes is enough)

• Daily study/work for 90 minutes (no distractions allowed)

• First hour of the day without phone, social media, and Netflix

• Nature walks, journaling, reading, sports, etc.

#2: Make Important Activities Less Intimidating

Instant gratification helps us cope with stress. Starting a book or business can be intimidating. Video games and social media offer a quick escape in such situations.

Make intimidating tasks less so. Break them down into small tasks. Start a new business/side-hustle by:

• Get domain name

• Design website

• Write out a business plan

• Research competition/peers

• Approach first potential client

Instead of one big mountain, divide it into smaller sub-tasks. This makes a task easier and less intimidating.

#3: Plan ahead for important activities

Distractions will invade unplanned time. Your time is dictated by your impulses, which are usually Netflix, social media, fast food, and video games. It wants quick rewards and dopamine fixes.

Plan your days and be proactive with your time. Studies show that scheduling activities makes you 3x more likely to do them.

To achieve big goals, you must plan. Don't gamble.

Want to get fit? Schedule next week's workouts. Want a side-job? Schedule your work time.

Starting a passive income stream with data science and programming

My website is fresh. But how do I monetize it?

Creating a passive-income website is difficult. Advertise first. But what useful are ads without traffic?

Let’s Generate Traffic And Put Our Programming Skills To Use

SEO boosts traffic (Search Engine Optimisation). Traffic generation is complex. Keywords matter more than text, URL, photos, etc.

My Python skills helped here. I wanted to find relevant, Google-trending keywords (tags) for my topic.

First The Code

I wrote the script below here.

import re
from string import punctuation

import nltk
from nltk import TreebankWordTokenizer, sent_tokenize
from nltk.corpus import stopwords


class KeywordsGenerator:
    def __init__(self, pytrends):
        self._pytrends = pytrends

    def generate_tags(self, file_path, top_words=30):
        file_text = self._get_file_contents(file_path)
        clean_text = self._remove_noise(file_text)
        top_words = self._get_top_words(clean_text, top_words)
        suggestions = []
        for top_word in top_words:
            suggestions.extend(self.get_suggestions(top_word))
        suggestions.extend(top_words)
        tags = self._clean_tokens(suggestions)
        return ",".join(list(set(tags)))

    def _remove_noise(self, text):
        #1. Convert Text To Lowercase and remove numbers
        lower_case_text = str.lower(text)
        just_text = re.sub(r'\d+', '', lower_case_text)
        #2. Tokenise Paragraphs To words
        list = sent_tokenize(just_text)
        tokenizer = TreebankWordTokenizer()
        tokens = tokenizer.tokenize(just_text)
        #3. Clean text
        clean = self._clean_tokens(tokens)
        return clean

    def _clean_tokens(self, tokens):
        clean_words = [w for w in tokens if w not in punctuation]
        stopwords_to_remove = stopwords.words('english')
        clean = [w for w in clean_words if w not in stopwords_to_remove and not w.isnumeric()]
        return clean

    def get_suggestions(self, keyword):
        print(f'Searching pytrends for {keyword}')
        result = []
        self._pytrends.build_payload([keyword], cat=0, timeframe='today 12-m')
        data = self._pytrends.related_queries()[keyword]['top']
        if data is None or data.values is None:
            return result
        result.extend([x[0] for x in data.values.tolist()][:2])
        return result

    def _get_file_contents(self, file_path):
        return open(file_path, "r", encoding='utf-8',errors='ignore').read()

    def _get_top_words(self, words, top):
        counts = dict()

        for word in words:
            if word in counts:
                counts[word] += 1
            else:
                counts[word] = 1

        return list({k: v for k, v in sorted(counts.items(), key=lambda item: item[1])}.keys())[:top]


if __name__ == "1__main__":
    from pytrends.request import TrendReq

    nltk.download('punkt')
    nltk.download('stopwords')
    pytrends = TrendReq(hl='en-GB', tz=360)
    tags = KeywordsGenerator(pytrends)\
              .generate_tags('text_file.txt')
    print(tags)

Then The Dependencies

This script requires:

nltk==3.7
pytrends==4.8.0

Analysis of the Script

I copy and paste my article into text file.txt, and the code returns the keywords as a comma-separated string.

To achieve this:

1. A class I made is called KeywordsGenerator.

2. This class has a function: generate_tags

3. The function generate_tags performs the following tasks:

• retrieves text file contents

• uses NLP to clean the text by tokenizing sentences into words, removing punctuation, and other elements.

• identifies the most frequent words that are relevant.

• The pytrends API is then used to retrieve related phrases that are trending for each word from Google.

• finally adds a comma to the end of the word list.

4. I then use the keywords and paste them into the SEO area of my website.

These terms are trending on Google and relevant to my topic. My site's rankings and traffic have improved since I added new keywords. This little script puts our knowledge to work. I shared the script in case anyone faces similar issues.

I hope it helps readers sell their work.

(The author's opinions should not be used to make investment decisions or as a recommendation to invest.)

The pandemic and social media pseudoscience have made us all epidemiologists, for better or worse. Flattening the curve, social distancing, lockdowns—remember? Some of you may remember R0 (R naught), the number of healthy humans the average COVID-infected person infects. Thankfully, the world has moved on from Greater China's nightmare. Politicians have refocused their talent for misdirection on getting their constituents invested in the war for Russian Reunification or Russian Aggression, depending on your side of the iron curtain.

Humanity battles two fronts. A war against an invisible virus (I know your Commander in Chief might have told you COVID is over, but viruses don't follow election cycles and their economic impacts linger long after the last rapid-test clinic has closed); and an undeclared World War between US/NATO and Eurasia/Russia/China. The fiscal and monetary authorities' current policies aim to mitigate these two conflicts' economic effects.

Since all politicians are short-sighted, they usually print money to solve most problems. Printing money is the easiest and fastest way to solve most problems because it can be done immediately without much discussion. The alternative—long-term restructuring of our global economy—would hurt stakeholders and require an honest discussion about our civilization's state. Both of those requirements are non-starters for our short-sighted political friends, so whether your government practices capitalism, communism, socialism, or fascism, they all turn to printing money-ism to solve all problems.

Free money stimulates demand, so people buy crap. Overbuying shit raises prices. Inflation. Every nation has food, energy, or goods inflation. The once-docile plebes demand action when the latter two subsets of inflation rise rapidly. They will be heard at the polls or in the streets. What would you do to feed your crying hungry child?

Global central banks During the pandemic, the Fed, PBOC, BOJ, ECB, and BOE printed money to aid their governments. They worried about inflation and promised to remove fiat liquidity and tighten monetary conditions.

Imagine Nate Diaz's round-house kick to the face. The financial markets probably felt that way when the US and a few others withdrew fiat wampum. Sovereign debt markets suffered a near-record bond market rout.

The undeclared WW3 is intensifying, with recent gas pipeline attacks. The global economy is already struggling, and credit withdrawal will worsen the situation. The next pandemic, the Yield Curve Control (YCC) virus, is spreading as major central banks backtrack on inflation promises. All central banks eventually fail.

Here's a scorecard.

In order to save its financial system, BOE recently reverted to Quantitative Easing (QE).

BOJ Continuing YCC to save their banking system and enable affordable government borrowing.

ECB printing money to buy weak EU member bonds, but will soon start Quantitative Tightening (QT).

PBOC Restarting the money printer to give banks liquidity to support the falling residential property market.

Fed raising rates and QT-shrinking balance sheet.

80% of the world's biggest central banks are printing money again. Only the Fed has remained steadfast in the face of a financial market bloodbath, determined to end the inflation for which it is at least partially responsible—the culmination of decades of bad economic policies and a world war.

YCC printing is the worst for fiat currency and society. Because it necessitates central banks fixing a multi-trillion-dollar bond market. YCC central banks promise to infinitely expand their balance sheets to keep a certain interest rate metric below an unnatural ceiling. The market always wins, crushing humanity with inflation.

BOJ's YCC policy is longest-standing. The BOE joined them, and my essay this week argues that the ECB will follow. The ECB joining YCC would make 60% of major central banks follow this terrible policy. Since the PBOC is part of the Chinese financial system, the number could be 80%. The Chinese will lend any amount to meet their economic activity goals.

The BOE committed to a 13-week, GBP 65bn bond price-fixing operation. However, BOEs YCC may return. If you lose to the market, you're stuck. Since the BOE has announced that it will buy your Gilt at inflated prices, why would you not sell them all? Market participants taking advantage of this policy will only push the bank further into the hole it dug itself, so I expect the BOE to re-up this program and count them as YCC.

In a few trading days, the BOE went from a bank determined to slay inflation by raising interest rates and QT to buying an unlimited amount of UK Gilts. I expect the ECB to be dragged kicking and screaming into a similar policy. Spoiler alert: big daddy Fed will eventually die from the YCC virus.

Threadneedle St, London EC2R 8AH, UK

Before we discuss the BOE's recent missteps, a chatroom member called the British royal family the Kardashians with Crowns, which made me laugh. I'm sad about royal attention. If the public was as interested in energy and economic policies as they are in how the late Queen treated Meghan, Duchess of Sussex, UK politicians might not have been able to get away with energy and economic fairy tales.

The BOE printed money to recover from COVID, as all good central banks do. For historical context, this chart shows the BOE's total assets as a percentage of GDP since its founding in the 18th century.

The UK has had a rough three centuries. Pandemics, empire wars, civil wars, world wars. Even so, the BOE's recent money printing was its most aggressive ever!

BOE Total Assets as % of GDP (white) vs. UK CPI

Now, inflation responded slowly to the bank's most aggressive monetary loosening. King Charles wishes the gold line above showed his popularity, but it shows his subjects' suffering.

The BOE recognized early that its money printing caused runaway inflation. In its August 2022 report, the bank predicted that inflation would reach 13% by year end before aggressively tapering in 2023 and 2024.

Aug 2022 BOE Monetary Policy Report

The BOE was the first major central bank to reduce its balance sheet and raise its policy rate to help.

The BOE first raised rates in December 2021. Back then, JayPow wasn't even considering raising rates.

UK policymakers, like most developed nations, believe in energy fairy tales. Namely, that the developed world, which grew in lockstep with hydrocarbon use, could switch to wind and solar by 2050. The UK's energy import bill has grown while coal, North Sea oil, and possibly stranded shale oil have been ignored.

WW3 is an economic war that is balkanizing energy markets, which will continue to inflate. A nation that imports energy and has printed the most money in its history cannot avoid inflation.

The chart above shows that energy inflation is a major cause of plebe pain.

The UK is hit by a double whammy: the BOE must remove credit to reduce demand, and energy prices must rise due to WW3 inflation. That's not economic growth.

Boris Johnson was knocked out by his country's poor economic performance, not his lockdown at 10 Downing St. Prime Minister Truss and her merry band of fools arrived with the tried-and-true government remedy: goodies for everyone.

She released a budget full of economic stimulants. She cut corporate and individual taxes for the rich. She plans to give poor people vouchers for higher energy bills. Woohoo! Margret Thatcher's new pants suit.

My buddy Jim Bianco said Truss budget's problem is that it works. It will boost activity at a time when inflation is over 10%. Truss' budget didn't include austerity measures like tax increases or spending cuts, which the bond market wanted. The bond market protested.

30-year Gilt yield chart. Yields spiked the most ever after Truss announced her budget, as shown. The Gilt market is the longest-running bond market in the world.

The Gilt market showed the pole who's boss with Cardi B.

Before this, the BOE was super-committed to fighting inflation. To their credit, they raised short-term rates and shrank their balance sheet. However, rapid yield rises threatened to destroy the entire highly leveraged UK financial system overnight, forcing them to change course.

Accounting gimmicks allowed by regulators for pension funds posed a systemic threat to the UK banking system. UK pension funds could use interest rate market levered derivatives to match liabilities. When rates rise, short rate derivatives require more margin. The pension funds spent all their money trying to pick stonks and whatever else their sell side banker could stuff them with, so the historic rate spike would have bankrupted them overnight. The FT describes BOE-supervised chicanery well.

To avoid a financial apocalypse, the BOE in one morning abandoned all their hard work and started buying unlimited long-dated Gilts to drive prices down.

Another reminder to never fight a central bank. The 30-year Gilt is shown above. After the BOE restarted the money printer on September 28, this bond rose 30%. Thirty-fucking-percent! Developed market sovereign bonds rarely move daily. You're invested in His Majesty's government obligations, not a Chinese property developer's offshore USD bond.

The political need to give people goodies to help them fight the terrible economy ran into a financial reality. The central bank protected the UK financial system from asset-price deflation because, like all modern economies, it is debt-based and highly levered. As bad as it is, inflation is not their top priority. The BOE example demonstrated that. To save the financial system, they abandoned almost a year of prudent monetary policy in a few hours. They also started the endgame.

Let's play Central Bankers Say the Darndest Things before we go to the continent (and sorry if you live on a continent other than Europe, but you're not culturally relevant).

Pre-meltdown BOE output:

FT, October 17, 2021 On Sunday, the Bank of England governor warned that it must act to curb inflationary pressure, ignoring financial market moves that have priced in the first interest rate increase before the end of the year.

On July 19, 2022, Gov. Andrew Bailey spoke. Our 2% inflation target is unwavering. We'll do our job.

August 4th 2022 MPC monetary policy announcement According to its mandate, the MPC will sustainably return inflation to 2% in the medium term.

Catherine Mann, MPC member, September 5, 2022 speech. Fast and forceful monetary tightening, possibly followed by a hold or reversal, is better than gradualism because it promotes inflation expectations' role in bringing inflation back to 2% over the medium term.

When their financial system nearly collapsed in one trading session, they said:

The Bank of England's Financial Policy Committee warned on 28 September that gilt market dysfunction threatened UK financial stability. It advised action and supported the Bank's urgent gilt market purchases for financial stability.

It works when the price goes up but not down. Is my crypto portfolio dysfunctional enough to get a BOE bailout?

Next, the EU and ECB. The ECB is also fighting inflation, but it will also succumb to the YCC virus for the same reasons as the BOE.

Frankfurt am Main, ECB Tower, Sonnemannstraße 20, 60314

Only France and Germany matter economically in the EU. Modern European history has focused on keeping Germany and Russia apart. German manufacturing and cheap Russian goods could change geopolitics.

France created the EU to keep Germany down, and the Germans only cooperated because of WWII guilt. France's interests are shared by the US, which lurks in the shadows to prevent a Germany-Russia alliance. A weak EU benefits US politics. Avoid unification of Eurasia. (I paraphrased daddy Felix because I thought quoting a large part of his most recent missive would get me spanked.)

As with everything, understanding Germany's energy policy is the best way to understand why the German economy is fundamentally fucked and why that spells doom for the EU. Germany, the EU's main economic engine, is being crippled by high energy prices, threatening a depression. This economic downturn threatens the union. The ECB may have to abandon plans to shrink its balance sheet and switch to YCC to save the EU's unholy political union.

France did the smart thing and went all in on nuclear energy, which is rare in geopolitics. 70% of electricity is nuclear-powered. Their manufacturing base can survive Russian gas cuts. Germany cannot.

My boy Zoltan made this great graphic showing how screwed Germany is as cheap Russian gas leaves the industrial economy.

$27 billion of Russian gas powers almost $2 trillion of German economic output, a 75x energy leverage. The German public was duped into believing the same energy fairy tales as their politicians, and they overwhelmingly allowed the Green party to dismantle any efforts to build a nuclear energy ecosystem over the past several decades. Germany, unlike France, must import expensive American and Qatari LNG via supertankers due to Nordstream I and II pipeline sabotage.

American gas exports to Europe are touted by the media. Gas is cheap because America isn't the Western world's swing producer. If gas prices rise domestically in America, the plebes would demand the end of imports to avoid paying more to heat their homes.

German goods would cost much more in this scenario. German producer prices rose 46% YoY in August. The German current account is rapidly approaching zero and will soon be negative.

German PPI Change YoY

German Current Account

The reason this matters is a curious construction called TARGET2. Let’s hear from the horse’s mouth what exactly this beat is:

TARGET2 is the real-time gross settlement (RTGS) system owned and operated by the Eurosystem. Central banks and commercial banks can submit payment orders in euro to TARGET2, where they are processed and settled in central bank money, i.e. money held in an account with a central bank.

Source: ECB

Let me explain this in plain English for those unfamiliar with economic dogma.

This chart shows intra-EU credits and debits. TARGET2. Germany, Europe's powerhouse, is owed money. IOU-buying Greeks buy G-wagons. The G-wagon pickup truck is badass.

If all EU countries had fiat currencies, the Deutsche Mark would be stronger than the Italian Lira, according to the chart above. If Europe had to buy goods from non-EU countries, the Euro would be much weaker. Credits and debits between smaller political units smooth out imbalances in other federal-provincial-state political systems. Financial and fiscal unions allow this. The EU is financial, so the centre cannot force the periphery to settle their imbalances.

Greece has never had to buy Fords or Kias instead of BMWs, but what if Germany had to shut down its auto manufacturing plants due to energy shortages?

Italians have done well buying ammonia from Germany rather than China, but what if BASF had to close its Ludwigshafen facility due to a lack of affordable natural gas?

I think you're seeing the issue.

Instead of Germany, EU countries would owe foreign producers like America, China, South Korea, Japan, etc. Since these countries aren't tied into an uneconomic union for politics, they'll demand hard fiat currency like USD instead of Euros, which have become toilet paper (or toilet plastic).

Keynesian economists have a simple solution for politicians who can't afford market prices. Government debt can maintain production. The debt covers the difference between what a business can afford and the international energy market price.

Germans are monetary policy conservative because of the Weimar Republic's hyperinflation. The Bundesbank is the only thing preventing ECB profligacy. Germany must print its way out without cheap energy. Like other nations, they will issue more bonds for fiscal transfers.

More Bunds mean lower prices. Without German monetary discipline, the Euro would have become a trash currency like any other emerging market that imports energy and food and has uncompetitive labor.

Bunds price all EU country bonds. The ECB's money printing is designed to keep the spread of weak EU member bonds vs. Bunds low. Everyone falls with Bunds.

Like the UK, German politicians seeking re-election will likely cause a Bunds selloff. Bond investors will understandably reject their promises of goodies for industry and individuals to offset the lack of cheap Russian gas. Long-dated Bunds will be smoked like UK Gilts. The ECB will face a wave of ultra-levered financial players who will go bankrupt if they mark to market their fixed income derivatives books at higher Bund yields.

Some treats People: Germany will spend 200B to help consumers and businesses cope with energy prices, including promoting renewable energy.

That, ladies and germs, is why the ECB will immediately abandon QT, move to a stop-gap QE program to normalize the Bund and every other EU bond market, and eventually graduate to YCC as the market vomits bonds of all stripes into Christine Lagarde's loving hands. She probably has soft hands.

The 30-year Bund market has noticed Germany's economic collapse. 2021 yields skyrocketed.

30-year Bund Yield

ECB Says the Darndest Things:

Because inflation is too high and likely to stay above our target for a long time, we took today's decision and expect to raise interest rates further.- Christine Lagarde, ECB Press Conference, Sept 8.

The Governing Council will adjust all of its instruments to stabilize inflation at 2% over the medium term. July 21 ECB Monetary Decision

Everyone struggles with high inflation. The Governing Council will ensure medium-term inflation returns to two percent. June 9th ECB Press Conference

I'm excited to read the after. Like the BOE, the ECB may abandon their plans to shrink their balance sheet and resume QE due to debt market dysfunction.

Eighty Percent

I like YCC like dark chocolate over 80%. ;).

Can 80% of the world's major central banks' QE and/or YCC overcome Sir Powell's toughness on fungible risky asset prices?

Gold and crypto are fungible global risky assets. Satoshis and gold bars are the same in New York, London, Frankfurt, Tokyo, and Shanghai.

As more Euros, Yen, Renminbi, and Pounds are printed, people will move their savings into Dollars or other stores of value. As the Fed raises rates and reduces its balance sheet, the USD will strengthen. Gold/EUR and BTC/JPY may also attract buyers.

Gold and crypto markets are much smaller than the trillions in fiat money that will be printed, so they will appreciate in non-USD currencies. These flows only matter in one instance because we trade the global or USD price. Arbitrage occurs when BTC/EUR rises faster than EUR/USD. Here is how it works:

1. An investor based in the USD notices that BTC is expensive in EUR terms.

2. Instead of buying BTC, this investor borrows USD and then sells it.

3. After that, they sell BTC and buy EUR.

4. Then they choose to sell EUR and buy USD.

5. The investor receives their profit after repaying the USD loan.

This triangular FX arbitrage will align the global/USD BTC price with the elevated EUR, JPY, CNY, and GBP prices.

Even if the Fed continues QT, which I doubt they can do past early 2023, small stores of value like gold and Bitcoin may rise as non-Fed central banks get serious about printing money.

“Arthur, this is just more copium,” you might retort.

Patience. This takes time. Economic and political forcing functions take time. The BOE example shows that bond markets will reject politicians' policies to appease voters. Decades of bad energy policy have no immediate fix. Money printing is the only politically viable option. Bond yields will rise as bond markets see more stimulative budgets, and the over-leveraged fiat debt-based financial system will collapse quickly, followed by a monetary bailout.

America has enough food, fuel, and people. China, Europe, Japan, and the UK suffer. America can be autonomous. Thus, the Fed can prioritize domestic political inflation concerns over supplying the world (and most of its allies) with dollars. A steady flow of dollars allows other nations to print their currencies and buy energy in USD. If the strongest player wins, everyone else loses.

I'm making a GDP-weighted index of these five central banks' money printing. When ready, I'll share its rate of change. This will show when the 80%'s money printing exceeds the Fed's tightening.