Environmental Hedging: Week 22

So here we are in Week 22 of this blog and what an exciting week it has been. First and foremost the world of cryptocurrencies is absolute insanity and is reminiscent of investing in the roaring 20s’… Indeed I have been enjoying their Interstellar growth but have been pondering when Matthew McConaughey will make his appearance at the moon-tower, beer in hand. As a trader anytime I see parabolic trend lines a sense of healthy skepticism kicks in, wherein I speculate what can go wrong with the asset and trigger a technical break-down. In the case of cryptos, there is a lot that can go wrong indeed. But, as detailed in their price-action, there is a lot that is going right for them right now — futures-market approval, larger global adoption, and merchant deals being struck left and right. Now, I do not proclaim to be an expert on the subject matter, in fact, if I was to give credit where credit is due that tidbit goes to one of our students, the Green Beret, Josh Van Alstyne. That being said, thanks for being a convincing factor in my buying of cryptos in 2014 Mr. Van Alstyne! Cheers, buddy! I owe you a drink…or four.

But lets settle down, folks. Just because we have made some coin on this doesn’t make you an expert investor or detail a skill-set beyond open-mindedness and a high tolerance for volatility. Thus it is important to approach the crypto market with a level head and proper risk evaluation. I have been receiving dozens upon dozens of messages, emails, and phone calls pertaining to this and I offer very little in advice… This is unprecedented stuff, folks, and I am living in the same moment as you are… Just be aware cryptocurrencies are exhibiting a lot of the text-book qualities of an asset bubble: 1). irrationality and laymen hype; 2). highly speculative parabolic trend-lines; 3). they becoming crowded by “thanksgiving dinner” investors; 4). most investors are investing to sell at a higher price, not to actually use the currency as a currency; 5). deflationary products; 6). they have no rate of return — i.e. a house=rent, a bond=coupons, options=stock, cryptos=?; and the list goes on…

However, to poke the bear, cryptos do have a lot going for them, though: 1) they are decentralized from government and institutions (for now); 2). they carry “safe”-haven potential; 3). they are limited in supply, thus immune from inflation; 4). there is rapid global adoption; 5). they are a democratization of money and wealth distribution; 6). easy to use; and the list goes on as well. If there is any light I can shed on the matter for the here and now, which is advice I have given to family members, is: if you decide to invest in cryptos start small and with amounts of money that if the asset disappeared over night you wouldn’t even think twice about it. Also, become educated on the subject matter. Read up on it and do so before investing. That, and do not trade them, just buy and hold them. Cryptos are too volatile and fees are to high to be directionally played. Also, do not go for I.C.O.s and try to focus on BTC, ETH, LTC, and maybe Ripple and Neo. The rest are questionable. Now, in my personal opinion and to submit a worse-case synopsis: that cryptos are a bubble, then this bubble is just getting started, folks. That, or we are witnessing the beginnings of a paradigm shift, a moment that could very well change humanity forever. Only time can tell. Be smart and stay frosty.

Travel — I know I haven’t been do much in terms of videos, but I have been quite busy in the office (whatever that may be) writing the last bits of the Personal Gold System. The below video is of where I have been as of late or what I have been able to squeeze in since Europe. That being said, I am a very fortunate person and what has filled this short squeeze has been amazing to say the least. (Camping at the Great Salt Lake with Franco, Golf at Cypress Point, and Culebra in the Spanish Virgin Isles). In the upcoming weeks, however, I will be bringing you some very touching, profound things from Puerto Rico — things which go to the core of our humanity and things that are fundamentally apart of the Environmental Hedging Philosophy. But for now, here is another montage’ of me trading around the world, using E.H. to fund the adventure.

Environmental Hedging — Corporatism & Consumerism

So, over the course of two prior blogs: “Distribution of Wealth”, and “Self-Interest vs. Social-Equality” I basically pitted the thinkers Aristotle, Tocqueville, Rand, and Orwell against each other in an attempt to explain the political logic behind Top-Down Economics and what we are seeing in the G.O.P. Tax reform. I am doing this such that our readers understand where these approaches originate and therefore are able to better discern if such market models and tax reform approaches are actually in their interest, let alone the partisan structure which accompanies them. In other words, I am trying to get you to move past the talking-heads and into critical thought.

A third and final philosophical perspective I enjoy when attempting to understand the logic behind American Top-Down Economics originates with G.F.W. Hegel’s Philosophy of the Right. Hegel theorized that one of the final attainments in the economic ‘gradation’ of a nation would be the creation of corporations. For Hegel the ‘gradation’ of history was gradual unfolding of the Dialectic: which is the tension between freedom and reason and between individual-liberty and social-equality — which, for Hegel, culminated with the French Revolution in 1789–1799.

In this dialectic unfolding there would periods of individualism and periods of social-equality. Hegel was a very practical thinker, he saw that with full individual-liberty comes savagery and sometime we need to be reasonable, create law and order, and limit individual liberty in favor of rules and regulations which benefit the whole. In the simplest terms possible, government is nothing more than a balancing act, one designed to suppress the darkest desires of the individual in favor of collective virtues.

For example, one is not at liberty to murder another because he or she has the desire to do so. Since the collective has already deemed murder to be “wrong”, even if the individual has such desires, they will be unable to fulfill them because of the “customary practice of all.” But Hegel anticipated that there would never be a perfect harmony between self-interest and social-equality. He saw things by way of dialectic logic. If there was a Ying then certainly there had to be Yang — light to darkness, left to right and so on and so forth. What makes Hegel’s logic unique beyond the expression of duality and polarity is that the synthesis of expression is never fully achieved between the two. Things are the way that they are because it is “the way of the world” in his purview.

Thus tensions are maintain between the left and the right and at the end of the day a person will naturally seek their own ends. Yet what often seems to be our own is in fact “the skill and customary practice of all.” What we do for ourselves results in the satisfaction of others’ needs and the development of society as a whole. In playing a part in something larger, our individuality is also fully expressed. But as a person naturally seeks their own ends, taking and enjoying things with forceful abandon, grabbing “hold of life as much as ripe fruit is plucked,” without thinking of abstract notions of happiness, and even less about laws or custom. When we eventually learn that living for ourselves alone does not provide total satisfaction; this end is set aside for an awareness that the individual is “only a moment” in time.

Therefore Hegel shows us the meta-political world as is. He shows us that there will always be a left and a right, (the self vs. the Other) and that a life of individual-liberty “unconsciously performs a universal work.”. This push and pull, this Aristotelean ebb and flow, will always be the case — it is what makes democracy, democratic. Then again Hegel also postulated that one can limit the liberties of the individual in such a way that a “Master-Slave relationship” reared it’s ugly head. Therefore it is equally important that individual liberty has legislative mechanisms in place to preserve the pursuit of personal happiness, as was the case for Ayn Rand.

Thus society, for Hegel, was a balancing act between the will of the few and the interest(s) of the many. And the best mean to achieve balance, in his political perspective, was through corporatization. As a collection of self-interests, a corporation can more broadly define a “base interest” than any single person or propitiator could. In Hegel’s definition a corporation is more like an “public institution” like the E.P.A., or the F.D.A. for example. Another aspect to Hegel’s idea of corporate creation is what we would call the right of free-association and unionization in modern terminology — wherein the rights of the laborer are protected and the individual is kept from predatory work environments via ‘unionization’.

Corporations contrived as “unions” could achieve a similar check and balance to government that individual-liberty can, but from an economic perspective. Hegel saw this as a primary strength of corporatization: It was at the end of the day, the generalization of many individual interests into one common goal. Being that corporations are “in and of themselves” self-serving entities — a union of common-interests — Hegel thought corporate interest would be that of the collective, since the collective itself would be the laborers and consumers of the corporate entity. Otherwise, they would not have willing consumers, nor would they have willing employees for that matter.

I suppose what Hegel could not anticipate would be the eventual nature of corporate leadership in the 20th and 21st centuries. That, and in the society of Hegelian Idealism there was an aspect of philosophical, and ethical guidance to consider. He constructed his perfect world as having a philosopher-king presiding over the whole — who’s job it was to make sure leadership was in favor of social-equality, but also allowed the virtues of self-interest to take hold in the correct way(s).What Hegel did was craft a world in which both individual liberty and collective-will have their place and unique application. In reality Hegel probably contributed more to American economic and political structure than any other modern thinker has. In fact Marx, an immense admirer of Hegel, stated that history nearly ended with Hegel’s Philosophy of History; thus forever crafting a world dialectically punctuated by two-party political systems tittering on the verge of corporatization. Of which, Marx attempted to change with his philosophy and commentary on Hegel.

In Hegelian Idealism, however, if and when things go wrong it is because Earth became a mere “playground for the pleasurable fulfillment of desires”. It is in this way that corporatism was commandeered by consumerism. On a basic level this shift in corporate approach was influenced by profiteering and psychological trickery and in the early 20th century corporations began to run amok: dismantling their unions, legally restructuring into single-person entities, and ever more focused on the bottom line. However, most corporations at the time were limited by the demands of the consumer. Let’s face the facts, not all consumers require goods and services in unlimited amounts every day nor does the average consumer desire such abundance.

But if corporations were going to achieve this maximum-output they needed to create that demand, in some way shape or form. Thus there is an element of manufacturing demand to consider: One of the fundamental realities big business faces is that of the preverbal “bottom-line”. In order to appease shareholders and the board of directors there needs to be profits… and being profitable doesn’t always mean being necessary. As such the manufacturing of desire became a base technique in consumer markets in and around the early 1950s. You see, not everyone is interested in the newest fashion or a new “fidget-spinner” everyday, nor does that mean either or is a necessity for life in the first place. A consumer economy, however, requires such excess and that “junk” is readily available.

In such markets corporations need a loyal, long-lasting consumer basis, a “society of consumers” if you will. In order to do this producers need to manufacture lifestyle themes, ones which nudge people to consume what they produce. This can come in the form of goods and services, but can also come in the form of fads, music, and culture associated with goods and services — even politics has it’s place. A excellent analogy used by Noam Chomsky in his documentary Requiem for the American Dream are Ford truck commercials. For Chomsky, in a ‘true free-market consumers make rational decisions based upon detailed information’. In such frameworks a Ford truck commercial would ‘contain a list of things the truck can do and cannot do with an attached price point’.

In consumer markets, however, the commercial details the journey of a group of cowboys driving up a giant mountain, whereafter they start a bonfire and consume alcohol around it, invoking lifestyle sentiments of friendship, adventure, and achievement — themes which the average person desires in today’s society. It is a theme that is being sold here, not the quality of a product. If quality was being marketed then it’s possible that your need for a truck, not desire, may very well land you a Chevy, not a Ford. Or, maybe, a Toyota S.U.V.. Who knows? Even the American political process campaigns in such a manner, which is a large contributing factor to it’s corrosiveness.

What is apparent, however, is that these themes are designed to encourage the average person to consume and economists and politicians alike take advantage of human nature in that respect; and do so in order to appropriate the necessary demand to justify a supply that may or may not be useful or necessary for life whatsoever. For example consider consumerism in terms of essential resources. It is fairly easy to say fresh water is more necessary to the continuity of life than, let’s say, CocaCola is. Although CocaCola mostly contains water, it also contains things like high fructose corn syrup, caramel coloring, phosphoric acid, and caffeine — all of which are substances the CocaCola corporation have a stake in. It is entirely possible that without CocaCola these substances may not have a scaleable use in the economy. But if CocaCola can create the desire for these materials then they have something that goes far beyond a series of useless substances, they now have a necessary product. And because it is a necessary product, containing various components, these substances, which are not necessary to life itself, are, as materials, necessary to the corporate life-blood of Coca-Cola. Which is where a lion’s share of corporate profits reside and is also where metrics like G.D.P are derived.

Thorsten Veblen’s work, The Theory of Leisure Class, is one of the premier works on this economic technique. He asserted that through “conspicuous consumption” society could be structured to have a single end goal — consumption in and of itself. You see, in democratic societies you cannot control the masses through force. However you can control a democratic society by controlling attitude and individual identity; and if you can fabricate an identity that is associated with goods and services and, in particular, the desire of “things” that are just outside of an individual’s financial grasp, you can trap that individual into becoming a “consumer” for life.

Now, if society’s end goal is merely to consume, conspicuously, then that population is, by it’s very nature, a society that is conditioned to be reflections of that environment, like advanced animals, rather than aware, self-deciding human beings. All in all for Veblen the marketing of conspicuous consumption implied the usage and continuing development of useless goods and services that eventually become consumer staples and necessities for life itself. Top-Down Economics is derived from this shift in corporate and economic approach; whereas beforehand economics was demand oriented, and not everything was in demand. But through the power of marketing and the exalting of decadent lifestyles, what was once useless quickly became necessary according to Veblen.

It is commonplace in this day and age for corporations to take environmental short-cuts, to “nudge” products onto consumers — as Richard Thaler would put it — so to achieve maximum-output and corporate revenues. In the ideal world of informed consumerism, however, companies which exhibit such poor practices would not have consumers, as was the case for Hegel. In his philosophy there was a special emphasis on guidance and leadership, as mentioned before. But let’s say, for the sake of argument, that leaders of this political system, or maybe the philosopher king or queen him or herself, were in the pockets of these corporations. That, and the only sense of guidance present in this example is the guidance of profit and profit alone.

The Progressivist Walter Lippmann, an early 20th century intellectual, said it best in: Society In It’s Place. He stated: “The public must be put in it’s place, so that it may exercise its own powers, but no less and perhaps even more, so that each of us may live free of the trampling and roar of the bewildered heard.” Lippmann’s point was that control of society should be left to “responsible men” and to “sympathetic property owners” and that the average person should merely be spectators of the higher economy and it’s political systems. Thus the average person’s role in society is merely to consume and be grateful they are able to do so. And this is precisely why bills with over 70% public disapproval ratings are able to be passed in modern America.

Today, American society can be best described as the ultimate “playground for the pleasurable fulfillment of desires” and is becoming, largely, undemocratic in affect. And we willingly accept this world and do so at the behest of the impoverished, the elderly, and the sick from around the world. My prior blogs ’Self-Interest vs. Social-Equality’, and ‘The Distribution of Wealth’ go hand in hand with this particular blog. Indeed they are lengthy and challenging to our value systems, but I took the time to write them in order to widen your perspective and provoke some critical thinking in critical times. That and this isn’t necessarily my opinion, nor are any of the prior blogs. These are ideas cleaved from the greatest thinkers in human history as well as cleaved from a book I helped work on in grad-school: World Poverty and Human Rights by Thomas Pogge.


Bob Shannon.



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