This is one of the best books I’ve read in a long time, and certainly the best on economics. I thought Morgan Housel’s book was good, but this one went so much deeper and more in depth about the real problems facing our world. And I agree with about 95 percent of what she says, and whatever I don’t can be chalked up to a rounding error or understandable generational gaps in perspective. She’s Gen Z after all, and I’m a crusty Millenial!
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Leading off part 2 about how money works, there’s a quote from Sid Verma, the global editor at Bloomberg Markets. “Money has always been a meme from Day 1. What seems wacky and modern is a return to the traditions of the ancients.” As in, proper bartering.
Fiat currency is absurd when you stop and think too much about it. And I love how Kyla describes the US dollar today: “The US dollar is backed by ‘the full faith and credit of the US government,’ which essentially equates to the value of all the drones, tankers, and military bases that are waiting to pulverize anyone who dares question its status.” LOL.
Anyway, in a global economy the gold standard is too inflexible, like Kyla says. Money is now an abstraction.
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Chapter 4 Mechanics of Modern Money was a really long chapter, but one that’s very important. Honestly, I’m pretty sure barely anyone realizes banks only hold about 10 percent of your money at any given time. And they are what create money, so people stuffing it in their mattresses is a bad economic practice.
On how banks hedge risk: “Hedging is similar to planning a beautiful party in the park, complete with non-weatherproof snacks and drinks and having a backup plan in case it rains.” Aww!
Anyway, millionaires and billionaires don’t sit on piles of money. It’s a balance sheet game! And the greatest hedge worldwide? George Washington, the US dollar. It’s all about the Benjamins baby, for real.
The notion that the wine industry is as much a symbol as the dollar is a telling one. Samuel Hammond who’s a senior economist at the Foundation for American innovations said. “If a bottle of aged grape piss can sell for thousands of dollars, what other trillion dollar industries and worldviews are constructed on a foundation of mass preference falsification and status driven self-deception? Almost all of them?” Still the dollar is the best we’ve got at the moment.
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Part 3 of “In This Economy” is How Money is Measure. My boy Bertrand Russell is quoted at the beginning of Ch.5 Supply and Demand. “Mankind must acquire two things which are at present increasingly disappearing: loving kindness and scientific impartiality.”
While I’m fluent in the concepts of supply and demand, I like Kyla’s examples, particularly “eggflation.” She writes, “The eggflation story is emblematic of what could happen to the rest of the economy. We are dependent on fragile systems that can break when stressed.”
Kyla makes the point that policy needs to fix the infrastructure, and yet we keep lagging behind with that. Plus, each emerging technology we get continues to be used increasingly less effectively. (I might add the more ‘efficient’ we claim to be, the more inefficient we actually are in implementation and accessibility of new tech.)
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From GDP and the Economy. I want to visit the country of the Gingerbread Yeti she uses as an example! Our real problem is productivity stagnation, something that isn’t talked about nearly enough!
Concerning GDP and how much it sucks as an economic measurement: “When we use metrics that kind of suck and those metrics say that things suck, we get a double dose of suck. This margin of suck is essential: If the metric can’t even measure how much things suck but then loudly underscores that yes indeed, things suck, it is a very bad combination for consumer sentiment!”
So how do we replace or adjust the concept of GDP? The idea of “degrowth” is fascinating to me, but I think it’s counterproductive [not sure I ever explain my reasoning later.] “Postgrowth” makes better sense.
I need to type up this Matt Haig quote on pg 67: (I’m doing this for longer quotes to save time)
“If everyone is spending hour after hour on their phones, scrolling through text and timelines, that becomes normal behavior… If everyone is maxing out their credit cards to pay for things they don’t really need, then it can’t be a problem. I f the whole planet is having a kind of collective breakdown, then unhealthy behavior fits right in. When normality becomes madness, the only way to find sanity is by daring to be different. Or daring to be the you that exists beyond all the physical clutter and mind debris of modern existence.”
And in response to this, Kyla asks a big question with a seemingly obvious answer “In a world that sees us merely as vectors for economic growth, how can we truly be ourselves?” We can’t.
And looking forward to the future she quotes Terry Pratchett, pg 78.
“Tomorrow the sun will come up again, and I’m pretty sure that whatever happens we won’t have found Freedom, and there won’t be a whole lot of Justice, and I’m damn sure we won’t have found Truth. But it’s just possible that I might get a hard-boiled egg.” – Night Watch
Also, hard-boiled eggs are delicious.
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Chapter 7 is short and it’s about commodities. This George Bernard Shaw quote I’m familiar with but bears repeating: “The reasonable man adopts himself to the world; the unreasonable one persists in trying to adopt the world to himself. Therefore all progress depends on the unreasonable man.” Yup.
I’ve never herald of Spodumene, a lithium-containing ore that is economical and safe to store. The more you know.
Also, AI is great and all, but we still need to take care of our own needs and the world’s needs, too! And reality doesn’t give two shits about geopolitics or arbitrary borders on maps. Globalization isn’t the problem, entirely arbitrary inequality is!
Kyla also mentions a lot about US shale oil production… It’s actually shit for the environment, too; it’s not just investors losing money by the hundreds of billions…
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Chapter 8 is about inflation. My boy John Stuart Mill is quoted here: “Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.”
Yes, this was written in the mid 19th century. It’s much worse now.
It’s very interesting what exactly different countries use to measure inflation. Every “market basket” is different from country to country. I’ve definitely seen some crazy increases just at the supermarket in the past year. I really like Kyla’s example of the “inflation pizza” as a way of showing how many products go into things we might otherwise take for granted, and how all these inputs are all exposed to different levels of inflation.
Kyla also brings up evidence that the real reason prices continue to move up at such a rate in postpandemic years is that people simply aren’t saving as much as they used to and are more likely to borrow (credit cards and buy-now-pay-later) than ever. The demand is there so the price is simply rising accordingly with underlying costs. Yes, there is greed in some sectors, but overall, it’s just consumers consuming more than is sustainable in the long-term when wages aren’t anywhere near keeping pace.
I was talking to Emily about what I’ve been thinking about with this book and came to the conclusion that if people just went back to being mindful of their consumption, we wouldn’t have so many problems. Most people on public assistance are good people; they got left behind by shitty government policies meant to keep the poor getting poorer and the rich getting much richer.
Like Kyla, I agree globalization should be a good thing as it benefits so many people. The problem is the colonialist mindset of America and European countries who think they should run the whole game, and thanks to the strength of the Dollar and Euro, they do. Even China is propped up on the dollar! And while I agree with Kyla that we should have one global currency freely exchanged everywhere, global geopolitics are a mess.
As for hyper inflation VS deflation, I believe the latter is the more likely scenario within the next decade. As there’s going to be record unemployment in the coming years, where’s the consumer demand going to come from? People can’t keep borrowing at this rate. Eventually, the credit bubble WILL burst. It’s coming sooner or later.
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Chapter 12 is about the bond market. In no other market do “Expectations manifest reality” than bonds. It’s why Emily and I hold onto so much of them. They are the backbone of everything. If stocks go, bonds are just chillin’.
About the finance industry: “The industry is based on making money off people disagreeing on what will happen and why.” And now we also have sports gambling for that!
The greatest irony is that in a near-zero interest environment that we had for two decades before the pandemic, investment in actual capital went down. Kyla writes, “Society at large has gotten a bit lazy. We have sacrificed tomorrow for today and the markets are a prime example of that.”
Corporate America has definitely defaulted to what Kyla refers to as “accounting embellishment” to make their numbers look better than they are.
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In Chapter 13 about Crypto, I love how Kyla called FTX’s ridiculous excuse for a balance sheet, “a crayola crayon copy of some of dimension of reality. It was comprised of tiers liquidity: liquid, less liquid, and illiquid.” No balance at all. I still hold out hope that blockchain tech will evolve into something actually useful. I was enamored by NFTs in 2019, but I saw how sketchy things were getting and bailed before I ever bought into them. I was right about the potential but wrong in the timing. Now Pokemon and sports cards are essentially the next NFT’s anyway… at least PSA graded ones…
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Chapter 14 is about recessions. I like learning about the actual data used in the determining recessions, albeit after the fact. This sentence made me think: “The lens through which we view our world quantitatively is archaic.” Not just on macroeconomics scales, either, I think..
And, “The term recession is largely semantic.” Isn’t everything we use as a label to try and reduce things to something tangible?
This is very interesting as a person of words: “There is currently a battle between words and concepts.” The semantic difference between ‘welfare’ and ‘spending on the poor’ is huge! But they are literally the same concept.
These three short paragraphs sum up a lot of what’s going on with our world right now. “No one really knows what’s going on. / The only certainty is uncertainty, the only conviction is lack thereof, and the only path forward is blindfolded / We may simply be consuming for too much information for our brains to process. We are not built ot be bombarded by all of the news, all of the time. But we are, and the resulting overwhelm becomes the narrative.” Fun times.
I gotta type up this Toni Morrison quote on pg. 174:
“Fascism talks ideology, but it si really just marketing — marketing for power. It is recognizable by its need to purge, by the strategies it uses to purge, and by its terror of truly democratic agendas. It is recognizable by its determination to convert all public services to private entrepreneurship, all nonprofit organizations to profit-making ones — so that the narrow but protective chasm between governance and business disappears. It changes citizens into taxpayers — so individuals become angry at even the notion o the public good. It changes neighbors into consumers — so the measure of our value as humans is not our humanity or our compassion or our generosity but what we own. It changes parenting into panicking — so that we vote against the interests of our own children’ against their health care, their education, their safety from weapons. And in effecting these changes it produces the perfect capitalist, one who is willing to kill a human being for a product (a pair of sneakers, a jacket, a car) or kill generations for control of products (oil, drugs, fruit, gold.)” Toni Morrison, The Source of Self Regard
I’m not familiar with the film Before Sunrise but this quote on pg. 175 needs to be noted.
“I believe if there’s any kind of God it wouldn’t be in any of us, not you or me but just this little space in between. If there’s any kind of magic in this world it must be in the attempt of understanding someone, sharing something. I know, it’s almost impossible to succeed, but who cares really? The answer must be in the attempt.”
Kyla adds, “The answer must be in the attempt. We get so caught up in what happens at the end that we forget to simply exist. And maybe availability and optionality could both be solved if we were just more present in the moment. More reflective. More there for one another. Of course the thing we have to remember is that people are the economy…” I haven’t forgotten.
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Chapter 17 is about the federal reserve. “Ah, the Fed and their crystal ball,” Kyla quips at the beginning of the chapter. That made me chuckle.
Anyway she calls the Fed “pseudo governmental” as they set monetary policy whereas the government sets fiscal policy. This is an extremely important distinction.
Oh this is something I didn’t know. Apparently Woodrow Wilson had a stroke and his wife Edith was essentially acting president for a bit, at the same time that JP Morgan was pushing for the creation of the Federal Reserve. Well, it turned out to be a good idea.
I didn’t take many notes because the gist is this… as has been brought up before in this book: “Expectations manifest reality.” And in reality, like Kyla says, we are all the Federal Reserve. Economy is all about vibes, man!
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Chapter 18 is titled “Old Guy and New Theories. “The amount of energy needed to refute bullshit is an order of magnitude bigger than to produce it.” – Alberto Brandoloni. Thus why we are overcome with BS from all directions with generative AI pumping it out and not knowing any better!
Basically, many economic theories are oversimplified or should work in theory but don’t in practice. And while Marxism is extreme, he always made a lot of good points that shouldn’t be ignored, like this:
“The less you eat, drink, and read books; the less you go to the theatre, the dance hall, the public house; the less you think, love, theorize, sing, paint, fence, etc., the more save – the greater becomes your treasure which neither moths nor dust will devour – your capital. The less you are, the more you have; the less you express your own life, the greater is your alienated life – the greater is the store of your estranged being.”
Most of us give up far too much for what we want, and if workers could enjoy at least some share of the means of production (and there are legit easy ways to do this like stock programs and employee ownership perks) this would allow people to not have to work their lives away to subsist, never mind get ahead!
Great George Saunders quote, “Find out what makes you kinder, what opens you up and brings out the most loving, generous, and unafraid version of you – and go after those things as if nothing else matters. Because, actually, nothing else does.” (From Congratulations, by the Way: Some Thoughts on Kindness.)
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Chapter 19 “Problems” gets personal for Kyla. This is an amazing sentence: “We are pixels away from disaster, yet a vision for a safer world remains elusive.”
Mental health is also a real crisis, which spills over into physical health, too. I suffered from “presenteeism” myself; I was there physically, but most days, not mentally, only there to collect a relatively meager paycheck.
Kyla talking about the rise of social media after the ‘08 financial crisis: “For the first time ever, everything was broadcasted to the world, and feelings became assets that could be traded for likes and retweets.” Yeah, and stupid me, I thought for a few years this was a good thing!
This Susan Sontag quote is more relevant now then ever! “Thinking about images of suffering is not the same as doing anything about suffering. To treat the images of suffering as equivalent to the suffering itself is to participate in a cult of nostalgia.” And I’ve been too closely involved with nostalgia these past few years, even if I’m only on the property of any cult mentality.
About the media literary crisis in the US: “The limitations of the words we choose end up shaping the narratives we tell ourselves.” Thus, why building and strengthening vocab skills is now my top priority!
Krista Tippett, host of the On Being podcast has said, “We are analog creatures in a digital world.” We aren’t equipped for it and sadly I must healthily agree. Kyla adds that: “The same pundits that imply their wisdom can save the world from ending, hypothetically, are also the people sowing seeds of district in the discourse… often proclaiming that things are Much Worse Than They Actually Are. The marginal cost of plausible bullshit is effectively zero.” I’ve harbored similar thoughts before, but bad vibes alone can manifest disasters, which is what’s happened in the year since this was published.
This book is giving me language, phrasing particularly, to help me better understand my own often vague concerns about how the media’s love of rage bait (Oxford’s word of the year) is going to torpedo humanity.
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In Chapter 20 “Solutions,” Kyla mentions a 2022 Derek Thompson article in the Atlantic highlighting what he called an “abundance mindset.” We need to fight the “the zero-sum mindset when it comes to new policy,” Kyla writes. Healthcare is number one, and I agree with her proposed solutions… but will any of them happen before the mental and physical health crisis tanks the economy? The ‘fee-for-service’ model has to go, I think.
And I agree with Kyla that immigrants won’t take our jobs. That’s racist, xenophobic nonsense. I totally agreed paid paternity leave needs to happen, at least six months maternal leave and I think similar paternal leave, too. After all, children are literally the future! Here’s a point not made often enough: “A lot of wealth generated through home ownership is luck.” Look at Emily and I! Luck central! Most people get their wealth purely from their home’s appreciation, and if that doesn’t happen, they get stuck!
That was a truly good book. I’ll have quite the write-up with my notes. Kyla and I are on the same page with so much to the point I may actually write her a letter at some point. I wouldn’t say that this book “changed my life” but it solidified a lot of concerns I had and crystallized them into something tangible and expressible.