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Three Things I Think I Think – Some Weekend Reading

Summary:
Here are some things I think I am thinking about: 1) Weimar Inflation! I was back home last week to see my family in DC and boy was that nice. My daughter got to meet her 10 nieces and nephews and I got to drink beer with my 7 brothers, sisters and parents. It almost felt like life was normal again. While I was there I was rummaging through my grandfather’s old stamp collection and I had to laugh at this little note he left on one page with a 50 million mark note from Weimar Germany. He wrote: “…an historic example of the evils of inflation, and one our country should bear in mind!” It’s fun to think about considering I’ve spent most of my adult life trying to understand and predict inflation.  I wonder what my grandfather would say today? 2) MMT and Non-Existent Inflation Theories.  I

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Here are some things I think I am thinking about:

1) Weimar Inflation!

I was back home last week to see my family in DC and boy was that nice. My daughter got to meet her 10 nieces and nephews and I got to drink beer with my 7 brothers, sisters and parents. It almost felt like life was normal again.Three Things I Think I Think – Some Weekend Reading

While I was there I was rummaging through my grandfather’s old stamp collection and I had to laugh at this little note he left on one page with a 50 million mark note from Weimar Germany. He wrote:

“…an historic example of the evils of inflation, and one our country should bear in mind!”

It’s fun to think about considering I’ve spent most of my adult life trying to understand and predict inflation.  I wonder what my grandfather would say today?

2) MMT and Non-Existent Inflation Theories. 

I was on Twitter earlier this week discussing MMT and their theory of inflation. Someone was asking why MMT people get so much crap for their theory of inflation when the mainstream theory of inflation seems to have performed so poorly. I don’t actually think this is fair. MMT doesn’t even have a tested theory of inflation. They claim that we can run huge deficits and give everyone a living wage through their national Job Guarantee while also maintaining low inflation. This is a lovely thought. And it’s also a theory that has literally never been tested. They cannot prove the claims they make. Meanwhile, we might not like the result of all of the economic trends of the last 50 years, but no one can dispute the fact that Central Banks in the developed world have hit their 2% inflation targets. And that’s kind of the point in this whole debate – there are always trade offs. Yes, we’ve had low inflation, but the trade off was some level of sustained unemployment. Is that good or bad? I don’t know because I can’t tell you what the counterfactual would look like because a sustained full employment program has never really been tested.

One of the reasons why I’ve become so skeptical of MMT is because they sell an untested inflation narrative that, to be frank, doesn’t pass the basic common sense test. How are we going to give everyone a high paying job, reduce inequality, make the planet green, AND maintain low inflation? The answer is that we’re not. And the last 18 months are a decent little test tube for this experiment where we’ve run massive deficits and shelled out money to everyone in exchange for what? Higher inequality and higher inflation. Yes, we got the economy back to pretty much full strength and we avoided a potentially horrific recession. I was mostly in favor of the stimulus. But it wasn’t a free lunch by any means.

Of course, maybe the MMT policy approach is one that involves tradeoffs that we’re okay with. I don’t really know and I am definitely not closed minded to the potential. But it won’t be a free lunch and I think it’s fair to be skeptical of MMT people and the utopian economic outcomes they often sell to people.

3) CFA, MBA, BLA, BLAH, BLAH. 

There was a big debate this week about the CFA vs MBAs and whether one is more valuable than the other. Some people were even arguing that both are worthless. This is kind of an extension of the “don’t go to college” narrative. And there’s probably shreds of truth to all of the opinions. But I think this one is way simpler than most people make it out to be. Higher education degrees and designations are not “worth it” because you learn some world changing skill in the program. Looking back at my time in school I can tell you that 95% of what I know now was not learned in school. I learned it navigating the real world, doing independent research, talking to other experts and doing the work. Yes, these programs don’t teach you how to do the work. You’ve gotta want to do the work. But these programs weed out the people who likely aren’t willing to do the work. That’s all these programs are – signaling devices that tell prospective employers that this person has been competent and focused enough to obtain a degree while being an adult. This doesn’t mean you are going to achieve instant success. Hell, it doesn’t even necessarily mean that people without these degrees can’t do the work. But it sends a strong signal from a reputable source that you are someone who very likely will put in the work.

I always tells young college and high school students that these degrees and designations could be great. But you’ve gotta know your future potential path with the acknowledgement that you’re still going to have to put in the hard work AFTER you get that designation. After all, the designation is the beginning of the work, not the end of the work. And if it helps you get to a point where you can start that work then that’s great.¹

¹ – Just to be clear – I don’t have a CFA or a MBA. I am just a knucklehead who thought he’d achieve more without these degrees, but probably could have gotten ahead faster if I’d spent the time getting one of them. 

Cullen Roche
Former mail delivery boy turned multi-asset investment manager, author, Ironman & chicken farmer. Probably should have stayed with mail delivery....

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