A Brief Hiatus
My book project is moving right along.
Several subscribers have asked where the heck I’ve been lately. My last Stack went out on March 5, and there’s so much to write about, so why the big void?
The answer is yes; there is so much to write about that I’m working hard on a book titled (no surprise) A Black Hole in Economics: Money Creation And Its Consequences.
The project is moving along well, and I expect to have a good manuscript ready for Kindle publication in July. The plan is to get your feedback on the Kindle version, which can be easily updated, and then get a paperback published by the end of the year.
So, thanks for your patience and understanding. Once this project is done, my Stacks and podcasts will resume more frequently.
As a preview, here is a draft of the Preface to A Black Hole in Economics:
Preface
Pour yourself a favorite beverage and let the adventure unfold as we explore the secrets of money creation—why money creation is so misunderstood, how governments exploit this lack of knowledge to siphon wealth, and what you must do to prosper in an era of financial repression.
This book is for anyone who wants to understand money creation in the modern economy. In the following pages, I’ll explain how money is created, who creates it, and its consequences, both good and bad.
Whether you're an investor navigating volatile markets, a student searching for understanding, or a conscientious voter who wants to stay well-informed, this book is for you. Get ready to have your assumptions challenged as we dive headfirst into what I call the “black hole” of economic knowledge. After reading this book, you’ll emerge with insights that will transform your perspective on money, banks, and their impact on your life.
Chapter One, Money Creation - Who Cares? starts the journey by unraveling why modern money creation is poorly understood and why it's crucial to grasp its basic mechanics.
In Chapter Two, Money Creation, Then and Now, we delve into the core principles of how banks have always wielded the miraculous power to create credit, shaping it into the medium of exchange we know as money. You’ll be surprised at the unexpected similarities and critical differences between money creation under the gold standard and our contemporary “fiat-reserve" standard.
Chapter Three, Money from Nothing, applies the lessons of Chapter Two to understand the essential details of modern money creation. To reinforce our new knowledge, we zoom in on concrete examples of money creation and money destruction, including a surprising revelation of where paper money comes from and why our money creation system should be called “pure credit creation.”
In Chapter Four, Good Money Creation: The Capitalist Money Factory, we take a brief historical tour of banking in the United States to demonstrate that it was designed to promote non-inflationary money creation. We show why responsible money creation in a free market economy is essential for growth and innovation. But money creation in the wrong hands can cause great economic ruin.
In Chapter Five, Bad Money Creation: The Statist Wrecking Ball, we expose the destructive power of politicians and bureaucrats who subvert the investment decisions of privately owned banks. We’ll dive deep into two famous financial crises to reveal how unproductive money creation, driven by government interference in the commercial banks, causes economic destruction through price inflation, asset bubbles, wasted capital, and unjust economic inequality.
In Chapter Six, Uncle Sam's Unpayable Debt, we’ll focus on the most destructive consequence of the U.S. government’s policy of irresponsible money creation. We’ll see how irresponsible money creation encourages unsustainable government spending, leading to a mountain of sovereign debt that can never be paid with dollars of today’s purchasing power.
Chapter Seven, The Disease and The Cure, lays bare the challenges and choices posed by the United States’ unpayable financial obligations. Prepare for a counter-intuitive insight: The same politicians who have misused our money creation system, burdening us with unpayable debt, will likely resort to creating even more money to alleviate that burden. Their policies will result in “financial repression,” a peculiar combination of high inflation with low “real” interest rates, that makes saving for the future challenging but not impossible.
In Chapter Eight, Surviving Financial Repression, we roll our sleeves and provide hard-headed advice on safeguarding and growing wealth in the new investment environment. In a world where interest rates will not keep up with inflation, what has worked for the last twenty years is unlikely to work for the next twenty.
While I refrain from making detailed investment recommendations, fear not! Chapter Eight recommends numerous talented investment advisors who can guide you on your specific investment program. These are the same experts I trust to help manage my family office. With the insights from this book and carefully chosen advisors, you'll be equipped to design your saving and investment program, ensuring you're well-prepared to navigate the treacherous waters of financial repression. (I receive no compensation from these or any other investment services. As far as I know, they are blissfully unaware of my recommendations.)
For serious students and enthusiasts wanting a deeper dive, I've included a reading list of books, scholarly articles, speeches, and essays that helped sharpen my thinking for this book.
For the real strivers, there are also three Appendices to address a few background issues.
Appendix 1, Defining Money, explains why I endorse Ludwig Von Mises's simple yet profound definition of money as "a commonly accepted medium of exchange." We'll also venture into the US Federal Reserve's definition of "broad money supply" and delve briefly into the controversies surrounding what the Fed classifies as "money.”
In Appendix 2, The Legal Basis of Bank Money Creation, we’ll introduce the Constitutional and legislative foundations of money creation in commercial banks.
Lastly, Appendix 3, A Fractured Fairy Tale, critiques and rejects Paul Samuelson’s faulty exposition of “fractional reserve banking.” Based on a 2014 ground-breaking empirical experiment by Professor Richard Werner of Oxford University, the “credit creation theory” of banking is shown to be the only one consistent with the actual practice of banking.
Biography
Jim Brown holds a Bachelor of Science degree from the U.S. Air Force Academy, an MBA from Harvard Business School, and is a Chartered Financial Analyst. His career progression includes being an Air Force pilot, airline pilot, financial analyst, investment group director, and CEO. He has 40 years of experience as a securities analyst and portfolio manager. Formerly, he was the President and CEO of the Ayn Rand Institute and served on its board of directors for six years, retiring in 2023. He currently serves on the Board of Directors for Monetary Metals & Co and the Board of Advisors for the Brandes Institute. Jim and his wife, Kathy, run their family office from their Jackson Hole, Wyoming home.
Jim writes on Substack as HardmoneyJim. Twitter: @hardmoneyjim. Linkedin: Jim Brown, CFA
“Like” this piece and comment for a free preview of A Black Hole In Economics!
Exciting! I'm looking forward to its publication.
Jim,
One aspect from your previous video work that causes a degree of apprehension for me could be a subtopic. I know from the videos that your hypothesis is financial repression comes over a period of decades with more frequent bursts of "emergencies" that are a result of the government's compounded ineffectiveness over the previous decades coupled with reluctance to cut spending or raise taxes moving forward. The death of SVB was one of these emergencies.
But I wonder what if you are wrong on the timing aspect? How confident are you in the timing? Why? And what if you are wrong? What if there is a collapse that is more sudden, as opposed to a periodic emergency dealt with? What are the implications then, and the safeguards one can take now? For example, I heard Dalio say in January that he thinks there is a greater than 50% probability of civil war in the USA in the next 10 years. That's an alarming statement! How does money creation, debt and financial repression play out then? Of course, that's an extreme case. But are there lessor situations that can create trouble with greater rapidity? What if with more suddenness major world powers like China, Russia and India opt out of dollars? Of course, that is already happening. But can it happen with acceleration?
And related... it seems like in times of financial repression, an obvious left wing strategy will be to attack the "rich" with an initial definition that is narrow and then an ever widening definition that will include me. I think about Spain already having a wealth tax of 1.2% on global wealth over $900,000. I think of taxing unrealized gains, as Biden recently proposed on the "rich." And I think a lot about what the countermoves might be, including offshoring wealth.
I'm not hoping for a reply to this post because answering these questions could be a book in itself. I just wanted to share things in my mind from your previous materials because others may have similar questions.
Nassim Taleb commented in one of his books that he had no deep interest in mathematics until he figured out he could use probability to make a lot of money for himself. At that point, Taleb dove deeply into the topic. I think similarly many readers may have only a middling interest in money creation, EXCEPT to the extent it impacts their ability to create wealth or keep it. And of course, as you've already established in your video materials, the exception here is very true. It's massively true. It seems to me that framing certain topics/headers from this perspective may be a helpful mechanism of gaining readers. And of course I believe strongly that the more people you educate on these topics, the better. Cheers!