Thursday Night Links

• After justifying the legitimacy of interest, Chancellor proceeds to demonstrate the effects of different interest rates throughout economic history. In general, lower interest rates indicate a more advanced, stable economy. However, once interest rates go below about 3%, investors get antsy about their income. No one wants to bleed down their principal, and no one, and certainly not most rich people who derive social status from their wealth, wants to endure even a temporary lifestyle downgrade from less income. One is reminded of Machiavelli’s dictum that a man will hate you less for killing his father than the humiliation of losing his fortune. So when interest rates go below 3% and especially as they approach 2%, investors become desperate for higher yields. This creates an environment where speculative bubbles become attractive, which become self-reinforcing as they grow. These bubbles conveniently always come packaged with a plausible narrative that explains why the speculative asset is not a bubble but rather a world-changing economic innovation. Sometimes these narratives happened to be true, such as the economic revolutions associated with railroads and automobiles, but bubbles arose when way more capital entered an “obvious” opportunity than could possibly make a decent return on investment, while sometimes they are mostly cons like John Law’s Mississippi scheme, Holland’s tulip bubble, or cryptocurrency. Those who remain in safe assets get to feel dumb and poor while everyone else makes a mint, for a time. When your buddy doubled his money last year in crypto, it's easy to feel like a loser sitting on bonds yielding 2%.  [The Tom File]
  
• Most people think of the Fed as having two mandates: price stability and employment. But it actually has a third mandate that nobody ever talks about: Making sure the Treasury market stays functional to make sure the US government gets funded. Which one of these three is the most important? If push comes to shove, they won’t be able to make a choice. The Fed will have to keep the government funded. Looking at the numbers, you see that the interest expense on US debt over the next couple years, with the rollovers that need to happen, will rise from $900 billion to $1.4 trillion per year. Spending for Social Security is roughly $2.2 trillion per year. Tax proceeds in a non-recession year are about $4 trillion. So, rather soon, Social Security and interest expenses alone will basically make up all of the tax receipts. There will come a point where the Fed just can’t raise interest rates further. They need to keep the government on the road, and without printing money, without lower interest rates, the Treasury market will melt down. [Louis Gave] 
• The Price of Time is about as close to a complete history of interest as you are likely to find. In fact, it is really two books in one. Part One deals with the history of interest rates from Babylon of the ancient world to modern times. Part Two is an exploration of recent bubbles fueled by ultra-low interest rates and the long term consequences of this remarkable period of history. The book should interest historians as well as those who seek insight into the public policy implications of zero interest rate policy (ZIRP). [The Rational Walk]
  
• It may be significant that Madeira started going out when Santa Claus started coming down the chimney. Squire Robert always suspected that the secretive Dutch elf was a milk-drinking teetotaler, and being such, was not to be fully trusted. Honest Father Christmas, like any Carolina gentleman, would look one straight in the eye and share the family bowl. [Columbia Metropolitan]
• The investment case for ARCH is simple. Its 2022 free cash flow (FCF) is at around 50% of its enterprise value (EV), and its expected 2023 FCF yield is over 30% of EV. This is a long-term investment for collecting high capital returns: hopefully an increasing slice of the dividends as the company buys back shares at a low valuation. If we are bullish on coal further out than 2023, we could potentially get 100% capital returns within 2-4 years. And, in the short term, it seems to me China reopening could be seriously bullish for coal demand. [Retail Bull]
  
• Brunello is often compared with the Pinot noir wines of Burgundy with its smooth tannins and ripe, fruit driven character. The high acidity of the wine allows it to pair well with food, especially grilled meat and game. A large portion of Brunello sold in the United States is purchased in restaurants. The wine has become particularly popular in America with nearly 1 out of every 3 bottles of Brunello di Montalcino being sold in the US. Brunello di Montalcino are known for their ability to age with well made examples from exceptional vintages often showcasing development for several decades. Master of Wine Mary Ewing-Mulligan notes that most Brunellos often need at least 10 years before they shed their youthfulness and start to harmonize their flavors. [Brunello di Montalcino]
• And my sense is that the Chinese government is finally kind of understanding the social and emotional costs. Of really intensive, high stake, standardized testing. And maybe if they could have a genomic test that, you know, could fill the same role in terms of, kind of helping their cognitive meritocracy and figuring out, you know, who, who would be really good at University of Beijing versus who should go to more, you know, mid ranked provincial university that would save them an awful lot of time and effort and money and, and mental health costs. [Geoffrey Miller]
• Happy First Day of Kwanzaa everyone. Let’s look at a popular product from an African-American automobile company... During a trip to Houston, on my way back from trying to meet up with Hunter Biden in Pahrump, Nevada, I rented a Tesla 3 from Hertz. The rental of a BMW 5-series sedan from Sixt in Vegas ($430/week) had taken about 2 minutes: sit down, adjust seat/mirrors, add phone via Bluetooth, find Apple CarPlay on the screen. It took 45 minutes, two Tesla 3s, and three Hertz employees to get out of the Hertz lot. [PhilG]
  
• He had wanted to be in the movie business. It’s important to never forget this about him. He watches Sunset Boulevard, “one of the greatest of all time,” again and again and again. A silent-picture star sidelined by the talkies, driven to madness, in denial over her faded celebrity. When he was a businessman, he showed it to guests aboard his 727. When he was president, he held screenings of it for White House staff at Camp David. He once showed it to his press secretary Stephanie Grisham, who later described how “the president, who could never sit still for anything without talking on the phone, sending a tweet, or flipping through TV channels, sat enthralled.” And he once showed it to Tim O’Brien, the biographer, who wrote that when Norma Desmond cried, “Those idiot producers. Those imbeciles! Haven’t they got any eyes? Have they forgotten what a star looks like? I’ll show them. I’ll be up there again, so help me!,” Trump leaned over O’Brien’s shoulder and whispered, “Is this an incredible scene or what? Just incredible.”A washed-up star locked away in a mansion from the 1920s, afraid of the world outside, afraid it will remind him that time has passed … Well, he does not like the way it sounds for Trump. He still talks that way, in the third person. [NY Mag]
• So what matters, it appears to me, is not the schedule of tutoring, nor even what subjects are covered. Rather, the key ingredients, judged from some of the most stand-out and well-documented accounts, are (a) the total amount of one-on-one time the child has with intellectually-engaged adults; (b) a strong overseer who guides the education at a high level with the clear intent of producing an exceptional mind (in Mill’s case, his father, in Russell’s case, his grandmother, in Hamilton’s case, Knox, and we can look to modern examples like mathematician Terence Tao, whose parents did the same); (c) plenty of free time, i.e., less tutoring hours in the day than traditional school; (d) teaching that avoids the standard lecture-based system of unnecessary memorization and testing and instead encourages thinking from first principles, discussions, writing, debates, or simply overviewing the fundamentals together; (e) in these activities, it is often best to let the student lead (e.g., writing an essay or poetry, or learning a proof); (f) intellectual life needs to be taken abnormally seriously by either the tutors or the family at large; (g) there is early specialization of geniuses, often into the very fields for which they would become notable (even, e.g., Hamilton’s childhood experience with logistics making him an ideal chief of staff for Washington’s war); (g) at some point the tutoring transitions toward an apprenticeship model, often quite early, which takes the form of project-based collaboration, such as producing a scientific paper or monograph or book; (h) a final stage of becoming pupil to another genius at the height of their powers, often as young adulthood is only beginning (Mill with the early utilitarians like the Bethams and his father, Russell with Whitehead, Hamilton with Washington). From there, they are off and running. [Erik Hoel]
• Let this single fact testify, that not only in the church, but in the worldly professions, few of the men who make their mark and serve their generation are reared in the lap of wealth. The useful men, the workingmen of every community, are usually the sons of poverty or of plain mediocrity. To use God's wealth in bestowing such indulgences is a double dishonesty. It embezzles the trust, and it robs him of the services of our children by disqualifying them for active usefulness. A kindred abuse of the trust is committed by those who stint their children of a thorough education for usefulness because so large a portion of their means is appropriated to selfish indulgences, or more frequently to the schemes of avarice. Again, in support of expensive living we often hear a great deal said about "the style proper to one's standing in society." And such a style is represented as necessary to distinguish the different ranks in society. The truth lies in just the opposite direction. This is just one of the chiefest social evils resulting from luxury, that it assists in confounding the proper distinctions of society. When expensiveness of living becomes the index of rank and gentility, then whoever can procure wealth, by fair means or foul, claims that rank. Thus, by this very boasted means of keeping up the proper distinctions of society, vulgar and ignorant persons are admitted into the society of the pure and well-informed, and that vilest and most despicable of all aristocracies, an aristocracy of wealth, is introduced. The consequence is, that the coarseness and low principles of the rich boors are diffused through all the circle into which their luxuriousness has introduced them. And an unrighteous standard of admission is erected, which excludes humble worth, and talent, and taste, because united with poverty. But if extravagance were disreputable and were banished from professedly virtuous society, if the rich practiced a simplicity of living equally attainable by all of moderate means, the distinctions of society would necessarily be drawn by some other criterion than wealth. They cannot possibly be drawn by any other so base and injurious. [Discussions by Robert L. Dabney]