Going back to his first book, Currency Wars, published in 2011, Jim has a track record of predictions that often surprise the consensus narrative. His case in Sold Out, written in clear prose, is especially useful to investors and business owners trying to adapt to an environment of disrupted supply chains. My favorite excerpts are below.
On predictive analytics:
"The best predictive analytic method does not rely on linear extrapolation. That always produces deficient results except on rare occasions when it’s right by chance. This does not mean the past has no lessons for the future. The history of inflation has valuable lessons for forecasting inflationary trends, yet they don’t derive from simple projections of trends. They derive from the ability to identify causal factors, mapping those factors into a network of nodes, populating each node with data and natural language inputs, estimating the direction and strength of nodal outputs, and aggregating those outputs into a single inflation forecast. In plain English, history matters because you can derive causes, not because it’s ever the same twice. People, even policymakers, learn. Behavior is adaptive. When society passes through an adverse phase such as the late 1970s inflation, officials resolve not to let it happen again. That doesn’t mean inflation won’t happen again. It doesn’t mean officials won’t make new mistakes; they usually do. It does mean that certain response functions are highly predictable both as to policy and timing. It’s the Ph.D. equivalent of closing the barn door. This makes it easy to predict that the barn door will be closed. That gives you a head start on what comes next."
On the consequences of the Fed becoming ever-more transparent:
"Over eighteen-years from 1994 to 2012, the Fed had gone from non-transparency to full transparency to prognostication. That same span included the Asian financial crisis in 1998, the dot.com market collapse inn 2000, the Global Financial Crisis of 2008, and a set-up for the Pandemic Panic of 2020. Every novice statistics student knows correlation is not causation, yet the correlation between efforts at Fed transparency and frequent financial crises is striking. Perhaps a return to the days of a stealthy Fed operating through secrets shared at Harry’s Bar is worth consideration."
On the prospects of deficit spending adding to inflationary pressures:
"Inflation is the greatest enemy of sound money. It destroys capital formation, dissuades saving, amplifies capital misallocation, creates asset bubbles that soon burst and acts as a tax on the poor. Inflation has emerged in early 2022 as the result of lingering base effects, supply shocks in energy, supply chain disruption, and profligate federal spending. Whether inflation persists or accelerates has little to do with monetary policy and everything to do with consumer psychology. The danger is that inflation now, as opposed to inflationary expectations, causes behavioral changes including higher wage demands, job quits in search of higher pay, accelerated purchases of big-ticket durable goods and increasing leverage. In that world a feedback loop is created where demand-pull inflation feeds on itself and drives consumer prices higher faster than central bankers anticipate. Another threat is Modern Monetary Theory, which endorses unlimited spending financed by unlimited monetization by the Fed. Money printing alone does not cause inflation, but if it facilitates prodigal spending it may. That sets the stage for runaway inflation or a policy response that will precipitate a market crash and recession or both. All three inflation scenarios – persistence, acceleration, and crash – are antithetical to the price stability and policy consistency needed to improve supply chains. Apart from broader societal costs, inflation is as much an impediment to supply chain efficiency as the logistical factors described above. The best case is that inflation fades without a monetary policy blunder on the way. That’s a slim reed to lean on."
On the importance of sound money to rebuild resilient supply chains:
"In truth, the greatest challenge to investors is not asset allocation, it’s the demise of sound money. A sound money system is not imposed, it is earned through the trust of system members. Digital money may be a new preceptual mode, but that does not change human nature. Trust is a nice blend of right hemisphere emotion and left hemisphere calculation. It exists (or not) in villages and central bank board rooms."
Sold Out is a must-read for investors, business owners, policymakers, or anyone interested in a road map for the trend toward re-shoring manufacturing and shortening supply chains in the 2020s.
Sold Out: How Broken Supply Chains, Surging Inflation, and Political Instability Will Sink the Global Economy
4.6 | 305 ratings
Price: 15.75
Last update: 07-29-2024
Top reviews from the United States
dknox
Jim tackles the supply chain as only he can...
Reviewed in the United States on December 18, 2022Daniel Bernard
Useing this Book
Reviewed in the United States on December 6, 2022Marian Raff
#EEE ~ Educational, Entertaining Easy read!
Reviewed in the United States on February 20, 2023Shawna Ellcey
Was a gift
Reviewed in the United States on March 9, 2024Adee
Jim Rickards knows a lot and is an excellent writer.
Reviewed in the United States on October 29, 2023John L. Herr
Will you get sold out?
Reviewed in the United States on July 28, 2023Jay River
Must Read
Reviewed in the United States on October 4, 2023