Thread by @trader_ferg

Thread

I've been trying to wrap my head around how we headed up in this mess of multiple lockdowns

Don't buy the power grab(few exceptions) or incompetence arguments

Listening to @profplum99 interview @Gavekal a theory was outlined that makes a lot of sense

CYA=Cover your ass

Now CYA was always fairly prominent in democracies

Adding social media to the mix was like adding 100x leverage to a trade(makes it easy to blow yourself up)

So politicians were terrified of being held accountable for deaths

So obviously they have zero incentive to take risks

"Now that every policy choice is reviewed and debated in real-time by millions of people around the world, CYA has become all-important.

Politicians have to put policies in place to hedge against the wildest tail risks imaginable."

"Once Denmark and Norway had decided to follow Italy’s lead and lock down their populations, any western government that did not follow suit risked being accused of playing Russian roulette with people’s lives, regardless of
the epidemiological evidence."

The CYA theory also extends to monetary and fiscal policy as govts and central Bankers must be seen to do something.

This is quite the incentive when combined with being the path of least resistance for govts and central Bankers

"CYA principle and investing

Indexing is the new in-vogue form of socialism.

Capital is not allocated according to its marginal return—the foundation on which capitalism rests.

Instead, capital is allocated according to the size of
companies."

"In the 20th century, the goal of every socialist experiment was for everybody to earn the same salary

In 21st century, it seems that the goal of indexing
is for everybody to earn the same return

As we now know fixing everyone's return on labor at the same price was a disaster"

"People stopped working, and economic growth plummeted.

Fast forward to today, and why should we expect a different outcome if the end-goal of our investment strategy is to ensure that everyone gets the same return, not on their labor but on their capital?"

"And should we really be surprised if the growth rates of our economies continue to slip?

Why should we expect a positive growth outcome from an epic misallocation of capital?"

Hope you found Louis Gaves @Gavekal framework as interesting as I did.