Missisipi Bubble - Inflation

History repeats itself. Why is inflation so dangerous?
To look forward, we must look back.

"Those who don't study history are doomed to repeat it." Winston Churchill

 “There is no better teacher than history in determining the future... There are answers worth billions of dollars in $30 history book.” -Charlie Munger

Below is a cartoon of the Mississippi Bubble. I loved it. 

















How can we relate America's inflation with the Scottish Immigrant John Law and his sage "advice" of printing money to pay off loans for France? How did John Law's actions lead to the "Mississippi Bubble"?

Since Nixon cut off the dollar's peg to gold, there are a few reasons why
inflation hasn't hit America as hard as other nations despite the Federal Reserve
printing money.

One of the reasons is the U.S dollar is one of the most widely circulated currency.
Another reason is since it has power over a Belgium company Swift, it is able to impose
economic sanctions on countries it deems a threat.

But the most important reason is its ties to oil. In exchange for security from
the U.S in the middle east, they choose to have all oil transactions denominated in
U.S dollars.

When Saddam declared using the Euro instead, it infuriated Bush.
Bush's family was associated with Arbusto energy and has always been in Oil.

Thus, "weapons of mass destruction" was declared to be politically correct to
 justify war.

Well, if you were a leader of a national which was susceptible to the ruins of inflation,
would you do the same?

Yes. You would.

It was in the best interest of the country,
but it was not morally correct.

People blame leaders for their actions, but if leaders acted based on a popularity contest,
the nation would be in ruins.

 Bush could only execute his best options at the time. 

Looking in the rear view mirror, you see why he did what he did. 

Bush was right-- "If things don't loosen up, this sucker will sink."

Quantitative Easing was required. That required the printing of money.
The lowering of interests. Interest rates are like gravity, the higher the cost of borrowing,
the less borrowing.

 The less borrowing, the more fiscal discipline there is in companies.
But during times of liquidity and financial contraction, it was the only option.

This is the finances of a nation is so important. Despite the trade-war, China cannot
just release all the American Treasury Bonds it has. They understand that all the IOU's
are intrinsically worth less after printing money, but there's no alternative.

An interesting thing to study is the foreign currency reserve of China. There are problems there
and its composition, while revealed more in the last few years, it is largely kept a secret.

So we can't blame America for "imperialism." First, weapons need to be sold to keep the nation moving. Second, without the dollar in circulation and it dominating oil and most transactions, America will die of economic inflation.

For China, you can't blame it for dictatorship. Study history.
China has had a long history of civil war.
China has never been unified until Mao in 1949.
 His successor Deng Xiao Ping wanted to imitate
Lee Kwan Yew, and wanted China to be more capitalistic.

Yet, China cannot exist without censorship or one party rule. Why?
What happened to the Soviet Union when it opened up too quickly?

Also, there are too many peasants and uneducated people in China whose vote
can be "bought". America has 300 million people. China has over a billion.
It's easier to govern 3 kids rather than 10, wouldn't you agree?
The level of discipline has to be immense in order to not have a up rising.
China has done an amazing job to lift people out of poverty.
This is why, despite a housing bubble, China is trying to keep the economy
under control. With a stable economy, and uplifting the poor to middle class,
a happy population is a happy country.
There's a lot of similarities in the quote " A happy wife is a happy life."

India has inherited the worse aspects of America's democracy.
This is why they are unable to have high speed rail, they can't execute quickly.

Munger was talking about Posco, a Korean company which developed a better
way to make steel and they wanted India's cheap labor. This was mentioned in his 2017 Daily Journal Meeting.  It never got off ground
due to environmentalists and protests. If it were done in China, there would be
no voting or parties, they would simply do it.

However, what's the risk of having centralized government? Yes, it is efficient.
But if the next ruler is corrupted or conceited, China is ruined.
America has less efficient with idiots from both parties, but having power in
congress or in the corporate world doesn't mean your lobbying or political power
can ruin America. It is like being the captain of a huge ship with a small rudder.
You can only veer it off in the wrong direction for so long.

Let me tell you, most leaders wants their economy to be strong.
If they could press a button and make their GDP and economy stronger,
they would be pressing it non-stop. But it doesn't work that way.

Suffering, saving, and hard work is required.

Tim Cook was right when he took over the helm of Apple.
He told analysts, " Apple is in a position where any idiot can run it."

At the time Steve Jobs was sick, and didn't know "whether to take this as
a compliment or not." But that moat was built through suffering.
So much suffering that it caused Steve to have pancreatic cancer.
Michael Dell told him to return everything back to shareholders, and
yet he persisted and eliminated unnecessary products, departments,
and projects and instilled focus into the company.

While I may be naive, I hope both nations can get along and create "synergy."
(God, I hate that word.)