Three new posts in less than two weeks! You never know what you're going to get around here. "There are decades when nothing happens and there are weeks when decades happen" -Lenin. Pretty sick quote.
A couple quick updates before we jump in. First off, follow @poogsBLOG on X/Twitter for updates. Also, one thing I forgot to mention in my last couple posts was the ending to the BlockFi saga. If you don't know, I got caught up in the Blockfi debacle that happened a couple years ago now. Basically, they got in bed with FTX and ended up with their pants down and froze withdrawals. I had about half of my stack on there at the time (big time No0b move. I have since moved everything onto a cold storage wallet and I highly recommend you do the same) split between a regular "wallet" and an "earn account." After months and months of litigation and back and forth, I ended up getting 100% of my wallet funds back and about 20% of my earn account. The wallet funds came in crypto which was ideal but the earn funds came in cash, valued at the time of the Blockfi blowup, which just so happened to be at the very bottom of the market. All in all it cost me about a couple grand but like I said before, I am honestly happy that it happened. I probably wouldn't have moved my funds to a real cold wallet if this didn't happen, and something like this was for sure going to occur at some point. So it's good that it happened when it did as opposed to years from now when my stack was much larger. I consider the money that I lost the cost of a much needed education. Everything that went down is now baked into my numbers.
For a quick update: my average BTC price is $27k. ETH: $1720, LINK: $6.6, LTC: free rolling but own small amount, MATIC: $.8. Not bad, considering we're bumping up against an all time high for BTC right now at about $72k.
Now, onto the meat of what we're going to talk about today.
The Phantom Gourmet is a pretty legendary TV show that is on in the New England area every weekend for two hours starting at 10 AM. When it started in 1993, it gained a cult following immediately and was given a "Best of Boston" award by Boston Magazine in 1994. The basis of the show was that a secret shopper, or 'The Phantom' would go to restaurants/bars/chains all around the New England area and give them number grades on different aspects of their business, culminating in one overall grade. They would be very honest too, often times giving places bad reviews. They earned quite a reputation around here and I would bet that something like 90% plus of all people in the NE area are aware of the Phantom Gourmet. They would give the store owners stickers that they could put on their front window saying the "phantom was here" which generally meant that they had received a good review from the Phantom. (Their stickers and the whole look of it all was cool, too. The "phantom" was made to look like the phantom of the opera guy and when they showed him on the show, it would just be his purple arm. They took his anonymity seriously and still to this day, no one ever found out who it was. They made sure to always pay for their own meals, too. So the restaurants didn't even know they were serving a food critic).
And it had real tangible results. Getting a good review from the Phantom would increase a restaurants profile immediately. It was fairly common for people to see a new place favorably reviewed on there and check it out that weekend. I know I personally have been to at least a dozen places I wouldn't have otherwise gone to, just because they were featured on the PG. If you were out walking about, you might choose to check out a place based on nothing but the PG sticker on the front window. And on the other hand, getting a bad score from them could be a death sentence to a restaurant, especially a new one.
In other words, people trusted and respected The Phantom Gourmet and their judgement. The fact that they gave out plenty of bad reviews made people realize that a good review meant something. It was scarce. A good review from The Phantom Gourmet had real, tangible, intrinsic value.
However, The Phantom Gourmet of today is a shell of itself. They stopped doing the letter grades completely and now the show is basically a two hour commercial. They do full features for a place and have the owner come in and talk all about the food, location, etc. They basically never say a single negative thing about anyone anymore. Ever. I was watching an episode this past weekend and actually got pretty sad at how cheesy and downright bad it was. I don't know if the restaurants actually pay to get on but I wouldn't be surprised. The show is, for all intents and purposed, a two hour long advertisement and pictures of cheesy food.
So you might be wondering, that's a great little story Poogs, but what does it have to do with economics? Well, my friend, it perfectly encapsulates an economic 'theory' that I've been abstractly thinking about for a few years now. The best way to describe it in one sentence would be this: "anything that has value will have that value extracted from it at some point". Let me explain.
As I stated, the Phantom Gourmet built itself a well earned reputation over the years for being a trusted and honest eatery critic. They did everything right, filled a hole in the marketplace and were rewarded for it. Their reviews had value. And now they're cashing in on that value. No more report card, no more brutal honesty, just gushing, glowing reviews of everyone. They're trading on their old reputation but are not doing the necessary things to keep that reputation. And the results are obvious. It had such a strong reputation for so long that a sticker/endorsement from the PG still means something, I suppose, but not nearly as much as it used to. And a year from now, it will mean even less. Two years from now, even less still. They are extracting value from the PG's reputation and unless they go back to the old format, which they won't, eventually that value will run out.
You can find similar examples everywhere. One that springs to mind is trust in the police here in America. Decades ago, people really did trust the police. Whatever they said was thought to be true, period. They were given the benefit of the doubt. In other words, the word of a police officer had value. So how do you extract that value? You trade it for money or favors. Every time you extract, you damage the reputation, or decrease its value. A cop can lie and get away with it, ONLY because cops were known NOT to lie. However, every single time they do lie, they hurt their reputation and decrease its value. They're cashing in on, or extracting its value.
Another example is peoples trust in the dollar/trust in America in general. For a solid two hundred years, roughly, America had built itself a reputation of a fair, hard working, industry friendly country. We were the 'good guys' and we had a strong dollar, backed by actual gold, to show for it. However, ever since the 70's when we took ourselves off the gold standard, we've basically been slowly extracting value from our reputation. Or, put more precisely, had value extracted FROM us. Now it's really only a matter of time until it runs out.
It's easy to think of inflation as a sort of esoteric, intangible 'thing' that doesn't really effect you. "OK, so maybe the government does print money and just give it out to a select few. How does that effect me?" To answer that, think about exactly what is being done. Someone is printing paper, putting ink on it, and giving it to someone else (actually not even that. These days it's all electronic so all they do is change a line of code to show a 1 instead of a zero on a computer screen). The only reason anyone values that line of code or that piece of paper is because you will get up and go to work tomorrow. Think about it. If Americans weren't as productive as they are, those dollars would mean less. That is your value being extracted. It's robbery just with extra steps. It is literally no different than someone taking money right out of your pocket.
I was talking with a few people a couple weeks ago and the topic of the moon landing came up. Someone asked if I thought we really did land on the moon and I said that I think we did but if it was faked I wouldn't be shocked. But that we basically fake a moon landing every single day. The federal debt, the money printing, the 'housing crisis', the dollar bubble, real inflation being probably 10 times the "official" numbers. That's worse than pretending to land on the moon one time, in my opinion. It effects every single one of us, all the time. The reason housing is so expensive these days has very little to do with actual houses. It really isn't that housing got more expensive, it's more that the dollar/your purchasing power got weaker. Obviously there's more to it than that, including existing homeowners colluding to limit supply. But the main reason that housing, groceries, energy, basically everything is so expensive is largely due to an increase in the money supply, aka inflation. Something to keep in mind as we head into an election year.
Tha'ts about it for today. Check back soon, buy Bitcoin, store it yourself and talk soon!
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