Higher startup valuations are often favorable for all parties. High valuations show a business's potential. New customers and talent are attracted. They earn respect.

Everyone benefits if a company's valuation rises.

Founders and investors have always been incentivized to overestimate a company's value.

Post-money valuations were inflated by 2021 market expectations and the valuation model's mechanisms.

Founders must understand both levers to handle a normalizing market.

2021, the year of miracles

2021 must've seemed miraculous to entrepreneurs, employees, and VCs. Valuations rose, and funding resumed after the first Covid-19 epidemic caution.

In 2021, VC investments increased from $335B to $643B. 518 new worldwide unicorns vs. 134 in 2020; 951 US IPOs vs. 431.

Things can change quickly, as 2020-21 showed.

Rising interest rates, geopolitical developments, and normalizing technology conditions drive down share prices and tech company market caps in 2022. Zoom, the poster-child of early lockdown success, is down 37% since 1st Jan.

Once-inflated valuations can become a problem in a normalizing market, especially for founders, employees, and early investors.

the reason why startups are always overvalued

To see why inflated valuations are a problem, consider one of its causes.

Private company values only fluctuate following a new investment round, unlike publicly-traded corporations. The startup's new value is calculated simply:

(Latest round share price) x (total number of company shares)

This is the industry standard Post-Money Valuation model.

Let’s illustrate how it works with an example. If a VC invests $10M for 1M shares (at $10/share), and the company has 10M shares after the round, its Post-Money Valuation is $100M (10/share x 10M shares).

This approach might seem like the most natural way to assess a business, but the model often unintentionally overstates the underlying value of the company even if the share price paid by the investor is fair. All shares aren't equal.

New investors in a corporation will always try to minimize their downside risk, or the amount they lose if things go wrong. New investors will try to negotiate better terms and pay a premium.

How the value of a struggling SpaceX increased

SpaceX's 2008 Series D is an example. Despite the financial crisis and unsuccessful rocket launches, the company's Post-Money Valuation was 36% higher after the investment round. Why?

Series D SpaceX shares were protected. In case of liquidation, Series D investors were guaranteed a 2x return before other shareholders.

Due to downside protection, investors were willing to pay a higher price for this new share class.

The Post-Money Valuation model overpriced SpaceX because it viewed all the shares as equal (they weren't).

Why entrepreneurs, workers, and early investors stand to lose the most

Post-Money Valuation is an effective and sufficient method for assessing a startup's valuation, despite not taking share class disparities into consideration.

In a robust market, where the firm valuation will certainly expand with the next fundraising round or exit, the inflated value is of little significance.

Fairness endures. If a corporation leaves at a greater valuation, each stakeholder will receive a proportional distribution. (i.e., 5% of a $100M corporation yields $5M).

SpaceX's inherent overvaluation was never a problem. Had it been sold for less than its Post-Money Valuation, some shareholders, including founders, staff, and early investors, would have seen their ownership drop.

The unforgiving world of 2022

In 2022, founders, employees, and investors who benefited from inflated values will face below-valuation exits and down-rounds.

For them, 2021 will be a curse, not a blessing.

Some tech giants are worried. Klarna's valuation fell from $45B (Oct 21) to $30B (Jun 22), Canvas from $40B to $27B, and GoPuffs from $17B to $8.3B.

Shazam and Blue Apron have to exit or IPO at a cheaper price. Premium share classes are protected, while others receive less. The same goes for bankrupts.

Those who continue at lower valuations will lose reputation and talent. When their value declines by half, generous employee stock options become less enticing, and their ability to return anything is questioned.

What can we infer about the present situation?

Such techniques to enhance your company's value or stop a normalizing market are fiction.

The current situation is a painful reminder for entrepreneurs and a crucial lesson for future firms.

The devastating market fall of the previous six months has taught us one thing:

1. Keep in mind that any valuation is speculative. Money Post A startup's valuation is a highly simplified approximation of its true value, particularly in the early phases when it lacks significant income or a cutting-edge product. It is merely a projection of the future and a hypothetical meter. Until it is achieved by an exit, a valuation is nothing more than a number on paper.
   

2. Assume the value of your company is lower than it was in the past. Your previous valuation might not be accurate now due to substantial changes in the startup financing markets. There is little reason to think that your company's value will remain the same given the 50%+ decline in many newly listed IT companies. Recognize how the market situation is changing and use caution.
   

3. Recognize the importance of the stake you hold. Each share class has a unique value that varies. Know the sort of share class you own and how additional contractual provisions affect the market value of your security. Frameworks have been provided by Metrick and Yasuda (Yale & UC) and Gornall and Strebulaev (Stanford) for comprehending the terms that affect investors' cash-flow rights upon withdrawal. As a result, you will be able to more accurately evaluate your firm and determine the worth of each share class.
   

4. Be wary of approving excessively protective share terms.
   The trade-offs should be considered while negotiating subsequent rounds. Accepting punitive contractual terms could first seem like a smart option in order to uphold your inflated worth, but you should proceed with caution. Such provisions ALWAYS result in misaligned shareholders, with common shareholders (such as you and your staff) at the bottom of the list.

40 years pass. After 14 years of retirement, you die. Am I the only one who sees the problem?

I’m the Jedi master of escaping the rat race.

Not to impress. I know this works since I've tried it. Quitting a job to make money online is worse than Kim Kardashian's internet-burning advice.

Let me help you rethink the move from a career to online income to f*ck you money.

To understand why a job is a joke, do some life math.

Without a solid why, nothing makes sense.

The retirement age is 65. Our processed food consumption could shorten our 79-year average lifespan.

You spend 40 years working.

After 14 years of retirement, you die.

Am I alone in seeing the problem?

Life is too short to work a job forever, especially since most people hate theirs. After-hours skills are vital.

Money equals unrestricted power, f*ck you.

F*ck you money is the answer.

Jack Raines said it first. He says we can do anything with the money. Jack, a young rebel straight out of college, can travel and try new foods.

F*ck you money signifies not checking your bank account before buying.

F*ck you” money is pure, unadulterated freedom with no strings attached.

Jack claims you're rich when you rarely think about money.

Avoid confusion.

This doesn't imply you can buy a Lamborghini. It indicates your costs, income, lifestyle, and bank account are balanced.

Jack established an online portfolio while working for UPS in Atlanta, Georgia. So he gained boundless power.

The portion that many erroneously believe

Yes, you need internet abilities to make money, but they're not different from 9-5 talents.

Sahil Lavingia, Gumroad's creator, explains.

A job is a way to get paid to learn.

Mistreat your boss 9-5. Drain his skills. Defuse him. Love and leave him (eventually).

Find another employment if yours is hazardous. Pick an easy job. Make sure nothing sneaks into your 6-12 time slot.

The dumb game that makes you a sheep

A 9-5 job requires many job interviews throughout life.

You email your résumé to employers and apply for jobs through advertisements. This game makes you a sheep.

You're competing globally. Work-from-home makes the competition tougher. If you're not the cheapest, employers won't hire you.

After-hours online talents (say, 6 pm-12 pm) change the game. This graphic explains it better:

Online talents boost after-hours opportunities.

You go from wanting to be picked to picking yourself. More chances equal more money. Your f*ck you fund gets the extra cash.

A novel method of learning is essential.

College costs six figures and takes a lifetime to repay.

Informal learning is distinct. 6-12pm:

• Observe the carefully controlled Twitter newsfeed.

• Make use of Teachable and Gumroad's online courses.

• Watch instructional YouTube videos

• Look through the top Substack newsletters.

Informal learning is more effective because it's not obvious. It's fun to follow your curiosity and hobbies.

The majority of people lack one attitude. It's simple to learn.

One big impediment stands in the way of f*ck you money and time independence. So often.

Too many people plan after 6-12 hours. Dreaming. Big-thinkers. Strategically. They fill their calendar with meetings.

This is after-hours masturb*tion.

Sahil Bloom reminded me that a bias towards action will determine if this approach works for you.

The key isn't knowing what to do from 6-12 a.m. Trust yourself and develop abilities as you go. It's for building the parachute after you jump.

Sounds risky. We've eliminated the risk by finishing this process after hours while you work 9-5.

With no risk, you can have an I-don't-care attitude and still be successful.

When you choose to move forward, this occurs.

Once you try 9-5/6-12, you'll tell someone.

It's bad.

Few of us hang out with problem-solvers.

It's how much of society operates. So they make reasons so they can feel better about not giving you money.

Matthew Kobach told me chasing f*ck you money is easier with like-minded folks.

Without f*ck you money friends, loneliness will take over and you'll think you've messed up when you just need to keep going.

Steal this easy guideline

Let's act. No more fluffing and caressing.

1. Learn

If you detest your 9-5 talents or don't think they'll work online, get new ones. If you're skilled enough, continue.

Easlo recommends these skills:

• Designer for Figma

• Designer Canva

• bubble creators

• editor in Photoshop

• Automation consultant for Zapier

• Designer of Webflow

• video editor Adobe

• Ghostwriter for Twitter

• Idea consultant

• Artist in Blender Studio

2. Develop the ability

Every night from 6-12, apply the skill.

Practicing ghostwriting? Write someone's tweets for free. Do someone's website copy to learn copywriting. Get a website to the top of Google for a keyword to understand SEO.

Free practice is crucial. Your 9-5 pays the money, so work for free.

3. Take off stealthily like a badass

Another mistake. Sell to few. Don't be the best. Don't claim expertise.

Sell your new expertise to others behind you.

Two ways:

• Using a digital good

• By providing a service,

Point 1 also includes digital service examples. Digital products include eBooks, communities, courses, ad-supported podcasts, and templates. It's easy. Your 9-5 job involves one of these.

Take ideas from work.

Why? They'll steal your time for profit.

4. Iterate while feeling awful

First-time launches always fail. You'll feel terrible. Okay. Remember your 9-5?

Find improvements. Ask free and paying consumers what worked.

Multiple relaunches, each 1% better.

5. Discover more

Never stop learning. Improve your skill. Add a relevant skill. Learn copywriting if you write online.

After-hours students earn the most.

6. Continue

Repetition is key.

7. Make this one small change.

Consistently. The 6-12 momentum won't make you rich in 30 days; that's success p*rn.

Consistency helps wage slaves become f*ck you money. Most people can't switch between the two.

Putting everything together

It's easy. You're probably already doing some.

This formula explains why, how, and what to do. It's a 5th-grade-friendly blueprint. Good.

Reduce financial risk with your 9-to-5. Replace Netflix with 6-12 money-making talents.

Life is short; do whatever you want. Today.

You’ll be surprised; I sure was

Blogging and writing online as a side income has now been around for a significant amount of time. Nowadays, it is a continuously rising moneymaker for prospective writers, with several writing platforms existing online. At the top of the list are Medium, Vocal Media, Newsbreak, and the biggest one of them, Quora, with 300 million active users.

Quora, unlike Medium, is a question-and-answer format platform. On Medium you are permitted to write what you want, while on Quora, you answer questions on topics that you have expertise about. Quora, like Medium, now compensates its authors for the answers they provide in comparison to the previous, in which you had to be admitted to the partner program and were paid to ask questions.

Quora just recently went live with this new partner program, Quora Plus, and the way it works is that it is a subscription for $5 a month which provides you access to metered/monetized stories, in turn compensating the writers for part of that subscription for their answers.

I too on Quora have found a lot of success on the platform, gaining 23 Million Content Views, and 300,000 followers for my space, which is kind of the Quora equivalent of a Medium article. The way in which I was able to do this was entirely thanks to a hack that I uncovered to the Quora algorithm.

In this article, I plan on discussing how much money I received from 23 million content views on Quora, and I bet you’ll be shocked; I know I was.

A Brief Explanation of How I Got 23 Million Views and How You Can Do It Too

On Quora, everything in terms of obtaining views is about finding the proper question, which I only understood quite late into the game. I published my first response in 2019 but never actually wrote on Quora until the summer of 2020, and about a month into posting consistently I found out how to find the perfect question. Here’s how:

The Process

Go to your Home Page and start scrolling… While browsing, check for the following things…

1. Answers from people you follow or your followers.

2. Advertisements

These two things are the two things you want to ignore, you don’t want to answer those questions or look at the ads. You should now be left with a couple of recommended answers. To discover which recommended answer is the best to answer as well, look at these three important aspects.

1. Date of the answer: Was it in the past few days, preferably 2–3 days, even better, past 24 hours?

2. Views: Are they in the ten thousands or hundred thousands?

3. Upvotes: Are they in the hundreds or thousands?

Now, choose an answer to a question which you think you could answer as well that satisfies the requirements above. Once you click on it, as all answers on Quora works, it will redirect you to the page for that question, in which you will have to select once again if you should answer the question.

1. Amount of answers: How many responses are there to the given question? This tells you how much competition you have. My rule is beyond 25 answers, you shouldn’t answer, but you can change it anyway you’d like.

2. Answerers: Who did the answering for the question? If the question includes a bunch of renowned, extremely well-known people on Quora, there’s a good possibility your essay is going to get drowned out.

3. Views: Check for a constant quantity of high views on each answer for the question; this is what will guarantee that your answer gets a lot of views!

The Income Reveal! How Much I Made From 23 Million Content Views

DRUM ROLL, PLEASE!

8.97 USD. Yes, not even ten dollars, not even nine. Just eight dollars and ninety-seven cents.

Possible Reasons for My Low Earnings

• Quora Plus and the answering partner program are newer than my Quora views.

• Few people use Quora+, therefore revenues are low.

• I haven't been writing much on Quora, so I'm only making money from old answers and a handful since Quora Plus launched.

• Quora + pays poorly...

Should You Try Quora and Quora For Money?

My answer depends on your needs. I never got invited to Quora's question partner program due to my late start, but other writers have made hundreds. Due to Quora's new and competitive answering partner program, you may not make much money.

If you want a fun writing community, try Quora. Quora was fun when I only made money from my space. Quora +'s paywalls and new contributors eager to make money have made the platform less fun for me.

This article is a summary to save you time. You can read my full, more detailed article, here.

WRITE FOR THE WEB3

Why web3’s messaging is lost and how crypto winter is growing growth seeds

People interested in crypto, blockchain, and web3 typically read Bitcoin and Ethereum's white papers. It's a good idea. Documents produced for developers and academia aren't always the ideal resource for beginners.

Given the surge of extremely technical material and the number of fly-by-nights, rug pulls, and other scams, it's little wonder mainstream audiences regard the blockchain sector as an expensive sideshow act.

What's the solution?

Web3 needs more than just builders.

After joining TikTok, I followed Amy Suto of SutoScience. Amy switched from TV scriptwriting to IT copywriting years ago. She concentrates on web3 now. Decentralized autonomous organizations (DAOs) are seeking skilled copywriters for web3.

Amy has found that web3's basics are easy to grasp; you don't need technical knowledge. There's a paradigm shift in knowing the basics; be persistent and patient.

Apple is positioning itself as a data privacy advocate, leveraging web3's zero-trust ethos on data ownership.

Finn Lobsien, who writes about web3 copywriting for the Mirror and Twitter, agrees: acronyms and abstractions won't do.

Web3 preached to the choir. Curious newcomers have only found whitepapers and scams when trying to learn why the community loves it. No wonder people resist education and buy-in.

Due to the gender gap in crypto (Crypto Bro is not just a stereotype), it attracts people singing to the choir or trying to cash in on the next big thing.

Last year, the industry was booming, so writing wasn't necessary. Now that the bear market has returned (for everyone, but especially web3), holding readers' attention is a valuable skill.

White papers and the Web3

Why does web3 rely so much on non-growth content?

Businesses must polish and improve their messaging moving into the 2022 recession. The 2021 tech boom provided such a sense of affluence and (unsustainable) growth that no one needed great marketing material. The market found them.

This was especially true for web3 and the first-time crypto believers. Obviously. If they knew which was good.

White papers help. White papers are highly technical texts that walk a reader through a product's details. How Does a White Paper Help Your Business and That White Paper Guy discuss them.

They're meant for knowledgeable readers. Investors and the technical (academic/developer) community read web3 white papers. White papers are used when a product is extremely technical or difficult to assist an informed reader to a conclusion. Web3 uses them most often for ICOs (initial coin offerings).

White papers for web3 education help newcomers learn about the web3 industry's components. It's like sending a first-grader to the Annotated Oxford English Dictionary to learn to read. It's a reference, not a learning tool, for words.

Newcomers can use platforms that teach the basics. These included Coinbase's Crypto Basics tutorials or Cryptochicks Academy, founded by the mother of Ethereum's inventor to get more women utilizing and working in crypto.

Discord and Web3 communities

Discord communities are web3's opposite. Discord communities involve personal communications and group involvement.

Online audience growth begins with community building. User personas prefer 1000 dedicated admirers over 1 million lukewarm followers, and the language is much more easygoing. Discord groups are renowned for phishing scams, compromised wallets, and incorrect information, especially since the crypto crisis.

White papers and Discord increase industry insularity. White papers are complicated, and Discord has a high risk threshold.

Web3 and writing ads

Copywriting is emotional, but white papers are logical. It uses the brain's quick-decision centers. It's meant to make the reader invest immediately.

Not bad. People think sales are sleazy, but they can spot the poor things.

Ethical copywriting helps you reach the correct audience. People who gain a following on Medium are likely to have copywriting training and a readership (or three) in mind when they publish. Tim Denning and Sinem Günel know how to identify a target audience and make them want to learn more.

In a fast-moving market, copywriting is less about long-form content like sales pages or blogs, but many organizations do. Instead, the copy is concise, individualized, and high-value. Tweets, email marketing, and IM apps (Discord, Telegram, Slack to a lesser extent) keep engagement high.

What does web3's messaging lack? As DAOs add stricter copyrighting, narrative and connecting tales seem to be missing.

Web3 is passionate about constructing the next internet. Now, they can connect their passion to a specific audience so newcomers understand why.

My kids redesigned the internet because it lacks inventiveness.

Internet today is bland. Everything is generic: fonts, layouts, pages, and visual language. Microtypography is messy.

Web design today seems dictated by technical and ideological constraints rather than creativity and ideas. Text and graphics are in containers on every page. All design is assumed.

Ironically, web technologies can design a lot. We can execute most designs. We make shocking, evocative websites. Experimental typography, generating graphics, and interactive experiences are possible.

Even designer websites use containers in containers. Dribbble and Behance, the two most popular creative websites, are boring. Lead image.

How did this happen?

Several reasons. WordPress and other blogging platforms use templates. These frameworks build web pages by combining graphics, headlines, body content, and videos. Not designs, templates. These rules combine related data types. These platforms don't let users customize pages beyond the template. You filled the template.

Templates are content-neutral. Thus, the issue.

Form should reflect and shape content, which is a design principle. Separating them produces content containers. Templates have no design value.

One of the fundamental principles of design is a deep and meaningful connection between form and content.

Web design lacks imagination for many reasons. Most are pragmatic and economic. Page design takes time. Large websites lack the resources to create a page from scratch due to the speed of internet news and the frequency of new items. HTML, JavaScript, and CSS continue to challenge web designers. Web design can't match desktop publishing's straightforward operations.

Designers may also be lazy. Mobile-first, generic, framework-driven development tends to ignore web page visual and contextual integrity.

How can we overcome this? How might expressive and avant-garde websites look today?

Rediscovering the past helps design the future.

'90s-era web design

At the University of the Arts Bremen's research and development group, I created my first website 23 years ago. Web design was trendy. Young web. Pages inspired me.

We struggled with HTML in the mid-1990s. Arial, Times, and Verdana were the only web-safe fonts. Anything exciting required table layouts, monospaced fonts, or GIFs. HTML was originally content-driven, thus we had to work against it to create a page.

Experimental typography was booming. Designers challenged the established quo from Jan Tschichold's Die Neue Typographie in the twenties to April Greiman's computer-driven layouts in the eighties. By the mid-1990s, an uncommon confluence of technological and cultural breakthroughs enabled radical graphic design. Irma Boom, David Carson, Paula Scher, Neville Brody, and others showed it.

Early web pages were dull compared to graphic design's aesthetic explosion. The Web Design Museum shows this.

Nobody knew how to conduct browser-based graphic design. Web page design was undefined. No standards. No CMS (nearly), CSS, JS, video, animation.

Now is as good a time as any to challenge the internet’s visual conformity.

In 2018, everything is browser-based. Massive layouts to micro-typography, animation, and video. How do we use these great possibilities? Containerized containers. JavaScript-contaminated mobile-first pages. Visually uniform templates. Web design 23 years later would disappoint my younger self.

Our imagination, not technology, restricts web design. We're too conformist to aesthetics, economics, and expectations.

Crisis generates opportunity. Challenge online visual conformity now. I'm too old and bourgeois to develop a radical, experimental, and cutting-edge website. I can ask my students.

I taught web design at the Potsdam Interface Design Programme in 2017. Each team has to redesign a website. Create expressive, inventive visual experiences on the browser. Create with contemporary web technologies. Avoid usability, readability, and flexibility concerns. Act. Ignore Erwartungskonformität.

The class outcome pleased me. This overview page shows all results. Four diverse projects address the challenge.

1. ZKM by Frederic Haase and Jonas Köpfer

Frederic and Jonas began their experiments on the ZKM website. The ZKM is Germany's leading media art exhibition location, but its website remains conventional. It's useful but not avant-garde like the shows' art.

Frederic and Jonas designed the ZKM site's concept, aesthetic language, and technical configuration to reflect the museum's progressive approach. A generative design engine generates new layouts for each page load.

ZKM redesign.

2. Streem by Daria Thies, Bela Kurek, and Lucas Vogel

Street art magazine Streem. It promotes new artists and societal topics. Streem includes artwork, painting, photography, design, writing, and journalism. Daria, Bela, and Lucas used these influences to develop a conceptual metropolis. They designed four neighborhoods to reflect magazine sections for their prototype. For a legible city, they use powerful illustrative styles and spatial typography.

Streem makeover.

3. Medium by Amelie Kirchmeyer and Fabian Schultz

Amelie and Fabian structured. Instead of developing a form for a tale, they dissolved a web page into semantic, syntactical, and statistical aspects. HTML's flexibility was their goal. They broke Medium posts into experimental typographic space.

Medium revamp.

4. Hacker News by Fabian Dinklage and Florian Zia

Florian and Fabian made Hacker News interactive. The social networking site aggregates computer science and IT news. Its voting and debate features are extensive despite its simple style. Fabian and Florian transformed the structure into a typographic timeline and network area. News and comments sequence and connect the visuals. To read Hacker News, they connected their design to the API. Hacker News makeover.

Communication is not legibility, said Carson. Apply this to web design today. Modern websites must be legible, usable, responsive, and accessible. They shouldn't limit its visual palette. Visual and human-centered design are not stereotypes.

I want radical, generative, evocative, insightful, adequate, content-specific, and intelligent site design. I want to rediscover web design experimentation. More surprises please. I hope the web will appear different in 23 years.

Update: this essay has sparked a lively discussion! I wrote a brief response to the debate's most common points: Creativity vs. Usability

(The author's opinions should not be used to make investment decisions or as a recommendation to invest.)

The pandemic and social media pseudoscience have made us all epidemiologists, for better or worse. Flattening the curve, social distancing, lockdowns—remember? Some of you may remember R0 (R naught), the number of healthy humans the average COVID-infected person infects. Thankfully, the world has moved on from Greater China's nightmare. Politicians have refocused their talent for misdirection on getting their constituents invested in the war for Russian Reunification or Russian Aggression, depending on your side of the iron curtain.

Humanity battles two fronts. A war against an invisible virus (I know your Commander in Chief might have told you COVID is over, but viruses don't follow election cycles and their economic impacts linger long after the last rapid-test clinic has closed); and an undeclared World War between US/NATO and Eurasia/Russia/China. The fiscal and monetary authorities' current policies aim to mitigate these two conflicts' economic effects.

Since all politicians are short-sighted, they usually print money to solve most problems. Printing money is the easiest and fastest way to solve most problems because it can be done immediately without much discussion. The alternative—long-term restructuring of our global economy—would hurt stakeholders and require an honest discussion about our civilization's state. Both of those requirements are non-starters for our short-sighted political friends, so whether your government practices capitalism, communism, socialism, or fascism, they all turn to printing money-ism to solve all problems.

Free money stimulates demand, so people buy crap. Overbuying shit raises prices. Inflation. Every nation has food, energy, or goods inflation. The once-docile plebes demand action when the latter two subsets of inflation rise rapidly. They will be heard at the polls or in the streets. What would you do to feed your crying hungry child?

Global central banks During the pandemic, the Fed, PBOC, BOJ, ECB, and BOE printed money to aid their governments. They worried about inflation and promised to remove fiat liquidity and tighten monetary conditions.

Imagine Nate Diaz's round-house kick to the face. The financial markets probably felt that way when the US and a few others withdrew fiat wampum. Sovereign debt markets suffered a near-record bond market rout.

The undeclared WW3 is intensifying, with recent gas pipeline attacks. The global economy is already struggling, and credit withdrawal will worsen the situation. The next pandemic, the Yield Curve Control (YCC) virus, is spreading as major central banks backtrack on inflation promises. All central banks eventually fail.

Here's a scorecard.

In order to save its financial system, BOE recently reverted to Quantitative Easing (QE).

BOJ Continuing YCC to save their banking system and enable affordable government borrowing.

ECB printing money to buy weak EU member bonds, but will soon start Quantitative Tightening (QT).

PBOC Restarting the money printer to give banks liquidity to support the falling residential property market.

Fed raising rates and QT-shrinking balance sheet.

80% of the world's biggest central banks are printing money again. Only the Fed has remained steadfast in the face of a financial market bloodbath, determined to end the inflation for which it is at least partially responsible—the culmination of decades of bad economic policies and a world war.

YCC printing is the worst for fiat currency and society. Because it necessitates central banks fixing a multi-trillion-dollar bond market. YCC central banks promise to infinitely expand their balance sheets to keep a certain interest rate metric below an unnatural ceiling. The market always wins, crushing humanity with inflation.

BOJ's YCC policy is longest-standing. The BOE joined them, and my essay this week argues that the ECB will follow. The ECB joining YCC would make 60% of major central banks follow this terrible policy. Since the PBOC is part of the Chinese financial system, the number could be 80%. The Chinese will lend any amount to meet their economic activity goals.

The BOE committed to a 13-week, GBP 65bn bond price-fixing operation. However, BOEs YCC may return. If you lose to the market, you're stuck. Since the BOE has announced that it will buy your Gilt at inflated prices, why would you not sell them all? Market participants taking advantage of this policy will only push the bank further into the hole it dug itself, so I expect the BOE to re-up this program and count them as YCC.

In a few trading days, the BOE went from a bank determined to slay inflation by raising interest rates and QT to buying an unlimited amount of UK Gilts. I expect the ECB to be dragged kicking and screaming into a similar policy. Spoiler alert: big daddy Fed will eventually die from the YCC virus.

Threadneedle St, London EC2R 8AH, UK

Before we discuss the BOE's recent missteps, a chatroom member called the British royal family the Kardashians with Crowns, which made me laugh. I'm sad about royal attention. If the public was as interested in energy and economic policies as they are in how the late Queen treated Meghan, Duchess of Sussex, UK politicians might not have been able to get away with energy and economic fairy tales.

The BOE printed money to recover from COVID, as all good central banks do. For historical context, this chart shows the BOE's total assets as a percentage of GDP since its founding in the 18th century.

The UK has had a rough three centuries. Pandemics, empire wars, civil wars, world wars. Even so, the BOE's recent money printing was its most aggressive ever!

BOE Total Assets as % of GDP (white) vs. UK CPI

Now, inflation responded slowly to the bank's most aggressive monetary loosening. King Charles wishes the gold line above showed his popularity, but it shows his subjects' suffering.

The BOE recognized early that its money printing caused runaway inflation. In its August 2022 report, the bank predicted that inflation would reach 13% by year end before aggressively tapering in 2023 and 2024.

Aug 2022 BOE Monetary Policy Report

The BOE was the first major central bank to reduce its balance sheet and raise its policy rate to help.

The BOE first raised rates in December 2021. Back then, JayPow wasn't even considering raising rates.

UK policymakers, like most developed nations, believe in energy fairy tales. Namely, that the developed world, which grew in lockstep with hydrocarbon use, could switch to wind and solar by 2050. The UK's energy import bill has grown while coal, North Sea oil, and possibly stranded shale oil have been ignored.

WW3 is an economic war that is balkanizing energy markets, which will continue to inflate. A nation that imports energy and has printed the most money in its history cannot avoid inflation.

The chart above shows that energy inflation is a major cause of plebe pain.

The UK is hit by a double whammy: the BOE must remove credit to reduce demand, and energy prices must rise due to WW3 inflation. That's not economic growth.

Boris Johnson was knocked out by his country's poor economic performance, not his lockdown at 10 Downing St. Prime Minister Truss and her merry band of fools arrived with the tried-and-true government remedy: goodies for everyone.

She released a budget full of economic stimulants. She cut corporate and individual taxes for the rich. She plans to give poor people vouchers for higher energy bills. Woohoo! Margret Thatcher's new pants suit.

My buddy Jim Bianco said Truss budget's problem is that it works. It will boost activity at a time when inflation is over 10%. Truss' budget didn't include austerity measures like tax increases or spending cuts, which the bond market wanted. The bond market protested.

30-year Gilt yield chart. Yields spiked the most ever after Truss announced her budget, as shown. The Gilt market is the longest-running bond market in the world.

The Gilt market showed the pole who's boss with Cardi B.

Before this, the BOE was super-committed to fighting inflation. To their credit, they raised short-term rates and shrank their balance sheet. However, rapid yield rises threatened to destroy the entire highly leveraged UK financial system overnight, forcing them to change course.

Accounting gimmicks allowed by regulators for pension funds posed a systemic threat to the UK banking system. UK pension funds could use interest rate market levered derivatives to match liabilities. When rates rise, short rate derivatives require more margin. The pension funds spent all their money trying to pick stonks and whatever else their sell side banker could stuff them with, so the historic rate spike would have bankrupted them overnight. The FT describes BOE-supervised chicanery well.

To avoid a financial apocalypse, the BOE in one morning abandoned all their hard work and started buying unlimited long-dated Gilts to drive prices down.

Another reminder to never fight a central bank. The 30-year Gilt is shown above. After the BOE restarted the money printer on September 28, this bond rose 30%. Thirty-fucking-percent! Developed market sovereign bonds rarely move daily. You're invested in His Majesty's government obligations, not a Chinese property developer's offshore USD bond.

The political need to give people goodies to help them fight the terrible economy ran into a financial reality. The central bank protected the UK financial system from asset-price deflation because, like all modern economies, it is debt-based and highly levered. As bad as it is, inflation is not their top priority. The BOE example demonstrated that. To save the financial system, they abandoned almost a year of prudent monetary policy in a few hours. They also started the endgame.

Let's play Central Bankers Say the Darndest Things before we go to the continent (and sorry if you live on a continent other than Europe, but you're not culturally relevant).

Pre-meltdown BOE output:

FT, October 17, 2021 On Sunday, the Bank of England governor warned that it must act to curb inflationary pressure, ignoring financial market moves that have priced in the first interest rate increase before the end of the year.

On July 19, 2022, Gov. Andrew Bailey spoke. Our 2% inflation target is unwavering. We'll do our job.

August 4th 2022 MPC monetary policy announcement According to its mandate, the MPC will sustainably return inflation to 2% in the medium term.

Catherine Mann, MPC member, September 5, 2022 speech. Fast and forceful monetary tightening, possibly followed by a hold or reversal, is better than gradualism because it promotes inflation expectations' role in bringing inflation back to 2% over the medium term.

When their financial system nearly collapsed in one trading session, they said:

The Bank of England's Financial Policy Committee warned on 28 September that gilt market dysfunction threatened UK financial stability. It advised action and supported the Bank's urgent gilt market purchases for financial stability.

It works when the price goes up but not down. Is my crypto portfolio dysfunctional enough to get a BOE bailout?

Next, the EU and ECB. The ECB is also fighting inflation, but it will also succumb to the YCC virus for the same reasons as the BOE.

Frankfurt am Main, ECB Tower, Sonnemannstraße 20, 60314

Only France and Germany matter economically in the EU. Modern European history has focused on keeping Germany and Russia apart. German manufacturing and cheap Russian goods could change geopolitics.

France created the EU to keep Germany down, and the Germans only cooperated because of WWII guilt. France's interests are shared by the US, which lurks in the shadows to prevent a Germany-Russia alliance. A weak EU benefits US politics. Avoid unification of Eurasia. (I paraphrased daddy Felix because I thought quoting a large part of his most recent missive would get me spanked.)

As with everything, understanding Germany's energy policy is the best way to understand why the German economy is fundamentally fucked and why that spells doom for the EU. Germany, the EU's main economic engine, is being crippled by high energy prices, threatening a depression. This economic downturn threatens the union. The ECB may have to abandon plans to shrink its balance sheet and switch to YCC to save the EU's unholy political union.

France did the smart thing and went all in on nuclear energy, which is rare in geopolitics. 70% of electricity is nuclear-powered. Their manufacturing base can survive Russian gas cuts. Germany cannot.

My boy Zoltan made this great graphic showing how screwed Germany is as cheap Russian gas leaves the industrial economy.

$27 billion of Russian gas powers almost $2 trillion of German economic output, a 75x energy leverage. The German public was duped into believing the same energy fairy tales as their politicians, and they overwhelmingly allowed the Green party to dismantle any efforts to build a nuclear energy ecosystem over the past several decades. Germany, unlike France, must import expensive American and Qatari LNG via supertankers due to Nordstream I and II pipeline sabotage.

American gas exports to Europe are touted by the media. Gas is cheap because America isn't the Western world's swing producer. If gas prices rise domestically in America, the plebes would demand the end of imports to avoid paying more to heat their homes.

German goods would cost much more in this scenario. German producer prices rose 46% YoY in August. The German current account is rapidly approaching zero and will soon be negative.

German PPI Change YoY

German Current Account

The reason this matters is a curious construction called TARGET2. Let’s hear from the horse’s mouth what exactly this beat is:

TARGET2 is the real-time gross settlement (RTGS) system owned and operated by the Eurosystem. Central banks and commercial banks can submit payment orders in euro to TARGET2, where they are processed and settled in central bank money, i.e. money held in an account with a central bank.

Source: ECB

Let me explain this in plain English for those unfamiliar with economic dogma.

This chart shows intra-EU credits and debits. TARGET2. Germany, Europe's powerhouse, is owed money. IOU-buying Greeks buy G-wagons. The G-wagon pickup truck is badass.

If all EU countries had fiat currencies, the Deutsche Mark would be stronger than the Italian Lira, according to the chart above. If Europe had to buy goods from non-EU countries, the Euro would be much weaker. Credits and debits between smaller political units smooth out imbalances in other federal-provincial-state political systems. Financial and fiscal unions allow this. The EU is financial, so the centre cannot force the periphery to settle their imbalances.

Greece has never had to buy Fords or Kias instead of BMWs, but what if Germany had to shut down its auto manufacturing plants due to energy shortages?

Italians have done well buying ammonia from Germany rather than China, but what if BASF had to close its Ludwigshafen facility due to a lack of affordable natural gas?

I think you're seeing the issue.

Instead of Germany, EU countries would owe foreign producers like America, China, South Korea, Japan, etc. Since these countries aren't tied into an uneconomic union for politics, they'll demand hard fiat currency like USD instead of Euros, which have become toilet paper (or toilet plastic).

Keynesian economists have a simple solution for politicians who can't afford market prices. Government debt can maintain production. The debt covers the difference between what a business can afford and the international energy market price.

Germans are monetary policy conservative because of the Weimar Republic's hyperinflation. The Bundesbank is the only thing preventing ECB profligacy. Germany must print its way out without cheap energy. Like other nations, they will issue more bonds for fiscal transfers.

More Bunds mean lower prices. Without German monetary discipline, the Euro would have become a trash currency like any other emerging market that imports energy and food and has uncompetitive labor.

Bunds price all EU country bonds. The ECB's money printing is designed to keep the spread of weak EU member bonds vs. Bunds low. Everyone falls with Bunds.

Like the UK, German politicians seeking re-election will likely cause a Bunds selloff. Bond investors will understandably reject their promises of goodies for industry and individuals to offset the lack of cheap Russian gas. Long-dated Bunds will be smoked like UK Gilts. The ECB will face a wave of ultra-levered financial players who will go bankrupt if they mark to market their fixed income derivatives books at higher Bund yields.

Some treats People: Germany will spend 200B to help consumers and businesses cope with energy prices, including promoting renewable energy.

That, ladies and germs, is why the ECB will immediately abandon QT, move to a stop-gap QE program to normalize the Bund and every other EU bond market, and eventually graduate to YCC as the market vomits bonds of all stripes into Christine Lagarde's loving hands. She probably has soft hands.

The 30-year Bund market has noticed Germany's economic collapse. 2021 yields skyrocketed.

30-year Bund Yield

ECB Says the Darndest Things:

Because inflation is too high and likely to stay above our target for a long time, we took today's decision and expect to raise interest rates further.- Christine Lagarde, ECB Press Conference, Sept 8.

The Governing Council will adjust all of its instruments to stabilize inflation at 2% over the medium term. July 21 ECB Monetary Decision

Everyone struggles with high inflation. The Governing Council will ensure medium-term inflation returns to two percent. June 9th ECB Press Conference

I'm excited to read the after. Like the BOE, the ECB may abandon their plans to shrink their balance sheet and resume QE due to debt market dysfunction.

Eighty Percent

I like YCC like dark chocolate over 80%. ;).

Can 80% of the world's major central banks' QE and/or YCC overcome Sir Powell's toughness on fungible risky asset prices?

Gold and crypto are fungible global risky assets. Satoshis and gold bars are the same in New York, London, Frankfurt, Tokyo, and Shanghai.

As more Euros, Yen, Renminbi, and Pounds are printed, people will move their savings into Dollars or other stores of value. As the Fed raises rates and reduces its balance sheet, the USD will strengthen. Gold/EUR and BTC/JPY may also attract buyers.

Gold and crypto markets are much smaller than the trillions in fiat money that will be printed, so they will appreciate in non-USD currencies. These flows only matter in one instance because we trade the global or USD price. Arbitrage occurs when BTC/EUR rises faster than EUR/USD. Here is how it works:

1. An investor based in the USD notices that BTC is expensive in EUR terms.

2. Instead of buying BTC, this investor borrows USD and then sells it.

3. After that, they sell BTC and buy EUR.

4. Then they choose to sell EUR and buy USD.

5. The investor receives their profit after repaying the USD loan.

This triangular FX arbitrage will align the global/USD BTC price with the elevated EUR, JPY, CNY, and GBP prices.

Even if the Fed continues QT, which I doubt they can do past early 2023, small stores of value like gold and Bitcoin may rise as non-Fed central banks get serious about printing money.

“Arthur, this is just more copium,” you might retort.

Patience. This takes time. Economic and political forcing functions take time. The BOE example shows that bond markets will reject politicians' policies to appease voters. Decades of bad energy policy have no immediate fix. Money printing is the only politically viable option. Bond yields will rise as bond markets see more stimulative budgets, and the over-leveraged fiat debt-based financial system will collapse quickly, followed by a monetary bailout.

America has enough food, fuel, and people. China, Europe, Japan, and the UK suffer. America can be autonomous. Thus, the Fed can prioritize domestic political inflation concerns over supplying the world (and most of its allies) with dollars. A steady flow of dollars allows other nations to print their currencies and buy energy in USD. If the strongest player wins, everyone else loses.

I'm making a GDP-weighted index of these five central banks' money printing. When ready, I'll share its rate of change. This will show when the 80%'s money printing exceeds the Fed's tightening.