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EvergreenGaveKal, EVA, December 13, 2019
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Reviewer Comment:
As the title indicates, the author's subject is to link the 'knowledge
revolution', which he takes for granted, with its likely social-political,
cultural consequences. For this he cites a few historical examples. This
appears to be a simple, straight forward piece, but do count on Louis-Vincent
Gave for some remarkable surprises. Read on.
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Introduction:
Mr. Gave notes that interest in the role of knowledge is as old as the first
book of the Bible in which Adam and Eve are ejected from the Garden due to
eating fruit from the forbidden Tree of Knowledge. He shifts to the present to
discuss the 'knowledge revolution'. He summarizes Louis Gave's view that 'the
shifting power dynamic between people and information is a key catalyst for
many of the upheavals around the world'. He gives his opinions specific
substance by noting that Evergreen has been recommending that investors
consider 'hard assets' (such as precious metals, real estate, farmland, and
oil) since the FED as the government's central bank has been 'printing money'
to 'purchase' the government's debt. This policy creates a temporary boom. He
links this subject to the 'knowledge revolution'.
I question this recommendation. It seems to me that farmland in particular had
several disastrous boom - bust cycles in the 20th century and remains subject
to large external geopolitical and well and consumer shifts. Although I do
believe that expansion of food production will be vital to feed the world
population in the future. Of course we remember what happened in the boom-bust
of real estate during 2005-2009. But there were similar cycles in the more
distant past (such as in Florida). Oil also has seen very large boom-bust
cycles, although again I do not doubt that the world demand for oil and NG will
continue to increase over the next 30-40 years. I lived through the boom-bust
cycle of silver - gold from the 1960's to 1980's.
More generally, I wish everyone would stop describing central bank action as
'printing money to purchase the government's debt'. The government is
exchanging credit for goods and services with producers and simply giving
credit to the bank accounts of non-producers while matching the credit assets
with bond liabilities in its accounts with the banking system. Much of that
credit is then exchanged with long term investors such as pension funds that
then exchange it back to the treasury for long term bonds.
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The Knowledge Revolution and Its
Consequences:
This is Louis-Vincent Gave's essay. He begins by noting that the several most
discussed examples of popular riots and conflicts have different proximate
causes. But that they all relate to dissatisfaction with aspects of the
economic infrastructure being reflected in the political superstructure.
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Economic infrastructure vs political
superstructure:
The author turns to Marx, citing his 'correct analysis' of contemporary
revolutions versus his incorrect conclusion on what would be their results. He
writes that in Marx's era the driving economic factors could be limited to
land, labor, and capital. But now, due to its extraordinary expansion we must
add 'knowledge' as a fourth significant factor. The ability to individuals,
organizations and societies to mobilize and exploit knowledge in now dominant.
As a specific example he cites the results for the world's banks and provides a
vivid graph of the performance of the world MSCI World Banks index relative to
the MSCI World index. The link to knowledge is not made clear, but presumably
banks have lagged behind in their ability to exploit knowledge.
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Knowledge and revolutions: Looking back in
history, Mr. Gave mentions the revolution that took place in Europe after
Luther's publication of his dissent. The revolutionary results of this were due
to the Gutenberg printing press that created a revolution in social literacy
and spread of knowledge and opinions. From this he finds the spread of
democratic political institutions.
He describes specific historical cases representative of the effect of change
in information flow between populace and central politicians. He sums the past
with this: "in short, representative democracy was a system build on the
back of a 'top-down' economic infrastructure in which - given- the travel
distance between say "Toulouse and Paris, or Paris and Clermont-Ferrand -
it made sense for communities to be 'represented' in Paris...."
But, he writes: "But the world has now changed". "Today,
knowledge and information, are more diffuse than ever. This new reality should
point towards new political arrangements." He believes that just as the
Internet has enabled the elimination of layers of immediate managers in
industry so also political middlemen can be eliminated. His conclusion:
"The knowledge revolution should spark a shift towards direct
democracy."
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The author describes in detail four specific
changes. He summarizes this: "In short, the knowledge revolution has
dramatically changed the economic infrastructure, but our political
superstructure has barely evolved."
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Different political responses to the
knowledge revolution - Mr. Gave describes one response - by the ruling elite
(today's 'aristocrats') which has been to make the government institutions and
processes even more complex and unknowable in order to retain power. He points
to the European Union bureaucracy that has nearly achieved Napoleon's and
Hitler's dreams of a European empire. He believes that smaller political
entities such as Singapore can better provide for their people - especially
investors. Considering his focus on investment opportunities, he believes that
investors will find the future of assets based in these countries to be more
valuable.
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However, he describes the defensive policies
and actions of the ruling governments of the large states. They are attempting
to keep the public under control by expanding, increasing spending financed by
credit (debt). They will expand their control over channels of information such
as the new 'social media'.
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Mr. Gave sees government elites attempting
one of three policy options: - join the movement toward increased direct
democracy by increasing the free creation and dissemination of information and
knowledge - attempt to retain control by increased spending - attempt to
control both at the same time, increase spending while increasing their control
of information. He gives a few specific examples: Switzerland is his favorite
for the first category. The U.S. and some EU countries are in his second
category, but are in danger of shifting into the third category.
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Mr. Gave then switched to mention the advent
of Crypto-currencies. A remarkable idea, quite a leap of imagination. He
suggests that this might be a response of the public to the reigning elite's
effort to keep control of the currency. He points out that the currency is the
basis of everything and that rulers have throughout history debased their
currencies as a way to retain power.
He minces no words: "If governments lose control of their currencies, the
clash between economic infrastructure and political superstructure may devolve
into outright revolutions. "Then he makes another leap, not surprising
from Louis-Vincent Gave, given his background. He muses that (by coincidence)
we have the noted Marxist, one Xi Jinping , who has switched from opposing to
adopting crypto-currencies. Might this be part of his program to destabilize
Western currencies, especially the U.S. Dollar.
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Conclusion: Turning again to history, Mr.
Gave references Arnold Toynbee who is one of the historians who have noted the
propensity of rulers who seek to preserve their status by finding a way to
accommodate the social changes yet retain control. One typical method is to
'throw money' to (at) the commoners. He considers that, however, today's
environment may not be conducive to that solution yet that might continue to be
the policy for a time. But the 'street riots' are already occurring.
Investment advice - always the main point for the Gave's. Switzerland and
Singapore enter the picture again as worthwhile places in which to deploy ones
wealth.
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Next I want to mention a very interesting
snippet from Barron's. It is by Charles Gave extracted from his "The
Daily" The heading is "Doomsday for ETFs". It is an excellent
analysis of coming financial fiasco. He writes that the central banks have been
manipulating both long-term interest rates and the stock indexes while
subsidizing the indexers. The result is that the real price discovery mechanism
of an open market has 'broken down'. He believes that this has created
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Some other references to 'knowledge'
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Joseph Scieber - Theories of Knowledge:
How to Think about What You Know - The Great Courses, Chantilly VA.
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Patrick Grim - The Philosopher's Toolkit:
How to be the Most Rational Person in Any Room - The Great Courses,
Chantilly, VA.
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George Gilder - Life after Google: The
Fall of Big Data and the Rise of the Blockchain Economy, Regnery,
Washington D.C.
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George Gilder - Knowledge and Power: The
Information Theory of Capitalism and How it is Revolutionizing our World -
Regnery, Washington D.C.
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Jeremy Black - The Power of Knowledge: How
Information and Rechnology Made the Modern World Yale Univ. Press, New
Haven
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