In an unconstrained world, everyone can achieve their optimum.
You love steak, but so does everyone. No problem. No constraints mean all the steak you could want exactly as you want it.
You want to be a professional ballet dancer though you lack the physique and talent. You’re in luck because an unconstrained world means you can find enough people willing to pay to watch you dance.
You fell in love with Cindy in college, but she fell for another man. Thankfully, unlimited Cindys (the one you fell in love with, not just any girl named Cindy) means you can find a Cindy that loves you back.
This is all absurd, of course. But it highlights the unavoidable fact that we live in a world with sharp boundaries, within which we determine what goals we wish to pursue. Plus, we can’t all have the same goals.
This is all well and good because, to my way of thinking, limitless living doesn’t qualify as life.
Scarcity will always be with us one way or another. For anything to have any meaning, we need limits like we need water and air. And should technology somehow manage to eliminate one constraint, others will crop up to fill the void.
But that simple, obvious fact fails to factor in the decision-making of one-dimensional thinkers…
To one-dimensional thinkers singularly focused on minimizing the impact of COVID-19, productive activity had no relevance. Providing for you and your family and avoiding foreclosure looked selfish. And only an idiot prioritized mental health, physical activity, or getting together with friends and family.
To the narrow mind of someone with a singular goal for society, the worthwhile plans of individuals get thrown out with the bathwater. All opportunity costs and negative externalities take a back seat to achieve a singular objective, even when that means destroying trust in science by wrapping your mandates up in BS narratives to prove your point.
But locking down society accomplished nothing. Even the CDC admits that natural immunity works (shocking). And now they’ve flipped the script on masks. Evidently, the science changed or perhaps they now see some utility from acknowledging what basic science suggested all along.
That’s the trouble with imposing your priorities on everyone else. Contrary evidence gets dismissed or labeled “anti-something-or-other” or “this-or-that-denier” while collateral damage racks up. Throughout this theater, those of us able to balance more than one idea at a time in our brain buckets can’t help but shake our heads at the myopia of single-minded meddlers.
Unfortunately for their grand plans, the real world won’t let you optimize one variable without making all other variables suboptimal.
Constraints get in the way.
We’re running up against a lot of constraints today. Far more than we had two years ago — all because they meddled yet again.
And that bastion of one-dimensional thinking — the Federal Reserve — now gets to deal with them.
A Trap of Their Own Making
You can blame constrained supply lines and tight labor on politicians and their apparatchiks. But the constraint imposed by markets addicted to more than a decade of easy money lies squarely on the lap of the Fed.
And with everyone freaked out about inflation, no matter what the cause, they have little choice but to do something now and deal with withdrawal symptoms later. So, we can anticipate more constraints.
Plus, whatever rate rises they dare approve runs headlong into an election season (mid-terms this fall) which doesn’t tend to favor incumbents. I guess we’ll see who controls the Fed.
The Fed is trapped between contradictory constraints.
How this plays out for stock markets is anyone’s guess. But you can bank on more volatility than most investors are accustomed to for the rest of this year — at least. Because whatever they do in service to their single goal, (dictating the cost of borrowing on everyone), will ultimately create more collateral damage, unintended consequences, and chaos.
As distressing as this sounds, I personally love the noise because chaos leads to an explosion of opportunities.
So, dismiss the constraints of long-only thinking, buckle up, tighten your chinstrap, adopt a trader’s mentality, and take what the market gives you.