Confused about 2025? This theory explains everything.

Inflation: It's not just about money.

Inflation explains everything.

But first - what is inflation? There’s a misconception among some people (i.e., me, until recently) that inflation means prices going up and things getting more expensive. In fact, inflation is a misnomer; it actually means the value of money is going down.

It’s not that you get less gold for your money, it’s that you get more money for your gold. Whereas a gold bar used to get you only $169k, now it gets you over a million bucks, because dollars are worth so much less than they used to be. But one gold bar is still worth one gold bar, more or less.

It helped me to think of it like this - you’re a kid at school, and you’ve spent the entire weekend working on your art project to get it just perfect. You’ve even added pipe cleaners and glitter. When you present it to your teacher, she says well done and gives you a glorious gold star, which you cherish. Then it’s little Johnny Ramsbottom’s turn to approach teacher’s desk. He hands in a crumpled paper with a potato scribbled in crayon - and the teacher says well done and gives him a gold star too.

Because the gold star was given out willy-nilly, it’s literally worth less. It is no longer a reliable store of value, of time and effort.

OK. Now, instead of a gold star, imagine it’s money, and instead of little Johnny Ramsbottom, imagine it’s everyone being paid 80% of their salary to sit around bashing pots and pans at the sky to ward off the flu. If you print money and give it to people to do nothing - like furlough, or bank bail-outs - money loses it worth.

As for what happens next, here’s an illuminating diary entry quoted in When Money Dies, about hyperinflation in pre-Nazi Weimar Germany.

In the large banking hall a great deal of business was being done ... All around me animated discussions were in progress concerning the stamping of currency, the issue of new notes, the purchase of foreign money and so on. There were always some who knew exactly what was now the best thing to do! I went to see the bank official who always advised me. “Well, wasn’t I right?” he said. “If you had bought Swiss francs when I suggested, you would not now have lost three-fourths of your fortune.” “Lost!” I exclaimed in horror. “Why, don’t you think the krone will recover again?” “Recover!” he said with a laugh... “Just test the promise made on this note and try to get, say, 20 silver kronen in exchange.” “Yes, but mine are government securities: Surely there can’t be anything safer than that?” “My dear lady, where is the State which guaranteed these securities to you? It is dead.”

Hyperinflation only ended when a new currency, the Rentenmark, was introduced.

And that’s the iron law of inflation. People trust something (e.g., currency), that trust is exploited (e.g., by money-printing), people stop trusting it and look for something else (e.g., a new currency), and the cycle begins afresh.

The reason gold coins have ridged edges, for example, is because unscrupulous money handlers used to clip small pieces off. Implicit trust in the coins was exploited until a new format had to be introduced.

Money is of course the most obvious example of this - but the boom and bust in trust explains a lot more besides. Not sure if you knew, but a few other things happened in Germany around the same time. They were largely driven by a decline in trust in institutions like politicians, academia and the media.

And we’re going through something not dissimilar today.

There’s been media inflation, for example. People used to trust the ‘mainstream media’ implicitly; that trust was exploited (for example, the media calling Hunter Biden’s laptop or the Covid lab leak a conspiracy theory) and now, fewer and fewer people trust it, looking for alternatives like Joe Rogan or X (formerly known as Twitter), for better or for worse.

There’s been academic inflation, too. Marxists call it the Long March Through the Institutions - that is, taking over trusted vehicles like universities to use them, and leverage people’s implicit trust in them, for political agendas. This is how we’ve ended up with universities that teach students that a man can get pregnant - and trust in universities declining accordingly.

We’ve even had word inflation. Racism is bad (duh), but the fact that it is universally agreed upon as bad makes it a valuable currency, one which has accordingly been cheapened and degraded. Journalists and academics have variously said that maths is racist, the countryside is racist, and peace and quiet is racist. Likewise, the media has hysterically claimed that Trump is Hitler, and then that Putin is Hitler - at this point, you could be forgiven for beginning to wonder if Hitler was even Hitler. (N.B. This is a joke.)

Well, the book Political Ponerology: A Science on the Nature of Evil Adjusted for Political Purposes argues that WWII-like crises come around every 100 years or so because that is how long it takes for the event to fade from living memory. Specifically, by that point, there is no one around to spot the signs of psychopathic and exploitative leaders.

I posted about Nazis using behavioural science on LinkedIn last year, and got berated by a chap in the comments. ‘We’re fighting Nazis every day,’ he said. Who is he, I thought, Captain America? I had honestly no idea what he was talking about. Was he talking about the Trump supporters and ethnonationalists of the populist right, or was it the ‘papers please’ authoritarianism and coerced medical procedures of the lockdown left? Perhaps he meant the ongoing atrocities in Gaza; or maybe the reactive anti-Semitism? I sincerely had no clue to what he was referring, and that’s the point of Political Ponerology. We all sense something Nazi-esque is coming, but we don’t really know where, when, or who – because the people who do know, the living memory of WWII, are no longer here.

The seminal book The Fourth Turning outlined persuasively (in 1996) how civilisation goes through a 100-year cycle from ‘spring’ to ‘summer’ to ‘autumn’ to ‘winter’. Winter, the crisis inflection, marks the death of the old order, the extant way of viewing the world, and is accompanied by pestilence (health breakdown, arguably a result of poorer immune function due to declining trust, increased stress, and poorer living standards), famine (economic breakdown), and war (diplomatic breakdown).

Yes, ok, so things are a bit gloomy at the moment, but look closely and you can see the green shoots of spring to come. Cultural groups are obsessed with awakening at the moment - whether it’s conspiracy theorists referring to each other as ‘awake’, leftists as ‘woke’, or disaffected young men as ‘red-pilled’. The old paradigm is crumbling and the search is afoot for a new one - ‘Follow the Science’ replaced by holistic and natural health perhaps, fiat currency replaced by crypto, and the legacy media replaced by online citizen journalists.

If I were me, which I am, I’d invest in crypto and gold, which I have, and batten down the hatches for the next few years. A storm is coming, but the flood will leave the plains rich and fertile for new shoots. Then, the cycle will begin all over again.

Enjoy!