“Nvidia killer.”

That’s the phrase suddenly getting attached to Cerebras Systems after one of the wildest IPO debuts we’ve seen in years.

Yesterday, the company priced its IPO at $185 per share.

Then the stock opened around $350.

Demand reportedly exceeded available shares 20-to-1.

In other words, investors desperately wanted in.

Now naturally, investors are asking the obvious question:

What exactly is Cerebras?

And more importantly… should you buy the stock?

What Does Cerebras Actually Do?

Whereas Nvidia builds chips roughly the size of a Post-it note…

Cerebras builds chips roughly the size of a dinner plate.

This size difference is the key to Cerebras’ entire strategy.

Normally, AI systems rely on thousands of smaller chips working together at the same time.

These chips constantly need to communicate with one another through networking systems called “interconnects.”

(Companies like Broadcom, Credo, Astera Labs, and Marvell supply these interconnects, as well as the chipmakers themselves.)

But as AI models get larger and more complex, all that communication starts creating traffic jams.

Cerebras is trying to eliminate that problem.

Instead of connecting thousands of smaller chips together, the company builds giant chips called Wafer-Scale Engines (WSE).

This allows far more of the work to happen in one place, dramatically reducing the amount of data bouncing around between separate processors.

Cerebras also packs huge amounts of ultra-fast SRAM memory directly onto the chip itself.

Without getting too deep into the weeds, SRAM is much faster than the traditional memory used in most AI systems.

(Companies like Micron, SanDisk, SK Hynix, and Samsung supply traditional memory chips used in most AI systems.)

Cerebras claims its systems can generate AI responses many times faster than traditional GPU-based setups in certain workloads.

Of course, there’s a catch.

Building one giant chip is incredibly difficult and expensive.

If something goes wrong while manufacturing a normal chip, you throw away one small processor.

If something goes wrong on a wafer-scale chip, you could lose the entire dinner-plate-sized processor.

This is what makes Cerebras so fascinating.

The company is attempting something very few semiconductor companies would even try.

The Competition With Nvidia

Let’s slow down a bit on the “Nvidia killer” narrative.

Cerebras has fascinating technology.

But replacing Nvidia is an entirely different challenge.

Here are the biggest reasons Nvidia’s position still looks extremely secure:

CUDA Is Still A Huge Advantage – Almost every major AI developer already builds on Nvidia’s CUDA software platform. That makes switching away from Nvidia extremely difficult and expensive for large companies.

Nvidia Is More Flexible – Nvidia’s chips are used across gaming, AI, robotics, autonomous vehicles, and scientific computing. Cerebras is much more specialized toward massive AI models and ultra-fast inference.

Nvidia Keeps Adapting – Cerebras gained attention partly because of its inference speed. But Nvidia responded by acquiring Groq in late 2025, bringing similar ultra-fast inference technology into its own ecosystem.

This doesn’t mean Cerebras can’t succeed.

But investors should be careful assuming one impressive IPO suddenly means Nvidia’s dominance is coming to an end.

Cerebras Also Has Some Major Risks…

Of course, investors need to understand this stock comes with some very real risks.

And after trading up to $350 following the IPO, these risks matter even more.

Here are the biggest ones I see right now:

The Valuation Is Extremely Expensive – Cerebras generated roughly $500 million in revenue in 2025. And as I type, the company’s market capitalization is around $70 billion. That means the stock is trading at roughly 140x sales. That’s dot-com bubblicious.

Revenue Is Highly Concentrated – Roughly 86% of the company’s revenue came from just two UAE-government-linked entities. That’s a massive customer concentration risk for a newly public company.

Profitability May Not Be Sustainable – Cerebras recently reported its “first profitable year,” but much of that profit reportedly came from a one-time accounting gain rather than normal business operations.

A Large Wave Of Shares Could Hit The Market – Over the next six months, insider lockups will gradually expire, allowing a large amount of additional shares to potentially enter the market. That can create meaningful selling pressure after a huge IPO rally.

In other words, Cerebras may absolutely become an important AI infrastructure company.

But investors should probably expect extreme volatility from here.

So… Should You Buy Cerebras?

Cerebras is a legitimately fascinating company.

This isn’t some random AI startup throwing buzzwords around to attract investors.

The technology is real.

And the company clearly has a unique approach to solving one of the biggest problems in AI right now – moving enormous amounts of data quickly enough to handle larger and larger models.

I also think the broader AI infrastructure boom is still in the early innings.

There’s room for multiple winners here.

Nvidia can continue dominating while companies like Cerebras carve out important niches in the market.

That said, investors need to separate “great technology” from “great stock.”

After the IPO frenzy, Cerebras already trades at an extremely aggressive valuation.

And with insider lockups expiring over the next several months, I’m betting we’ll be able to pick up shares at more attractive prices in the future.

Personally, I’m not chasing the stock after a near-doubling right out of the gate.

But I am putting Cerebras firmly on my watchlist.

Because while the valuation looks overheated, the underlying technology is interesting enough that this could eventually become a very important company in the AI ecosystem.

The post The “Nvidia Killer” IPO appeared first on Daily Reckoning.

Both President Trump and Iranian leaders are standing firm on their red lines.

Before peace negotiations restart, Iran has made 5 demands:

1. Ending the war on all fronts, including Lebanon
2. Lifting all sanctions
3. Releasing frozen Iranian assets
4. Compensation for war damages and losses
5. Recognition of Iran’s sovereign rights over the Strait of Hormuz

Trump called the proposal “TOTALLY UNACCEPTABLE!”.

The President has criticized Obama fiercely for releasing frozen Iranian funds, and hasn’t backed down on that subject.

As far as paying compensation, that’s not going to happen either. Sanctions relief could come in time, but asking for a total end before negotiations restart is a pipe dream.

And ending the war in Lebanon would mean Israel would have to stop bombing Hezbollah and likely give up the 10% of the country it currently occupies.

Nearly every one of these 5 points is a non-starter. And Iran knows it.

To understand the thinking here, we have to apply game theory.

A Mexican Standoff

In the classic Spaghetti Western The Good, The Bad, and The Ugly, there is a classic Mexican standoff near the end.

All three men in the standoff want the gold buried nearby. All are armed and deadly with their weapons. The scene’s tension is legendary. You don’t see filmmaking like this anymore.

I won’t spoil the ending for those of you who (somehow) haven’t seen this excellent movie. But these standoff scenes have become a cinematic staple for a reason.

Here is how Wikipedia defines a Mexican standoff:

“A Mexican standoff is a confrontation where no strategy exists that allows any party to achieve victory. Anyone initiating aggression might trigger their own demise. At the same time, the parties are unable to extract themselves from the situation without either negotiating a truce or suffering a loss, maintaining strategic tension until one of those three potential organic outcomes occurs or some outside force intervenes.”

This is essentially where we are with Iran. Everybody is armed to the teeth, staring each other down, wondering if there’s a resolution that doesn’t involve missiles, bombs, and drones.

With our current situation, however, the world economy hangs in the balance.

Last Man Standing

Early on during the conflict, the U.S. Navy allowed Iranian oil tankers to continue passing through the Strait of Hormuz and deliver their cargoes, mostly to China.

However, on April 13th, Trump ramped up the pressure with a blockade. A few Iranian ships have snuck through, but most are stuck.

Iranian oil is piling up in storage. They are likely close to reaching capacity. And when that storage is full, things get tricky for Iran.

The country’s oil wells are particularly vulnerable to shut-ins (shutting down production). Stopping the flow can seriously damage the wells. We saw this during COVID, which combined with U.S. sanctions, crippled Iran’s oil exports for years:

This was an absolutely devastating blow for Iran. Oil is their biggest industry, by far. Their currency was annihilated, and it’s getting destroyed even worse today. But somehow they buckled down and weathered the storm from late 2019 to 2022.

The blockade is currently costing Iran about $500 million per day. That’s a massive hit. President Trump has also sanctioned Chinese oil refineries for processing Iranian crude, which was a big trade war escalation.

However, it sounds like he may back down on this matter after his recent visit to Beijing. China has essentially told the refineries to ignore the sanctions, which is the first time that’s happened. Another Mexican standoff.

President Trump is betting that Iran will break first. I’m not sure that’s a great bet. This is a country that’s been under harsh sanctions for 47 years, cut off from the world.

And like it or not, the current leadership remains firmly in charge.

Iran vs. The World Economy

I ran some numbers this morning, and it looks like so far, the world has spent about an extra $600 billion on oil, fertilizers, and liquefied natural gas (LNG).

The energy crisis is beginning to work its way through the global economy. Inflation is picking up, as we covered yesterday.

When the price of fuels, plastics, and fertilizers spike, it affects almost everything. And it’s really only just beginning.

Yields on government bonds around the world are spiking. Investors are demanding higher yields to account for higher inflation. This is a bad sign for a debt-bloated world.

So while Iran is under serious pressure, so are the rest of us. Americans are struggling with high energy and food prices, and don’t want another prolonged war in the Middle East.

Last Man Standing

Despite Iran’s economy being put in a vise, I don’t expect them to give in.

For them, this conflict is existential. So they’re willing to accept prolonged economic pain. Or even a return to war.

Are they bluffing? Perhaps. But it doesn’t seem like it. They are united with a certain religious and nationalist zealotry.

Can we say the same? Are we willing to restart the war, or let the Strait of Hormuz remain closed for another few months, or even the rest of 2026?

If Hormuz remains shut, the pain will quickly become extreme. And despite his threats to end Iran as a civilization, I don’t think Trump wants to restart the war. We were the party which asked for a ceasefire via Pakistan. And we know that Iran will strike back at Gulf oil infrastructure and further damage U.S. and Israeli targets in the region.

I hate to say it, but President Trump has painted himself into a corner. It’s a classic Mexican standoff. There are no good exit options.

At the beginning of this conflict, back on March 7th, Jim Rickards made a bold statement.

In a war of attrition, really a war for survival, victory goes to the last man standing. That may be Iran.

At the time, almost nobody else was saying this. The U.S. appeared triumphant and unstoppable. He also predicted that U.S. munitions would become a problem, and they have. The March 7th piece, Jim Rickards’ Most Surprising Iran Takes, is worth a re-read today. He nailed it.

Exit Possibilities

President Trump wants to find an exit that can be spun as a win. Frankly, this is a longshot. So for now, the Mexican standoff will continue.

Eventually we may simply have to withdraw. It’s happened before. Vietnam, Afghanistan.

What that would look like isn’t exactly clear. Would all the U.S. bases in the Gulf be repaired and rebuilt? Even though they’re under threat from Iranian missiles and drones? If not, that’s a sea change in U.S. power projection in the region. If they are rebuilt, that’s going to be a rather expensive proposition, especially considering the new defensive measures which would be required.

Would the Strait of Hormuz remain under Iranian control? That’s another key consideration.

Ultimately, a deal remains the most likely outcome. But it could take years to reach a lasting agreement.

In the meantime the world economy will suffer. Somehow, stocks are just below fresh all-time highs. But I don’t see that lasting as this situation drags out.

This is why every past administration avoided a hot war with Iran. Now President Trump must find a way to salvage the situation. Even if that means making compromises.

If he can put aside his pride and make a deal, my respect for Trump will only rise. But it remains unlikely until the pain becomes unbearable. So buckle up.

The post A Mexican Standoff With Iran appeared first on Daily Reckoning.

Inflation came in hot in April.

The producer price index (PPI) rose 6% year-over-year. That’s the price companies pay for wholesale goods.

The bad news is that consumer inflation (CPI) tends to follow PPI with a lag of around 2 months.

The chart below shows how closely CPI and PPI track (with PPI running 2 months ahead):

Source: Robert infra on X

Note the large spike from back in 2021 and 2022. That was related to post-COVID inflation caused by massive monetary stimulus. And of course in 2022 Russia invaded Ukraine, which compounded the problem by spiking oil and fertilizer costs.

Here’s another chart showing how recent inflation trends (green) match up to the 1970s (blue):

It’s worth noting that official inflation was higher in the 1970s, peaking out at around 12% in the middle wave, and 14.5% in the final move.

Our “middle wave”, which peaked in 2022, rose to a high of around 8.5% inflation.

This is mostly due to differences in how CPI (inflation) is measured today. Now we have fancy tools like “hedonic adjustment” which make inflation appear lower than it truly is.

So in reality, we’re on a similar trajectory to the 1970s inflationary period. The primary difference is the level of debt we have today.

America’s current debt to GDP ratio is around 125%. In the 1970s it topped out around 35%. So we have 3.5x more debt today in comparison to the size of the economy.

Today’s huge debt load severely limits the Federal Reserve’s options.

To kill the 1970s inflation wave, Paul Volcker hiked to a crazy 20% fed funds rate. That is no longer an option due to the huge amount of debt we have.

Even if we see another major wave of inflation, I don’t see the Fed hiking interest rates. The math simply doesn’t work.

The Fed’s Dilemma

President Trump’s nominee, Kevin Warsh, was just confirmed by the Senate.

Tomorrow he will take over from Jerome Powell, who is considered somewhat of an inflation “hawk”, meaning he hiked interest rates to attempt to control inflation.

However, as the chart below shows inflation has remained above the Fed’s 2% target for 62 consecutive months.

Source: Charlie Bilello on X

President Trump has criticized Powell sharply over his refusal to cut rates further. And he’s not wrong.

Even though on paper the Fed “should” be raising interest rates, it would be extremely destructive to do so.

We have reached a point in this debt cycle where just paying the interest on the federal government’s debt costs $1.2 trillion per year. Here’s a 10-year chart:

Source: St. Louis Federal Reserve

In 2020, when interest rates were lowered to near-zero, interest costs got as low as $500 billion. Now that cost is $1,218 billion annualized ($1.2 trillion).

In 2025, total U.S. tax revenue was about $5.2 trillion. So 23% of taxes are being spent to pay interest on our debt. It’s outrageous.

At this point, higher interest rates would be devastating. We’d rapidly be paying $2 trillion in interest. Then things would rapidly snowball out of control.

In a perfect world the Federal Reserve is supposed to be “independent”. They are only supposed to adjust interest rates to cap inflation at 2% and keep employment high.

In the real world, they need to think about our country’s debt situation. And that means that in the mid-long term, rates need to be lower.

Financial Repression

This brings us back to the concept of “financial repression”. My belief is that the Fed will be forced to cut rates even as inflation is well-above target. They will have to buy large quantities of U.S. debt, essentially financing government excess.

Eventually they will institute “yield curve control” and keep rates artificially low, even if inflation is out of control.

I’ve been focusing on this topic so much lately for a reason. We’re approaching the point where drastic measures are going to become necessary to control the debt spiral.

Kevin Warsh will soon begin his term as Fed Chair. I believe he will go along with Trump’s wishes and cut rates, even if inflation is high.

Rate cuts may not happen immediately, but we need to start lowering this year. The debt situation is becoming urgent. And that will take precedence over inflation, as uncomfortable as it may be.

Starting as early as next year, more drastic measures will likely become necessary. Massive QE (quantitative easing), eventually leading to yield curve control.

During times of financial repression, hard assets and natural resources are key to preserving and growing wealth.

I want to own miners with huge projects that will last another 20 or 30 years. I want to own the best oil producers with billions of barrels of oil in the ground. Companies with real assets that will grow in value no matter how crazy things get.

We will continue to explore ideas to help readers navigate the coming storm.

The post The Next Inflation Wave is Here appeared first on Daily Reckoning.

By now, everybody knows the U.S. government has a debt problem.

But the chart below offers a new angle, because it is inflation-adjusted.

Source: U.S. Treasury Dept

This chart is about 6 months old, so it’s already outdated. The current federal debt total is up to $39 trillion. And growing at $2 trillion a year, which could rise to $2.5 trillion soon. And much larger when we get a recession.

The point is that even once we adjust for inflation, debt is a big problem. It’s not a good sign when debt charts go parabolic.

Besides the obvious, there are a few interesting things to note in the image. First, look at the bump in 1945 from World War II. It looks so tiny once you adjust for inflation.

Second, look at what happened after WW2. The debt load came down, and was steady for around 40 years.

Then in the 1980s, government spending jumped. Around 2008, the debt goes almost vertical.

That’s what most people think of when they think of our country’s financial problems. And it’s a real, big thing. Oh yeah, and let’s add in another $7 trillion for state and local debt.

But there’s another black swan lurking out there. One many people aren’t aware of.

Unfunded Liabilities

Social Security and Medicare. The two horsemen of the unfunded fiscapocalypse.

The American government has promised huge benefits for these programs going forward.

And for a while, when baby boomers were at their earnings peak, we had huge surpluses. All that money should have been saved for the future, when baby boomers were set to retire.

But those surpluses were spent by stupid politicians. So now we have massive unfunded liabilities.

Here’s the broad overview:

Medicare is the biggest unfunded liability. Healthcare costs (and fraud) are absolutely surging.

Take a look at the chart below. It shows the percentage of Medicare spending which is funded by payroll taxes.

Source: Peterson Foundation

In 1974, payroll taxes paid for 71% of Medicare expenses. Only 18% came from the government’s “general revenue” fund. Not bad, almost sustainable.

But today payroll taxes cover less than 35% of Medicare expenses. The rest is paid with general taxes and deficit spending. So despite having massive payroll tax revenue, Medicare is still underwater.

According to the Medicare Trustees Report, the program’s Hospital Insurance Trust Fund will be depleted by 2033.

The situation looks bad based on government projections. But those projections tend to be far too optimistic.

Medicaid is a whole separate issue, and isn’t considered an “unfunded liability” due to the fact that it’s paid out of general revenue (no trust fund). But it’s also a huge problem.

Together, Medicare and Medicaid account for about 6% of GDP. A massive, ridiculous number.

$100 Trillion+

Add in another $8.2 trillion for underfunded federal pensions and Veterans Affairs costs.

And we get a number that dwarfs U.S. debt. Let’s call it $100 trillion.

These are America’s unfunded liabilities. Money we have promised but haven’t budgeted for.

In short: Medicare, Medicaid, Social Security and other unfunded liabilities will remain a drag on the economy for many decades to come.

Unless there’s major reform. Cost-cutting, benefit-slashing. But that is a very hot political issue. Too hot for any sane politician to touch. President Trump has announced a major fraud task force, and hopefully something comes of that. Because fraud in Medicare and Medicaid is absolutely out of control.

But the fundamental problem will remain. Too many benefits promised to too many people, and not enough money to pay for it all.

How will we solve these issues?

Money will be printed to cover shortfalls. It’s the only realistic political outcome.

The Next Decade is Key

These big debt/liability situations always take longer to play out than it seems like they should.

But I believe the debt + unfunded liability situation will reach a tipping point within the next decade. We have already passed the “event horizon”, where there’s no turning back. It’s impossible to pay off the debt and fully fund the liabilities with fully-valued dollars.

The debt will need to be paid off with devalued money. The liabilities will be paid for in “full”, but they won’t be worth what they should.

In other words, inflation will eat up a large portion of our debts and liabilities. Which means the people holding U.S. debt (Treasury bonds, bills, notes) will likely get hosed.

At some point people expecting to live off social security will have to lower their expectations. Sure, your check will come every month, but it won’t come close to meeting your needs. Inflation will eat up the purchasing power (cost-of-living adjustments won’t match true inflation).

It’s a bummer, but I don’t see any way around it.

When will we hit this turning point? There are hundreds of factors to consider, so it’s very difficult to say. But we are approaching the “snowball” period on our debt, where interest payments are becoming a huge portion of overall government spending. Not a good sign.

And as far as unfunded liabilities go, Medicare is probably more of a concern than even Social Security. Healthcare costs are simply rising too fast, with no signs of slowing down.

DOGE Never Stood a Chance

Even if DOGE (President Trump and Musk’s plan to slash government spending) had worked, it would have only delayed the inevitable.

But it didn’t work. The swamp remains undefeated. Our political system has become an enrichment scheme for fraudsters and special interests. Call them whatever you want. The deep state, the swamp, or much worse.

No matter who’s in power, unfunded liabilities and debt will continue to grow. It’s a structural part of our economy now. The ponzi must go on.

So the train is accelerating down the mountain with no brakes. And it’ll probably avoid derailing for longer than we expect.

But eventually the bill comes due. And when it does, the Federal Reserve and Treasury Department will go to insane lengths to engineer a “solution”. We’re approaching that point now.

Hint: their solutions will involve lots of money printing, debt monetization, and financial repression. And given the size of the problem, it’ll take at least a decade, and probably longer, to fix.

This is why we own hard assets.

The post Nothing Stops This Train appeared first on Daily Reckoning.

A dear reader, planning to move here from Australia, wrote to ask if we thought this would be a good time to buy property in Argentina.

Context: Argentina is the most fascinating experiment in government and finance since the Bolsheviks took over Russia in 1917. Back then, the collectivists were determined to prove that they could do a better job of running a country than free people could do on their own. They failed.

In Argentina a similar, but less dramatic, experiment began in the 1950s, led by the Big Man, Juan Peron, and continued for the next 70 years. They wrecked the economy, too. Now, Javier Milei wants to show that the free market can fix it.

The first two things we noticed when we got to the airport in Buenos Aires was a major remodeling on the international terminal…and a cup of coffee cost 6,600 pesos.

Some quick math tells us that the dollar cost of the coffee was a little less than $5. That is about what you pay in most places.

We are staying in the old, elegant ‘Recoleta’ neighborhood…in the old, elegant Alvear Hotel. We had heard that things were getting pricey. But you wouldn’t know it from the local real estate listings. At a glance, you could buy a decent two-bedroom apartment for around $250,000. Not much more than it was a few years ago, the last time we looked. That seems cheap to us…too cheap to be the top of the market. But there are few fixed-rate, long-term mortgages in Argentina. The lack of credit keeps prices low.

But the quality of life, at least here in this upscale neighborhood, is high. Yesterday, we went for lunch at La Rambla on Posadas. It’s a classic corner café where we’ve gone for many years. The waiters are professionals…dressed properly with black jackets and white shirts. The food — mostly pieces of beef in various ‘sandwiches’ — is excellent. And the décor — warm woodwork throughout, with wrap-around glass in front — was inviting and restful. As for the loud music that ruins most US restaurants, there was none. We sat and sipped our coffee, happily thinking that if there were a major nuclear war, we here in the Southern Hemisphere, would be among the last to die.

Ah yes, Buenos Aires, mi querido!

Small things. But a life is passed in small increments. Minutes…hours…days…full of sights, sounds, tastes, touches and words. Let the economists worry about GDP growth; we just want a quiet place to have a cup of coffee.

Beyond these initial impressions, we turn to two old friends who follow events in Argentina more closely than we do. Joel Bowman, for example, is on the case and on the numbers:

• Country Risk: down from 2,700 to 510
• Poverty: down from 57% to 28%
• Annual Inflation: down from 211% to 30%
• Debt: down $30 billion USD
• Public Spending: down 30%
• Public Employment: down 65k positions
• Budget Surplus since 2024
• Reserves: up $28 billion USD

Those numbers describe a major turnaround. But Doug Casey has a word of caution. He lists some ‘unforced errors’ committed by the Milei government:

‘When he was elected, one of his central propositions was abolishing the Central Bank. That hasn’t happened so far. In fact, he’s no longer talking about eliminating the evil institution.’

‘Argentina should have defaulted on its debt, which was run up by past criminal regimes. Though much of that money was stolen, it’s now a liability of future generations of young Argentines. But instead of defaulting on what they have, he’s gone back to the IMF to borrow more.’

‘Milei said that he wants to join NATO, a truly stupid and pointless desire. He supports the criminal Zelensky regime in the Ukraine. He wants to take sides in the conflict between the Israelis and the Palestinians.’

‘And…Argentina, a bankrupt country, bought 24 used F-16s from Denmark for about $300 million, which makes no sense.’

The errors are costly. But probably not fatal. A bigger threat probably comes from politics. Cutting off government giveaways helps an economy in the long run, but it causes pain to voters in the short run. They may lose patience. We consulted our own expert source:

“Milei is doing the right things,” said the cab driver. “You know, we had thousands of people we called ‘gnocchis.’ They were on the government payroll but they never came into work. Milei is getting rid of them. But it takes time. Probably two generations. You need to get rid of a whole mindset, where people think they can live off the government…. But I think this is the time to buy here in Argentina. It is a country on the way up.”

Hmmm…two generations is a long time to wait.

We’ll be here in Buenos Aires for a few days. Then, we’ll head up to Paraguay.

Stay tuned for a report.

Editor’s note: read more of Bill and his team’s work at Bonner Private Research.

The post The free market can fix it appeared first on Daily Reckoning.

LA politics burned down his house. Now, he’s burning LA politics.

“I’m not running to be a politician,” said Spencer Pratt, former television personality and now a candidate for Mayor of Los Angeles.

“I’m running because the current mayor (Karen Bass) let my house burn down.”

Spencer & Heidi Pratt amidst debris of former home in LA. Courtesy Pratt for Mayor 2026.

Kaboom! Great line.

It’s no wonder that Pratt is soaring in polls. He’s honest, serious, straightforward, sincere, sympathetic, original, energetic and refreshing; plus, he’s funny and totally incisive. Definitely, this guy resonates with voters. Hence, Pratt is raising funds, gaining endorsements, and remaking California politics, if not America’s.

Will Pratt be the next mayor of America’s second-largest city? Can he salvage LA from its trashy level of decline and urban implosion? Just now, it’s hard to say because strange things definitely happen on election days anymore.

Still, it’s “America 250,” and what better way to celebrate the country’s quarter-millennium than to liberate a formerly great city from the seedy, greedy grip of long-term, left-wing, progressive political dysfunction, corruption, incompetence and cronyism.

Meanwhile, the tale of Pratt’s political journey pertains not just to the Golden State, but offers a teachable moment to the entire nation. Let’s dig in…

Reality TV Meets LA Reality

At first blush, 42-year-old Spencer Pratt is an unlikely candidate to run a city, let alone a really big place like Los Angeles.

Still, he begins with solid bones, so to speak. Born and raised in LA, he’s a home-boy USC grad who went into a local industry, namely the entertainment business. There, Pratt played roles that portrayed him as a bad guy; although, of course, in Hollywood that’s also what actors call “work.”

“Yes, I was a bad guy,” Pratt explained in one interview. “That was my job. I worked with show-creators, producers and scriptwriters to be a bad guy. And I made good shows that people wanted to watch, which led to good ratings.”

(Note – Pratt discusses his career in a recently published book entitled The Man You Love to Hate: Confessions from a Reality TV Villain.)

Meanwhile, ratings are the cash register of the entertainment biz. And Pratt’s strong ratings led to more than a few handsome paydays. During one stretch, Pratt’s income was so good that he and his wife Heidi bought a multimillion-dollar home in tony Pacific Palisades. (Well, back then it was tony. Not anymore, as we’ll discuss below; and see here for a related article I wrote last year.)

For Pratt, his home and former life amidst the LA show biz crowd burned down on January 7, 2025, at the beginning of several weeks of massive wildfires that scorched the region.

Pratt’s house went up in flames, along with much else. In fact, those LA fires burned about 90 square miles, destroyed more than 18,000 homes and structures, killed at least 31 people and forced more than 200,000 to evacuate. Insurance estimates placed losses north of $250 billion.

Pacific Palisades post-fire, January 2025. Courtesy ABC News.

During the conflagration, flames jumped from building to building. But in many neighborhoods water mains were empty and fire hydrants didn’t work. Not that it mattered because several of LA’s key reservoirs were empty, drained and never refilled by officious, know-it-all bureaucrats.

Even adjacent to the Pacific Ocean – absolutely, an aqueous firefighting resource – many areas burned to the ground for lack of equipment simply to pump seawater ashore and squirt it from a hose.

LA burned to the waterline; i.e., the Pacific Ocean! Courtesy U.S. Army Corps of Engineers.

On streets across the city, the LA fire department lacked sufficient firefighting trucks. In its fiscal wisdom, the city had retired equipment without replacement; or the fire department lacked funds for normal maintenance after the Bass administration raided the budget to fund so-called “homelessness” programs and other boondoggles.

And while LA burned, Mayor Bass was on a political junket to Africa, in Ghana to be exact, and nowhere to be seen in the early days of flaming disaster.

Burned Again, After the Fires

Immediately after the fires, politicians lined up and promised help. Clear the debris! Rebuild fast! Permits forthcoming! Blah, blah, blah. Yeah, right…

A year later, per Fox News, a mere 12 building permits were issued for reconstruction in Pacific Palisades. And in the past 17 months, just two new houses have been erected amidst the ruins, one of which is a “spec” by a builder who bought land from a seller who just wanted to cash out and get away from the entire mess.

Instead of helping citizens who lost homes rebuild, the Bass administration and her LA city bureaucracy placed roadblock after roadblock: new zoning and land use rules, extensive permits, costly filing fees, architectural reviews, endless checklists. And this is on top of how property owners must battle insurance companies over the amount of fire coverage (long story).

Along the way, several thousand displaced people have simply sold their former real estate to insiders, speculators and developers, more than a few of which are foreign corporations, and some apparently funded from Chinese sources.

Downtown, at City Hall, and up north in the state capital of Sacramento, the prevailing push is to rebuild Pacific Palisades with a large element of so-called “low-income” housing.

In other words, we see here a political land grab from former homeowners. The system ties up burnt-out homeowners in red tape, waits them out, wears them down, and then takes their property to advance the cause of Social Justice and the Nanny-Welfare State. It’s a massive racket between well-connected developers and local, county and state government.

Meanwhile, as things currently stand in California, multi-billions of dollars per year are already dedicated to… ahem… “housing the homeless,” and yet the numbers of people on those LA mean streets never seem to decline. (Long story; scandalously long.)

Campaigning for Competency

Pratt’s frustration with unaccountable, incompetent, uncaring government prompted led him to toss his hat into the political ring. “I saw who was running,” he said, “and it was the same exact people who caused the problems in the first place. So, I stepped up.”

Now, Pratt is staging a fast-growing, populist-style campaign, and in California no less; a state defined – and ossified – by two decades of single-party political dominance, certainly in LA.

“I’m running against incompetency,” Pratt said. “I’m running against complacency. Against the idea that these politicians are entitled to power, and to spend taxpayer money on whatever they want, no matter how bad the result. My campaign platform is common sense.”

Asked about his lack of past political experience, Pratt quickly notes, “The people who run things have all this supposed ‘experience,’ and look where we are.”

He explains that his campaign has been working with a long list of outsiders who will be pleased to step up and play roles in bringing better governance to LA if (when) he wins the election.

Pratt points out that, “California is home to some of the smartest people in the world. Many of them live in or around LA. And none of them seem to be working in the Bass administration.”

Meanwhile, “The LA region is among the wealthiest spots on the face of the earth,” he says. “We ought to be an economic powerhouse, gleaming like Dubai or Singapore. But instead, we have miles of homeless camps. We have drugs everywhere. Feces on the sidewalks. Crime. Bad schools. Broken infrastructure. Boarded up buildings where nobody can start a business.”

In a recent interview with CBS News, Pratt was filmed at his current abode, a trailer parked on the site of his burnt-out home in Pacific Palisades. “My opponent lives in a three-million-dollar home. I live in a trailer, a year after my house burned down. And after my parents’ house burned down. And my friends’ houses. And ten thousand other people’s houses.”

But neither is Pratt a single-issue candidate. For example, in another discussion he explained how LA is unprepared for a mass-casualty event.

“It’s not just last year’s fires,” he said. “Already, much of the underbrush has grown back and the city isn’t clearing fire breaks. And LA is unprepared for even a modest earthquake, and we know what kind of damage that would cause because we’ve seen it before.”

Plus, Pratt has a more than respectable approach to many other basic issues of city governance: how to deal with homeless people, drugs, crime and criminals; how to promote growth and economic development, repair infrastructure, and much more.

Indeed, it’s fair to say that Pratt has as much of a campaign package as anyone else, if not more. But it doesn’t matter if he doesn’t win.

Shock & Awe Social Media

So, what’s Pratt’s pathway to the mayor’s office? Well, here’s where his bad boy, reality TV past comes in handy.

Pratt understands that the way to break through the California media market is with some level of spectacle, but not just gratuitous sound and light. Thus, his ads are creative gems that offer a sharp, honest, reality-based, easily understood political point, delivered with pithy humor.

One of Pratt’s first ads was a homemade effort that required about six hours to devise and has already amassed over 20 million views. Numerous other Pratt ads are similarly impactful: a mix of funny sketches that include devastating political points about how out-of-touch is the current political class. (These ads are easily located with a simple You Tube search.)

Pratt eschews typical political pabulum. He knows that California is a one-party state run via a tight, mostly closed political-media system that maintains the Left in power. In other words, it’s next-to-impossible for an outsider to break through to the public by conventional means; other candidates have tried in the past and spent hundreds of millions of dollars on losing campaigns.

With this in mind, Pratt’s road to success is to mobilize public opinion via social media. His ads must land hard, and then go viral; that is, go over, under, and around the roadblocks of conventional television, radio, print and even established online venues.

Pratt’s anchor-narrative – and it will continue, no doubt – has been the loss of his house to the Palisades Fire: “Karen Bass let my house burn down.” Yes… very emotive.

But now that Pratt has people’s attention, his narrative is expanding. He can’t just be the “burned house” guy. So, he campaigns honestly on issues that quickly relate to other, widespread levels of dissatisfaction: homelessness, crime, drugs, urban decay, etc. That, and massive waste of billions of taxpayer dollars on failed boondoggles. At root, Pratt tears the mask away from standard California zombie-party politicking.

For Pratt, the political idea must be to mobilize and build a voter base via social media. Clearly, he has caught the wave of broad public opinion that’s dissatisfied with progressive, expensive, thoroughly ineffective Left-wing government.

Serendipitously, Pratt’s engaging ads have sparked a cottage industry of creative, independent imitators and spinoffs, many of them constructed from astonishing displays of visual AI. One ad depicts Pratt as Batman fighting crime, and thoroughly mocks the current crop of California political frauds.

So, Spencer Pratt is a blast of fresh air; but can he prevail? Will he be the next mayor? Well, he’s coming on strong right now. And the California primary is June 2^nd. We’ll see, of course, and then we’ll see what happens in the November elections.

But clearly, Pratt is out to change Los Angeles, to recapture governance, kick out the hard Left, and bring some basic honesty and sanity back to the streets.

At an even higher level, LA offers hope to the nation. Because if the City of Angels can come back from the brink of Perdition, it says much about many other American jurisdictions where political dysfunction, corruption, grift, graft and incompetence also run deep.

Spencer Pratt. Bad guy. But you can call him “Mr. Mayor.” Indeed, maybe even America’s Mayor.

That’s all for now. Thank you for subscribing and reading.

The post Spencer Pratt appeared first on Daily Reckoning.

Things are finally getting exciting in silver again.

Today we broke out above $85/oz in the U.S.

There was some stiff resistance around the $82 level that gave us trouble for a bit, but today we cut through like butter.

According to our friend Sean Ring, if we can stay above this key $82 level, the uptrend will be confirmed and the technical outlook much improved.

Personally, I’m more of a fundamentals guy. But when technical + fundamental views converge, it’s often worth paying attention.

Meanwhile in Shanghai, China, silver is trading at $96/oz. That’s a hefty 12% premium. In the chart below, the red line is the Shanghai price, and the blue line is the Western price.

Source: GoldSilver.ai

As you can see, Shanghai silver pricing tends to lead the West. This is because Asia has become the primary consumer of physical silver. Especially China.

In March, China shattered silver import records. The orange line represents 2026 data through March.

Over 800 tons of silver, imported in a single month. And China mines a lot of silver as well.

Here’s an excerpt from the Bloomberg piece which the above chart comes from:

Demand was bolstered by retail investors piling into small silver bars, an alternative to pricey gold, and solar manufacturers front-loading production ahead of the removal of the export tax rebates on April 1. The solar industry consumes about a fifth of annual supply, and is overwhelmingly located in China.

So two catalysts are fueling a demand spike simultaneously. First, it’s the solar panel boom we’ve been talking about for a while. More than 20% of total silver demand comes from solar alone.

The spike in fuel costs related to the Iran war has caused countries around the world to diversify their energy mix with solar. Many countries rely almost entirely on fuel imports, so this crisis has been a wakeup call. Solar combined with battery storage is the quickest solution to increase energy production, by far.

The second catalyst is fierce silver buying by Asian investors. In China, they’ve essentially outlawed crypto. So speculative demand often flows into silver.

Silver has thousands of years of history as money in China. The country has had dozens of paper money disasters (hyperinflations) over the past thousand years.

So the fact that prices are 12% higher in the home of physical silver is a very promising sign. The physical market remains tight, which is bullish for silver stackers.

New Markets

Some of you may be wondering: why is he spending so much time on silver demand in Asia, and China in particular?

Because during most modern silver bull markets, Asia was not a significant player.

Both India and China were too poor to buy all that much investment silver. And solar hadn’t yet taken off like it has today.

So this is a whole new world for silver. Today Asia has significant saving and investment dollars. In China, the personal savings rate is over 30%. A lot of that money will find its way into silver coins and bars.

And solar is a whole new animal as well. China controls up to 85% of that market.

During the 1980 bull market we had photography driving industrial demand for silver. At its peak, photo development accounted for around 30% of silver demand.

Today solar, electric vehicles, medical, and electronics have taken over as the primary industrial uses. And I don’t see these sectors slowing down anytime soon.

We’re in an extended “price discovery” period where silver will find its new trading range. It will continue to be volatile, but the trend should be higher for years.

Remember, it was just last October that we finally broke through the 1980/2011 prior high of $50.

Personally, I believe prices are going far higher. I plan to hold my silver investments for at least 5 years, and possibly longer.

A Proper Silver Mania

Eventually there will be a true silver mania. That brief spike above $100 we saw at the start of the year wasn’t the finale. Not even close.

I don’t claim to know exactly when it will happen. The price could fall if the Iran situation escalates (but then most assets would likely fall).

But sometime in the next few years, we’re going to enter a more chaotic financial period. The effects of the debt bubble will become apparent.

The Fed will print vast sums of money, lower rates, and the government will send out stimulus checks. Inflation won’t stay this low for much longer.

Demand for silver coins, bars, and jewelry will spike. Silver is one of those rare assets that is both a monetary and industrial asset.

Long-term predictions are tricky, but I could certainly see silver trading above $200 sometime in the next 3 years.

And whenever the next inevitable wave of inflation begins, we should see a flood of new money coming into precious metals. And for most people (at today’s prices) that means silver.

So we’re in a situation where both industrial and investment demand for silver are rising strongly. The catalysts driving these moves (diversification into hard assets, and energy insecurity) are durable and should last for many years to come.

Earlier this year, the move in silver got ahead of itself. But that spike from $50 in October to $115+ in January shows what’s possible.

When silver breaks out, it behaves like no other commodity. That’s because for many thousands of years, our ancestors used silver as money. We still have a cultural attachment to this metal.

Silver has been a safe haven for just as long as gold. But today it also benefits from growing industrial demand.

When these two types of demand rise together, as they are today, the result can be powerful.

Silver remains my favorite long-term hard asset. Yes, the price will jump around quite a bit. But the long-term trajectory remains unchanged: higher.

The post The Shanghai Silver Secret appeared first on Daily Reckoning.

In the last 24 hours, Iran has launched missiles and drones at the UAE, hitting an unknown target at Dubai International Airport (causing a large plume of smoke).

Censorship in the UAE is heavy-handed, but a passenger on their way out of the country snuck a few pictures from the runway:

Iran also claims to have hit American destroyers with either anti-ship missiles or drones, forcing them to retreat. But we’ve seen nothing to indicate this is true. CENTCOM reports that all attacks were intercepted.

The U.S. Navy has also been busy, hitting two Iranian tankers attempting to bypass the blockade, and striking Iranian military positions along the coast. American destroyers are patrolling the Persian Gulf, which didn’t happen during the earlier stages of the war.

US Navy F/A-18 strikes an empty Iranian oil tanker | Source: X

I guess the ceasefire is holding?

It is true that full-on war hasn’t resumed yet. But it sure looks like we’re headed in that direction.

Today, let’s examine some key aspects of where we are in this conflict, and how things could play out from here.

Opening the Strait By Force

Since the beginning of this war with Iran, I have believed that opening the Strait of Hormuz by force is not going to work.

Iran’s anti-ship missiles and drones are too spread out. Their longest-range anti-ship missiles can strike from roughly 800 kilometers (500 miles). Their fast-attack boats and naval drones wait hidden in deep tunnels.

Iranian anti-ship missiles in a deep underground tunnel | Via AP

Rooting all that out would take years. Hundreds of strike aircraft, thousands of missiles, and a large ground force basically going cave-to-cave.

So President Trump has taken a different route. First, he attempted to bomb Iran into submission. Hitting bridges, power plants, and oil infrastructure. But Iran hit back, striking U.S. bases and key Gulf oil and gas sites. It wasn’t working, which is why we changed the strategy.

The Navy blockade of Iranian ports is working better. But some tankers were still getting through. So the Navy started confiscating vessels, and is now disabling them with missile and artillery fire.

Meanwhile negotiations are going nowhere. Both sides are sticking to red lines the other will never agree to.

And the global economy is looking like a hostage locked in an airtight room with limited oxygen.

Hitting Tank Bottom

Oil industry guru Jeff Currie was recently on Bloomberg TV. His interview was sobering. He says in all his years in the commodities business, he’s never seen anything like this.

Jeff says Europe’s oil storage will hit “tank bottom” sometime this month. Australia, the Philippines, and Thailand are in even worse shape and already rationing fuel. China is OK for now, because it has reserves of around 1.3 billion barrels of oil.

Jeff expects the U.S. to hit crisis levels around July 4th. Yes, we are not immune. Right now we’re exporting vast quantities of oil and fuel. So we are still affected by global prices. And inventories are dropping rapidly.

Our colleague Jim Rickards has been warning about this for months. Jim says the “floating pipeline” of ships which left the Gulf before the blockades has now arrived at their destinations and delivered their cargoes.

Much of it is already refined by now and in the market. These sorts of disruptions work on a delay. And it’s going to hit very soon.

Fertilizers Too

In a press conference this week, Secretary of State Marco Rubio stated the following:

“It’s other countries’ fertilizer that’s stranded in the Persian Gulf, not our fertilizer.”

It is true that we only import about 10% of our fertilizers through the Strait of Hormuz. But that’s still a decent amount.

And more importantly, fertilizers are a global market. They will be delivered to whoever is willing to pay the most.

And farmers around the world are already struggling. High diesel costs, high electricity costs, and now sky-high fertilizer costs, too.

This war began at a very unfortunate time. Spring planting season. This is a critical period for fertilizer application.

This war needs to be resolved soon.

Pressure’s On

President Trump is once again threatening to bomb (and possibly nuke) Iran. In response to a reporter’s question about the ceasefire, Trump replied that it is still in effect, but warned:

“If there’s no ceasefire… you’re just going to have to look at one big glow coming out of Iran. They better sign the agreement fast… If they don’t sign, they’re going to have a lot of pain.”

Meanwhile, an Iranian advisor warned that if Trump and Netanyahu renew their attacks, “the Islamic Republic’s response will be ruthless. The global economy collapses.”

Iran’s primary deterrence continues to be threats to strike local oil and gas infrastructure. Which they’ve proven they can do on short notice.

I realize we sound like a broken record by this point. But truly, nothing has changed. Both sides are capable of carrying out their threats.

So we remain at a stalemate.

Stocks Stumble Forward

Despite the chaos and looming shortages, markets are partying like it’s 1999 (literally).

I really don’t know what to make of this situation. It doesn’t seem like a good time to get overly bearish. The vibe is downright manic. Take advantage of it where you can.

This could be the market’s “blow-off top”, which tends to happen before every big correction.

How long could it last? Who knows…

These things tend to go on longer, and run farther than a rational person would expect. Bubbles are intoxicating, and the world is hitting that punch bowl hard right now.

I suspect it may be an eventful weekend. Markets are closed, and that tends to be when most of the action happens. We’ll be keeping a close eye on the situation. More next week.

The post Iran Ceasefire Teeters appeared first on Daily Reckoning.

Before yesterday, I was never too interested in old gold coins, known as numismatics.

My assumption was they were overpriced and you didn’t get much for your money.

But this is no longer the case.

The recent spike in gold prices has flooded the market with pre-1933 American gold coins. So premiums have dropped to rock-bottom levels.

I listened to a podcast yesterday with Van Simmons, one of the founders of PCGS, the leading coin grading company.

It was absolutely fascinating. Here’s an excerpt:

A $20 Liberty used to be 10 or 20 times the melt value. Now you can buy a brilliant uncirculated $20 Liberty for like 10 percent [over spot price], not 10 or 20 times. I was just looking at them today, just totally shocked and thinking this is stupid. But there’s so many on the market right now because so many people have sold and there’s also a couple of hoards that have come out. But that’ll change.

Van thinks this is a great time to buy pre-1933 coins. And after checking out the market, I fully agree.

Let’s dig in.

Pre-1933 Coins

As many of you know, the U.S. government made owning gold coins illegal for Americans in 1933.

Millions of gold coins in America were turned in or confiscated, then melted down. Citizens were paid $20.67 per ounce of gold. And then in 1934, gold was revalued to $35/oz. It was a huge overnight devaluation of the dollar.

Penalties for owning illegal gold ranged from a $10,000 fine to 10 years in prison, or both.

Owning gold was illegal for Americans all the way up until 1975.

Buy a Piece of History (at an incredible price)

The beautiful coin below is a $20 Liberty Head gold double eagle.

These coins were minted from 1850 to 1907. Each contains .9675 oz of pure gold.

You can currently buy a brilliant uncirculated (BU) $20 Liberty Head double eagle (random year) for just $4,619 on Apmex.com, a reputable dealer (we have no relationship and receive no compensation from Apmex).

That’s just $39 above the spot price of gold! A steal.

You can also buy smaller denomination American coins like the $2.50 Liberty Quarter Eagles starting at around $615.

These coins are a rich piece of American history. They symbolize the importance of sovereign money.

Of course, highly-graded coins will cost more. But these are in excellent condition considering they’re well over 100 years old.

The European Hoards

So, if most gold coins were confiscated and melted down by Roosevelt’s government, where did all these coins currently hitting the market come from?

Mostly from hoards in European bank vaults. Throughout the 19th and early 20th centuries, U.S. gold coins were commonly used to settle trade.

Hyperinflations are common in European history, so for a long time they didn’t trust paper/fiat money.

International business owners often kept a large portion of their capital in the form of gold coins. And many of those stayed in wealthy families for generations. They sat in European (and even Asian) bank vaults for many years.

Now that the price of gold is rising, many of the people who inherited those coins are selling.

So there’s a temporary flood of beautiful old coins in great condition hitting the market.

This is a rare opportunity to buy 100+ year old coins in brilliant condition for essentially the same price as a brand new American Eagle. That’s a special opportunity.

I suspect these low prices on old coins won’t last more than a year or two.

Eventually these beautiful old coins will find their way to new owners. And my guess is that most of them will be passed down for a generation or two.

So if you’re in the market for gold bullion, why not buy a piece of history while you’re at it? The premiums are unlikely to ever get better than they are today.

Here’s the link to that podcast with Van Simmons. He’s one of the most knowledgeable people in the world when it comes to rare coins. I highly recommend checking it out. You can watch or listen on Youtube.

The post Now is the time to buy “old gold”… appeared first on Daily Reckoning.

My good friend and colleague, Greg “Gunner” Guenthner, and I were chatting on X when he introduced me to a term I had never heard. It knocked me for a loop, so much so that I had to research and write about it.

This piece is the result of that research, and it won’t cheer you up. But I hope naming what’s happening to America’s once-great cities will help end their rot.

You see, we tell ourselves a comforting story about bad politicians. They mean well. They got the models wrong. They’re in over their heads.

What if that’s not the right story?

What if some of them know exactly what they’re doing? What if the decline is the plan?

Meet James Michael Curley

Two economists, Edward Glaeser and Andrei Shleifer, gave this dark idea a name. They called it The Curley Effect.

The name comes from James Michael Curley. He was the mayor of Boston 4 times. He was governor of Massachusetts once. He ran the city in the first half of the 20th century.

Curley built his power base on poor Irish voters. He went to war with the wealthier, mostly Yankee, middle class. He raised their taxes. He handed city jobs and contracts to his loyalists. He sneered at the people paying the bills.

Capital fled. Productive families moved to the suburbs. Boston stagnated.

Curley lost businesses. He lost taxpayers. But he kept the only thing he cared about: City Hall.

The Game He Was Actually Playing

Glaeser and Shleifer’s big insight was simple. Curley wasn’t failing. He was winning a different game.

The public’s game is “make the city rich.” His game was “stay in office.” Those games aren’t the same.

The logic is ugly but clean. Imagine a city with two voter groups. One is rich, mobile, and against you. The other is poor, stuck, and loves you.

So you raise taxes on the rich group. You spend the money on patronage jobs for your base. You call the wealthy parasites. You make them feel hated.

What happens? They leave. They take their tax dollars with them.

The city gets poorer. Less dynamic. More dependent on government.

But your share of the vote goes up. With every election, your odds improve.

Bad policy is a feature, not a bug.

Burn It Down to Rule the Ashes

There’s a quote that floats around the internet. It says, “An evil man will burn his own nation to the ground to rule over the ashes.” People stick Sun Tzu’s name on it, but he never wrote it. The line is a modern invention that feels so real, people just accept it must be true.

But it captures Curley perfectly. He was happy to mortgage Boston’s future. He just needed a smaller, more loyal voter pool. Ashes were fine, as long as he sat on top of them.

Once you see this pattern, you can’t unsee it.

The Pattern Today

Look around (I see you, New York City, Los Angeles, and Chicago). You see jurisdictions where:

• Productive people and firms are bolting for the exits.
• Leaders cheer the higher taxes and the regulations driving them out.
• The ruling class shrugs at the fiscal damage.

The reflex is to call them stupid. It feels good. But it’s also lazy.

Maybe they’re not stupid. Maybe they’re playing Curley’s game.

When wealthy families flee California for Texas, the response from Sacramento isn’t panic. It’s a sneer. “Good riddance.” When firms leave Illinois or New York, the message is the same. The leavers are traitors. The stayers are martyrs. The leader becomes a hero.

Polarized media supercharges this. In a calmer era, presiding over decline was reputational poison. Today, half the country cheers you on for it.

The Asymmetry That Makes It Work

Here’s the cold truth. Voters can move. Politicians can’t.

A wealthy family can leave New York for Florida. A company can move its HQ. A pro can pick Zurich over London.

But the mayor is stuck in his city. The governor is stuck in his state. Their job is to win the next election with whoever is left inside the borders.

Given that math, taxing and harassing your opponents until they leave isn’t crazy. It’s rational. It’s how you keep your job.

We like to think “voting with your feet” disciplines bad governance. The Curley Effect flips that idea on its head. If the people leaving were going to vote against you anyway, their exit helps you. You’d rather rule a smaller, poorer, loyal town than a larger, richer, divided one.

The Catch

This game isn’t free, even for the politician. The tax base shrinks. Patronage costs money you no longer have. Roads crumble. Schools rot.

But if your time horizon is the next two or three elections, who cares? You’ll be retired or in a different office before the bill comes due.

You’re not trying to maximize prosperity. You’re maximizing control.

Wrap Up

Stop assuming incompetence. Start assuming it’s a strategy.

When you see a once-great city collapse under leaders who double down on every wrong move, ask the harder question. Not “why are they so dumb?” But “what game are they actually playing?”

Sometimes the answer is incompetence. Sometimes it’s something darker.

The Curley Effect is the academic label for that darker thing. It’s a real pathology in democratic systems. And until the people who can leave start naming it for what it is, they’ll keep walking out the door.

One by one, it leaves the arsonists in charge of the ruins.

The post The Arsonist’s Playbook appeared first on Daily Reckoning.