By Snow White (2024) is a terrible movie. Granted, I don’t have any particular insights into the film, but economics teaches me that everyone involved in that movie believes it’s a terrible movie, and I’m willing to bet that they’d know. So, unless this movie surprises absolutely everyone involved in making it, it’s a terrible movie.
“So what?” you might ask. But this example reminds us that the Fed’s inflationary money policies destroy all values, including artistic values. Let me explain.
If anyone involved with Snow White believed that people want their celibate warrior-princess story, then why would they rely upon intellectual property that they don’t own to market their story? That’s right: Disney does not own Snow White because that fairy tale is in the public domain. They only own their versions of that tale, but if they were to popularize their new-and-improved lonely warrior Snow White, then anybody would—and could—make knockoffs, thereby depriving Disney of money that would otherwise be Disney’s.
Disney doesn’t leave money on the table. The only reason Disney would use an intellectual property that it doesn’t own to launch a completely different character in a completely different cinematic universe is that Disney wants to adulterate its own intellectual property. That is, Disney wants to sell tickets to people who would never intentionally purchase lonely warrior White but who would buy a ticket while mistakenly believing that they’re getting Disney’s Snow White. In that sense, it’s the same economics as if McDonald’s secretly replaced beef with chicken in its burgers—they wouldn’t adulterate their burgers if they genuinely believed that there was a market for chicken burgers; they’d only adulterate their product if they knew that consumers didn’t want chicken burgers.
What does any of this have to do with the Fed? Well, when the Fed makes money artificially cheap by devaluing the currency, what’s an investor going to do? They’re going to store money in the stock market, in big brand names like Disney. This leads to stock prices that are constantly rising. So, if you’re an executive paid mostly in stock, what do you want to do? Isn’t it obvious? You want to remain employed while the Fed inflates your company’s stock price for you; you don’t care about Disney’s performance because you make money off its stock price, which is driven by the Fed’s inflationary policies. Sure, you’d like to succeed, but you’d rather stay employed because the benefits of doing unusually well are slight, relative to the benefits of hanging on for longer. Alpha’s just not worth the career risk when beta’s so high for so long.
Since your only goal is to remain employed, you’re going to shy away from controversy. It doesn’t do you any good to approve a “racist” movie that makes billions because you’ll be fired. Thus, you’re going to kowtow to activists.
Likewise, you aren’t going to pick any fights with BlackRock or Vanguard. These huge institutional investors could kill your stock price on a whim, so you’ll do anything they want, and they want environmental, social, and governance (ESG) standards.
And nobody cares about your losses because money’s free, remember? You can lose billions and billions on failed films, but your share price will just keep climbing because you can borrow for nothing and your real interest rates are likely negative after inflation. Since share prices function as a kind of alternate currency, executives need only ensure that their currency doesn’t lose value more quickly than the dollar, which is easy when you’re selling “brand name” shares like Disney’s.
Throw in some rampant speculation on how “streaming” will make billions—someday, somehow—and you’ve got a recipe for turning out bad film after bad film, all of which seek only to adulterate preexisting intellectual property because that’s the cheapest and easiest thing to do for people whose only purpose is not getting fired.
Firms or their owners might want to profit maximize, but the people who run those firms often don’t—they’d rather keep their jobs. And once investors are just trying to avoid losses to inflation, your losses don’t seem so bad (especially because your investors can sell to people who want to speculate on “streaming” and the like).
Throw in people who actually believe in ESG practices, and your share prices can skyrocket even as your films flop! And everybody’s happy losing other people’s money.
Of course, remember that we’ve been told, “Nobody can beat the market.” Combine the efficient capital markets theory with the Fed’s inflationary money and you have an entire market in which nobody cares about making profits—it’s just about riding the next Fed-launched speculative wave.
And when your society’s resources are allocated by people who don’t care on behalf of people who also don’t care, well, you’re not going to get economic growth. Or good films. But you are going to get a lot of representation (because it’s hard to fire somebody who hired lots of black actors or created lots of LGBTQ roles without exposing yourself to potentially career-ending allegations, and why would anyone risk that).
Long and short, nobody’s going to make a decent story about a warrior princess who doesn’t need a prince when they can just make anything they want and call it Snow White; the adulterated Snow White will always outcompete anything else because it’s essentially cheating, using intellectual property improperly. If McDonald’s could throw whatever it wanted in burgers and still call the result “burgers,” you wouldn’t like what they’d throw. Quite simply, when there’s no penalty for failure, there’s no reason for success.
In the final analysis, therefore, the Fed will destroy everything when it destroys the medium of exchange (i.e., money) because trade requires money and human civilization requires trade. Indeed, poverty is best understood as a lack of access to trade, and the Fed’s trying to impoverish us all by denying us access to trade. We all remember that Rome’s inflation led to the collapse of its Empire, but do we remember what happened next? It’s called the Dark Ages for a reason.
