For over 40 years, Duane Peters has truly embraced the title “The Master of Disaster.” Each day has seen him dive headfirst into the world of skateboarding, giving it his all in pursuit of exhilarating tricks and stunts.
This path was fraught with challenges, including broken bones, missing teeth, and countless injuries. Yet, he thrived in this chaos.
In 2015, when he was inducted into the Skateboarding Hall of Fame, Peters delivered what is arguably one of the greatest acceptance speeches ever. This moment marked the culmination of a tumultuous yet vibrant journey.
However, the last few years have not been particularly kind to Peters. Against the odds, he has survived into his 60s, navigating the complexities of life in America as of 2023.
This week, the yield on the 10-Year Treasury note soared past 4.3 percent, achieving a 15-year peak. If this trend continues, it could have major ramifications across the board.
Where do we even begin?
Back in 1981, Duane Peters was innovating tricks like the invert revert, acid drop, and fakie thruster amidst Southern California’s empty swimming pools. While showcasing his creativity, he also exemplified the art of self-destructive enthusiasm.
His numerous injuries garnered him the title “The Master of Disaster.” Meanwhile, unbeknownst to him, the foundations for a forthcoming mega-disaster were quietly being laid.
In fact, the interest rate cycle reached its peak in 1981. Over the subsequent 40 years, rates gradually declined, propagating these seeds of potential disaster across the financial landscape.
Credit and Asset Prices
The link between interest rates and asset prices is usually quite simple. Strained credit conditions tend to lower asset values, while accessible credit tends to inflate them.
When borrowing is easy and affordable, individuals and businesses are more likely to take loans for purchases they otherwise could not afford. For instance, individuals take on large jumbo loans, driving up home prices. Companies taking advantage of abundant credit buy back their shares, inflating both their stock prices and executive compensation.
On the flip side, when credit tightens, borrowing becomes limited to investments with assured high returns that justify the higher interest rates. As a result, financial asset prices may deflate.
In 1981, borrowing was costly, while financial assets remained relatively cheap. At that time, the interest on a 30-year fixed mortgage peaked at 18.63 percent, with the median U.S. home price at around $70,000.
In stark contrast, the interest rate for a 30-year fixed mortgage hit a low of 2.65 percent in January 2021, while the median home price skyrocketed to approximately $416,100. The coasts saw even higher prices.
The DJIA was around 900 points back in 1981 but has since surged to about 34,500 points today, reflecting an astonishing increase of over 3,733 percent. Meanwhile, nominal gross domestic product has only grown by around 764 percent during the same timeframe.
A 40-year trend of increasingly cheaper credit appears to have contributed to the inflation of both stock and real estate values. Asset prices, along with other inflated costs, such as college tuition, have been severely distorted by these four decades of inexpensive credit.
Moreover, the widening gap between high asset valuations and low borrowing costs has set the stage for a looming mega-disaster.
Master of Disaster
The Federal Reserve wields significant influence over credit markets, although they do not entirely control them. Indeed, Fed interventions are secondary to the encompassing ups and downs of the interest rate cycle.
Historically, the current yield of 4.3 percent on the 10-Year Treasury note remains below its long-term average of 4.49 percent. Nevertheless, compared to the past three years, it is exorbitantly high.
In July 2020, the yield reached a low of just 0.62 percent, but today it has surged more than 593 percent in just 36 months.
The last significant low in interest rates occurred in the early 1940s when the 10-Year Treasury note hovered around a yield of 2 percent. Subsequently, interest rates trended upward for about four decades.
Few recall that the Fed’s attempts to adjust the federal funds rate produced very different outcomes during rising and falling phases of interest rates.
During the years from 1987, with the inception of the Greenspan put, until 2020, whenever the economy softened, the Fed cut interest rates to stimulate demand. In that disinflationary climate, credit markets helped cushion the adverse effects of these policies.
While asset values soared and incomes stagnated, consumer prices did not dramatically escalate.
This led the Fed to mistakenly believe they had mastered the business cycle, which was a grave misunderstanding.
In contrast, during the rising phase of the interest rate cycle, as illustrated in the 1970s after the U.S. defaulted on the Bretton Woods Agreement, Fed interventions proved disastrous.
During that decade, policymakers were unable to manage rising rates effectively. Their attempts to keep federal funds rates artificially low to stimulate the economy did not yield the intended results.
As demonstrated since 2020, this inflationary monetary policy led to significant consumer price inflation. Thus, the Fed’s policies during this rising interest rate cycle reflect a recipe for disaster.
An Urgent Appeal for Duane “The Master of Disaster” Peters
As of July 2020, interest rates have finally begun to rise after 40 years of decline. They are likely to continue increasing for the next three decades.
This shift means that the cost of credit will progressively escalate into the mid-21st century. The era of perpetually falling interest rates that began during Reagan’s administration has come to an end.
So, what of Duane Peters, “The Master of Disaster”? Well, Peters appears to have missed the memo. Even if he had received it, he likely wouldn’t have paid it any mind.
Just a few years back, at a time when interest rates were plummeting, Peters voiced his opinions on social media, disparaging “liberals,” political correctness, and surgical procedures for transgender individuals.
So caught up in pursuing disaster, he seemingly missed how tattoos had morphed into expressions of conformity. Skateboarding, too, had become mainstream. The whole culture had turned “woke.”
In an instant, Peters faced cancellation. Sponsorships evaporated, and product lines were discontinued, resulting in the loss of 40 years of his legacy.
And now he’s in urgent need of assistance—he’s been evicted.
Peters isn’t seeking a handout; he’s looking to liquidate his assets to get back on his feet.
Among these assets are items of questionable value, like old sneakers and T-shirts. However, if supporting a legend appeals to you, you can check them out here and see if anything catches your eye.
Peters’ story, aptly titled Who Cares, serves as a cautionary tale about the importance of planning for the future and the consequences of stretching beyond one’s means.
While Peters may not be a role model, he mirrors many aging Americans facing retirement without significant savings.
Now, after decades of accumulating debt, the credit landscape has shifted. Disaster looms on the horizon.
“When the nuclear bomb comes, run towards the light,” Peters advised
For countless individuals, businesses, and governments confronting impending disaster in the future, this might prove to be the most sensible approach.
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Sincerely,
MN Gordon
for Economic Prism
Return from An Urgent Appeal for Duane “The Master of Disaster” Peters to Economic Prism
