# Water Below Zero

I have been in a very contemplative mood this last week trying to make sense of this crazy beautiful world we live in.

In Kurt Vonnegut’s book Cat’s Craddle he introduces the hypothetical concept of ice-nine where ice remains stable up to 100°c. What I didn’t realize is that ice is not a simple straightforward concept, that there are in fact 18 phases of ice. For the past 4 days I simply have not been able to shake these images of ice from my mind so I have been researching the transition phases of H2O and their molecular structure as they pass through their solid, liquid & gaseous phases.

I must stress I do not understand this area of science, do not mistake me for my cousin Michael Berman an authority in this field.

In past newsletters I have tried to describe phase transitions from a psychological perspective such as Jung’s Complex’s becoming constellated. That is when the conscious thoughts of people are disturbed and take on random autonomous characteristics. I call this the Market Complex in my unfinished book.

I will break the letter into 2 phases, excuse the pun ?. Today we will look at some of the ingredients necessary to move to a new phase. I will leave to a future letter how a form of statistical mechanics has progressed to the field of quantum chromodynamics.

In the statistical method of investigation, we do not follow the system during its motion, but we fix our attention on a particular phase, and ascertain whether the system is in that phase or not, and also when it enters the phase and when it leaves it.

James Clerk Maxwell (1878).

I suspect not everyone reading this is as intrigued by molecular structure in different phases of H2O as I am, so lets answer the question.

Can you have water below a temperature of zero°c ?

The answer is yes, water can stay a liquid below zero degrees Celsius if a few things happen, the opposite is also in fact true, that is you can form ice at a temperature above zero degrees Celsius.

Adding salt to water causes the water molecules to stick to the salt ions instead of each other allowing you to take water to -21°c before it eventually freezes.

Pure water can go to -40°c before freezing as there is nothing for the water molecules to crystallize onto. The phase transition at -21°c and 40°c will be discussed in the future.

Inflation

Last week Jerome Powell spoke from Jackson Hole delivering to the markets a much awaited forward guidance on the Fed’s stance on inflation.

“[…]inflation that is persistently too low can pose serious risks to the economy.” Jay Powell.

This is quite an incredulous statement as price stability is precisely what the Fed has been pursuing since Alan Greenspan said in 1989.

“the primary role of monetary policy in the pursuit of this goal is to foster price stability.”

I started this newsletter with a question whether a temperature below zero celsius automatically meant water became ice. I was able to show that this is not always the case.

I want to take these principles and suggest the same from an inflation point of view. We have witnessed interest rates drop to zero, we have seen central banks expand their balance sheets by more than 5 fold, we have seen stock markets compound growth at above average levels, we have seen bond prices deliver above average compound growth, we have seen property both residential and commercial deliver above average compound growth and yet there is still no inflation.

The market believes inflation is guaranteed, speak to any gold or bitcoin bulls, but perhaps the market is forgetting the icy principles of nature.