A better approach

Fake money turned into real assets

Central bankers destroy the value of paper currencies, but not of Gold

Inflation has distorted the markets

How is this possible?



The economic cycle is still downward

No matter what the Dow does, no matter what the headlines or the pollsters say, the deeper cycle is trending downward. It has been since 1999. And it will probably continue until it finally reaches its rendezvous with its catastrophic destiny.


Then, people will be able to buy almost any stock they want for only about a quarter -measured in gold – of what they would pay now. Houses, too, should be only about half what they cost today. And bonds? Don’t be surprised to find that most of them will be worthless by then. That’s what inflation does to bonds. It wreaks havoc.


Inflation has already done trillions of dollars’ worth of damage to the economy. And if the picture that is emerging is correct, this will only be the beginning.


“Inflation” refers to an increase in the supply of money. People use it colloquially to refer to consumer price increases. But increasing the supply of money doesn’t necessarily increase consumer prices. It depends on where the money flows and how it gets there. Following each of the two bubble blow-ups this century, the feds decided to “stimulate” the economy with fake money.


A better approach

Instead of buying bonds, for example, they could have taken their $3.6 trillion QE program and used it to send taxpayers a rebate check. Each taxpayer could have gotten a check for about $30,000 – tax free, of course. The money would have been almost immediately spent on consumer items. The economy would have boomed.


Fake money turned into real assets

These days, banks don’t lend pre-existing money which they have in their vaults. When they lend, they create money that didn’t exist before. And over the last 40 years, the world economy has come to depend on it. This credit has helped the economy expand. It allowed borrowers to command the resources needed to build their houses. Under the gold standard, borrowing was anchored to available savings, but not in the new credit economy. Today, the sky is the limit! Being more specific; this is more or less how the world economy has grown over the last four decades – using money which came from nowhere, which was turned into real assets for the financial sector.


When money is pumped into the economy via the monetary channel, stock, bond and property prices rise. When pumped into the economy via the fiscal channel, consumer prices rise. Typically, they rise slowly at first. Then, they rise fast. Effectively, monetary inflation evaporates the value of your money.


The only way the feds can keep the financial boom alive is to inflate more. That is the real meaning of the Fed’s recent turnaround. Fed chair Jerome Powell has paused his rate hike program, and is now looking at more cuts. To support Trump’s re-election in 2020, the Fed has to inflate the financial sector with more cheap credit, or the boom will die. Volcker, in his FED days, 1979 -1987 made his choice. He decided to kill the fake boom himself. Then, with inflation on the loose, a real boom could begin. And now, Powell has made his choice too. He will not “pull a Volcker” card. He rather wants to go with more inflation.


Central bankers destroy the value of paper currencies, but not of Gold

Governments use deficit spending and inflation, to be able to run up huge deficits, which are partially funded by the Central Bank’s money created out of thin air. The resulting monetary inflation acts as something of a hidden tax. It is in plain language, theft. People walk around with money in their wallets. They have money sitting in their bank accounts. But this money is essentially being taxed, by its loss of value due to monetary inflation.


It isn’t always possible to determine the effects of monetary inflation by looking at price inflation. Higher prices are just one consequence of monetary inflation. Monetary inflation also misallocates resources, encouraging more debt and less saving. It tricks investors into thinking that more savings exist than really is the case.


This often leads to unsustainable bubbles, such as in stocks and real estate. Inflation hides the cost of government spending. If Central Banks were not able to create money out of thin air and help governments to fund their deficits, then people would not stand for the increase in taxes.


Inflation is worse than people may think; the destruction of their fiat money lurks stealthily in the wings. Owning gold is one way to protect yourself from the Central Bankers’ deceptive policies and preserve your wealth.


Central bankers and governments destroy the value of paper currencies; they can’t hurt the value of gold. Gold has held its value through every financial crisis in history. That’s why humans have been using gold as a store of value for thousands of years.


Over ten irrational years of zero interest rates and quantitative easing and God’s mercy have sent the stock markets soaring to highs that only can be described as dizzying, but the real economy, is in a bust.


Inflation has distorted the markets

The central bankers inflate; they have to keep inflating or the show comes to an end.  The increasing money supply causes confusion, mistakes, and disasters. When consumer prices rise, at first businesses are happy with the extra income, until they see their costs rising too. Then, they are lost.


They can organise promotions. But they don’t know if they’ll make money, or lose it by the time all is sold. Should they order new equipment? Hire new employees? With the most important signals – prices – in motion, it’s impossible to make sound and balanced decisions. What they typically do is shut down their factories, either voluntarily or involuntarily. GDP collapses. That’s why the shelves in Zimbabwe were empty during the great inflation in 2008, and it’s why the shelves are empty in the great inflation in Venezuela today. Consumer prices are said to be rising at nearly one million percent per year in Venezuela. The country is in chaos; people are running away to save their lives.


Inflation is in the capital markets

A similar process takes place when the inflation is in the capital markets, as opposed to the consumer markets. But it is much harder to understand. Because the price data is manipulated, distorted and censored. Rising prices on Wall Street should mean a healthy economy. Instead, they are a measure of how unhealthy the economy has become.


The Central Banks lend money overnight. But no one can build a factory with overnight-money. Or even buy a car or a house. The Main Street economy needs long-term financing. And when the Central Bank lends short term, at near or below the cost of inflation, the whole financial world turns its eyes to fast money, quick fixes and financial tricks, taking advantage of the free money. The action is fast. Speculators want a piece of the pie.


The story goes as follows, in a simplified example: A CEO of a Company has a contract that gives him a bonus if the stock price hits a specific target. He knows he can build a new plant, buy more equipment, train new employees and launch a new product line, and if all goes well, in five years’ time, profits will rise.


He also realises that he can borrow short term for only 3%. Nor is it lost on him that the stock market adds a multiple of 20 in value on his company, so that every dollar of profit increases the stock price by $20. That makes it simple for him to decide what best to do, in order to increase his company’s stock value.


Forget the long-term business-building. He can acquire a company with $1 million in profits, jacked up to $20 million. Borrowed at 3% and costing his company $600,000 in interest, this profit-falsification trick adds $8 million – $20 million, less the capitalised interest payment of $12 million – to the market value of the company.


Now, he has not added a penny to the world’s real wealth or hired a single new employee. But the value of the stock has gone up. He gets his bonus. And shareholders are happy. What’s wrong with this?


How is this possible?

One of the most popular, albeit fallacious, “conceptions” since the crisis of 2008-2009 was that of the share buyback. It’s crazy, too, since a firm that can’t think of anything better to do with its capital other than buy its own stock is a zombie.


What would oil be worth if the oil companies had to buy half of their output just to keep the price from collapsing? What would a house be worth if developers bought every other house they built, trying to goose up prices?


And what kind of capitalism is this, when the capitalists spend their precious capital driving up their share prices, rather than producing goods and services that they can sell at a profit?


But over the last 10 years, corporations spent $15 trillion buying back themselves. And now, they owe $15 trillion, an amount equal to half the total value of their stocks.

If the stock market drops by half – which is likely to happen – the value of the entire publicly traded capital will be wiped out.


By connecting the dots, the picture emerging is a staggering one. It is almost impossible to believe it is true. Rub your eyes in wonder at the utter oddness of it. How is this possible? Bond investors own $13 trillion worth of loans, and pay for the privilege by making negative interest payments.


The U.S. stock market hits an all-time closing high, while the economy actually slows down. And people are so desperate for an honest currency that they turn to bitcoin, which they can’t see, can’t touch and can’t understand. How is this possible?


Focus your eyes and take a closer look. And out of the fog, a hypothesis will emerge, an explanation almost as strange as the picture itself: People have allowed the Central Banks to control their markets. People have given away their power. Wake up and share this message with everyone you know. If many more of us were to wake up, the cabal’s manipulation game would be over.

Monetary inflation