The End of Economic Expansion

In the Name of Stimulating the Economy

Every boom based on inflation, instead of real income, crashes



Too much Easy Money

Central banks across the entire globe have announced they’ll be cutting interest rates and drowning the world in easy money. It is not just the big central banks slashing rates. Eleven emerging market central banks cut rates in September. That follows on the heels of 14 rate cuts by emerging market central banks in August. September was the eighth straight month of net cuts by emerging market bankers, according to a Reuters report. In fact, it has become a race to the bottom regarding interest rate cuts around the world.


Negative-yielding bonds, could never happen without mob bosses like the European Central Bank’s (ECB) President Mario Draghi propagating that discouraging people from keeping money in the bank will stimulate economic growth. How is an economy being grown without capital? And where does capital come from if not resulting from savings? When it comes to economics, saving is the cornerstone at the genesis of all capital allocations, and capital formation, it is the root source of all economic growth.


Draghi recently called negative rates a “necessity,” as though discouraging saving brings the much-needed discipline or the much sought after relief. Given the gargantuan bond bubble that has resulted, it’s anybody’s guess how it could be either.


With his term as ECB president ending soon, Draghi is pulling out all the stops to revitalise the European economy. He’s cutting the central bank’s main deposit rate from -0.4% to -0.5% and he’s launching a fresh round of quantitative easing – a fancy term for manipulating the bond market, which is simply more money printing – starting in November.


Next, his successor, Christine Lagarde, will lead a strategic review in search of still more radical measures, including the ECB possibly depositing money directly into individual bank accounts. Free money for everybody, i.e. giveaway program. A variant of Bernanke’s helicopter money. It really is time people start to question the mental sanity of these people in charge. It will turn out like Hans Herman Hoppe formulated: these people belong to, “an institution ‘Deep State’, run by gangs of murderers, plunderers and thieves, surrounded by willing executioners, propagandists, sycophants, crooks, liars, clowns, charlatans, dupes and useful idiots—an institution that dirties and taints everything it touches.”


His thesis has been strengthened, as is known Lagarde has a criminal record, which the media fails to report on, she is a corrupt official who was involved in financial fraud and she has a proven criminal record. – Is the Eurozone in danger? Of course it is, as financial fraud is rampant at the highest levels of political and economic decision-making. A senior official in high office with a criminal record can easily be manipulated. As long as she’s in office, this will affect the way she manages the ECB, with potentially devastating impacts on the very fabric of monetary policy.


The End of the Economic Expansion

The world is now at what must be near the end of the longest business cycle expansion in recorded history. There are also record high stock markets and real estate prices, after a 10-year march to the top, with prices more than 200% higher than they were in 2009.


Both of these record highs were made possible by a record expansion of the base money supply — in other words plain inflation. Through their quantitative easing (QE) programs; the central banks have added more money to the monetary system in the last 10 years than they added in the previous 90 years of their existence.


Not only that, but by lowering its key interest rate below the level of consumer price increases, borrowing was made more attractive than saving. In addition to which, borrowed money – approximately $20 trillion- has been added to the nation’s total debt over the last 10 years, which should, for the sake of accuracy, be added to the available “money supply.” Resulting in yet more inflation. And do not think that it will be the end, because it has just emerged that Chinese banks are also experiencing major problems and secretly are being supported in the same way. The world is flooded with more and more worthless printed money. Soon this will lead to hyperinflation all over the world. The only way not to losing your savings is to buy as much physical gold and silver as is possible to be stored in-house. It is now almost certain that the world economy is literally begging for the arrival of the Global Reset – RV.


And, to keep the banks upright the continuous Repo-subsidies, that have meanwhile grown to 300 Billion per night, will add another $20 Trillion by year’s end, as the flood gates have to stay open! And don’t think it won’t be more, as just now has emerged that China’s banks are in deep trouble too, and are secretly being treated the same way.


Deutsch Bank is collapsing according to its bankruptcy application, on Tuesday, November 5. This could probably mean that the rest of the world banks will follow. There is still an ongoing run on Chinese banks that have now culminated in an implosion of $ 40 trillion. All indications are that without immediate application of the Gold Treaty the world economy could stop within a few weeks.


Flooding the world with more and more worthless printed money. Soon the world will be inundated with paper money, that soon will create hyperinflation all over the globe. The only manner to save your life is moving into gold and silver as much you can manage. For sure, the global economy is virtually crying as it is desperately in need for the Global Reset – RV.


Inflation, by definition, both in experience and theory, means the increase in the amount of money in circulation. But it does not increase the amount of goods people can buy with it. The law of supply and demand demonstrates that, when all other things remain constant, prices do rise. This is another way of saying that the central banks have “debased” the currency; i.e. money has become less valuable. Each unit buys less stuff.


If the new money goes into the system through the consumer channel, as tax cuts, spending increases into welfare and handout- programs, wars, etc., expect consumer prices to go up. If it goes into the system via monetary policy, through lower interest rates or QE, the result is more likely to be an increase in capital prices, higher prices for stocks and bonds and real estate. So, it was not a coincidence that the rich got so much richer, while ordinary people got poorer during the last 10 years, compared to any other period in history. In effect, the Central Banks have been giving the rich the money.


In the Name of Stimulating the Economy

Of course, it isn’t that simple, but to central bank puppets, perhaps it was not obvious. The central bankers may have truly thought they were “stimulating the economy” rather than simply robbing the middle classes to pay off the rich. Most of the country did not benefit at all, as the 1% got richer, while the remaining 90% got poorer. Those in between stayed where they were.


The only real asset most people do have is their time. But by 2018, it took about twice as many hours of work for the average person to buy an average house or automobile, as was needed in the 1970s.


The central banks’ inflation policies have resulted in inflated asset prices of the rich; it added not a second to the working man’s time. Nor did it increase the wealth of the economy. Inflation is just a trick, more accurately a deception. Imagine if they sent everyone a check for $1 million. Everyone would be rich, right? Of course not. Prices would rise. And everyone would soon be back to where they started.


But between the time the check was opened, and prices rose to meet the new levels of available currency, created out of thin air, people would feel rich, and would spend as though they were rich. Merchants and manufacturers would step up output to meet the new demand. So, it would seem like a real boom, but only for a while.


Every boom based on inflation, instead of real income, crashes

This is the so-called “wealth effect” that the central banks are banking on. If higher stock or real estate prices make people feel richer, they’ll go out and spend! However, a business can’t really make a profit by selling goods and services to people who can’t afford them. And it wouldn’t be long before consumers, businesses and investors realised that they have overspent, overbuilt and over-extended themselves. They would soon realise that they need to cut back, producing a bust that would be equal in magnitude and opposite to the fake boom that preceded it.


Every boom that is based on inflation, rather than on real earnings, is doomed to fail. Because, as French economist Jean-Baptiste Say put it, you buy products with products, not with money. He meant that real wealth is the ability to provide goods and services to others, ultimately a measure of time and productivity. Time cannot be increased. Only productivity can be improved, which requires a long, demanding process.


Consequently, it doesn’t help to hand out pieces of paper with ink on them. Instead of stimulating growth and productivity, inflation does just the opposite. It distorts, disguises and stifles the key price information that people need to make decisions.


The result is always negative; bubbles, crises and lower growth rates. Compare the growth figures by looking at the averages over the last 10 years with the averages of the 10 years preceding those, and see that the past 10-year period barely achieves half of the 10 preceding years.


And that brings us back the dictum: Inflate or die. Real GDP growth is declining. A recession is coming. And the only way the central banks can keep this inflationary expansion going is to inflate more. Be supportive, and share this important financial information with all your contacts and motivate them to do the same with theirs.