Thursday, December 19, 2019
By Paul Martin

by Egon von Greyerz
December 19, 2019

Since the Great Financial Crisis started in 2006, global debt has more than doubled from $125 trillion to $260 trillion. The more money that has been printed, the lower interest rates have gone. In 2006 US short term rates were 5% and between 2008 and 2015 they were ZERO. Today they are at 1.5%. But at the same time almost $13 trillion global debt stands at negative rates.

So the world has manufactured $135 trillion debt with the push of a few buttons and at ZERO cost since 2006. This means that more than 2x annual global GDP has been created at no cost and with no service or goods produced. Instead fake money has been printed which corresponds to TWO YEARS’ global production but no one has done a day’s work or manufactured a single product, so this money has been created out of thin air.

Global working population is estimated at 3 billion. Let’s assume on a conservative basis that on average a person works 200 days per year. That would make 1.2 trillion man days for two years. So central banks and governments can with some hocus pocus do the work of over 1 trillion man days. Well, that certainly beats working and is in line with MMT (Modern Monetary Theory) which states that countries can print themselves to prosperity.

Well, this seems to have worked quite well since the Fed was created in 1913 and even more so since 1971 when the debt explosion started in earnest. For the ones who have forgotten, 1971 was when Nixon closed the gold window which allowed central banks to create unlimited money and debt.

The world is today in the wonderful position that with MMT, or Modern Money Trickery we can now replace work with money printing. In coming years, this could then be taken to its extreme with no one working and no one producing anything, except for a number of robots. For all the world’s needs, unlimited money is printed. This is the real Shangri La and ultimate paradise. But is it really? Because the robots will then take over and get rid of mankind since we will just be superfluous parasites.

This scenario might be the ultimate outcome of AI (artificial intelligence) combined with MMT as well as decadence and irresponsible adherence to false economic theories. But it is fortunately unlikely to happen in my lifetime.

Here we are at the end of the second decade of this century. In the last twenty years we have seen the collapse of a tech bubble and we have experienced the implosion of fake debt aka (also known as) the sub prime debt collapse. Central banks have skilfully but deceitfully navigated between Scylla and Charybdis as in Homer’s Odyssey and managed to avoid the total and final collapse of the system.

But I doubt they will be third time lucky. This time, printing unlimited free money will be recognised for what it is, namely Modern Money Trickery or Wizardry that can’t fool the world a third time in the 2000s. The effect of that will be that buying the dips will fail this time because stocks will soon start their journey to the bottom which is likely to be at least a 75% fall but more probably a 95% fall in real terms. So now as the world discovers that the last 100 years have been an illusion with fake money, fake assets and fake debt, we are all in for the biggest shock in the financial history of the world.

The Rest…HERE

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