The Economy is Deflating but prices are rising? WTF are you talking about? The Deflationary Death Spiral Explained – May 20, 2021
So today it’s May 20, 2021, the price of Bitcoin as the time of me writing this is nearing $43000 USD for 1 Bitcoin. Just a few weeks ago Bitcoin was as high as $60,000 and who knows it might relive those prices again, maybe even going higher, but currency, whether it’s fiat or a decentralized digital currency is a distortion of the real economy.
Money is nothing more than a convenient form of bartering, if you think humanity has somehow evolved from bartering, then you clearly haven’t been or lived through a situation in which REAL PHYSICAL resources are scarce. When resources are scarce, sometimes you don’t want money.
I have friends in Venezuela as an example, they prefer trading in U.S dollars, but because many of the friends I have there own their homes what they do most is engaging in barter transactions, their currency is trash, losing value daily. Money for them is a convenience when dealing with strangers and a US dollar will often buy you a lot more in Venezuela than it will buy you in the United States, and you should ask the question why?
The answer is that the GOVERNMENT or the Government services you enjoy artificially raise prices and the cost of living. As a Canadian, when I bought my custom Macbook, the price in U.S dollars was actually less in Canada than the price I’d pay had I been living in ANY U.S State!
Canada has a higher cost of living than America, but we also have a smaller market than the United States, you’re not going to find too many Canadians that can afford a custom Macbook in the year 2021, so Apple obviously doing the math structures their offer to match the market.
Does this mean U.S consumers are being ripped off? Well, that depends, do you believe in Democracy? Because if you do and your fellow voter, votes to grow the size of government, the entire country pays the INFLATED prices. Now, these inflated prices are actually government-created inflation and not necessarily inflation that comes as the result of innovation.
There’s only one type of inflation in fiat dollars worth following and that’s intellectual property-based inflation. I buy a Macbook at an inflated price, because of their reputation as a company, maybe there’s a company that makes a better computer than Macbook, but I’m not willing to take the risk to find out, especially when my Macbook is essential to my business. That’s good inflation for Apple, that’s inflation that would even exist if government currencies were backed by Gold or didn’t exist at all.
The type of FIAT inflation we’re experiencing now is government inflation, there’s no housing boom, the price of housing in fiat dollars is going up, but there’s no inflation or lack of housing problem, the governments have simply artificially lowered interest rates and the people who got in early, have some sales skills or who can afford the down payments have taken advantage.
But had there been an actual housing market and not a low-interest rate fueled housing casino, neither the banks nor would 95% of the mortgage borrowers be willing to take the risk of buying an ever-appreciating mortgage. Nobody believes the housing market is going to crash, and even if the housing ‘market’ does crash, most people genuinely believe the government will bail them out and they’re right to believe that when you look at the debt and how much money it costs to finance the government.
If the housing markets around the world crash, the government crashes, and as I like to say it’s rare if ever that I hear anyone talking about austerity measures anymore. I bring this up because that’s why prices are rising, prices are rising because the cost to run the government is rising, however, the real economy is actually deflating, it’s not only deflating a little bit it’s deflating MASSIVELY.
TECHNOLOGY has created all sorts of deflation, I brought up my Macbook because although my Macbook costs over $6K people are old enough to remember when computers had a price tag of over $6K in the 1980s. I personally find a WIRELESS computer for $6K pretty cheap.
If it seems expensive that’s because the government has you spending a lot of money on taxes, artificially low interest rates, and social securities. Although some people are calling for Gold to go $10,000 it wouldn’t surprise me if Gold dropped to $1000, like I don’t think people comprehend how expensive the government is.
Gold is a luxury, I like to point out that Jesus was sold for silver, because in that era only the kings and the very wealthy transacted in Gold, as is the case now! Some people have bought gold in hopes of appreciation, that’s the dumbest thing to do, Gold is INSURANCE! Even the rich people in prior eras would only spend gold if it was absolutely necessary.
I think most people know, but I don’t think they’re consciously aware of how expensive the government is. Most people tend to blame the central banks for everything, I personally put the blame on politicians and democracy, if I were a socialist I’d control the school system and make sure the people of the world were financially illiterate, I’d make sure the economists viewed the world from the eyes of a socialist, I’d set up the financial regulatory system to be ambiguous and use the media to repeat the mantra that money is the root of all evil and if it was a democracy I’d focus my attention on the female voters.
After doing this eventually people would not recognize deflation especially if the money they got used to spending came from and was issued by the government. In this era, I’d roll out an invention called Bitcoin to get people used to the idea of a PURELY digital currency, I’d allow this Bitcoin invention from the 1990s to flourish and I’d slowly begin to create a centralized version of Bitcoin because after all, let the market do all the heavy lifting, my end goal is to control the market anyway, you know LATE STAGE CAPITALISM.
So while people borrow government money to pump up the price of Bitcoin, and I teach them to NEVER SELL no matter what happens, they’re not going to see that anytime I want to I can print enough money to pump up the price of this supposedly decentralized currency. Despite the real value of my centralized fiat currency, it’s still widely accepted, I can hide deflation by printing more of this government currency.
Robert T Kiyosaki of Rich Dad Poor Dad was the first person I knew about who talked about Financial Literacy
The downside to this centralized fiat currency is that in order for it to maintain value, it must be backed by people willing to work for it! This is where the U.S as well as many Western Countries are running into a problem, you see they’ve given financially illiterate people a taste of free money without labor and although some are smart enough to know this is unsustainable, most people are FINANCIALLY ILLITERATE!
How this will inevitably manifest itself will be in the political arena because the politicians will make promises that they can’t pay for, and unlike in prior eras in which the debt was manageable via tax collection, that era is long gone, we’re in the austerity measures era, but based on my research it’s going to take people a long time to figure that out, and being that most unionized government workers have paychecks that keep up with inflation, during this deflationary death cycle, the cost of government is going to go up and up and up!
Price distortions are going to be everywhere, nothing is going to make any sense, but everything will make perfect sense if you managed to read this blog post. Because I did a lot of charity work in poor countries, all I can tell you is that you’d be wise to position yourself to be the beneficiary of price inflation in a deflationary economy, because during every deflationary crash there were a lot of opportunities to become very wealthy
As Wayne Gretzky used to say skate to where the puck is going!
Interesting times ahead
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