Higher Gas Prices Are Deflationary To The Global Economy, Government Borrowing and Central Bank liquidity equate higher asset prices in Fiat dollars – May 30, 2021,
So the politicians have a problem and that problem is that they’re putting the private sector in a position to forcibly raise prices. Now, why this is so problematic is that it’s going to lead to deflation. Now, I hear the argument for a Universal Basic Income or ar higher minimum wage or some other big government initiative that can create the inflation governments and central bankers appear to want.
The problem with all of this is that the private has to raise prices and will have to raise prices again if let’s say there’s a Federal Minimum wage hike. Serving the public sector debt was a problem pre-pandemic one can only imagine what it is now. Furthermore, although RESPONSIBLE people have used their newfound UBI wealth to pay down debt, most of the UBI recipients have actually used their UBI wealth to increase their debt loads.
Now, UBI isn’t permanent yet, but we’re already beginning to see what the world looks like if UBI does become permanent. Firstly, if UBI becomes permanent, I don’t even think the government needs to raise the minimum wage because it will be more expensive for private sector employers to hire talent anyway.
If there’s a UBI, employers will have to compete with it, because if the UBI covers a person’s living expenses, there’s little incentive for anyone to work unless the job at least doubles what the government is willing to pay them for doing nothing.
Now debt in all of this could fuel people to go back to work, but from what I know with people on State or Provincial UBI/Welfare they’re not afraid to default on loans, because it’s not like the government won’t have their backs, a private creditor won’t be able to seize someones UBI check. So if UBI is permanent I expect people to change their behavior towards credit and I also think that credit issuers might abandon certain markets altogether.
This all points to deflation, when productivity comes down, fewer people have skin in the game and the private sector will adjust to catering to working classes. Even in Venezuela, in fear of having their property seized the private sector does its best not to appeal to people dependent on the government.
There still are people living well in Venezuela, sure a lot of money is fleeing the country, but they’re still are free-market zones there, that the greater public doesn’t have access to. In Cuba, they’ve completely disincentivized their private sector and what it led to was a lack of private sector innovation, because innovation could land you in jail in Cuba, I say this because deflation has some commonalities that most people ignore when it arrives.
Gold, Silver, and Bitcoin might see further fiat price declines
I’ve written before that I don’t value anything I own in fiat dollars, the DECENTRALIZED forex markets are distorted, what can’t be distorted are commodity prices and when it comes to gold, it’s a hoarded precious metal, meaning that it’s insurance, people like myself have no intentions of selling it unless we ABSOLUTELY have too.
Speculators of Gold, Silver, and Bitcoin, on the other hand, sell when the price is right for them, speculators are a lot like gamblers, in that they’re willing to cut their losses at a certain pricing point and most speculators prefer cash over Gold and Bitcoin. Also, speculators often borrow to invest, this is often hard for a lot of people to comprehend but I like to point out that the real estate markets have high prices because people are borrowing to invest, if people had to pay a REAL market price with real MARKET interest rates, the value of a house would fall and would often fluctuate mirroring an honest market.
I measure housing prices in gold, which means that housing prices are massively inflated, and inflated property values equate to deflation. But you see it’s hard for people to comprehend the economy is deflating when the fiat prices for things are going up.
I think it will become more obvious that the economy is deflating when the price of gold comes down, but the price of food, oil, and everything else stays high. Gold is HOARDED, not so much consumed, try to get that through your head. Oil is consumed, food is consumed and the cost to bring these things to market coincides with government edicts.
I’ve already written that Chinese manufacturers and vendors are being forced to raise the fiat price for their finished goods.
This ultimately equates to fewer dollars for consumers to invest. Now again you have to remember, federal minimum wage hikes and a permanent UBI isn’t law yet, but prices have already risen, one can only imagine the deflationary death cycle when prices are forced to rise again after these socialist laws are passed. Get Ready for the Gold Fire Sale!
Because there is no way to lower the cost of doing business in most Western Nations, we’ve re-entered into a permanent inflation cycle in which every action of government is going to be met with higher prices. It’s why I’ve repeatedly written about AUSTERITY MEASURES.
Now, based on what I’ve observed it’s unlikely that people will understand that the government’s role must shrink to solve this problem, so during this period of time, you must be smart and see the world for what it is!
Interesting times ahead!
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