More Signals of economic DEFLATION: Almost half of Americans are willing to take on more debt post-pandemic, Private Debt to GDP in the United States increased to 235.50 percent in 2020 – June 9, 2021,
Public Sector debt is one thing, I mean the truth of the public sector debt is one day the welfare state won’t be worth saving and because I’ve been to third world countries for charity work, I’ve seen up close how behaviors change once the fiat/government-money becomes worthless.
Once people lose trust in the government and its money, people work less for said fiat money. Now, there will of course be people who will work for the sake of working or they’ll work simply to survive and take care of their family, but the moment PRIVATE SECTOR debt is no longer available for the masses, this is when the government has to take on a larger role and borrow money into existence to HIDE deflation.
Now, the main reason why governments print money is to HIDE DEFLATION. if government money isn’t being PROMOTED, humans will find or create their own money. In countries in South America as an example in which the U.S dollar is used, the people opted for U.S dollars, because creating their own PRIVATE currency would be an act of war against their socialist governments.
In Cuba as an example, the Cuban Government decides what the value of the U.S dollar is, and because private property in Cuba belongs to the government, the Cuban people don’t see any reason to be productive. People think these blockades on Cuba or sanctions on Iran work, they actually don’t work, the problem with non-market-based-socialism is that the people don’t have any incentive to be active participants in the economy.
In market-based economies it’s the private banks that are in charge of the distribution of money and these institutions are profit-driven themselves, which means that they’re unlikely to lend money to individuals they believe are unable to pay back their loans.
Well, a UBI disguised as a Federal Government Emergency check has the temporary benefit of stimulating an economy, but eventually, those debts come due and the servicing of debts becomes more difficult for a citizen who either on a fixed income or has to work to pay down those loans.
The price people are willing to pay for a smartphone has risen, primarily because more and more people are willing to go into debt to purchase a smartphone, well, consumer prices, in general, tend to rise for the exact same reason. If there are enough people willing to go into debt to spend more than something is worth, the price of said good or service rises.
Now whatever can go wrong, typically will go wrong, the problem with more and more people going into debt is that eventually, shortages become a problem, because remember that as prices rise, so does the cost of living, and if the government is paying people to do nothing, a lot of people will do nothing.
Now, on the surface, this seems like a quick fix, but getting people to return to work is not easy, you have to pay them more, and typically what the government does is the government increases its spending and possibly its regulations to match the demands of the voters.
Meaning that the government will do everything in its power to PREVENT price deflation, but laws like a minimum wage, don’t take into account the other costs associated with running a business, in the modern era we have a carbon tax/Paris Climate Agreement.
This law forces energy prices up and as long as that law is enforced, energy prices CAN NOT come down, which means that businesses that consume energy can’t lower their costs or face bankruptcy. By the way, the government can’t go bankrupt, The Cuban government has been unproductive for almost 100 years and still hasn’t gone bankrupt.
Anyway, I write this because in 2020 Private Debt to GDP in the United States was rising, and I want the reader to understand that during this period the U.S government was paying people NOT TO WORK!
This coincidently coincided with Bitcoin reaching record levels, which continued into 2021 and only stopped recently, which I like to point out is because people are running out of money to borrow and to spend. Again it’s hard for most people to imagine that the economy is deflating, because of all the money printing, but money printing is nothing more than central bank liquidity.
The real problem is the size of the government. If the government stops bailing out bankrupt people and bankrupted corporations, cuts regulations, and cuts all of the public sector fat, the economy could at the very least return to a sense of normalcy. Now, do I think this is going to happen voluntarily? Absolutely not, it’s going to happen when it’s forced to happen and that date is getting closer.
When I write about #LateStageSocialism I’m referring to the cash flow crisis, which causes fiat-currency-hyperinflation. What most people forget is that hyperinflation is deflation the economy is contracting and to cover up the economic contraction the government prints more money or dilutes the coinage.
Now, during this process, doesn’t assume that the price of Gold or Silver will rise drastically, the price of gold and silver will rise when people reject the system outright. We saw this in the Weimar Republic, now, for most people they buy Gold and silver as speculators, the rest of us buy Gold and Silver as INSURANCE.
Even most of the so-called experts have no clue what’s happening. Once I listen to a person, who doesn’t understand the role the government plays in distorting the economy, I tune them out, but most people don’t. It’s not just about the central banks, there has always been a DEMAND for central banks because without a central bank fractional reserve banking or fractional reserve distribution of money is far riskier.
As an example imagine the world was on a Bitcoin standard and Bitcoin didn’t have the U.S dollar to determine its value. What would happen in that scenario? Well, obviously interest rates would be extremely high, because there are only a certain amount of bitcoins that could be lent out and there’s a cost to manage the bitcoin network.
This type of deflationary system would make Bitcoin useless. At least with Gold, there’s the possibility of finding more gold in the future, with Bitcoin, there will 21 million bitcoins and that’s it, so if you borrow bitcoin for business and your business goes down, the lender will be stuck with a property that will most likely continue to lose it’s value in bitcoins and have little to no means of finding appreciation.
Now, as was the case historically, which is similar in the crypto markets today, money was simply a convenient form of bartering, meaning that sure you might have Gold money, but I might have tobacco money, so in the event, I default on my gold loan, the debt could be paid in tobacco.
Now maybe the person or entity with the gold money does not want Tabacoo money but at the very least because that ‘forex’ market would be vast, the lender could find a way to make themselves whole with their newly seized property. In the fiat money system, The U.S dollar is king, but this doesn’t mean that other currencies can’t find their place in this equation when money is convenient barter, the market fixes everything. Now obviously nothing is perfect but when you understand the beauty of the market you quickly understand that innovation is the only form of sustainable INFLATION.
All other forms of inflation are government or centralized creations and these creations eventually have their expiry date. The U.S dollar has been the beneficiary of many innovations that find value pinning themselves next to it. The issue then becomes Cash flow and when des the poor and middle class find itself in a situation where it makes more ECONOMIC sense for the people NOT to work!
Because of the Eurodollar system, it wouldn’t surprise me if the Federal Reserve or the U.S dollar outlived the United States.
Interesting times ahead