by Charles Hugh-Smith
What’s left are the ‘deadly synergies’ of hovering debt and leverage, diminishing returns on stimulus, the substitution of credit score for financial savings and the approaching deflationary tsunami that pops all of the speculative bubbles.
Think about a as soon as modest however sturdy residence constructed close to a cliff to maximise the vistas. Over the a long time, the muse slowly degraded and the home moved imperceptably nearer to the unstable fringe of the cliff. Those that noticed the slippage and the potential for eventual catastrophe have been both derided as alarmists or ignored.
Given the enviable location and views, the house rose in worth and a collection of more and more gaudy additions have been added, utterly obscuring the once-modest exterior with low-cost imitations of long-lasting, time-tested supplies (plastic trim and brittle fake-marble veneers). The foundations of those ostentatious additions have been slapdash, shallow and poorly made, because the aim was not sturdiness however look.
The low-quality additions accelerated the slide to the unstable cliff edge, and in 2019 the viewing deck broke away and crashed into the canyon beneath. The repairs have been hasty and the residents have been assured all was nicely–in actual fact, higher than ever.
In 2020, the weak basis of the gaudiest, lowest-quality addition crumbled. The response of the house owners was to fill the widening crack within the decaying construction and spray on a brand new coat of paint. There–good as new, the residents have been instructed.
However this was not true. The home is now teetering on the precariously unstable cliff edge. Paradoxically, the overwhelming majority of the residents have moved to the sport room, which is now cantilevered over skinny air. The slightest motion will tip all the decayed construction over the cliff.
That decayed, precariously unstable construction is the U.S. financial system, and Covid was the catalyst that nudged the financial system proper to the sting. Gordon Lengthy and I focus on the causes and penalties in our new video program, Covid Has Triggered The Subsequent Nice Monetary Disaster (34:46).
Chief among the many many causes is a really primary one which’s straightforward to grasp: America has consumed greater than it has produced for many years, and crammed the hole with imports bought with borrowed cash and foreign money created out of skinny air.
As Gordon and I clarify, this can be a very well-worn path to instability and collapse: governments (which now embrace nominally impartial central banks) have all the time responded to declines in productiveness and reasonably priced vitality/supplies, the growth of a parasitic elite and extreme spending with the identical bag of monetary tips:
1. They borrow extra money, ultimately borrowing extra to pay curiosity on present money owed, greasing the slide to default and insolvency.
2. They defraud the customers of their foreign money by devaluing the foreign money. Within the previous days, this was completed by substituting base metals for silver or gold within the minting of coinage. Ultimately the cash contained solely a hint of silver. Customers quickly caught on and the outcome was the coinage misplaced buying energy, a.okay.a. inflation destroyed the worth of the formally issued cash.
In in the present day’s fiat foreign money regime, central banks create trillions of recent models of “cash” with a number of keystrokes, successfully diluting the worth of all present foreign money.
3. Determined for revenues, governments elevate taxes, which regardless of all claims on the contrary by political leaders, fall most closely on the productive center class. For the reason that parasitic elite won’t ever settle for any consequential discount of their wealth or energy, the upper taxes and financial stagnationthat outcome from these three insurance policies crush the center class, which was the engine of productiveness and demand that enabled the parasitic elite to reside massive.
These are key dynamics in what Gordon calls the killing of the golden goose, the productive synergies that generate widespread prosperity and alternative.
What’s left are the deadly synergies of hovering debt and leverage, diminishing returns on stimulus, the substitution of credit score for financial savings and the approaching deflationary tsunami (53 min) that pops all of the speculative bubbles, establishing the destabilization and cliff-dive of all the decayed, flimsy construction–The Subsequent Nice Monetary Disaster that can’t be papered over with extra central financial institution legerdemain.
There’s extra in our 34-minute video program:
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Covid Has Triggered The Subsequent Nice Monetary Disaster
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