A favorite term of our current government is “monetize the debt”. Think about that statement for a brief moment. On the surface, it could be dismissed (and usually is) by ‘non-finance’ people as too convoluted to understand. Monetizing the debt is simply, turning debt into income. By this, of course, it means to have the Federal Reserve create money and the Government to spend the money on things like ‘infrastructure’. In Keynesian economics, the back of the economy relies on this function. As long as the money is able to be created, and the government can spend it, the (financial) economy will not crash. This leads to all sorts of problems, such as ever-growing debt principle which is amplified by interest. If you or I obtain a loan, we have to repay the loan principle amount plus interest on that amount borrowed. If the government borrows money, they just borrow more to cover the principle and interest. This effectively “rolls the debt” to a later date to be dealt with. To pay this debt off, they actually require inflation. Without inflation, this entire system is simply not possible.
Trump understands this concept very well. He has tweeted more than enough times about the Federal Reserve dating back to 2011. If we are being completely honest, however, we know that Trump doesn’t make these decisions. He is simply the talking head for public relations.
So what does this mean? Simply put, the dollar is too strong to pay the debt back. Since he has taken office, he has stated this several times. He has openly discussed how countries around the world have the “amazing privilege” of negative interest rates and how that would be beneficial for the US. Imagine if you or I got a loan with a negative interest rate. That means we would be PAID to take a loan! The US Government NEEDS the principle debt and interest they owe to disappear. This is where we citizens come in – we pay it.
In 2019 the platform was tariffs on China and Europe. The purpose was to essentially steal from those countries to cover our irresponsible debts, which created massive tension. To solve the problem of a currency being too strong, the ultimate answer is: DEVALUE it! They can do this through money creation and supply/demand inflation. With enough inflation, the national debt can be covered.
If we are direct about it, we can make some good sense of it:
- Give (bailouts) banks and (favors) corporates billions in taxpayer dollars.
- Send everyone bonus money in the form of stimulus, unemployment and governmental pay increases
- Order to shut all businesses down (real economy) to slow supply of goods (inflationary)
- Point blame for all of these actions on an external threat (China virus)
- Benefit from inflation through (wage) taxes and interest on loans to cover national debt
In short, if you flood the economy with paper notes and force productivity to stop, inflation has to happen. The lack of goods and services combined with the surplus of paper money has no other outcome historically. If the concern was citizen welfare, you would think they would cut wage taxes. Unfortunately, tax is the factor backing the USD.
I’d like to go a little more in depth. The Federal Reserve serves 2 purposes: controlling interest rates and printing reserve currency units. Specifically, they *create* reserves for big banks (BoA, JP Morgan, Sachs, Deutsche etc.)
The Federal Reserve will deposit these reserves into the bank, and the government will take these newly created reserves (debt) and spend (monetize) it into the economy! There are several issues with this, one being: the government has a tendency to spend in their own interest. Where you may see civilians without housing and food, the spending the government does is toward things like $1.75 billion on a new FBI building. Of course when asked why they are disallowing people to operate their businesses and not offering alternatives, yet including this type of spending in their “stimulus proposal”, they have no answer.
The most reasonable conclusion is often the best: they need to spend money to clear the debt. In the world of our government, every $1 they borrow requires $2 to pay back. To pay back $2, they need $4. To pay the $4, they need to borrow (monetize) $8…you may see a pattern in this.
While the Covid-19 pandemic is potentially a very real threat, things don’t seem quite right. Sweden has had no lock-downs, no absurd and excessive death counts and very controllable reported illness cases. At the same time, Sweden has very little debt…things that make you go “Hmmmm”
This is an incredibly interesting chart. It shows how – on average – Pneumonia deaths tend to stay within the same range year on year. However, this year in 2020, those reported deaths have dropped straight down while a *very similar* virus has reported parabolic rates of infection and death.
It could almost look as if, possibly, some form of incentives were set in place for institutions that reported more Covid-19 related illnesses than other illness, whether or not it was honest reporting.
Let’s not dismiss that 30-50% of people get cancer, and most deaths are from heart health due to unhealthy lifestyles. At what point did the government decide Covid-19 was worth caring about individual health? Millions of people die yearly from poor diet and exercise, yet Covid-19 is too dangerous to allow you a BBQ with family?
Let’s not forget about India – a disease as “deadly and contagious” as this would surely destroy a country like this, yet nothing notable has come from it.
I consider my views with reserve, but often the simplest explanation is the correct one. Examining the debt levels of the US, the conclusion is: the debt will not be repaid, likely ever. Deficits have only and will likely forever grow larger. To cover this debt, the Federal Reserve aims at 2% inflation YoY (Year on Year). The fed has not met the inflation mandate in the last 10 years in the real economy – only in the stock market (stocks go up).
The easiest way to cause inflation: print money – with a caveat – it is spent into the economy. Often, created money goes directly to corporate elites and “the 1%”. These people don’t spend money into the real economy, but instead invest it into stocks, bonds etc. Over the last 10 years, the Fed has continued creating money, that money gets absorbed into the (financial economy) stock market, and (real economy) inflation never occurs. Without real inflation, products can’t get more expensive, worker pay can’t rise, taxes can’t go up and the national debt can’t be repaid.
If a debtor was desperate enough to “inflate the debt away”, the next best option would be to simply shut the economy down. Print trillions of dollars, give it to whoever says they need it, stop production so goods become more scarce and prevent people from making their own income so they are forced to borrow (+interest!) those newly created funds.
It sounds almost made up, but its a greater than 0 chance of this being the real reason for Covid-19 lockdowns. While there may be illness, it is entirely possible the numbers are over-reported for financial incentive. Either way, it is interesting that deaths from every other cause this year have dropped while Covid-19 has gone straight up parabolic.
Either way, we can be certain inflation is coming. The Federal Reserve is committed to destroying the middle class through cost of living at the hand and for the advantage of the Government.
Some good advice: change “higher inflation” to “higher cost of living” when reviewing this type of information. If you follow this blog, you understand very well how technology is deflationary, which means we need less man-hours for the same output as technology streamlines processes.
The Federal Reserve will do everything in its power to ensure this productivity is stolen through inflation and monetary abuse.
I hope you’ve bought Bitcoin.
Edit: Does this make sense if you are worried about the health of your population? Or does it make more sense to implement these types of measures with an authoritarian goal in mind? And let’s not forget that rioting is still allowed in the name of “peaceful protesting” (Hint: graffiti and destruction is vandalism, not peaceful).
Maybe the virus goes away after the debts? Maybe it’s after a “vaccine” from Bill Gates in the form of traceability or financial exclusion. Be safe out there.