Expect conditions to deteriorate for the next 3-5 years.
The way the real economy should work is fairly simple. Everything, including the financial economy, should support real economic growth.
The financial economy should always exist to serve the real economy, not vice versa. Once the financial economy becomes a master to the real economy, massive debts are needed to sustain the Ponzi, which results in wealth inequality, power imbalances, and ultimately insolvency.
This is the path we are on.
How A Real Economy Works
While you’re reading, think about these basic principles and how they differ from today’s economy.
- In the real economy, banks lend money to businesses so they can further production and growth.
- The Government sells reasonable amounts of debt (treasuries) into the real economy. This helps fund the government, but also provides entities and individuals the ability to purchase those treasuries, which can be used as fixed-income assets for retirees and pristine collateral for institutions.
- The government takes their treasury auction proceeds and spends them back into the real economy for things like infrastructure, welfare, education, etc.
- In a real economy, the Fed isn’t a common household institution. It’s ignored by most of society. Nobody knows who The Fed chairman is, and most people still believe the Fed is both a federal institution and a bank with reserves because society is too busy producing stuff in the real economy to notice.
Social Wealth And Standard Of Living Depends On Real Results
The wealth and standard of living for a society rely on how the real economy performs. Quality of life is a byproduct of achieving real results.
The Financial Economy Has Enslaved The Real Economy
The real economy now serves the financial economy. The roles have reversed. The financial economy now commands control over the real economy and the real economy now hinges on the success and failure of the financial economy.
Tremendously bigger governments
In today's economy, the government has no choice but to sell treasuries to the buyer of the last resort, the Federal Reserve.
This is how funny money, or Fugazi, gets created. There are not enough individuals or institutions available to purchase the trillions of dollars in Treasuries flooding the market. So the Federal Reserve must step in to make these purchases.
With so much supply destruction in today's economy and massive money printing, anytime the government spends money back into the real economy all it is effectively doing is increasing M2 money supply.
The government isn't improving private sector productivity through effective infrastructure projects meant to facilitate growth. Instead, it pays people to stay home.
Banks Are No Longer Fueling Real Growth through Lending
In today's economy, banks are no longer lending to encourage productivity growth. They are lending directly to financial institutions in the financial economy, which continue to inflate the massive asset bubble that spans almost every asset class.
Supply growth has stalled
Today we are no longer producing the excess goods we once produced. Our exports have dwindled because the system has deteriorated.
We Rely Too Much On Outside Countries
When it comes to ‘real stuff', the United States has to rely on outside countries like China.
The only things we are producing in the United States are domestic services. Services that circulate within the domestic economy.
Stimulus helps inflate massive asset bubble
As helpful as stimulus checks are to the individual, they aren't so helpful to a sick real economy. Not only are stimmy checks competing with real wages, which are deterring people from going back to work, but people are buying stocks with them.
Stimulus spending is flowing right back into the financial economy, further growing the massive financial economy bubble.
There's A Massive Ticking Time Bomb In DC
The real economy is at the mercy of the financial economy. And the financial economy consists of one massive asset bubble that must continue to grow, else the financial economy and the real economy both collapse.
This asset bubble is fueled by trillions of dollars in treasuries purchased by the fed. Both the government and the Fed have no point but to continue this dysfunctional relationship. If the Fed stops buying the federal government's debt, the government faces a collapse.
Scarcity Vs Infinity
In the real economy, scarcity is a primary driver of price. In today's economy, the government and fed ignore scarcity because they can overwhelm scarcity by printing an unlimited amount of dollars and inject them into the system.
“It doesn’t matter how much you increase the price when I can just print what you ask…”
Money Printing – How Much, How Fast, And For How Long?
Will Core Producers Be Able To Keep Pace With Government Money Printing?
The probability Is VERY VERY HIGH that they cannot.
The Probability is very very high that producers will not be able to keep pace with government money printing once this machine really gets moving.
The Money Printing Will Have To Continue Exponentially
Case in point. Look at Quantitative Easing. There was only supposed to be one QE. We got QE1 – QE3, Not QE QE, and now QE infinity.
George feels it's going to be the exact same way with stimulus, which will pump right through the system at a faster and faster rate and producers will be unable to keep pace, therefore this inflation will last into the future.
Expect conditions to deteriorate for the next 3-5 years.
And to be clear, these are consumer prices. Not asset prices nor the dollar on the dxy, which just measures the dollar against a basket of inflating fiat currencies.
How The Government Plans To Side Step Commercial Banks
Central Bank Digital Currencies
If we take the current system's trajectory into consideration it becomes clear that all things lead to Central Bank Digital Currencies.
In order for the above plan to work, and believe us when we say this, they desperately need this plan to work, the government will need to cut out commercial banks. Enter Central Bank Digital Currencies.
Once a Central Bank Digital Currency has been set up, and people have FED Coin wallets on their phones, then things will have already heated up with commercial banks.