I’ve been thinking about the mechanics of all things financial. In the past, I’ve talked a lot about debt, but as I’ve learned and synthesized so much more information, I have a new theory to share. It’s not the debt which is causing the economic machine to break down. It’s the leverage and liquidity. In financial vocabulary, leverage means that you can lend out or borrow many times more than you own. Banks, brokerage firms, and governments have this lending privilege called leverage. They have been granted a magic wand to make something out of nothing. So for every $1.00 they own, they may lend out $100 or $1000 or more. The reason the stock market is up is because the options market, which is built on extreme leverage, has become very large. So large that options are driving stock prices, and the tail is wagging the dog. This is the same reason the market fell so quickly and violently in March. In this case, borrowers had too much leverage, and they had to sell their stocks in order to cover their debts.
Liquidity is the ease with which an asset can be converted into cash. Now if you look carefully at how everything is operating, you will notice that the real GDP of actual goods has been steadily declining for a very long time. Have you wondered why every airline and retailer is selling credit cards so voraciously? If you’re old like me, then you know that wasn’t always the case. The biggest companies in America generate profits now by buying back their own stock or engaging in other trickery, but not through the sales of actual goods that they produce. And the biggest most profitable companies make their money from advertising and exploiting user data “to sell” the concept of marketing. In terms of market cap, no real goods are produced by many of the most valuable companies. And companies like Apple produce goods but don’t really profit from their sales anymore. At least there’s no growth.
The deindustrialization of the US, paired with mega-leveraged credit and falling interest rates, has pushed investors into a hunt or frenzy for yield. Investors are no longer profiting from the sale of real good and services, or from bonds, but on the lending and borrowing process. This means that leverage is outpacing liquidity and explains why the repo (repurchase) market broke in September 2019. The repo market is the heart of the financial system, and if the heart breaks, the whole house of cards collapses. Open your eyes to this flaw in the system, and you will understand that we are destined to continue on the same downward spiral, regardless of the presidency and regardless of the virus, vaccine, or market prices. This is because real tangible assets will continue shrinking against their claims. More money printing, at a faster pace with greater volume, will exacerbate an ever-increasing wealth divide.
As defaults and bankruptcies continue, the government will have to print more money, thus increasing the supply of dollars against the same pool of assets and a shrinking pool of supplies. This will result in major supply shortages which will quickly snap into hyperinflation, essentially destruction of the value of currency. Hyperinflation will destroy the lower and middle class, which will explode with extreme social unrest. The problem is completely systemic and it was breaking down long before Covid19. Perhaps Covid19, which happened a month or two after the repo crisis last year, was a necessary evil, an excuse to print money, in order to keep liquidity in the system, and keep everything going. It was clear the Fed was unable to resolve the repo crisis, as they were already having to print a half trillion at the end of last year. The plan was to continue printing huge amounts of money thru April. Then, all of the sudden there was Covid19; miraculously, the perfect excuse to print!
Creating lots of money out of thin air covers up the actual problem within the machine, just like it did in 2008-09. But it will be unable to support its own weight for too much longer without an equal increase in production, which simply will not happen no matter what. It won’t happen because the cause wasn’t Covid19, although there are people that want you to believe it was the culprit. So what’s the solution? What are they trying to roll out? And will it solve the problem this time or continue to hide the problem in the old broken system like before? That’s the million dollar question. We are experiencing a global crisis with the USA leading the way. Global leaders must put their minds together. If you look back at the Titanic, the solution was not to rearrange the chairs on the deck; it would have been to get everyone off the ship onto a new ship without any leaks. But they didn’t have time, didn’t recognize the problem until it was too late, and many people died.
The solution I’m hearing about, the Great Reset talk that has suddenly appeared in the media is creditors cancelling your debt in exchange for your property. You won’t be able to own property but you’ll get a universal income and all your debt removed. Sounds great, right? So let’s analyze this. The government or central banks, or whomever is the creditor, gets your real tangible assets and you get paper or digital money which you can use to exchange for real goods and services. Ahhhh but remember the creditor is getting real assets first while you get paper or digit money to buy real goods later. Then, because the money printing outpaces the production of real goods, those goods get more expensive in terms of dollars. This keeps going until the real assets you gave your creditor in exchange for free paper money become priceless and your paper or digital money becomes worthless over time. Do you see the switcheroo?
Remember the old saying, there’s no such thing as a free lunch. In the end of this great reset, the creditors own everything real, all assets, including you. And then what? Isn’t that the definition of slavery? You get to rent from them but since the currency becomes worthless, you actually get to labor instead and they’ll dictate what you do in the system to keep this all going. Now none of these problems were intentional or deliberate. It’s merely the natural repercussion of cheating and lying and greed; hence, the flaws in the system. It’s the natural result of bad politics, the result of making impossible political promises in exchange for votes and money. It’s the result of a broken monetary and political system that has been prolonged on its death bed again and again and again, to the point where booms and busts seem natural. It’s not a conspiracy against humanity; it’s the price paid for power.
Now here’s a little philosophy lesson. Power is the opposite of love, and it’s the eventual downfall of every civilization. It’s a result of enantiodromia and it was first described by Heraclitus as the way consciousness works. If you want to understand anything, you need only to conceive its opposite. It’s easy to think the opposite of love is evil, but if you dig deeper and think deeper, the will to love is the opposite of the will to power. And the will for power of central banks and those who really own them has been stealing more and more of everything over hundreds and hundreds of years. This has created a spiritual problem in the world, like a cancer that has gradually eroded the fabric of our humanity in society. There’s only one way out and that’s a collapse and return to love. But unless we intentionally take that higher road, we end up on the lower road, the easy way, and eventually go down with the ship.
The Great Reset is a plan is save creditors and their freedom (the freedom that their wealth gives them), not to save ordinary people and their lives, except temporarily. It’s a plan to save bond holders, and keep the broken system alive. It’s a tradeoff, an exchange of your freedom as a debtor for their taking care of you as a creditor. Imagine a loved one on life support. You have to decide whether to remove the life support and allow your relative to die, setting his soul free in the process, or keep him on life support and stop that natural process of death from happening. What do you do? Do you save the system or people’s freedom, or just whatever works for you? Do you save the chicken or the eggs, or the environment where they reproduce and grow? It’s ironic that Covid19 presents the same moral dilemma as the broken financial and political systems. We are divided souls enslaved by a broken body…what are we to do? If you think this is good food for thought, pass it forward. Opening people’s eyes can only help us all.