Stampettes. When central banks outperformed Ponzi

It has been three years since I wrote an entry in this blog in which I crossed out the dollar, and the euro for that matter, because of the central bank monetary policy coordination from stampssix years ago, and six years ago I assumed that housing could drop in another post which also cost me the loss of some friendships. Attention, in no case did I predict anything nor will I do it today, I just limited myself and I will limit myself now to make a reading of something that seems to me of a drawer.
Today I go one step further than I did three and six years ago because not only have we not made stairs to get out of the well but, as my uncle says EulogioWe have dug deeper and deeper; perhaps it is because we hope to get out of the antipodes, but not even Jules Verne's imagination envisioned such great stupidity.
With the First World War, the gold standard was abandoned, which means not being able to mint more money than can be backed with precious metals, that is to say, it puts a ceiling on central banks, even if it is a fictitious ceiling, since gold is just another metal, in fact, there are many more. beautifulgold, such as palladium, platinum and osmium, but gold is culturally associated with wealth and is therefore chosen to endorse the minted coin.
Shortly after abandoning the gold standard, Germany went into a spiral of hyperinflation that degenerated into the minting of tickets million marks. It seems that the Germans learned their lesson and today their central bank is considered the paradigm of stability.
Well, today it turns out that under the euphemism of financial stimulus for the markets paper money is being manufactured like there is no tomorrow. Look at the graphic The US Federal Reserve's own money supply in circulation and you will realize that there are four times more dollars minted today than there were only five years ago, and watch out because I do not think that the Euro, Yen, Pound,... will follow very different paths.
Yesterday, all the alarms went off again when I read that more than two thirds of the debt issued by the United States in 2013 was bought by the Federal Reserve, that is, since nobody wants to buy the country's debt anymore, they take it and put the bill machines to work and buy it themselves because they have the bills.
The only thing I do not understand is why interest rates and inflation do not shoot up, I guess there must be many people interested in accumulating large amounts of banknotes, and also that the inhabitants of emerging countries love to have some euro or some dollar, because otherwise I do not understand anything.
An outline Ponzi This means selling an investment, decapitalizing it and the money that the new investors put in is used to pay the interest to the investors. As it turns out, the central banks have already passed the point of the Ponzi scheme and, since the money they attract from new investors is not enough to pay the huge public expenditure, instead of looking for new investors they have started to manufacture more money under the cry of: the banknote machine is mine and I do what I want with it.
Do not expect from me an apocalyptic reading of all this; I think that just as housing has been going down since 2008 and is still going down but has not hit any firecracker all at once, I think that things will happen here, I do not know in which direction but I do not expect them all at once.
Just as after the Lehman bankruptcy in 2008 lenders began to consider that many of the people they had lent money to would not be able to pay it back, I believe that at some point we will realize that the bills in our pockets cannot be backed by the central banks that minted them, and that will trigger a slow and painful change, perhaps even slower and more painful than the one we are currently experiencing.


Leave a Reply

Your email address will not be published. Required fields are marked *