Markets and The Economy: A GRAND DECEPTION AND A FUNDAMENTAL LIE. By Gregory Mannarino
Markets and The Economy: A GRAND DECEPTION AND A FUNDAMENTAL LIE.
By Gregory Mannarino TradersChoice.net
Quick review. In finance and economics there exists only two fundamental truths, which when implemented are beneficial to We the People of the world.
These two fundamental truths are:
To have a strong economy you need a strong currency. A strong currency meaning having purchasing power, not relative strength. (Relative strength refers ONLY to comparative strength). Both the mainstream media and politicians prey on people not being aware of the difference between relative/comparative strength, and absolute strength, referring to purchasing power. Politicians will say things like “our currency is strong.” This is deceptive, as most people perceive this as the currency having strong purchasing power.
To have a strong currency, meaning high purchasing power, you need a corresponding rate of interest high enough to support the purchasing power of the currency.
The two above listed fundamental truths are universal.
However, when these two fundamental truths are flipped upside down, both the economy and the people suffer. However, for those who run the system and know how to take advantage of it, they benefit GREATLY by turning them upside down.
Selling a fundamental lie.
Central bankers, Politicians, and Wall Street all work closely together, and are in the business of selling lies, deceptions, distractions, half-truths, backtracking, propagating public misinformation and the like, (devilism in my opinion).
An integral part of their coordinated deception is selling We the People of the world on the grand idea that “lower rates is what we need to make our economy strong.” (Go ahead, make it up).
If we understand that lower rates steal purchasing power from the currency, how is this beneficial to the economy and the people?
Having lower rates sounds good to those seeking to borrow however, having lower rates now means that you need to borrow more weakened currency, (brought about directly by lower rates). Moreover, now it will take even more devalued currency to pay back what you borrowed.
The overall effect of lower rates and therefore currency purchasing power losses is inflation. Moreover, the effect of low rates creates massive price action distortions. By weakening the currency and therefore creating inflation/weakening the economy, low rates are also responsible for producing asset bubbles/stock market bubbles AND real estate bubbles. (Today losses of currency purchasing power are also, among other things, causing cash to seek yield in cryptocurrencies).
Low rates inflate stock market and real estate bubbles.
Cash always seeks yield! Low rates are directly responsible for inflating stock market bubbles. When rates are low, it opens a doorway for cash to flow into risk assets like stocks. This mechanism invariably leads to wild speculation in the stock market, and the result is massive price action distortions/stock market bubbles.
Low rates, and therefore currency purchasing power losses, inflate real estate/housing prices. The result is higher rent and vastly inflated real estate prices.
Lower rates and therefore currency purchasing power losses also lower our standard of living. People now must work harder, and longer, to acquire more devalued currency to maintain a particular lifestyle.
Lower rates accelerate global debt hyper-bubbles.
The simplest way to put a perspective on how lower rates accelerates debt hyper-bubbles is this. As lower rates are responsible for currency purchasing power losses, the demand for more currency grows.
The effect of lower rates/currency purchasing power destruction is an economic wrecking machine however, this mechanism allows central banks to inflate/introduce more “new money” into the system. The effect of new money pumped into the system does not affect all people equally, as those closest to the money benefit. This “close to the money benefit” is due to the inherent lag effect of how cash moves through an economy. (To further understand this principal, look up The Cantillion Effect).
Stock market investors, real estate investors, cryptocurrency investors, Wall Street Superbanks, CENTRAL BANKS, the ultrarich, multinational corporations, all benefit from low rates/currency purchasing power losses by knowing how to capitalize on price action distortions.
Low rates, and the promise of even lower rates to come, (possible even negative rates, as the world economy freefalls faster), will assure the creation of a modern global neo-feudalistic paradigm.