It may seem at times as if I’m trying to just enclose myself tighter inside my bubble. And if I’m to be honest about my current mindset, it’s hard for me to tell the difference, although I try really hard to be objective about all my observations. But, I seriously don’t see any other way this thing is going to play out.

The crisis is imminent

It can be delayed, but can it be avoided? I don’t see how, and I promise I’ve been trying to twist my head around this for the better part of this year. Now, it’s not that I don’t understand the ideas of capitalism, or the function of FIAT even, the way inflation is suppose to entice us to consume, to transact, to outwork it’s percentage points, all that is clear as day.

However, as with many things, the system is corrupted, it’s not working as it was intended and it’s literally held in place, with almost comical solutions. Maybe not everyone is familiar with negative interest, and of course, if you are not someone who reads up on economics, the term sounds impossible, but that’s just the thing, it’s not, it’s quite real.

Negative real interest rates. If there is a negative real interest rate, it means that the inflation rate is greater than the nominal interest rate. If the Federal funds rate is 2% and the inflation rate is 10%, then the borrower would gain 7.27% of every dollar borrowed per year.

So when we have renowned economist calling for the next crisis, they are not calling it for ratings, not because they enjoy being the prophets of doom, but because they are seeing the effects. In other words, 2008 was just the beginning, the first shakeup, but another one is coming, and is coming real soon.

Nothing is real about our Economy

Here in the US we see it all over the news; record breaking year for stocks, biggest bull run in history, record low unemployed, etc. It would seem as if we are doing great, and honestly on the surface you can say that we are. However, what’s really happening is that we are continuing to over extend our debt, overspending, pretending that everything is fine and dandy.

What does this all mean you say? Well, it means that there will be either a new crash, something that might even dwarf 2008, and again, the people, us, will be expected to pay the bill. One more time we will have these conversations about how X bank is too big to fail, and thus the government cannot allow it.

We would think that we learnt the lesson last time, that we did something as a country to make the Banks smaller, to not allow the bubble to inflate again, but today my friends, today we are seeing the bubble of everything, and unfortunately that is not an exaggeration.

So what happens next?

I wish I knew, I wish someone knew. Here is the deal, there are plenty of economist theorizing on how we can fix this. Some with progressive leftist ideas, some with a more libertarian angle, but both simple theorizing, and nothing more.

One would think that there would be an active search for solutions from our government, but this is not the case, not even a little bit. “Oh, we need more money? Print more, just print more… ” – Rounds of quantitative easing to make up for an in depth administration of wealth and resources.

Quantitative easing, also known as large-scale asset purchases, is an expansionary monetary policy whereby a central bank buys predetermined amounts of government bonds or other financial assets in order to stimulate the economy and increase liquidity.

When the bonds, if the bonds become worthless, What happens? What happens if these countries that we do trade with, that mind you we’ve been somewhat hostile lately, say to us, We don’t want dollars anymore? What then?

Sometimes I wonder what’s a more true, that I believe in Cryptocurrencies a lot, or that I’ve completely lost my faith in FIAT.

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Responses

  1. sandwichbill

    Great article and I completely agree with you. The Dow is tumbling, interest rates are rising and if inflation spikes, the FED will have to increase interest rates even more. There’s too much private debt, because many people need to borrow to make ends meet, so when the crash comes the ordinary populous will suffer the most and, as you say, the US governemnt are trying to prop-up the economy by printing more money to buy bonds and assets. It’s all going to end in tears, again.

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  2. CryptosDecrypted

    Thanks for the thought-provoking article Meno. I agree grim days ahead, equities, property, bonds all inflated…interest rates at near record lows or negative as in Switzerland and Japan (everytime I try to understand the logic of negative rates I fail). I’m fairly optimistic in general but looking under the hood of global economic policies is….scary.

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    1. Meno Post author

      thank you for reading brother and for the nice comment, i need to do a better job at checking my comment section!!

      In the end, we are the ones being smart, divesting.

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