Wealth Destroying Inflation is Rapidly Approaching
Wealth Destroying Inflation is Rapidly Approaching
The current banking crisis illustrates that inflation is a permanent feature in our world, but the time is fast approaching when it will reach a crisis point for the savings and wealth of everyone.
In light of the current banking crisis in the United States and the effective nationalising of the Swiss banking system with the forced marriage of UBS and Credit Suisse, I want to remind you that savings and wealth-destroying inflation are a certainty in every Western economy. The time this takes a more profound effect on you is fast approaching.
We have just seen government guarantees in the US effectively printing trillions of dollars in just two weeks. This is after the recent printing of approximately $4 trillion since 2020 for ‘Covid response’. We’ve also seen a shotgun wedding consummating the marriage of the failed Credit Suisse to UBS + $100 billion of government provided liquidity, without which UBS would also implode.
The more money they print to correct their last error, the more they’ll need to print with each subsequent crisis. Contraction of the money supply is no longer possible for more than very brief periods between crises.
Even worse, with the advent of this latest crisis - the Fed is now forced to bail out foreign banks with ‘swap lines’ arranged with other global Reserve Banks. If it doesn’t, institutions worldwide will start dumping US treasuries to gain liquidity, and the whole system will collapse.
All discipline, responsibility and accountability have not just been thrown out the window but rocket-propelled with extreme prejudice.
This shouldn’t be surprising. Once those in power decide to help those close to them and suffer no consequences, they will inevitably do so repeatedly until the entire system breaks.
We are fast approaching this precipice. A lesson already learned multiple times by those in many developing countries is finally going to dawn on those living in the United States, Western Europe, the UK, Australia, Canada and New Zealand - formerly privileged states that have, for the most part, been able to export the worst of their inflation demons.
You may have seen headlines like this in the news:
Fed officials declined to provide a specific figure for the size of that new loan program, but made clear it would be large enough to cover trillions of dollars in potential requests.
The Spin
Government and Central Bank heads will tell you they protect the system, save the banks, make depositors whole, and provide liquidity backstops. All these purposely vague and confusing terms are used to hide from you what they are doing, what they are always doing every time government and regulator action results in something blowing up; they are printing more money.
They’ll also tell you inflation doesn’t exist or that it isn’t a problem even though we all know it is instinctively.
Let’s simplify it so you can see the jargon when watching or reading headlines.
Terms used to camouflage government printing of money:
Bail Out= Printing MoneyGovernment Assistance= Printing MoneyQuantitative Easing= Printing MoneyGovernment Backstop= Printing MoneyIncreasing Money Supply= Printing MoneyDevaluation of Currency= Printing MoneyLiquidity Provision= Printing MoneyMonetary Depeciation= Printing MoneyInflation Decreasing= Printing Money at Slightly Lower Rate Temporarily
Hopefully, that will help you see through the daily news propaganda.
Government Interference
Government ‘solutions’ only make our system more fragile. In the current banking crisis, the government selectively choose which banks will receive a guaranteed backstop and which won’t. In this scenario, money will flee from banks without a guarantee and flood into the ‘chosen’ banks. They may paper over the current emergency (or not), but it only ensures an even larger crisis when they pull back on guarantees.
In reality, they won’t be able to remove these guarantees and will need to widen them. With each new event or collapse, they must continue promising more and bailing out with higher amounts (printing). As this continues, a new alternative will emerge - to deposit your money directly with the government’s central banks because it’s the only ‘safe’ option remaining - CBDCs. After all, what could possibly go wrong with handing over to the government all your savings?
If the government believes you haven’t paid enough taxes, they can deduct it from your account until you argue successfully that you paid a sufficient amount. If government officials or legislature is
bribedlobbied by special interest groups to amend laws on what is acceptable, you may immediately become a dissident yourself.
While the current banking crisis is grabbing the headlines, it’s essential to realise this is yet another symptom of a fragile, rotting and crumbling system and just one more justification in their minds to inflate the monetary base (‘print money’ lest I be accused of obfuscation also) and destroy your buying power.
The more they print, the less every dollar in your pocket is worth.
The US Dollar is the ‘strongest’ of the fiat currencies alive today. So if you’re savings are in another currency, those dollars/euro/pounds/yen are declining even faster in purchasing power. This should scare the pants off anyone with children or grandchildren.
Eighty per cent (and rising) of US dollars in existence have been printed since January 2020. Inflation is increasing rapidly and cannot stop until it breaks everything. The increase in prices of everything we see is not the cause but the result of inflation of the money supply - more dollars chasing fewer goods.
Don’t be fooled when leaders stand before a microphone and assure you that inflation is only temporary. It’s a permanent feature of the system by design and helps them to your detriment.
Fiat Money Through History
Throughout history, governments have enjoyed the purview to create and control money. ‘Fiat’ money is the term for notes in your pocket and balances in your accounts, ‘money by decree’. The men with swords or guns tell the people it’s money, so they have little choice but to accept it. Fiat money is only limited by the restraint of rulers’ desire to print it. This restraint is lacking, as we can see from the money printing over the last two years, particularly the previous two weeks.
You work hard every day. You put in honest work and receive your pay each week, which you then apportion for everything you need or want. This is after the government has stuck their hands in first and taken a portion of it. This same government then turns around and prints infinite amounts more than you, and everyone you’ve ever known could earn in their lifetimes in minutes. They claim to do this to protect and ‘make whole’ those they deem are deserving - aka have the proper lobbying and palms greased in the corridors of power - while letting those they don’t twist in the wind.
I think democracies are prone to inflation because politicians will naturally spend - they have the power to print money and will use money to get votes.
Charlie Munger
So if they can print the money, why must we pay taxes? Because taxes are a system of control, they know money printing only works for a time. Money printing always fails in the long term. Once society loses confidence in its money, it’s all over. The inflation of the money supply becomes pre-empted as people know what is coming and seek other ways to store their wealth - better money.
This can be seen playing today in Argentina, where the moment a person is paid, there is a mad scramble to buy anything tangible possible before the money loses its purchasing power by the end of the day.
The fiat money is so broken in Lebanon right now that the price of a coffee increases during one lunchtime sitting at a cafe.
While extremes like this may still be a while off for those in the West, please don’t kid yourself into thinking it can’t or won’t happen.
The more confidence is lost, the more they print. This eventually led to the hyperinflation we have seen throughout history, including Weimar Germany, Hungary, Zimbabwe, Venezuela, and soon to be the United States and European Union.
Why Printing Money is Dangerous
When a government can print money at will, it removes accountability for its decisions and passes on the consequences to future generations in the form of debt that must be paid off to avoid complete devaluation and eventual destruction of the currency.
A government that prints money has no limitation to buying the power it needs by moving funds to whichever area or group of people is politically expedient. It also has no restriction on its ability to pay for enforcement (police and military) of whatever policy it wants to ensure dissent is crushed.
If President Macron of France couldn’t print money to pay for his enforcers, how long would they remain loyal to him during the seemingly endless protests in the country?
This power means government can make decisions arbitrarily that would not be supported by the wider population and worry about massaging public opinion later.
Imagine a country where government money printing was impossible, and leaders were forced to justify all spending from a limited budget pool derived only from taxes.
You’re given a choice; would you like to stop childcare benefits this month so we can send $100 million of weapons to Ukraine? Should we allocate $200 million to Non-Governmental Organisation funding in Taiwan to ‘advance democracy’, or should we construct a new bridge?
It’s obvious where people want their money to be spent as opposed to where unaccountable government, through money printing, obfuscation and debt accumulation, actually spends it. An end to money printing would immediately lower global tension and conflict. The government would be forced into accountability and need to justify its actions - something sorely missing now.
Tying it All Together
While we aren’t currently seeing the levels of the hyperinflation of Weimar Germany shown in the diagram below, high or ‘low,’ inflation is still detrimental to your savings. Be very clear about what is happening; the government is purposefully destroying the currency to inflate away its debt for its benefit and to your detriment. This will only get worse.
The current banking crisis will subside for a time. They will again patch over this latest wound, but the days of being able to do that are numbered as debt levels among Western governments skyrocket.
Avoid the temptation to forget once it leaves the headlines and settle back into a false sense of security or ignorance. While you move on to the next distraction the news provides, inflation will continue eating away at your purchasing power. That night out, the house you want, your children’s education, and your coming holiday will continue increasing in price.
Recognise what is happening; continual seemingly isolated economic and financial events are a symptom of a system in turmoil. As the wheels wobble and start to fall off, inflation in a debt-based monetary system and its coordinated destruction of your wealth is the only option governments have to maintain political control.
It will not get better. Fractional reserve systems constantly need bailouts to function because they constantly implode. This is how the government intends to keep it because a better alternative would end their shell game. They can and will bar all the exits - evidenced by the recent rejection of Custodia Bank to obtain a banking license with their 100% reserve banking model. Regulators cannot allow a 100% full reserve banking to exist in our ponzi, debt-based, fractional reserve system. If it did, capital would flood into the safe, 100% reserve bank and lead to an end of the debt-based monetary system.
Fortunately for us as individuals, Bitcoin doesn’t require permission from regulators. You can already store your money in a 100% sovereign, full-reserve monetary asset that doesn’t rely on third-party custodians or increasingly meaningless guarantees in which the dollar denominator loses value with each passing day. I delve into much greater detail on it here.
Avoid complacency and prevent your savings and lifestyle from being destroyed as it has been to countless millions of people, even as you read this.
Suppose the above system concerns or, better yet, sickens you. In that case, I urge you to start taking steps to move a portion - whatever portion you are comfortable with - into sovereign assets like Bitcoin or at least gold if that’s more comfortable. Even 1% of your money in a safe, sovereign money increasing or maintaining its purchasing power is better than 100% being inflated away. Time is running out.
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