It's getting exciting! With the massive rise in the price of gold, which can be seen as a sign of liquidity surpluses and geopolitical uncertainty as well as a lack of creditworthiness in government finances, the markets are signaling the start of a possible new monetary policy regime. Government debt has long since accelerated and spiraled out of control, and no one has the power to reverse course. The US Treasury published these papers yesterday, which can be seen in the appendix. This is about the buyback of government bonds to control interest rates at the long end - the volume initially appears small at 200 million dollars, but as a rule such actions always begin in such a way as to cause as little irritation as possible in the markets. The end is well known and can be seen in Japan! A completely over-indebted state sector that uses its central bank exclusively to monetize new and existing debt. The goal is clear: to further suppress volatility, which will cause asset prices to rise further. If this spills over into the real estate sector, the social crisis in economies infected by Keynesianism and socialism will intensify.
42 sats \ 7 replies \ @justin_shocknet 3 Apr
I think it's been here for awhile, it's just becoming more obvious...
Since dollars are loaned into existence, and destroyed when debt is paid off, the national debt === the money supply
The Stephanie Keltons of the world are correct in that "the debt is money we owe to ourselves"
Rates and taxes are just levers that can be adjusted to nudge how the newly created money is used and how quickly it is destroyed
Lots of financial influencers would equate a debt crisis as no buyers for treasuries, but the Fed has long treated treasuries exactly as dollars, by arbitrarily changing bank reserve ratios and loaning dollars for treasuries at par value
So if treasuries are dollars, and dollars are loaned into existence, then the debt has effectively been monetized since 1971? 1913?
This is why federal spending must be greater than it's combined tax revenues and interest, lest we run out of new dollars to pay back old debt.
If the government was a good investor, and the production of "stuff" you buy money with increased at an equal or better pace than dollar supply, this could theorhetically go on until the singularity... but reality is that decades of malinvestment means more dollars than there is stuff === asset inflation
I think the financial influencers conflate debt crisis with currency crisis because in this system they're exactly the same thing
reply
17 sats \ 6 replies \ @TomK OP 3 Apr
that's a good overview, thank you. how do you assess the situation? at what point does the debt level become critical? If I understand correctly, Japan has over 200% debt in relation to GDP. if that's the case, the whole show should go on for a very long time, shouldn't it?
reply
42 sats \ 5 replies \ @justin_shocknet 3 Apr
I don't think Japan comparisons are useful because there's too many variables that make it completely different
The Yen isn't the world reserve currency, and Japan also has a far different economy and demographics... those things being so different make it impossible to compare the two situations. We could also argue GDP is just a number fake as the fiat it's measured in.
An ideal economy is 0 GDP, implying no conversion of fake currencies, just as no one would consider Bitcoin's circular economy as having GDP, yet its flourishing.
So let's define critical, we can say the system broke in 1971... so maybe then? When did asset prices start outpacing savings accounts? When did aspiring billionaires start going leveraged long bonds, rather than building the actual stuff people need?
These things have been happening gradually for a long time, we're just seeing mounting evidence we're at the suddenly part of the curve.
I believe the interest expense being greater than tax receipts is on track for this year or next, I'd call that a critical milestone.
reply
17 sats \ 4 replies \ @TomK OP 3 Apr
Wow, that's not much time left. Thank You for sharing Your insights, very helpful. May I ask how You see BTC doing in a transitionary phase or a deflationary shock? Down hard, than rebounce like crazy?
reply
42 sats \ 3 replies \ @justin_shocknet 3 Apr
We've already seen the first innings, the fake pandemic needed to happen to slow the velocity of money by shutting down industry, such black swans:
- provide an excuse to pump trillions into the system
- slow velocity so that the trillions don't immediately collapse the currency by inflating everything all at once
Remember how hastily they needed to get stimmies and the PPP dollars into checking accounts, and therefore the banking system? I'll never forget Mnuchin looking like he was about to shit his pants when they were trying to stimmies out, the Treasury and Fed were consolidated into a single entity that day.
What happened to Bitcoin? It hit 3k before it hit 60.
This is the only thing that stops me from maintaining a 3-4x Bitcoin long open at all times, there must be a draw down before they open the dam again... what's different this time is the same old tricks don't produce the same high...
So I don't think the next drawdown will be as deep as the last one, but the blow off might be the final one as in the death of the dollar as we know it.
The other twist next time surely goes hand in hand with all the WW3 chatter and other weird shit going on. The world order is changing and that's directly linked to currencies.
I don't know exactly what it will look like, but it'll be another manufactured black swan not unlike covid that provides cover for a major change that's about to happen.
We could really lay on the tinfoil and I could tell you how I believe the US has been quietly restructuring under continuity operations since 2020 under the military JSOC and that the psyops we see every day aren't purely political.
reply
17 sats \ 2 replies \ @TomK OP 3 Apr
good that you mention the clown flu. i was one of the very few people here in germany who wrote against it from day one. apart from that, i absolutely agree with your assessment
reply
0 sats \ 1 reply \ @justin_shocknet 3 Apr
Oh that's right I forgot sie sind Deutsch
You may appreciate all the MSM narrative about US not being a reliable NATO partner any more, that goes hand in hand with all of it and is likely foreshadowing something big. Germany couldn't be any more in the middle of all these changes, both economically and geographically. Hope you're a prepper 🫡
reply
17 sats \ 0 replies \ @TomK OP 3 Apr
Don't worry, I left this sh 5 years ago.
reply on another page
21 sats \ 8 replies \ @siggy47 3 Apr
I'll do a search now, but have you noticed whether this has gotten much attention in the US or international press?
reply
75 sats \ 7 replies \ @TomK OP 3 Apr
in my press research this morning in the european press, I found nothing about this. so it is urgent
reply
21 sats \ 6 replies \ @siggy47 3 Apr
Very strange. I found an article from May of last year, but nothing about yesterday.
reply
75 sats \ 5 replies \ @TomK OP 3 Apr
In view of the chaos on the bond markets, I am no longer surprised
reply
21 sats \ 4 replies \ @riberet19 3 Apr
Do you think the U.S. will go Japan's way? Or is it simply unfeasible for them?
reply
10 sats \ 3 replies \ @TomK OP 3 Apr
If you look at the growing government ratios and the demographic situation in large parts of the so-called West, I believe that almost all of them will go the same way as Japan.
reply
21 sats \ 2 replies \ @riberet19 3 Apr
If that's true, disaster is inevitable, but Japan has delayed it for a long time, do you think all countries will do it this "well"?
reply
10 sats \ 1 reply \ @TomK OP 3 Apr
as things stand, the central banks are trying at all costs to keep volatility on the stock markets low through massive interventions, liquidity injections and government bond purchases. this naturally discharges itself through volatility on the street, mass impoverishment through inflation etc - all the problems we always discuss here. and this is the path that all states will take in the fiat money system. There can be no state bankruptcies or debt cuts in this monetary system for balance sheet reasons without triggering the most serious banking crises.
view replies