The Trillionaire Next Door

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The coordinated global destruction of money by what seems to be every central bank on earth is a panic effort to keep the debt-money supply from liquidating. The problem is too much debt. There no longer is real growth because there is too much debt.  Unless the debt is liquidated there cannot be real economic growth again. 

The problem the central bankers face is debt liquidation. In a debt-standard system this also means money liquidation, or money supply deflation. They will make any effort possible to keep the house of cards inflated and the debt from going bad. More debt is the solution to keeping the debt-money supply inflated while it is also the very problem keeping the real economy from growing. Herein lies the conundrum central bankers face. More debt, more money printing causes the real economy to get worse, not better. What the central banks are doing to keep the debt from liquidating is destroying the real economy. It is the equivalent of using gasoline to put out a fire.

The worse the real economy gets the more money printing will be required to keep the debt from going bad. The effects of this accelerating money printing can already be seen in nominal prices of equity markets defying gravity hitting new record highs almost daily, despite virtually all economic indicators showing real economies around the global are continuing to slow. Japan's Nikkei index is prime example - going nearly straight up since November 2012 when unlimited QE was announced - despite no improvements in the real economy. 

This money-printing-rather-than-real-growth experiment has been tried before, in Zimbabwe. The stock market there went parabolic in the early 2000s  hitting record highs until peaking in 2007. Imagine the guy who bought in just a few years before or up to the peak. He was likely feeling euphoric in his expectations of getting rich and false security of having obtained inflation protection. Is that how your equity portfolio is making you feel now? Equity investors in Zimbabwe became trillionaires while they all simulataniously went broke. 


Central bank's are printing money out of thin air, lifting equity markets to new nominal highs, creating an illusion of wealth. Contrary to what they would like you to believe, they are not economic alchemists. Nominal is not real.  Money printing does not create wealth. Nominal paper wealth is not real wealth until it is converted into real hard assets. Once the money printing music stops it will be too late to convert as everyone and their uncle will all be rushing for the same small exit door at exactly the same time. If the money printing music doesn't stop eventually the market will demand higher interest rates as compensation for the deteriorating value of money causing the debt to go bad and the entire house of cards to collapse. If the rate of central bank money printing continues to accelerate to prevent this rise in interest rates stock markets will go parabolically higher as money becomes worthless making us all broke trillionaires. 

My name is Greg Simon. I am an independent thinker and world traveler.