DID OUR "WORLD LEADERS" JUST PUSH GLOBAL RECESSION AWAY from our doorsteps?steemCreated with Sketch.

in #economy5 years ago (edited)

111.jpg

INTRODUCTION

line2.png

A while ago I opened my eyes wildly in shock reading today’s news. It seems that the US government will enjoy their debt ceiling being raised (link at the end of this post). Which would allow them to increase their spending for next 2 years. Isn’t it amazing (I’m being sarcastic here)?

Another stimulation plan, more spending’s, more debts created and in effect – more newly created and printed money. If I remember well, just this year alone, China decided to stimulate their own economy by pumping it with a record high amount of new easy money. How did they manage to do that? Obviously by creating more debt, that will make it harder for those paying debts in the future but right now we will all be enjoying more of that wealth.

WHAT’S NEXT?

line2.png

How will it all end?

I think we all know.

It can only end very badly.

After all (based on my understanding) pumping more printed money into economies will mostly allow stock market to grow even higher, since a large chunk of this wealth will end up as investments on Wall Street.

So perhaps with all those new easy money entering markets and economies, we will experience another 2-3 years of prosperity and growth? That’s how it does look like to me. So China is printing money like there is no tomorrow. US and FED will do the same. I wonder what will other central banks do.

My current knowledge about economy (still quite limited) is telling me, that all we are doing is delaying another recession and we’re doing it simply by creating more debts, which allows to print new money. These money enters and boost current economy. The way I see it is that we’re using wealth from “the future” (our future time, energy, effort etc) within current days. We’re basically sucking all of our resources from the future and using them today.

And that’s what is exactly happening right now. After all, those debts will have to be paid back. With interests rates. Isn’t that just terrific?

DO I UNDERSTAND IT RIGHT? SHARE YOUR VIEW

line2.png

My important question is:

Do you, dear readers, believe that this kind of solutions (printing more money, creating more debts) will be enough?

Can it really allow goverments to avoid global economic recession by another few years? Or perhaps it’s a little bit too late or simply not enough?

I’m far from being an expert when it comes to economy and every day I’m trying to put some pieces of the puzzle together. In hopes that I will slowly start understanding some relations and that I will eventually see the bigger picture.

Am I wrong or am I right by saying, that all those extra spendings will help current administrations to avoid recession within a short-term timeline. It does seem obvious to me, that our governments’ learned that by creating more debts (which allows to print more money, since each $$$ need to be connected to some debt) is the easiest way of keeping a stable economy growth.

However the question is: how long can we all carry on this way. How long before countries, goverments, societies, companies, house owners and just regular people around the world will not be capable of increasing their debts and large chunk of their profits will be simply used to pay growing interest rates. What will happen then?

After all in every economy it's all about money flow. And once access to new cheap money will finish (or be greatly reduced) and debts pile up – then money flow will slow down bringing one day our entire world to its knees.

Yours,
Piotr
(I read and reply to all comments)

line2.png

Link to article "House approves two-year deal to raise debt ceiling and increase government spending":
https://www.latimes.com/politics/story/2019-07-25/house-approves-two-year-deal-to-raise-debt-ceiling-set-government-spending

Sort:  

The printing press won't stop until "the market" decides that the debt burden is too high. When that time comes (months or years) all wealth in the stocks/bonds/housing market will be destroyed.
After a short deflationary period, we will see hyperinflation like in Venezuela, but it will all happen within a few weeks. Not enough time to get your wealth in Gold/Silver/BTC.
That will be called the great global reset and the elites will use the chaos to push for one world currency and another 50 years of money printing (new debt cycle).
States will default, banks will go bankrupt and believe me it will be nearly as ugly as a war in your country would be.
People will lose their pensions, their homes... it will be one big mess worldwide, but especially in developed countries, because they are not used to living a low life standard.

Late thank you for this excellent comment @ew-and-patterns

Yours, Piotr

@crypto.piotr has set 3.000 STEEM bounty on this post!
logo_for-light-bg_1000.png

Bounties let you earn rewards without the need for Steem Power. Go here to learn how bounties work.

Earn the bounty by commenting what you think the bounty creator wants to know from you.

Find more bounties here and become a bounty hunter.

Happy Rewards Hunting!

Congratulations to the following winner(s) of the bounty!

Hello dear @crypto.piotr.

After all in every economy it's all about money flow. And once access to new cheap money will finish (or be greatly reduced) and debts pile up - then money flow will slow down bringing one day our entire world to its knees.

It is a very realistic opinion, I think that is what has happened with the populist governments of some Latin American countries (including Venezuela), it seems that the most important thing for them is to create a scenario where everything seems to be fine and in the future we will see how it is fixed , and who fixes it. It's living life today and we'll see what happens in the future.

Thanks for sharing friend!

Something to think about; what are they printing? What are they not printing? The debt can never be repaid because they are printing principal, but they aren't printing the interest. Zero sum game? There is more debt than money in many cases, and every time they print a Euro, Dollar or what have you, the one in your wallet is worth just that little bit less and the price of a Liter of Milk magically goes up.

We saw this before in 1920's Germany, and you couldn't put enough money in a wheelbarrow to buy another Wheelbarrow. This has also been repeated in other countries throughout history, yet somehow few seem to catch on and keep using this easy money from nothing. I have a few million Intis from Banco Central de Peru in 1990. They are worth less than the paper it's printed on.

Sobering thought I hope. Greetings.

Dear @onnovocks

I'm glad to see that you're still around. I remember you mentioned that you've been targeted and flagged a lot. Did this problem go away?

Yours
Piotr

Unfortunately the answer is no.

we’re using wealth from “the future” (our future time, energy, effort etc) within current days. We’re basically sucking all of our resources from the future and using them today.

Interesting way of looking at it. Like any debt, we're using future wealth now, assuming we'll have it later. Like taking out a student loan, with the assurance that the completed "education" will be so valuable in the future, money will be no problem, even at outrageous interest rates.

It's also theft through inflation - our wealth is being plundered by less buying dollar power. We need to teach our children these concepts, that's why I read the "Tuttle Twin" books to my children - so perhaps the next generation will know better. 40% off right now with coupon code FORTY


I am an affiliate and receive compensation from your purchase.

Dear @ironshield

I just realized that I never actually thanked you for your amazing comment. I absolutely appreciate it.

Yours
Piotr

I think that very bad and will create another bubble that will blow in 5 years

Posted using Partiko Android

Well, the EU is going to explode. The currency union aspect of it was never a good idea in the first place. It's a matter of when not if that happens.

By contrast, in the US I think it is a matter of if not when we will ever see a return to historic "normal" interest rates (about 5%). The Modern Keynesians are really about to break through into the mainstream. And they maybe onto something about the old monetary indicators being inappropriate for the modern economy. After all, if we're looking for price inflation to be the tail that wags the dog, there are a lot of good reasons that have cropped up in the 21st century for that to have stopped being a reliable indicator, among them globalization and the digital sharing economy.

In China, it's a race between rising debt and sovereign investments. There's a chance that all the infrastructure building that the Chinese have engaged in will grab them a share of that seignorage that allows the US to print money so freely without consequence. For now, China is relying on its planned economy to hold things together and they are hoping that will hold until everything that is the One Belt One Road matures and can contribute significantly to their economy. That's a big bet. But they probably have the best leadership out of the 3 regions mentioned here.

That's my view @crypto.piotr, thanks for asking!

Dear @shanghaipreneur

Thank you for your great comment.

The currency union aspect of it was never a good idea in the first place. It's a matter of when not if that happens.

Is that really how do you see it? I wonder how US in the past managed to unite all states and introduce USD to all of them. I wonder why same couldn't happen in europe.

ps.
Recently I've bumped into this site: https://www.usdebtclock.org/world-debt-clock.html

It does shows debts of all major countries and I noticed that with few exceptions everywhere debt is increasing. However 4 countries (including Poland and Germany) seem to have their debt going down.

And I was wondering how could that be possible? Also I realized that Poland has very good ratio between debt to GDP (around 50%), which is great comparing to countries like France (107%) or Italy (147%). Not to mention JApan (261%).

I found it so confusing. It would suggest that Poland have more stable economy than majority countries out there. Looking at those numbers could even suggest that Japan is serious financial trouble.

Mind sharing your thoughts?

Yours
Piotr

What I don't think people even slightly understand is how devastating this increasing debt will be in the future. Right now governments around the world are struggling to pay for their massive debt loads with the lowest interest rates in modern history.

When rates normalize the cost of servicing these debts will skyrocket.

Short term added spending may keep the economy moving along, but long term this kicking of the can (yet again) is devastating.

You're very right @thedarkhorse

Generally people do not understand much about idea of printing money and debt based economy. I can only hope that we won't witness all of it crushing down within our lifetimes.

ps. I've heard that in Switzerland they already introduced negative interest rates. That must be insane.

Yours
Piotr

Honestly I don't see how we wouldn't see the house of cards crash down. There are very few governments that are in a position to handle the debt loads they have amassed. I'd rather it happen sooner then later and give my children a chance at a future that isn't strapped with what has to happen. It shouldn't be their burden...heck it shouldn't be mine, but I'd rather bear it then it being their problem.

Hi @thedarkhorse

Difficult times ahead of us.

Thank you for your kind comment. I appreciate it a lot.

Yours
Piotr

Oh, my friend. I know this terrible and crazy dynamic very well!

Maybe you know that this mad releasing of money is exactly what the Venezuelan government has done all this years, in a proportion, maybe, infinitely higher than every other country. And look at us now, eating shit.

The first time I got this comprehension in a strong manner was when I saw the documentary series Zeitgeist. Do you know it? There the author explains very well the mechanisms by which corporations, banks and governments hold the control of society by simply creating debt.

I recommend you to look at least this excerpt:
Money creation and fractional reserve banking

I'm not a fan of conspiracy theories, but these dynamics show themselves clearly as sick forms of mass control.

!tip

Thank you again @spirajn for resteeming my latest post and your amazing comment.

Seriously one of the best i've read in this topic. Appreciate your time buddy.

I will watch this video right away. It's from 2012 so it's not the newest ...

ps. God bless Venezuela
Yours, Piotr

Hi Piotr,
Thanks for this interesting topic. I think you get the concept quite well. The more money in the economy the more goods should be produced to compensate it. All countries are using the same economical concept which means growth can be created by increasing the money supply. Countries all over the world are doing it at least since 2008.

In Switzerland for example we have a negative interest rate. This means that you are actually being paid for making depts! How crazy is that.

Growth and cheap money a very short term solution

Politicians worldwide believe that a good economy depends on growth and that this growth can be optained by increasing the money supply. This works and we see the results everywhere. Products are getting cheaper and cheaper. We buy to throw away which results for example in huge plastic waste in the oceans all over the world. We also have a bad alocation of funds as you point out quite well. Instead to use this money to invest we have bubbles in the real estate market and the share market.

Countries and individuals can buy with the money of tomorrow by using dept but there is a point where the charge of the dept doesn't allow it anymore. In a way this point is already reached in many places(Greece, Italy, Argentina, South Africa,...). Once the point is reached where the dept can't be served anymore there is no solution. Everybody seems to put their head into the sand and ignore this. What will come then? I can only think of quite negative outcomes, like Venezuelian like hyperinflation.

These "growth with cheap money" policies have the result that we not only rob the future generations of their economical development but we also produce all the waste of the future today and ruin the planet.

We have to come up with another set of policies

Protecting the climate and the environment, protecting the interests of future generations, in short sustainable developments starts with having a new set of societal values that are different from purely economical values.

hello @ achim03

Protecting the climate and the environment, protecting the interests of future generations, in short sustainable developments starts with having a new set of societal values that are different from purely economical values.

In order to achieve a stable economy, social principles must be evaluated; A consumerist consciousness has been created that states that we should eat the hen of the golden eggs, that we should consume the seeds. If we sacrifice the chicken we will not have more eggs; if we consume the seeds we will not have to sow. Consumption awareness should be generated, which will lower the debt.

You are quite right. We live in world of greed where we want to make money of the chicken, the eggs, the seeds and even the nutriments for the earth. One generation uses it all. We should learn that we dont need consumption and growth to live a happy life...

Posted using Partiko Android

Thanks for sharing your thoughts @tramelibre

Yours, Piotr

Dear @achim03

Thank you for your great comment.

In Switzerland for example we have a negative interest rate. This means that you are actually being paid for making depts! How crazy is that.

That's very unique. I wonder what is advantage and disadvantage of that solution. In a long term (probably longer than our life) this system sounds like a economical suicide.

ps.
Recently I've bumped into this site: https://www.usdebtclock.org/world-debt-clock.html

It does shows debts of all major countries and I noticed that with few exceptions everywhere debt is increasing. However 4 countries (including Poland and Germany) seem to have their debt going down.

And I was wondering how could that be possible? Also I realized that Poland has very good ratio between debt to GDP (around 50%), which is great comparing to countries like France (107%) or Italy (147%). Not to mention JApan (261%).

I found it so confusing. It would suggest that Poland have more stable economy than majority countries out there. Looking at those numbers could even suggest that Japan is serious financial trouble.

Mind sharing your thoughts?

Yours
Piotr

Hi @crypto.piotr,

I found the link quite interesting. It's amazing to see how much dept there is around and how fast it developps. I share your feeling about confusion... It's difficult to interpret these numbers correctly. One thing we should keep in mind is that all these dept is compared to the GDP. So this means that to make these numbers look better governments can either reduce the dept by reducing spending, or they can try to increase GDP by spending even more. Politically speaking it seems always easier to spend more to "encourage" the economy.

Probably the whole castle of cards would come crumbling down if we had a new economical crisis with lower GDP's.

What can we expect of this? I don't know but I doesn't seem a healthy tendency ...

Cheers
Achim

Cheap money is a temporary solution. Then, it becomes a problem. Repeat as necessary.

Cheap money is Indeed a temporary solution but a solution that used makes the problem worse in the long term. We will come to the point where we need another medicine to solve this problem...

Right, the problem is exacerbating. And there's no new medicine available yet. Hope someone comes up with a solution.

Yes @ majes.tytyty....u r right. This temporary solution will only lead to Permanent problem!