politicians around the world throw money around as if there is no tomorrow. Spending hundreds of billions, even trillions of dollars or euros has now become the norm. Money that no government has and that it could never – or even wanted – to collect through tax increases. “Loans” is the magic word. Loans that seem to be available in unlimited amounts thanks to the magic of the money printing machine. For the third time in 20 years, a crisis that is essentially a global debt crisis is being fought with even more debt.
Governments and central banks run wild
What is happening here has little in common with Keynesian economic stimulus programs. Because the economic imbalances and undesirable developments that have arisen over two decades have become so great that it is no longer a matter of stimulating the economy and cushioning a downturn, but only of delaying the collapse of the debt pyramid and with it the financial system.
Full throttle into bankruptcy
The events of the past few months show once again how determined the politicians on both sides of the Atlantic – and of course also in China – are not to abandon the path they have chosen to ruin through inflation. In the US, the money supply expanded by 25% in just a few months compared to the previous year. In the EU it is currently being increased at an annual rate of 9.2%, as of July 2020, and the ECB has increased its total assets by a staggering € 1,717 billion since the end of February this year through the purchase of bonds.
The lessons of history are ignored, common sense is despised. The money of others can easily be squandered. Responsibility for future generations, forward-looking action and regulatory foresight no longer take place. Muddling along at any price is the political motto.
From the point of view of a short-term oriented politician, inflation is by far the most convenient and simplest answer to the problem of over-indebtedness. The high growth in the money supply, which even surpasses the levels of the highly inflationary 1970s, shows where the journey should go.
Worth more than the entire Japanese stock exchange
The older of you may still remember the insane valuations of the Japanese stock market in the late 1980s. At the height of this speculative bubble – the first major post-war equity and real estate bubble – comparisons made the rounds to illustrate the madness of what was happening.
For example, the real estate value of the Belgian embassy site in Tokyo at that time was higher than the total national debt of Belgium, which amounted to 130 percent of Belgium’s gross domestic product. And the area around the Imperial Palace in Tokyo achieved the same rating as all of California in 1989.
As I reported to you here last week, according to US analyst David Rosenberg, the market capitalization of the four US stock exchange favorites Amazon, Apple, Google and Microsoft exceeds the market capitalization of the entire Japanese stock exchange. The times and names change, the core of the action remains the same. Both Japanese stock prices and Japanese house prices are still around 50% below their then highs.
Protect your wealth from the wealth destroyers
Governments and their central banks have set in motion a gigantic spiral with which wealth is destroyed on a large scale, but also redistributed upwards. How you can protect yourself from these machinations and with which gold mining stocks you can even achieve high price gains in the coming months, you can read in my market letter Crisis-Safe Investing – test now for 30 days free of charge.
Claus Vogt, Editor-in-Chief of Crisis-Safe Investing
P.S .: The debt union is sealed with the debt-financed EU economic stimulus program, which the Federal Ministry of Finance foolishly calls the “reconstruction fund” – albeit with small built-in hurdles.
P.P.S .: If you want to get through this crisis week after week, please request the free Claus Vogt market comment here today easily with your email at.
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