The Great Reset
Updated
!!!CAUTION ONLY BIG BRAINS FROM HERE ON OUT!!!
White: US 10 Year Bond Yield
Orange: US Debt to GDP
Blue: US yoy inflation
"Inflation transfers wealth from creditors to borrowers for all sorts of nominal debt, not just government debt." -- Christopher J. Neely, Vice President at St. Louis Fed.
What is the Great Reset? Is it a new 1929 Crash, a new Great Depression? No. The real Great Reset is the controlled writing down of US debt-to-GDP which has reached unsustainable levels and surpassed those at the end of WW2. In fact this chart only shows government debt (orange), in truth when you add corporate and all other forms of private debt, you get a figure currently in excess of 700% of GDP.
People believe inflation is the problem, they don't understand that in most of the world it is a tool for writing down debt. This was also the case in the US after WW2.
How do you write down debt measured against a country's productive output? Well, the easiest way is to increase GDP, but because in reality growth is limited (in some cases almost zero), it's easiest to do this by increasing the nominal value of GDP by ramping up inflation:
Nominal GDP = Real GDP * inflation factor
So by increasing inflation we increase GDP nominally and we decrease our debt with respect to productivity.
So what does this have to do with the chart? Look what happened after WW2, when bond yields bottomed and debt-to-GDP peaked. These two reversed over the next 40 years until 1980, when they reversed again. Look what happened to the long-term inflation in that same 1945 to 1980 period: ignoring the many short-term spikes (known as surprise inflation), the curve slopes exponentially upwards, gently at first until culminating in the inflationary spial of the late 1970s. This same process is beginning again. We will see many short-term inflation spikes in the coming years (surprise inflation) but they will mask an underlying increase in long-term inflation. What does this mean? It means your savings will be wiped out with respect to purchasing power. It means diversify into bitcoin and other dead (non-productivity related) assets over the coming decade and decouple from the fiat.
The same principle applies to Eurozone and other so-called developed countries with excessive debt-to-gdp ratios.
Further reading:
The truth is wealth is being transferred from the creditors, i.e. the citizen, to pay down government debt: as your savings lose purchasing power, the value of debt also vanishes. This is really why we say inflation is a tax!
White: US 10 Year Bond Yield
Orange: US Debt to GDP
Blue: US yoy inflation
"Inflation transfers wealth from creditors to borrowers for all sorts of nominal debt, not just government debt." -- Christopher J. Neely, Vice President at St. Louis Fed.
What is the Great Reset? Is it a new 1929 Crash, a new Great Depression? No. The real Great Reset is the controlled writing down of US debt-to-GDP which has reached unsustainable levels and surpassed those at the end of WW2. In fact this chart only shows government debt (orange), in truth when you add corporate and all other forms of private debt, you get a figure currently in excess of 700% of GDP.
People believe inflation is the problem, they don't understand that in most of the world it is a tool for writing down debt. This was also the case in the US after WW2.
How do you write down debt measured against a country's productive output? Well, the easiest way is to increase GDP, but because in reality growth is limited (in some cases almost zero), it's easiest to do this by increasing the nominal value of GDP by ramping up inflation:
Nominal GDP = Real GDP * inflation factor
So by increasing inflation we increase GDP nominally and we decrease our debt with respect to productivity.
So what does this have to do with the chart? Look what happened after WW2, when bond yields bottomed and debt-to-GDP peaked. These two reversed over the next 40 years until 1980, when they reversed again. Look what happened to the long-term inflation in that same 1945 to 1980 period: ignoring the many short-term spikes (known as surprise inflation), the curve slopes exponentially upwards, gently at first until culminating in the inflationary spial of the late 1970s. This same process is beginning again. We will see many short-term inflation spikes in the coming years (surprise inflation) but they will mask an underlying increase in long-term inflation. What does this mean? It means your savings will be wiped out with respect to purchasing power. It means diversify into bitcoin and other dead (non-productivity related) assets over the coming decade and decouple from the fiat.
The same principle applies to Eurozone and other so-called developed countries with excessive debt-to-gdp ratios.
Further reading:
- St. Louis Fed blog entry "Inflation and the Real Value of Debt: A Double-edged Sword"
- Russell Napier interview "We Will See the Return of Capital Investment on a Massive Scale"
The truth is wealth is being transferred from the creditors, i.e. the citizen, to pay down government debt: as your savings lose purchasing power, the value of debt also vanishes. This is really why we say inflation is a tax!
Note
The truth is not a Great Depression, but a Great Repression (see imf.org/external/pubs/ft/fandd/2011/06/reinhart.htm)Note
pssst the rate hikes are not going to keep up with inflation, on average, in the long-term. They'll always just low enough to allowed elevated net inflation to cancel debt-to-gdp, and that by design ;)Note
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