The new economic theory gov't and central banks have chosen as a path to economic prosperity is called "More is never enough". The results of this new economic theory has produced the complete opposite effect. As GDP to Debt continues Crash! While asset classes such as stocks and bonds have completely disconnected from economic reality and continued to soar.
To understand this phenomenon you must understand where the money ends up after created from thin air. The answer is savings. You are not stuffed with savings I know hold, on getting to it. The private sectors has two parts to it productive (household income where the 95% reside) and unproductive (Business profit where the 5% reside). No profit/Savings can ever exist for businesses, without Income/ Dissavings from the household. Thus, how household income is funded is vitally important to the economy.
1. IF the household is funded by Gov't. inequality is assured and business profit/savings will soar. Thus all Gov't deficits are savings for the top 5% who speculate with those savings in asset classes. in this case, inflationary within the productive household will suffer along with GDP and national wealth. This is the path of economic ruins if sustained for long periods of time.
2. IF the household is funded by the Businesses, inequality is balanced and national wealth grows and shared by all, while asset class inflation subdued and based on real fundamentals.
What we have been experiencing is case 1 unfortunately. the economics of it all is more complex obviously but the net outcome is the same. If you want a simple way to monitor on the path we are all on. This chart speaks volumes not 1000 words. Now that you have a basic understanding of the macroeconomics behind it all, don't be surprised or get too upset about the moves the markets are making. In fact, it is to be expected that they do make such moves or the economics behind it would not be valid and we would all be lost. That does not mean the markets, the economy cannot correct, or that the rich are evil, or whatever. We will follow th data closely and adjust as necessary.
To understand this phenomenon you must understand where the money ends up after created from thin air. The answer is savings. You are not stuffed with savings I know hold, on getting to it. The private sectors has two parts to it productive (household income where the 95% reside) and unproductive (Business profit where the 5% reside). No profit/Savings can ever exist for businesses, without Income/ Dissavings from the household. Thus, how household income is funded is vitally important to the economy.
1. IF the household is funded by Gov't. inequality is assured and business profit/savings will soar. Thus all Gov't deficits are savings for the top 5% who speculate with those savings in asset classes. in this case, inflationary within the productive household will suffer along with GDP and national wealth. This is the path of economic ruins if sustained for long periods of time.
2. IF the household is funded by the Businesses, inequality is balanced and national wealth grows and shared by all, while asset class inflation subdued and based on real fundamentals.
What we have been experiencing is case 1 unfortunately. the economics of it all is more complex obviously but the net outcome is the same. If you want a simple way to monitor on the path we are all on. This chart speaks volumes not 1000 words. Now that you have a basic understanding of the macroeconomics behind it all, don't be surprised or get too upset about the moves the markets are making. In fact, it is to be expected that they do make such moves or the economics behind it would not be valid and we would all be lost. That does not mean the markets, the economy cannot correct, or that the rich are evil, or whatever. We will follow th data closely and adjust as necessary.
Real Macro Economic Investing
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