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.
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!
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 ;)
@milwaki5, Play the monthly chart, 5k wicks just noise 🤠
Joe9T
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@milwaki5, the bonds? down - inflation? up I think thats what hes saying?,
cuibono
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@Joe9T, Read the Russell Napier interview, it explains the setup very well. Bond yields will be prevented from outpacing inflation in the long-term, although there should be a short-term rebound now? Seen bonds recently? Can't get much worse
The main point is that inflation isn't coming down to pre-2020 levels and it will grow steadily over the coming decade(s).
Joe9T
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@cuibono, yeh I believe it’s all a game to keep the USD strong bro. So in 4 months bonds will rise enough to let “clever money” to come back out and play at the risk off sounding like an ass I’m already waiting bro shit ain’t getting much lower so fill my bags :)
@cuibono my up or down was half joking but I truly appreciate the response!
I have been buying
I read Russel Napier's interview, they changed the formula and I think people who have been staring at charts for 50 years will expect further downside and miss out.