Ask HN: Is anyone worried about the monetary mass? Since 2008, nearly x3 USD are circulating.
Durung last year, we almost doubled the monetary mass.
We are still in credit crunch with the fed providing liquidity to banks.
The monetary system seems only afloat because the fed is printing. But don't we face a huge collapsing if people stop considering this huge amount of dollars still have the same value than 10 years ago ? |
This is why we can not see the effect yet, because everything is still somehow in a balance.
Around 2008 there was about 4 times more money than things you can buy, now we approach 20 times and over. So this is not a new problem.
This money is stored somewhere and not part of the economy, so this usually does not matter, but the implications are crazy. If you look at Tesla for example they are worth more then the next 6 biggest car companies combined, while only producing the tiniest amount of product and having very little people employed. This will continue and continue, over years people assumed it would crash and have been wrong.
This makes no sense to me, but having more money and less stuff is actually a booming economy in the making. The problem is, the money can not be used right now. The world economy is stalling.
But give the money just a place to be stored or a product worth buying and boom its value goes through the roof. Housing, rare materials and companies like tesla will suck up money like crazy for now... Other then that nothing much will happen for now.
This IS a new problem that is 5 times bigger that 2008 crash. Probably much worse due the catastrophic chain effects it will cause.
So the resession was healed by providing more moving money and everything bounced back.
This is what we see again now.
So the system is actually holding up because the amount of money is increased. This is not the symptom, but the cure.
This way everything can go on as it is, but you are right, there can be more effects. Although I'm not sure which.
If the cash flow goes away so do all products and people starve... This is avoided by printing more cash. At least that is the theory and it seems to hold, for now...
Again I could be wrong on this.
How so? What does a collapse mean and what are the mechanisms through which it can happen?
I'm not saying that it can't or won't happen btw, I just think that it's much more useful to discuss specific outcomes and market processes than a vague feeling of "the numbers are going up too quickly, we'll have a crash soon".
e.g. Zimbabwe in recent memory
After the financial crash of 2008, I think many people worry. That's one of the reasons why you can see the price of bitcoin, gold and other assets went up in the last 5 years. Even if they don't have guaranteed returns, people want to make returns. It can also be a hedge against fiat currency collapse.
Governments are in direct competition with each other. The trade war is fought with different means including monetary mass (Quantitative Easing), tariffs and IP theft. The huge collapse will be in 2nd/3rd world states.
Those states don't have an economy to support the money printing policy. When states can't manage their finances, that is pushed onto its citizens. Even if they were never in debt themselves.
The newly minted money will not go directly into the middle or lower class bank accounts, thus those citizens get less purchasing power. If money printing is not an option, the states will try to raise taxes (Colombia 2021, Chile 2020, Argentina 2020). If that is not an option, they'll try to confiscate savings from bank accounts (Cyprus, 2012). If the states finances fail, they will have civil war (Venezuela, 2021) or "sell" public assets to other states (China is confiscating assets in other states: Greece 2019, Angola, Ethiopia, Zambia etc).
Don't worry, diversify and think globally
When thousands of hard working americans will wake up 100 times more poor.
Middle class will end up holding a bag
A lot of countries's central banks and relationship with politcs, monetary policy and so on made people feel somewhat confident that this can go on for a long time and perhaps doesn't create inflation, as long as the money is directed towards "stuck" money, money that isn't moving around and doesn't accelerate M1.
I think the final outcome of this will be that all those zombie companies that only exist for the reason that they can take debt almost indefinitely will plague the growth of countries up to the moment that they see that they are no longer growing.
There's also a problem with GDP that doesn't make it obvious because a zombie company, no matter how dead it is, is still pushing that number higher as long as it still manages to sell or produce something(not whether people really want it or are actually buying it). Imagine a company selling to the other company a useless product, if you make a good loop, this could go on forever and make am infinitely high GDP figure... but for the end consumer it has no impact.
It might take multiple decades for us to really understand what will be that impact and no real economist can say what that impact and effect is, but one thing for sure is that it will create turmoil and issues in society.
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If you want an answer in order to protect yourself from all this mess: diversify. Diversify by not only investing in many stocks, but many kind of assets. Including land. Learn how to live by yourself without being very dependant on others. Learn how to grow your vegetables and look for alternatives most people in the rat race aren't looking for. The system will change, that's the only thing that is crystal clear. You want to be ready for those changes to adapt with it.
Most of people here seem to mention crypto, but crypto is just a very tiny part of what you could to in order to protect yourself. Have farmland in multiple countries, assets in multiple countries, hell, even multiple fiat currencies and metals. AND mostly importantly... invest in yourself, be healthy, in shape and go see your doctor while he is still there.