![]() | (Hey everyone, this is the SECOND half of the Finale, you can find the first half here)The Dollar EndgameTrue monetary collapses are hard to grasp for many in the West who have not experienced extreme inflation. The ever increasing money printing seems strange, alien even. Why must money supply grow exponentially? Why did the Reichsbank continue printing even as hyperinflation took hold in Germany?What is not understood well are the hidden feedback loops that dwell under the surface of the economy. The Dragon of Inflation, once awoken, is near impossible to tame. It all begins with a country walking itself into a situation of severe fiscal mismanagement- this could be the Roman Empire of the early 300s, or the German Empire in 1916, or America in the 1980s- 2020s. The State, fighting a war, promoting a welfare state, or combating an economic downturn, loads itself with debt burdens too heavy for it to bear. This might even create temporary illusions of wealth and prosperity. The immediate results are not felt. But the trap is laid. Over the next few years and even decades, the debt continues to grow. The government programs and spending set up during an emergency are almost impossible to shut down. Politicians are distracted with the issues of the day, and concerns about a borrowing binge take the backseat. The debt loads begin to reach a critical mass, almost always just as a political upheaval unfolds. Murphy’s Law comes into effect. Next comes a crisis. This could be Visigoth tribesmen attacking the border posts in the North, making incursions into Roman lands. Or it could be the Assassination of Archduke Franz Ferdinand in Sarajevo, kicking off a chain of events causing the onset of World War 1. Or it could be a global pandemic, shutting down 30% of GDP overnight. Politicians respond as they always had- mass government mobilization, both in the real and financial sense, to address the issue. Promising that their solutions will remedy the problem, a push begins for massive government spending to “solve” economic woes. They go to fundraise debt to finance the Treasury. But this time is different. Very few, if any, investors bid. Now they are faced with a difficult question- how to make up for the deficit between the Treasury’s income and its massive projected expenditure. Who’s going to buy the bonds? With few or no legitimate buyers for their debt, they turn to their only other option- the printing press. Whatever the manner, new money is created and enters the supply. This time is different. Due to the flood of new liquidity entering the system, widespread inflation occurs. Confounded, the politicians blame everyone and everything BUT the printing as the cause. Bonds begin to sell off, which causes interest rates to rise. With rates suppressed so low for so long, trillions of dollars of leverage has built up in the system. No one wants to hold fixed income instruments yielding 1% when inflation is soaring above 8%. It's a guaranteed losing trade. As more and more investors run for the exits in the bond markets, liquidity dries up and volatility spikes. The MOVE index, a measure of bond market volatility, begins climbing to levels not seen since the 2008 Financial Crisis. MOVE Index Sovereign bond market liquidity begins to evaporate. Weak links in the system, overleveraged several times on government debt, such as the UK’s pension funds, begin to implode. The banks and Treasury itself will not survive true deflation- in the US, Yellen is already getting so antsy that she just asked major banks if Treasury should buy back their bonds to “ensure liquidity”! As yields rise, government borrowing costs spike and their ability to roll their debt becomes extremely impaired. Overleveraged speculators in housing, equity and bond markets begin to liquidate positions and a full blown deleveraging event emerges. True deflation in a macro environment as indebted as ours would mean rates soaring well above 15-20%, and a collapse in money market funds, equities, bonds, and worst of all, a certain Treasury default as federal tax receipts decline and deficits rise. A run on the banks would ensue. Without the Fed printing, the major banks, (which have a 0% capital reserve requirement since 3/15/20), would quickly be drained. Insolvency is not the issue here- liquidity is; and without cash reserves a freezing of the interbank credit and repo markets would quickly ensue. For those who don’t think this is possible, Tim Geitner, NY Fed President during the 2008 Crisis, stated that in the aftermath of Lehman Brothers’ bankruptcy, we were “We were a few days away from the ATMs not working” (start video at 46:07). As inflation rips higher, the $24T Treasury market, and the $15.5T Corporate bond markets selloff hard. Soon they enter freefall as forced liquidations wipe leverage out of the system. Similar to 2008, credit markets begin to freeze up. Thousands of “zombie corporations”, firms held together only with razor thin margins and huge amounts of near zero yielding debt, begin to default. One study by a Deutsche analyst puts the figure at 25% of companies in the S&P 500. The Central Banks respond to the crisis as they always have- coming to the rescue with the money printer, like the Bank of England did when they restarted QE, or how the Bank of Japan began “emergency bond buying operations”. But this time is massive. They have to print more than ever before as the ENTIRE DEBT BASED FINANCIAL SYSTEM UNWINDS. QE Infinity begins. Trillions of Treasuries, MBS, Corporate bonds, and Bond ETFs are bought up. The only manner in which to prevent the bubble from imploding is by overwhelming the system with freshly printed cash. Everything is no-limit bid. The tsunami of new money floods into the system and a face ripping rally begins in every major asset class. This is the beginning of the melt-up phase. The Federal Reserve, within a few months, goes from owning 30% of the Treasury market, to 70% or more. The Bank of Japan is already at 70% ownership of certain JGB issuances, and some bonds haven’t traded for a record number of days in an active market! The Central Banks EAT the bond market. The “Lender of Last Resort” becomes “The Lender of Only Resort”. Another step towards hyperinflation. The Dragon crawls out of his lair. QE Process Now the majority or even entirety of the new bond issuances from the Treasury are bought with printed money. Money supply must increase in tandem with federal deficits, fueling further inflation as more new money floods into the system. The Fed’s liquidity hose is now directly plugged into the veins of the real economy. The heroin of free money now flows in ever increasing amounts towards Main Street. The same face-ripping rise seen in equities in 2020 and 2021 is now mirrored in the markets for goods and services. Prices for Food, gas, housing, computers, cars, healthcare, travel, and more explode higher. This sets off several feedback loops- the first of which is the wage-price spiral. As the prices of everything rise, real disposable income falls. Massive strikes and turnover ensues. Workers refuse to labor for wages that are not keeping up with their expenses. After much consternation, firms are forced to raise wages or see large scale work stoppages. Wage-Price Spiral These higher wages now mean the firm has higher costs, and thus must charge higher prices for goods. This repeats ad infinitum. The next feedback loop is monetary velocity- the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy. The faster the dollar turns over, the more items it can bid for- and thus the more prices rise. Money velocity increasing is a key feature of a currency beginning to inflate away. In nations experiencing hyperinflation like Venezuela, where money velocity was purported to be over 7,000 annually- or more than 20 times a DAY. As prices rise steadily, people begin to increase their inflation expectations, which leads to them going out and preemptively buying before the goods become even more expensive. This leads to hoarding and shortages as select items get bought out quickly, and whatever is left is marked up even more. ANOTHER feedback loop. Inflation now soars to 25%. Treasury deficits increase further as the government is forced to spend more to hire and retain workers, and government subsidies are demanded by every corner of the populace as a way to alleviate the price pressures. The government budget increases. Any hope of worker’s pensions or banks buying the new debt is dashed as the interest rates remain well below the rate of inflation, and real wages continue to fall. They thus must borrow more as the entire system unwinds. The Hyperinflationary Feedback loop kicks in, with exponentially increasing borrowing from the Treasury matched by new money supply as the Printer whirrs away. The Dragon begins his fiery assault. Hyperinflationary Feedback Loop As the dollar devalues, other central banks continue printing furiously. This phenomenon of being trapped in a debt spiral is not unique to the United States- virtually every major economy is drowning under excessive credit loads, as the average G7 debt load is 135% of GDP. As the central banks print at different speeds, massive dislocations begin to occur in currency markets. Nations who print faster and with greater debt monetization fall faster than others, but all fiats fall together in unison in real terms. Global trade becomes extremely difficult. Trade invoices, which usually can take several weeks or even months to settle as the item is shipped across the world, go haywire as currencies move 20% or more against each other in short timeframes. Hedging becomes extremely difficult, as vol premiums rise and illiquidity is widespread. Amidst the chaos, a group of nations comes together to decide to use a new monetary media- this could be the Special Drawing Right (SDR), a neutral global reserve currency created by the IMF. It could be a new commodity based money, similar to the old US Dollar pegged to Gold. Or it could be a peer-to-peer decentralized cryptocurrency with a hard supply limit and secure payment channels. Whatever the case- it doesn't really matter. The dollar will begin to lose dominance as the World Reserve Currency as the new one arises. As the old system begins to die, ironically the dollar soars higher on foreign exchange- as there is a $20T global short position on the USD, in the form of leveraged loans, sovereign debt, corporate bonds, and interbank repo agreements. All this dollar debt creates dollar DEMAND, and if the US is not printing fast enough or importing enough to push dollars out to satisfy demand, banks and institutions will rush to the Forex market to dump their local currency in exchange for dollars. This drives DXY up even higher, and then forces more firms to dump local currency to cover dollar debt as the debt becomes more expensive, in a vicious feedback loop. This is called the Dollar Milkshake Theory, posited by Brent Johnson of Santiago Capital. The global Eurodollar Market IS leverage- and as all leverage works, it must be fed with new dollars or risk bankrupting those who owe the debt. The fundamental issue is that this time, it is not banks, hedge funds, or even insurance giants- this is entire countries like Argentina, Vietnam, and Indonesia. The Dollar Milkshake If the Fed does not print to satisfy the demand needed for this Eurodollar market, the Dollar Milkshake will suck almost all global liquidity and capital into the United States, which is a net importer and has largely lost it’s manufacturing base- meanwhile dozens of developing countries and manufacturing firms will go bankrupt and be liquidated, causing a collapse in global supply chains not seen since the Second World War. This would force inflation to rip above 50% as supply of goods collapses. Worse yet, what will the Fed do? ALL their choices now make the situation worse. The Fed's Triple Dilemma Many pundits will retort- “Even if we have to print the entire unfunded liability of the US, $160T, that’s 8 times current M2 Money Supply. So we’d see 700% inflation over two years and then it would be over!” This is a grave misunderstanding of the problem; as the Fed expands money supply and finances Treasury spending, inflation rips higher, forcing the AMOUNT THE TREASURY BORROWS, AND THUS THE AMOUNT THE FED PRINTS in the next fiscal quarter to INCREASE. Thus a 100% increase in money supply can cause a 150% increase in inflation, and on again, and again, ad infinitum. M2 Money Supply increased 41% since March 5th, 2020 and we saw an 18% realized increase in inflation (not CPI, which is manipulated) and a 58% increase in SPY (at the top). This was with the majority of printed money really going into the financial markets, and only stimulus checks and transfer payments flowing into the real economy. Now Federal Deficits are increasing, and in the next easing cycle, the Fed will be buying the majority of Treasury bonds. The next $10T they print, therefore, could cause additional inflation requiring another $15T of printing. This could cause another $25T in money printing; this cycle continues forever, like Weimar Germany discovered. The $200T or so they need to print can easily multiply into the quadrillions by the time we get there. The Inflation Dragon consumes all in his path. Federal Net Outlays are currently around 30% of GDP. Of course, the government has tax receipts that it could use to pay for services, but as prices roar higher, the real value of government tax revenue falls. At the end of the Weimar hyperinflation, tax receipts represented less than 1% of all government spending. This means that without Treasury spending, literally a third of all economic output would cease. The holders of dollar debt begin dumping them en masse for assets with real world utility and value- even simple things such as food and gas. People will be forced to ask themselves- what matters more; the amount of Apple shares they hold or their ability to buy food next month? The option will be clear- and as they sell, massive flows of money will move out of the financial economy and into the real. This begins the final cascade of money into the marketplace which causes the prices of everything to soar higher. The demand for money grows even larger as prices spike, which causes more Treasury spending, which must be financed by new borrowing, which is printed by the Fed. The final doom loop begins, and money supply explodes exponentially. German Hyperinflation Monetary velocity rips higher and eventually pushes inflation into the thousands of percent. Goods begin being re-priced by the day, and then by the hour, as the value of the currency becomes meaningless. A new money, most likely a cryptocurrency such as Bitcoin, gains widespread adoption- becoming the preferred method and eventually the default payment mechanism. The State continues attempting to force the citizens to use their currency- but by now all trust in the money has broken down. The only thing that works is force, but even the police, military and legal system by now have completely lost confidence. The Simulacrum breaks down as the masses begin to realize that the entire financial system, and the very currency that underpins it is a lie- an illusion, propped up via complex derivatives, unsustainable debt loads, and easy money financed by the Central Banks. Similar to Weimar Germany, confidence in the currency finally collapses as the public awakens to a long forgotten truth- There is no supply cap on fiat currency. Conclusion: QE Infinity When asked in 1982 what was the one word that could be used to define the Dollar, Fed Chairman Paul Volcker responded with one word- “Confidence.” All fiat money systems, unmoored from the tethers of hard money, are now adrift in a sea of illusion, of make-believe. The only fundamental props to support it are the trust and network effects of the participants. These are powerful forces, no doubt- and have made it so no fiat currency dies without severe pain inflicted on the masses, most of which are uneducated about the true nature of economics and money. But the Ships of State have wandered into a maelstrom from which there is no return. Currently, total worldwide debt stands at a gargantuan $300 Trillion, equivalent to 356% of global GDP. This means that even at low interest rates, interest expense will be higher than GDP- we can never grow our way out of this trap, as many economists hope. Fiat systems demand ever increasing debt, and ever increasing money printing, until the illusion breaks and the flood of liquidity is finally released into the real economy. Financial and Real economies merge in one final crescendo that dooms the currency to die, as all fiats must. Day by day, hour by hour, the interest accrues. The Debt grows larger. And the Dollar Endgame Approaches. ~~~~~~~~~~~~~~~~ Nothing on this Post constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. From reading my Post I cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you, so any opinions or information contained on this Post are just that – an opinion or information. Please consult a financial professional if you seek advice. *If you would like to learn more, check out my recommended reading list here. This is a dummy google account, so feel free to share with friends- none of my personal information is attached. You can also check out a Google docs version of my Endgame Series here. ~~~~~~~~~~~~~~ I cleared this message with the mods; IF YOU WOULD LIKE to support me, you can do so my checking out the e-book version of the Dollar Endgame on my twitter profile: https://twitter.com/peruvian_bull/status/1597279560839868417 The paperback version is a work in progress. It's coming. THERE IS NO PRESSURE TO DO SO. THIS IS NOT A MONEY GRAB- the entire series is FREE! The reddit posts start HERE: https://www.reddit.com/Superstonk/comments/o4vzau/hyperinflation_is_coming_the_dollar_endgame_part/ and there is a Google Doc version of the ENTIRE SERIES here: https://docs.google.com/document/d/1552Gu7F2cJV5Bgw93ZGgCONXeenPdjKBbhbUs6shg6s/edit?usp=sharing Thank you ALL, and POWER TO THE PLAYERS. GME FOREVER ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ You can follow my Twitter at Peruvian Bull. This is my only account, and I will not ask for financial or personal information. All others are scammers/impersonators. |
![]() | This post will teach you the basics of how to properly conceptualize options in your mind.It will then teach you how to translate the idea of what an option is into what you see in your brokerage.I say this because if you want to trade options, you need to firstly understand and be able to conceptualize what an option is. As traders we are trying to create a sustainable way to generate returns on our time and capital. Just like any other business, we need to first understand the product we are working with. This post goes over the basics.Simply put, options are a financial instrument.They are not a strategy. They are not inherently better than stocks, or futures, or forex, or bonds.They serve a particular purpose in the market, just like each of the others. The reason many smart retail traders are attracted to options is because of what they give you exposure to. Or more simply put*: the different ways you can make money trading them.* As you dive deeper into the product, you will come to realize that they are an extremely versatile product that can let you express almost any view or idea you have in the market. They are pretty cool. But in order to dive deep into options, you first need to be able to conceptualize what an option is. Let's get started. There are 6 characteristics of an option.Regardless of what option you are trading, they all have the same 6 characteristics that define them.These characteristics are:
1) An option is a contract..When you buy or sell an option, you are not trading the stock itself. The options market is actually separate from the stock market. When you trade in the stock market, you are actually exchanging a piece of the company with others. But in the options market, when you make a trade, you are creating a contract.2) Created between two people..Most people think about option trading as "them VS the market". They aren't really wrong when saying that, because the market determines the prices of the options you see, but I do think people internalize that wrong.When a we say it's "you VS the market", it's not the same as "you VS the house" at a casino. You see, trading is not like blackjack, where all the players sit down and play against the casino. Rather, it is more like poker, where all the players are playing against each other at the same table, betting on the events that will be unfolding. So whenever you are placing a trade, if you break a market down to it's micro transactions, there is actually someone on the other side of that trade. In the options market, there are two players in every transaction: The person who writes/creates the contract (seller) and the person who purchases the contract (buyer). Whether you are the buyer or the seller, there are many different players that could be on the other side of your option contract, but we will save that for another post. 3) That gives the purchaser the right to buy or sell a stock..The contract that the option buyer purchases gives them the right to buy or sell a stock.This also means that by selling an option, you have an obligation to fill the order if the buyer chooses to exercise the contract. 4) At a set price..In the options world, this is called the strike price. So for example, you might buy an option contract from someone that gives you the right to buy Apple stock at $160.This is written into the contract. Different contracts will have different strike prices. Now let's stop and think about this for a second. Would it make sense for an option contract to go on forever? If they did, it wouldn't really make sense to sell them (you'd have a lifetime of risk, for one time pay!). So that brings us to the next characteristic of an option. 5) In a set time frame..Options don't last forever. The contracts have a deadline, at which time they expire. Going back to our Apple example, you might buy an option contract that gives you the right to buy Apple at $160 in the next 30 days.But there is one more thing we need to take into consideration. We know why someone would buy an option now. It gives them the right to buy or sell stock, at a set price, within some timeframe.. But why would anyone sell an option? Why would someone give you that right? 6) For a premium!Purchasing options is not free. The reason someone would sell an option is because they get paid to do it.So if we revisit our (hypothetical) Apple example, this is what the full picture would look like: You could buy an option contract from someone that gives you the right to buy Apple at $160 in the next 30 days for a price of $10. Now that we can visualize what an option looks like, let's learn some industry lingo.Let's turn the picture we created into what it actually looks like when you are looking at the options market.1. Contract = option chain.You go into your brokerage to see it. It is literally a list of all the different contracts you can trade for a stock. When you want to buy or sell a contract, you come here and you pick the one you want to buy or sell. https://preview.redd.it/v4cagtzprx2a1.png?width=2626&format=png&auto=webp&s=2d4dcde996618a7768dc7c559266da56048cf37e 2. Two people = bid/ask.The way you can really understand that there is someone on the other side of you trade is the bid and ask. these are the prices that someone is willing to either buy a contract at (bid) or sell a contract at (ask). Every contract has a bid and an ask price.Think of it like you are standing in a market, and someone is standing there saying "ill buy an apple contract for 1 dollar" and someone else is there saying "ill sell an apple contract for $2". If you want to buy an option, you engage with the person on the ask side. If you want to sell an option, you engage with the person on the bid side. And sometimes, someone might actually meet you in the middle if you try to buy or sell somewhere in between those two price! The buyers and sellers act as supply and demand for the contract, and depending on the buying and selling pressure, that's how we get the "market price" for the contract! https://preview.redd.it/ospymawsrx2a1.png?width=2624&format=png&auto=webp&s=f4038ac9481ae53fa7ae3a3f5db3a6453e618b63 3. Right to buy, right to sell = calls and puts.A call is what we call an option contract that gives the buyer the right to buy a stock.A put is what we call an option contract that gives the buyer the right to sell a stock. On most brokerage set ups, the left side of the option chain will be the calls and the right side will be the puts. https://preview.redd.it/1eouf5avrx2a1.png?width=2620&format=png&auto=webp&s=19514ec8a76e7065feb5cb0f6887351814d5a8ef 4. A given price = strike priceWhen you look at an option chain, each row is different contract that is listed. Each of these contracts that you see will have a number in the middle of the chain. $115, $120, $125... etc.These are the prices that the contract gives the buyer the right to get the stock at! Each contract has a different stock price that the contract is based on. Each strike price is the price you have the right to buy/sell the stock at for the options on that row. https://preview.redd.it/luxqf8oxrx2a1.png?width=2626&format=png&auto=webp&s=2d997e70b3363f26eb55cddb36ddd24004c0ada6 5. Time frame = expiration dateNot all option contracts expire at the same time. Depending on the stock, you could have options that expire in 1 day, 7 days, 30 days... 2 years.. the list goes on.When you look at the option chain, you will see that there are a bunch of different contracts listed under different dates. The date you see are the expirations for those contracts! When you select the expiration you want to look at, it will open up the list of all the options expiring on that date. https://preview.redd.it/1cwhdyvzrx2a1.png?width=2622&format=png&auto=webp&s=1969d0619c151ca2f833ff331c2d4a8ac2e82568 6. Premium = PriceFor each contract, there is a price associated with them. The price what someone is either willing to buy or sell the contracts for! Where do you see the price on the option chain? Well, it's the bid and the ask! You can see how much someone is willing to pay for a contract, or how much someone is willing to sell it for, right on your brokerage.There is a lot that goes into pricing options, but for now, all you need to remember is that options are not free. There is a price associated with them. Imagine you are standing in a marketplace. The bid is like someone else standing there looking to buy a call option for (as in the below picture) $11.90. The ask is someone else in the marketplace saying that they will sell that same option for $12.60. There is a gap between what the buyer wants to pay and what the seller will accept. You can sometimes purchase or sell in the middle of these two by making an offer in the middle! Trying to get something for the best price is what we call "working your order". https://preview.redd.it/nfjs0v04sx2a1.png?width=2616&format=png&auto=webp&s=50bce48ba2faa842c953968a31a86c7bc5b72377 ConclusionSo let's recap the 6 characteristics of what an option is by writing out a sentence for our Apple example.You want to buy a call on Apple's option chain that lets you buy Apple at a strike price of $160. The contract will expire in December 2021. There is someone willing to sell it to you at the "ask" price for that contract, for a premium of $15. I hope this post makes it clear what an option contract is. With this as a basic understanding of how the product functions, we can move forward into some of the intricacies related to the product and the opportunities that they create. Happy trading, ~ A.G. |
![]() | submitted by Stopthemadness42 to PokerstarsPCA [link] [comments] |
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![]() | As the Fed begins their journey into a deflationary blizzard, they are beginning to break markets across the globe. As the World Reserve Currency, over 60% of all international trade is done in Dollars, and USDs are the largest Foreign Exchange (Forex) holdings by far for global central banks. Now all foreign currencies are crashing against the Dollar as the vicious feedback loops of Triffin’s Dilemma come home to roost. The Dollar Milkshake has begun. submitted by peruvian_bull to Superstonk [link] [comments] The Fed, knowingly or unknowingly, has walked into this trap- and now they find themselves caught underneath the Sword of Damocles, with no way out… Sword Of Damocles -------------------------- “The famed “sword of Damocles” dates back to an ancient moral parable popularized by the Roman philosopher Cicero in his 45 B.C. book “Tusculan Disputations.” Cicero’s version of the tale centers on Dionysius II, a tyrannical king who once ruled over the Sicilian city of Syracuse during the fourth and fifth centuries B.C. Though rich and powerful, Dionysius was supremely unhappy. His iron-fisted rule had made him many enemies, and he was tormented by fears of assassination—so much so that he slept in a bedchamber surrounded by a moat and only trusted his daughters to shave his beard with a razor. As Cicero tells it, the king’s dissatisfaction came to a head one day after a court flatterer named Damocles showered him with compliments and remarked how blissful his life must be. “Since this life delights you,” an annoyed Dionysius replied, “do you wish to taste it yourself and make a trial of my good fortune?” When Damocles agreed, Dionysius seated him on a golden couch and ordered a host of servants wait on him. He was treated to succulent cuts of meat and lavished with scented perfumes and ointments. Damocles couldn’t believe his luck, but just as he was starting to enjoy the life of a king, he noticed that Dionysius had also hung a razor-sharp sword from the ceiling. It was positioned over Damocles’ head, suspended only by a single strand of horsehair. From then on, the courtier’s fear for his life made it impossible for him to savor the opulence of the feast or enjoy the servants. After casting several nervous glances at the blade dangling above him, he asked to be excused, saying he no longer wished to be so fortunate.” —--------------- Damocles’ story is a cautionary tale of being careful of what you wish for- Those who strive for power often unknowingly create the very systems that lead to their own eventual downfall. The Sword is often used as a metaphor for a looming danger; a hidden trap that can obliterate those unaware of the great risk that hegemony brings. Heavy lies the head which wears the crown. There are several Swords of Damocles hanging over the world today, but the one least understood and least believed until now is Triffin’s Dilemma, which lays the bedrock for the Dollar Milkshake Theory. I’ve already written extensively about Triffin’s Dilemma around a year ago in Part 1.5 and Part 4.3 of my Dollar Endgame Series, but let’s recap again. Here’s a great summary- read both sides of the dilemma: Triffin's Dilemma Summarized (Seriously, stop here and go back and read Part 1.5 and Part 4.3 Do it!)Essentially, Triffin noted that there was a fundamental flaw in the system: by virtue of the fact that the United States is a World Reserve Currency holder, the global financial system has built in GLOBAL demand for Dollars. No other fiat currency has this. How is this demand remedied? With supply of course! The United States thus is forced to run current account deficits - meaning it must send more dollars out into the world than it receives on a net basis. This has several implications, which again, I already outlined- but I will list in summary format below:
Dollar Recycling Essentially, they print their own currency to buy Dollars. Wanting to earn interest on this massive cash hoard when it isn’t being used, they buy Treasuries and other US debt securities to get a yield. As their domestic economy grows, their need and dependence on the Dollar grows as well. Their Central Bank builds up larger and larger hoards of Treasuries and Dollars. The entire thesis is that during times of crisis, they can sell the Treasuries for USD, and use the USDs to buy back their own currency on the market- supporting its value and therefore defending the peg. This buying pressure on USDs and Treasuries confers a massive benefit to the United States- The Exorbitant Privilege This buildup of excess dollars ends up circulating overseas in banks, trade brokers, central banks, governments and companies. These overseas dollars are called the Eurodollar system- a 2016 research paper estimated the size to be around $13.8 Trillion USD. This system is not under official Federal Reserve jurisdiction so it is difficult to get accurate numbers on its size. https://preview.redd.it/92wcmhdb0uq91.png?width=691&format=png&auto=webp&s=20dbaf63f75ff6f2e255fff06e6f48c03170b11b This means the Dollar is always artificially stronger than it should be- and during financial calamity, the dollar is a safe haven as there are guaranteed bidders. All this dollar denominated debt paired with the global need for dollars in trade creates strong and persistent dollar demand. Demand that MUST be satisfied. This creates systemic risk on a worldwide scale- an unforeseen Sword of Damocles that hangs above the global financial system. I’ve been trying to foreshadow this in my Dollar Endgame Series. Triffin’s Dilemma is the basis for the Dollar Milkshake Theory posited by Brent Johnson. The Dollar MilkshakeMilkshake of Liquidity In 2021, Brent worked with RealVision to create a short summary of his thesis- the video can be found here. I should note that Brent has had this theory for years, dating back to 2018, when he first came on podcasts and interviews and laid out his theory (like this video, for example). Here’s the summary below: ----- “A giant milkshake of liquidity has been created by global central banks with the dollar as its key ingredient - but if the dollar moves higher this milkshake will be sucked into the US creating a vicious spiral that could quickly destabilize financial markets. The US dollar is the bedrock of the world's financial system. It greases the wheels of global commerce and exchange- the availability of dollars, cost of dollars, and the level of the dollar itself each can have an outsized impact on economies and investment opportunities. But more important than the absolute level or availability of dollars is the rate of change in the level of the dollar. If the level of the dollar moves too quickly and particularly if the level rises too fast then problems start popping up all over the place (foreign countries begin defaulting). Today however many people are convinced that both the role of the Dollar is diminishing and the level of the dollar will only decline. People think that the US is printing so many dollars that the world will be awash with the greenback causing the value of the dollar to fall. Now it's true that the US is printing a lot of dollars – but other countries are also printing their own currencies in similar amounts so in theory it should even out in terms of value. But the hidden issue is the difference in demand. Remember the global financial system is built on the US dollar which means even if they don't want them everybody still needs them and if you need something you don't really have much choice. (See DXY Index): DXY Index Although many countries like China are trying to reduce their reliance on dollar transactions this will be a very slow transition. In the meantime the risks of a currency or sovereign debt crisis continue to rise. But now countries like China and Japan need dollars to buy copper from Australia so the Chinese and the Japanese owe dollars and Australia is getting paid in dollars. Europe and Asia currently doing very limited amount of non-dollar transactions for oil so they still need dollars to buy oil from saudi and again dollars get hoovered up on both sides Asia and Europe need dollars to buy soybeans from Brazil. This pulls in yet more dollars - everybody needs dollars for trade invoices, central bank currency reserves and servicing massive cross-border dollar denominated debts of governments and corporations outside the USA. And the dollar-denominated debt is key- if they don't service their debts or walk away from their dollar debts their funding costs rise putting great financial pressure on their domestic economies. Not only that, it can lead to a credit contraction and a rapid tightening of dollar supply. The US is happy with the reliance on the greenback they own the settlement system which benefits the US banks who process all the dollars and act as gatekeepers to the Dollar system they police and control the access to the system which benefits the US military machine where defense spending is in excess of any other country so naturally the US benefits from the massive volumes of dollar usage. https://preview.redd.it/yq1f1anq0uq91.png?width=1140&format=png&auto=webp&s=27447e2acec884848a5c70ab3651820e487fc0f3 Other countries have naturally been grumbling about being held hostage to the situation but the choices are limited. What it does mean is that dollars need to be constantly sucked out of the USA because other countries all over the world need them to do business and of course the more people there are who need and want those dollars the more is the pressure on the price of dollars to go up. In fact, global demand is so high that the supply of dollars is just not enough to keep up, even with the US continually printing money. This is why we haven't seen consistently rising US inflation despite so many QE and stimulus programs since the global financial crisis in 2008. But, the real risk comes when other economies start to slow down or when the US starts to grow relative to the other economies. If there is relatively less economic activity elsewhere in the world then there are fewer dollars in global circulation for others to use in their daily business and of course if there are fewer in circulation then the price goes up as people chase that dwindling source of dollars. Which is terrible for countries that are slowing down because just when they are suffering economically they still need to pay for many goods in dollars and they still need to service their debts which of course are often in dollars too. So the vortex begins or as we like to say the dollar milkshake- As the level of the dollar rises the rest of the world needs to print more and more of its own currency to then convert to dollars to pay for goods and to service its dollar debt this means the dollar just keeps on rising in response many countries will be forced to devalue their own currencies so of course the dollar rises again and this puts a huge strain on the global system. (see the charts below:) JPY/USD GBP/USD EUUSD To make matters worse in this environment the US looks like an attractive safe haven so the US ends up sucking in the capital from the rest of the world-the dollar rises again. Pretty soon you have a full-scale sovereign bond and currency crisis. https://preview.redd.it/72nlain01uq91.png?width=1141&format=png&auto=webp&s=cbaa411acc88acb3849949d84a36624d75d6cfc4 We're now into that final napalm run that sees the dollar and dollar assets accelerate even higher and this completely undermines global markets. Central banks try to prevent disorderly moves, but the global markets are bigger and the momentum unstoppable once it takes hold. And that is the risk that very few people see coming but that everyone should have a hedge against - when the US sucks up the dollar milkshake, bad things are going to happen. Worst of all there's no alternatives- what are you going to use-- Chinese Yuan? Japanese Yen? the Euro?? Now, like it or not we're stuck with a dollar underpinning the global financial system.” —------------- Why is it playing out now, in real time?? It all leads back to a tweet I made in a thread on September 16th. Tweet Thread about the Yuan The Fed, rushing to avoid a financial crisis in March 2020, printed trillions. This spurred inflation, which they then swore to fight. Thus they began hiking interest rates on March 16th, and began Quantitative Tightening this summer. QE had stopped- No new dollars were flowing out into a system which has a constant demand for them. Worse yet, they were hiking completely blind- Although the Fed is very far behind the curve, (meaning they are hiking far too late to really combat inflation)- other countries are even farther behind! Japan has rates currently at 0.00- 0.25%, and the Eurozone is at 1.25%. These central banks have barely begun hiking, and some even swear to keep them at the zero-bound. By hiking domestic interest rates above foreign ones, the Fed is incentivizing what are called carry trades. Since there is a spread between the Yen and the Dollar in terms of interest rates, it thus is profitable for traders to borrow in Yen (shorting it essentially) and buy Dollars, which can earn 2.25% interest. The spread would be around 2%. DXY rises, and the Yen falls, in a vicious feedback loop. Thus capital flows out of Japan, and into the US. The US sucks up the Dollar Milkshake, draining global liquidity. As I’ve stated before, this has seriously dangerous implications for the global financial system. For those of you who don’t believe this could be foreseen, check out the ending paragraphs of Dollar Endgame Part 4.3 - “Economic Warfare and the End of Bretton Woods” published February 16, 2022: Triffin's Dilemma is the Final Nail What I’ve been attempting to do in my work is restate Triffins’ Dilemma, and by extension the Dollar Milkshake, in other terms- to come at the issue from different angles. Currently the Fed is not printing money. Which is thus causing havoc in global trade (seen in the currency markets) because not enough dollars are flowing out to satisfy demand. The Fed must therefore restart QE unless it wants to spur a collapse on a global scale. Remember, all these foreign countries NEED to buy, borrow and trade in a currency that THEY CANNOT PRINT! We do not have enough time here to go in depth on the Yen, Yuan, Pound or the Euro- all these currencies have different macro factors and trade factors which affect their currencies to a large degree. But the largest factor by FAR is Triffin’s Dilemma + the Dollar Milkshake, and their desperate need for dollars. That is why basically every fiat currency is collapsing versus the Dollar. The Fed, knowingly or not, is basically in charge of the global financial system. They may shout, “We raise rates in the US to fight inflation, global consequences be damned!!” - But that’s a hell of a lot more difficult to follow when large G7 countries are in the early stages of a full blown currency crisis. The most serious implication is that the Fed is responsible for supplying dollars to everyone. When they raise rates, they trigger a margin call on the entire world. They need to bail them out by supplying them with fresh dollars to stabilize their currencies. In other words, the Fed has to run the loosest and most accommodative monetary policy worldwide- they must keep rates as low as possible, and print as much as possible, in order to keep the global financial system running. If they don’t do that, sovereigns begin to blow up, like Japan did last week and like England did on Wednesday. And if the world’s financial system implodes, they must bail out not only the United States, but virtually every global central bank. This is the Sword of Damocles. The money needed for this would be well in the dozens of trillions. The Dollar Endgame Approaches… —------------------------------------------------------------- Q&A(Many of you have been messaging me with questions, rebuttals or comments. I’ll do my best to answer some of the more poignant ones here.)—-----Q: I’ve been reading your work, you keep saying the dollar is going to fall in value, and be inflated away. Now you’re switching sides and joining the dollar bull faction. Seems like you don’t know what you’re talking about! A: You’re mixing up my statements. When I discuss the dollar losing value, I am referring to it falling in ABSOLUTE value, against goods and services produced in the real economy. This is what is called inflation. I made this call in 2021, and so far, it has proven right as inflation has accelerated. The dollar gaining strength ONLY applies to foreign currency exchange markets (Forex)- remember, DXY, JPYUSD, and other currency pairs are RELATIVE indicators of value. Therefore, both JPY and USD can be falling in real terms (inflation) but if one is falling faster, then that one will lose value relative to the other. Also, Forex markets are correlated with, but not an exact match, for inflation. I attempted to foreshadow the entire dollar bull thesis in the conclusion of Part 1 of the Dollar Endgame, posted well over a year ago- Unraveling of the Currency Markets I did not give an estimate on when this would happen, or how long DXY would be whipsawed upwards, because I truly do not know. I do know that eventually the Fed will likely open up swap lines, flooding the Eurodollar market with fresh greenbacks and easing the dollar short squeeze. Then selling pressure will resume on the dollar. They would only likely do this when things get truly calamitous- and we are on our way towards getting there. The US bond market is currently in dire straits, which matches the prediction of spiking interest rates. The 2yr Treasury is at 4.1%, it was at 3.9% just a few days ago. Only a matter of time until the selloff gets worse. —------ Q: Foreign Central banks can find a way out. They can just use their reserves to buy back their own currency. Sure, they can try that. It’ll work for a while- but what happens once they run out of reserves, which basically always happens? I can’t think of a time in financial history that a country has been able to defend a currency peg against a sustained attack. Global Forex Reserves They’ll run out of bullets, like they always do, and basically the only option left will be to hike interest rates, to attract capital to flow back into their country. But how will they do that with global debt to GDP at 356%? If all these countries do that, they will cause a global depression on a scale never seen before. Britain, for example, has a bit over $100B of reserves. That provides maybe a few months of cover in the Forex markets until they’re done. Furthermore, you are ignoring another vicious feedback loop. When the foreign banks sell US Treasuries, this drives up yields in the US, which makes even more capital flow to the US! This weakens their currency even further. FX Feedback Loop To add insult to injury, this increases US Treasury borrowing costs, which means even if the Fed completely ignores the global economy imploding, the US will pay much more in interest. We will reach insolvency even faster than anyone believes. The 2yr Treasury bond is above 4%- with $31T of debt, that means when we refinance we will pay $1.24 Trillion in interest alone. Who's going to buy that debt? The only entity with a balance sheet large enough to absorb that is the Fed. Restarting QE in 3...2…1… —---- Q: I live in England. With the Pound collapsing, what can I do? What will happen from here? How will the governments respond? England, and Europe in general, is in serious trouble. You guys are currently facing a severe energy crisis stemming from Russia cutting off Nord Stream 1 in early September and now with Nord Stream 2 offline due to a mysterious leak, energy supplies will be even more tight. Not to mention, you have a pretty high debt to GDP at 95%. Britain is a net importer, and is still running government deficits of £15.8 billion (recorded in Q1 2022). Basically, you guys are the United States without your own large scale energy and defense sector, and without Empire status and a World Reserve Currency that you once had. The Pound will almost certainly continue falling against the Dollar. The Bank of England panicked on Wednesday in reaction to a $100M margin call on British pension funds, and now has begun buying long dated (10yr) gilts, or government bonds. They’re doing this as inflation is spiking there even worse than the US, and the nation faces a currency crisis as the Pound is nearing parity with the Dollar. BOE announces bond-buying scheme (9/28/22) I will not sugarcoat it, things will get rough. You need to hold cash, make sure your job, business, or investments are secure (ie you have cashflow) and hunker down. Eliminate any unnecessary purchases. If you can, buy USDs as they will likely continue to rise and will hold value better than your own currency. If Parliament goes through with more tax cuts, that will only make the fiscal situation worse and result in more borrowing, and thus more money printing in the end. —---- Q: What does this mean for Gamestop? For the domestic US economy? Gamestop will continue to operate as I am sure they have been- investing in growth and expanding their Web3 platform. Fiat is fundamentally broken. This much is clear- we need a new financial system not based on flawed 16th fractional banking principles or “trust me bro” financial intermediaries. My hope is that they are at the forefront of a new financial system which does not require centralized authorities or custodians- one where you truly own your assets, and debasement is impossible. I haven’t really written about GME extensively because it’s been covered so well by others, and I don’t feel I have that much to add. As for the US economy, we are still in a deep recession, no matter what the politicians say- and it will get worse. But our economic troubles, at least in the short term (6 months) will not be as severe as the rest of the world due to the aforementioned Dollar Milkshake. The debt crisis is still looming, midterms are approaching, and the government continues to deficit spend as if there’s no tomorrow. As the global monetary system unravels, yields will spike, the deleveraging will get worse, and our dollar will get stronger. The fundamental factors continue to deteriorate. I’ve covered the US enough so I'll leave it there. —------ Q: Did you know about the Dollar Milkshake Theory before recently? What did you think of it? Of course I knew about it, I’ve been following Brent Johnson since he appeared on RealVision and Macrovoices. He laid out the entire theory in 2018 in a long form interview here. I listened to it maybe a couple times, and at the time I thought he was right- I just didn’t know how right he was. Brent and I have followed each other and been chatting a little on Twitter- his handle is SantiagoAuFund, I highly recommend you give him a follow. Twitter Chat I’ve never met him in person, but from what I can see, his predictions are more accurate than almost anyone else in finance. Again, all credit to him- he truly understands the global monetary system on a fundamental level. I believed him when he said the dollar would rally- but the speed and strength of the rally has surprised me. I’ve heard him predict DXY could go to 150, mirroring the massive DXY squeeze post the 1970s stagflation. He could very easily be right- and the absolute chaos this would mean for global trade and finance are unfathomable. History of DXY —---------- Q: The Pound and Euro are falling just because of the energy crisis there. That's it! Why is the Yen falling then? How about the Yuan? Those countries are not currently undergoing an energy crisis. Let’s review the year to date performance of most fiat currencies vs the dollar: Japanese Yen: -20.31% Chinese Yuan: -10.79% South African Rand: -10.95% English Pound: -18.18% Euro: -14.01% Swiss Franc: -6.89% South Korean Won: -16.73% Indian Rupee: -8.60% Turkish Lira: -27.95% There are only a handful of currencies positive against the dollar, the most notable being the Russian Ruble and the Brazilian Real- two countries which have massive commodity resources and are strong exporters. In an inflationary environment, hard assets do best, so this is no surprise. —------ Q: What can the average person do to prepare? What are you doing? Obligatory this is NOT financial advice This is an extremely difficult question, as there are so many factors. You need to ask yourself, what is your financial situation like? How much disposable income do you have? What things could you cut back on? I can’t give you specific ideas without knowing your situation. Personally, I am building up savings and cutting down on expenses. I’m getting ready for a severe recession/depression in the US and trying to find ways to increase my income, maybe a side hustle or switching jobs. I am holding my GME and not selling- I still have some shares in Fidelity that I need to DRS (I know, sorry, I was procrastinating). For the next few months, I believe there will be accelerating deflation as interest rates spike and the debt cycle begins to unwind. But like I’ve stated before, this will lead us towards a second Great Depression very rapidly, and to avoid the deflationary blizzard the Fed will restart QE on a scale never seen before. QE Infinity. This will be the impetus for even worse inflation- 25%+ by this time next year. It’s hard to prepare for this, and easy to feel hopeless. It’s important to know that we have been through monetary crises before, and society did not devolve into a zombie apocalypse. You are not alone, and we will get through this together. It’s also important to note that we are holding the most lopsided investment opportunity of a generation. Any money you put in there can be grown by orders of magnitude. We are at the end of the Central Bankers game- and although it will be painful, we will rid the world of them, I believe, and build a new financial system based on blockchains which will disintermediate the institutions. They have everything to lose. —------ Q: I want to learn more, where can I do? What can I do to keep up to date with everything? You can start by reading books, listening to podcasts, and checking the news to stay abreast of developments. I have a book list linked at the end of the Dollar Endgame posts. I’ll be covering the central bank clown show on Twitter, you can follow me there if you like. I’ll also include links to some of my favorite macro people below:
—------------------- Nothing on this Post constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. |
![]() | submitted by Stopthemadness42 to PokerstarsPCA [link] [comments] |
![]() | I am getting increasingly worried about the amount of warning signals that are flashing red for hyperinflation- I believe the process has already begun, as I will lay out in this paper. The first stages of hyperinflation begin slowly, and as this is an exponential process, most people will not grasp the true extent of it until it is too late. I know I’m going to gloss over a lot of stuff going over this, sorry about this but I need to fit it all into four posts without giving everyone a 400 page treatise on macro-economics to read. Counter-DDs and opinions welcome. This is going to be a lot longer than a normal DD, but I promise the pay-off is worth it, knowing the history is key to understanding where we are today. submitted by peruvian_bull to Superstonk [link] [comments] SERIES (Parts 1-4) TL/DR: We are at the end of a MASSIVE debt supercycle. This 80-100 year pattern always ends in one of two scenarios- default/restructuring (deflation a la Great Depression) or inflation (hyperinflation in severe cases (a la Weimar Republic). The United States has been abusing it’s privilege as the World Reserve Currency holder to enforce its political and economic hegemony onto the Third World, specifically by creating massive artificial demand for treasuries/US Dollars, allowing the US to borrow extraordinary amounts of money at extremely low rates for decades, creating a Sword of Damocles that hangs over the global financial system. The massive debt loads have been transferred worldwide, and sovereigns are starting to call our bluff. Governments papered over the 2008 financial crisis with debt, but never fixed the underlying issues, ensuring that the crisis would return, but with greater ferocity next time. Systemic risk (from derivatives) within the US financial system has built up to the point that collapse is all but inevitable, and the Federal Reserve has demonstrated it will do whatever it takes to defend legacy finance (banks, brokedealers, etc) and government solvency, even at the expense of everything else (The US Dollar). I’ll break this down into four parts. ALL of this is interconnected, so please read these in order: Updated Complete Table of Contents:
“Enter the Dragon”The Inflation Dragon PART 5.0 “The Monster & the Simulacrum”“In the 1985 work “Simulacra and Simulation” French philosopher Jean Baudrillard recalls the Borges fable about the cartographers of a great Empire who drew a map of its territories so detailed it was as vast as the Empire itself.According to Baudrillard as the actual Empire collapses the inhabitants begin to live their lives within the abstraction believing the map to be real (his work inspired the classic film "The Matrix" and the book is prominently displayed in one scene). The map is accepted as truth and people ignorantly live within a mechanism of their own design and the reality of the Empire is forgotten. This fable is a fitting allegory for our modern financial markets. Our fiscal well being is now prisoner to financial and monetary engineering of our own design. Central banking strategy does not hide this fact with the goal of creating the optional illusion of economic prosperity through artificially higher asset prices to stimulate the real economy. While it may be natural to conclude that the real economy is slave to the shadow banking system this is not a correct interpretation of the Baudrillard philosophy- The higher concept is that our economy IS the shadow banking system… the Empire is gone and we are living ignorantly within the abstraction. The Fed must support the shadow banking oligarchy because without it, the abstraction would fail.” (Artemis Capital) The Inflation SerpentTo most citizens living in the West, the concept of a collapsing fiat currency seems alien, unfathomable even. They regard it as an unfortunate event reserved only for those wretched souls unlucky enough to reside in third world countries or under brutal dictatorships.Monetary mismanagement was seen to be a symptom only of the most corrupt countries like Venezuela- those where the elites gained control of the Treasury and printing press and used this lever to steal unimaginable wealth while impoverishing their constituents. However, the annals of history spin a different tale- in fact, an eventual collapse of fiat currency is the norm, not the exception. In a study of 775 fiat currencies created over the last 500 years, researchers found that approximately 599 have failed, leaving only 176 remaining in circulation. Approximately 20% of the 775 fiat currencies examined failed due to hyperinflation, 21% were destroyed in war, and 24% percent were reformed through centralized monetary policy. The remainder were either phased out, converted into another currency, or are still around today. The average lifespan for a pure fiat currency is only 27 years- significantly shorter than a human life. Double-digit inflation, once deemed an “impossible” event for the United States, is now within a stone’s throw. Powell, desperate to maintain credibility, has embarked on the most aggressive hiking schedule the Fed has ever undertaken. The cracks are starting to widen in the system. One has to look no further than a simple graph of the M2 Money Supply, a measure that most economists agree best estimates the total money supply of the United States, to see a worrying trend: M2 Money Supply The trend is exponential. Through recessions, wars, presidential elections, cultural shifts, and even the Internet age- M2 keeps increasing non-linearly, with a positive second derivative- money supply growth is accelerating. This hyperbolic growth is indicative of a key underlying feature of the fiat money system: virtually all money is credit. Under a fractional reserve banking system, most money that circulates is loaned into existence, and doesn't exist as real cash- in fact, around 97% of all “money” counted within the banking system is debt, in one form or another. (See Dollar Endgame Part 3) Debt virtually always has a yield- that yield is called interest, and that interest demands payment. Thus, any fiat money banking system MUST grow money supply at a compounding interest rate, forever, in order to remain stable. Debt defaulting is thus quite literally the destruction of money- which is why the deflation is widespread, and also why M2 Money Supply shrank by 30% during the Great Depression. Interest in Fractional Reserve Fiat Systems This process repeats ad infinitum, perpetually compounding loan creation and thus money supply, in order to prevent systemic defaults. The system is BUILT for constant inflation. In the last 50 years, only about 12 quarters have seen reductions in commercial bank credit. That’s less than 5% of the time. The other 95% has seen increases, per data from the St. Louis Fed. Commercial Bank Credit Even without accounting for debt crises, wars, and government defaults, money supply must therefore grow exponentially forever- solely in order to keep the wheels on the bus. The question is where that money supply goes- and herein lies the key to hyperinflation. In the aftermath of 2008, the Fed and Treasury worked together to purchase billions of dollars of troubled assets, mortgage backed securities, and Treasury bonds- all in a bid to halt the vicious deleveraging cycle that had frozen credit markets and already sunk two large investment banks. These programs were the most widespread and ambitious ever- and resulted in trillions of dollars of new money flowing into the financial system. Libertarian candidates and gold bugs such as Peter Schiff, who had rightly forecasted the Great Financial Crisis, now began to call for hyperinflation. The trillions of printed money, he claimed, would create massive inflation that the government would not be able to tame. U.S. debt would be downgraded and sold, and with the Fed coming to the rescue with trillions more of QE, extreme money supply increases would ensue. An exponential growth curve in inflation was right around the corner. Gold prices rallied hard, moving from $855 at the start of 2008 to a record high of $1,970 by the end of 2011. The end of the world was upon us, many decried. Occupy Wall Street came out in force. However, to his great surprise, nothing happened. Inflation remained incredibly tame, and gold retreated from its euphoric highs. Armageddon was averted, or so it seemed. The issue that was not understood well at the time was that there existed two economies- the financial and the real. The Fed had pumped trillions into the financial economy, and with a global macroeconomic downturn plus foreign central banks buying Treasuries via dollar recycling, all this new money wasn’t entering the real economy. Financial vs Real Economy Instead, it was trapped, circulating in the hands of money market funds, equities traders, bond investors and hedge funds. The S&P 500, which had hit a record low in March of 2009, began a steady rally that would prove to be the strongest and most pronounced bull market in history. The Fed in the end did achieve extreme inflation- but only in assets. Without the Treasury incurring significant fiscal deficits this money did not flow out into the markets for goods and services but instead almost exclusively into equity and bond markets. QE Stimulus of financial assets The great inflationary catastrophe touted by the libertarians and the gold bugs alike never came to pass- their doomsday predictions appeared frenetic, neurotic. Instead of re-evaluating their arguments under this new framework, the neo-Keynesians, who held the key positions of power with Treasury, the Federal Reserve, and most American Universities (including my own) dismissed their ideas as economic drivel. The Fed had succeeded in averting disaster- or so they claimed. Bernanke, in all his infinite wisdom, had unleashed the “Wealth Effect”- a crucial behavioral economic theory suggesting that people spend more as the value of their assets rise. An even more extreme school of thought emerged- the Modern Monetary Theorists%20is,Federal%20Reserve%20Bank%20of%20Richmond.)- who claimed that Central Banks had essentially discovered a ‘perpetual motion machine’- a tool for unlimited economic growth as a result of zero bound interest rates and infinite QE. The government could borrow money indefinitely, and traditional metrics like Debt/GDP no longer mattered. Since each respective government could print money in their own currency- they could never default. The bill would never be paid. Or so they thought. The American ReckoningThis theory helped justify massive US government borrowing and spending- from Afghanistan, to the War on Drugs, to Entitlement Programs, the Treasury indulged in fiscal largesse never before seen in our nation’s history. America's Finances The debt continued to accumulate and compound. With rates pegged at the zero bound, the Treasury could justify rolling the debt continually as the interest costs were minimal. Politicians now pushed for more and more deficit spending- if it's free to bailout the banks, or start a war- why not build more bridges? What about social programs? New Army bases? Tax cuts for corporations? Subsidies for businesses? There was no longer any “accepted” economic argument against this- and thus government spending grew and grew, and the deficits continued to expand year after year. The Treasury would roll the debt by issuing new bonds to pay off maturing ones- a strategy reminiscent of Ponzi schemes. This debt binge is accelerating- as spending increases, (and tax revenues are constant) the deficit grows, and this deficit is paid by more borrowing. This incurs more interest, and thus more spending to pay that interest, in a deadly feedback loop- what is called a debt spiral. Gross Govt Interest Payments The shadow threat here that is rarely discussed is Unfunded Liabilities- these are payments the Federal government has promised to make, but has not yet set aside the money for. This includes Social Security, Medicaid, Medicare, Veteran’s benefits, and other funding that is non-discretionary, or in other words, basically non-optional. Cato Institute estimates that these obligations sum up to $163 Trillion. Other estimates from the Mercatus Center put the figure at between $87T as the lower bound and $222T on the high end. YES. That is TRILLION with a T. A Dragon lurks in these shadows. Unfunded Liabilities What makes it worse is that these figures are from 2012- the problem is significantly worse now. The fact of the matter is, no one knows the exact figure- just that it is so large it defies comprehension. These payments are what is called non-discretionary, or mandatory spending- each Federal agency is obligated to spend the money. They don’t have a choice. Approximately 70% of all Federal Spending is mandatory. And the amount of mandatory spending is increasing each year as the Boomers, the second largest generation in US history, retire. Approximately 10,000 of them retire each day- increasing the deficits by hundreds of billions a year. Furthermore, the only way to cut these programs (via a bill introduced in the House and passed in the Senate) is basically political suicide. AARP and other senior groups are some of the most powerful and wealthy lobbying groups in the US. If politicians don’t have the stomach to legalize marijuana- an issue that Pew research finds an overwhelming majority of Americans supporting- then why would they nuke their own careers via cutting funding to seniors right as inflation spikes? Thus, although these obligations are not technically debt, they act as debt instruments in all other respects. The bill must be paid. In the Fiscal Report for 2022 released by the White House, they estimated that in 2021 and 2022 the Federal deficits would be $3.669T and $1.837T respectively. This amounts to 16.7% and 7.8% of GDP (pg 42). US Federal Budget Astonishingly, they project substantially decreasing deficits for the next decade. Meanwhile the U.S. is slowly grinding towards a severe recession (and then likely depression) as the Fed begins their tightening experiment into 132% Federal Debt to GDP. Deficits have basically never gone down in a recession, only up- unemployment insurance, food stamp programs, government initiatives; all drive the Treasury to pump out more money into the economy in order to stimulate demand and dampen any deflation. To add insult to injury, tax receipts collapse during recession- so the income side of the equation is negatively impacted as well. The budget will blow out. The U.S. 1 yr Treasury Bond is already trading at 4.7%- if we have to refinance our current debt loads at that rate (which we WILL since they have to roll the debt over), the Treasury will be paying $1.46 Trillion in INTEREST ALONE YEARLY on the debt. That is equivalent to 40% of all Federal Tax receipts in 2021! In my post Dollar Endgame 4.2, I have tried to make the case that the United States is headed towards an “event horizon”- a point of no return, where the financial gravity of the supermassive debt is so crushing that nothing they do, short of Infinite QE, will allow us to escape. The terrifying truth is that we are not headed towards this event horizon. We’re already past it. True Interest Expense ABOVE Tax Receipts As brilliant macro analyst Luke Gromen pointed out in several interviews late last year, if you combine Gross Interest Expense and Entitlements, on a base case, we are already at 110% of tax receipts. True Interest Expense is now more than total Federal Income. The Federal Government is already bankrupt- the market just doesn't know it yet. Luke Gromen Interview Transcript (Oct 2021, Macrovoices) The black hole of debt, financed by the Federal Reserve, has now trapped the largest spending institution in the world- the United States Treasury. The unholy capture of the Money Printer and the Spender is catastrophic - the final key ingredient for monetary collapse. This is How Money Dies. The Underwater State ------- (I had to split this post into two part due to reddit's limits, see the second half of the post HERE) ~~~~~~~~~~~~~~~~ Nothing on this Post constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. From reading my Post I cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you, so any opinions or information contained on this Post are just that – an opinion or information. Please consult a financial professional if you seek advice. *If you would like to learn more, check out my recommended reading list here. This is a dummy google account, so feel free to share with friends- none of my personal information is attached. You can also check out a Google docs version of my Endgame Series here. ~~~~~ I cleared this message with the mods; IF YOU WOULD LIKE to support me, you can do so my checking out the e-book version of the Dollar Endgame on my twitter profile: https://twitter.com/peruvian_bull/status/1597279560839868417 The paperback version is a work in progress. It's coming. THERE IS NO PRESSURE TO DO SO. THIS IS NOT A MONEY GRAB- the entire series is FREE! The reddit posts start HERE: https://www.reddit.com/Superstonk/comments/o4vzau/hyperinflation_is_coming_the_dollar_endgame_part/ and there is a Google Doc version of the ENTIRE SERIES here: https://docs.google.com/document/d/1552Gu7F2cJV5Bgw93ZGgCONXeenPdjKBbhbUs6shg6s/edit?usp=sharing Thank you ALL, and POWER TO THE PLAYERS. GME FOREVER ~~~~~ You can follow my Twitter at Peruvian Bull. This is my only account, and I will not ask for financial or personal information. All others are scammers/impersonators. |
Game | Publisher | RRP$ | Steam rating | Release Date | 3 word description | Steam link |
---|---|---|---|---|---|---|
Age of Wonders: Planetfall | Paradox | 49.99 | 9/10 | 6 Aug, 2019 | Beautiful Sci-Fi 4X | Steam |
PlateUp! | It's happening / Yogscast Games | 17.99 | 10/10 | 4 Aug, 2022 | Brilliant Cooking Chaos | Steam |
You Suck At Parking | Happy Volcano | 19.99 | 9/10 | 14 Sep, 2022 | Party Racing Fun | Steam |
Here Comes Niko! | Gears for Breakfast | 24.99 | 9/10 | 3 Aug, 2021 | Cute Cozy Platforming | Steam |
A Total War Saga: TROY | Creative Assembly | 49.99 | 7/10 | 2 Sep, 2021 | Swords Sandals Slaughter | Steam |
First Class Trouble | Invisible Walls / Versus Evil | 14.99 | 7/10 | 1 Nov, 2021 | Cruise Ship Among Us | Steam |
Lost Nova | HopFrog | 14.99 | 9/10 | 11 May, 2022 | Explore Build Craft | Steam |
Factory Town | Erik Asmussen | 19.99 | 9/10 | 17 Nov, 2021 | Automate Your Town | Steam |
Imagine Earth | Serious Bros. | 24.99 | 7/10 | 25 May, 2021 | Planetary Colonization | Steam |
ConnecTank | YummyYummyTummy | 29.99 | N/A | 28 Sep, 2021 | Coop Conveyer Battles | Steam |
Final Vendetta | Numbskull Games | 24.99 | 9/10 | 17 Jun, 2022 | Side Scrolling Brawler | Steam |
Bonfire Peaks | Draknek | 19.99 | 9/10 | 30 Sep, 2021 | Atmospheric Burning Puzzles | Steam |
Kaiju Wars | Michael Long, Foolish Mortals Games | 19.99 | 9/10 | 28 Apr, 2022 | Monster Mashing Tactics | Steam |
Kitaria Fables | PQube | 19.99 | 7/10 | 2 Sep, 2021 | ARPG with Farming | Steam |
Tenderfoot Tactics | Ice Water Games | 24.99 | 9/10 | 21 Oct, 2020 | Lovely Lowpoly Tactics | Steam |
Warhammer 40,000: Gladius - Relics of War | Slitherine Ltd | 39.99 | 9/10 | 12 Jul, 2018 | Grand Strategy Warhammer | Steam |
Space Crew | Curve Digital | 24.99 | 7/10 | 15 Oct, 2020 | Space Management Adventure | Steam |
Vibrant Venture | Semag Games | 14.99 | 9/10 | 24 Jul, 2020 | Cute Platforming Action | Steam |
Aeronautica Imperialis: Flight Command | Green Man Gaming Publishing | 24.99 | 6/10 | 28 May, 2020 | Turn-based Top Gun | Steam |
Men of War: Assault Squad 2 | Fulqrum Publishing | 29.99 | 9/10 | 15 May, 2014 | Tanks Troops Tactics | Steam |
CryoFall | AtomicTorch Studio / Daedalic Entertainment | 19.99 | 9/10 | 29 Apr, 2021 | Sci-fi Multiplayer Survival | Steam |
Orbi Universo | Orbi Universo Team | 19.99 | 7/10 | 10 Jan, 2020 | Abstract Civ Strategy | Steam |
Fury Unleashed | Awesome Games Studio | 19.99 | 9/10 | 8 May, 2020 | Frantic Roguelike Shooter | Steam |
Driftland: The Magic Revival | Star Drifters | 19.99 | 7/10 | 18 Apr, 2019 | Floating Wizards 4X | Steam |
WARSAW | Retrovibe | 23.99 | 7/10 | 2 Oct, 2019 | Stylish WW2 Tactics | Steam |
Swords 'n Magic and Stuff EA | Kindred Games | 19.99 | 9/10 | 8 Sep, 2020 | Cute Multiplayer RPG | Steam |
DESOLATE | HYPETRAIN DIGITAL | 24.99 | 6/10 | 17 Jan, 2019 | Coop Zombie Survival | Steam |
The Turing Test | Bulkhead | 19.99 | 9/10 | 30 Aug, 2016 | Sci-Fi Puzzle Mystery | Steam |
Lucifer Within Us | Kitfox Games | 19.99 | 7/10 | 15 Oct, 2020 | Intricate Demonic Detective | Steam |
Epic Battle Fantasy 5 | Matt Roszak | 19.99 | 10/10 | 30 Nov, 2018 | Tongue-in-cheek JRPG | Steam |
Mech Mechanic Sim | Polyslash | 19.99 | 6/10 | 25 Mar, 2021 | Build-a-mech workshop | Steam |
Aporia: Beyond The Valley | Green Man Gaming Publishing | 16.99 | 9/10 | 19 Jul, 2017 | Stunning Story Puzzler | Steam |
Pendragon | inkle | 16.99 | 6/10 | 22 Sep, 2020 | Mythic Tactical Narrative | Steam |
The Galactic Junkers | Green Man Gaming Publishing | 16.99 | N/A | 30 Jun, 2022 | Comedic space adventures | Steam |
Little Inferno | Tomorrow Corporation | 14.99 | 10/10 | 19 Nov, 2012 | Burn Your Toys | Steam |
Plague Inc: Evolved | Ndemic Creations | 14.99 | 9/10 | 18 Feb, 2016 | End The World | Steam |
Ancient Enemy | Grey Alien Games | 14.99 | 9/10 | 9 Apr, 2020 | Modern Fantasy Solitaire | Steam |
Moon Hunters | Kitfox Games | 14.99 | 9/10 | 10 Mar, 2016 | Tiny DnD Adventures | Steam |
Tanuki Sunset | Rewind Games | 14.99 | 9/10 | 4 Dec, 2020 | Skateboarding Racoons | Steam |
Geneshift EA | Nik Nak Studios | 14.99 | 9/10 | 23 May, 2017 | Cars Guns Action | Steam |
Turnip Boy Commits Tax Evasion | Graffiti Games | 14.99 | 10/10 | 22 Apr, 2021 | Vegetable Crime Sim | Steam |
Zombie Rollerz: Pinball Heroes | Zing Games Inc. / Daedalic Entertainment | 14.99 | 9/10 | 2 Mar, 2022 | Pinball Zombie Madness | Steam |
Mad Experiments: Escape Room | PlayTogether Studio | 14.99 | 7/10 | 16 Apr, 2020 | Mind-bending Escape Room | Steam |
JARS | Mousetrap Games / Daedalic Entertainment | 11.99 | 8/10 | 20 Oct, 2021 | Creepy Puzzles | Steam |
The Dungeon Beneath | Puzzle Box Games | 14.99 | 9/10 | 23 Oct, 2020 | Roguelike Dungeon Battler | Steam |
The Hex | Daniel Mullins Games | 9.99 | 9/10 | 16 Oct, 2018 | Creepy Pixel Murder | Steam |
Chroma Squad | Behold Studios | 14.99 | 10/10 | 30 Apr, 2015 | Power Ranger Manager | Steam |
Paradise Lost | All in! Games | 14.99 | 7/10 | 24 Mar, 2021 | Postapocalyptic Adventure | Steam |
Dude, Stop | Team HalfBeard | 14.99 | 9/10 | 1 Jun, 2018 | Be Annoying | Steam |
Dark Nights with Poe and Munro | D'Avekki Studios Ltd | 12.99 | 7/10 | 19 May, 2020 | Supernatural FMV Strangeness | Steam |
ΔV: Rings of Saturn | Kodera Software | 9.99 | 10/10 | 12 Aug, 2019 | Realistic Space Mining | Steam |
Ato | Tiny Warrior Games | 14.99 | 9/10 | 8 May, 2020 | Cat Samurai Adventure | Steam |
Wunderling DX | Bitwave Games | 14.99 | 9/10 | 5 Mar, 2020 | Retro Puzzle Platforming | Steam |
Primal Light | Fat Gem | 14.99 | 9/10 | 9 Jul, 2020 | 16bit Boss Battler | Steam |
Big Crown Showdown | Hyper Luminal Games Ltd / Fireshine Games | 12.99 | N/A | 14 Dec, 2018 | Big Crown Showdown | Steam |
Seals of the Bygone EA | rologfos | 12.99 | 9/10 | 13 Mar, 2020 | Roguelike Dungeon Delver | Steam |
Viscera Cleanup Detail | RuneStorm Games | 12.99 | 9/10 | 23 Oct, 2015 | Horror Aftermath Cleaning | Steam |
Maiden and Spell | mino_dev LLC | 12.99 | 9/10 | 25 Feb, 2020 | Flying Magic Bullet-hell | Steam |
Eternal Hope | Kwalee Ltd | 11.99 | 9/10 | 20 Aug, 2020 | Cinematic Puzzle Platformer | Steam |
Paperball | Cliax Games | 11.99 | 9/10 | 27 Mar, 2020 | Stunt Ball Racing | Steam |
Absolute Drift | Funselektor Labs Inc. | 11.99 | 9/10 | 29 Jul, 2015 | Chill Drifting | Steam |
CHUCHEL | Amanita Design | 9.99 | 9/10 | 7 Mar, 2018 | Comedy Mushroom Adventure | Steam |
Fit For a King | Kitfox Games | 9.99 | 8/10 | 5 Sep, 2019 | Marry Divorce Execute | Steam |
House | Bark Bark Games | 9.99 | 9/10 | 30 Oct, 2020 | Spooky Pixel House | Steam |
Chaos Reborn | Snapshot games | 9.99 | 7/10 | 26 Oct, 2015 | Tactical Wizard Wars | Steam |
Danger Scavengers | Star Drifters | 9.99 | 7/10 | 25 Mar, 2021 | Cyberpunk Rooftop Romp | Steam |
Idle Champions - Prismeer Sentry Skin & Feat Pack | Codename Entertainment | 9.99 | N/A | 23 Mar, 2022 | Buff Your Champion | Steam |
Idle Champions - Polymorphed Shandie Skin & Feat Pack | Codename Entertainment | 9.99 | N/A | 31 Aug, 2022 | Buff Your Champion | Steam |
Crazy Machines 3 | Fakt Software / Daedalic Entertainment | 9.99 | 9/10 | 18 Oct, 2016 | Wacky Physics Sandbox | Steam |
Deponia | Daedalic Entertainment | 29.99 | 9/10 | 8 Jul, 2014 | Iconic Point-and-Click | Steam |
Demolish & Build 2018 | PlayWay | 9.99 | 7/10 | 8 Mar, 2018 | Knock Stuff Over | Steam |
Chronicon | Subworld | 13.99 | 10/10 | 21 Aug, 2020 | Live Loot Level-Up | Steam |
Uligo: A Slime's Hike | Nôrdika Studio | 8.99 | N/A | 13 May, 2022 | Precision platforming, precisely | Steam |
Discolored | Godbey Games | 7.99 | 9/10 | 11 Nov, 2019 | Perform Pigment Puzzles | Steam |
Concrete Jungle | Colepowered Games / Fireshine Games | 6.99 | 9/10 | 23 Sep, 2015 | Classic City Builder | Steam |
City Climber | Ondrej Angelovic | 6.99 | 7/10 | 24 Feb, 2017 | Ragdoll Climbing Fun | Steam |
KILLRUN | Bulkhead | 4.99 | 6/10 | 25 Aug, 2022 | Run Gun Parkour! | Steam |
Sunlight | Krillbite Studio | 3.99 | 9/10 | 14 Jan, 2021 | Chilled, wholesome trees | Steam |
Chatventures | Sokpop Collective | 2.99 | 9/10 | 14 Feb, 2020 | Popping Micro-games | Steam |
King Pins | Sokpop Collective | 2.99 | 9/10 | 24 Oct, 2020 | Popping Micro-games | Steam |
Pyramida | Sokpop Collective | 2.99 | 9/10 | 3 Aug, 2020 | Popping Micro-games | Steam |
Pocket Watch | Sokpop Collective | 2.99 | 9/10 | 25 Dec, 2020 | Popping Micro-games | Steam |
Flipper Volcano | Sokpop Collective | 2.99 | 8/10 | 31 Aug, 2020 | Popping Micro-games | Steam |
Sok-worlds | Sokpop Collective | 2.99 | 8/10 | 21 Feb, 2020 | Popping Micro-games | Steam |
Popo's Tower | Sokpop Collective | 2.99 | 7/10 | 25 May, 2020 | Popping Micro-games | Steam |
Hellblusser | Sokpop Collective | 2.99 | 8/10 | 10 Aug, 2021 | Popping Micro-games | Steam |
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