Eight Axioms to Understand the Fake Economy, by Bill Bonner

The picture peddled by the government and MSM of the economy is a mirage. From Bill Bonner at bonnerandpartners.com:

DELRAY BEACH, FLORIDA – What have we learned so far?

Let’s spell it out as a series of axioms.

  1. Real money must be connected to the real economy of energy, time, and resources. Traditionally, gold makes the connection. (In the case of bitcoin, electricity is the connector.)
  2. Time, energy, and resources are limited; money must be limited, too. Real wealth is based on real things. The feds cannot command real wealth to increase, so they cannot increase the supply of real money, either. They can increase only the supply of fake money – the new elastic currency put in place in 1971.
  3. The financial world is cyclical, governed by markets and manias. The economic world is incremental and made up of real things. Markets can reverse suddenly. Prices can collapse. But farms, factories, and films rarely disappear.
  4. Government is always a way for the few to take advantage of the many. While the rest of society engages (mostly) in win-win deals, the feds rely on win-lose deals. Controlling money is a way to force win-lose deals onto people (usually without them realizing how they are being flimflammed).
  5. Things have no inherent price or value. Instead, markets discover what they are worth as people bid for them. If markets are not allowed to function freely, honest price discovery doesn’t happen… and no one knows what anything is really worth.
  6. Interest rates should be discovered, too, honestly… in a free market. Since 1987, the feds have diddled interest rates… forcing them down into the sweet mud of fantasyland, where time runs backwards and risks decline as time passes.
  7. Driving interest rates down to ultra-low levels, the feds have falsified all asset prices.
  8. The Fed is reversing the policy of the last three decades. Instead of adding to liquidity, it is subtracting from it. (By the end of 2018, the Fed says it will be draining about $600 billion a year from the U.S. money supply.) Instead of pushing down interest rates, it is pushing them up. Instead of supporting the stock and bond markets as the world’s number one buyer, it will become the world’s number one seller.

To continue reading: Eight Axioms to Understand the Fake Economy

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