Ponzi plans keep going up until the criminal is stopped from the outside. They never visit of their own volition. Bernie Madoff kept going till all of it exploded.
In the year 2000 the Nasdaq composite surpassed a P/E of 200 before collapsing 78% by October 2002. The more successful a Ponzi the more outright the bubble and resultant discomfort. The granddaddy of Ponzi– far higher than anything we’ve seen before– is our financial system.
Let’s consider what money is. It is an innovation that permits us to produce and take in not just in the present but across time.
It is, for this reason, that it needs to offer both a cash as well as a store of worth. If for instance a transaction needs to be made over a crop cycle then the value of the money needs to remain sufficiently steady over that time frame to allow the participants to make an exchange and not come out undersea. This benefits neither party to the deal due to the fact that, while in the short-term celebration A might get an exceptional deal from celebration B, if the offer is so “excellent” regarding insolvent party B, then no future commerce will be done and total production decreases causing less supply and a fall in the overall standard of living.
The cash requires to be useful to both celebrations. In prisons they utilize cigarettes. Even if you don’t smoke sufficient prisoners do and the cigarettes do not alter (consistency) and so they form a cash.
Naturally, gradually we’ve utilized all sorts of things utilized as money: gold, silver, copper, even servants. At primary school I utilized to utilize marbles and Garbage Pail Children (ah, those were the days).
To be used, money needs to be trusted, and to be trusted it requires to
have integrity. But when you include the federal government in cash undoubtedly it gets damaged.
We have actually many examples, however back in 1215 King John was forced to sign the Magna Carta, which meant that the crown couldn’t tax what the people hadn’t authorized. That concept was the foundation of democracy.
Years later on King Henry VIII determined that by clipping the coins he might melt down the clipped parts, melt them into coinage and spend the cash. Simply put, he pumped up the money supply. He was a crafty bastard and later figured he could take a copper coin and coat it in silver.
At first individuals thought they were getting a pound sterling, but as it turned out– due to the fact that the old fart had his face emblazoned onto the coin– with his nose standing out, it was his nose that provided him away. The silver covering specifically on his protruding nose scraped off when it rubbed in peasants’ pockets. This let the copper show through and made his face look like he had a red nose. Therefore peasants, whenever they looked at the coin with his red nose looking at them, knew immediately that he’s taken from them.
Trust disappeared.
We’re no longer in the 1200’s however that only means the gentility has actually gotten better.
This time around, after they’re made with their economic killing spree (aka lockdowns) and rampant financial inflation, the resulting stagflation will have the same result amongst the peasants as it did in great ol’ copper nose’s time. Loss of faith.
This Ponzi too will blow up, and the driver will be a failing of trust, since that’s all that’s left holding this together. It will be people that stop it. They’ll stop it by declining to use the currency.
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