I know that these are not laws of nature. The knowledge, but apparently not!
Inflation used to be feared. - But she came anyway.
Today, Inflation is desired. - But it stays out.
Inflation is when you inflate a balloon. Comes from Latin, inflatio (inflating, swelling) like the word STEM related flatulence, is therefore rather something unappetizing. Wikipedia currently states that Inflation is to be understood as the ongoing, general increase in the price level of certain shopping baskets. Only far below, where simple relationships are noted in pseudo-scientific formulas, so most users stop reading, the causes of Inflation are discussed. These are, according to Wikipedia:
Money supply growth
Increase of the speed of circulation
Decrease in production volume
All three causes mentioned above lead to the quantity of available liquidity in those market areas covered by the shopping baskets exceeding the quantity of goods, goods and services offered.
We will look at this in more detail at the same time, but first have to justify why the factor “velocity of circulation” no longer has any relevance today. The velocity of circulation is a relic of theory in the time of “commodity money”, so it has more to do with Karl Marx than with Mario Draghi, Christine Lagarde, Jens Weidmann or Christian Sewing.
Credit money, there is no other, does not run around, it fluctuates.
It is created by a commercial Bank. Whether as an overdraft on the salary account or on the current account of the company, or in the form of a loan with fixed interest and repayment terms, secured by tangible assets, or not, in any case, money pops out of the banker’s hat, is used by the borrower once to pay something, meets the current account of a “supplier” and is often immediately gone there.
It is gone, because the money created from credit does not increase a balance there, but reduces the debt. So it disappeared again in the Nirvana from which it came. Well, the supplier can have a balance that is increased, but at the latest when he pays salaries that hit excessive salary accounts, it is gone again.
Certainly there are also ways of money, which remain from the creation of money as balances, often as a long-term investment, but this money, which saves in the long term, does not run around any more.
Accelerated money circulation is no longer. In its place is the changing willingness of banks to lend and thus influence the money supply. It is also not about production volume, but about shortages.
Unfortunately, the “real production volume” must now also be removed from the equation, because with constant, buyable demand, no healthy company will reduce production if this would be equivalent to a voluntary loss of profit, which would immediately prompt the competition to fill this gap.
What takes place are “artificial, speculative” shortages, such as those that can be created in commodity futures markets, or actual “shortages"caused by Disasters (Nature, war, plague, strike).
But this has nothing to do with the monetary value, but only with the fact that “urgent need” motivates those who can afford it to voluntarily pay higher prices, while those who cannot afford it simply smear Margarine on bread instead of scarce Butter, drive the 10-year-old car a year longer and cancel the annual holiday. There is nothing inflated, there is something missing.
Scarcity causes inflation, not Inflation!
Or would the ECB count it as a success of its monetary policy if the price of a barrel of crude oil returned to $ 100? No, she can’t, and if she did, it would be a lie. It is also a lie when Inflation is too low due to the fall in the price of the oil market. These are external events that affect the European single market without it having any influence on it.
So Inflation is …
Once this has been clarified, only one Relation remains as a trigger for real Inflation, namely the Relation between the money supply and the supply of goods.
Not every offer of goods, goods and services is included in the baskets used to measure inflation, and if so, not necessarily in the correct weighting.
And once again, caution!
Only a part of the available money supply also occurs as demand where the shopping baskets are placed! In this respect, the measurement results represent only limited excerpts of reality and hide everything that money does when it drives its being as a monetary asset.
If Inflation is measured where there is little liquidity available to demand, because the access to liquidity has been made massively difficult for consumers through wage abandonment and mass unemployment, pension cuts and a high government ratio, so if it is measured where consumers and consumer goods providers meet, it will not be possible to measure Inflation due to a lack of liquidity surplus-and what is measured as Inflation is the consequences of scarcity, i.e. inflation, or the increased tax and tax burden, e.g. in the area of power supply, broadcasting fees, tobacco taxes, and even fines for road traffic violations.
The naivety with which the ECB assumes that its trillion-dollar bond-buying programmes will arrive where they could trigger Inflation can no longer be surpassed by a three-year-old in the defiance phase.
Of course it is a fairy tale.
There are in this world as a classic pair of opposites the net assets and the net debtors. There is nothing in between.
Because the net assets from their non-performance-adequate income, despite sometimes almost fairytale consumption, still can neither consume large parts nor invest sensibly in real economic investments (e.g. for the construction of a factory, the purchase of machinery, etc. – but not the purchase of shares on the stock exchange), the liquidity collected in the financial sphere remains stuck in bank accounts, is therefore withdrawn from the real economy, where Inflation is measured.
Unfortunately, these net assets (going a long way through the banks they control) continuously demand from the net debtors both return, i.e. interest, and repayment, which they cannot afford, however, if the liquidity available in the real economy is not sufficient for this.
Because of the detour via the banks, their balance sheets are in some cases in considerable disarray, because the growing deposits of the net assets as counterparts are opposed to the debts of the net debtors, which, if they cannot be served, melt down in “value”. Net debtors are also states. Banks hold government bonds in their assets, which lose value in trade if the creditworthiness of the States is downgraded. The banks ‘speculative transactions that have gone wrong also reduce the banks’ assets – and if they were to pass on the depositors ' assets, a Bank would have to declare bankruptcy.
This prevents the ECB
By buying trillions of euros from the banks, which have rotten government and corporate bonds in their portfolios, the ECB is rebalancing banks ' balance sheets. In addition to the remaining Assets, the deposits of net assets now face fresh money in sufficient quantities.
But money itself does not multiply. In order to be able to pay the guaranteed interest to the net assets, banks must look for new debtors who are willing to pay interest. It’s nice that there are distressed states whose bonds still yield interest. This can be purchased with the fresh money of the ECB and put into the balance sheet with the higher value. The nice side effect: the debtor countries get rid of their new bonds and are liquid again. If it goes downhill again with the debtor countries, the ECB takes over the old bonds from the banks (guaranteed!), then the banks are liquid again and can buy new bonds again, put them on the balance sheet as “valuable” – and the debtor states can continue to operate cheerfully again-as usual.
This will maintain the economic cycle. The companies can produce, turn over and realize the most important thing, namely profits, which in turn go to the big pile via dividends, loan interest, rents, leases, license fees, etc.
The imbalance between deposits and assets of the Bank has already arisen again. What to do?
In addition to the permanent injection of liquidity by the central bank, the banks are also in control of another way of juxtaposing deposits with “values”. They make every effort to increase the prices of shares and other speculative securities, as well as the market values of their real estate assets.
Because a company that last year posted 100 billion in sales and 7 billion in profits, and expects about 100 billion in sales and 7 billion in profits again in the current year, has by no means become in any way more valuable, while its shares are traded 25 percent more expensive, we discover right here, on the stock market, the Inflation triggered by the ECB.
(DAX January 2019: 10.416 – January 2020: 13.219 ~ + 27%)
We also discover Inflation in the prices of real estate in metropolitan areas. These price increases show the actual Inflation caused by monetary inflation. The flatulence of the ECB meets the olfactory nerve.
Investors with Happy Hands know how to sell at a profit during a period of price growth and how to buy cheaply into companies in the market of the real economy, which is still untouched by Inflation.they also know how to acquire real estate – recently also square kilometres of arable land – and thus use partial Inflation to acquire real assets.
Time and again, it also succeeds in luring small savers to the stock market in a bull market – at the same time zero interest on the savings book. They eventually have to pay for the exit of the big ones at prices close to the highs, and then when the big ones have retreated and turned their backs on the stock market for a while, they fall on their noses with big losses. Not all, but those who can’t stand a loss and sell in panic, and those who need and need to sell money, too.
This destroyed the savings of the small savers. Whereby a small saver is usually also a net debtor, although he does not know it at all, because he does not calculate the national debt proportionally. This savings money ends up as tangible assets with the speculator who left in time – and the world is back in order.
The ECB continues to print fresh money, the banks buy fresh government bonds, the states issue them and thus enable returns on capital. The capital drives up the stock market prices until the savers carry their savings to the stock market …
Ad infinitum? To all eternity?
Certainly not, because with each run, and the runs come in ever faster succession, there are new scarcity phenomena – on the investment market.
The construction boom will collapse at some point, because it will no longer be possible to find tenants who are able to pay the rents out of the real economy with too little liquidity. So at some point only the existing buildings remain in the market.
The undeveloped land and arable land, as well as the forests, are somehow removed from the private property of the net debtors and can only be traded between the players in the financial casino.
The private, owner-managed commercial enterprises meet the return demands of capital less and less in their earning power, are therefore either driven into Ruin or bought up and incorporated into public limited companies.
The large state-owned enterprises as well as the municipal properties and facilities will still be left to privatisation and, if the debt brake is maintained, will eventually also have completely passed into the hands of finance capital.
But because only real assets represent real value and eventually the last one will have understood that he must quickly separate himself from money if he wants to save his assets, the net assets with all their long accumulated money will plunge into battle and offer insane prices for the last free real assets – and also pay, so that the last farmer suddenly floats in the billion dollar blessing, because he could still sell two hectares of swamp Meadow.
Only: the next day, the litre of milk also costs 25,000 euros at ALDI, because the hay on a meadow purchased for billions can no longer be delivered to the dairy farmers for a few euros per Tonne. The question is no longer whether it will come to that. The only question is when it will be.
Our economic and financial system is, and thus it is now up to date, an ascension command. Only those who have invested their assets safely in land – and if the assets are large – also in precious metals, remain safely on the ground.
For comfort: if you have nothing to lose, you will lose that too. But it can’t be much.
It is already written in the Bible: whoever has, to him it is given that he has fullness, but whoever does not have, to him also what he has is taken away. According to the apologists, this is only about “faith”. Transfer it quietly to wealth, wealth, money, happiness among women, whatever you want. It is true at every nook and cranny.
So when Markus Gürne and Anja Kohl tell you in the Daily Börsen-Show of ARD that the ECB has determined that Inflation is far too low, then treat yourself to a superior smile.
But only when you are sure to be safe yourself.