The Fairy Tale Is Almost Too Perfect

We are experiencing a (hyper)inflationary depression. As a consequence of Quantitative Easing (exponential growing money supply) the price of Low Order Consumer Goods (LOCG) stays high and keeps rising and the price of High Order Capital Goods (HOCG) comes down. [with the exception of seasonal and other short term fluctuations].

Real Estate is a HOCG and does not protect savings.  During the Weimar Hyperinflation Rentals were more or less nominal and in the period of hyperinflation , housing was obtained practically free of charge . In reality the property of the landlords was confiscated. Imports but also exports were controlled. Argentina taxes the export of food but Germany simply banned it.  During those years interest rates were never raised sufficiently to prevent a negative return. Buyers were eager to purchase anything which would maintain value. Hence the more rapid the rise in price the greater the demand.  People purchased not what they needed but whatever they could get. 

All of the technological improvements of the last decades originated in capitalistic countries. The people of the USA are now more prosperous than the inhabitants of all other countries because their government embarked LATER than the governments in other parts of the world upon the policy of obstructing business. Once popular government (democracy) popular controls the production and distribution it's GAME OVER. Mainly because of misallocation of funds, taxation and regulation it chases away (or consumes) Capital and Entrepreneurs.

They are fabricating the DREAM BUBBLE…with the help of Derivatives, Central Banks and Propaganda.

The fairy tale is almost perfect.

derivatives

Financial markets are rigged..thanks to Derivatives which are a mighty weapon.

  • with the help of swaps currencies are maneuvered within a certain trading channel (up and down)
  • the price of food commodities (wheat, corn, soy, sugar) is locked
  • gold, silver, palladium, platinum, copper, …the price of most metals is rigged
  • energy: crude oil, natural gas and uranium…even with a war raging in the Middle-East, the price comes down and is staying low.
  • interest rates are miraculously staying low. Swaps are the magic.
  • price of short and long term treasuries is miraculously staying high
  • stock markets are going up because either the co’s are buying in their own stocks ore the FED or ECB are buying.
A hyperinflation policy is only possible with a deflation propaganda.

Prices are not coming down, are they!? We have a strong deflation propaganda. And...it’s working. Mainstream Media, some analysts and a lot of people BELIEVE it. Off course the price of High Order Capital Goods (real estate, electronics,..) are coming down. Such is normal in a hyper inflationary depression. But the price of LOCG continues to go up. Every family experience it each time they go shopping. In many countries, the price of utilities keep soaring: electricity, natural gas, water,...But unemployment and poverty continues to go up and stays high. As a consequence we have more and more social unrest in the USA and Western Europe and more and more war in the Middle-East, Central Europe...

Important is to know that by manipulation a basic trend cannot be reversed and that only an up- or downtrend can be delayed. Even more important is that, the longer the manipulations lasts for, the stronger and the more dramatic the final freakout and bull/bear run once the manipulation stops working. In the mean time, it's waiting for GODOT and rather unpleasant for the Financial Analysts and Investors who understand what is happening.

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Moon Kil Woong 9 years ago Contributor's comment
It is amazing how people, companies, and governments still completely fail to ignore the risks and downfalls of derivatives. Even worse is the growth of derivatives and the fact that they are used by market participants to move markets rather than invest or make a profit in a given thing. When the government loses they end up printing or taxing costing the people. When government protected entities go under they end up charging it to the government which includes a growing number of formerly private markets. In the end, government is disrupting and perverting the private economy at a frightening pace and doing so increasingly with derivatives. Like all countries going away from free market capitalism, it will not end well.