Gradual Nationalization of the Economy

Global Liquidity Expansion

The global money supply has seen a significant increase, with a surge of $4.7 trillion in the past three months. This rapid increase began when the Federal Reserve postponed the normalization of the balance sheet in June, causing a panic. Since then, developed economies have been implementing new stimulus policies, adding to the already hefty fiscal packages. These include multi-trillion-dollar investment packages like the EU Next Generation Fund, which now encompasses massive deficit spending plans. However, these programs only lead to a state of secular stagnation as government projects and current expenditures consume money at an unprecedented rate.

Dependency on New Spending Plans

Developed economies are becoming increasingly dependent on new and larger spending plans, resulting in more debt, weaker productivity growth, and declining real wages. A recent report from Bank of America indicates that the rise of unproductive debt has created a significant problem for the United States economy. For every dollar of new government debt, the impact on the gross domestic product has fallen to less than fifty cents. Despite having some productivity growth, the United States is drowning in unproductive debt. In the euro area, the negative multiplier effect of new government debt is particularly evident, despite enormous stimulus plans and negative nominal rates.

Intentional Nationalization of the Economy

While some may attribute this to bad policies and reckless government spending, there's a belief that this is an intentional, gradual nationalization of the economy. The government expands its influence in the economy by slowly depleting the middle class's savings due to consistently declining real wages, thereby gaining support from a significant portion of the population. Market participants welcome this as more money printing means more liquidity in the markets, fueling multiple expansions regardless of weak economic figures. However, this could end badly as discontent among citizens is rising.

Debt Crises and Neo-Keynesian Policies

Debt crises may not manifest as they used to. Instead of a cataclysmic event, it's a slow process leading to impoverishment. Neo-Keynesians may see the past four years of the United States economy as a victory, but for many in the middle class, their impoverishment mirrors that of Greek citizens in 2009. Central banks envision a soft landing as a gradual erosion of the purchasing power of salaries and deposits. However, this is what we're currently experiencing, compounded by the additional burden of higher taxes. The only beneficiaries of a soft landing are government bureaucrats and those who can shield their wealth from money destruction.

Impact of Increased Money Supply

The recent increase in money supply may not trigger a new wave of inflation due to stagnant money velocity. However, this could lead to lower investment, growth, and productivity. Market prices, multiple expansions, and bubbles may reappear, while families and small businesses find themselves in a more challenging situation. The continuous chain of stimulus plans highlights the failure of Keynesian policies. Governments are now piling new programs on top of each other, claiming that the economy is on the verge of a turnaround. The majority of newly created money is consumed by government spending, leaving the productive economy with decreasing access to credit, declining currency purchasing power, and wealth confiscation through taxes and currency printing.

OECD Report and Inflation

According to the most recent OECD report, by 2025, inflation will be 3.5% with a global growth rate of 3.3%. The implementation of massive new spending and financial repression programs has led to 80% of OECD countries experiencing annual inflation that exceeds their central banks' target. There is a global policy of absorbing productive and private sector wealth.

Bottom Line

The gradual nationalization of the economy is becoming more evident, with the middle class facing the brunt of the impact. The increase in global liquidity and the dependency on new spending plans are leading to more debt and weaker productivity growth. While some see this as an intentional move towards nationalization, others see it as a failure of Keynesian policies. The impact of an increased money supply and the predicted inflation rates are worrying. It's crucial to protect yourself from inflation and financial repression, or risk becoming a dependent subclass. What are your thoughts on this? Share this article with your friends and engage in a discussion. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.