Cause of The Collapse

[Martin Hash]

The reason why The Collapse has yet to occur has stymied me but I think the amount of wealth and the level of its concentration is the explanation: we simply haven’t run out of people with the resources to “invest,” and the ever-increasing pool of money adds to it. The Collapse will occur when enough money gets into the hands of enough people that consumption exceeds production, and we don’t have enough people left willing to work for a living.

Chances are inflation before collapse, which could be short term except because of the ultra-toxic social climate, White men who could step in and cover the slack, won’t.

[SuburbanFarmer]

Inflation is essentially The Collapse. Once your cash is near-worthless, there’s no reason to be a part of the system.

[DBTrek]

https://www.investopedia.com/articles/i ... ation.asp

Investopedia says the reason the money printing doesn't lead to a collapse or hyperinflation is because the M0 money supply and M2 money supply are different animals. Stimulus hits the M0 money supply which is what the banks use to lend out via fractional reserve, multiplying the money in circulation. The M2 money supply "includes the effects of fractional reserve banking and credit".

Since the Wall Street bail-outs the banks *have not* been lending out the stimulus money. That means trillions go into the M0 money supply for the banks, but the banks don't lend it out to the public so it doesn't hit the M2 money supply (where consumers would have access to it). Instead, the banks use the printed money to offset the toxic assets on their balance sheets.

So ... if trillions of dollars are being printed - but they're only buying off the toxic assets of banks and never reaching the hands of consumers - you're not going to see that expected, direct, inflation. There are more dollars, but not in the hands of buyers, so free market prices aren't directly affected.

Anyway, that's what Investopedia says. I'm certainly unqualified to comment on it either way, but it is an explanation worth considering. When a system you think you understand (like basic economics in my case) doesn't behave the way you think it should - it means you don't understand something. There's obviously much I don't understand about the economy, but the M0/M2 money supply explanation provides answers to a questions I have about our current economic situation - aka "why isn't hyperinflation hitting".

[Martin Hash]

Inflation is essentially The Collapse. Once your cash is near-worthless, there’s no reason to be a part of the system.

Inflation only takes imaginary money: Entitlement checks are indexed, and salaries are essentially indexed. Real things will inflate too, so all that is lost is imaginary money. (And sense of well-being but that's mostly already been taken.)

[C-Mag]

https://www.investopedia.com/articles/i ... ation.asp

Investopedia says the reason the money printing doesn't lead to a collapse or hyperinflation is because the M0 money supply and M2 money supply are different animals. Stimulus hits the M0 money supply which is what the banks use to lend out via fractional reserve, multiplying the money in circulation. The M2 money supply "includes the effects of fractional reserve banking and credit".

Since the Wall Street bail-outs the banks *have not* been lending out the stimulus money. That means trillions go into the M0 money supply for the banks, but the banks don't lend it out to the public so it doesn't hit the M2 money supply (where consumers would have access to it). Instead, the banks use the printed money to offset the toxic assets on their balance sheets.

So ... if trillions of dollars are being printed - but they're only buying off the toxic assets of banks and never reaching the hands of consumers - you're not going to see that expected, direct, inflation. There are more dollars, but not in the hands of buyers, so free market prices aren't directly affected.

Anyway, that's what Investopedia says. I'm certainly unqualified to comment on it either way, but it is an explanation worth considering. When a system you think you understand (like basic economics in my case) doesn't behave the way you think it should - it means you don't understand something. There's obviously much I don't understand about the economy, but the M0/M2 money supply explanation provides answers to a questions I have about our current economic situation - aka "why isn't hyperinflation hitting".

Good Post.


I've read that something like 80% of all US dollars have been printed in the last 9 months. Which is pretty crazy.

In the view of a neophyte, the banks are only running on promises and dreams from the Fed, which they've been doing since the Fall of 2008. Once they got that first injection of free juice, there was no going back. Why settle up with toxic assets when you can free injections from the Fed ?

Many of our individual states and cities are running like this too. They can't pay for their pensions or infrastructure, but they keep ignoring it and putting money into shit like inclusion and diversity training. I guarantee you this next big injection of cash titled Corona stimulus is going to be filled with money for all these blue states and cities running on fumes.

The housing market again is inflated beyound where people can really buy houses. The retail and commercial real estate have an appointment with reality. You don't need retail space if you can't run a small business, and you don't need big commercial space if all your employees work from home.

I don't know when the music will stop, but wild ass guess is that a crash of real estate could set it off. I lean toward the retail and commercial real estate, but could be residential too.

[DBTrek]

Yeah ... one big question I have is what are the effects of banks buying off toxic assets with money that never hits the M2 supply? We all know nothing in this world is free. Economics is a game of trade-offs, there is never something for nothing. So banks hold toxic assets, they get money no one else sees to buy them off, and then ... what?

I mean, obviously it frees banks up to make whatever shit investment they want because anything that goes south is printed out of existence by money consumers never see. But what effect does that have on the consumer economy? And how does the economic effect work it's way from the bank balance sheets into the larger economy?

If I knew that shit, I'd be lining up my investments right now to take advantage of the incoming disaster.

[SuburbanFarmer]

Essentially, they’re all paying off bad leveraged bets to each other. The theory seems to be that the money lent never existed in the first place, therefore the money paid ceases to exist as well.

There might be some bizarre balance to be struck there, but the system is inherently unstable and unpredictable. Remember the casino scene in Big Short where they explain that everybody in the crowd is betting on whether a blackjack player wins, and takin huge odds.

At some point, the hand is dealt, and all of those ridiculous odds have to be paid, but nobody knows what actual amount of money will end up where.

It will collapse into fighting and dead bankers. I plan to toast their falling corpses, just like they toasted the end of America.

[C-Mag]

OWS, we will never be defeated
No, they just joined wall street.


I'm ready for hedgies and bankers jumping off tall buildings

[DBTrek]

This CNBC video actually has an interesting take.
Where is all the inflation?
It's in assets, that's where.

Remember - housing prices so high people can't afford them - inflation, baby.

Stocks trading at an average price-to-equity (P/E) ratio of 35+?
That's inflation.

The kind of inflation banks would make by buying things - but your average Joe consumer wouldn't.


Perhaps the inflation is already here - we're just searching for it on the store shelves when we should be looking at our mortgage and 401k.

[Martin Hash]

The Econ 101 way of tracking inflation is the cost of a can of Coke, which has almost doubled in the past 3 years.