Dr. Martin Hash Podcast

The imaginary nature of money tends to make the things it touches insubstantial; an economy that trades chickens can be measured in chicken shit, but imaginary money leaves little trace. There is the illusion of accounting, and people think in accounting terms, but with a slight-of-hand, trillions of dollars can be created and given away with almost no impact on anything else. If a stock index is down, Central Banks buy the handful of companies that control the index. If banks are undercapitalized, Central Banks grant more capital. If the nations budget needs to be funded, Central Banks issue IOUs that never need to be repaid. And why not? As long as people are producing more than they are consuming, how much money there is makes no difference. This makes money one of the greatest discoveries of man, and the ultimate source of our success. It's an open question whether it would hurt or help for the average person to understand that our civilization is truly built in the clouds.

There are signs when an economy is in trouble: falling sales. It can be masked for a significant length of time because of the way business reports earnings, but when corporations have to report real profits, not just buy-back-stock-using-borrowed-money-to-make-EPS-go-up, there's no way the Fed can hold stocks up forever with low interest rates. Another way to tell if an economy is in trouble is bubbles; do the things that people really need, relentlessly increase in price even though overall inflation is not increasing? Housing, cars, education, healthcare, food? Central banks and government can prop up our artificial economy on imaginary money for a long time, but eventually the weight will be too heavy, and people will stop playing with their phone and notice.