Elvis Ng

#Crypto going to infinity. If you’re invested, this is important US Gov spends more money than it earns in tax So where the hell does the money come from that they spend? They issue debt to the international bond market - they create a bond with a promise to pay an interest and get $ from the market Next year, there is a deficit again, because they spend even more than they earn in tax When the bills are due, and previous investors want their interest, the Gov can't afford to pay it So they issue more debt But issuing more debt means that the US is a seller of debt The bond market has buyers and sellers just like everything else So the Gov is selling more and more debt Usually when a big seller is in the market, the price goes down But as the price goes down, other financial institutions that hold the debt sit on huge losses US Gov debt is world collateral, so it's like your house going down in price And maybe you need that money back so you sell the debt for a loss just to get cash back Lots of sellers, so the price goes down further As bond prices fall, interest rates go up (they are two sides of the same coin) So the interest rate which the Gov (and everyone else that issues debt) is now paying is higher The debt burden gets worse because they now pay higher interest on the debt they issue So they need to issue even more debt to pay off previous debt that gets larger and larger Debt spiral The only way to stop this is to reduce Gov spending so that they earn more in tax than they spend Just like a family with a credit card bill, you just stop buying stuff; austerity This is impossible A lot of the "spending" is social security, healthcare, military (these will NEVER see a nominal decline is spending. EVER) And no-one will vote for a politician that tells them their healthcare, pension or education will get cut As soon as you stop spending, you're taking stimulus out of the economy And so GDP falls down, and so tax falls down So stopping spending will create very slow growth, reducing Gov tax receipts, but they still have the same liabilities for public spending, which requires more debt to pay off previous debt, continuing the same problem Nominal $ Reduction of Gov spending is impossible - the ONLY thing they could do is try to slow the rate at which is rises The other way would be to hope and pray that the private sector invents something that drastically increases productivity of the existing workforce Actually, that's what humans do on a daily basis Human beings, since the dawn of time have crafted tools to increase their own productivity It's what makes us the dominant species on this planet Pointed rocks, spears, cogs, wheels, screws, engines, tractors, chips, robots, artificial intelligence All of this invention and hard work grows the actual economy But, there’s a problem Each country is different Some countries have a large populace of young people with energy, ideas and ambition Some counties have a populace that is getting older and doesn’t have the willingness or ability to fight like before The US is an example of a populace that is getting older, with more liabilities for healthcare and social security So growth slows, but the debt burden from spending like you were in your 20’s keeps expanding A “country” and humanity generally is actually reminiscent of a massive ponzi scheme You need more human offspring to be produced so that more young workers are present to produce value and pay tax for the older members (wild right!?) Just like every ponzi, if new money (humans) don’t come in, then you can’t payout the earlier investors (socials security, pensions) Especially as we live longer, which is very costly Humanity really does seem similar to a classic ponzu Maybe that’s why the border is open, huh? You need more young humans (or maybe robots) Anyway, If we reduce Gov spending too much, it may increase the debt burden (because slower growth) The current economic growth isn’t enough to grow out of debt burden Increase tax? Nope, will take money out of the economy and slow growth Increase Gov spending to “grow” the economy? Just increases debt burden further and increases the cost of future debt which creates debt spiral, which is what is literally happening right now *Note* If Gov spending can actually be done properly, it may actually help growth, for example if the Gov borrows and spends, it may be able to create more growth than the cost of the debt. However the Gov is typically the absolute worst capital allocator within the economy Capitalism works, not socialism Stay out of our business, and stay out of our pockets! The problem with huge Gov spending is that it may create inflation in prices as the Gove steps in to bolster growth with new money it created. It can also force interest rates higher and distort pricing mechanics within the economy It creates chaos and the inability to plan or invest capital in new growth. It also raises interest rates, which act like restriction on private economic activity. The central bank will also step in and raise rates to restrict Gov spending, with the intention of creating a slowdown in growth. What’s happening right now in the US is massive fiscal spending from the government and a crowding out of private capital. It’s essentially economic socialism. A far cry from what I remember the US to be. So about interest rates. With a debt spiral and interest rates going higher and higher as more debt is sold than there are buyers, what happens? The pricing mechanism of the economy fails. Investments are usually made using models such as discounted cash flow, or net present value. When interest rates rise, current values fall. Even worse would be if interest rates become unpredictable, and so what value does anything have? It becomes impossible to invest, impossible to fund growth. Demand goes away, deflation occurs and everything falls in value creating a huge financial crash. We’re trapped. But wait. There’s something we can do. We can print money. There’s a way we can fund the Government spending. There’s a way to stop interest rates rising. The Fed uses it’s money printer to print cash out of thin air, and they use it to buy the Gov debt. Brilliant! Now we can create all the debt we want and fund everything and keep interest rates low, because the Fed will step in and be the buyer of last resort! Rates are low, and we can spend money on social security, healthcare, and all of our military to remain our dominate force We’re saved. No. When you print money, you debase the currency Things that are desirable have demand Like gold, stocks, houses, Bitcoin and even stuff like food so we can stay alive (There are arguments that central bank money printing doesn’t raise the price of goods/services, but only raises asset prices. There is a difference between interbank money and private money creation through credit from banks to consumers. What is extremely clear though, is the link between central bank money creation and asset prices). Whilst many can try to offset price rises through lifestyle changes, their quality of life may reduce. What’s worse is that their ability to save for the future is diminished by asset prices that are going up faster than their wages because of money debasement Why could your parents afford such a nice place with a normal job, that our generation can’t? The Gov printed way more money than the actual growth output of the economy. They made all of us actually poorer Want to earn more money to compensate for the rising in prices? No, you can’t! That will cause inflation and a breakdown of pricing mechanisms and stability within the economy and the central bank will raise rates to increase unemployment to physically stop you from being able to demand higher wages It’s simple. Printing money does not create any wealth or purchasing power. Wealth creation only occurs through hard work and actual output How does it work? First they print money to prevent Gov default on debt But that creates currency debasement which negatively affects everyone (but benefits those who have assets like S&P500, Nasdaq, Housing, Bitcoin) Hence the large increase in rich vs poor wealth disparity over the last generation Young people who typically have no wealth to start, find that buying a house is impossible You can afford fewer assets, you are poorer than you parents because the money was debased faster than the real economic value growth created The reality is: If a nation is producing less value per person than before And it has a massive tax burden that’s getting bigger And the population isn’t growing And the inventions like AI and others aren’t growing fast enough to stop the rot Then that nation is simply poorer Currency debasement is used to prevent total system collapse of all prices and pricing mechanisms Debasement spreads the cost, and the poverty over the population bit by bit by bit over time, slowly so that no-one notices until eventually everyone looks around and says “what the fck happened?” Why bitcoin? Because bitcoin is property. No one can fiddle with the supply The boomers had stocks and housing Young people can barely afford to get on the housing ladder They can’t afford the downpayment to start saving in an asset A mortgage on a house is basically a savings plan Over long cycles the price goes up faster than your wages can save because of money printing But, you can buy $10 of bitcoin at a time It’s not much, but it’s a start. Bitcoin is hope This view is a longer term view of demographics and long term economic trends, when large parts of the economy are in decline you have to bail them out, or risk everyone’s assets crashing in price The only way that it’s publicly justifiable to print large sums of money through currency debasement, otherwise known as Quantitative Easing (QE) is in response to a “crisis” It’s a bargain; either total system collapse or we socialise the losses again and give you another shot at outperforming the average person During a financial crisis all assets correlate to one, to the downside Including Bitcoin, your house and your stocks What i’m interested in is not market timing, but how to defend myself against what i see as unavoidable currency debasement There is no “end” to this, there is no final curtain, crises happen, life goes on, the currency gets hit in order to give normal people the best chance of rising up by themselves, so they at least have a chance and we don’t go back to the feudal system. It’s not a conspiracy. It’s just life. I believe in hope, and innovation. It’s all we have to look forward to better times. Best to focus on what you can do, personally Work hard, invest in growth. (If you got this far, thank you. These are just my thoughts and I will be wrong in some areas, but i think i’m directionally correct) Posted first on https://t.co/jr376maIfZ

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Elvis Ng @Rebuters

about 3 years ago

https://t.co/KKy4Z2I96k

Elvis Ng @Rebuters

about 3 years ago

@TradingInTheNow @FundedNext I want to work for myself but also making big wins.

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Sanjeev S

@TradingInTheNow

about 3 years ago

🎁 Funded Challenge Giveaway 🎁 I'm giving away 3 evaluation accounts this week: 1 x 15k 1 x 25k 1 x 50k To take part: 1. Follow @TradingInTheNow & @FundedNext 2. Like & re-tweet this post 3. Comment why you want to be a trader Winners announced Friday 12th May. Good luck !

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