Hi Readers
Spoke to a few readers who have become great friends over time and i noticed that there is a huge myth which people believe. Central banks DO NOT CREATE MONEY.
So lets get a few things out there and clear up the YouTube posters stupidity, how things have become uncontrollable and things are and will continue to collapse.
Regardless of where you are Australia, US or the UK every central banks works the same way.
Economies have dismantled the productivity of economies and have become debt based economies.
China's 30 year investment into productivity has successfully achieved its purpose, whether we like it or not this is such an achievement to be proud of as a country. The stupidity of the world to give China its manufacturing and productivity is by no means the fault of the Chinese, they are smart people and we need to respect it.
The world has become a debt based economy, More debt needs to be taken to pay for previous debt.
Central banks DO NOT write up debt or provide debt to banks or governments.
It is the commercial banks that write up debt to either businesses or people to invest or to purchase.
Back in the 70's banks used to use depositors money to give out loans to people but this ended in 1985, and people still today think that this is the case.
Commercial banks write debt up on a pledge that you will pay it back and produce money out of thin air. Commercial banks have computer algorithms which determine if you can pay a loan back or not. Commercial banks are responsible for the asset bubbles which have occurred in the last 20 years not the central bank as many believe. As money has been cheap to source due to covid and the stimulus cheques people have been given, inflation was being incubated.
I say that because of the way the economy has been managed, big business around the world has had access to cheap money and rather than investing in production they have been buying the own company stock up, Others bought Bitcoin, and others have been buying property. Yet small business which has needed the help and who is the biggest employer in the world has been left out of all stimulus help.
People who got given government assistance to help out with the costs of living back in 2020-2021, went out and started buying new furniture, crypto currencies , stocks, cars or banked the money.I can remember here in Australia everyone was going out buying new flat screen TV or new Fridges. but what occurred was a supply/demand issue, which have just carried and will continue until the balance comes back.
What people don't understand is that the central banks do have data on whats in savings accounts, and yes the central banks know that people have banked funds which the governments had handed out to people.
So now that you understand how the system works the commercial banks world wide didn't expect for the central banks to ever raise the cost of money as no government will ever be able to pay it back. Whats now happened is that inflation and the rising costs of daily living has become a tax on the consumer so great that it's like 30% draw down on the consumer and as a result discretionary spending has fallen off a cliff.
So the cost of money is rising , which the commercial have been exposed to and now find themselves exposed to losses, which CEO's didn't expect or anticipate. Regardless of where you are in the world all banks are exposed to asset losses. While the Major banks are some what protected due to there association to there central bank the smaller banks or the mortgage originators are not protected at all and have the major losses on there books. So the pledges that banks have written up (which are loans) now cost far more to service and while banks now realize that liar loans have been issued they have no hesitation in defaulting loans and selling assets. Banks won't hesitate to liquidate investments portfolios should there algorithms say so regardless of if your making your repayments or not, they can simply increase the capital requirements and paralyze the mortgage holder.
So the central banks have stopped buy bonds, banks around the world must hold bonds as a safety net should they get into trouble, the cost of those bonds is increasing, so the commercial banks find themselves vulnerable with less mortgages being written up as the demand for investments or discretionary spending falling quickly. So the anticipation which the commercial banks would usually have thinking the central banks wouldn't let the economy fall, is wrong and banks are now vulnerable to all the debt they have written up.
As of said before 2008 was a $1.6 trillion US issue, which didn't end well, this time it a $32.4 trillion issue worldwide.
We are now going to see people demanding higher wages and the cost of living will continue to rise. Yes these costs will be passed on and yes inflation will continue to rise further.
As I've said previously until interest rates are higher than the inflation rate then inflation will keep rising.
Above is for education purposes
