December 29, 2013
Here’s a script that I’m preparing for an upcoming video:
The Man-Made Money Cycle
I talk a lot about natural cycles that happen over and over again throughout history. They influence everything from climate to the economy to our health.
But there are man-made cycles that we create ourselves … over and over again … and they cause financial booms … and financial busts.
And honestly, we have to be the dumbest creatures on the Earth, because we don’t learn from the past. We just keep “booming” and “busting” over and over again.
If you understand these man-made money cycles, you can beat the system, and stay prosperous in any economy.
Governments and banks are the cause of this boom/bust cycle. They get together to create inflation and promote it as a good idea. Well, it’s good for them, not for us.
What inflation does is devalue our money. For example, since 1913, the dollar has lost 96% of its value. That’s why everything seems to continually get more expensive. In actual fact, it’s our money that’s become almost worthless. It takes more dollars to buy that new car, for example.
As time goes on, and inflation eats away at the value of the dollar, prices for products and services rise. But as prices rise (and our salaries don’t), we find it tougher and tougher to buy those new products.
So manufacturers figure out ways to reduce costs, by going off-shore for cheaper labour to lowering the quality of the parts that make the products. It happens in everything, even food, and this is why we’re so overweight and unhealthy. We’re eating food that’s been sweetened and degraded; that doesn’t have the nutrients it once had.
It’s why the air bags in our cars are blowing up.
While prices go up and quality goes down, your salary virtually stays the same. So you end up going further and further into debt to maintain your lifestyle.
The bottom line is that inflation destroys our economy. It makes us poorer.
Governments however, love inflation. Because when prices go up, the GDP goes up. That’s Gross Domestic Product. That’s like the government’s salary and assets—their net worth (actually, it’s our hard work as a population, but they get the credit for it).
You know that when your salary goes up, when the value of your house goes up, the banks will lend you more money. It’s the same with governments.
And they take full advantage of that fact. In fact they’ve borrowed so much money, all the G7 countries are all bankrupt. Yup, there they are, and they all owe more money than they can ever pay back (with percentage of debt to Gross Domestic Product—the sustainability level is 60%). From: https://en.wikipedia.org/wiki/List_of_countries_by_public_debt
- Canada (84%)
- France (89.9%)
- Germany (79.9%)
- Italy (132.5%)
- Japan (229.2%)
- Russia (12.2%) (in 2016, Russia was suspended from the G8, ironicly)
- United Kingdom (88.6%)
- United States (104.17%)
On the one hand, “we the people” have had our money destroyed and are living off credit cards and on the other, governments have mortgaged our future. Because government debt is money we owe on top of our personal debt.
How do you like our financial system so far?
Eventually, when our money is almost worthless, the economy starts to falter. We’re so far in debt that we stop spending. So … to spur the economy, governments lower interest rates … they make money really cheap to borrow—and it works for a little while.
It leads to people buying more homes and over-extending themselves. As a result, in Canada, we have the largest housing bubble in the world. Bubbles always burst and this one’s just about there.
The end result?: A huge financial collapse and a major depression. This happens over and over again … we have a big depression every century: 1929, 1837 and 1857, (South Sea Bubble) 1720, crash and depression in Britain in 1663, and on and on. You can find some lessor crises here: https://en.wikipedia.org/wiki/List_of_economic_crises
Each crash causes the value of money to reverse. We call it “deflation.” That’s what happened after the crash in the 1930s. It’s where our money increases in value. That’s actually a good thing for us, but governments hate it. Because government income goes down and debt becomes even more impossible to pay back.
What does this mean for you?
You want to be in cash. Cash is king- because cash increases in value. Prices of virtually everything, except food will drop drastically. You money will buy more products and services at cheaper prices. Prices of homes will drop up to 80%, for example.
You don’t want to be in debt, because debt also increases and credit starts to dry up. Banks start to pull in loans.
And you want to learn all you can about deflation.
In the 1930s, great fortunes were made by people who understood the man-made money cycle.
If you don’t, and you’re mortgaged to the hilt with an over-inflated home, or have other debts you can’t pay off, you could lose it all.
But, if you play this right, it could be the biggest financial opportunity of your life.
It’s time to pay attention to the bigger picture.
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