Going ‘Negative’ is the trend – last Straw of Keynesianism!
The Swedish Riksbank has lowered its core rate to -0.50 from -0.35. This negative trend is now the last straw for many Central Banks who operate under the Keynesian economic model. The purpose for this action is to boost asset values and create inflation within the overall economy. What Central Banks now desire is more inflation in asset values to prevent the holocaust of deflation from engulfing the markets. Deflation must not occur, say our elite Central Bankers, as this means that all the historical DEBT underlying asset values will be exposed and this leads to defaults, bankruptcies, insolvencies, and imploding ‘values’. The Keynesian economic model is built upon rising asset values over time, more debt and credit, and a continuing ‘wealth effect’ for consumers. This game is now collapsing as the Keynesian economic model is broken!
Stephan Ingves of the Swedish Riksbank continues to lower interest rates into negative territory to perpetuate inflation! He and other Central Bankers must follow this policy to prevent economic collapse!
After some 80 years of continual inflation and increasing asset values (generally) we now are entering a period of disinflation, deflation, and eventual collapse of the entire Keynesian superstructure. Keynesian math is becoming dysfunctional! Our Western economies can not handle declining asset values…as our underlying debt becomes exposed and impossible to repay. The derivative time-bomb will eventually explode and this leads to bank insolvencies, value write-downs, and eventual bankruptcy of the entire system. This is why the Riksbank and other Central Banks are trying to create ‘negative’ interest rates to revive borrowing and credit expansion. It is the last straw of this Keynesian economic model which we have followed since its inception in 1934. How long can this negative trend continue?
Central Bankers under Keynesianism can not allow the above trend to develop!
I suspect that all Central Banks will eventually be entertaining ‘negative’ interest rates as events play out in 2016 to 2023. There is no other alternative to this option. QE has not worked and negative interest rates will also not work for long. We need to understand why this policy decision is now being promulgated. The entire reason has to do with asset values. The best example for the lay person is to think about their house value. What was your house (property) value in 1934? A typical 1500 square foot house could be built and sold for $4000. This identical house and property would command some $250,000 today (on average). The Keynesian economic model has allowed underlying DEBT on this typical property to increase from zero to over $200,000. What happens if asset values decline under $200,000?
Economics is based upon historical CYCLES. The cycle of disinflation and deflation is now the trend!
What happens is that the DEBT gets exposed and as ‘values’ continue to deflate the salability of this property stops. Who carries this underlying DEBT? Some lender carries the debt and becomes the real owner of the property. This is what is now happening to our entire Western economy as asset values disinflate and then deflate. The ‘wealth’ effect which allows us to continuing borrowing stops and defaults and bankruptcies emerge. All this is part of the Keynesian model of economics which is now culminating. The cycle of debt and credit is starting to reverse as demand and confidence in this model wanes. The biggest time-bomb that will soon ignite is called the Derivative Time Bomb. Derivatives (like CDS) have allowed debt to continue and low-interest rates perpetuate the trend of borrowing and credit extension for a period.
The derivative time-bomb is the eventual harbinger of a total collapse of the Keynesian model!
The key concept in economics under Capitalism is the concept called VALUE. This subjective concept is why we invented MONEY. We then invented our CURRENCIES in order to measure (calculate) VALUE. Under Keynesian economics this concept called ‘value’ must continue to increase so that debt can continue to expand. Asset values must continue to inflate indefinitely and forever! This is the foundation of this model called Keynesianism. This game is now mostly over and the transition to a New Model will take many years of pain and depression. The Second Great Economic Depression is starting and it will continue for many years. Our elite Central Bankers will attempt to delay this inevitable result via their Ponzi gimmicks of QE and Negative Interest Rates. The eventual outcome, however, is certain! We need a New Model going forward!
House values have continued to increase (generally) for some 80 years under Keynesian economics!
But DEBT is now the problem going forward! A decline in asset values means that DEBT is exposed as unpayable!
Now is the time to get out of our Ponzi fiat currencies and get into a material ‘thing’ which can be exchanged from hand to hand. None of our cyber currencies qualify as a material ‘thing’. This units are cyber/virtual/imaginary. Now is the time to get into items like silver coins and gold coins for this coming transition period. Silver and Gold are God’s money as they have existed for nearly 6000 years. Cyber money is recent and depends upon our computers, forced loyalty to our elite politicians, and eventually loyalty to a 16 digit number which controls one’s buying and selling. This is what we now experience with our credit card money, smart phone money, and all our cyber computer money! Get out of these units to the degree that you can and get into physical silver/gold coins, bars, and similar items which we can exchange from hand to hand.
Money (historically) was always some ‘thing’ perceived to contain VALUE! Today’s cyber money has ZERO value and no existence in space/time! Central Bankers like this as they can create these units OUT OF THEIR ‘consciousness! Central Bankers just ‘type’ numbers into their computer screen!
2016 will be the beginning to this transition period. The transition will likely last for some 7 or more years. Some say 10 or more years. But the message is clear. The End Game of Keynesian economics is near and negative interest rates, QE, and other Central Bank gimmicks will likely continue during this collapse period. Economics is not math and numbers. In reality, economics is about growing material wealth and prosperity for a society. Wealth can be viewed mostly as food, clothing, shelter, transportation, and health care. These are the basics. Scarcity of these items of production are not the issue today! We have robots and machines which create most of our material wealth. Any New Model for economics will be much different from the current Keynesian model. Wake-up and think for yourself! I am: https://kingdomecon.wordpress.com.