• 151 days Could Crypto Overtake Traditional Investment?
  • 156 days Americans Still Quitting Jobs At Record Pace
  • 158 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 161 days Is The Dollar Too Strong?
  • 161 days Big Tech Disappoints Investors on Earnings Calls
  • 162 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 164 days China Is Quietly Trying To Distance Itself From Russia
  • 164 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 168 days Crypto Investors Won Big In 2021
  • 168 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 169 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 171 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 172 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 175 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 176 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 176 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 178 days Are NFTs About To Take Over Gaming?
  • 179 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 182 days What’s Causing Inflation In The United States?
  • 183 days Intel Joins Russian Exodus as Chip Shortage Digs In
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Demographics - Bad News for Sovereign Solvency, Good News For Long-term Hard Asset Investors?

The amount of unfunded government liabilities are estimated to range anywhere from $150 trillion to as high as $250 trillion in the developed world (what is a few tens of trillions anyway these days). Given that the number of taxpayers to foot this bill is dropping at the same time as the number of claimants is rising and that this liability represents several multiples of global economic output, what realistic options do our governments have other than de jure (outright debt repudiation via sovereign defaults) or de facto (printing press/debasement/inflation) defaults? If we take a look at central Central Bank behaviour in the form of their balance sheet activities when faced with the current and much smaller banking crisis I would argue the answer becomes more clear.

40-65 Pop

The Race to the Bottom - Is a Global, Co-ordinated Currency Debasement Underway?

It appears the answer is yes, all key Central Banks are engaging in currency debasement via balance sheet expansion.

Debt M3

Combined with an environment of strongly negative real interest rates - what's your preference sovereign debt or hard assets?

CB Assets v gold

Remember the quip that fiat currencies do not appreciate - they merely fall at different rates? We are witnessing the first, global, synchronized debasement in history. Even the traditionally "sound money" Swiss are working overtime to devalue their currency (see SNB line above).

Central Banks - Good for the FIRE Economy, Not so Good for Purchasing Power

Since inception of the the US and Canadian Central Banks the purchasing power of the US and Canadian dollars has fallen approximately 97% and 95% respectively - with a large portion of that devaluation occurring after the US went of the gold standard in 1971 and Central Bankers of all stripes were given the all clear to began to unleash increasingly rapid money supply creation on the world.

Purchasing Power

Surely such a complete loss of purchasing power is an odd outcome given both of these institutions have price stability as core mandates. At the same time our purchasing power was being methodically destroyed artificially low interest rates inflated the value of assets in the Finance, Insurance and Real Estate ("FIRE") sectors beyond all ties to reality or more accurately to cash-flow. Perhaps we should remind our Central Bankers that nominal asset values are not in their purview.

Regards

 

Back to homepage

Leave a comment

Leave a comment