Infinite QE is making a return.
China's central bank on Tuesday unveiled its biggest stimulus since the pandemic to pull the economy out of its deflationary funk and back towards the government's growth target, but analysts warned more fiscal help was vital to hit these goals.
Everyone can see that the economy is totally shattered.
The FED has begun their pivot.
The banking sector is potentially on the verge of collapse.
China now scrambles to inject liquidity into stagflation.
But analysts questioned how productive the People's Bank of China's liquidity injections would be, given extremely weak credit demand from businesses and consumers, and noted the absence of any policies aimed at supporting real economic activity.
At a certain point a drug addict can only reup so many times before they crash and burn. We are seeing this theory play out in slow motion with the debt market. The reserve requirement for banks was quietly lowered from 20% to 0%. Fractional reserve banking has essentially become reserveless banking. Whenever something goes wrong the top gets bailed out by the taxpayer and debt restructuring rather than being allowed to fail under a capitalistic system. The middle class is constantly being cannibalized, and they don't have much more left to give.
A reckoning is upon us.
China's property market has been in a severe downturn since peaking in 2021. A string of developers have defaulted, leaving behind large inventories of unwanted apartments and a troubling list of uncompleted projects.
The housing market bubble has been an asset class waiting to pop for over a decade now. The problems that caused the 2008 crisis were never fixed and have only gotten worse as the can has been kicked down the road over and over again. Personally I believe that hedge funds like Blackrock will realize that assets like Bitcoin are superior to real estate in every way and will begin slowly unwinding their positions into crypto. This is a process that could see sustained downward pressure on the housing market for indefinite lengths of time. There's even been rhetoric from the democrats pointing to the idea that hedge-funds should be forced to unload these positions under the law... which is a whole other can of worms.
It's all about perspective
Some people want housing prices to fall so they can buy a house. People who already own a house obviously want the value to go up. Ultimately I hope that society itself stops viewing domicile as a way to conserve financial energy. This has always been a toxic proposition that defies the technological laws of deflation. Houses keep getting easier and easier to build (and with 3D printing it might get exponentially crazier) but yet become more and more expensive ever year because people who don't need them for their primary purpose are just speculating on future value.
The property crisis has weighed heavily on the economy and crippled consumer confidence, given that 70% of household savings are parked in real estate. Analysts remain unconvinced the latest measures will have a significant impact.
It's a truly horrifying prospect to realize that we've been conditioned as a society to willfully sign a DEATH PLEDGE (which is what mort-gage literally translates to) and financially enslave ourselves to the banks under the guise that this is a wise investment.
- Property is not very liquid.
- Property has high overhead and upkeep.
- Property has burdensome taxes and interest rates.
- Property has high fees, predatory middlemen, and takes a long time to sell.
None of these attributes are conducive to a wise investment, and yet we have all been brainwashed into thinking that it is actually the smartest investment to make, to the point at hurling personal insults at anyone who would dare disagree. When this bubble pops many of our friends and family will be completely destitute. It's certainly not an outcome we should root for but it's hard to see the future turning out any other way. The only question is how long it takes; we've become complacent due to the boy crying wolf every year, but their absolutely is a wolf out there. Waiting.
Inflation is coming.
The only tool in the box is to print our way out of these things and flood the economy with more debt. Those who are closest to the money get the best access while the rest of us plebs have to hope for table-scraps. The main thing to remember about inflation and money printing is that just like being a drug addict there is a delayed reaction to the negative consequences. The reward comes early and the comedown doesn't hit for years later.
This is exactly how Bitcoin was able to pump 15x in the wake of the COVID panic. All that money flying around in the beginning was great. A lot of it went into pumping the markets. Only years later did we come down from that high and realize that a cheeseburger from McDonalds went x2 in price.
We find ourselves in a similar situation today but it's even worse. The war against inflation was absolutely not won no matter what the FED chair says. They are going to turn printer back on to get us out of whatever shitshow is coming on the horizon. We will once again get that euphoric burst of FOMO; especially for crypto markets... right into a devastating comedown just like we always do when no one expects it because "this time is different". It's not different; there is no S-curve or supercycle coming to pump your bags forever. Get over it.
This leads me to wonder what the safest course of action will be over the next few years. Obviously if you're on the Titanic about to sink then a crypto lifeboat is looking pretty good. At the same time a lifeboat is just a temporary solution to avoid death in the short term. They can still capsize or be stranded in the middle of the ocean with no help in sight. On a certain level I think we have to hope that we can upgrade these lifeboats into yachts before it's too late. Do we have enough time to build that type of infrastructure? Hopefully.
Conclusion
Signal after signal points to dark clouds looming on the periphery. Can we make it through the storm unscathed? Some of us will, but there's no telling how many will suffer through no fault of their own. Prepare for the lower class to be saddled with the burdens created by the upper class. This is simply the way of the world now. Embrace Clown World or it will eat you alive.