September 24, 2024 | Daniel Lacalle: Prepare for “Unprecedented Monetary Destruction”

Daniel Lacalle, economics professor, Mises Institute analyst, and publisher of the QTR’s Fringe Finance Substack, just posted a chilling summary of where we’re headed. Here’s an excerpt:

An Unprecedented Monetary Destruction Is Coming

“There is no escape from debt.”

Global money supply has soared by $20.6 trillion since 2019, according to Bloomberg.

Additionally, global debt surged by over $15 trillion in 2023, reaching a new record high of $313 trillion. Around 55% of this rise came from developed economies, mainly the U.S., France, and Germany. Unfunded liabilities in the United States amount to $72 trillion, almost 300% of GDP. This may seem high until you look at Spain with 500% of GDP, France with close to 400%, or Germany with close to 350% of GDP.

There is no escape from debt. Paying for the government’s fictitious promises in paper money will result in a constantly depreciating currency, thereby impoverishing those who earn a wage or have savings. Inflation is the hidden tax, and it is very convenient for governments because they always blame shops or businesses and present themselves as the solution by printing even more currency.

Governments want more inflation to reduce the impact of the enormous debt and unfunded liabilities in real terms. They know they can’t tax you more, so they will tax you indirectly by destroying the purchasing power of the currency they issue.

High taxes are not a tool to reduce high debt, but rather to perpetuate the expropriation of national wealth. Countries with high taxes and big governments also have enormous public debt levels.

If you thought the monetary destruction we have witnessed in recent years was excessive, just wait for the suffering we will endure in the future.

In 2024, the world has seen more than seventy elections where none of the parties with access to power even bothered to present a realistic plan to cut debt. Governments and politicians understand that they can make any promises using someone else’s money, and many voters will readily accept the fallacy of taxing the wealthy. Naturally, currency debasement leads to widespread impoverishment.

Kamala Harris promises tax deductions for start-ups and first-time homebuyers, as well as families with children. It is hilarious. Inflation, a hidden tax, consumes their earnings and savings, while high direct and indirect taxes absorb the remaining funds. Despite this, she promises a tax deduction that most small businesses will never take advantage of, as they will shut down before generating any profit.

The Treasury expects a $16 trillion increase in public debt between 2024 and 2034, without taking into account any recession risk. The enormous government debt of $35 trillion, along with its subsequent additions, has the potential to destroy the currency. Citizens will face higher debt, reduced access to goods and services, and the ultimate dissolution of the middle class in the absence of a pro-growth plan and serious support for the currency’s purchasing power.

Governments and politicians need the votes of the middle class to reach power, and they also need to erode the savings and wages of that same middle class to reduce the weight of public debt in real terms. When the government says they can print and issue more debt, you pay for it.

The trillions of dollars accumulated in debt will lead to an unprecedented wave of central bank easing, which will continue to include negative real rates and even direct debt monetization. However, they need an excuse to present themselves as the solution to the problem they created. A recession or a significant slowdown will be the trigger to implement the plan to destroy the purchasing power of currencies. However, this time inflation is already evident and persistent.

John Rubino September 24th, 2024

Posted In: John Rubino Substack

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