What Could Pop the Everything Bubble?

I’ve long held that if a problem can be solved by creating $1 trillion out of thin air and buying a raft of assets with that $1 trillion, then central banks will solve the problem by creating the $1 trillion out of thin air—nothing could be easier.

This is the lesson of the past eight years: if a problem can be solved by creating new money and buying assets, then central banks will solve that problem.

Problem: stock market is declining. Solution: create new money and buy, buy, buy stock index funds. Problem solved! Market stops falling and quickly rebounds as “central banks have our backs.”

Problem: interest rates are inhibiting lending and growth. Solution: create a few trillion units of currency and buy enough sovereign bonds to drop interest rates to near-zero.

Problem: nobody’s left who can afford to buy the new nosebleed-priced flats that underpin China’s miracle-grow economy. Solution: create new currency, lend it to local government agencies who then buy the empty flats.

Problem: stagnant employment and deflation. Solution: create a trillion in new currency, buy a trillion in new government bonds that then fund infrastructure projects, i.e. bridges to nowhere.

And so on. Any problem that can be solved by creating a few trillion out of thin air and buying assets will be solved.  The mechanism to solve these problems—creating currency out of nothing—is like a perpetual motion machine: there are no intrinsic limits on the amount of new money that can created at near-zero interest, as the interest payments can be funded by new money.

Even better, the central bank (the Federal Reserve) buys Treasury bonds with the new currency that generate income, which is then returned to the Treasury: a perpetual-motion money machine!

The policy of creating trillions in new currency and buying trillions in assets has inflated an everything bubble, a bubble in all the asset classes being supported or purchased by central banks and their proxies.

Many observers wonder what, if anything, could pop the everything bubble.

This leads to an interesting question: what problems can’t be solved by creating another trillion and buying assets?

What Problems Can’t Be Solved by Creating Another Trillion and Buying Assets?

The past eight years have created the comforting illusion that essentially all problems in the modern era of globalized, centralized, debt-based, state-cartel capitalism in all its flavors (Chinese, Japanese, European, American, etc.) can be solved by creating as many trillions as are needed (whatever it takes) and buying assets or issuing guaranteed lines of credit with the new currency.

But there are some structural problems that can’t be solved by this mechanism. Some are primarily economic, some are primarily political-social, but all of them affect the entire system, not just the financial realm.

Inflation

We’re told that inflation—the loss of purchasing power of a currency—is near death and this greatly saddens the globe’s central bankers, who desperately need inflation to push wages higher and reduce the burden on debtors.

So let’s say, just as a thought experiment, that central banks get their much-desired inflation, but it runs hotter than their 2% annual target.  Once inflation is embedded in expectations and the supply chain, printing another trillion and using it to buy stocks, bonds, empty flats, etc. won’t make inflation go away.  Rather, the inflation in asset valuations generated by endless central bank buying if assets ends up feeding real-world inflation as all this new currency doesn’t actually produce more goods and services; it simply expands the supply of currency sloshing around the world looking for speculative yield.

The chorus of voices advocating for Universal Basic Income (UBI) is growing, and central banks will increasingly be pressured to issue new currency to fund UBI and its equivalents—what’s known as helicopter money, as the central bank issues currency that then funds deficit spending, i.e. the government dropping cash into the real economy.

Helicopter money comes in a variety of forms: debt forgiveness, negative tax rates (i.e. tax rebates to those who owe no income taxes), and cash stipends such as UBI. In every case, this helicopter money doesn’t expand the supply of goods and services; all it does is expand the funds available for consumption.

While China may be able to export deflation in goods that are tradable, that is, commoditized goods that can be made anywhere and shipped to markets elsewhere, nontradable goods and services such as local government services, housing, groceries, fast food, most healthcare services, haircuts, education, etc.—the bulk of the real economy—soar in price as the supply of money expands faster than the supply of these goods and services.

This is why inflation is already running extremely hot in nontradable sectors (which are often dominated, funded or controlled by the public sector/government), while deflation is still visible in tradable goods such as TVs, software, etc. I covered real-world inflation rates in The Burrito Index: Consumer Prices Have Soared 160% Since 2001 (August 1, 2016))

Much of the real-world inflation in sectors such as healthcare is invisible to protected classes because it’s being absorbed by employers and the government, a topic I covered in Inflation Isn't Evenly Distributed: The Protected Are Fine, the Unprotected Are Impoverished Debt-Serfs (May 25, 2017)

Real-world inflation is also distorted by hedonics and substitution, tricks that lower the official rate of inflation but don’t change the reality that the average prices paid for vehicles have risen substantially, despite the official claim that vehicle prices have been flatlined for years, a topic I addressed in About Those "Hedonic Adjustments" to Inflation: Ignoring the Systemic Decline in Quality, Utility, Durability and Service (October 11, 2017)

Be Careful What You Wish For: Inflation Is Much Higher Than Advertised (October 5, 2017)

As political pressure on central banks mounts to fund QE for the people, QE for Main Street, etc., that is, helicopter money in one form or another, the introduction of new currency into the real economy has the potential to make real-world inflation undeniable.

Once inflation is undeniably in the 5% to 7% range, who will be willing to buy a negative-interest rate bond, or a bond paying 1%?

Another potential engine of inflation that’s widely discounted is global shortages of key commodities such as oil, grain, fresh water, etc. The global economy has come to view cheap, abundant commodities as the natural and permanent state of affairs, but history tells us that abundance and low prices are not permanent.  Since essential commodities are integral to the global supply chain, any price increases due to scarcity or supply disruption quickly feed inflation into the entire supply chain.

Inflation is a problem that creating another trillion won’t solve; creating and distributing another trillion or two will actually make the problem worse.

Rising Social Disorder Due to Soaring Wealth-Income Inequality

Famed financer Ray Dalio recently penned a commentary labeling the divergence of the wealthy elite from the bottom 90% The Most Important Economic, Political And Social Issue Of Our Time.

This is a topic many alt-financial bloggers have covered for years; I’ve penned dozens of essays on the topic, most recently The Fading Scent of the American Dream (October 16, 2017)

This chart depicts the inconvenient reality: central bank currency-creation-asset-buying has enriched the top of the wealth-power pyramid, with limited trickledown to the top 10% and negative effects on the bottom 90%.

The consequences of this outcome of central bank stimulus-for-the-already-wealthy can manifest in all sorts of ways.

Political pressure on central banks may grow, forcing policy changes or even limiting the scope of central bank largesse to banks and financiers.

Social movements demanding UBI and other income-distribution policies may become mainstream, a dynamic that as described above will add to the inflationary pressures building in the real world.

Once again, creating another trillion and buying more assets held by the wealthy won’t fix this problem—it will only make it worse.

Fragmentation of the Elites

As I have often noted, historian Michael Grant identified profound political disunity in the ruling class as a key cause of the dissolution of the Roman Empire. Grant described this dynamic in his excellent account The Fall of the Roman Empire, a book I have been recommending since 2009.

The chapter titles of the book provide a precis of the dynamics Grant identifies:

The Gulfs Between the Classes

The Credibility Gap

The Partnerships That Failed

The Groups That Opted Out

The Undermining of Effort

I’ve discussed profound political disunity in dozens of essays since 2009, for example, When Did Our Elites Become Self-Serving Parasites? (October 4, 2016)

The Real Trouble Begins When Rising Inequality Splinters the Elites (October 22, 2015)

There are a number of manifestations of profound political disunity we can discern:

-- The splintering of the technocrat class as soaring wealth and income inequality narrows opportunities for financial security for the class that considered security and wealth a birthright.

-- The fragmenting of the Deep State, the unelected, permanent leadership of the Establishment, a subject I’ve addressed since 2014: The Age of Disintegration: Political Disunity and Elites At War. (November 21, 2016)

-- The fragmentation of the two political parties into warring camps that have little common ground in a struggle for control of the rising tide of populism.

-- The splintering of the social order into conflicting classes of Haves and Have-Nots, a topic I covered in America's Nine Classes (April 13, 2015).

Once again, creating another trillion and buying assets—a policy that enriches the financial elites at the expense of every other class and elite—doesn’t solve the problem, it only makes it worse.

Popping the Everything Bubble Created by Central Bank Currency Creation-Asset Buying

As central bank creation of currency and asset purchases fail to solve the problems outlined above, these dynamics will undermine the status quo rather than prop it up.  As central bank policies are increasingly fingered by the mainstream as the source of soaring wealth-income inequality, central bank policies supporting credit/asset bubbles will either be limited or cut off, and at that point all the credit/asset bubbles will pop.

In Part 2: What To Invest In When The Everything Bubble Bursts, we lay out our how to best prepare for the social discord, political disorder and financial upheaval that will result when the central banks inevitably lose control of the system.

As today's bubble-drunk asset prices start plummeting, what investment opportunities will offer the best returns?

To find out, click here to read Part 2 of this report (free executive summary, enrollment required for full access)

CNN reporter Jim Acosta was confronted at CPAC by The Federalist reporter David Marcus with a valid question: "When are you guys going to start covering Cuomo?" His answer — or, really, lack of an answer — perfectly demonstrates why he was earlier surrounded by CPAC attendees chanting, "CNN sucks!"

On the "Glenn Beck Radio Program" Tuesday, Glenn and producer Stu Burguiere react to a video clip of the exchange with Acosta, as well as the mainstream media's double standards when it comes to Democratic New York Gov. Andrew Cuomo.

Watch the video below:

Want more from Glenn Beck?

To enjoy more of Glenn's masterful storytelling, thought-provoking analysis and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution and live the American dream.

Glenn Beck can't help but wonder, "What is wrong with us?" in light of the Left's latest move — canceling six Dr. Seuss books due to "hurtful and wrong" illustrations — that takes America one step closer to complete insanity. And now, school districts are jumping on board after President Joe Biden seems to have dropped Dr. Seuss from the White House's annual "Read Across America Day" proclamation.

On the radio program Tuesday, Glenn argued that deleting books is the perfect example of fascism, and asked when we as a country will finally realize it.

"They are banning Dr. Seuss books. How much more do you need to see before all of America wakes up? ... This is fascism!" Glenn said. "We don't destroy books. What is wrong with us, America?"

Watch the video below to hear more from Glenn:


Want more from Glenn Beck?

To enjoy more of Glenn's masterful storytelling, thought-provoking analysis and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution and live the American dream.

Former Democratic presidential candidate and Hawaii representative Tulsi Gabbard and Glenn Beck don't agree much on policy, but they're in lockstep on principles.

On "The Glenn Beck Podcast" this week, Tulsi spoke with Glenn about one of her last acts in Congress, introducing the "Protect Women's Sports Act," which she says would "strengthen, clarify, and uphold the intent of Title IX to provide a level playing field for girls and women in sports." But since then, the Biden administration has gone in the opposite direction, and has supported allowing biological men to compete in women's sports.

Watch the video clip below to hear why Tulsi took a stand for female athletes:


Watch the full interview with Tulsi Gabbard here.

Want more from Glenn Beck?

To enjoy more of Glenn's masterful storytelling, thought-provoking analysis and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution and live the American dream.

Later this week, former President Trump will attend CPAC and give his first major policy appearance since leaving office. Sources close to the President reveal he will focus on "the future of the Republican Party and the conservative movement."

The future of the GOP is a question that demands real discussion before elections in 2022 and 2024. Right now, I can see three possible answers for how you act:

  1. Those in power and senior positions will ignore the reasons behind Donald Trump winning in 2016. They will be vindicated in their minds because they outlasted him, as they view DC as a job for life. These leaders will go back to business as usual and seek forgiveness from the left, hoping for unity and acceptance in the future.
  2. The second outcome is another section of the party that is understandably very angry over the left's Presidents treatment. They still support and believe in Trump. They think it's time to take off the gloves and treat Biden/the left exactly how they treated Trump.
  3. The few policy positions offered in public will be centered solely around opposing the left. They will also make the case how the left suck, are dangerous, and how you need them in power. The next four years are merely a countdown for Trump to run again and right the wrong of 2020.
  4. The third outcome is very similar to the second, but with one key difference. While they appreciate everything Trump accomplished while in office, they feel it's time to unite behind another candidate.
Question

Which of these three positions will work best for the American people? Which helps built a political base for elections in both 2022 and 2024?

If you seek to help save America, it is critical to do some soul searching. Whether you love or hate him, Donald Trump got 75 million votes and made advancements in key demographics. What did he do well that you can develop further? In what areas was he poor, and how can you improve?

I want to raise six principled points everyone on the right should be forced to consider in the run-up to 2024.

1 - Understanding American Exceptionalism

FACT: America is an exceptional nation. If you read enough of world history, you will find ample evidence that America acted in ways that made it unique and significantly different from other countries in the past and modern times. These reasons must be understood and promoted through the culture and body politic.

One of those reasons is the layout of your Declaration of Independence. If you look around politics today, you will see people on all political sides telling you what they hate, why the other side is the enemy, and how they must be defeated.

In the Declaration of Independence, Jefferson also made that case against the English when he listed 27 grievances against the King. So how is the layout key? It took Jefferson 357 words to get to those grievances. Your Declaration is your mission statement: it tells everyone in the world what America aspires to be. It states the belief that all were created equal, all had certain rights that come directly from God, and that it is the government's job to protect rights -- not give people rights.

The left is successfully painting everyone on the right to be a terrorist who enjoyed the Capitol Hill riots. If you ever want to win another election, it will be critical to explain what you stand for to the American people.

After all, ask yourself which makes you the most passionate to vote - removing someone from office or voting for a vision and change you believe in?

2 - The Constitution

Is there a better place to start this vision than the Constitution? Yes, it is mostly ignored today by those in power and is only referenced by politicians and media when it fits a narrative.

The Constitution is a beautiful and complex document but is primarily based on a straightforward principle. The government should be extremely limited in its power, but it should be as close to the people as possible where there is a clear need for government. Who can argue with this principle?

Who wants someone they have never met, dictating how they live their life?

This is why the Constitution grants the President no real power, and gives Congress 18 clauses of power, listed under Article 1, Section 8. Any and every power not mentioned there belongs at the state level.

3 - Finances

The power structure in DC has changed many times over the last twenty years, with both parties having the opportunity to rule the different federal branches. There have been two periods where one party controlled all the power in DC:

  • 2008-2010: Obama / Dem
  • 2016-2018: Trump / GOP

Despite these changes, your government continually grows, you continue to spend money you don't have, and in ten out of the last thirteen years, you have added over $1,000,000,000,000 to your national debt, which now sits just under $28 trillion. Does this seem sustainable to you? Of course not, but sadly your finances only get worse.

America has revenue of over $3.2 trillion every year, yet DC has not passed a budget since 2008. Can you imagine any business running that way? Do you think Apple, Amazon, or Disney have a budget? It is time to get America on a path to financial sustainability, work towards a balanced budget, and explain to the American people how you will achieve it.

4 - Taxes

Do you remember discussing taxes during the Tea Party?

We used to make the simple moral case to the American people: any money you earn is yours, you should use it to plan your life, and the government has no right to take it from you. This was so successful around 2012 that Herman Cain ran for President with one primary policy: the 9-9-9 plan.

If America is to return to prosperity after Covid, lower taxes and a simpler tax code must be a central theme.

5 - Cutting Government

Look at the size of the US government in 2021. Are you happy? Can you name the numerous departments? Is it now the freedom-loving Americans' position that agencies like Education, Energy, EPA, and Commerce are constitutional bodies of government and are well-run?

How about the IRS, which targeted Tea-Party groups under President Obama? Do they deserve support, or is it time to start sharing a vision of the departments that should be abolished?

This principle used to be a big part of the Conservative platform. It played a massive role in 2012 when Rick Perry ran for President. His campaign was destroyed in 45 short seconds when he could not remember the three agencies he would abolish.

Maybe it's time to refresh this debate but change the parameters. How about we discuss the agencies that should be kept?

6 - Bill of Rights

Today, the Bill of Rights is under constant attack. The far-left/woke mob hates free speech, and they seek to cancel anyone with an opposing view. However, the attacks on the Bill of Rights don't always come from the left.

America has a second amendment that guarantees you the right to bear arms. The last time the GOP held both houses of Congress and the Presidency, they banned bump stocks - but who really NEEDS a bump stock?

As the years have passed, some have admitted they are open to red flag laws. Is this still the case?

While the second amendment may be under attack, it is clear the fourth amendment is dead. Regardless of which party holds power in DC, the NSA is given continuous ability to spy on Americans. The simple, principled case from Rand Paul of "get a warrant" always falls on deaf ears.

The Bill of Rights should be a unifying document for most Americans, as the principles are self-evident and a significant part of any freedom platform going forward.

Conclusion

America will face significant challenges over the coming years. As the government continues to grow, the far left get more hostile, and central planners seek a great reset. If you share my concern, then now is the time to forget our tribes and ignore the debate on who should be President in 2024.

It's time to work hard to build a platform by raising a banner of bold colors, not pale pastels. We must share a clear vision to the American people of a bright future where they are free, prosperous, and can pursue their happiness.

When the platform is built and successful, people can identify the best candidate to run in 2024.

"First, you win the argument, and then you win the election." — Margaret Thatcher

Jonathon Dunne is a keynote speaker, weekly podcast host on Blaze Media, and published author on major platforms such as The Blaze, Glenn Beck, Libertarian Republic, Western Journalism, and Constitution. Since 2012, he has reached millions with his message of American exceptionalism.

You can find him on social media – Facebook, Twitter, MeWe