Follow the incentives:

Just follow the incentives.

Bankers are some of the worst people in financial crises because they don’t get burned. If they get caught, they get free money through bailouts from the government. Then the executives go back to paying themselves millions of bonuses even though they’re risky behaviour lost people trillions of dollars.

Unless something happens with this movement in terms of laws and regulations, this is just going to continue. We’ll talk about this for a few years and then they’ll do the same thing again. We need the stock market to function properly.

The other issue is leverage. The banks give out so much leverage to hedge funds in times of zero interest rate environments. We need transparency so see what is happening with the financial system at all times. Otherwise this will happen again.

Everyone’s making money right now and everyone thinks they’re a genius.

Everyone thinks money exists for free and it does right now. The issue is money is not free forever. History has taught us that. No matter how long we push the issue, eventually things will change. The world is going to be keenly watching the actions of the US government because if they keep printing money to pay the debt when interest rates go up without taxing more rich people and corporations, the American dollar is going to be in a bad place.

Let me explain why.

Imagine you had 100 apples today. 1 apple was worth 100 dollars. The total number of apples in the whole world is 1 billion apples. Imagine 2 billion apples then got created out of thin air. Now your 100 apples are worth less than it was before. The supply of apples has increased so your apple doesn’t buy you as many things. 1 apple used to be worth let’s say a dinner. Now that dinner costs 150 apples. The companies in the supply chain have to charge more money to you to recover the cost of the things that created your food. They pass this charge onto the customer. It’s happening already.

Look at the price of lumber.

The price of building homes and doing renovations has gone up significantly because the supplies are more expensive.

The problem with unlimited money printing, as we’ve seen in other countries that have undergone hyperinflation, is it destroys an economy and a country. The rich get to remain rich while their assets earn over time while the people at the bottom can’t afford food and the basic necessities.

This is my fear for America. We already saw what happened with Trump. If this market does crash, Biden will be blamed by the Republicans for causing this crisis. He didn’t create it, Trump’s government did through de-regulation for the banks and the Powell put by printing endless supplies of money.

This can’t last forever. This is why this current administration is going to have to deal with a significant crisis. They’re going to need to hike interest rates, let zombie companies go bankrupt and get control of their money supply. Otherwise their status of global reserve currency will be in question.

Right now the world is pegged to the US so no one wants this to happen. But countries understand that by having excess US dollars in circulation is not good. You can’t have a reserve currency that hyperinflates.

All of this is speculation of course but history is a great teacher. If you want to learn more about why I have these thoughts, Ray Dalio’s free book on LinkedIn – the Changing World Order, basically walks through all of this.

He’s a genius. Thank you Ray for sharing your knowledge with the next generation.

The world is going to be so different this next decade, technologically and socially but we’re also in a completely different world than previous crises. America is losing its control on the world, while China has been doing everything to prepare for the future. This next crisis could be the tipping point.