When the tide comes…why we might need a new recession…

There is an old saying that goes something like “when the tide comes we’ll know who has been swimming naked”.

We are currently writing anno 2019, and it seems like a long time ago, that the tide was here. That is in a lot of senses good, as we are currently enjoying the economic benefits of one of the longest booms in the business cycle in the post WWII period.

As we all know by now, this has for a large part been entirely driven by the monetary policy of the reserve banks of the western world. Every where we look, we see the consequences of this policy. Asset prices across the board has been pushed to historic heights. Stocks, bonds, real estate, and basically everything that just remotely works as a store of value has been propped up by easy and cheap money through the banking channel.

Once in a while, I will venture outside my natural habitat (our apartment at V.bronx in Copenhagen) and be exposed to some of these “economic realities”. One such occasion came last week where my oldest had to play a soccer ⚽️ match up north of Copenhagen. So we started up the child container of a car that we drive, and went uptown to what will be the equivalent of “the Hamptons”. We drove by mansion after mansion. Parked next to a big ass Volvo XC90 and when we left we were so lucky to drive just behind a Porsche Cayenne. We saw middle aged humans of the female sex, casually strolling by in their posh outfits.

One can’t help to reflect on the perverted effects of the reserve banks 🏦 monetary policy in recent years. The current monetary policy schemes in play are ones that increasingly benefit the already well offs, and increasingly enriches the 1% and 10% wealthiest persons.

One central mechanism of a capitalistic societal model is that unprofitable ventures, projects and businesses must be allowed to default. They have to default, in a proper controlled manner for society to still believe that the capitalistic model still has two sides. One side that will propel people with bright innovative ideas upwards on the societal ladder. And one side that will “help” people down on that ladder again if the ideas, and business ventures turn out to be financially unsound.

In my view, the core social channel of the capitalistic economy has increasingly stopped working. It is increasingly the same 10% well off people that are being held up, by the adverse effects of the current monetary policy that is being pursued in the western world. Please note the very small dip in 2009 in the graph above of the wealth share of the 10% richest.

So what is left for the bottom 90% of the population. Well increasingly the only option is to pile on more and more debt in order to potentially buy a home 🏡 for your family to live in. A home that increasingly is driven up in price by cheap interest rates, and will leave younger and younger generations in ever increasing debt. The millennial to boomer wealth transfer is very real.

And thus, the social contract is completely broken, in a new liberalism/capitalistic free for all game where it is even allowed to bypass the normal functioning of the capitalistic model by allowing it to be manipulated by a group of central bankers with questionable motives.

So when I get to go on an anthropological field study to northern Copenhagen, I cannot help to think 🤔 that we might just need a little recession now, to shake the money tree 🌲 a bit, in order to just bring a little balance and fairness into the system again.

Ps. the “poor” kids from the city beat the shit out of them 4 to 3.


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