By Bruno de Landevoisin
STEALTHFLATION: An intractable economic condition that inevitably arises as excessively issued fiat currency compulsively pursues non-productive wealth assets in a grossly over-leveraged economy which has been artificially reflated by Central Banking authorities, in a misguided attempt to synthetically engineer economic growth via extreme monetization. (ie: Counterfeit Quantitative Easing & Interest Rate Suppression)
This ill-advised monetary regime effectively prevents the real economy on the ground from realizing the healthy normalization of free market forces crucial to genuine capital formation, authentically derived from bonafide industrious productivity which generates actually earned savings, the very life blood essential to creating legitimate and sustainable growth.
Under the imposition of StealthFlation, asset prices are deliberately inflated in an irrational attempt to elicit a vapid wealth effect, while the generative velocity of money is extinguished. Worse still, the seeds of hyperinflation are sown, as the compromised overtly financialized economy becomes increasingly dependent upon the interminable entirely destructive monetization.
Also known as; wishful thinking, and robbing Peter to pay Paul.
This entirely synthesized approach to capital formation brings about the following disastrous conditions:
1) Engenders stealth dormant velocity of money, concealing embedded inflationary risks to the economy.
2) Produces highly unstable and recurring capital market asset bubbles.
3) Drives superfluous misallocation of true investment capital, disregarding and disadvantaging the crucial SME sector.
4) Generates excessive capital market volatility and unpredictability, disrupting deliberate business development and planning.
5) Delivers lethargic overall economic activity with limited and unsustainable growth.
6) Encourages deleterious off-shoring of the manufacturing base.
7) Facilitates fantastic fiscal deficit spending sprees.
8) Decreases median incomes and new job creation.
9) Spawns extreme income inequality and social discontentment.
10) Eviscerates the essence of money by compromising the means of exchange and its crucial role as a conduit for savings.
Visualizing the Vanishing Velocity of Money Vortex
The inflationary risks are deliberately concealed and remain latent due to the synthetic suppression of determinant free capital market forces. However, the grossly excessive supply of money has definitively been created, and it will debase the currency via inflation, it’s just a function of time. Continue reading