There is one big problem with Jim's statement - Central Banks have alway and will always print money artificially. Why? First: How is money created? Where is it born? Who creates it? The answers to these questions are actually quite simple. Money is created by virtue of a journal entry by a Central Banker in their books of account. There is little "physical" rhyme or reason for its creation, as the basis for authorizing the entry is a decision made by policy-makers based on the circumstances of the time. So the amount of entry is not determined by a set tried and true formula tied to GDP or any similar economic measure. It is largely arbitrary.
So the paper you hold in your hands, bank accounts or use to ascribe other assets value is existentially nothing more than the fiat offspring of a Central Banker's accounting entry. It is not tied to national resources or future resource output potential in anyway - that would put too much science into this mystical journal entry and money printing process. By the way, the more we print the more global stock markets go up as shown:
Global Stock Market Growth Flat J -Curve (Exponential Upwards)
Therein lies the real issue, because as national resources behind the money supply are exponentially depleted by expanding populations, so is the de facto value of each money unit that had ever or will ever be printed.Thus, creating the basis for another exponential J-curve, as there is an inverse relationship between printed money and exponential resource output depletion. (see charts below) More and more printed money is simply needed to preserve the statu quo perceptions and defer social unrest.
Global Money Supply Flat J-Curve (Exponential Upwards)
Global Resource Depletion Flat J-curve (Exponential Upwards)
Debasement in a sense actually started when the very first dollar was printed. The above hockey-stick charts show a fairly clear relationship between the expanding expanding money supply, resource depletion and population growth, leading to two logical questions: What's left? How long will it last? The chart below uses oil as a surrogate for resources - and as expected the J-curve is inverted to the money, depletion and population J-curves above.
Global OIL Production (Extraction) Declines - Flat J Curve (Trending to Exponential Downwards)
Not only do these charts paint an obviously bleak picture - the most important observation is that they are all going the wrong way - Exponentially! And so is the climate right along with it as population growth spurs a J-curve in climate change as well as can be seen in the undernoted chart.
Global Climate Change - Flat J Curve (Exponential Upwards)
Bottom line is that the printing of money actually correlates with the respective J-curves population growth, resource depletion and climate change. While they correlate the printing of money appears to affect everything in the wrong way. But regardless of causation or correlation all these charts are forming J-curves going the wrong way. But most importantly, they are doing in EXPONENTIALLY!
Now try explain these simple J-curves to Central Bankers in Greece, Cyprus, Spain, Portugal, Nauru, Japan, Italy, Ireland, and the rest. Money is de jure or legal evidence from the issuing state that it is obliged to pay its holder the stated value of resource outputs through its various agencies. All is fine until there are no further resource outputs because inputs no longer exist for conversion by the nation's economic processes . As we can see in individual real nations noted, as these J-Curves continue to accelerate, the economic effects and value of money diminishes by country, and should ultimately do so in an exponential manner globally.
What next? Just keep reading the international headlines.
First Financial Insights
September 2, 2013