Why Haven’t We Seen Hyperinflation?

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Coming straight from the Federal Reserve, we started this period with around 4 trillion US Dollars in the system. One year later, that number is at 6.7 trillion dollars. Meaning that over 40% of all US dollars were printed in just the last 12 months. And from the looks of it, no one seems to be in a rush to slow things down. And strangely enough, we haven’t seen much inflation for everyday goods like gas and food? Prices definitely haven’t gone up anywhere near 40%?. Where’s the inflation?
The reason why we haven’t seen inflation is because the amount of money being printed is only one of the factors that contributes to inflation
To get inflation, here’s everything you need:
1. Industrial Output: how much “stuff” an economy makes
2. Employment
Too much employment leads to employers fighting over workers, which leads to higher wages, which leads to higher prices
3. The Money Supply: the main topic of this video and probably the easiest to understand
More money when an economy is producing the same amount or less stuff equals higher prices
And 4. If money is exchanging hands, and if so, how fast is it exchanging hands, or the Velocity of Money
And in our case right now, the money supply has shot up a ridiculous amount, but the other factors have been keeping inflation down
Industrial Output: It’s been down from businesses not being able to operate, which means less stuff. But there’s also less demand from you and I to buy those things.
Employment has also definitely taken a hit. And with less employment comes lower wages, which means lower prices. Not inflation.
And the Velocity of Money. It’s pretty slow for everyone with all the uncertainty in the air. People don’t want to spend a lot of money right now if they don’t know if they’re gonna be able to find a job or keep their job
But you know what they are gonna spend it on? The things that only go up! Like Tesla stock, every other stock, real estate, and Bitcoin!
But instead of calling it inflation, we call it the stock market rally, the real estate boom, crypto’s time to shine or the great crypto bubble depending on who you ask.
Should the money printer keep going brr? Can the money printer keep going brrr?
Philanthrope, Leavv - What Was Before chll.to/7764bee5
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жүктөп алуу



  • Get your first seven days right now for just ONE dollar. Go to ➡️ trends.co/jaketran​ for your $1 seven-day trial! 🔥

    Jake TranJake TranАй мурун
    • I thought the federal reserve controls the supply of money and not the gov.?

      tropickmantropickman2 күн мурун
    • this is not only happening in USA, this is happening now in the WHOLE WORLD! welcome to Hyperinflation World, welcome to mad max world!

      illimited knowledgeillimited knowledge5 күн мурун
    • einstein you forgot the trade embargos on Zimbabwe, farming isn't hard to learn

      AnonymousAnonymous5 күн мурун
    • @Jake Tran This video totally misses the point. The government doesn't spend the money on nothing, it spends it on jobs, hardship benefits, infrastructure, hospitals, schools all of which have a much larger benefit over the long term. Prices might rise for a few years, boo hoo, but on the bright side your entire economy didn't collapse. This pandemic was the opportunity for governments to upgrade public infrastructure to keep the economy going while the private sector has been suffering. I am so glad that I am from New Zealand, where we have a competent government which is democratically representative and where we disdain politicians who are as abhorrent as the one you voted into the last term. Here in New Zealand our government is spending their extra money on upgrading our entirely country, solving a housing shortage and addressing climate change. We defeated Covid in May with a lockdown and our economy has barely even taken a hit because of our success in totally eliminating it for almost a year. This video is entirely based on a straw man argument. A misunderstanding of the point of government spending, you never once mention where that spending goes or what it does to put money in peoples pockets so the economy continues to function. This video is just another part of the American paranoia of their own government (an institution which is suppose to be for the public good), a paranoia which is mostly based on false slander from the right wing and is ultimately self fulfilling.

      Andrew LamontAndrew Lamont6 күн мурун
    • @TheCripOf WallStreet black farmers ?? Nothing about the ppl taking all the wealth out the nation n fleeing to Australia and Canada. alt right talking points.

      m3abdim3abdi9 күн мурун
  • Zimbabwe is what is going on in the United States with Obiden and the left printing cash. The part I can't figure out is why they send 3/4 of the cash overseas? Why do they do that and what part will that do with inflation? Buy bitcoin 👌

    ohio player1177ohio player1177Саат мурун
  • End the Federal Reserve.

    bungis kungisbungis kungisСаат мурун
  • Buy bitcoin

    ohio player1177ohio player1177Саат мурун
  • Printing the money is the inflation. You are talking about inflation consequences seen in prices.

    Ra MändRa Mänd6 саат мурун
  • How do you get movie footage for your videos?

    Madhavi lathaMadhavi latha10 саат мурун
  • This video was great on the history, but as soon as it said that all the money in existence is what’s on the Fed Balance sheet: WRONG. Sigh.

    Gordon StylesGordon Styles15 саат мурун
  • America export inflation all over the world. Party is over. Trillion of dollars would come back to USA and China would refuse to be your factory. Say no to dollars

    Michael YaoMichael Yao19 саат мурун
  • You forgot to mention Hungary

    Vladimir LeninVladimir Lenin20 саат мурун
  • Yo I like the jacket. What kind is it?

    Matthew LombardiMatthew Lombardi22 саат мурун
  • this video was semi stupid and pointless.

    Josh NortonJosh Norton22 саат мурун
  • Because the US dollar is backed by nothing, so the only thing making $1 worth $1 is people agreeing it is. Hyperinflation was backed by gold. You know the value of a Dollar fixed v an asset.

    Sean BaileySean Bailey23 саат мурун
  • Worried about inflation? wonder why our shelves are not full? Research for yourself how much food we ship to China. They need it and we have no problem sending it there and feeding them. It's staggering.

    surveyguyorsurveyguyorКүн мурун
  • It's happening, it doesn't jump to ultra high numbers overnight, but it's already happening. Look at the price of gas. The effects have started in all aspects. While they exponentially print money, then it keeps "hiding".

    surveyguyorsurveyguyorКүн мурун
  • So they avoided hyperinflation by decreasing employment and other factors. kinda sad

    Parham DavoodiParham DavoodiКүн мурун
  • Its a dishonest description of MMT. MMT people say there's a limit and the deficit has to be managed. They also say pay people to work when the job market is weak, not pay them to do nothing (the pandemic is another issue) Tge objective being to keep workers up to date, active and to increase the output. The GOV and the central bank are NOT applying the MMT. They are doing something else.

    Lunar ModuleLunar ModuleКүн мурун
  • "They can't do it forever" "Watch me"

    gaijinblowgaijinblowКүн мурун
  • Because the scarcity is not in commodities, but a hole made by the financial services that are acting like casino

    Nuno ToneloNuno ToneloКүн мурун
  • You’re literally just serving as Schiff’s megaphone without critically questioning anything he’s saying. He doesn’t even critically question anything he’s saying. For example, have you considered the temporary nature of the cash infusions? You make no mention of it

    UFOinsiderUFOinsiderКүн мурун
  • They just print money for their jewish pals in wall street to play with.

    V UV UКүн мурун
  • Lockdowns

  • Lol Don't worry 80% of that money is parked @ the Bermuda's by the rich so it wont be released into the economy because it would get taxed if they move it back to the US. If the dollar gets destroyed China will get the hardest hit!

    Ricardo BlikmanRicardo Blikman2 күн мурун
  • Venezuela government banned firearms from citizens in 2012...it collapse 2016. If they ban in the u.s then we can expect a collapse.

    Toni DueñasToni Dueñas2 күн мурун
  • When a bankruptcy occurs there is a destruction of wealth that may in large part accrue to the government. How does this effect things? Don

    don hansendon hansen2 күн мурун
  • "Money does not grow on trees." What's money made out of? Paper Where does paper come from?

    Hyperloop BeatsHyperloop Beats2 күн мурун
    • Tree.

      Shantanu PandeyShantanu PandeyКүн мурун
  • Best video I have ever watched related to Inflation!

    swapswap2 күн мурун
  • The US is going to collapse. And it ain't gonna be pretty.

    Remo GaggiRemo Gaggi2 күн мурун
    • We can only hope... It would be grade in the sense that the US will stay out of the rest of the world for a while, but also when US collapses, so will many NATO countries... And Ofcourse than China will become the new asshole superpower (not for long though, since they'll run out of people)... So maybe it will be great who knows

      MaximMaxim7 саат мурун
    • Been saying it for years nobody listens

      Chaz ParishChaz ParishКүн мурун
  • It's still time for hyperinflation.

    Sorin NicuSorin Nicu2 күн мурун
  • Germany wasn't called the Weimar Republic until after WW1...

    D BD B2 күн мурун
  • This is why Bitcoin is our only hope, US dollar is going to fall

    Damian_ai9Damian_ai92 күн мурун
  • The bawdy behavior crucially label because dietician recently bounce sans a wonderful anthropology. goofy, barbarous aquarius

    Brandon MalcolmBrandon Malcolm2 күн мурун
  • Looks like 45% tax rate coming in the future.

    JER JOSJER JOS2 күн мурун
  • So TL;DR is that once the pandemic restrictions leave and the market becomes more regular is when inflation will come? Dang it.

    Michael LooksMichael Looks2 күн мурун
  • We are headed for a Worldwide crash. Perfect timing for a Worldwide currency. This is all been planned out for years.

    Scrooge McDuckScrooge McDuck2 күн мурун
  • Inflation could happen but I highly doubt it, they are trying to print away deflation. Many unemployed people out there with decreasing purchasing power, just now they’ll be giving money away for free just to “stimulate” the economy away from a depression.

    Anthony WalkerAnthony Walker2 күн мурун
  • If you oppos a white country, then they'll destroy your economy....remember Zimbabwe and Venezuela

    Diwakar ChettriDiwakar Chettri2 күн мурун
  • US 10-year treasuries are on the way up. Make of that what you will.

    Flying TranslatorFlying Translator2 күн мурун
  • Glad I am 79 years old. Self imposed pain is the most idiotic act a human being, if you can call them that, can make. The most pain inflicted is pain inflicted on ones self.

    Derrell PriceDerrell Price3 күн мурун
  • 'No matter where you go relative to the surface... it doesn't make sense" 😂

    Tanner BeanTanner Bean3 күн мурун
  • A lot of delusional BS in this video.

    ТурбоТОПТурбоТОП3 күн мурун
  • What planet are you folks on? Hyperinflation is everywhere. a halfway decent house in my hood is a $1,000,000.........

    therealthreadkillatherealthreadkilla3 күн мурун
  • But the people only got 1 check of $2,600 in a whole year & a half where is this money that is being printed going? Funny they didn’t touch on point.

    Rafael ValenciaRafael Valencia3 күн мурун
  • Silver and gold Just imagine it like the dude from Rudolph is singing it

    Lucas DillinghamLucas Dillingham3 күн мурун
  • 18:30 Libertarians will never understand that we're playing this game because we decided to form a society for a greater good than just our personal fortunes. These people are literally burning the world for their own wealth.

    Neo LixNeo Lix3 күн мурун
  • I need an advice. Lets say i wanna launder small amount..how much should i bank in? Monthly? Weekly?

    Anex415Anex4153 күн мурун
  • inflation is a myth, we have the capability to send out 2000 dollar checks every month to every american but we won’t. Instead they’ll spend that money on the military and give it away to foreign governments

    L AL A3 күн мурун
  • Certain economies are experiencing stagflation. In the past six weeks, we experienced a 20.68% increase in (premium grade) gasoline per gallon. Also, we’ve experienced an 18.3% increase in organic chicken breast. Inflation is lagging indicator of new circulated cash. Get ready frenz, because our national economy is about to take a massive shit on us!

    We Need PatriotsWe Need Patriots3 күн мурун
  • Why Haven’t We Seen Hyperinflation? That question make me think ... Why do those 2 different speakers sound different while they measure the same? Insufficient theory, measurements, model are possible explanations.

    David WongDavid Wong3 күн мурун
  • I am a manufacture. The price of raw materials has gone up about 35% in the last two months. I'm having a hard time passing the cost to my costumers.

    Santiago SuarezSantiago Suarez3 күн мурун
  • 40%? More like 60

    Samantha RondeauSamantha Rondeau4 күн мурун
  • The petro-dollar keeps the US dollar afloat. This is one of the reasons the US wont leave the Middle East.

    jaydav04jaydav044 күн мурун
  • As long as all major central banks are devaluating their currencys by printing we are fine. Or are we?

    maTzepreimaTzeprei4 күн мурун
  • Don't be stupid, buy Crypto

    RoscoRosco4 күн мурун
  • Haven’t we seen a form of hyperinflation in that stocks are way overpriced.

    GooseGoose4 күн мурун
    • No that’s just overvalued stocks. Hyperinflation means the dollar is worth less, and it’s really not.

      J TommyJ Tommy3 күн мурун
  • Excellent piece. Get bitcoin while you can, ladies and gentlemen.

    aquaphazedaquaphazed4 күн мурун
  • "Should the government have a monopoly on money in the first place?" Wow Jake Tran do you actually not know, that the governments have to BUY the money? This is the root of the scam - there are private companies "selling the money" to the governments (e.g. federal reserve). Maybe I just misunderstood Jake... Edit: Sorry I obviously misunderstood Jake. At the end of the video he discusses the problems arising from exactly this buying of money and accumulating debt in the process (by the governments).

    ForcefighterX2ForcefighterX24 күн мурун
  • By the way the government is NOT the issuer of money. If governments were the source of money, they could by definition not have any debt. The governments are just the entities creating the most dept in order to lend more money for specific purposes. Be it in Europe, where the European Bank creates the money, or in the USA where the federal reserve (a private bank) creates the money - in the end, the governments simply lend the money (by selling bonds to the central banks). However, most money in circulation is the result of credits given out by private banks to people and private companies. And yes, this is not 100% correct as there are minor regional tweaks to the system, but this is pretty much how it goes in most part of the world.

    ForcefighterX2ForcefighterX24 күн мурун
  • Facts you didn't address. 1) what about fiat currency and that everyone is printing not just the US. 2) The US dollar is the world exchange currency. 3) bills can be paid with printed money and so on and so on so along as inflation doesn't become realized (see statement 1)

    Joshua FitchJoshua Fitch4 күн мурун
  • Government intervention hoisting up the market and unrealistic projections.

    OhGeeGankstaOhGeeGanksta4 күн мурун
  • “Haven’t seen hyperinflation” have you seen those gpu prices? 2500$ for rtx3070?

    Mike CMike C4 күн мурун
  • Because there is not enough velocity.

    Gene AuGene Au4 күн мурун
  • Now I wanna know how people survive in those hyper inflation situation?

    Penguin HunterPenguin Hunter4 күн мурун
    • Probably by government assistances...few people can live without their help

      J TommyJ Tommy3 күн мурун
  • 8:20 The actual video starts here. You are welcome.

    BurzinBurzin4 күн мурун
  • People need to understand the government has NO money to spend. The only money they have is OUR money. What we earned. When the government spends they are actually taking from us and giving to others, mostly non productive people.

    Mark KellerMark Keller4 күн мурун
  • Peter Schiff has been predicting hyperinflation for well over a decade in response to the massive quantitative easing in the Great Recession and now he is repeating these claims in the pandemic. He will continue to be wrong. This video grossly misrepresents the arguments for increasing the money supply so here are the real ones: Economic downturns produce deflation, and if you don't stop deflation, then no one spends money because it will be worth more in the future turning downturn in to depression. The massive increase to the money supply is just to keep inflation rates at their targeted goal and is in fact easily reversible, because most of the vast majority of the money supply increase comes in the form of electronic money rather than printed paper bills. Printing money has nothing to do with deficits and everything to do keeping our inflationary rate at a predictable and controlled level.

    Noah LambNoah Lamb4 күн мурун
  • One of the other problems with the modern monetary theory is that the national debt for the US isn’t JUST government debt, about half or more of that is also civilian/consumer debt....

    Moises JimenezMoises Jimenez4 күн мурун
  • Peter Schiff has been predicting hyperinflation and doomed US economic system since 1998. He might be right some day.

    Sergio VelascoSergio Velasco4 күн мурун
  • Jake Tran, you refer to yourself as a hustling entrepreneur business owner. Do you have a business or businesses? Are you an entrepreneur? I can see your a hustler by being a content creator with a half a million subscribers making probably 12-$,15,000 a month of gross income. But does being a content creator on KGfilm make you a business owner or entrepreneur? IDK if it does and if it does please explain. I'm sure being as you are financially smart that you use your KGfilm revenue to invest, most likely in digital currency or trendy stocks but what business or businesses do you own? And how are you an entrepreneur?

    Flash GordonFlash Gordon5 күн мурун
  • And for you libtards... This isn't former President Trump's fault... It's the Government's fault... The former President doesn't make the decision to print more money.... So before you blame former President Trump like you libtards do for anything and everything.... Just remember President Biden will only make the problem much much worse

    Flash GordonFlash Gordon5 күн мурун
  • The Central Bank needs to hide the Great Rest......The Plandemic will not cut it........they are holding it back as long as possible, but..... Nothing Can Stop What Is Coming

    Stew PidassoStew Pidasso5 күн мурун
  • The biggest misperception of MMT, from people who can't read or listen, is around printing money. Zero MMT economists are saying you can print money with reckless abandon. Saying a government can't *default* on a loan based on their own currency doesn't also mean you can't potentially wreck the value of your own currency (depending on many specifics). MMT is very similar to Keynesian economics, which we have lived on for decades. I see a lot of lazy, straw-man arguments from monetarists or people that haven't read anything. It doesn't make for intelligent conversation....

    Floating PointzFloating Pointz5 күн мурун
  • You can pay completely for the welfare programs you promised people. You just have to stop producing the planes, bombs, and tanks that kill people around the world. That makes up as much spending as the whole welfare state.

    Jhovany CoronaJhovany Corona5 күн мурун
  • This could mean that, if you have money in stocks, you might see huge gains on paper that will actually mean that you are conserving your value. If shares stay at the same value but there are more dollars, the price of these assets in dollars will rise. So basically if you hold cash you are screwed but if you have real estate or stocks or other assets you will be fine. I guess I am screwed...

    Octavian VasilescuOctavian Vasilescu5 күн мурун
  • I used to listen to Peter Schiff from 2005 onwards. He has been warning about an imminent hyperinflation over 15 years now. I read his book Crash proof, which came out in 2007 and it made a lot of sense, until I found out how money actually is created (Money creation in modern economy by Bank of England). Since most of the money supply is created by banks when they give out loans, Schiff's take on it is wrong. I found out that Prof. Steve Keen understands the debt aspect of money much better and he has actual empiric evidence of its effects on economy.

    Toma KavoniusToma Kavonius5 күн мурун
  • Anytime I hear the Congress say we are spending too much money I should show them this. 😂. No excuses

    lombardo141lombardo1415 күн мурун
  • In the immortal words of Admiral Ackbar "it's a trap!"

    RyanRyan5 күн мурун
  • The squeamish linda comprehensively harm because skirt latterly beg vice a unusual lemonade. terrific, perfect scissors

    Jason HarmonJason Harmon5 күн мурун
  • This would never happen in America because we aren't dependant on foreign goods. We will always have bread, milk and meat up until we become divided. We have oranges polar bears and alligators and rainforests and deserts and plains and mountains snow deserts. We will never fail unless we devide against each other.

    Chris LedgerChris Ledger5 күн мурун
  • Anyone find it concerning now with covid and stimulus money, how we reward people who don’t save with stimulus money, while f-king people who are responsible and saved money pre covid?

    ocelot.ocelot.5 күн мурун
  • Aren't central banks (who print money) independent from the government

    Abhilash DixitAbhilash Dixit5 күн мурун
  • Because they are CONTROLLING THE NARRATIVE !

    Douglas RowlandDouglas Rowland5 күн мурун
  • although i disagree with schifty on crypto, he is absolutely right in his criticism of modern monetary lala land. Economy should be based on sound money, backed by austrian economics and, i don't know, correlation between sound money and prosperity throughout history. We've been blinded by the education system and the fact that our reality is knowing only this poison pill of spending.........

    Vassil TopouzanovVassil Topouzanov5 күн мурун
  • Another counter argument is how production is measured. How services are measured, sure we have less people working but increasing production level due to efficiencies with tech and production.

    Will SwansonWill Swanson5 күн мурун
  • Answer: the pandemic is basically a dam thats holding the inflation rn.

    Colby HillColby Hill5 күн мурун

    Hjuryfhuk HjugdstjjHjuryfhuk Hjugdstjj5 күн мурун

    Nikita MysakovNikita Mysakov5 күн мурун
  • What is left out of this video is the role of DEBT. The US is a debt based economy with extremely high amount of debt in the system- credit cards, corporate debt, car loans, housing, student debt, etc. In our debt based economy, the money that enters the system must outpace the amount of debt created. That is not happening. In fact the opposite is happening. ***Dollars get destroyed (deflation) when debt is payed down. The amount of dollars entering the system would have to be magnitudes larger than the debt serviced in order for inflation to even begin. That is why we don't see hyperinflation or inflation.

    Andy zAndy z5 күн мурун
  • USD is the strongest weapon of US so don’t worry they will do everything to keep it out of inflation, otherwise it’s similar of a massive disarmament and golden path for Chinese supremacy.

    Chemist2013Chemist20135 күн мурун
  • Will this inflation also hit other countries, or mostly the US?

    Mattheus de koningMattheus de koning5 күн мурун
  • Can’t have hyperinflation when you just ‘won’ a controversial election, that would look bad. Don’t worry, it’s coming, just not right now.

    ThomasThomas5 күн мурун
  • A big reason why the Fed keeps expanding money supply is because of their retarded dual mandate. Their mandate of price stablity and full employment. Both contradictory and honestly, monetary policy doesn't impact jobs. It manipulates asset prices. So Congress needs to scrap that full employment mandate. But that would never happen, Congress (who is in charge of fiscal policy) should be the one task to support full employment.

    PyrrhicPyrrhic5 күн мурун
  • So america is controlling people by just printing money that's why only american corps are getting richer than even than a whole country while every other country is with a slow economy. Soon other countries will retaliate and fuck the sanctions like Russia and china are not being happy about it usa controlling or trying to say who does something or what other country is allowed to do WWIII IS AROUND THE CORNER.

    Maykel SachMaykel Sach5 күн мурун
  • Although this video is just an ad it has made me very much afraid of the near future

    FlynnFlynn5 күн мурун
  • 20:40 wait if you're saying that everybody is gonna consume goods and services without producing anything where would the goods and services come from? The majority of Americans are still productive and helping to produce goods. I'm going to have to agree with MMT economists the gist of the Austrian School's argument is just "Gubment gon point gunz at me."

    Ho Lee FukHo Lee Fuk5 күн мурун
  • Quantitative easing might be going on. The economy was kind of crashing because of COVID and so much money was injected just to increase spending and businesses needed that money since there was no spending happening so prices were kept low to incentivize purchases.

    Elly HarderElly Harder5 күн мурун
  • They could give each American enough to get through the pandemic, but then people would realize that money is worthless. It's not any worse than allowing banks to create money via debt. Fractional reserve banking is just as fd up as anything else.

    Damaged Provider ModuleDamaged Provider Module5 күн мурун
  • Yeah, you don't understand the current economic climate at all. Money isn't being "printed". This is the common narrative used by right wing pundits in the hoped to stop helping people who have been most hit by the pandemic/lockdown (I.e. the poor). This money you're talking about isn't going to people - this is why there's no inflation. Starting during the great recession, a failed economic theory originating from Japan was implemented in most of the developed world - Quantitative Easing. Tens of trillions have been created and pushed through QE around the world since, never achieving the goal of 2% inflation in the US in 13 years. The reason is because they are buying junk stock from Banks and Corporate Bonds - who then, in turn, hoard the cash or push dividents/buybacks. This is a very well reported reaction. The reason inflation isn't happening is because the money has stayed with banks, the ultra rich, and corporations who have made historic profits off the misery of others. Inflation requires that the money "printed" is in circulation which has NOT happened. This narrative you're pushing is often used as a way to demonize those in need for requesting help during a global pandemic because they aren't privileged enough to have a job that can be done at home. This is an illegitimate argument. If you don't know economics, if you're not digging into the weeds of economic policy. Then don't say anything. You're part of the problem.

    Nadim FetaihNadim Fetaih5 күн мурун

    The ScramblerThe Scrambler5 күн мурун
  • Didnt they print 2 trillion for the bank bail out

    Bob ManBob Man5 күн мурун
  • The explanation on why we haven't seen inflation yet is much simpler in my opinion. Money (fiat currency i.e. USD) has not lost value (USD losing value = inflation) because the demand for it has and is rising. The Fed can sort of see this and so they continue printing. And potentially, this may never cause inflation if the equilibrium I will explain below is maintained. The question then is, why do normal people, investors, etc... demand money in such a huge way (that allows the Fed to make the printer go BRRRRR)? Well, fiat currency is a government-backed asset, just like the usual debt they emit, that in most developed economies is currently under negative interest rates (which means that these government-backed assets are hugely valued and demanded). In other words, government-backed assets are hugely valued, being money a type of these assets it naturally is hugely valued. But why are government-backed assets so demanded? There are two combined reasons for this. First, is that profits in the private sector are shit. Through regulations, taxes and government intervention in general markets have become more inefficient. Second, capital sees no investment opportunities and decides to hibernate. What assets are the most secure out there? Government-backed ones. This shouldn't come as a surprise. If a business does bad, it becomes broke. If the State does bad, it taxes people. THIS IS WHERE THE POWER OF THE STATE COMES FROM. Of course this only works in rich countries in which there is wealth for the government to steal in the first place. A dynamic economy is needed to drain resources from it. If you are still reading you probably don't see the link between taxes, and backing the value of the dollar. The thing is to think of fiat currency as usual debt. Let's imaging that people read this and start selling their USD for BTC or whatever. Demand decreases, the offer remains equal, value drops. What does the central bank (the Fed) do? They buy USD (taking it out of the market, hence reducing the offer of USD)(low demand, low offer = stable price). And how do they buy money? Have in mind, the Fed prints money and uses it to buy government debt, buy gold, and a few other assets. This is more or less the Fed's balance sheet. So if they bought this stuff (more technically their assets) by issuing currency (liability), if they want to buy dollars, they sell their assets. That's the connection, by selling government debt, two things can happen: the fed sells it in the market (you don't really want to do it) or government pays it straight away. Since the government cannot print an inflationary currency, nor issue more debt, the only way to maintain the value of fiat currency is through taxation. Here is where it gets interesting. Why doesn't Venezuela do this, and the US does? As I said before, you need a wealth-creating economy to be able to tax it. Investors buy US debt because they are aware that the US will be able to pay it. Which is equivalent to saying "Investors buy US debt because they are aware that the US citizens will pay it through taxes". There is no free lunch here. What holds the system together is the fact that the State has the ability to rob people to pay the debt back. And this could go on forever as long as the US (or any other solvent State) makes sure that their debt is not higher than their ability to rob people (tax). Final reflections. There is only one question left. Why does the government use fiat currency in this system, instead of issuing usual debt and let investors figure out that can pay it through taxing people? This will blow up your mind. The usual federal reserve banknote (cash) is a liability as we said before. And if it is a liability for the Fed, by definition, it has to be an asset for someone else. More specifically, its users. You and I. Now think about the example in the paragraphs above. For the government, debt is a liability, but for the fed, it is an asset. By buying US debt, the Fed is financing the US government. Now back to cash, by holding USD as an asset (as the fed holds US debt) YOU ARE FINANCING THE FED (as the Fed finances the US government). Returning to our question, why does the State use fiat instead of usual debt to finance its spending? TO MAKE THE POPULATION FINANCE IT WITHOUT THEM REALISING. That's the trick. Getting millions to finance you in the shadow. What a perfect depiction of the true and sick nature of the State. The king is now naked. Welcome to your world.

    Álvaro MoroñoÁlvaro Moroño6 күн мурун