Federal reserve keeps printing. Under the market a lot of puts are being sold. Soon not even printing of money can keep up the market for at least a temporary correction. If ever the FED stops printing there will be a crash. Historically there is often a correction in August where the correction ends the end of the month. It does not mean it will happen now - maybe we get a year of sideways movement, that would be bullish for fundamentals to catch up to the stock market. It’s all ending soon. We’ve had several months of sideways movement on terrible breadth. Waiting for the last snow flake to fall, to start the avalanche. The Federal Reserve and other central banks around the world have pumped trillions of dollars into the global economy and depressed interest rates to artificially low levels to blow up the mother of all bubbles. I explained how the recent acquisition of Afterpay by Square reveals the extent of this global bubble economy that will inevitably have to pop. Square paid $29 billion in an all-stock deal to purchase payment processor Afterpay. It was the biggest corporate takeover in Australian history. Shares of Square rose 10% on the deal. This isn’t typical. Normally, when a company buys another company at a premium and issues a bunch of stock, the acquiring company’s stock price drops. But not in today’s crazy bubble world. In this bizarro world, the acquiring company goes up.” Square overpaid for a company that I don’t think has much value whatsoever. Afterpay is touted as an alternative to a credit card. When you buy something using Afterpay at a participating retailer, you only have to pay 25% at the point of sale. You then make three more payments to Afterpay over a six-week time period. In effect, the consumer gets a six-week interest-free loan. Afterpay has been viewed as a big competitor for traditional credit card companies, but this really isn’t the case. Everybody, or most of the people, who are using Afterpay, are using their credit cards to pay Afterpay. All Afterpay is is another middleman that is getting in the way between the transaction.” Afterpay generates revenue by charging merchants between 4 and 6% for every sale. Visa and Mastercard typically charge about 2%. But where does Afterpay get the money to pay the merchants for that initial transaction? The answer is they’re borrowing it. In effect, they’re taking advantage of central bank monetary policy. Their entire business model is to take advantage of extremely cheap interest rates to borrow money and to pay merchants so that the people who are buying the products can get a six-week interest-free loan.” And this entire business model would not exist and could not exist but for the Federal Reserve and the other central banks around the world. All of the banks artificially suppressing interest rates are temporarily creating an environment where this company can exist.” Even while enjoying the advantage of this global loose monetary policy, Afterpay still can’t make any money. Over the last 12 months, the company lost $63 million. Meanwhile, Square’s stock is inflated by the same bubble. The ticking time bomb for this business model is what happens when interest rates go up. If they can’t make money now in this booming environment when they’re signing up all these people and you have rock-bottom interest rates, if they’re losing money now, imagine how much more money they’re going to lose when interest rates go up. So, this company has a short shelf life. It is going to exist so long as the bubble doesn’t pop. But eventually, it’s going to deflate.” This is an example of a massive misallocation of resources. Afterpay doesn’t produce anything. It’s nothing more than a middleman attempting to further monetize retail sales. These aren’t loans financing investments that ultimately lead to more goods and services. It’s just a clever way to delay paying for goods and services. So, this is simply part of this inflationary bubble, this big misallocation of resources that is going to have to unwind. This is going to be very painful when this thing collapses and all these companies have to be liquidated, all these workers have to lose their jobs, all this money that was invested ends up getting lost. But the entire world is rendered much poorer as a result because all of this money could have gone to more productive purposes. And would have gone to more productive purposes but for the artificially low interest rates and the inflationary environment created by the world’s central banks. They are the reason that these companies exist. They are the reason that these companies are attracting capital. They are the reason that they are able to bid away resources and labor from other uses that are actually more productive. But in the short-run, in this bubble economy, it is more profitable on paper to finance this speculative mania than it would be to finance legitimate investment, which is simply fueling this inflationary fire because all we’re doing is focusing on demand.” We’re increasing demand and depleting supply. All of the resources used to accelerate demand are being sucked out of producing supply. So, we’re making less stuff to buy, but we’re creating more money and more demand to buy it. So, this is inflationary holocaust. This is what’s coming.” This is the mother-of-all bubbles. And it’s difficult to look at the inflationary snowball rolling downhill and somehow conclude this is all transitory. Welcome back to The Atlantis Report. You are here for your daily dose of the truth, the whole truth, and nothing but the truth. Please take a second to hit the like button, hit the subscribe button, and don't forget to also hit the notification bell. Thank You. Inflation continues to run rampant and it’s distorting the entire economy. Rising prices create the illusion of economic growth. And they are also allowing the US government to stealthily default on its massive debt. This is not a sign of a strong economy. GDP growth for the second quarter of the year came in lower than expected. Even so, the economy still appears to be experiencing solid growth. But a deeper dig into the numbers reveals a lot of smoke and mirrors. The media’s focus was on the 6.5% number, so-called “real” growth. That number is adjusted for inflation. Minus inflation, the nominal GDP gain was about 13%. The divergence between these two numbers really puts the inflation level into perspective. The deflator used in the GDP calculation was about 6.4%. That means almost half of the nominal GDP growth was due to inflation and not actual economic growth. Comparing the GDP deflator with CPI reveals that “real” growth may even be overstated. If you add up Q2 CPI and annualized it the same way they calculate GDP, you get 9.35%. So, if you use the CPI as a deflator, you get annualized GDP at a mere three-and-a-half percent. CPI doesn’t capture the real price level. If we could deflate the GDP using a legitimate measure of rising prices, we likely had an economic contraction in Q2. So, despite all this fanfare about all this economic growth, all of this economic growth is, in fact, an illusion that is created by inflation. Inflation creates the illusion of economic growth even as the economy is not growing.” Breaking down the GDP components further pierces the illusion of real economic growth. Virtually all of the Q2 GDP growth came from an 11.8% leap in consumer spending. This accounted for 70.6% of total GDP, the most ever. It was the first time consumer spending has ever made up more than 70% of GDP. Meanwhile, private investment – the GDP component that signals the potential for real growth in the future – was down 3.5%. So, we had no legitimate economic growth at all. All we had was people spending money. And one of the reasons that they spent more money is because all the things that they were buying cost more. So, it’s rising prices, not a growing economy, that is behind the gain in the GDP.” And where did a lot of Americans get the money that they spent? From the Fed. The Federal Reserve printed the money and then the US government distributed all that printed money to Americans in the form of stimulus checks and enhanced unemployment benefits. So, we printed a bunch of money and spent it buying higher-priced stuff, and that is the reason that we had this big increase in GDP. But this is not a sign of a strong economy. It simply evidences a weak economy that is being camouflaged by inflation.” This inflation also has implications on the $28.5 trillion national debt. Using the 6.5% GDP deflator effectively wipes out $1.5 trillion of debt. It’s not officially defaulted on, but for all practical purposes, it’s been repudiated by the government. When the government creates inflation, and the value of money goes down, that means the value of their debt goes down. That means when the US government repays its creditors the money that it borrowed, creditors are getting back money that has less purchasing power. That is in effect a stealth default. Creditors are getting back less in real terms than they loaned, which is one of the main reasons the government is deliberately causing inflation because it has no other way to get out of this debt.” The federal government doesn’t have the money to pay off the debt. It doesn’t have the integrity to legitimately default. So it does a stealth default through inflation. Of course, the debt is growing so fast now, the stealth default can’t keep up. The debt to GDP ratio continues to rise despite the fact that the government is repudiating part of the debt through inflation. Even while effectively decreasing the debt by 6.5% a year via inflation, the government is expanding the debt by some 15% per year. So, we’re still going deeper into debt despite the fact that so much of it is being repudiated by inflation — that is how big this problem is. So, in other words, if the US government really wants to use inflation to shrink the absolute amount of debt in relation to the economy, given how big the deficits are right now, we’re going to need a whole lot more inflation. And you know what? That’s exactly what we’re going to get. We’re going to get much more inflation than what we’ve already experienced. In fact, we’re already getting more inflation than the government is admitting to. But even that number is going to get much bigger.” There is also oil prices and energy stocks, the Fed’s inability to wage a war on inflation, and the Robinhood IPO. This was The Atlantis Report. Please Like. Share. Leave me a comment. Subscribe. And please take some time to subscribe to my backup channels, I do upload videos there too. You'll find the links in the description box. You will also find a PayPal link if you want to make a donation. Thank you wholeheartedly to all those of you who have already donated. Stay safe, sane, and healthy friends!
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