If there was still any doubt that western socialist governments are not in a bubble yet, well I can say that there’s no reason left over to keep that doubt alive. They are into a big bubble!
In socialist paradise they usually sell you that education, health care, and other welfare programs are free. Even that government is free. Well that’s not enough anymore nowadays.
Today they want you to believe that even money itself is free! And you don’t even have to do the digging yourself or read between the lines to come to that conclusion. It is being told bluntly in the Dutch Mainstream news. Geld is gratis: Money is free they said. If this isn’t the signal that the bubble in both the EU and national government finances have reached a huge tipping point, I don’t know what is.
Interest rates don’t matter anymore for the allocation of money into investments. Forget about old fashioned investing where you had to think twice before you went to a bank for a loan to pay back the loan plus interest. In those days you really took risk loaning money, so you better had to be sure that the investment delivered a good return. In other words: you had to be sure that your investment addressed a real need in the market.
In a situation without manipulation of interest rates by central banks, interest rates are set by demand for – and supply of savings accumulated by people and companies and trade surpluses and thus more of less by existing reserves on bank balance sheets. Interests rates are a free market mechanism that helps to allocate capital in an effective way. It tells market participants as entrepreneurs and businesses if there is a need to invest. When rates are higher, the demand for money is bigger than the supply of it. And when it’s low, the supply of saving is bigger than the demand for it. This is the way of the markets to tell participants how well the economy is doing, if it’s growing, there is a need for investment to meet the growth that increases the demand for money. Or the opposite, if the economy is not growing or shrinks, the demand money to allocate into investments will be lower, signaled by lower interest rates.
Besides interest rates, you have to work, make effort, have a skill to somehow be able to make or earn money. So your effort in time spent on earning or making money has a price as well.
Now we have centralist socialists completely drunken by power and personal ego claiming that money should be free. What they really say is that markets with millions of participants don’t know how the real economy is doing and have no clue if, when, where and what investments are needed. Our socialist friends think they know that all better. Really? If that was the case why were interest rates invented at all? Talking about centralists, you can’t get more of it!
In 1971 when Nixon took the US dollar from the Gold standard, socialists and bankers already had taken full control over the money supply. The consequence was that money became a political tool, instead of an independent medium of exchange and store of value. The control of money supply resulted in an increase in manipulation of interest rates. Instead interest rates set by independent market forces of supply and demand, it became Central Bank policies. Supply and demand for money became a political process instead of an organic process directed by millions independent savers, investors, businesses and entrepreneurs
Nowadays our socialist politicians has taken a next step by taking control over the allocation of money into the economy. So besides money supply, they have control over allocation of money as well. Due growth of government regulations and all sorts of government (welfare) programs politicians are getting more influence on investment decisions. We can speak of politicalization of investment today.
In case you wonder what those are, well lets make a start: climate CO2 policies, renewable (green) energy, electric cars, recent Corona bail-outs are all illustrative for politicalization of investment decisions. What all these programs have in common is that you receive money from government (subsidy) to participate. Sound investments that generate a decent cash flow doesn’t count anymore, as the program initiators are lobbyists in a role of rent seekers, instead of independent entrepreneurs or business owners. The recent Corona bail out is used to force companies to increase in so called ‘green’ investments. This where lots of printed Euro’s by the ECB will flow into.
The big question is how long will ‘free’ money prevail, and when will we face the music, aka the real price of ‘free money’?