People who don't have a solid understanding of the parity policy of the 1920 won't understand the implications of this illustration.
Discussion
Ima guess….that NGU again soon?
Let me guess. We are looking into a soft landing?
Well, you're right about that. Would you mind explaining the link between 1920s agricultural price controls and 2020s central bank balance sheets?
The parity policy was many of the European countries' efforts to get their currencies back to the same value in terms of price of gold as before WWI started in 1914. To do this they shrinked the money in circulation in society. This caused real interest rates to skyrocket, as money became extremely scarce. It bankrupted companies, farmers and landowners, while those who had access to cheap credit, for instance in the UK and the US (where the central banks expanded the money supply), as well as governments in the countries with the parity policy, could buy up land and capital at firesale prices. It's the same that ia going on today.
I see. Thank you for the explanation. So according to the chart, the BOJ and ECB are currently contracting monetary supply at a greater rate than the fed, so those with access to relatively cheap capital in the US will be able to take advantage of the consequences of tightening in those other monetary regimes?
If the monetary supply reflects the reduction of the balance sheet, that might be the case yes. I've written about how this political game played out in the 1920s in my book, Fraudcoin.
I see, thanks for answering my naïve questions, this is not my area of expertise but I'm learning. I'll check your book out, sounds interesting