Alexander Savenkov At the start of the Covid-19 pandemic, banks like the U.S. Federal Reserve loosened up money rules to help people out. But now, it looks like they’re changing back to tighter rules again – and this only happens every 150 years! Nick Gerli from Reventure Consulting explains how “the amount of money is officially decreasing now.” He warned that in past cases, a depression happened with way more than 10% joblessness rates.
How a Decrease in the Money Supply Could Lead to Deflation and an Economic Depression
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Experts don’t know what will happen with the economy. Many of them fear that it might get worse due to inflation and bad decisions by governments around the world. When Covid-19 hit us, lots of countries gave out money to help the economy, which has caused a lot of debt in America and other nations. Some people think this could lead to serious problems for Western economies, which would make hard assets (like gold) more valuable than things like regular money.
Recently, Rob McEwen said during an interview at 2023 BMO Metals, Mining, and Critical Minerals Conference that the value of hard assets will go up as the US dollar weakens compared to other currencies. He also talks about how governments are irresponsible with money by printing more than they should and taking too much debt. He points out how most Western countries right now owe a lot of debt to others.
On March 8, 2023, Nick Gerli (founder of Reventure Consulting) said that the money supply is decreasing, which only happened four other times in the last 150 years. Whenever this happens, an economic depression with higher-than-normal unemployment rates might follow. He shared a picture related to this topic on the same day and his company, Reventure Consulting, shares weekly advice on finance and real estate matters.
The Reventure leader said that when there’s less money around and prices go up at the same time, it can start a problem. This is because people won’t have enough money to buy the things they need if prices get too high. This could eventually cause a lot of people’s savings to become worth very little, which could lead to an economic crash.
After World War I and the Spanish Flu, there was high inflation for several years. But then, suddenly, something happened. The unemployment rate rose sharply, and prices dropped by 11%. This deflationary depression was caused by just a 2% decrease in the money supply in 1921.
The Reventure executive said that there has been a 2% decrease in the economy by 2023. This suggests that our money and inflation rate could be weaker than it appears. There is still lots of money circulating around, with over $21 trillion in the financial system compared to what was before the pandemic. But we can’t ignore that if things change just a tiny bit, deflation and depression may occur.
The records show that when there is a decrease in money supply, even as small as 2-4% per year, it can cause an economic depression or deflation. Problems may occur because of this decrease.
Gerli believes that many people are focused on rate hikes, but they fail to notice the shrinking money supply caused by ‘quantitative tightening’ techniques. This could unfortunately cause a serious system breakdown and a kind of depression known as deflation. Gerli warned this might happen in 2023 or 2024 unless governments act quickly to print more money, send out stimulus payments, and drive up economic activity and prices (inflation) again.
Do you have any ideas about what the government can do to stop people from having too much money and causing a recession? Let us know your thoughts by commenting below!
