Very interesting analogy which I think fits into the general thesis of The Great Credit Contraction where capital burrows down the liquidity pyramid into safer more liquid assets.

But even with the massive damage being done by the State humanity is still on an upward trajectory with advancements happening in science, math, computers, etc. and all of that is capital accumulation.



One thing that is so exciting about Bitcoin is its censorship resistant properties. The main problem from the State's interference in money and currency is its massive interference in the pricing mechanism. With a censorship resistant currency the economy will be able price much more efficiently by being able to route around the State imposed damage from monetary and financial regulation.

This will allow economic calculation to happen on a scale never before seen in human history and is extremely bullish for the generation and creation of wealth on a ginormous scale.

If by 'spot on' you mean opposite of reality, then yes

Paper could follow that path, but physical metal won't.

Compare to M1:



There is no truly reliable metric I know of for euro/petrodollars, which would be similar to M3. We have no good way of knowing what the velocity is on derivatives.

Now take note of excess reserves at depository institutions:



Velocity is falling largely because the flow has been redirected - funds are now pooling at financial institutions. Domestic US monetary demand still exists, but is being starved due to reserve-building (similar situation in Europe). It is a ratchet effect wherein the institutional buffer is reinflated, then velocity rises. If even a small percentage of institutional reserves flow into the real economy, velocity can be accelerated to a breaking point.

Using a biological analogy, M1 could be compared to base physiological function - alligator brain activity controlling the organs, respiration, heart rate, etc. M2 might then be sensory interpretation and fine motor control. Derivatives and other instruments would be analogous to higher conscious thought and activity.

What I think we've seen is an organism that has sustained grievous injury and reacted - the 1970s through 1980s were the period during which a trauma occurred due to war and oil supply shock, and the initial response manifested. It may be viewed as a physical assault followed by a fight-or-flight reaction boosting awareness and overall body activity in preparation.

In the 1990s, the organism's response from the previous decade was no longer able to keep pace with the loss of blood from its injury. During the early 2000s, aggression increased as systemic functionality remained. Over the past few years, organs have begun shutting down and irreversible damage has occurred. Falling blood pressure (dropping velocity) means loss of consciousness is imminent.

Excess reserves display the blood supply present in the core relative to the periphery - by shunting blood to the core, the limbs are sacrificed to (hopefully) ensure survival of the entity. This is synonymous with a body in a state of shock - an extremely dangerous situation, and an indication of impending mortality.

When a sociological organism begins to lose consciousness, it panics just like a biological one. With M2 velocity collapsing, the sociorg is no longer able to take actions that could right itself - like playing Tetris at a level too fast to move blocks into position. If M1 takes a nosedive, it's all over - that's where day-to-day activities fail to happen on a cohesive level.

Oddly enough, M3 could still be skyrocketing, as activity there won't fail until M1 falls apart and supply runs out at the higher levels. The body dies, but the mind remains for a short time.

What might transpire over the course of a few minutes for a human body is taking place over a few decades for the sociorg.


While there are major similarities, Japan does not have the world's reserve currency and therefore does not run the same risks. The dollar does not have the flexibility to grind along because it has been the fiat foundation of the global economy. There are dynamics that would shatter the dollar if the Fed blatantly tried to pull a Japan.

I know it is going down, which is typical for a recession.  And this can last for a very long period, just look at Japan.  Only, it won't last forever.

I'm not all back in yet, buying oppurtunity, it dips much more and I'll buy back in to where I was.

No reason why inflation can't last forever.  It's easier (less short-term negative consequences) to grow the monetary base than to shrink it.  Without monetary base reduction, deflation cannot go on forever.


shortages + money printing = inflation (when money velocity and lending is constant, which usually isn't the case after a boom period).