Hollow Men, Hollow Markets, Hollow World
March 30, 2014·0 comments
American wealth has grown far faster than the economy for 25 years, creating an illusion of prosperity built on borrowed time. This separation began as a deliberate policy choice by central banks, but it's now collapsing as inflation reveals the bill that was never paid.
- Wealth and GDP growth moved in lockstep for nearly 50 years, then abruptly diverged in the mid-1990s. Alan Greenspan discovered monetary policy could inflate asset prices without sparking wage inflation, turning a one-time crisis tool into permanent policy. Every Fed chair since has accelerated this separation.
- The justification for this experiment depends entirely on inflation staying low. Once people know that everyone knows inflation is a real problem, the entire mechanism fails. That moment has arrived. The story holding everything together has changed.
- We redistributed massive wealth to the already wealthy during a crisis that didn't require it. Covid stimulus and earlier tax cuts pushed hundreds of billions into the pockets of people who faced zero economic hardship, stacked on top of trillions in asset inflation already pulled from the future.
- The math now demands one of two impossible choices. Either destroy enough wealth to match the economy's actual growth (equivalent to another 2008 financial crisis), or impose wage and price controls that nationalize large parts of the economy and destroy long-term growth potential.
- Neither option is politically bearable, which means we're headed toward something worse. The system will choose policy desperation over wealth destruction, lashing out culturally and economically as it becomes clear there is no good way out of this story.
The Why of Epsilon Theory
- Make more informed decisions as an investor and citizen.
- See through the nudges of Big Politics and Big Media.
- Become a better consumer of news.
- Maintain your autonomy of mind in a swarm of narratives.
- Join a community of more than 100,000 truth-seekers.
Unlock instant access to this and hundreds of other evergreen essays that explore the world of narrative through hard science and human wisdom.
Looking for Deeper Insights?
Unlock exclusive market intelligence, trade ideas, and member-only events tailored for investment professionals and active investors with Perscient Pro.
VISIT PRO
DISCLOSURES
This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.
Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives.
