Thursday, August 4, 2016

The Supernova Economy and what will warn us to take shelter.

I've been posting about something I've been calling the SuperNova economy for a long time.  There are two meanings that I have always had for this:

- A supernova dies by collapsing in upon itself.  This is analogous to deflation.  In other words, there is not enough new credit being created to keep the money supply from shrinking as many pay off or default on their debts.  Since credit creation increases the money supply, debt destruction (be it be pay off or default) shrinks the money supply.  Once a supernova collapse hits a critical stage it triggers and explosion and everything is blown outward resulting in most of the matter being ejected from the dying star.  All of this happens very quickly.  The economic equivalent of the explosion is called a currency event.  Essentially the people lose confidence in the issuing authority of the currency and so they get rid of it like a hot potato as quickly as possible.  The velocity of money sky rockets and we have hyperinflation which, when complete, leaves little value remaining relative to the original currency.

- super no va.  "Ir" is the Spanish verb meaning "to go".  "Va" is the conjugation of that verb meaning "he, she or it goes".  So no va means it doesn't go.  Add the super to the front of it and it means it really doesn't go.  And that is perfectly descriptive of an economy which is first racked by deflation and then subsequently pounded by hyperinflation.

In a recent article, smart guy Gordon Long tells us why it must eventually happen while mixing in a bit of light technical analysis indicating when he thinks it will happen.  It's all very complex looking for most people so let me keep it simple.  The following chart is one I have been watching for a long time now. It shows the velocity of money being in absolute free fall since just around the time of dot bomb until now.  You see, the world never really recovered from that even though the stock markets have gone much higher.  The real economy is not the stock market.

In any case at some point relatively soon 5 waves down will have transpired and when that occurs this chart is going to turn up again.  That could be the start of Gordon Long's expected currency event.  He's now stating it should be in the 2017 time frame where I have long said that I see evidence enough to suspect that 2017 to be a key year as well.

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