Summary: The pandemic allows for hyper-money printing<br> Debt trap starts with we can, then we should, then we must<br> CLICK HERE To Register For The Tactical Short Q3 Call Thursday October 22, 2020 – 4:00pm Eastern / 2:00pm Mountain<br> <br> <br> The McAlvany Weekly Commentary<br> with David McAlvany and Kevin Orrick<br> The Fed Breaks The Window, Then Offers The Loan To Fix It<br> October 21, 2020<br> “This is unbelievable. The fact that they’re talking this way suggests to me that there is an imminent problem. The game is nearly up. Instead of saying, ‘I’m sorry,’ or ‘We did it wrong,’ they’re basically saying, ‘We’ll just need greater regulatory control to make sure it doesn’t actually get out of hand.’ I’d suggest that this is a whole new level of reverse incentives where central banks get to create the mess, then rather than be discredited for their contribution to it, they’re charged with cleaning it up.”<br> – David McAlvany<br> Kevin: Well, of course, since we talk about economics, we all have on our bookshelves here at the office, and I even have one at home, Economics In One Lesson. One of the examples right as you start into that book is what they call the broken window fallacy where an economist might say, “Well, gosh, if there’s a broken window, we’re going to see economic expansion because you’ve got the people who make the glass, you’ve got the workers who put the new window in.” But actually, the fallacy of that is there is no real productivity.<br> And thinking about this, Dave, as we look at what’s going on with the central bankers creating problems and then coming in and saying, “Hey, we can solve your problem.” It reminds me of the broken window fallacy, only one more step. That step is, they break the window, then they provide the resource is to fix the window. Sounds like an abusive relationship to me.<br> David: Right. “I created the problem, but I can solve the problem for you, as well, for a fee. I oftentimes wonder, how did we get here? And sometimes there are inspiring cases where if you unpack that question, you can see a strategy worthy of emulation, or at a minimum, there is inspiration and gratitude. There are also the cases where maybe it’s more cautionary than rousing, where answering the question, how do we get here, is a reminder of what not to do, and we’re still living in the dreamy side of credit expansion at present. So nobody’s really asking the what not to do aspect of it, because it’s working.<br> So here’s today’s preview. Somebody is going to add to your Economics 101, not Economics In One Lesson, that’s already been written, but the New Economics 101, or Managerial Finance 101, the nightmarish aspect of the credit markets.<br> Kevin: How many people when they’re young don’t find the nightmarish aspects of credit markets on their own? When my wife and I got married we had come from middle class families and obviously we had not really wanted for anything. We weren’t rich, but when we got married, we really wanted to continue the pattern, even though I was making, I think, $4.85 an hour and she wasn’t making much more than that. So we had credit cards. I remember when I married my wife she was like, “You don’t have credit cards? And I’m like, “No.” She said, “Oh, well, I have good credit. We want to make sure that we continue to use it.” And we did.<br> David: Living the dream.<br> Kevin: We used that credit. Well, it’s a little bit like the nightmarish outcome, because at some point you have to pay that credit off. Unless – unless you’re the government.<br> David: Well, you know, every 18-year-old who heads off to college will find in that first week on campus that there are credit card companies everywhere and they play into the naiveté of an 18-19 year old. And this is where you start your credit. You have to start young and they’re there to help you.<br> Kevin: We got married at 20 and getting married is another time … eve...
