The Gryning Essays | HIR
The following is a continuation of The GRYNING | Essays - they are designed to give you a better understanding of the current state of affairs, allowing you to make informed decisions on how best to protect your wealth, before pointing you towards where the best opportunities lie.
High Interest Rates [HIR] – January 15, 2023.
Money supply growth has turned negative. There are 206 million fewer dollars in existence today than there were a year ago (Gryning’s definition of a “dollar” is a unit of liability of the Federal Reserve). M1 money supply, which includes demand deposits, has shrunk by $346 million year-over-year. Simple math tells us that credit markets will implode if the Fed allows this trend to continue.
To illustrate, imagine a model economy in which there exists $100 in gold. The owners lend it out for 10% interest. The next year, the lenders are owed $110 in gold. But where is the extra $10 of gold supposed to come from? (Mining and minted may have produced another dollar or two, but this new money is probably owned by the lenders anyway). This was the usury problem that the ancients wrestled with for millennia. Aristotle called the making of money through interest “against nature” since, unlike chickens or cattle or crops, gold and silver do not self-increase. If the lenders forbear collection for another year, they are owed $121, and the imbalance between money owed and money in existence grows worse.