Welcome to themoneyenigma.com, home of The Enigma Series!
In the weeks and months ahead, I will use this blog to discuss many of the practical implications of The Enigma Series and to answer some of the questions that readers may have regarding the theory itself.
The Enigma Series is an expansive work that touches upon many areas of economic theory. As a result, there is an almost endless list of topics that we could discuss. While I believe that there are certain pressing topics that need to be discussed, such as the rising risk of inflation and the unsustainable path of government balance sheets across the Western World.
I would encourage all readers who are interested in this blog to subscribe to our email list. Many of the topics covered on this blog will be covered in greater depth and detail in subscriber-only emails.
So, what can readers expect in the weeks ahead?
Firstly, I think it is important to discuss the very simple notion that printing money and increasing government debt have consequences. At the present moment, these consequences are being obscured by what can only be described as extremely complacent conditions in financial markets. But, market sentiment can change overnight. Such a shift in market sentiment could have a major and dramatic impact upon the market value of money, the denominator of every money price in the economy.
Ultimately, the market value of money is a function of confidence regarding the long-term economic future of society. Most market commentators seem very optimistic regarding the future path of the “real output/base money” ratio: they expect real output to continue to grow steadily as the monetary base declines.
My personal view is that there are two key reasons why the markets will be disappointed in this regard. First, central banks will find it very difficult to reduce the global monetary base from its current extended levels for a wide variety of reasons that we will discuss in later posts. Second, even if central banks do manage to reduce the monetary base for a short period without damaging confidence in the long-term prospects of the economy, the defining economic event of our lifetime still looms large on the horizon: “the Great Debt-for-Equity Swap”.
“The Great-Debt-for-Equity Swap” refers to what I believe is the inevitable acquisition and cancellation of trillions of dollars of government debt by all of the major global central banks. Hope, optimism and a false sense of confidence may obscure this complex issue for a few more years. Nevertheless, markets will begin to discount this event long before it occurs and we will discuss how the models developed in The Enigma Series can be used to think about the possible market implications.
Finally, on a more theoretical note, one of the main purposes of this blog is to help explain the strengths and limitations of existing economic theories and how The Enigma Series can provide a better platform for economic analysis. Concepts such as the “output gap” and the “quantity theory of money” persist in economic teaching because they recognize some important element of “common sense” regarding the way the world works. The problem is that most of these concepts provide an incomplete or partial description of macroeconomic forces. The Enigma Series hopes to provide a platform that can both embrace and temper these traditional concepts.
I hope that you find this blog useful and I look forward to working with all of you over the months ahead.