Quantitative easing and surging property prices explained using a coconut

Posted 17 Jan 2018, 7:28pm

Australian banking analyst Brian Johnson uses the analogy of a desert island to explain how quantitative easing, or printing money, has driven up property prices.

VIDEO BELOW (notes): 

• This is an interview about a desert island where there is a one coconut.  We decided currency is 1 shell. Then a wave washes up 10 shells each, what is the value of the coconut Brian says 10 shells. 
• Brian says it is still a coconut, he says that is what Quantitative Easing is,
• The Federal Reserve has injected $4.5 trillion of cash into global economy, ECB will do a big number, Japan the same, China the same, we measure assets in this idea of currency.  More notes circulating in the system. 
• Perhaps assets haven’t moved one zack, just the denominator has gone up.   
• The journalist says there is the threat of deflation (prices falling). Brian says people are so scarred by GFC, businesses so scarred rather than spend liquidity they are saving it.  They are not buying the coconut.  The coconut will last for 3 months, we all have our one shell, we suddenly have 10 but scared to buy that one. What happens to the value of coconut? 
• People can consume or save?
• The wave of liquidity has come in at the same time as you are scared to buy.  Real asset values go up.

http://www.abc.net.au/news/2018-01-17/surging-property-prices-explained-using-a-coconut/9337328

I am just going to contemplate the above.  My response to the above.  

If people are competing for the coconut the asset value of the coconut rises.  However, if they prefer fish and not coconuts (preferences) then the coconuts value diminishes until the demand for coconut rises.

Brian is saying quantitative easing is the wave which washes up the currency.  He speaks of 4.5 trillion injected into the global economy. What he doesn’t say is that there is no gold or asset backing to that liquidity, it is just paper/plastic. The gold standard Fort Knox was what gave the US dollar for example its values.  Asset backed lending was to guarantee a loan with assets behind it, e.g. a mortgage on a house (can be cashed in) so it is secure (confidence).  In the case of printing money it gives the illusion of money injections (interest rates fall) but there is nothing secure behind it, similar to the mentality of the Global Financial Crisis (GFC) loans (no assets), the same greed as before driving the desire for more to maintain the illusion of wealth.  The flaw in this crisis was greed, this has not been solved as leopards do not change their spots. This is a core issue. He talks about countries injecting cash, same problem.  The value of assets have not increased or decreased (real demand based on confidence and expansionary perceptions).

The journalist brings in deflationary pressures.  I go to recession.  The real global market is like a stack of cards, you could call it a magicians trick in confidence and the illusion of growth to fool people into spending. However, prices are rising, the illusionary cash injection may go into speculative housing which pushes up prices.  As contractionary pressures continue on wages going downward, the multiple propensity to consume (MPC) falls, investment falls, competition increases (inclusive of online trading). The attachment to wealth, the fear of asset loss, status loss, losing everything (the insecurity behind greed) is triggered. You may recall people jumped out of buildings when Wall Street collapsed, when they lost everything.  This is the poverty mentality I mention in my blogs which is behind wealth generation.  The facade of success is the same illusion where people pretend confidence but deep down do not feel good enough or secure.  This is how the global financial system operates as those attracted to this field are attracted by the lavish lifestyles and the illusion of security.  Brian goes onto say they are afraid to buy the coconut. This is not such a good analogy as a coconut is food on a desert island and a shell is just a shell (you can’t eat money), So the coconut in a realitistic scenarios would be not traded for shells as it is real wealth (food).  They would have to learn to share the coconut as the shells are worthless given real needs. So the real economy (in my view) emerges as needs are prioritised rationally.  Luxury items mean nothing when you are hungry. The wave for me represents climate change as it wipes out the illusion of wealth in money. The real wealth is in maintaining the coconut tree to ensure more coconuts grow (sustainability).  If energy output (coal powered plants) heats the atmosphere, melts ice and raises the sea level to wipe out the island wouldn’t it make sense to not burn coal but find another way of keeping warm that is not going to impact climate and earth supports systems. This is what realistic thinking envisages.  The two on the island have to learn to share, there is no winner takes all, if you kill the other to have the whole coconut then you are all alone and overtime you become hungry again (lose/lose).  Your need for human company leaves you in despair (no anti-suppressants or alcohol to sooth). You become depressed to the point of suicide growing thinner or you die off and so does the species, as you are the last one.  

The flaw in economics is the mantra of infinite growth (output) and the scenario of a casino where all play the game to win big (gamble, arbitrage, investments, stock market etc.), they forget they are on a finite planet with dynamic changes occuring that have not been experienced in collective memory (features of mass extinction events). The illusion of abundance occurs in cities given concentration of materialism and disconnection from nature.  It is living in an unreal paradigm (out of balance with earth systems).  Most of the things we buy we don’t use – the impulse is to look nice, impress friends, showcase success, immediate gratification divorced from real need.  After a while there is a clean out and it goes into landfill (can’t see, no problem, solved  – next?). The waste produces energy, chemical imbalance as it interacts with nature that seeks via symbiosis to integrate and recycle.  Thus our needs and wants that drive consumption are false needs based on illusionary desires and wants (apart from basic needs refer Maslow’s hierarchy).  Marketing and the propaganda – competition of success based on excessive materialism and grandiose ego inflation is best exemplified by the parable of the Emperor Has No Clothes.  We see that with the climate change issue, the energy industry falsifying evidence to pretend there is no climate change.  So the emperors march around feeling unreal power based on believing they are changing the world given people respond to their needs (given money [security]). However, the child sees that the possessions are not the person, they only see the person, as they are free from social constructivism as economics.  They see a man naked. he is just a man (they laugh). He is not superior or inferior. The child looks into the eyes to see if he is a good man or a scary man.  The scary man cannot see the child, he is looking into the mirror (narcissim) and can only see his own reflection, this is the blindness of arrogance that cannot see the demise of its own creation. So transfixed on the scaffolding of a persona that was never real.  An example for me was with Saddam Hussein, the Iraqi leader whose life was taken.  He was the big man, military man, could have anyone killed then when the war came and he hid down a hole, his face completely changed as power was stripped by fear.  He was never powerful, it was the illusion upheld by those around him. Weapons are used to create the illusion of power.  So the emperor is tricked by the people as they believe the illusion, even when they know it will collapse they keep on keeping on pretending all is good as they fear him (for them fear is powerlessness).  When it is not ‘all good’. 

When you step out of the illusion of capitalism, you step back and look at the mind control, propaganda, impassive faces, iPhones you can see they are unconscious.  You look up at the clouds and you monitor the weather as you live in accordance with nature.  You test your fears, you unravel your false needs and then look again,  it is as if a veil is coming down. This is a feature of the awakening that we cannot eat money.  We are the creator of our realities which have been unreal.

That is why I talk about peace as our true nature, until we go inside, until we unravel our lies, until we learn to live with less, until we challenge our own negativity (inquiry) we cannot change anything as we are still stuck in business as usual.   That footage above evoked this stream of consciousness which I just allow to flow without trying to be a journalist.  I just allow the feeling to move my thoughts as I seek for truth. I see to look (internal) rather than look to see (external).  That is how I move beyond the thinking mind.  Allowance.

That for me the real story arises when you expand consciousness where the sum of the parts exceeds the whole. Where you regard yourself as one with nature (wholistic) rather than separated (egoic) and selfish. When selfish we cannot see the whole picture (blindspot). When we live in fear and book knowledge to gratify the separate self we graft to illusionary concepts.  We all lose.

Alternatively, when we see the other as ourselves, we join, we share the coconut and this is how we expand the bounty, we see our connection to the island, the ocean, the coconut tree and humanity as part of nature, not in dominion.  A cyber reality will not last 5 minutes in this environment as it will be useless in reality as it mirrors the financial world of 0,1’s.

So I don’t see what Brian perceives.

So by all means watch the story from a financiers perspective.  You decide if the island is a mirage or a miracle.

http://www.abc.net.au/news/2018-01-17/surging-property-prices-explained-using-a-coconut/9337328