Volcanic Eruption

One night, when my mother went out with my dad, and my brother and I were left with a babysitter, I had told my folks that I’d invite some friends over and my parents agreed.

In order to make it epic for my little get-together with friends, my parents ordered pizzas, burgers and sushi, well in excess of what we really needed.

The food just sat there, as we played in the garden, but when we got hungry, we pigged out.

We ate well more than we should have; it was a feast.

Next thing you know, a bunch of my friends started to feel so full that they took cabs home; they were totally bloated.

My parents feared that we would be hungry or that my friends wouldn’t have a good time, so they went above and beyond, buying more food than was possibly logical to consume, but they preferred to overdo it and risk handling leftovers than the other way around.

When the governments of the world put over 3bn human beings on home curfews, quarantines and shutdowns, they had to fill these gaps with trillions of dollars of income – but it is next to impossible, in a short amount of time, to know the precise number of empty pockets to fill, so they overdid it!

Adjusted for inflation, more fiscal and monetary measures were dumped into the bank accounts of Americans than during WW1 and WW2, combined.

Truly, governments decided to just throw the kitchen sink at this and deal with any blowback and negative consequences later, rather than be attacked for not doing enough.

Had my parents rationed the meals and one of my friends been left without a slice of pizza, that would not have been a big deal, but if millions of families would have been evicted (on top of what happened anyway), that would have been very unfortunate and could have deteriorated society in major ways.

Because of this trauma of losing one’s job, of not knowing whether it’s safe to go back to work and of being up in the air, both people and banks are hoarding cash. As of today, there is more cash on the sidelines than at any other point in history. Think of it as seeing all of those burgers, pizzas and sushi combinations sitting on the table…

My friends and I could have behaved sensibly with the whole thing, quietly and orderly dividing the food among ourselves, not eating with our eyes, but with our stomachs, but we didn’t – we attacked it like we’d never seen food in our lives.

We were confident that nothing would happen if we overate; our confidence helped us to just eat, without thinking about the portions.

Banks and households aren’t like that right now; fear is still pretty high and banks are actually looking to return the cash to the FED, via reverse Repurchase Agreements (REPO).

But, what will happen when households begin to forget about the crisis (as they always do)?

The potential for inflation today, expressed by the ability of households to begin splurging and spending, has never been greater.

This situation is much more complex and intricate, and I will elaborate on it further, including explaining exactly what REPO is in the coming publications.

Best Regards,

Lior Gantz
President, WealthResearchGroup.com