Artificial Life

업데이트됨

We live artificially, in a virtual world. We began this experiment when from actual currency we went to fiat.
Money printing is not that simple. A debt based economy is fueled not only by money printing but also by money creation.

Let's consider this thought experiment:
We have three protagonists, Central Bank (CB), Private Bank (PB), and Human (HS)

CB decides that she wants to run the economy, and prints $100. She creates the debt as well, so all is good.
CB lends that money to PB and demands some profit (Y) which could be the current US10Y.
The Private Bank then, to profit off of the loan, lends some money to a human.

Let's pretend that the loan the human gets is ($100+Y). On top of that there will be another tariff that will go towards the PB, let's say again Y. From that simplified transaction, the PB makes more profit than the loan, because she lended some funds from their reserves. So the PB will earn from the human 100+Y*(100+Y) and will pay back to the CB 100+Y.

Now remember, the only money in existence is the $100 that the CB made. So technically, nobody can fully pay out their obligation. Everyone is in debt and technically everyone is bankrupt from Day 1.

To cover the increasing needs of humans for loans, the PB needs more money, and so lends from the CB. The second time around, the PB borrows $100+y

So what the CB does is print some more money, every day we pay out our old obligations and we create more.

That story you might already know. I added it because I wanted to make some calculations on it.

For us to make sense of it all, we try to find out how many obligations were created from thin air.

Scenario 1

If everyone is paid off, including the CB, the extra obligations are y^2+2*y.

Now let's consider the percentage we gained from all of this. From a single "y" obligation, we created y^2+2*y obligations.
Therefore the rate of change is (final value - initial value)/(initial value).

Rate of Change = ROC = y+1
And if we plot SPX/ROC = SPX/(US10Y+1)

Scenario 2

Everyone is paid off, except the Central Bank. While this might not be 100% feasible, I believe that it ends up describing much clearer today's life.

Now the extra obligations (extra money) in circulation are y^2+2*y+1
And the rate of change from the single "y" obligation is:

ROC = y+1+1/y
And this is the plot we are witnessing now. (SPX/ROC)

Conclusion
spy_master invented this chart SPX/(1/US10Y), linked below.
Which is basically a ROC of 1/y.
So the new ROC comes to fulfill the one before it, and give it a more "mathematically accurate" representation.

Where does this leave us?
This chart stopped on the 4th retracement.

RSI is looking something more beyond precarious. It is fearful.

This is another chart on how price moved the last 20 years.

I will comment later on some more charts. For now, I will let the indicators speak of themselves.

Tread lightly, for this is hallowed ground.
-Father Grigori

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Look at this RSI divergence.

And this chart compared to money printed.

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This year, this chart had a 56% drop. That is more than what this chart calculated for 2008, when we had a 46% drop.

Also look at this:

Let's compare the modified DJI it to PPIACO (Producer Price Index)

And modified SPX compared to PPIACO

Look where the 2020 Black Swan occurred, on the PPIACO chart:

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Finally (I hope) here is a bull flag on the PPIACO chart.

I cannot overstate what the 12M RSI is warning about.

I am annoying I know.
I've never been popular, I don't mean to start now. -NB

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Standard SPX/PPIACO is very beautiful...

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After a little fiddling with the chart I have now perfected it.

Chart is drawn on the 6M timeframe, with magnet tool enabled.

Specific attention was taken when pinpointing the bottom of the 1920's. The down wick that shapes on second half of 1921 is ignored as an outlier. The closing price of the first half of 1921 is more representative of the price action that took place in the previous months.
A beautiful golden bull flag is shaped during the stagflation period. It was at that time when price was in a dilemma, between increasing to the upside or dropping to pre-Great-Depression levels.

Now it makes sense... why and when stagflation occured... It was a period of indecision, either QE is born or the economy stagnates, even if dollar has abandoned the gold standard.

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After a little fiddling with the chart I have now perfected it.

Chart is drawn on the 6M timeframe, with magnet tool enabled.

Look at the peak.

Now it makes sense... why and when stagflation occured... It was a period of indecision, either QE is born or the economy stagnates, even if dollar has abandoned the gold standard.

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The violation of this trend marks the end of QE. This shows the true effect. I hope you all understand it.

With Green and Red arrows, I have marked the points I used to draw the rays.

These long-term rays, prove as significant resistance.
Hitting one of them, was a fundamental reason the Black Monday was so severe.