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Banks lend money based on your assets. And when you have very large asset holdings, those loans can have very favorable terms.
Yes and there’s two problems with this scheme; one is large and the other could be an apocalypse.
The first problem, the large one, is that the wealthy aren’t paying taxes on the money they receive from those loans. This starves the Government of the funding that it needs which causes endlessly escalating deficit spending as the rest of the population cannot provide enough tax revenue to cover everything the Government needs to do.
The apocalyptic problem is that their scheme only works when those assets appreciate in value. If they decline in value, or even just hold steady, it collapses. Right now the wealthy take out another loan, either on a different asset or on the same assets appreciated value, in order to repay the original loan. However if assets decline in value, or even hold steady, they’re unable to keep “flipping” loans like this and they’ll need to come up with the cash to actually repay them. Which means that they’ll have to actually sell some of their assets, as this spreads to more and more of the wealthy the marketplace will enter a value reduction spiral (too many sellers and not enough buyers) and as that happens the Lenders, the banks, will be left holding assets that have increasingly less value. This will quickly lead to an unstoppable chain of Bank failures.
We’re arguably already in the spiral with Commercial Real Estate values continuing to decline and CRE Mortgage default rates are climbing. We’ll likely reach the tipping between late 2024 and mid 2025, then the bank failures will really start to ramp up.
Somewhere in there the stock market will start to deflate as the wealthy seek liquidity to stave off foreclosures. Once it deflates enough it too will collapse.
It’s quite possible that we’re standing on the edge of another “Great Depression” event.
You can have both a labor shortage and mass unemployment. It occurs when workers are skilled for an industry with decreasing or no demand while another industry that requires different skills has increasing demand.
A good example of this is the high demand in the US for so called “Blue Collar” jobs. We have a shortage of trades people (Electricians, Plumbers, HVAC, etc) and far too many Business and Marketing people. There’s 100,000 MBA’s out there looking for a job and there’s 100,000 Plumbing Contractors trying to hire someone.