I haven't read this guy before, but he's spot on:
Credit growth: The most important indicator is credit growth or lack thereof. Everything else follows. Actually, you could stop right there. However, there are two other factors to assist you, although they depend on credit growth.
Yep.
Or, as I have put it in my signature on the forum for quite some time now:
"The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
When it grows, so does the actual monetary base and so does the economy.
Fundamental Principle #1:
The asset base (otherwise known as the monetary base, or the base against which all "money" in said nation is valued) of a nation only grows as a consequence of mining, manufacturing, or growing things. That is, through the expression of labor either with mind or body, frequently with the assist of The Sun.
Therefore:
To grow the monetary base in real terms you must mine, manufacture or grow something. You cannot increase it by the pressing of buttons on a computer or by making entries in a ledger.
The latter is the expansion of leverage against the monetary base, not expansion of the monetary base itself. Those who claim otherwise are lying; this is trivially discerned by the fact that if the entirety of "things of value" in a nation is one bushel of corn, if you emit ten "dollars" you have declared the value of a "dollar" as 1/10th of a bushel. If you emit one hundred "dollars" then you have declared the value as 1/100th of a bushel. All you have done by emitting currency - digitally or otherwise - is change the leverage ratio.
Economic Stability is likewise easily defined, although it cannot be conclusively proved since measuring the true purpose of leverage is difficult. However, the following general principle applies:
When the leverage applied to the monetary base is constant and, at its present level, has the vast majority of its exercise applied toward productive investment (that is, the expansion of the monetary base, such as the use of leverage to purchase a machine that will produce more output than its financed cost, operational expense, and a profit) the economy is generally stable.
When the leverage applied to the monetary base is either expanding or the majority of its exercise is applied to speculative or consumptive purpose, the economy is generally unstable.
Thus, in the general case, when credit is growing faster than output the economy is generally unstable and a bubble either exists or is attempting to form.
Again, this is trivially discerned, in that if output of an economy is 1,000 bushels of corn and you permit said corn to be "hocked" five times for each ear where previously you could only do so once, you have effectively naked-shorted the "value" of that ear of corn. It is a naked short because there are an insufficient number of ears to cover the entirety of the short position; ergo, by definition you are blowing a bubble since you are "factoring" tomorrow's production at an increasing rate.
Finally, whenever such a bubble exists and is not arrested by the monetary authorities it will ultimately burst and some who shorted naked will not be able to cover their bets in each and every case.
This is also trivially provable: the planet we live on is of finite size and mass. It is therefore physically impossible to have an exponential growth function operate on an indefinite basis as such will eventually consume all of the physical resource of the planet down to the last atom, and the rate of acceleration, due to exponential growth being a compound function, will always be increasing over time.
Finally, my last principle, which WE THE PEOPLE must insist be applied:
Any monetary "authority" willfully and intentionally violating the above has committed a Federal Offense, in that they have willingly and intentionally put in motion a set of events that is mathematically guaranteed to result in the destruction of the wealth and property of a large segment of the population.
Title 18, USC Section 242 says:
This statute makes it a crime for any person acting under color of law, statute, ordinance, regulation, or custom to willfully deprive or cause to be deprived from any person those rights, privileges, or immunities secured or protected by the Constitution and laws of the U.S.
....
Acts under "color of any law" include acts not only done by federal, state, or local officials within the bounds or limits of their lawful authority, but also acts done without and beyond the bounds of their lawful authority; provided that, in order for unlawful acts of any official to be done under "color of any law," the unlawful acts must be done while such official is purporting or pretending to act in the performance of his/her official duties. This definition includes, in addition to law enforcement officials, individuals such as Mayors, Council persons, Judges, Nursing Home Proprietors, Security Guards, etc., persons who are bound by laws, statutes ordinances, or customs.
Therefore, all such persons who use their official government powers to create and promulgate such an economic instability are liable for arrest, prosecution, fine and imprisonment under EXISTING Federal Statute.
Where's the handcuffs?
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