This thesis guides public market investment decisions at STE. It is a macro-monetary framework built from first principles. As global sovereign debt expands, we show how modern policy protects markets at the cost of monetary integrity, and how this drives capital toward scarce assets.

Introduction

• We approach this thesis through first-principles reasoning: understanding what money is, how it’s created, and how it moves.
• Money is a system of trust that coordinates activity across time and space. When that trust erodes, the damage cascades through communities, markets, and eventually entire nations.
• In a universe governed by entropy, standing still is the same as losing ground. Only growth offsets the constant background pull of decay. This applies to living things, empires, and portfolios alike.
• Investing is the practical pursuit of growing money. There was a time when investing was reserved for the pros. Today, it’s the path anyone must take to stand still, let alone move forward.
• Rather than forecast the future, our approach is to study the system that creates and directs money. By understanding that system’s rules, we identify where money tends to accumulate and position ourselves there.

The Growth Imperative

• Modern money is created through lending. When a bank issues a loan, it doesn’t use existing deposits. It simply credits the borrower’s account with new money.
• This means that all money is debt and therefore carries an interest obligation. However, while the principal is created when the loan is made, the interest is not.
• For all borrowers to repay both principal and interest, more money must exist in the future than exists today. This enforces a mathematical growth requirement into the monetary system.
• Over time, the money supply must therefore expand by at least the interest rate tied to it.
• When you repay or default on your loan, the bank removes your principal from the system, shrinking the money supply.
• If the money supply shrinks for too long, it becomes more difficult for borrowers to find money to pay back their principal plus interest. Spending falls, businesses cut back, and unemployment rises. This self-reinforcing loop can trigger a deflationary spiral, as seen in the Great Depression (1929–33) and Japan’s “lost decades” (1990s–2000s).
• Over the past century, broad money supply has grown 6% per year on average. The only brief contraction occurred in 2008–09 (around –1.5%), when the financial system deleveraged before being reflated by emergency stimulus.
• Productivity gains, demographic growth, and technological progress do not affect the system’s structural need for expansion. Due to interest, the debt-money system has its own internal momentum, independent of the real economy.
• Modern central banks exist largely to ensure that expansion continues, especially when markets dislocate, using tools like interest-rate cuts, quantitative easing, and emergency lending facilities.