For many reasons, the Fed will struggle to contain inflation. This is part one on the Fed’s struggle. It covers deficit spending and interest on the debt.
Key Points
- The government is running a cumulative deficit of $1.1 trillion so far in FY2024 ($46 billion more than the same period in the prior fiscal year when adjusted for timing shifts)
- Revenues were $2.2 trillion through February
- Outlays were $3.3 trillion through March
The above is according to the Bipartisan Policy Organization.
Those numbers do not include a $95 billion aid bill for Ukraine and Israel that recently passed Congress.
The projections look worse.
Revenue and Outlays Projections
“As spending continues to outpace revenues, deficits will exceed $1.5 trillion (an average of 5.6% of GDP) in each of the next ten years. In comparison to May 2023’s budget outlook, deficits are projected to be a cumulative $1.4 trillion less over FY2024-2033.”
This report as well as White House economic projections, and Congressional Budget Office projections are all too optimistic.
Q: Why?
A: None of them factor in a recession all the way through 2054.
The Fed makes the same optimistic assumptions in its projections.
Fed Summary of Economic Projections March 2024 vs December 2023
Compared to December of 2023 the Fed upped its central tendency of GDP expectations, core inflation, and the expected Fed Funds Rate as noted in my March 20, assessment Fed’s Dot Plot is More Hawkish Towards Cuts in March vs. December
The key points are the Fed assumes no recessions and the Fed assumes no matter what Congress does that it will hold inflation to two percent over the long term.
In other words, the Fed assumes that it is in control when history suggests that it isn’t.
The Fed has never forecast a recession, nor has the Fed spotted one in real time.
The deficit is now over $34 trillion with debt held by the public at $27 trillion. Interest on the national debt is over $1 trillion.
Money that would go for investment instead goes to bondholders.
Neither party will fix deficit spending. Nor will the Fed.
And it will get worse in the next recession. Unrestrained fiscal stimulus contributed to the mess we are in, and nothing suggests a policy change no matter who wins the election.
In the past two decades, the Fed did have some favorable global factors that held down inflation. Those factors are gone. I will discuss the differences in my next segment.
Meanwhile, please consider my question Dear Jerome Powell, Is Everything Under Control?
Reading through the comments, this article “struck a cord” with many of you. Wowza!
While I am voting ABB (Anybody But Biden), DJT (if elected) has a very tough road ahead of him. Here’s my analogy: It’s superbowl and your team is down 36 pts. Your lead QB just broke his ankle and you have to call in the backup QB. The backup QB has a horrendous job now (not only to dig your team out of a grave) but to actually win. Who the hell would want this job/duty? Apparently DJT is putting himself out there and saying he’s up for the challenge! (Unbelievable!) Biden has completely screwed up ……well…..Everything! ….How many of you would want to follow this failed president? You not only have to dig yourself out of his failed policies but actually make a miracle happen. If DJT is elected, inflation is not going anywhere. You can’t just enact a few policies…..and Poof!, it’s gone. What Biden and .gov and the Covid policies that have steamrolled across the USA over the last decade aren’t going to vanish because we elect a new President, but it will start to subside with new leadership. Stop spending $$ we don’t have. Get rid of welfare! This was originally enacted for “hardship” and has become a complete cash grab for the irresponsible/lazy meatbots among us. Have a few kids, get some more benefits….I mean like WTF!? Welfare should have a lifespan of 3 months max….then you’re OFF! Period! Get a damn job! Get off your butt and make a living for yourself and the children you’ve brought into this world. Be responsible for the decisions you make in life. The rest of us don’t want to pay for your indiscretion/irresponsibility! Increase housing supply (to make owning a home more affordable). Ban ABNB, VRBO and the likes so your residential neighborhood isn’t functioning like a commercial hotel. Why is this even allowed!? Housing has gone parabolic! What in the holy hell is even going on? A house going for a $million dollars now was worth $500K 5 years ago…. Why is this happening? Does 10 million illegals crossing the border have anything to do with it? Why is the $USD worth less and less and less every year while people are struggling trying to make a buck!? ….Why is the $USD devaluating so rapidly? People all around the world emigrated to the USA long ago to escape Authoritarianism/Communism/Socialism- so they had the opportunity to bust their balls in the USA and “come what may.” Your success here was based on the effort/struggle/hardship you were willing to endure. …and it has been working for a long time….until now. If you are a successful, responsible, independent human being….following the rules, making responsible decisions for you and your family; you are now being called on to take care of every damn person in the world that has not done so. ……oh, forgot me some student loan bailouts! ….add that on to your bar tab, Fu*k Joe Biden!
Why is the dollar losing value? It’s the printing of trillions of new dollars, way more than the increase in production of goods and services. And Trump and the Republicans were just as much in favor of this money printing as the Democrats. You can look up all the voting records of the spending bills. So voting for Trump doesn’t make sense if you don’t like the dollar losing value. But voters keep falling for the divisive partisan distractions tptb blast through the mainstream media propaganda channels such as gun control, abortion, gender, immigration, climate, EVs, etc., while the big money corps, banks, real estate lobby, MIC, etc. tell politicians to vote for more spending and debt in order to receive campaign funding.
Blast from the past: June 19, 2019.
WASHINGTON (Reuters) – President Donald Trump on Tuesday kept up pressure on the head of the Federal Reserve to lower interest rates, following a report that White House lawyers earlier this year explored whether they could legally strip Jerome Powell of the Fed chairmanship.
Asked by reporters outside the White House if he wanted to demote Powell, Trump said: “Let’s see what he does.”
Trump has repeatedly attacked Powell for raising interest rates, claiming that the Fed’s four rate hikes last year were undercutting his economic and trade policies, particularly as he battled over trade issues with China. Last October Trump said the Fed had “gone crazy” under Powell.
Absolute deficit numbers are sort of meaningless. Can you show the graph in percent of GDP figures?
People do this all the time…attempt to minimize the deficit by placing it in the context of the (alleged) GDP.
In theory, this is supposed to show the “affordability” of the deficit.
But there are some huge problems with this approach (an approach which DC always rolls out to defend its lifetime crack addict spending) –
1) The way DC calculates GDP makes government spending an integral factor – so DC can *always* phoney up GDP “growth” by increasing gvt spending (its favorite kickback activity). This usually makes the deficit-to-GDP ratio look better…while the real economy does worse.
2) The accumulated deficits (the debt) remain long after the phoney GDP goosings evaporate. That is, the “debt” is constant (actually perpetually growing) while the GDP growth is much more volatile (trending downward for GDP growth over 50+ years).
3) The Keynesian point of view behind deficit spending never contemplated (but it damn well should have) perpetual deficit spending and debt-to-GDP ratios far in excess of 100%. The plan was that surplus years would roughly offset deficit years, leading to rough balance across decades. Keynes knew that 50+ years of continuous deficits would indicate a deep, deep sickness in the underlying real economy that no level of government spending (and its inevitable inflation) would fix.
4) The deficit-to-GDP ratio ignores the gvt created inflation (and, in fact, it exploits it). Printing money to pay for 50+ years of deficits artificially (and poisonously) gooses the apparent GDP measure (in nominal terms, which the flying monkey MSM always uses). All the while, this new printed money (corrupt sword of corrupt DC) expropriates the value of every previously, privately saved US dollar on the face of the earth. That is how you end up with 20 years of low to no interest rates on US Treasuries (Treasuries of a grossly indebted government).
Not that I agree with everything you said, but OK fine, don’t use GDP, but use some other relative measure like deficit as percent of tax revenues.
Actually, with these deficits it’s reasonable not to assume a recession. Basically, policy makers have decided that they recessions are no longer acceptable, and will spend whatever amount of money is necessary to avoid them no matter the cost. The Fed’s projection of 2% rates is laughable, but as long as bond holders drink the kool aid and keep playing along with the fed they can continue. If bond holders ever revolt and the Fed is no longer able to convince them with its kabuki dances that it will control inflation, then we may see a form of yield curve control to keep rates at sustainable levels. After all, inflation is the best way to get rid of debt for governments.
Why are annual deficits so much higher now than before covid? Are they still paying folks to not work?
Because spending went up big time. It’s fun to spend other people’s money!
Not really other peoples money.
It’s actually the children’s future money.
the omnibus budgets & supplemental spending bills passed by Biden+RINOs included ridiculous sums to facilitate:
1) migrant transit/support through south¢ral america, illegal immigration across the US border + migrant settlement w/in the US,
2) EV subsidies & “green energy investment” (ROI = zero),
3) backdoor budget bailouts for failing Blue Cities & States, incl. enormous pay raises for public employees,
4) payment of unprecedented levels of interest on US debt,
5) funding of TWO unwinnable proxy wars (i.e. industrial-scale political money laundering), neither of which serves US national interests,
6) ever-increasing MIC/Pentagon budgets, much of which is not accounted-for,
7) ever-increasing Federal departmental budgets, all of which are quantifiably partisan/political, incl. elections, education, public health & “infrastructure”.
8) exponential growth (weaponization) of Federal tax/revenue enforcement, law enforcement & “intelligence” capacity,
9) development of coordinated institutional (public+private) censorship capacity + it’s enforcement/application.
It is fair to say that US taxpayers are directly funding the destruction of their own republic. The Left/democrats are fierce & overt in this endeavor, while the swampGOP & RINOs forfeit all pretense of political opposition & representation while quietly funding their family trusts & retirement.
It’s quite a pickle.
Thanks!
Agreed, thanks. It’s pitiful that, based on how many continue to obliviously vote for the Republicans and Democrats, almost no one seems to be aware or care. I think this nation is in for a heck of a reckoning.
Yes. There are a lot of people that can’t afford day care after Covid so they don’t work. They get free healthcare, food stamps, etc. Also these illegals are getting free housing, free food and free healthcare. In IL they were giving them $9,000 each to pay for rent. The amount of disability claims skyrocketed after the Covid vaccines. Also they usually get free healthcare.
In Argentina, Milei is silencing his critics with results. His budget-cutting actions will become a template for the West. Unfortunately he devalued the country’s currency by more than 50% Maybe the West can avoid the currency devaluation by enacting budget cuts. That would be VERY DEFLATIONARY.
“In Argentina, Milei is silencing his critics with results.”
“Unfortunately he devalued the country’s currency by more than 50%”
Oops!!! After literally stealing fully half the wealth left in the entire country, he has “managed” to use the loot to slightly improve nominal budgets…
Talk about curse of diminished expectations…..
Seriously: Even Biden or Trump could probably accomplish _that_: Reducing the deficits for a few months, if they were only allowed to confiscate half of what everyone owns in order to “accomplish” the feat…
Anyone economically even remotely literate, who intends to effect any meaningful improvement of the economical environment at all; in Argentina as well as everywhere else; has no choice but to seriously REvalue the currency. $20/Oz in the US. 10x that, in Argentina. The only thing DEvaluation accomplishes, is extending the runway, IN THE EXACT SAME DIRECTION; further towards the cliff.
As spending continues to outpace revenues, deficits will exceed $1.5 trillion (an average of 5.6% of GDP) in each of the next ten years.
That’s a good one. Do 10 year projections ever work out? Let’s go back to 2014 and see official and unofficial projections to learn if they’re worth a plug nickel…
Perhaps, but if Trump should win I expect the economy will improve as it did during his first term. In addition, I expect he will try to eliminate spending on foreign aid, green energy, etc. So improved economy and less spending would help in the fight against inflation.
Trying to constantly prevent deflation has led to an unintended consequence of too much inflation. I do expect a recession no matter who wins the election. The cycle of recessions being under a republican occupant of the white house may end. The debt problem was tenable until the global financial crisis occurred. Now there.is no way out but to try and prevent recessions through more inflation. We really need a party and president who is willing to tackle the debt first and everything else later. The debt must be dealt with or the pain will be worse. Deferring things forever only makes it worse.
Rent is the largest component in the CPI. The rent CPI : OER Northeast + OER
Midwest + OER south + OER west. The CPI is fake.
1) SPX [1Y] : 2023 is an inside bar. 2012 flip. 2020 #9. If 2024 [C] < 2023 [H], it’s an UT and if 2025 [C] < 2021 [C] ==> recession is likely.
2) MSFT [1Y] : 2022 is an inside bar. 2012 flip. 2020 #9. If 2024 is an UT and if 2025 is deep red ==> recession. No inflation.
3) SPX RSI [1Y] was never in a bearish territory. Not in 1932, or in 1973 nor in 2009. In 1999 RSI was 97.10. It might.
4) Resistance line : 1929 high to 1999 [C].
5) Can we move higher along this resistance line : yes !
The relief will come in 2031 when social security, facing insolvency, will only pay 79 cents on the dollar in benefits or perhaps less. You can read it straight from the horse’s mouth at link below. Note that those projections don’t include any recession.
https://www.ssa.gov/oact/TRSUM/
Until then, the $120b/month in free money handouts will continue to grow. $120×12 = $1.44 trillion per year.
2024 – 1.44 trillion
2025 – 1.5 trillion
2026 – 1.7 trillion
etc, etc… sooner or later you start talking real trillions of dollars for social security socialism. Just wait till the older retirees start hitting the nursing homes in mass droves and watch the medicare costs explode too.
Anyone waiting for any politician to save them is going to be disappointed. It’s best to T-bill and chill.
The numbers will probably be a lot worse by 2031 as there are a lot less people paying ss taxes. The birth rate is significantly down. There is a high % of the population that isn’t in the workforce and people that are paid in cash don’t pay ss taxes.
“The checks will always be mailed.” So said Rep. Rosa DeLauro when confronted about OASDI payments and projections several years ago. I believe her. Why wouldn’t they? The government will simply borrow directly from the Fed and always make payments. This will worsen inflation and ensure the payments are never enough to cover expenses, but who cares? The promise is kept!
No, you are misinformed. SS does not have assets, never has, never will. SS has spending authority by law. Rest assured that Congress will extend spending authority beyond the arbitrary timeline in the current law. Congress may reduce benefits on select high earners, but Congress will never reduce benefits to the masses. Anyone in Congress advocating for benefit reductions for the masses will not be in Congress long.
Do not confuse SS spending authority with cash flow. SS cash flow comes from 2 sources, payroll tax revenue and income taxes on SS benefits (a backdoor reduction in benefits especially with no index of inflation for taxation limits). Note that interest payment transfers from Treasury accounts are not cash flow (they are part of spending authority). SS has been cash flow negative since 2009. All of the excess SS revenues have long been spent, making Federal deficits appear smaller.
The financial position of SS is no different than any other federal government program. Deficit spending from SS or any other source involves more borrowing by the Treasury. At some point, the USA may face limits on borrowing due to inflation and rejection of the USA dollar. The real danger in excessive government spending is economic decline. The USA now has a permanent imbalance between spending and consumption with excessive deficit spending. In the long run, production of goods and services dominates the economy of a nation.
“For many reasons, the Fed will struggle to contain inflation.”
World War 3 will be inflationary. See WW2 for details.
WWIII might be deflationary. The worst deflation happens when cities, factories are
destroyed and millions are getting killed.
You may be putting the horse before the carriage. Likely they will start WW3 to divert a deflationary recession.
NOONE can control inflation/rising prices of products and services. Costs of insurance (health, auto, home), costs of services will continue to rise as labor costs are increasing. Gas prices determine the costs of transportation which affects prices of products. Gas prices may decrease a little if Trump wins but then the states/counties/cities continue to increase the taxes on the gas to keep the prices higher. We’re in a recession now and will be in a depression within a few years. As the economy gets worse governments will spend more money which will make things worse.
“Gas prices may decrease a little if Trump wins…”
Peak $65 per barrel during Trump’s term. Peak of $95 per barrel so far during Biden’s.
Yeah, just a little. LOL.
So what’s new . . .
How did Japan avoid inflation for over 2 decades? The population was effectively flat in growth. My spouse in medicine reports despite Republicans trying to limit abortions, abortions are actually way up and there’s been a slowdown at the labor and delivery unit here that they’ve had to remove one of the doctors on call. This is in a place where the economy never slowed even during covid bc of the influx of people from other places and remote work gaining popularity. Watch for declines in the birth rate and deflation will be possible.. family formation has continued to slow over the long term.
My daughter says the opposite. They have too much work and the salaries for obstetricians are through the roof.
Yeah. The economy isn’t doing that badly yet. We would need a 2009 recession again for things to slow down that much. I think the backlash to.trying to quash abortions is earlier stoppage of pregnancies. I was just surprised things had slowed at all at my local hospitals.
Oh, don’t be fooled. Deflation is the Fed’s biggest threat.
Price rises are not inflation; deflation will continue after the election; there is no inflation.
No recessions. Never again. Unicorns and ice cream for everyone! And these people get paid.
I think we skip the recession and head directly to a depression. Debt accumulated by the US is at an unimaginable level at this time and is compounding by the minute. We are on a unsustainable path. The economy will implode, probably preceded by hyperinflation. Our leaders can’t see the forest for the trees.
None of them factor in a recession all the way through 2054
None of them factor in a year with GDP growth >2.5% either, which has happened 9 times in the 21st century. They are projecting AVERAGE gdp growth, not the same amount every year.
until 2037 seems more likely.
If they predicted a recession on say, 2032, everyone would expect a recession and it would come true. They cannot plan for a specific recession, the best they can do without causing harm is to keep their numbers conservative.
While I agree on the conclusion, that there will be inflation no matter who wins, I disagree in the cause. Deficit spending is not unequivocally inflationary, especially for developed countries.
On the other hand, there are many forces that will contribute to keeping inflation high. To name a few:
1) protectionist policies like tariffs
2) geopolitical energy risks
3) corporate friendly policies that protect greedflation and price gouging
4) lack of support for more competition thiught support of small medium enterprises, for the benefit of large corporate overlords.
Massive deficit spending is unequivocally inflationary. And in “our” current case, intentional and offensively so
The word “inflationary” is meaningless. Those who use it don’t seem to understand what inflation is and what inflation isn’t. Price rises are not inflation. Inflation is a product of a hot economy; not a cooling one like yours.
Well, it’s clear enough that you do not understand what inflation is.
Inflation is defined by Austrian economists as an increase in the quantity of currency.
As you rightly point out, price rises are not necessarily due to inflation. If the beef herd shrinks because of a drought, the price of beef will rise due to lower supply. That has nothing to do with inflation. Likewise, if a refinery has a fire and is offline for awhile, the gas prices in that area might see a spike til the refinery is operating again, but that is not inflation. Furthermore, even if all the prices of everything are rising, that doesn’t cause inflation: rather, it is a result of inflation (an expansion in the currency supply). If an increasing quantity of dollars are chasing the same limited goods, that is a result of inflation.
You are 100% wrong that inflation is the result of a hot economy. That is junk “Phillips curve” science that should have died with the stagflationary 1970s, which should have been impossible under the Phillips premise that high inflation is associated with low unemployment.
High rates of inflation have exactly one source: the expansion in the quantity of currency. Post-Covid, we saw a rapid 40% expansion in the currency supply. That currency has filtered into different portions of the market at different rates, but the end result is 40% inflation across the overall economy. The idea that wage increases cause inflation is quickly debunked when you see that nominal wage gains have been significantly less than 40% (actually about 15% from Q1 2020 through Q1 2024).
Inflation in a debt economy like ours is an increase in personal debt. I’d hazard to say that personal debt is on a path to destruction.
If you are bored, watch the documentary “inside job” on Amazon. Although some of the players names have changed, it’s still the same teams. They change the rules much like NASCAR, to benefit a few race teams. They consolidated power, further reduce the accountability, and promoted further deregulation for themselves. Now, it’s about a regulated economy for the rest of us choking off our ability to get ahead of our own debt curve. The public in private financial systems corrupt. Much like the Soviets in the 1980s, they promote fake statistics so people can feel good. All the while stealing money for themselves.
Yep, inflation is going nowhere as long as we keep spending money. No matter who enters office in 2025 there will be a financial crisis. Don’t forget the “great reset”.
Spending is down and falling… where’s your “inflation”? It’s nowhere, there isn’t any.
You must be a recent graduate of the Keynesian college for Democrats majoring in MMT.
I don’t get on here much but, this kind of stuff brings me joy. My weekend is fulfilled now that I’ve triggered a liberal.
Deflation is possible. President Trump & and conservative Congress would need to take draconian measures. Raise interest rates to near 20% and crash commercial real estate and the banks. Lay off half the Federal Government impediments to prosperity including entire departments. Repeal minimum wage to create jobs for unemployed Federal parasites and stimulate reshoring of manufacturing. Raise tariffs to inspire reshoring and the hiring of unskilled Americans. Ash can the green laws to make oil, gasoline, and electricity cheap again. Defeat Russia. The prosperous industrial standard of living we once had was built and sustained with abundant fossil fuels. President Trump III would be a lame duck.
20% will never happen with the current debt load. And Repub delusional fascism aint gonna work either. Lay off the Federal govt? Where you been hiding? 🙂 Half of it is military. We will muddle thru day by day till we cant. Your plan only works in your mind. 1962 is gone.
Democrat delusional fascism hasn’t worked either, and there is no inflation.
But there has been national peace for 50 years. 🙂
The years 1346 – 1353 were deflationary, for some reason.
Asset prices went to zero I assume. That is debt deflation — when bonds etc become worthless …
Price falls are not deflation; price rises are not inflation.
Demand falls as population falls; scarcity rises as population grows, depending on the rate of growth. Surely this is obvious?!
What is debt deflation, or just deflation? What causes it? Only definition I ever found was the default of bonds and the zero-ing of value in assets. Deflation is caused when a whole lot of stuff that was valued at some value goes to zero. No?
No
It’s the decrease in the value of debt (though it could go to zero)
I think I just said that.
No
Yes, 25% of Europe died of the Black Plague. Owners of skilled labor serf slaves were free. Scarce labor commanded a high price. They migrated to cities, worked for wages, and the industrial economy of Europe emerged.
My god someone reads books besides me!
To your point I would add:
The Freemasons arose because the elites needed their castles and churches built of stone, so a secret system was derived to bypass the wage enforcement system and allowed elites to compete for specialized labor in masonry.
The only caste members who arose to manor tier wealth were the masons. Everyone else was a wage slave.
The commodification of advanced skills means wages for everything are going to plunge. No one will be able to afford $3000 – $5000 mortgages and 80,000,000 boomers sucking up end of life health care and SS and no one to buy their overvalued homes.
Real estate is going to deflate like a balloon.
Taxes will HAVE TO go up to pay the retirement promises of state and federal workers.
If you don’t see a collapse in this your not looking.
They will never shrink the government. NEVER it will only grow more vile and despotic – malignant and abusive. Beatings will increase like 1/6 to remind everyone who’s boss.
Obey
Fewer people is a good thing.
You can’t defeat Russia. The smart move is for Trump to take the opportunity of a fresh start to repudiate Obama and Bidens anti Russia policies and Russia election interference DNC hoax. Make a sincere apology, remove ALL sanctions, pay full and fair compensation for any sanction damage and become partners.
Any attempt to defeat Russia will just be more opportunities for the CCP to link Russia and China together to the detriment of both the US and the world. What Obama and Biden have done to push Russia and China into a marriage of convenience would be the envy of any Chinese asset in the US in their success.
As for the rest of your suggestions I like them but what chance that they will be implemented?
Trump is a real estate magnate. Why would he want to crash the real estate market?
To buy cheap.
November is looking very Thelma and Louise. Biden’ handlers keep it together a few more months, win the election and then let it fall apart. Yes, Trump won’t make much of a difference.
I think something is going to happen during this summer that will change everything in the election.
Where’s that Deep State when ya need ’em?
Trump and Biden both die of old age?
And in 2025, no matter who is president, interest rates will go to zero. Neither candidate will give a whiff about inflation once they are elected. Now, are interest rates gonna even be able to fight an inflation that is very different from the 1970s inflation, which was energy-based? (energy/pump prices/natgas are areas today where prices ARENT going up). This is not your fathers inflation.
If interest rates go to zero then inflation goes to 20%. Then inflation goes to 30%, then 40%. Who will buy US bonds? Who will hold reserves in USD knowing that they will both drop on the exchange rate in other currencies as well as drop on their purchasing power every day due to inflation.
I can keep my reserves in gold, silver or any sound currency like the Singapore dollar if I can only earn zero percent on USD. So can any saver in the US or the world.
And that 35 trillion debt is just federal government debt. I hear cities like Chicongo and states like California have even worse debt problems and will somehow need to keep rolling over bonds at the same time running up new debt. Fun times ahead for the muni bond market.
There is no inflation. Interest rates falling to zero will be because bond yields fall to near-zero; which will be because bond prices rise higher than now; which will be because money is moving into buying US debt to protect it from malinvestment in a weak economy.
International bond buyers are diminishing. China doesn’t want US debt; Japan and Korea don’t want it either. Do EU and EFTA states want US debt? I guess if overleveraged EU banks get stressed, they might buy in.
The only countries that can buy at an international level are countries that run trade surpluses. Countries that run deficits or are net zero (or very close) can’t buy the bonds because they have no surplus money.
So when you are looking for countries to buy US debt, look at the ones who have trade surpluses.
Inflation isnt the end of the world. Israel has had 10% inflation for decades and its still very busy mowing down Gaza. It’s uncomfortable but it isnt death. A whole lot of countries survive (more or less) with inflation for some period of time.
It’s not inflation – that’s how different it is. Prices are up because of engineered scarcity. You can’t have inflation when growth is contracting; when money-supply/credit is contracting; or, not growing more rapidly than the economy.
This time around inflation is different than the 1970s. You have businesses trying to temporarily up prices to get back some of the money they lost in Covid. You have baby boomers (some with government jobs) retiring and requiring pensions. You have home and auto insurance spiking due to weather. You have property taxes which go up every year anyway. You have Covid-related supply shortages. Meanwhile energy prices are pulling inflation DOWN. Its a very different inflation this time around.
There are no good options. There is a higher likelihood of a rate hike if Trump is elected because many of the policies would put more disposable income in people’s hands..
The Fed and Treasury can stave off any currency crisis as they interfere in US bond market anyway.
Ray Dalio says the odds of a real civil war in 2025 are now 1 in 3.
I haven’t ruled out another pandemic in 2025 that would kill energy prices but keep productive parts of the economy (tech) going.
define “civil war”
“ if Trump is elected because many of the policies would put more disposable income in people’s hands”
What are these miracle policies that you speak of? Free money distribution?
Does Ray Dalio explain how this civil war is supposed to play out? Are rural people going to “invade” and “fight” city dwellers because that’s essentially how red vs blue sits right now. Or are city dwellers going to invade rural areas and occupy them?
You can take any populous state like Texas, California, New York, or Illinois and run the traps, the cities are all controlled by Democrats and the rural empty and spread out counties are run and controlled by republicans for the most part.
Additionally, the median age of the population in most of these states is pushing 45+ and the GOP rural folks are pushing 60+ so who is supposed to be the cannon fodder for these wars? There sure aren’t enough young disposable people to go around as it is right now.
And most importantly if there is any type of civil war don’t expect the Fed to be handing out social security or medicare checks to insurrectionist states, it’s not going to happen and if you think red states like Texas or Florida will suddenly hand out money to the elderly, they will be greatly disappointed.
Civil war requires starving people willing to bet it all (read history — French 1790s). We have obese people who have little interest in even walking to the store, and they play video games all day long. A bunch of crazies with automatic weapons hardly defines a civil war army. Also remember Biden controls the national guard till January 20th and will stop it, not like Trump who let the crazies run over the Capitol. I know youve been hoping for war for decades (which comes to your doorstep too, and to your family who will die as well), but its gonna take more momentum than we actually have.