Viewing a thread - $50 Billion, $100 Billion, $50 Trillion, $100 Trillion Dollars from 2008

sand85 - 5/6/2024 07:13

I imagine it looks like runaway inflation based on a post 1985 or so baseline.

At first glance, it sure seems like the Fed.gov continues really excessive deficit spending. I am not sure it is unsolvable or unprecedented based on demographics and global trade flows, but it sure doesn’t seem indefinitely sustainable. The Fed Reserve seems to have trimmed its sails and is pulling back.

My question, as a relatively inexperienced market observer, is what will it take to bring fiscal policy back into alignment with more historical norms? Higher T bill interest? Political winds change the approved federal budget? I have been thinking the economy has been coasting on inertia for a while as lower interest rates resetting to higher rates slow consumer spending and business investment but apparently it’s ability to absorb more debt has not been met yet.

I saw a blog post a while back that the Treasury has an extra $1T balance right now because they just collected up a bunch of taxes, so that will probably get poured into the economy in this election year maintaining some liquidity/froth in the economy. Is this a classic situation that the next elected government inherits the hot potato as finally consumer confidence turns? I sure have had my portfolio positioned wrong for 18 months but talking to fairly financially conservative friends I am not the only one.

In fact, the entire commodity complex continues to broadly trend lower, especially in gold terms. As I have emphasized in the past, commodity prices are “best” measured in gold terms if our objective is to divine whether prices are being driven by economic growth (boom like the 1980-2000s) or monetary concerns. The behavior of commodities in gold suggests the most likely culprit is the latter:

This observation, of course, is grist for the mill of those arguing monetary debasement. And as I’ve accepted before, the monetary debasement is likely coming. Just not here… yet. The dollar shortage is building. We can see it in FX, where the quantity of goods that China, Japan, and Europe must sell to the US to obtain the same quantity of dollars is rising.

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