The Country is a Financial Basket Case
Most of us locked in our homes, locked out of our favorite restaurant, having grocery store outside pickup, working from home or schooling from home are fed up. This country is a mess. Even helicopter money raining down on us from Washington won’t be enough.
When Trump was elected, I thought he understood commerce, big business, small business, the oil industry, and working people. He took off with a roar beating up Mexico, Canada, Japan and South Korea on trade deals.
But he’s stuck with China fighting a battle that other Presidents ignored. If he’s re-elected he can get a better deal, if he’s not re-elected then we will need to order a big #2 sign for America.
Positive things said, the country is truly in a mess, a pandemic of its own making I call it “the fiscal flu.” Call it a money mess or a credit crisis, whatever, but we do have a debt crisis of unthinkable consequences.
The Federal Reserve’s 30-year Tinkering with Interest Rates.
We all want America to be great, but did we really have to borrow $xx Trillion Dollars to pretend we’re a rich nation. Do we really need near-zero interest rates or the Fed micro-managing everything to the benefit of the rich and the detriment of everyone else. Take Bonds for example.
We once owned an Austin School District, tax-free bond that paid 9.25% interest. Thanks to the Federal Reserve I haven’t owned a bond in decades or a bank cd that’s pays a mere token interest. I imagined 20 years ago that if I accumulated a million dollars for retirement I could leisurely live on totally safe, insured bond interest of $80,000 to $90,000 a year. The Federal Reserve certainly changed that game plan for baby boomers.
Fed Actions Year 2000 Till Now
If destroying interest income isn’t enough, the Federal Reserve has pumped money in one crisis after the next. Changing Presidents and Congress did not help. They borrowed and spent us into a corner that I never imagined could get so bad so quickly.
The first article I ever wrote about government debt urged President Reagan not to exceed the $1 Trillion Dollar debt limit. At that point, the total U.S. Government debt for the War of 1812, the First World I, World War II, the Korean War, and the U.S Interstate Highway system was less than $1 Trillion Dollars. (Pause to think about that.)
I guess you know by now that Washington and the Federal Reserve Banks disregarded my warnings about Debt as we passed through $10 Trillion of debt… more than $15 Trillion Dollar of Federal Government Debt, my plea literally begging the whole bunch in Washington to slowdown before we hit the $20 Trillion Dollar debt level.
We forecast we could never afford the interest alone on a $20 Trillion Dollar debt. They listened and dropped the interest rates to ridiculous low levels. Not what I had in mind. Oh, we always rollover the interest and finance that finance that too. America never repays the national debt.
Maybe I Was Wrong About the National Debt
I now think maybe I was wrong about debt all along. Today’s U.S. Government debt seems just fine. Here it is live growing by the second.
Let’s see if you are ok with this analysis. Today, we can project every man, woman, and child living in America owes at the time of this writing xxxxxx. It’s easy to calculate, you take $2…. divided by 333? Americans equal a debt of… oh wait a minute, my calculated doesn’t go to $27,xxxx.
Thanks to my Excel spreadsheet, I can get to you, your spouse, you partner, your friends, your children, your grandchildren each owe the U.S. xxxx all the billionaires in the world can be taxed enough to cover $#7? Tril.
The blame lies to the door of politicians and the Federal Reserve. The Feds
efforts to micromanage the economy have failed miserably. For decades,
One Fed Chairman (and Chairwoman) have marched before Congress saying they have a new plan to get us out of a crisis, only to create yet another more massive crisis.
Americans survived from crisis to crisis and bubble to bubble for over three decades… maybe as far back as 1971 when Nixon took us off the Gokd Standard.
We had the one day crash of 1987 that wreaked havoc for the next three years. We suffered Through the Long-Term Capital Management collapse in the late 1990s, some outfit I never heard of nearly took down the US. Financial banking system.
Back then, Inwatvhed n total dismay as investors piled into empty promises and get rich quick corporations.Then, not quietly I might add, as an entire generation was so,d a bill of goods that the Internet was the thing, the only thing, high tech, computer chips were the saviors of us all. In the dot com bust, thousands of companies, including internet giants went bankrupt or disappeared. The NASDAQ was loaded with these public companies that had never made a profit ever, who found theirs stock schemes
In the 2000 dot-com crash lithe NASDA Index fell from xxxx to yyy for a loss of 80% of its value.
The government and the Feds came up with the idea that we needed more houses to get everyone 8n their own home. Then came the 2008 housing market collapse… and the list goes on and on.
Today Everybody in Washington Can Just Blame Covid19
Indeed, the Covid19 pandemic was a blue swan event— an unexpected disaster in every way. Be forewarned: This crisis is far more dangerous, more toxic to freedom and the free market economy than any of the previous financial calamities.
Here we are unexpectedly stuck with catastrophic levels of unemployment. About 27 million people continue on some form of unemployment. On the other hand, the Stock Market’s bizarre recovery is adding to social unrest and the disparity between the rich and the poor. More tinkering?
Key economic sectors of the economy—retail, restaurants, automotive, airlines, leisure travel, the movie industry, energy, … have been shutdown for COVID, on furlough, parked jumbo jets sitting idle in the desert, Disney cruises a distant memory.
Before when we’ve had a recession, or the a Great Recession of 2008, the government bailed everyone out that they could… especially their banking buddies.
This crisis, yes this crisis is massively different. A severely bloated Fed balance sheet is now loaded with ?? bonds, Etfs, and we don’t even know if they just bought individual stocks. How can you create money out of thin air, transfer that to buy junk bonds, government IOUs, and nearly failed ETFs without there being consequences of catastrophic proportions.
Let’s face the facts, the Federal Ddeficit this year is dangerously close to spinning out of control. Interest rates are already near zero, and they will remain there for a very, very long time.
You can blow up a balloon with helium, but sooner or later the air leaks out and it goes down unexpectedly. My worst fear is that COVID has created the last balloon the Federal Reserve can inflate.
The last news about the Federal Reserve was quite ominous— and I quote “Fed Warns of ‘Extraordinarily Uncertain’ Path of Recovery.
But wait, I might be wrong. They can always inflate the next balloon with INFLATION.