Stagflation and the Fed's Catch 22

The new Biden budget has the national debt going to 50 trillion dollars in 10 years. For this year, spending will be 7 trillion dollars and tax receipts are estimated at 5.2 trillion. If you had a normal 5% interest rate, we would be paying 2.5 trillion dollars just in yearly interest payments in 10 years. About a third of U.S. debt rolls over every year so it might take a few years to get there but we will.

In ten years almost a third of adults will be retired. The costs of Social Security, Medicare, Medicaid and government pensions will equal 100% of tax receipts according to CBO projections. Immigrant families receive more in government benefits than they pay in taxes, so our high immigration levels make the situation worse. You also have the defense budget and all the other government programs.

We can't come up with enough money to pay interest on the national debt along with everything else under such a scenario. We will either default on the debt or go into hyperinflation and pay the debt back with worthless money. It would be a good idea not to hold government debt or the dollar. Gold, real estate or other physical assets may be safer.

Only unbelievably dumb third countries think printing a bunch of money makes them richer but you know looking around at nonsense going on in some of our iconic cities, yeah that title sounds about right for us now adays.

In 5 years this crisis will be nothing but a distant memory.
The thing no one seems to understand is we keep creating more and more wealth with every new generation and new problem will be solved. The next crisis will be larger than this one, even so the world will keep turning, life will go on, babies will be born old people will die.
In the grand scheme of things this is a big nothing burger.

Scrubby your a lowlife POS, why don’t you go away, you’re just embarrassing yourself

^ so none, is how many friends you have, we won’t count the turkey baster !

Well, I do agree with DesertScrub, and no this is not a “Shill Review/Club Ad”. Govt can behave like a malignant cancer and blood clot that can kill its host.
Coming out of WWII and Korea, America decided to be consumer-based economy, and Europe a Big Nanny economy.

In the 1942, millions of workers were diverted to the war effort leaving a lot of businesses with a worker shortage; remember women in the workforce was different back then. Govt economists were alarmed businesses would jack-up salaries to compete for workers and inflation would spike coming out of the depression. Roosevelt passed an Ex-Order creating the Office of Economic Stabilization and wages were frozen – don’t ya just love how govt names stuff like “The Affordable Care Act” or “The Inflation Reduction Act”. Businesses found away around this freeze and started providing benefits like FREE HEALTH INSURANCE, and the IRS made employer-based health insurance an expense (tax deductible). Keep in mind, health care was cheap compared to our costs today. Now, govt meddles and controls today’s medical care and costs have gone ballistic since The ACA. There were better ways to provide medical care to the indigent and those needing catastrophic care rather than stomping on everyone.

In 1968, Medicare was created as part of LBJ’s “Great Society” plus in places like Chicago, Baltimore and NYC we got The Projects as part of Welfare, and those turned into Black Holes of Calcutta with drugs and gangs. At the same time, surplus Social Security tax collections were rolled into the General Budget rather than creating a real Trust Fund – taxpayers were made the “Trust Fund”. In a properly managed “Social Security” program, which is just like a corporate pension fund, it wouldn’t be the mess it is today and more could be provided to retirees. Social Security is run by people like FTX/Sam Bankman-Fried and it won’t end well. Plus, Boomers are retiring and not enough younger people are working to fund it – just like run on cash at the bank. While Unemployment is at “3.6%” the Labor Participation rate is lower too – meaning fewer people that can work aren’t as they suck off the govt tit. How is it people who don’t have two Nickels to rub together have smartphones, tattoos and decent cars? Welfare has greatly expanded.

Least we forget the inflation issue in the 1970s. Long story short -1971: Nixon did Wage and Price controls for 90 days, and people LOVED IT. Nixon created a Pay Board and Price Commission that would eventually go away after the 1972 election. Nixon blew-out McGovern. Inflation was around ~6%. Friedman predicted this would be a disaster. Nixon did another freeze in 1973. The Price Controls didn’t work. Ranchers stopped sending cattle to market and killed off chickens as they couldn’t afford to raise and sell them. Consumers craped their pants and we had runs on grocery stores. Then it gets better: the Arab Oil Embargo and we have gas shortages: consumers could only buy gas on days with odd/even license plates – gas lines were huge. Carter said we need to be energy independent. That was 45 years ago.

Now we move into the 1980s, and inflation was blistering. To control inflation Fed Chair Volker raised interest rates, and I mean he RAISED THEM. Certificates of Deposit (CDs) at the bank were yielding around 16%. Mortgages were 14%. The main difference between what Volker did and what Fed Chair Powell is doing by raising rates is Raegan cut taxes (giving people more money to take home) and cut some govt spending – yeah I know he went Big on military spending, USSR did collapse. We did have a Stock Market and Savings & Loan collapse that was horrible in the mid-1980s. Again, I look at govt being the arsonist who tries to put out their fire. The Resolution Trust Corp was put in place to deal with the Savings and Loan mess plus handling bankrupt properties. RTC had a $200B budget, and it was all paid-back over about 10 years.

In the 1990s during Clinton, he pressured banks to stop Red Lining or face the wrath of AG Janet “Waco” Reno to loosen up lending with the Community Reinvestment Act Carter passed back in ~1978. So now we have Sub-Prime lending with ARMs and teaser rates backed by the govt – Fannie Mae and Freddie Mac.
Then in 2007 Jim ”Mad Money” Cramer did his spontaneous Federal Reserve “They know NOTHING” Rant live on CNBC and he was right. In 2009 Rick Santelli did a rant on CNBC on the stock room floor about Obama’s mortgage-bailout plan. These financial disasters were caused by the Sub-Prime Mortgages with govt (taxpayers) backing. Once again, the govt was the arsonist and fire fighter. So rather than letting bankruptcy take care of the idiots who took out loans they had no business having like was done back with the RTC in the 1980s, taxpayers footed the bill.

So today we’ve had 0% fed rates for way too many years. Govt spending is totally out of control – BY ALL IN GOVT. The Federal Reserve has like $8T on their books (not part of the govt $31T debt). The way the Fed gets money back is via interest rates. Raise interest rates, bond prices go down and junk banks like Signature, Republic and SVB who had crappy fiduciary management blow-up with runs on cash, and Biden says FDIC will cover ALL deposits, not just $250K, taxpayers won’t pay a dime as banks pay into FDIC. Well, FDIC will just raise their fees to banks and banks will raise their fees to customers – taxpayers. BOHICA

Inflation is primarily caused by 2 things: printing money and excessive govt spending. Think of Green Backs like Stock Shares. Simple math: You issue 100 shares valued at $100/shr so total value is $10,000. Now, issue (not sell) 100 more shares and the value of each share is now $50. Printing money is the same thing.
One thing govt doesn’t think or care about is spending money. It isn’t theirs, it’s TAXPAYERS.

PM Margret Thatcher summed it up perfectly: "The trouble with Socialism is that eventually you run out of other people's money."

Tucker Carlson also had a great quote just 18 months ago: “Never has a better country been run by worse people,"

History is repeating itself over and over and over. It's really up to voters to break this Politburo we have in DC. States need to convene a Constitutional Convention - last one was in 1792 w/the 10th Amendment: The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.

If you read all this, congratulations.

Also, what about the health care costs for the millions of illegals pouring in with no income that will be saddled on taxpayers?

===> "Also, what about the health care costs for the millions of illegals pouring in with no income that will be saddled on taxpayers?"

Dude we need more immigrants, legal or otherwise, not less. We are aging and we just don't have enough workers for our current needs or to support the future crop of retirees. The U.S. birth rate per woman is 1.64 and declining rapidly.
Replacement rate is 2.1. Immigration is the only reason why we don't look like Japan or some of the aging European countries. Sadly in the 90s we made changes which limited family pull through, which has made it nearly impossible for Latin Americans to come here legally anymore.

===> "Dude we need more immigrants, legal or otherwise, not less."

I get the population problem, 100% & what is happening in Japan.

Legal/merit-based, immigration is one thing. Open borders, the 14thA (it needs to be updated that at least one parent needs to be a legal citizen for the baby born on American soil is an automatic "citizen"), Chain Migration (started back in 1968) are real problems with millions pouring in with no skills to generate the income needed to support the welfare state.

SS and Medicare are not welfare program, American citizens paid into them and expect them to be there when they retiree. Even Cesar Chavez was against illegals back in the 1960s as farm workers. Low-income/indigent won't problem the tax flow to support the SS & Medicare Ponzi Scheme. Had these been properly managed, we would be what we are facing today. Medicare has gone to a monthly premium that rises each year as you age, it has "contacted" rates with medical providers, covers 80% after you pay you your annual $215 Part B Deductable and you need a Supplemental Plan that covers the other 20% Medicare doesn't pay. Medicare at $150/month*12=$1,800 + Supplemental $150/month*12=$1,800 + $250 = $3,850/per out of pocket, and retirees getting SS have Medicare deducted each month . As you get older, the cost increases - I managed my mother's finances.

Medicaid, welfare payments, cash to homeless, SNAP/EBT/FOOD STAMPS, Section 8, subsidized ObamaCare, subsidized mobile phones and other programs for the low income/indigent are welfare - redistribution of wealth. Even Bono (U2) who was (keyword=WAS) a staunch socialist has changed his view to more capitalism. Even Sweden is slowly nudging socialism back (keyword=socialism). I get we will also have those in need, we just have too many addicted to govt handouts.

Americans are numb to taxes and the associated fees and costs as they don't shell these out each month.

What we have is a govt spending problem and morons who get voted into office recycle after cycle to run govt. Sure, do term limits, Lobbyists are the ones in-charge - follow the money. Now we have The Biden Family that operates like one of the Five Sicilian Families in NY only Brandon enjoys a good young girl hair sniff to get off. The only decision Biden makes is what socks to select each morning, and I even doubt he does that alone.

You can't tax a country into prosperity.

Just to add a couple data points to point out what weird times we are in - oil is way down. It was $121/barrel on June 9 and is at $66 today and has steadily been trending down. As a component of many products plus its cost to the transportation of such products, manufacturing costs are declining. Who knows if this savings will be passed onto consumers. Second, bitcoin is way up from $21k to $26k in the last 5 days. Maybe all the tech bros are moving their cash in excess of the insured $250k into it. Moving cash from ‘safe’ banks to a highly volatile crypto. Weird times indeed.

Here's a cray cray idea, how about we lift the cap on FICA taxes meaning all earned income is subject to FICA tax. Then at the same time we cut the FICA tax from 6.2% (12.4% both employer & employee) to between 4 & 3.5% (7-8% both employer & employee) but you know that will never happen because rich cunts (mostly older people) won't go for it.

Changing the FICA tax as you say is reasonable and lift the income cap. The last line you said BLEW YOUR SUGGESTIONS OUT YOUR ASS LIKE PREPPING FOR A COLONOSCOPY! 💩

Stagflation requires high unemployment.

Since unemployment is near a 50-year low and there are no strong indicators of a coming sharp rise, the case for stagflation is weak at this time.

High unemployment would suggest Recession/Depression. Today we have low Labor Participation Rate meaning a lot choose not to work for assorted reasons including welfare pays better.

The Fed is carrying around $8T on their books which is highest ever adjusted for inflation and economic growth.

One big problem aside from moronic govt spending is inflation is running higher than wages/raises so people burn saving and run up their credit cards with interest rates that are rising - this is highly volatile.

The other thing is a lot of people are inheriting Boomers & The Greatest Generation estates and choose early retirement over the Woke BS at companies.

It's possible that the labor shortage is real if you are an older American, but not reflected in raw numbers or in wage increases because of benefits programs and illegal immigration. Companies dumping expensive employees for cheap newer ones is not new. What if with one hand the feds were helping feed the cycle which keeps wages reduced (fresh low wage employees) and with the other hand keeping the deficits ballooning (out of control social spending) because of the importation of fresh willing to work for little employees replacing folks who quit, are layed off, or find a disability to shelter under? The unemployment numbers can be very deceptive because once you've been out of the game long enough you don't get counted as unemployed, you're counted as not seeking work. The laxness of disability programs plays into this.

As far as the supply of fresh workers goes (I've raised three boys to adulthood. I know this ain't their friends getting after school jobs):
https://www.detroitnews.com/story/busine…

This was my point about India taking over global IT with dirt cheap labor (you get what you pay for) just as China took over global manufacturing. This creates a real lack of diversification. A good approach to investing is diversification. Look at the Labor Participation Rate in the USA compared to the past 50 years - it is dropping. Cheap labor will never generate the necessary tax review for SS, Medicare and Medicaid controlled by govt. We are a Representative Republic, not a Democracy. "America is the best country ever ruled by the worse people." (Paraphrase - Tucker Carlson, Nov 2021 - Patriot Awards).

The underlying issues are government overspending, government over regulation ( especially of energy ), and a break down if the supply chain. We are attempting to fix all this exclusively through monetary policy. That’s impossible.

The way to fix all this is to go back to the spending levels we had pre-CoVid, encourage energy production ( drilling, nuclear ), and incentivize bringing manufacturing back to North America. Do all that, and our economic problems would be quickly solved.

Here’s one specific example. The $7,500 EV credit is about to kill off the automotive industry. It is forcing a transition to electric much more rapidly than it otherwise would. The only car company to survive will be Tesla, which has a cost advantage over its competitors.

Tesla is building a mega factory in Mexico ( because regulations allow the credit for vehicles made in North America ) which will produce 2 million electric cars with a price of $25,000 within 2 years. At that point, consumers will have a choice between a $30,000 American-made gas car and a $17,500 ( $25,000 minus $7,500 ) Mexican made electric car.

That’s happening right now. We are spending untold billions to kill the American auto industry. All, in the name of climate change. It’s insane.

Our government at work.

Incidentally, the $100 Billion, give or take, that will be spent to secure the deposits at Silicon Valley Bank, will go to people like Gavin Newsome and Oprah, and organizations like Vox and Buzzfeed. It’s a who’s who of Democratic donors. Not to mention Chinese account holders.

But, yes, Chairman Powell, we need you to fix this inflation problem.

^ More copy and paste from Truth Social ? I guess these kind of talking points might resonate in a right wing bubble. But anyone with half a brain can figure out this is one sided and SVB had Republican depositors, small business owners, etc. and that the idea this was motivated by helping Dems and the Chinese is crackpot.

Bank runs are always fueled by panic, panic is proof that the world is pretty basic and financial cycles will run their course, eventually this too shall pass.
This crisis ain’t left wing or right wing, it’s just a periodic point of the cycle.

EVs having so many problems for today and govt is bum rushing into them. Sure EVs will work for some but not the masses, or for evac’ing from Florida for a hurricane. ACA wasn’t needed for the masses, govt bum rushed it in when the Dems had a strong majority yet there was a need for some that should have been a focused program.

Bill Clinton and Bob Dole balanced the budget in the late 90s (with a small surplus). I think it's fair to say the Republicans are more different from Dole than the Democrats are different from Clinton. So, you do the math.

Deposits are leaving community banks and going to the big 4, largely out of concerns about securing their money. When questioned this week whether she would protect deposits at, for example, a regional bank in Oklahoma whose depositors are farmers, Yellen said she wouldn’t.

Bill Clinton and Bob Dole balanced the budget in the late 90s

Bill Clinton showed no interest in a balanced budget until Newt Gingrich took control of the House in the mid terms. Newt’s Contract with America promised a balanced budget. So, let’s not be too quick to give Bill credit for it.

An alternative choice to The Bigs for consumers would be credit unions. Sure some need the services The Bigs offer.

Translation: Yellen said she’d use caprice whim on who sinks or swims and THAT is not her job. Consolidation to Fedcoin is the long term goal.

From the Daily Mail

“One of the progressive liberal politicians pushing for reparations in cash-strapped San Francisco also wanted to defund the police, and believes some Honduran fentanyl dealers are human trafficking victims who should be protected rather than prosecuted.

“Hillary Ronen is one of the 11 supervisors who will decide on a wide-eyed reparations plan for the city’s black residents that would pay them each $5 million, promise them $97,000 salaries and wipe away personal debt.”

They’re from the government. They are better than us. Thank goodness they are looking out for us.😏

They are morons who have a Global Progressive World Order who self-identify as “experts “. The USA needs to be “kneecapped” and the Dems are more than open to help.

It’ll take years at the ballot box and getting our education system away from indoctrination and grooming. What is being done creates continual devolution.

Trump was the fly in the ointment. His policies were excellent his communications sucked. The persecution he and his associates are getting is character assassin. The ends justify the means and the end is the Global Liberal World Order.

Look I’m not an economist I’m a carrier engineer/architect analyst who looks for solutions. And I happen to like strip clubs as a fun adult activity.

In ‘86 President Ronald Reagan said, “The nine most terrifying words in the English language are ‘I’m from the government and I’m here to help.’” 😎

“Hillary Ronen is one of the 11 supervisors who will decide on a wide-eyed reparations plan for the city’s black residents that would pay them each $5 million, promise them $97,000 salaries and wipe away personal debt.”

If San Fran wants to be an object lesson in how to destroy a city, let them have at it. As long as the state and fed tell them "you're on your own--you want to jump off a cliff, we're not going to hold your hand." Of course, progressives have raped Detroit, Chicago, Baltimore, and many more, and we haven't learned, so...

This is how you work your way out of stagflation. You improve productivity and grow your way out of it.

A US-based developer of small nuclear reactors, Last Energy, has signed a deal to sell 24 of its power plants to UK customers.

The £100m modular units, which are two-thirds the size of a football pitch, can output 20MW of electricity, enough to power 40,000 homes. They will be deployed in 2026 with no government funding required.

That works out to a one time cost of $3,000 per house ( plus ongoing operation cost ) for reliable, clean electricity for 30+ years.

If government would just get out of the way, we could have lower cost energy independence, bringing the cost of everything down.

Mark regarding what you mention wouldnt the gas cars prices be decreased in order to be more competitive? And gas prices could also go down in both cases due to less demand?

Very, very dangerous to take a knee-jerk approach with STEM competition from outside the US. Definitely true that, due to ageism, better quality work by older US STEM workers is being rejected in favor of lower quality work by younger overseas or H1B STEM workers. But totally prohibiting non-US workers would do way more harm than good. The bright spot that the more crucial STEM jobs, when done by non-US workers, go to the top ones. There aren't enough of them to displace equally talented US workers.