Since the GFC, QE tripled America's debt while keeping payments of interest flat.
Now the skies are full of chickens and black swans. America - by debt, inflation, inequality, social & political division, and war ( physical and economic) - is a complete catastrophe - as predicted here since a long time ago.
Surely they can't be thinking of printing again? Yet cuts to social security and Medicare would send the people back to the White House.
Already markets are panicking. The coupon for short-term US Treasuries is higher than corporate bonds and three-month T-bill rates are higher than one-month - this is markets saying they want more to hold the dollar through this debt-ceiling crisis. This really disorients calculations using the once "risk-free" rate. As proof, Standard & Poor’s have dropped America’s rating a notch - what if other rating agencies follow?
The entire world economy is built on credit and the starting point is the US Treasuries so-called risk-free rate. This is a bit more than just migrating the software code to new parameters.
Biden and Trump have said they won't cut. Yellen at the Treasury is down to her last 30 billion and will have to prioritise interest payments over welfare cheques, swelling the Trumpist camps in the barrios. Powell at the Fed pushes forward with hikes, resists "the Fed pivot", continues to defend his mandate on "stable" prices and employment - is inflation really cooling? Pushing the workforce into unemployment to reduce wage and consumption demand doesn't seem to be working - is this because fewer and fewer are active in the labour market?
The RoW (ie eurodollar land) knows all this and is running for the hills!
Have you heard of Ray Dalio's All Weather Portfolio? ... Coming up next ...
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