Since 1971, US govt.s have spent like there's no tomorrow - today it seems like there won't be.
America broke the dollar-gold link because France and Germany were asking that the money they'd lent be returned in gold. Effectively, America had defaulted.
Correct me if I have misunderstood things.
America is in a cleft stick. Tax receipts don't cover expenses, raising interest rates take interest payments to ? 40% of receipts, so need to borrow even more...but who is going to lend at that risk and that interest rate, so the markets are driving the 10-year yield.
Lower rates and you stoke inflation.
Raise rates and you bust bonds, then equities, then the real economy.
First, property suffers, especially commercial.
Then higher inflation causes demand to slacken so company revenues fall.
Higher rates to tackle inflation mean higher costs for companies, on top of lower revenues and mean lower earnings.
If profits fall, people get fired, unemployment rises.
Now, welfare increases and demand in the economy drops. And so on...
How can the fed keep rates high when this will bust the bond market?
How can it meet interest payments?
The value of bonds is inversely related to the coupon and so if rates rise, bonds fall in value.
But these bonds are often collateral for other loans,
which get downgraded and then at BBV- they reach junk status and have to be sold,
increasing pressure on the bond market.
It is just cause-and-effect linkages, "action-reaction", Hegelian logic.
At first, they spent money they had.
Then, they spent money because it was so cheap.
And now, they spend because they no longer care, because they have to, the dollar is a busted flush and they know very well that the only way out is "higher forever"....higher inflation and total currency debasement...."the pound in your pocket" ha ha. That way, in real terms (face value minus inflation), the debt is worthless, it's gone, all burnt up ... but so is the currency.
So both parties in Congress and Parliament are as one in their delusions of Anglo-Saxon exceptionalism, divine providence and eternal hegemony.
They enter foolish foreign adventure after foolish foreign adventure because they are totally paralysed, cannot evolve, cannot share, cannot understand.
They think they can endlessly spend their way out of trouble as if there are no limits.
Meanwhile populism reigns, the people take to the streets in their disgust at the wealth gap and these stupid wars. The elite won't change, can't change.
Meanwhile, they further their fortunes and careers. They offer us distractions and petty talking points, "liberal values", "human rights", identity politics, political correctness, they insult us with their specious propaganda.
It's worse than this. China too has a lot of debt and future obligations. This won't be an easy time for most countries on Earth. Geopolitics and climate change combine into a very severe existential threat.
It is absolutely true that geopolitics, climate, change and debt, combine into a dreadful "no tomorrow" scenario, but debt first of all.
MONEY HEAVEN
1. While there are Wars the world over, driven by fear and greed, it strikes me that the weakest of frontiers is the East-West divide in Europe, running from Finland right through to the Caucuses. With Europe, America and bits of east Asia up to Australia behind the line to the west; and Russia, China and the BRICS+ behind that line to the east.
The West v. The Global Majority.
In consequence, a Security conference is needed if we are to avoid to WW3...better not wait till after, but history teaches that an elite will never willingly go.
2. Managing cimate change, from the little that I understand, is already strategised and planned and even programmed, it's organised; it's just "the execution premium" that is missing.
3. And as to global debt, I cannot really imagine all the reckoning that is needed to cancel this all out, it's just too big for anyone's head to figure it out, but finally isn't it the politics of bean-counting? Perhaps chatGPT has the answer.
One thing worth adding is the idea of a "money heaven".
As others have remarked that increasing the money supply beyond the productivity of a nation increases inflation eventually, but as money, financials, is an unreal thing, the value in real terms of real assets goes down to a market-demand that is backed by the ability to pay using real assets.
I suppose all that puffed up QE is pumped out and so the difference between "inflated" or unreal, and "real", is "vaporised" i.e it's just sent to money heaven. (You know what you have to do to get to heaven?)
So this ought to deal with a lot of the debt, but of course inflation is a painful remedy.
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