The article below is from David Stockman’s Contra Corner. For those too young to remember, David Stockman was Reagan’s budget director. He now runs a blog site dedicated to things economic and political …
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If he’s right, then the biggest threat on the horizon is inflation, driven by a federal government unable to control its spending and that literally prints trillions of $$ to finance politically popular social programs, bailouts and military adventurism.
For those who are preppers. Consider that the biggest threat to your safety (both financial and physical) is not marauding gangs of street criminals, LGBTQ-people or illegal aliens bent on robbing you. But rather, the federal government’s bloat, unconstrained spending and printing money that will literally destroy your income and wealth through hyperinflation. Since 2017, according to Stockman, inflation has destroyed about 30% of the purchasing power of everyone’s savings and income.
It would be wise to develop plans.
Buckle Up For The Coming Trumpian Imbroglio.…With Our Daily Missive To Honestly Identify The Good, The Bad, The Bogus and The Beltway Bombast
Dear Reader,
America dodged a bullet on November 5th when the voters sent the Beltway Dems packing—along with their DEI, woke, climate howling, Nanny State, leftwing dumbassery. But having avoided plunging into the fire with Kamala, America is by no means out of the frying pan. Not by a long shot.
That’s because the mainstream Media Combine (CNN, MSNBC, ABC, CBS, NBC, the New York Times and the Washington Post) is in the tank for the status quo as defined by the Washington ruling elites. This means, of course that it will be viciously gunning for all the good things Donald Trump is trying to do like house-cleaning at the FDA and CDC with Bobby Kennedy; fumigating the FBI with Kash Patel; de-weaponizing the DOJ with Pam Bondi; and purging the intelligence community of its legions of Deep State miscreants with Tulsi Gabbard.
Unfortunately, Donald Trump has a lot of dubious plans of his own, as well. These include sweeping, unnecessary deportations of noncriminal immigrants and massive economically harmful tariff increases. Beyond these digressions, however, lies America’s real overriding problems—a rogue central bank, out-of-control public debt and a massively oversized national security establishment that never stops looking for foreign monsters to destroy and provocations to launch.
Unfortunately, Donald Trump is mostly on the wrong side of these bedrock issues. In no way shape or form has he abandoned his affinity for spending, borrowing, money printing and huffing and puffing with guns, bombs and missiles in some kind of glandular substitute for a coherent foreign policy.
Needless to say, we think there is every reason to expect on the fiscal front that the $8 trillion Trump added to the public debt during his first turn in the Oval Office was just a warm-up. When you add-up all his campaign promises to extend the 2017 tax cuts, exempt tips, overtime and social security income and spend far more for defense and border control it adds up to at least $10 trillion of added red ink over the next decade.
So, when the public debt crosses the $37 trillion mark in the next few months, it will be accurate to say that you haven’t seen anything yet. We will be well north of the $40 trillion debt mark sometime in 2025 and, when you add the GOP/Trump planned $10 trillion of new red ink to CBO’s latest optimistic baseline forecast, the public debt will be pushing $70 trillion by the mid-2030s.
And it’s off to the races thereafter. Under the current Warfare State and Welfare State UniParty policies, which we see no evidence that Trump intends to challenge, the public debt will reach $150 trillion and 166% of GDP by mid-century. That is to say, America is in the grips of a Doomsday Machine that was not even mentioned, let alone addressed, by either candidate in the woebegone election we have just completed.
Needless to say, figures of these stunning magnitudes imply Roman Empire style financial ruin. Even if the Keynesian fools at the Fed throw in the towel and restart the printing presses, which we do not expect to happen anytime soon, they could not possibly buy enough bonds and monetize enough of the public debt to enable Uncle Sam to smoothly borrow another $100 trillion over the next quarter-century.
In short, despite Donald Trump’s welcome election victory, a thundering fiscal and financial crisis is most surely just around the corner. That’s because the UniParty politicians of both parties—including Donald Trump-- want to shovel even more borrowed money into the bloated Warfare State and neither wants to save a dime from the heart of the Welfare State—the $36 trillion cost of the depleted Social Security and Medicare trust funds over the next decade.
Accordingly, what lies ahead is the most difficult stretch of economic and financial turmoil that the nation has seen since the 1930s at least, and likely ever in its history. After all, with the cost of living up 30% under the Trump/Biden administrations since January 2017 and the CPI stuck in the 3-4% increase zone, the Fed can’t come to the rescue by scooping up $120 billion of bonds per month like it did during the heyday of QE.
That means, of course, that the massive flow of red ink ahead will have to be financed the honest way by tapping available private savings. Unfortunately, however, the US savings rate has plunged to rock bottom levels, meaning that Uncle Sam’s massive presence in the bond pits will force interest rates steadily higher, crowding out private investment in the process.
In turn, this will mean staggering increases in the Federal debt service—the cost of which has already erupted from about $300 billion annually a few years back to more than $1 trillion at present. But there is now no prospect that the weighted average cost of US Treasury bills, notes and bonds could drop below the current 4-5% level during the balance of this decade.
By the early 2030s, therefore, the Federal interest tab alone will reach a staggering $3 trillion per year. At a minimum. And that’s more than the current budget for defense, Social Security, Medicare, Medicaid and Food Stamps combined!
At the same time, total private debt now totals more than $61 trillion, meaning that the carry cost of the current massive household borrowings ($20 trillion), business debt ($21 trillion) and financial sector borrowings ($20 trillion) will soar in the years ahead. The cheap debt issued by these sectors during the last decade will relentlessly rollover into far higher interest rate borrowings, if it can be refinanced at all.
In turn, rising interest rates and over-leveraged business and household balance sheets will weigh heavily on investment, productivity, jobs and incomes in the private sector.
Accordingly, America is not going to “grow” its way out of the $100 trillion of public and private debt that weighs heavily on the economy at present.
There is no mystery, of course, as to where this fiscal and economic disaster came from. Both Wall Street and Washington went off the deep end during the 2020-2021 pandemic period—spending, borrowing, printing, and speculating like never before in history.
That we are now reaping the whirlwind should not be surprising. Just recall the staggering magnitudes of the fiscal and monetary madness that erupted during the 365 days after March 2020.
On the fiscal front, Congress enacted $6.6 trillion of Covid-Lockdown bailouts and stimmies virtually sight unseen. That figure was 7.5X the actual $800 billion loss of
GDP during the same period. It was also equivalent to $49,000 for every single household in America.
Likewise, the Fed’s balance sheet soared from an already bloated $3.8 trillion in the fall of 2019 to a peak of $9.0 trillion a few months ago. Yet, how do you even comprehend that $5.2 trillion of central bank balance sheet expansion? After all, what it actually measures is the cumulative gobs of new fiat credits being printed day-in-and-day-out.
106 Years of Money-Printing Replicated In Mere Months…
Still, here’s one powerful metric that our mad-money printers in Washington surely didn’t notice as they ran the Fed’s printing presses red hot. To wit, the Fed’s balance sheet crossed the $5.2 trillion mark for the very first time in history on March 25, 2020.
That’s right. It took the Fed 106 years from the day it opened its doors for business in 1914 to reach the $5.2 trillion mark. And then it nearly replicated that figure in a matter of months.
Inflation should be no shock to anyone!
Is it any wonder, then, that we have had rampant inflation? That is, massive bubbles in the stock, bond, real estate, crypto, and other risk asset markets, followed by the highest consumer inflation rates in 40 years.
And that these inflationary forces have now become deeply embedded in the economy, with unit labor costs up nearly 17% in the last four years alone. That’s the highest rate of gain since the early 1980s. Needless to say, this is what happens when you monetize nearly 100% of Washington’s explosion of borrowing and spending. But the laws of sound money, fiscal rectitude, and economic gravity can’t be defied indefinitely.
It was always ordained, therefore, that there would be a time of painful reckoning. And that time has now arrived.