Financial article...is Tabs right?

[pwd72s]

https://www.zerohedge.com/markets/money-supply-rising-rates-discrediting-keynesian-hopium

Pretty long read, but here's the conclusion:

It seems extraordinary that the link between changes in the quantities of currency and credit, epitomised by deposit-based monetary statistics, is being totally disregarded by governments, monetary authorities, and the entire investment establishment. But that is certainly the case today. And no one seems to expect much more than an increase of a few percentage points in global interest rates.

We should not be surprised, therefore, that rising prices measured by the CPI have caught the whole establishment unawares. Nor should we be surprised that the current situation continues to be analysed through a neo-Keynesian lens, when we know it has led us to the current crisis. The crisis is now of debt traps not just for the US Government, but in all the other major jurisdictions.

The Keynesian belief that government economic and monetary management is superior to free markets is set to be discredited by market reality, which can only be suppressed so far. It has led to savers being forced to accept deeply and further deepening negative yields on their bond investments. So far, they have been prepared to have their pockets picked by this means, but that cannot last. When it becomes clear that inflation of prices is only a marker for currency debasement, and that this debasement can only continue, these deeply negative rates will no longer be available to subsidise profligate government spending.

The scale of an interest rate and bond market crisis for everyone’s reserve currency appears to be severely underestimated. The sudden emergence of runaway price inflation has led to tentative comparisons being made between the current situation and the 1970s. But so far, there is little evidence that these comparisons are being taken seriously enough.

If they were, analysts would have to conclude that events in common with the 1970s which led to high nominal bond yields and coupons in UK gilts exceeding 15%, are potentially far more destabilising today than they were then. That being so, the world is on the edge of a substantial bear market in financial assets driven by global bond prices normalising from the current deeply negative real rates to levels that truly reflect deteriorating government finances. All financial asset values will be undermined by this adjustment.

It is increasingly difficult to see a way out of these difficulties, and the Keynesian hope that economic growth will deal with the debt problem is simply naïve. In 2010, respected economists (Carmen Reinhart and Kenneth Rogoff) concluded that at a government debt to GDP rate of over 90% it becomes exceedingly difficult for a nation to grow its way out of its debt burden. With advanced economies averaging a ratio of 125%, Japan and Greece at over 200%, and some Eurozone nations at over 150%, there are debt traps almost everywhere ready to be sprung.

In highly indebted fiat currency economies, there can only be one outcome: once one falls into a crisis, the others will follow with accelerating currency debasements leading to the destruction of faith in their currencies as well. And with a government core debt ratio to GDP of 125%, the US with its dollars is up there with the others to be destabilised, being over-owned by foreigners, and transmitting risk to all currencies that regard the dollar as its principal reserve currency.

It can only be concluded that as we enter a new year the adjustment to market reality is likely to be more violent than anything seen in the 1970s.

[Zeke]

I've had that feeling for awhile.

[Por_sha911]

Tabs? He's just a copycat.
William F Buckley and other fiscal conservatives were speaking out against deficit spending and debt back in the 60's. Unfortunately the conclusions are correct.

[LWJ]

Can someone give me the readers digest version. I tend towards ADHD.

[smadsen]

The U.S. economy might have been able to "absorb" a Trillion+ of pandemic debt to keep the economy from crashing. But $8 Trillion is going to have an effect that won't be swept under the carpet. And the morons we elect to make monetary decision are clueless. Janet Yellen on
TV the other day shilling for the additional $3.0 Trill infrastructure package was saying more debt would be good for the economy. Meanwhile, last month the U.S. added 200,000 jobs, but 4 million people left the workforce, most to await their infrastructure dividend check.

The Cliff's Note's version for LWJ is there's too much cash floating (think an explosion in Scrooge McDuck's basement vault) around the system, chasing too few goods & services (see empty shelves).

[LWJ]

Perfect. Thanks

[Sooner or later]

Originally Posted by smadsen

The U.S. economy might have been able to "absorb" a Trillion+ of pandemic debt to keep the economy from crashing. But $8 Trillion is going to have an effect that won't be swept under the carpet. And the morons we elect to make monetary decision are clueless. Janet Yellen on
TV the other day shilling for the additional $3.0 Trill infrastructure package was saying more debt would be good for the economy. Meanwhile, last month the U.S. added 200,000 jobs, but 4 million people left the workforce, most to await their infrastructure dividend check.

The Cliff's Note's version for LWJ is there's too much cash floating (think an explosion in Scrooge McDuck's basement vault) around the system, chasing too few goods & services (see empty shelves).

It is my understanding that the "quits" are people quitting one job and moving to another with greener pastures. With the huge number of openings there is a significant amount of job churning going on.

Of course there are some sitting their arse waiting on free money, though those are now in the minority.

That is a huge amount of turnover for companies to deal with. The new hire won't be as efficient as the old worker that moved to a new, and seemingly, better job. Workplace inefficiency is growing which affects product availability.

[tabs]

Originally Posted by Por_sha911

Tabs? He's just a copycat.
William F Buckley and other fiscal conservatives were speaking out against deficit spending and debt back in the 60's. Unfortunately the conclusions are correct.

In the early 60's I still believed in Santa Clause...and by the late 60's I was more interested in reading the articles in Playboy...sometimes 3 or 4 times a day.

Buckley was the epitome of the Yankee Wasp Republican... a guy who talked like he had a stick up his azz.

Unfortunately...implies that you didn't believe him..

You and the other TABS haters should form a club..you can put me down for a membership in that club while you are at it...

[tabs]

Originally Posted by smadsen

The U.S. economy might have been able to "absorb" a Trillion+ of pandemic debt to keep the economy from crashing. But $8 Trillion is going to have an effect that won't be swept under the carpet. And the morons we elect to make monetary decision are clueless. Janet Yellen on
TV the other day shilling for the additional $3.0 Trill infrastructure package was saying more debt would be good for the economy. Meanwhile, last month the U.S. added 200,000 jobs, but 4 million people left the workforce, most to await their infrastructure dividend check.

The Cliff's Note's version for LWJ is there's too much cash floating (think an explosion in Scrooge McDuck's basement vault) around the system, chasing too few goods & services (see empty shelves).

Your rendition reminds of the Ant and the Grasshopper....the ant put his money away preparing for a rainy day.. Americans like the Grasshopper has spent every dime they could get their hands on living large. Now much of America is going to look like TJ with cardboard shacks... There is no way out, the day of reckoning has arrived.

In the fall of 2020 Powell told Trump the US govt had to spend big to jump start the economy...Trump didn't listen..The reason why Powell told Trump to spend big was the FED was reaching the end of the Monetary Policy rope . The FED balance sheet is now approaching 9T...up from 4.3T in early 20. I have estimated that they could go to around 9.5T before things get dicey...

Yellen is no fool...she is inside the WH to coordinate FED and Treasury policy..she wouldn't be there if the situation wasn't critical.

[HardDrive]

Everything is fine. Every century we simply cook the books by having a world war.