Will The US Economy End In Fire or In Ice?

𝐆𝐄𝐓 𝐓𝐇𝐄 𝐁𝐈𝐓𝐂𝐎𝐈𝐍 𝐂𝐎𝐔𝐑𝐒𝐄➜➜➜
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In this video, I discuss whether inflation (fire) or deflation (ice) is the best solution for an economy with a high debt/GDP that also happens to be the world's reserve currency issuer.

The Fed should have allowed debt/GDP levels to come down much lower before aggressively tightening as quickly and as much as they have done.

Apart from possible geopolitical concerns (such as lowering global energy prices in order to help defund Putin), the Fed's monetary policy makes zero sense. The heavily inverted Treasury yield curve and plummeting asset prices suggest that the Fed is committing a policy error.

Austerity, belt-tightening, defaulting on debt never work in a situation like this. Politicians who vote for austerity will be voted out and replaced by those who are willing to shower the voters with more "free" goodies.

Even if you confiscate the wealth of all US billionaires, you will have only made a small dent in the debt load.

If you try to reduce government spending that is 35% of US GDP, you end up tanking GDP and driving debt/GDP levels even higher.

The only way out of this mess is to allow inflation to run hot at 10-20% for a few years and allow debt/GDP levels to normalize. This is a painful path, but much less painful than a deflationary debt spiral or outright global depression.

Previous generations have ensured that we only have bad choices left at this juncture. The Fed will be forced by the markets to abandon the way of "ice" for the way of "fire" before too long-- just as the Bank of England was forced to pivot last week.

We should also encourage more real GDP growth by reversing the lowering of academic standards, and transitioning basic scientific research from the public sector to the private sector. Government bureaucrats are awful allocators of capital. And you don't compete with China by helping dumb students at the expense of intelligent students.

Not investment advice! Consult a financial advisor.

Historical chart of debt/GDP:
https://fred.stlouisfed.org/series/GFDEGDQ188S

Robert Frost's "Fire and Ice":
https://www.poetryfoundation.org/poems/44263/fire-and-ice

US debt clock:
https://www.usdebtclock.org/

US total public debt:
https://fred.stlouisfed.org/series/GFDEBTN

Gov expenditures as % of GDP:
https://www.statista.com/statistics/268356/ratio-of-government-expenditure-to-gross-domestic-product-gdp-in-the-united-states/

Financial repression in the US after WW2:
https://en.wikipedia.org/wiki/Financial_repression#:~:text=Financial%20repression%20%22played%20an%20important,over%20from%20the%20Great%20Depression
https://www.richmondfed.org/publications/research/econ_focus/2021/q1/economic_history

US gov still funds too much bad science:
https://www.science.org/content/article/data-check-us-government-share-basic-research-funding-falls-below-50

NYU professor fired by dumb students:
https://www.theguardian.com/us-news/2022/oct/06/nyu-professor-fired-maitland-jones-jr-student-petition

Why Can't We Just Forgive All The Debt?
https://www.youtube.com/watch?v=w41pMHvWw2k&ab_channel=TraderUniversity

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#fed
#inflation
#economy

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