The Last Wire - The Economy After Stabilization

[Luis Gonzalez]

The Economy After Stabilization
The Last Wire

By traditional indicators, the U.S. economy appears stable. Employment remains high. Output continues to grow. Inflation has slowed from its 2022 peak. Yet households continue to report persistent financial strain. Essentials consume a larger share of income. Savings feel thinner. Affordability has not recovered.

This disconnect is not a failure of perception. It reflects how a debt-driven economy absorbs shocks and distributes costs after stabilization occurs.

What Changed in 2021 and 2022

The defining economic event of the current cycle was the scale of borrowing used to prevent collapse during the pandemic period. Trillions of dollars were injected through fiscal spending, emergency lending facilities, asset purchases, and deficit financing.

According to the U.S. Treasury, federal debt held by the public rose sharply during this period, accelerating a trend already in motion (U.S. Treasury Fiscal Data). At the same time, the Federal Reserve expanded its balance sheet to stabilize credit markets and maintain liquidity (Federal Reserve Balance Sheet Trends).

The immediate objective was achieved. Markets stabilized. Employment recovered. Financial panic was avoided. What followed was not policy failure, but structural adjustment.

Continue reading at The Last Wire.

[DefiantMassRINO]

Biden and Obama wasted money on Nonsense.  Actually worse, they wasted Federal money on boondoggles with decreased output, decreased efficiencies, and higher cost per unit of inputs and outputs.

Brookline, MA, wasted Covid "art" funds on ceramic statues of wild turkeys known to torment the town.

You kill cancer by starving it of its blood supply.  You kill Big Government by starving its access to revenue and cheap debt.

[Luis Gonzalez]

You kill cancer by starving it of its blood supply.  You kill Big Government by starving its access to revenue and cheap debt.

Yes. But the Devil is on the details. Isn’t it?

[DB]

Biden and Obama wasted money on Nonsense.  Actually worse, they wasted Federal money on boondoggles with decreased output, decreased efficiencies, and higher cost per unit of inputs and outputs.

Brookline, MA, wasted Covid "art" funds on ceramic statues of wild turkeys known to torment the town.

You kill cancer by starving it of its blood supply.  You kill Big Government by starving its access to revenue and cheap debt.

I used to think that.

But it isn't true. It can't be starved. It just prints more money destroying what you have saved. The only dent you can put into it is reduce its size.

[Luis Gonzalez]

I used to think that.

But it isn't true. It can't be starved. It just prints more money destroying what you have saved. The only dent you can put into it is reduce its size.

Debt IS the economy at this point. How that debt is repaid sucks.

More on that tomorrow.

[DefiantMassRINO]

Sooner or later, there will be an insufficient number of buyers for US Debt.  That will force natural and Fed-manipulated interest rates higher.  The Fed won't be able to stop it because market forces will be too great.

Gold is $4,000+ and Silver is $65+ because China and India are no longer using US Debt for its currency reserves; they are using precious metals and other currencies instead.

Who can afford to buy trillions of dollars of US Debt?  Who can afford to hold US Debt as bond rates rise/bond values decrease?

The Fed had to scale back its original plan to raise interest rates because the US Debt market marked down the value of 30 year Treausry Bonds to the point of making a couple of California banks insolvent.

Without GDP growth and productivity increases, the US financial system will be drowning in devalued debt instruments that will stress domestic banks and insurance companies.

Exporting nations will no longer accept dollars for payment of trade because their utility as a stable store of value is greatly diminished.

Government is the largest economic problem America has.  Government is redistributing wealth to activities with zero or negative return on investment.  Government regulation and spending are economic forces which stifle GDP and Productivity.

Government is run by grasshoppers who are setting up the ants to starve during Winter.

[Luis Gonzalez]

Biden and Obama wasted money on Nonsense.  Actually worse, they wasted Federal money on boondoggles with decreased output, decreased efficiencies, and higher cost per unit of inputs and outputs.

Brookline, MA, wasted Covid "art" funds on ceramic statues of wild turkeys known to torment the town.

You kill cancer by starving it of its blood supply.  You kill Big Government by starving its access to revenue and cheap debt.

From the article:

Inflation is frequently framed as policy error. In a debt-heavy system, it is more accurately described as the least disruptive adjustment available.

Alternatives carry sharper consequences:

• Default risks financial contagion.
• Large immediate tax increases are politically volatile.
• Rapid monetary contraction risks recession and asset collapse.

Inflation preserves nominal stability while redistributing real value. That is why it was tolerated during the borrowing surge and why its effects remain even after inflation slowed.