{"id":82274,"date":"2022-05-26T11:18:23","date_gmt":"2022-05-26T16:18:23","guid":{"rendered":"http:\/\/www.shotinthedark.info\/wp\/?p=82274"},"modified":"2022-05-26T11:18:23","modified_gmt":"2022-05-26T16:18:23","slug":"there-is-a-lot-of-ruin-in-a-country-especially-this-one","status":"publish","type":"post","link":"http:\/\/www.shotinthedark.info\/wp\/?p=82274","title":{"rendered":"There is a lot of ruin in a country, especially this one"},"content":{"rendered":"\n

There isn’t enough bad news in the world, so let’s toss another stack of troubles on the table, shall we.

At American Greatness, Adam Mill outlines the financial ruin<\/a> headed our way.<\/p>\n\n\n\n

The coming reckoning for Washington\u2019s insanely irresponsible monetary policy may dwarf the troubles from all recent recessions and periods of inflation.<\/p>

The Federal Reserve has created a doom loop between the housing market and inflation. For years it has printed tens of billions of dollars each month to buy sketchy securities meant to subsidize the housing market and favor bond traders. This continues even now, in spite of inflation and a red-hot housing market. But the housing market has become dependent on unearned, newly printed money, and stopping the flow might cause a catastrophic correction. If it doesn\u2019t stop, however, inflation will explode.<\/p>

Let me walk you through some of the math.<\/p>

Inflation closes the gap between money earned and money spent. Since the financial crisis of 2008, the Federal Reserve expanded M2 money supply from just under $8 trillion to around $22 trillion today. During that time GDP has increased from around $14.6 trillion to around $24.5 trillion today. We\u2019ve gone from a ratio of one dollar chasing $2.20 in goods in services to an almost 1 to 1 ratio today. Inflation during the same period, according to the government, has eroded the dollar by a mere 33 percent.<\/p>

You think 8 percent inflation is high? Prices need to double to restore any semblance of balance between currency and the things you can buy with currency. We have a long way to go.<\/p><\/blockquote>\n\n\n\n

Fortunately, his conclusion is even worse. Enjoy your holiday weekend!<\/p>\n\n\n\n

To fight inflation, interest rates need to exceed the inflation rate. That means a dollar saved loses purchasing power unless savings interest rates climb from less than 1 percent to something over current inflation (now around 8 percent). One rule of thumb provides that savings interest rates should reach 150 percent of inflation in order to reverse the trend. The theory holds that high interest rates encourage saving cash thus slowing down the speed at which money chases assets. If interest rates are less than inflation, it makes holding cash a losing proposition.<\/p>

But in this environment, raising interest rates will cause a cascade of problems. The higher interest rates will slow the economy and cause unemployment. It will also swallow up tax revenue as the government has to pay interest on its massive debt. But more critically, it will increase the rate of default on home mortgages. Those defaults will make mortgage-backed securities less valuable and more unpredictable. That\u2019s how the 2008 housing market seized up.<\/p>

Thus, the doom loop.<\/p>

Alternatively, the Fed could just let inflation rip as it continues to pour gasoline on the fire. At this point, the latter scenario appears more likely as the Fed engages in half-hearted symbolic inflation-fighting measures. Not surprisingly, the inflation numbers get scarier and scarier. At some point, runaway inflation will force the Fed to take real action. One thing is certain: the longer it waits, the more it will hurt.<\/p>

Closing the gap between money earned and money spent means cutting government spending, raising interest rates, reducing regulation, and lowering taxes. Government can and should facilitate increases in productivity by reducing its interference in every private transaction. More Americans get a check from the government than pay taxes. The labor participation rate is dangerously low. There just aren\u2019t enough people pulling their weight to make the things needed to sop up all of this excess money.
<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

There isn’t enough bad news in the world, so let’s toss another stack of troubles on the table, shall we. At American Greatness, Adam Mill outlines the financial ruin headed our way. The coming reckoning for Washington\u2019s insanely irresponsible monetary policy may dwarf the troubles from all recent recessions and periods of inflation. The Federal […]<\/p>\n","protected":false},"author":273926,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35],"tags":[],"class_list":["post-82274","post","type-post","status-publish","format-standard","hentry","category-money"],"_links":{"self":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/82274","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/users\/273926"}],"replies":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=82274"}],"version-history":[{"count":2,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/82274\/revisions"}],"predecessor-version":[{"id":82280,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/82274\/revisions\/82280"}],"wp:attachment":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=82274"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=82274"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=82274"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}