The world is changing, and in the coming five years we'll see how accelerating debt, declining demand for dollars, and rising price inflation will show how deficits do matter, after all.
A "soft landing" is impossible unless the government cuts both taxes and government spending at the same time interest rates are rising. This won't happen, so get ready for a hard landing.
We are familiar with the five stages of grief. However, it is not a stretch to apply those stages to what is happening to the banking system. Right now, we are in the second stage: anger.
A new Fed survey shows that banks are cutting back on lending big time. Over the past thirty-five years, this almost always predicts recession. Our economy can't survive without endless new infusions of easy money.
April was yet another month of declining real wages, and was the twenty-fifth month in a row during which growth in average hourly earnings failed to keep up with price inflation.
Despite the soothing hot air from the White House and Fed officials, the financial system is becoming increasingly fragile and unstable. Maybe all of that intervention the past decade was not wise.
By any conventional measures of finance, the Federal Reserve has negative equity. In the long run, cooking the books only puts off the day of reckoning.
The combination of higher rates and declining optimism about the economy, plus slumps in equity, private investments, and bond valuations, is going to inevitably lead to a massive crunch in access to credit and financing.
