The Fed raised rates by .25% and set a hawkish tone for 2017, with plans to raise rates three more times next year. Yeah right! Rates can't go much higher without causing serious problems to the economy, the financial system, and to US government finances.
The problem with raising rates is the debt bubble that the Fed so willfully ignores. Each quarter point makes things more difficult for businesses and consumers. Here are just a few examples:
We have seen this movie before. Mexico in 1994; Thailand, Korea, Indonesia in 1996/1997; Japan in the late 1980’s; the entirety of South American in the 1970’s; the US in 2008! All of these bubbles were built on capital inflows. China fits the script perfectly. The Trump election may be the beginning of the final act.
President Trump! I am certainly excited that the Clinton corruption machine has been dethroned… that new Supreme Court justices will presumably honor biblical values… that we have a president that is presumably not controlled by the Luciferian elite… that WWIII with Russia is off the table…. that the US will stop supporting Islamic terrorist organizations like ISIS. There is a lot to be excited about. Unfortunately, I’m not so excited about Trump’s economic policy initiatives. It is a mixed bag.
The SDR world currency is in our future. It is insidious in nature. It will start as a currency that is only used in international trade transactions. There will be a US dollar, a Euro, a Yen; and unless you are in the import/export business or an executive at a multinational corporation, you wouldn’t ever use it. Most won’t understand it. Many won’t even know it exists.
In the end, world government control will be implemented not through the barrel of a gun, but through the ink of a proverbial printing press.
China is old news. Financial commentators are speaking in past tense about the China crisis. It was a whole bunch of worry that amounted to nothing. The Chinese economy is going to grow at 7% forever into the future, worst case 4%-5%. Nothing has happened, and nothing will happen.
That analysis is totally wrong. China is in the midst of the largest, most acute private sector debt bubble in the history of the world (and that is not an exaggeration). China will have its “Lehman moment” at some point; it is just a matter of time.
Throughout history, there have been repeated stock market crashes. It happens quite frequently, in fact. Since the credit super-cycle started in the United States in the early 1980’s, there have been three: 1987, 2001-2003, 2008-2009 (and four if you add the 1994 bond market massacre to the list). But why does this happen? And is there any way to figure out if it might happen again?
Debt problems are not new. The United States is not the first nation to rack up debts that cannot possibly be paid back through taxation. This is an ancient dilemma, with ancient “solutions”. A government can deal with a debt problems in one of two ways: 1) Bankruptcy. 2) Inflation. As you will see, the latter is the most common resolution, historically, and quite likely the future of the United States of America.
There is a lively debate among in-the-know economists and investors as to the outcome of the United States debt bubble, arguably the largest debt bubble in the history of the world: will this end in inflation or deflation? Everybody can agree that this will end badly, but the fundamental question of which direction the bad ending will go is very much up in the air.
Every American knows that the US government has a debt problem. Most can quote the $19 trillion debt number. Many know the estimates of unfunded liabilities of $100 trillion or more. Some even understand the use of fiscal gap accounting that shows the government is actually in the hole by $210 trillion in terms of present-value of future deficits and debt. But what does all this actually mean? How bad is it, really?