There’s so much debt now that the federal government knows that they couldn’t possibly meet the debt load if interest rates go up very much… I think this is a very dangerous period in terms of monetary policy.
The challenge of 5.4% inflation last month is very, very worrisome. The federal reserve now knows that there’s so much US federal debt, that if they use the classic instrument that Paul Volcker used in the Reagan years and started raising interest rates to cut off inflation, they will be crushing the US budget because there’s so much debt now that the federal government knows that they couldn’t possibly meet the debt load if interest rates go up very much. So all of a sudden the federal reserve has worked itself and do a very, very difficult blind alley. It’s a little hard to see how they’re going to solve it. And there is some danger that you could move towards a buy more German environment in which they just have to keep printing more and more and more paper. And that leads of course, to more, more and more inflation.
So keep your hand on your wallet, watch carefully. I think this is a very dangerous period in terms of monetary policy. And I frankly think that the Biden administration by piling even more spending on top of an overly already or too rapid, too hot two paper written financial system is just going to increase the danger of massive inflation which of course may be there a strategy for simply paying off the debt by cheapening the value of US bonds as the dollar collapses, because remember, every time you have inflation the value of paper goes down and the match you can buy with it goes down. So maybe that’s their grand strategy, but keep your eyes peeled because 5.4% inflation last month is a very dangerous sign.
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