Many years ago, some economists predicted, "The United States will finally face an economic dilemma not seen since the 70s of the 20th century - stagflation." "Apparently no one has been paying attention to this for a long time, but in 2024, stagflation will become a household word among Americans, and most of America's worries will revolve around prices**, stagnant wages, and declining production.
According to the 2018 article "The Stagflation Crisis: America's Continued Collapse," financial analysts discussed the Federal Reserve's problems many years agoThe end result of the massive stimulus is a rather idiotic debate. One side argues that the result will be deflation, and that no amount of money printing by the Fed will be able to overcome the huge debt black hole created by the implosion of derivatives. The other side argues that the Fed will continue to print money endlessly, resorting to QE4 or possibly"Unlimited QE"and negative interest rates, as a way to avoid a market crash for decades (as in Japan) and kick off a Weimar-style inflation spree.
Obviously, both of these arguments are wrong, because reality has a third option - stagflation.The process of stagflation is difficult to trace because it can have multiple paths, many of which depend heavily on the Fed's whims and its policy decisions
All we can do is look back at a limited number of historical cases and simply guess what will happen next. In the 70s of the 20th century, stagflation almost crushed the entire country, and inflation rose by more than 7% to 14% per year for a decade. When I heard"Millennials"Complaining about being born in"The worst economic era in history"I had to laugh because they really didn't know. The 70s of the 20th century were much worse in terms of weakened purchasing power and overall poverty. If you look at the film reels and ** of urban areas from Los Angeles and New York to Philadelphia at the time, many parts of these cities look like they were bombed war zones. The country is indeed on the verge of disaster.In the early 80s of the 20th century, under the leadership of Paul Volcker, the Federal Reserve raised interest rates above 20%. This stopped the inflationary crisis, but triggered a deflationary phenomenon that would weigh like a boulder on the chests of American consumers and small business owners for years to come.
Despite the terrible situation now, we have not seen anything from the Americans. Of course, the United States is rapidly moving towards a similar situation, and there is one thing that the United States has today that it did not have in the 70s of the 20th century:Huge national debt (and counting).
Currently, the U.S. national debt is as high as 33$8 trillion with a debt-to-GDP ratio of 120%. In one month in October 2023, the U.S. federal government added more than $600 billion to its debt. At the current rate, total debt will exceed $41 trillion within a year.The frightening rate of accumulation is that Obama** and the Fed have increased their debt by about $9 trillion in eight years through the corporate bailout frenzy of the Great Financial Crisis, and Obama** seems absolutely stingy in spending compared to Biden**.
The U.S. debt spiral will eventually erupt, but the Federal Reserve and the U.S. Treasury are still trying to avoid it.Just as the U.S. economy is based on essentially worthless money β and so much debt that even a slight rise in interest rates can have a huge ripple effect. The 20% interest rate level in the early 80s of the 20th century was worrying and led to severe recessions not one, but two, and after the 200 years of development that the United States experienced, the United States ended the 80s with a debt of only $3 trillion.
Today, Biden**'s 2021 budget has increased the national debt by 2$77 trillion, and that took only one year, compared to the U.S. federal** accumulated about 2With $77 trillion in debt, the Biden regime has saddled the country with more than 200 years of debt in just one year.With debt exceeding $33 trillion, barely above the historical average of 5A 25% interest rate is catastrophic. Because"Compound interest"Called by Albert Einstein"The most powerful force in the universe"γHe called it the largest known to man"Miracles"One if you're a creditor, but what if you're a debtorThis miracle will turn into a disaster. Nowadays, the United States** often borrows money to pay interest. The Treasury also writes new IOUs to finance old ones that are due. Finally, borrow more money to cover all expenses that exceed taxes.
At higher interest rates, borrowing and lending entered a destructive spiral. Debt needs to pay interest, and borrowing itself is to pay interest on the debt. To put it simply, it's a bit like a bankrupt person going to get a bunch of new credit cards in order to pay interest on a bunch of old credit cards, which is financial suicide.
Eventually, a debt avalanche will bring inflation to a standstill, but it will also wreak havoc on the economy as a whole, triggering a deflationary crisis.We have seen the collapse of the manufacturing and industrial sectors, wage freezes, and layoffs and bankruptcies piling up in the freight industry. These are all clear signs of an impending recession. At the same time, U.S. home sales have fallen to a 13-year low as home prices continue**.
These are all signals of imminent deflation, which is bound to lead to mass unemployment, and it is likely to happen in 2024.
Investors' expectations are that the Fed is ready to cut interest rates or quickly resume quantitative easing. This is not going to happen, at least not anytime soon, and perhaps what the Fed wants is a collapse of financial markets.
After more than a decade of indulging markets in easy money, central bankers are well aware of what to expect as they continue to cut off drugs**, and heading into 2024, we are about to see a major change in economic behavior.
If the stagflationary phase in the United States is coming to an end, the national debate will turn to the issue of the national debt and debt. The Great Debate will turn to this question again:Will the Fed keep interest rates steady and risk a deflationary implosion and a debt default, or will it lower interest rates and reintroduce stimulus measures to pay off debt, risking double-digit inflation?These are the two choices in front of the United States** - either option, the market loses.
That is why, now more than ever, there is an urgent need to have financial assets that are not debt-based, not IOUs, but tangible things that can be seen and touched. In this globalized world of financialization, there are only a handful of assets left β and only physical ones β are also private, safe havens.
If you don't have real physical goods as soon as possible, your financial future will be with the financial future of the United States. The U.S. economy will fail. Those who do not ensure their financial independence will sink with the ship.