Knowing this leads to a bunker mentality. Hunker down, because the storm is coming. But when? How will you know the storm is nigh? Yesterday's post answered it for me. Inflation will be the telltale sign. Here's how I came to that conclusion.
- Debts and deficits are not in themselves the problem. As the video I linked to yesterday said, bond vigilantes, those who will sell bonds, driving up rates, have been completely defanged by the central banks. Any and all excess government debt will be bought by central banks by printing money.
- Low interest rates will continue on for the foreseeable future. For years now, the US has been borrowing huge amounts of money at low rates, some of it in short term debt. The instant rates rise, the government budget is blown. That means the Fed, which has become codependent with the debt-addicted federal government, will continue to enable them with low interest rates as long as they can and probably even longer.
- The trigger for deficits, debt and government budgets to all blow sky-high will be inflation. It will trigger a cascade of bond selling, higher interest rates, deficits far in excess of what we have now and the arrival of the Four Horsemen of the Apocalypse.
The good news is that inflation doesn't show up instantly. It grows over time. I'd say that until inflation starts to show some growth, we can all relax.
|We're not there yet. Source.|
Interestingly, this is the linchpin of the arguments made by our favorite fascist economic charlatans, Paul Krugman and Robert Reich. Inflation hasn't happened yet and so we should keep borrowing and spending like crazy. What they don't admit is that borrowing more is like making the atomic bomb of upcoming fiscal collapse larger and larger and larger. If we keep borrowing a trillion dollars a year, that bomb is going to trigger events that none of us can foresee.
For now, however, I'm going to chill out.