It’s Not All That Complicated

It’s not all that complicated.  

For example, if the government spends like crazy and comes up with the money by just printing it, you should be suspicious of the long-term prospects of that money.

It’s not all that complicated.

We’ve tried to do a good job making fiscal and monetary policies simple.  Another example:  See out post on fiscal policy from early May that asked Is a US Debt Calamity Dead Ahead?  We reported that the US deficit for Fiscal Year 2020 was  going to explode.  It had been expected to run about a trillion dollars.  Then, suddenly that changed to $4.5 trillion.  That’s a lot of red ink.  It’s more than the five prior years’ deficits combined. 

Since the US was already unable to pay its debts, but has to keep borrowing more and printing more to keep the game going, of course a calamity is dead ahead.  If you doubt it, try the same kind of budget management at home.  

Calamity.  Not that complicated.  

Or take our recent commentary about monetary policy, What Hit Us?  We tried to show you how fast the Federal Reserve is printing money.  Pretty damn fast, to tell you the truth.  Fed officials like Kashkari and Powell have been quite outspoken about how they can print forever.  They sound proud of it, like accomplished counterfeiters might be proud of their handiwork.  Or maybe they know what a jam we’re in and they are putting on their brave faces.  But do dollars rolling off the Fed’s printing presses by the trillions make the dollars you’ve saved worth more or less?

Less.  Not that complicated

One of our favorite market commentators, Michael “Mish” Shedlock from Global Economic Trend Analysis, usually cuts through any fog and confusion, too.  And now he’s pointed out something that we, in the rush of domestic news, have not adequately reported.  Just how much of these same reckless fiscal and monetary policies are other leading economies engaged in?

Quite a lot.  Here’s a quick synopsis from Mish:

Japan:

Japan is considering a fresh stimulus package worth over $929 billion…. The package, to be funded by a second extra budget for the current fiscal year beginning in April, would follow a record $1.1 trillion spending plan deployed last month.  

China:

China will increase it’s budget fiscal deficit to a record 3.6% of gross domestic product this year, up from 2.8% in 2019.  This is the first time the ratio has exceeded 3% – a red line for decades.

European Union:

On April 23, the EU leaders announced ‘Unprecedented’ Stimulus Against Pandemic.  In addition, the EU is engaged in a stimulation policy of negative interest rates.  At the same time, the breakup of the EU is looking more likely.

Mish says, “given all this competitive currency debasement, I have a question: Got Gold?”

See?  It’s not that complicated.