Uh oh...this could be it. Central Banksters in a panic as under-pinnings of U.S. Dollar suddenly dry up!
We all know by now (or should know if we haven't been sleeping under rocks) that the money/liquidity crash of 2007-08 was never really "solved" but rather the proverbial can was kicked down the road. Well, it is beginning to become clear that the bright shiny thing just ahead in our way, is...wait for it....THE CAN. The tax cuts pushed by Trump, while popular and populist, are part of the very current problem as are the rising interest rates. In order for the tax cuts to work, the economy must BOOM to the point that those lost revenues are recouped, and that is not happening fast enough. Too much of the REAL ECONOMY (you know, the part that used to actually make things) has been scrapped, mothballed, sold off, and the skilled labor is retired and was never replaced for the real WEALTH-MAKING engine of the economy (the manufacturing sector) to do it's job in replacing the lost revenues.
At the same time, it is clear that the economy is now wed to low, low interest rates, so much so that even a quarter-point rise in the fed funds rate is slowing the housing sector noticeably. In other words, the patient we shove into the hospital bed back in early 2008 is still on lief support and CAN NOT RISE AND LIVE without it. Here is a detailed article explaining what has the (non-voodoo) economists panicking this morning:
The scariest excerpt from the whole piece might be this:
"One can only imagine the chaos and turmoil in EMs (and then DMs) in four months time, when not only the peak of the Fed's monthly shrinkage hits some time in October, but when for the first time since the financial crisis, global central bank liquidity will shift from a net injection to a net drain and then accelerate as both the ECB and BOJ proceed to taper their own Fed monetization."
That, my friends, is bankerese for "The piper is here, and he has one hand out, and the other hand on a big bad-ass sawed-off shot gun, and he says he wants to be paid."
Of course, the only solution is major cuts in entitlements, and that will inevitably lead to civil war if done rapidly. There is going to be pain, no matter what course we choose. A very gradual draw- down in entitlements to a level only around 10-20% of what we spend now, done over fifty years time, MIGHT work; but, politicians are notoriously impatient people, and they will not wait for the real economy to be built back up. They are already screaming bloody murder about the farmers withdrawal from their government subsidies addiction, and the free trait...uh traders....screaming bloody murder over the badly-need tariffs. There simply is not AND NEVER HAS BEEN the political will to deal with the real problem...i.e. that we spend twice as much as we take in. Keeping interest rates at near ZERO (or even negative) is the only thing that has kept us from a full meltdown 10-11 years ago, and there's that piper dude still sanding there in the doorway...
Keeping rates at zero or negative is like keeping a deathly ill patient on strong narcotics. He may not feel the pain, but he is still dying. I hate to be the bearer of such bad news, but the collapse is still inevitable. The only thing the banksters have done is made its inevitable fulfillment far more severe and probably unsurvivable (as a sovereign nation...ahem...maybe that was part of the plan all along?) with their delaying tactics.
Have a great day everyone. God is still on His throne!
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