This is simply staggering.
Visualizing the "stimulus" money being printed in the last year.
Did you receive your palette of cash yet? I'm still waiting for mine ...
My economics university professor friend says: The federal debt is over $30 tr., plus ten times that in other obligations including Medicare & Social Security.
The Federal government is printing up dollars by the trillions to pay its bills and debasing the value of the currency for everyone.
What corporations are doing makes a lot of economic sense:
In a time when you anticipate the government will continue expanding the money supply, shrinking the size of each dollar, the economic strategy is to borrow as much as you can handle (i.e. you’ve got to be able to make the monthly payments) and invest it in hard assets.
Get out of holding cash, and invest the money in real estate, precious metals, equipment, etc.
That’s why the real estate market is booming—everyone is borrowing and buying houses.
So as the size of the dollar bills continues to shrink, the prices of the hard asset go higher—it takes more of the smaller-size dollars to buy the same sized asset.
And the dollars you end up using to repay the loans are worth less than the dollars you borrowed.
So, you gain on the appreciation of the hard assets, you avoid shrinkage of your cash savings, and you repay your loans with lower-valued currency then what you borrowed—a triple win.
Then, when you think the government is about to start reeling back in the money supply, thus increasing the size of every dollar, the economic strategy is to sell-off the appreciated hard assets, pay off the loans and hold as much extra cash as you can.
As the size of the dollar bills gets bigger, the prices of the hard assets go lower—it takes fewer of the larger-size dollars to buy the same sized asset.
And the dollars you end up holding become worth more, while the hard asset markets go down.
So you gain on the appreciation in value of the dollars, and you avoid shrinkage of your hard assets—another double win.
The trick is predicting when the Federal Reserve will switch policy direction from expanding the money supply, to contracting it.
Watch news about the Fed like a hawk. Interest rates down—prices up. Interest rates up—prices down. It’s largely a mechanical relationship.
Now the risk is this: Once you borrow tons of money, what happens if your revenue stream gets disrupted, or you can’t raise the prices of your products to your customers, while your own expenses keep going up?
You get crunched on your ability to make your monthly loan payments and the Death knell is —lenders foreclose and all your hard assets have to get liquidated at fire-sale prices.
It’s a risky game, especially with wildcards like the COVID lockdowns lurking in the neighborhoods.
So it pays to keep a cash cushion, just in case.
That’s where the worry about corporations comes in. Do they have enough of a cash cushion? Will they reverse strategy in concert with Fed policy? Can they raise their sale prices as their own expenses go up?
Bottom line, I compare the economy to a pyramid turned upside-down and tottering on its point.
As it starts to fall in one direction, everyone scrambles to get under it and push it back up again.
They it starts to fall in the opposite direction, so everyone runs around to the other side and scrambles to push it back up again.
One of these days, the whole pyramid will come crashing down.
The last of the Baby Boomers will have turned 65 by 2029 (just 8 years from now). We are all drawing down on Social Security, and within about 10 more years will be drawing down heavily on Medicare.
That’s when the music stops. I expect within the next 8 – 10 years the federal budget will collapse. And because they have been inflating the money supply at a breakneck pace, confidence in the currency will decline.
People will seek alternative currencies, or baskets of other currencies. That’s where the Chinese digital Yuan comes in.
It is already 10% of the IMF Special Drawing Rights market basket of reserve currencies. And I anticipate as the dollar declines in prominence, the Yuan will begin to dominate the world reserve currency markets.
That is exactly what the Chinese have been strategizing toward for decades, and now they have the jump over every other country with the only digital national currency in the world.
Most of it went to the RICH!
The closer you are to the fed, the more money you get and the cheaper it is.