The Fed is well aware that the banking system is weak and that more bank failures are coming. The math is what the math is.
- The U.S. Economy is insolvent when you consider that Treasury Debt to GDP is 1.2x and Total Debt to GDP is 4.0x.
- How is the U.S. ever going to service unfunded liabilities such as Social Security and Medicare without taking the U.S. Dollar to zero? It can’t. Those obligations will never be serviced.
- The Fed hiking 25 BPS tomorrow isn’t going to change the nature of the debt bomb we are sitting on.
- A radical reduction in fiscal spending such that the U.S. runs healthy budget surpluses would be a good start on the path to solvency. When the time comes we can expand the money supply to avoid a Great Depression-era bank run. We are not there yet. Not to mention we have an inflation dragon flying overhead.
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