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User Info More RLA Goodies!; entered at 2024-02-07 11:53:34
Posts: 9076
Registered: 2009-02-28 DFW, Tx
The debt is one thing. In a sense, it's our money, which is how absurd the whole game is, spending what you owe. I look at government as spending per job. When you remove government jobs, there is a base of 120-130 million people. The private sector pays all the taxes of government workers, the net result being a rebate to the government. Business gets its money from people who work for a living. The owners get the bulk of their income from consumers. US government spending is around $50K per private job, if you use $6 trillion. Receipts are over $35K. Throw in State and local, there isn't much we spend that isn't already taxes. It appears to me they have run out of things to tax.

There are a lot of things Doug Noland talks about. One is they produce their own money on Wall Street during meltups like we have seen. Of course this isn't real money, but it plays the same, until it doesn't. Then it becomes a contest of who can get their fake money out first and cover their tab. These mechanisms allow them to dream and wake up to reality later. The prime players generally see it coming and sell out. It is why you see big tops. The fake money goes back where it came from and the inflation necessary to push the markets no longer exists.

The problem with this picture is though CPI inflation might be moderating, asset inflation is massive and will spill over. The Fed then has another problem, popping the bubble or worse, supporting a bigger bubble that will eventually implode on its own. We would not be witnessing the current run up, if the Fed was too tight. If Bonds stay in the range of where they are now, mortgage rates should settle in the high 5%'s and we could see the bubble expand. Real estate transactions produce real money, in that they produce equity extraction through loans on long term hard assets. You don't get a margin call on a mortgage, even if you are under water.

If I were to make a case for lower rates, it would be in a meltdown situation or a sizable decline in demand. Neither would be good for the market. What we have seen is a reflex reaction to a long term moral hazard. It is system wide. Government is going to spend and the CB's are going to provide free credit. People with access to near zero money can operate at near free costs. Leveraging a short position in bills at 1% ten to 1 and investing at 4% produces 30% returns, as long as everything maintains. You only need look to Japan to borrow. How big is that carry?

I suspect everything is going to follow China, which is at the end of a 30 year boom. One that has been overextended a decade or more. China has a problem, in that they need to reignite expansion and wish to support their currency at the same time. One or the other has to give. People like to down the dollar, but no country should dare run out of them. The story that China would sell their treasuries and collapse the dollar is pushed by people who don't understand the international scene or assets. Who wants assets in a country that can and most likely seize them back, once they don't need you. A real crunch in China will be a worldwide event.
2024-02-07 11:53:34