#58 A Bi-Partisan Deception

We’ve discussed previously how monetary expansion and deficit spending are a political mainstay. It’s actually quite frustrating to watch the dog and pony show that is the current American political theater in the midst of so many issues out of the public scrutiny.

Broadly speaking, the American bipartisan political spectrum only really covers social divergences, and in some cases foreign affairs international trade. On the grand scheme of things, economic and fiscal policy are not that different. Certainly, where and how much money gets allocated to different areas changes with each administration and with the seats in congress, but again, where and how grossly misappropriated funds are allocated by central planners is more of a social appeal than an economic one.

The term globalists gets thrown around a lot and at some point soon I hope to do a post or two dedicated to this topic. But in my mind, a much better definition for these types is “globalist central planners”. The political theater of today is no longer the liberal laissez faire types versus the nationalist central planners that it once was. Instead the line of demarcation is drawn between the globally oriented central planners and the national ones.

In terms of economic policy one may favor protectionism while one may favor more liberalized trade agreements, however, these conditions are largely irrelevant under the paradigm of a global fiat reserve system.

Both sides of the arbitrary political isle are monetary expansionists. Both sides of the political isle leverage every tool to increase both debt and spending to cater to their special interests. The faces and pocketbooks on the receiving end of these special interest handouts and government contracts is the only difference between China and the USA. The underpinnings of these economic central planning schemes is the greatest bubble the world has ever seen, the sovereign debt bubble.

I expect the shift we will see over the coming decade is one towards more competitive fiscal policies. This will have to happen as the long term viability of the nation-state is all but doomed on its current trajectory. No matter what Stephanie Kelton tells you, there is no such thing as a free lunch.

Eventually, the burden which expansionary monetary policies and deficit spending place on the foundations of voluntary, profitable cooperation will cause foundations to break. Sovereign debt can only expand as long as it can find buyers and the music has nearly stopped.

With the Fed’s balance sheet now exceeding 35% of US GDP, and debt to GDP now reaching levels not seen since WWII, the pressure builds in desperate search of a relief valve.

Credit wants to liquidate. Malinvestment wants to liquidate. But it can’t. The trajectory can be postponed for days, weeks, perhaps another decade, but its ultimately inevitable. Off balance sheet liabilities will one day come due. Negative yielding debt will one day stop selling. Like a family living off of credit card debt, eventually the bill collectors come.

Consider this your gentle reminder. Bipartisan politics…the entire global geopolitical theater is a sham. Focus on what’s really going on behind all the rhetoric and watch for the breaking points. In my humble opinion, the US general election come November will have very little impact on the impending economic reset. It could speed it up, it could slow it down…but collision is imminent.

Economic and fiscal policies will be forced to become increasingly competitive at some point in the near future. When and where this tipping point is exactly, one cannot say, but if you stay focused on the real issues and keep an eye open for creative opportunities, it can perhaps be navigated skillfully.

The ride will be bumpy.

Book of the Month:

The Price of Tomorrow: Why Deflation is the Key to an Abundant Future

-“The seemingly random events of Brexit, Trump, and a rise in populism and hate in our world are not haphazard or isolated at all. They are all connected to a loss in hope for a better future for large portions of the population. Underlying this loss of hope is a new economic reality where it’s not just the poor who are missing out on economic gains. Much of the middle class is also feeling squeezed. Instead of technology allowing for a fifteen-hour work week, as Keynes predicted when he penned his 1930s essay “Economic Possibilities for Our Grandchildren,” vast numbers of people are working longer, in jobs they rightly fear will soon be gone. Trapped—wondering how they will provide for their families and basic needs when the other shoe drops. At the same time, we are seeing a massive rise in inequality: in the United States, the top 5 percent of the population now holds more than two-thirds of the wealth, while the remaining 95 percent of the population fights for their share of the other third.1 Just three people—Jeff Bezos, Bill Gates, and Warren Buffett—account for more wealth than 50 percent of the population.”

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A fierce Canadian goose aggressively defending his tower.