Trillions of debt and trillions of deficit spending are the worst habits a country could have, and it inevitably undermines its currency.
Peter recently appeared on the Bald Guy Money show for a conversation on gold’s role in American and global politics, the influence of the BRICS coalition on metals markets, and, as always these days, the disastrous monetary policy coming out of the Fed.
Peter and Roger start their conversation by discussing how unlikely it is that the Fed can wrangle inflation under 2% anytime soon:
“I think the markets right now still are harboring this fantasy that a return to 2% inflation is possible. In fact, if you look at the breakevens on 30 year treasuries and tips, investors are expecting inflation to average 2.3% for the next 30 years. That is a complete pipe dream that that’s going to happen! You know the low inflation that we’ve had since the ‘08 financial crisis? That’s an aberration. That’s the exception, not the rule. You look at the 40 years before the 2008 financial crisis— inflation averaged close to 5% a year.”
America’s monetary recklessness comes at the expense of other economies’ performance. For them, abandoning the dollar as the reserve currency will prove beneficial in the long run:
“The world has to live beneath its means to enable Americans to live beyond their means. The rest of the world has to under-consume and save and then make that available to the U.S. and finance these huge trade deficits that we have with everybody. This is causing all sorts of problems— not only the drain on the resources of these economies, but by keeping interest rates artificially low to help sustain the dollar, they also end up with asset bubbles and misallocation of resources, and they screw up their own economy. So we’re exporting our bad monetary policy all around the world, and I think the sooner the world rejects the dollar as a reserve currency and moves on to sound money, the better off they’re going to be.”
Trillions of debt and trillions of deficit spending are the worst habits a country could have, and it inevitably undermines its currency:
“It’s like somebody that’s smoking cigarettes, and the doctor says, ‘You know you’ve got to quit those cigarettes. You’re going to get cancer!’ But they keep smoking, and they don’t have cancer. They don’t quit until they go to the doctor and he says, ‘Oh you know what? You’ve got cancer!’ And then it’s like, ‘Oh shoot, I better quit smoking!’ Well, it’s a little late for that, right? You should have quit a long time ago, but you think, ‘Well, I haven’t developed cancer yet, so I guess I can keep smoking.’ By the time we get the crisis, it’s too late to fix it.”
The only way to restore the economy to good health is to go cold turkey on debt, deficit spending, and money printing. With an election coming up, Biden and Powell have no incentive to do this. If anything, they’ll keep the economy addicted to debt until the cancer of inflation kills the dollar.
