Nice overview and analysis. With the GENIUS & ARM act's in the works, though it's far from a sure thing if they will pass, looks like they are going with the classic option 2. Kick the can and goose, market, then try to control the narrative and manipulate the citizens into directing their pitchforks in the other direction. Ugh.
Thank you! It seems like the most likely option. But it does seem to be the case that liquidity requirements are incredibly high for refinancing debt and financing new spending that they'll have trouble keeping markets afloat.
I don't know enough, so watch the MOVE index to see what's happening in real time.
I often attempt to explain these financial machinations to my wife on our morning walks, all without sounding wonky. Still, one of the toughest things to explain is how money doesn’t exist until it is borrowed and the interest rate on borrowed money is always a problem for the lender.
Glad to be of service. Let me know if there's anything you'd still like to understand better, I'll see if my expertise is adequate to explain it to you in a clear manner! :)
Q1) Is the ultimate problem the size of the deficit? Because this means that the top half of the US at least is living way beyond their means? That taxes would Have to rise to simply pay down debt?
But if they stopped consuming at present level, world would have lost its biggest market? And that would reduce incomes of a billion or so people, and be a large recession?
PLEASE ANSWER AT SOME POINT. Please say when this will be approximately. Ian
Hi Ian. Thanks for your question, it is an important question.
I am personally of the opinion that they will inflate away the debt. Tax hikes aren't happening, austerity isn't happening. The world and population will be taxed by inflation. So the first option is a "melt-up" in which prices of everything including real assets rise, while the value of debt falls.
The latter part you described is the scenario in which they let it crash, or they lose control over liquidity, which it very well could. It has happened before that a recession in the core has been terrible for peripheral economies. The US basically consumes the worlds exports, hitting industrial manufacturing and in turn causing a whiplash on commodity producers. This can in turn cause its own nasty effects.
These are cyclical movements though. Long term, it is extremely likely that global deficits escalate and will eventually have to be inflated away.
So inflation is part of the armoury of the survival of the advanced economies. Enables the top half at least in these countries to routinely live beyond our means. Our welfare states are part of this. Pity. Ian
Nice overview and analysis. With the GENIUS & ARM act's in the works, though it's far from a sure thing if they will pass, looks like they are going with the classic option 2. Kick the can and goose, market, then try to control the narrative and manipulate the citizens into directing their pitchforks in the other direction. Ugh.
We have master’s theses in the States, too. A capstone project is usually completed at the end of your undergraduate studies.
Ah thanks for letting me know! I've been confused in that case.
Thank you! It seems like the most likely option. But it does seem to be the case that liquidity requirements are incredibly high for refinancing debt and financing new spending that they'll have trouble keeping markets afloat.
I don't know enough, so watch the MOVE index to see what's happening in real time.
I often attempt to explain these financial machinations to my wife on our morning walks, all without sounding wonky. Still, one of the toughest things to explain is how money doesn’t exist until it is borrowed and the interest rate on borrowed money is always a problem for the lender.
Thank you so much for the thorough explanation! Will need to read again to catch the parts I missed first go round.
Glad to be of service. Let me know if there's anything you'd still like to understand better, I'll see if my expertise is adequate to explain it to you in a clear manner! :)
The AI investment boom is not slowing down. it’s accelerating.
Companies like Broadcom and CrowdStrike are reporting strong performance, driven by rising enterprise demand for AI.
But this is not just about software.
Massive investments are flowing into infrastructure data centers, chips, and cloud systems that power AI at scale.
At the same time, businesses are embedding AI into operations, from cybersecurity to decision-making.
This signals a deeper shift:
AI is no longer an experiment.
It is becoming core infrastructure for the global economy.
The companies building and controlling this infrastructure are not just growing
they are shaping the next phase of economic power.
Because in the AI era, compute is capability
and capability is competitive advantage.
Q1) Is the ultimate problem the size of the deficit? Because this means that the top half of the US at least is living way beyond their means? That taxes would Have to rise to simply pay down debt?
But if they stopped consuming at present level, world would have lost its biggest market? And that would reduce incomes of a billion or so people, and be a large recession?
PLEASE ANSWER AT SOME POINT. Please say when this will be approximately. Ian
Hi Ian. Thanks for your question, it is an important question.
I am personally of the opinion that they will inflate away the debt. Tax hikes aren't happening, austerity isn't happening. The world and population will be taxed by inflation. So the first option is a "melt-up" in which prices of everything including real assets rise, while the value of debt falls.
The latter part you described is the scenario in which they let it crash, or they lose control over liquidity, which it very well could. It has happened before that a recession in the core has been terrible for peripheral economies. The US basically consumes the worlds exports, hitting industrial manufacturing and in turn causing a whiplash on commodity producers. This can in turn cause its own nasty effects.
These are cyclical movements though. Long term, it is extremely likely that global deficits escalate and will eventually have to be inflated away.
Happy to help if you need any more clarification.
So inflation is part of the armoury of the survival of the advanced economies. Enables the top half at least in these countries to routinely live beyond our means. Our welfare states are part of this. Pity. Ian