Why the Hoped-for Solution to Out-of-Control Government Debts Won’t Work This Time

“Rapid growth is no longer possible” and “inflation is not going to be tolerated” in societies with slow wage growth: head of central bank of Singapore. It has been said out loud.

By Wolf Richter for WOLF STREET.

The solution now to the enormously ballooning debts in developed economies: Firing up consumer price inflation and let it run hot, according to the newest dogma trotted out incessantly by the Fed and other central banks, and hope that rapid economic growth will take care of the rest.

The US federal government debt alone has ballooned by $3.5 trillion in just eight months, and by $4.2 trillion in 12 months, to a breath-taking $26.7 trillion today:

Rising inflation and high economic growth worked during the decades after the Second World War in bringing down debt levels in highly indebted countries, such as the US, but it won’t work this time, said Tharman Shanmugaratnam, a Senior Minister in the Singapore Cabinet, Chairman of the Monetary Authority of Singapore (Singapore’s central bank), and Deputy Chairman of the Government of Singapore Investment Corporation (Singapore’s sovereign wealth fund). He was speaking at the opening day of the virtual Singapore Summit.

“I think the big issue in the next decade is how to ensure that debts are sustainable,” he said. “First, it’s obvious that you can’t just keep increasing your debts. I don’t believe that the new high levels of debt that many countries are now moving towards are going to be sustainable without imposing a significant cost on growth as well as on equity within their societies.”

The question of “equity” is how these costs are being distributed over society. In other words, who’s going to get slammed by those costs, and who benefits.

“It’s not like the post-war period,” he said. “In fact, after the Second World War, many of the advanced countries started at very high levels of debt – the United States, the UK, many European countries – but they brought it down dramatically over 30 years. How did they do it? Rapid growth and inflation. And both of those are not possible anymore.”

“Rapid growth is no longer possible; these are now aging societies; productivity growth is much lower than before,” he said.

“And inflation is not going to be tolerated by older societies,” he said. “They may be tolerated when societies are young and everyone’s incomes are going up, but it’s not going to be tolerated now. So that option isn’t there.” Like medication that is not tolerated and makes the sick patient even sicker.

“Neither can we assume that today’s low interest rates remain low forever.” Interest rates will rise to more normal levels at some point, and this will raise the costs of this debt, she said. Governments must find a way to grow their economies without simply expanding the deficit.

“It’s a very serious issue,” he said. “You’re going to need fiscal reforms – not simply cutting down on spending. But you need quality spending and ways of raising revenue that don’t dent growth,” he said.

So there you have it. What everyone already knew has now been said out loud at an official event. The new dogma won’t work. There are solutions, as Tharman Shanmugaratnam pointed out, but they’re more complex to implement and don’t involve the ever so convenient printing press.

But borrowing and printing money forever, and hoping for consumer price inflation to reduce the debt burden, aren’t going to work in creating a healthy economy and prosperity.

What consumer price inflation does in today’s developed economies is destroy the purchasing power of the currency, and thereby the purchasing power of already struggling labor paid in that currency, and thereby dent consumption and create more social frustrations and inequities, that would then be addressed with even more borrowing and printing and inflation?

Still a lot of fawning coverage, but big dissenters are now given prominent spots, and loaded questions are used to politely hammer Powell into telling obvious nonsense. Read... Have You Noticed How Push-Back Against Powell-Fed’s Actions Is Getting Louder in the Mainstream Media, from NPR to CNBC?

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  227 comments for “Why the Hoped-for Solution to Out-of-Control Government Debts Won’t Work This Time

  1. George says:

    As long as Treasury auctions are successful–as this one was today–with virtually no interest being paid by the U.S. (indeed, negative interest when inflation is considered), debt will continue to be issued. As long as the Eurodollar endures, there will always be a market for Treasuries, since they are top shelf collateral in international transactions.

    Indeed, the market shows an insatiable demand for Treasury debt.

    • Jdog says:

      The Treasury auctions are successful, because there are no other reasonably safe investments to be had because of outrageous asset valuations.
      All it is going to take is something to spook the heard, and the bottom will fall out of stupidly overpriced asset valuations.
      At that point, opportunity of picking up assets at reasonable value, will cause money to flow out of Treasuries, and into assets, leaving the auctions devoid of buyers at present rates.
      Rates will have to increase to facilitate the massive need for the auctions to finance the massive debt. That will be when the real fun starts….

    • Ruthless Gangbuster says:

      Ask yourself why? Cuz they know the stock market is goona collapse & yields will go zero/negative and they will reap the profits, people do not realise that buying bonds now it’s not for yield, hell the 30 yr yields twice what Apple pay anyway, they buy the bonds for capital gain & protection, the smart money is quietly buying bonds & sold all stocks, the dumb money is loading up on stocks with zero or close to zero yields at the top of an almighty collapse, then the smart money will sell the bonds after the crash ends to the dumb money who are fed up of loses & sell at the bottom, they will then buy the stocks, then ride it for 10 yrs and repeat, I think you’ll find stocks collapse plus 50% & bond will rally 30% or so. Yet the dumb money says “Why buy bonds, no yield?”, go figure, that’s the bag holders right there, the crowd is always wrong, the crowd always get slaughtered. :)

      • Does the Fed really believe they can auction a negative yield bond without paying buyers a premium? Would you pay a premium for a 5% yield in the secondary market after yields went negative, knowing a year from now yields might go to 10%? Or that the government may default, or they may call in those bonds (by obscure Fed decree) FED buys as many secondary market bonds as they can (something they have already been doing?) as they can, before they implement ZIRP (reduces the premium). They take all new issues for their balance sheet, booking any loss to par implied premium. Such a move would require a complete conspiracy in oversight, and be so utterly corrupt as to cause an immediate collapse.

      • Jdog says:

        There is is… not rocket science.

    • Ruthless Gangbuster says:

      Oh & there is a limit to debt issuance, they reached the end, any more debt issuance & they will never see growth again, those Dollars have to come from the economy, the Fed cannot keep doing QE, remember that the Gov are sucking Dollars from productive means, QE puts these Dollars into reserve accounts never to be seen again, they are causing a massive shortage of Dollars, if the Gov sucks the Dollars up to hand out money how are people gonna get Dollars for productive means. To say this can go on is wrong, they know that to, yea they play the Santa for the elections just wait & see next year how tight fisted they become. :)

    • FDR Capitalist says:

      Agreed. When the USA armed force base expansion growth stagnates then retreats look for inflation to begin to rise in Yankee Dollar consumption. Why?

      US$ hegemony begins to show weakness then collapse due to too many foreign entanglements that the US can’t or won’t commit to.

    • van_down_by_river says:

      If I was a primary dealer who could turn around and sell my treasuries to the Fed two days later for a quick tidy profit I would be buying government debt hand over fist also.

      Treasury auctions will be “successful” as long as the Fed continues to monetize deficit spending. In other words, treasuries will continue to have a negative real yields forever.

    • nick kelly says:

      ‘As long as…’

      It’ll work until it doesn’t. The guy is not saying tomorrows auction of T-bills will fail. He is saying there is a limit to their issuance at these rates that are probably below inflation, or in other words that reality applies to the US Empire as it applied to the Roman Empire.

    • BatHelix says:

      The big question is …what will be the unforeseen thing that happens that changes this scenario into something no one saw coming. We all have lots of theories but they’re probably all going to be wrong. When it comes to big future predictions we are always wrong about how they play out. I just hope it’s some amazing tech and not famine and war. People trying to hold on to “how it worked before” and not embracing green and other tech are infantile as one way or another the effects of technology will determine our future …. just need to hope it’s in positive ways.

    • Ian Mathers says:

      The Federal Reserve is buying most of the new US Treasuries.

  2. VintageVNvet says:

    ”CLEAN HOUSE, SENATE TOO” along with every level of every branch of elected guv mint until we get politicians who will do their sworn duty and represent the majority of We the Peedons. (Thanks Unamused.)
    There appears to be no way that the current crop of politicians will ever be able to wean themselves off of the bribes parading as campaign contributions or whatever.
    So ”throw the bums out!”

    • Anthony A. says:

      VVN, easier said than done. If I was King, I could just fire (or behead) them all. But who do we replace them with? The line of scoundrels in waiting is pretty long!

      • Keith says:

        With many voting groups looking for their cut.

      • Lee says:

        Well you see what happens in the USA when an outsiders is elected President:

        the biggest ‘benefit’ and problem are both the same – he isn’t a politician.

        All those incoming Presidents that are politicians have a huge number of people that have been with the party and been dragged along with the person for ages.

        Just throw/fire/not renew the leftovers from the previous administration and stack the government with your people who will faithfully follow whatever asinine policies and programs you have.

        When the ‘outsider’ comes in and one that is not particularly liked by the party or people in government, what do you do if you don’t have that cadre of hangeroners and professional leeches?

        You have to appoint people that secretly hate you and will do anything to block, stymie, and leak. Others will hang on to your coattails and then stab you in the back as soon as they can make a buck off of you.

        The situation today reminds me when reading history of a lot of the stuff that went on when General Grant was elected. A scandal plagued administration:

        “Corruption in federal departments was rampant; four of Grant’s appointed cabinet members resigned under scandal, while many Grant appointees were fired. ”

        Other items that ahppened back then also remind of me the current situation in the USA:

        Will Grant’s “Panic of 1873′ be repeated in the USA in 2021?

        • van_down_by_river says:

          Yes! The outsider was swept into power, drained the swamp, paid down the debt and put the US economy back on a sustainable path.

          Happy ending, it’s morning in America!

        • Zantetsu says:

          I think the concept of an outsider as President is still an interesting and potentially beneficial concept. It’s just that we picked the worst possible person as the outsider this time. The result is not so much about what an outsider is like in politics, as it is what THIS outsider is like. He’s an outlier (both unfortunately – in that we had to suffer 4 years of him – and fortunately – in that it will be virtually impossible to pick someone that bad again).

      • Steven Rowlandson says:

        Don’t replace them. Do it yourself if you can’t find any honest men.

  3. Nick says:

    You create jobs and a prosperous economy by generating capital and creating capital goods. What is the most basic level of capital on this rock? LAND!!! America needs a modern, 21st century homestead act. Entrepreneurial Americans who have ideas and are willing to work hard at farming, mining, building, etc. need to be given a few acres of productive land. Forest, farmland, etc. To do what they want with that “capital”. From the ground up this will create more wealth and more capital and lead to other businesses sprouting up. If I own land that sells timber then some business start up in America would use my product to build another product. This is not rocket science. This is common sense. There is absolutely no reason why men like Ted Turner should be sitting on productive ranch land, and resources to the tune of MILLIONS of acres. What my idea basically amounts to is the rich who are hogging all the “capital” in society need to take a haircut. Plain and simple. Capitalism thrives on failure. Businesses, banks, people need to be allowed to fail so others can come along and do better and provide a better product/service etc.

    • MarMar says:

      The world is drowning in capital, trillions in cash that can’t be put to productive use, so in the last decade or two has been thrown into the likes of Uber, fracking, and PE-based company dismemberment schemes.

    • Lisa_Hooker says:

      Plain and simple – this is not the 1890’s. I want my land to be beachfront property so I can go to the financial markets for the money to build a luxury resort for the people with money. Or perhaps a $400,000 combine for my farm. Or the money to lease a fishing license for a year from a 3rd generation holder. Or to develop a really significant social networking app. Or to lease a seat on one of the stock exchanges for some serious trading. Our society has become quite complex and intimately entwined with money. Simple solutions no longer need apply.

      Although, for me, it would be infinitely pleasing to watch the bastards go through bankruptcy.

      • pchap says:

        From my limited perspective.
        I find it hard to believe that you can estiquinsh debt with a debt instrument. Like fighting fire with fire.
        The problem, I think, is that people still think we are dealing with real money. Yes, if that was the case, we would have already reset the debt. If real money is gold then one should look at this debt problem differently.
        This “money” we all chase, is backed by our labor. 99% of our fellow citizens wake up every morning to go get some. When is the tipping point when all of your efforts no longer “pay off”? Beats me. But, that’s when I think “the dollar” will fall by the wayside. Just a thought, I’m not married to it.

        • Paul from NC says:

          Actually, I believe the world’s employment-to-population ratio is between 55-62%. The rest just laugh at us as we sit in traffic for hours on our slog to and from our “careers”.

        • Minutes says:

          Yes Paul is right. The social safety net has done a lot to discourage work and effort in general. That can be fixed….Instead we seem to be warp speed towards MMT.

      • Paul from NC says:

        The complexity brought upon by industrialization is very recent, and so, very simple to reverse if we act now: kill off the concept of currency. The longer we wait, the harder and more painful it will be for those addicted-to-money-and-convenience to re-realize that the only things in this life worth anything of value, are ones you can raise, grow, eat, drink, sleep in/on, etc. Homestead Act of 2020 sounds like a brilliant idea, and ultimately, no matter how desperately some of us want to delay the inevitable, we must all come back to the land to nurture the soil. Our great-grandkids’ future depends on it.

        • Xabier says:

          Unfortunately the complexity engendered by industrial civilization is very different to a civilization which has cities and towns, but mostly a rural base, as was the case until WW2.

          Modern civilization is best conceived as climbing a tall ladder, and kicking out the rungs as you go.

          Earlier civilizations left the lower rungs intact as civilization added higher, urban, layers.

          When they collapsed, agricultural ad pastoral life could still continue, unless the soil had been so abused that it had become infertile or salt-laden. through irrigation (think of all the most ancient cities of the Middle East and deforestation.

    • Harrold says:

      Higher taxes would take care of that extra capital the wealthy are sitting on.

      • Bobber says:

        That is the simple solution right in front of us, but the wealthy along with their legislators pretend it is not an option.

        Wealth has concentrated largely because the tax code has lost its progressivity. The recent 40% decline in corporate taxes exacerbated the problem.

      • Happy1 says:

        Yeah, that would be great for the economy…

      • Rudio says:

        There’s what they are sitting on and then there’s what they’re hiding.

    • 91B20 1stCav (AUS) says:

      Nick-i understand your frustration, but you need to study what makes ‘productive’ land productive, and there really isn’t a lot of it around. That means first, a stable and adequate water supply (this also implies a relatively stable climate environment in terms of rainy seasons ‘The Worst Hard Time’ about the Dust Bowl is a good read, here, as these folks were mostly the homesteaders you are envisioning)-freshwater has always been the story of civilization, and now, with a world population bursting its seams, is more in demand than ever before (you might find interesting the amount of capital and effort being expended by a number of large corporations-Vivendi comes to mind among several-in privatizing as much available world freshwater as possible). We in the U.S. have been redlining the tach on our freshwater resources for decades. Changing climate is reducing long-term snowpacks/glaciers and seasonal runoff in the Sierras, Cascades and Rockies, the attendant runoff reduction leading to general ag-water shortages and overpumping of many major aquifers, many of those containing ‘fossil’ water, which has no recharge path. The rest of the globe faces similar problems-diversion of recharge has all but killed the Aral Sea and severely impacted the Caspian. The ongoing degradation of Himalayan glaciers are on track to seriously limit river flows to the major rice-producing areas of Southeast Asia.

      Sorry to rant, but as an offgrid, non-big-ag, rural land dweller in Northern California, not served by any city/county/state/federal water program, i’ve witnessed our average yearly rainfall decline over 20″ in the last thirty years. We have ‘dry’ and ‘wet’ seasons in the West, in our particular area it’s now not uncommon to have six months-or more-without a drop of precip. In the -formerly- good years, 100″ in the wet season wasn’t that remarkable, 70″ average. This year we barely received 40″. Even in the rainier years, we must carefully watch our spring production/usage, even after we’ve augmented our ag needs with several thousand gallons of captured and tanked rainwater from the previous season. Our unirrigated forest land, as evidenced in current events, is more than parched and highly stressed.

      So, in the end, with any land-distribution strategy, you must first ask: ‘…where is the water?…’.

      Good luck in your quest, stay safe and well, and-

      may we all find a better day.

      • Paul from NC says:

        Very well said.
        I’m not sure the percentage, though I know it to be very low, of people in the US that know that parts of our country actually import water from Canada. At the same time, other parts of our country, export water to Mexico. I try to inform almost anyone I know about these facts if they happen to come up in a conversation, but I have a feeling it won’t sink in until its way too late. I live in a rural area, in old farm country, on land long ago run through. Some of my neighbors have no running water. *Most* of my neighbors have no drinking water; they get it from Walmart in those large plastic jugs. Some of my neighbors that have some drinking water, have their pumps set at 450ft.

        • 91B20 1stCav (AUS) says:

          Paul-thanks for the nod and your wise observations. Sounds, sad to say, that your neighbors are already living in the future of freshwater. Given our human propensity for eternal deficit spending in the non-natural world, i often despair, in terms of the natural one, that sufficient of our numbers will ever see folly in holding a faith that the lunch our environment has provided over the centuries will always be free. We can only keep attempting to learn more, to invest in, to restore, and always maintain that which keeps our species extant. If we don’t, we just clear the way for the rise of the next dominant life-form to fill the vacuum we’re bound to leave.

          Y’all stay safe, well, and-

          may we all find a better day.

        • td says:

          Water travels from Canada to the US in the form of the Columbia River and the Great Lakes basin. Water travels the other way via the Red River draining the Dakotas into Manitoba and generally Manitoba would like less water, thank you. There is very little man-made movement of water elsewhere between the two countries. A detailed look at a map will reveal all.

    • bungee says:

      Nick,
      I am writing to you now from my homestead in northern california. 12 acres with it’s own deeded spring. I bought it 4 years ago and paid for it by crazy-hard work and starting my own business in an overcrowded city. I didn’t get any loans or help from family with either of my businesses and I paid cash for the property. I’ve done NOTHING but work. I lost relationships all over the place but was rewarded with new and better ones and much more control over my station in life (it is still very low haha).

      “Entrepreneurial Americans who have ideas and are willing to work hard” don’t need a homestead act. What i fear is that idealist solutions like this take land from those who are able to get results (like me) and give it to those who have nothing but a frustrated dream (like you.. no offense). The last 10 years have turned me into a hard core right-winger. I call these years reality.

      it may be comforting to think that a bunch of rich, lazy bastards who inherited everything are the problem. but trying to legislate their downfall usually ends up bad for the little guy. Rather than try to decide what Ted Turner deserves, or what is best for millions of people, learn a trade that isn’t unionized and work like crazy at it. teach yourself how to code (it isn’t that hard and you can do it in the evenings), stay out of debt, don’t drink alcohol, eat healthy. don’t ever pay more than 25% of take-home pay on rent (even if you have to live in a slum) and any money you want to save for the long term, turn it into physical gold. you will one day wake up rich!

      These are the complex, tighten-your belt solutions that are impossible for us as a nation but TOTALLY do-able as an individual.

      -thank you

      • paul easton says:

        bungee you may wake up rich financially but you will be ruined as a human being. You must have been terribly insecure in the first place to make that kind of sacrifice. If would have been better for you to find a shrink and deal directly with the insecurity. Life is insecure. It is unavoidable. You will never feel secure and will always want more and do anything to get it. People like you are the problem not the solution.

        • VintageVNvet says:

          IMO P, you are generalizing and projecting your mind stuff, both based on way insufficient information.
          Many folks are hard working ”realists” who know how to save and be thrifty and not fall for the usual propaganda/brainwashing of the media owners, big pharmaceutical owners, etc., etc.
          I have known groups of folks, ( totally unrelated in any way, ) who are rich in deeds done and wealth harvested legally, as well as even richer in family and friends. who live the life style bungee describes.
          The only hitch in the giddy up for him is the very strong possibility that his spring will go dry long term, because, basically, everything west of the Mississippi river can do that, and there is clear evidence that it has done that more than once.

        • David Krenshaw says:

          Paul, a good, hard look in the mirror might do you some good.
          Bungee seems quite content. You, on the other hand…

      • Zantetsu says:

        I agree with much of what you said, self reliance and self improvement are great. But I would not recommend living in a slum just to stick to an arbitrary percentage of take-home pay on rent. Living decently has costs, just pay them.

        • Paul from NC says:

          I would disagree with your disagreement. Both from a standpoint of, yeah you probably should not pay more than 25% of your take home on housing (obviously only as a general rule of thumb, can’t take outliers into consideration on these types of statements), and from a standpoint of living in the slums. There is nothing objectionable about living in the ghetto, if you’re born and raised in the ghetto. We don’t *need* half of the things “on offer” outside of the ghetto. My fondest years were my poorest.

      • leanfire_Queen says:

        bungee,

        You guys will be the ones in charge of producing food for us, fruit, and vegetables given that the Central Valley has its days counted.

        I would do it but the government inflated land prices without any need by artificially lowering rates, which means it doesn’t actually want people like me to help with that daunting task. So it will have to force people like you to get it done, the TINA effect: there’s no alternative.

        Best of luck getting it done current land owners!!!

    • DanaH says:

      The Federal govt owns far more land than the Ted Turners.

  4. The US credit rating took a hit in the last debt ceiling impasse? How is that going to work this time around. One expert said the Congress did not agree to a spending bill because nobody wanted to make a mistake. Apparently neither side saw political opportunity either. Am I the only one who suspects the Fed is NOT going to monetize Treasuries new debt pile? Is there cause to fire Powell preemptively? Higher yields, foreign money to offset our deficits? Strong forex dollar, masks dollars declining value.

    • MCH says:

      Does the debt ceiling even exist any more?

      Looking at the last chart of US debt, debt ceiling appear to have gone the way of dinosaurs.

      • Mr. House says:

        When the government shutdown a few years ago with regards to the debt ceiling, they just happened to reach a bi partisan concensus to delay it until after the election.

        “Congress has suspended the debt ceiling until after the 2020 presidential election.1 It wants to avoid a repeat of the 2011 and 2013 debt crises during an election year. As a result, the U.S. debt exceeded $26 trillion on June 10, 2020.2

        

        In January 2019, House Democrats agreed to reinstate the Gephardt Rule. It was created by former Democratic Congressman Dick Gephardt. It automatically increases the debt ceiling whenever Congress passes a budget that exceeds it. The Senate or the president could still refuse to raise the debt ceiling.”

        • MCH says:

          Basically to free themselves from reality so that they can keep spending money they don’t have. That’s typical jackass for you. On the other side, the typical dumbo is to keep their mouth shut about these inconvenient truths until it’s time to open their trap and slam fiscal irresponsibility. Because, when it benefits you, you shouldn’t say anything.

          Almost make me wish 1990s Bill Clinton was still president. The nice thing about his brand of hypocrisy is that it balanced the budget, and was still consensual for the most part.

      • Jeremy says:

        It’s not a “debt ceiling” – it’s a “Debt Target”. Look at it in those terms and it all makes sense!

      • sunny129 says:

        Congress has lifted the so called DEBT ceiling atleast 44 times!
        It is a kabuki circus.

    • Joe Saba says:

      in our NEW ECONOMY were 1/2 workers get to work and other half good luck in future
      we are going to see maybe 50-70% production capacity
      and prices for said products are gonna go up 10-30%(2020) and ??pick number each year hereafter(10%+++)
      the loss of purchasing power is enormous already in 2020
      chicken prices up just 73%, food up in general 20-30%
      not to worry – no one is gonna pay back that debt congress is exploding
      YES CONGRESS not President Trump who is doing great job

      • Petunia says:

        There was a lot of chop meat on sale this week. Probably because nobody is buying it anymore because of all the unemployment and lowered benefits. I guess the unemployed are not sitting home getting fat after all, like some keep insisting.

        There’s also a story going around the web that Australia is running low on rice. Lock downs at work?

        • sdb says:

          Brasil is running low on rice as well .

        • Lee says:

          “Low rainfall, dry weather and COVID-19 panic buying have all been linked to the diminishing stock.

          Last year, SunRice produced its second lowest rice crop.

          Only 54,000 tonnes of rice was harvested – compared to its regular 800,000 tonnes. ”

          Yep, when the bs started here one of the first things to go was rice. You couldn’t find it anywhere. The normal groceries stores were sold out and even the Asian food stores were sold out.

          We were lucky in that we had just bought a bunch of Japanese imported rice during our regular shop before it started. The Japanese food store was sold out for months as well. Now when we buy we always buy an extra 5 kilo bag just to be safe.

          The price of the imported Japanes rice has soared over the past couple of years too.

          We used to eat domestic produced Australian rice, but it just isn’t the same as Japanese produced rice. Even the so called ‘sushi rice’ produced in Australia is a poor comparison to real Japanese rice.

          It is the same as eating Australian produced so called ‘wagyu’ and real Kobe or matsusaka wagyu. Not the same.

          The Australia sushi rice is good for mixing with others to eat though such as when making barley rice (mugi gohan).

          And it looks like that rice won’t be the only problem as Christmas approaches as the lockdown and curfew restrictions in Victoria are still hitting the various supply chains.

          If it doesn’t ease up, there may be some food distribution/supply problems popping up soon.

          And finally, it looks like there may be a ‘La Nina’ event taking place this year which means more rain, possible flooding and lots of clouds with lower than normal temps in the growing regions of Oz.

          If that does happen it will mean more problems here for food and another year of crappy results and higher food and vegetables prices.

          So far it looks like we are going to have a year with record low amount of sunshine even if we get a normal summer. More clouds and it will probably be a super duper record low – doesn’t help with the solar panels or solar hot water system on the roof.

          And finally, with all the mess going here and industry being shut down the wholesale price of natural gas has fallen by some 50% compared to last year…………

          But guess what?

          The price for RESIDENTIAL natural gas has not fallen at all for new contracts and in some has actually increased in price!!

        • MCH says:

          Low on rice… is China filling up the grain silos again?

        • Fat Chewer. says:

          That story is probably click bait. If the article didn’t mention the draining of the Great Artesian Basin, it’s lying to you already. The cotton farmers took all of the water that used to go to rice; and everything else.

      • jon says:

        With 30 million people unemployed, I don’t see inflation in the long run but I do see deflation after some time.

        I have lots of friends who are unemployed. They spent a lot because of $600/month benefit but are now severely tightening the belt.

        Unless the money falls from sky/govt but most of the money is going to wealthy people which won’t contribute to demand.

  5. MCH says:

    Hope… I almost stopped right there. In dire situations, that word is usually followed by the phrase “last refuge of the damned.”

    And the word fiscal reform is usually followed by the term austerity. This is not going to end well.

    • Fat Chewer. says:

      MCH, what is austerity but yet another punishment for being poor instituted by the rich. Say no to austerity and yes to 100% taxes on the rich. Punish THEM!

  6. IdahoPotato says:

    Don’t worry. The minute the current U.S. administration is no longer in charge, they will bring out their bullhorns about the mounting deficit and obstruct all attempts at governance. Any economic policies other than tax cuts for corporations will be taboo.

    You can set your clock to it.

  7. Seneca's cliff says:

    Wow, A huge dose of cold water and truth that the fed and all of our politicians need to hear. But the real bad news is that there are only two ways to get rid of this kind of debt. If the growth and inflation route is off the table, the only other way is a long road of debt write downs and deflation. As wolf has pointed out a debt jubilee is a near impossibility in todays interconnected financial world, so we will have to do it the hard way and let them go bad one at a time. As they say, “what can’t be paid won’t be paid.”

  8. Patrick says:

    So is inflation not being ‘tolerated’ in Argentina, Iran, Turkey and Venezuela? How’s that working out for them?

    And if yields ‘Must’ rise then isn’t that just an acronym for soverign currency default being that there’s zero chance higher interest rates can be serviced?

    Both of these assumptions reek of hubris given that the only way forward is both a steepening inflation curve along with increased rate suppression by central banks.

    Does anyone seriously believe that inflation is mediated by affordability or intolerance. Or that central banks can possibly fail at suppressing interest rates as long as a currency has at least some purchasing power left, along with a strong military to enforce it?

    • Wolf Richter says:

      Patrick

      Unwittingly you chose the prime examples to support everything Tharman said. Have you looked at the economy of Argentina — and its umpteenth debt default despite 50% inflation? Do you see why inflation is not a solution to a modern economy?

      Yeah, big inflation can happen, but as in Argentina — and the other countries you mentioned — it will destroy the economy because it is not being tolerated. It’s like a medication that’s not tolerated and makes you very sick. That’s precisely why inflation doesn’t work as a solution. And that’s the point.

    • nick kelly says:

      ‘How’s that working out for them?’

      Because there is a LOT of sarcasm on WS, it’s hard to know when its turned on. Assuming it isn’t, are you so totally out of touch with the situation in Venezuela that you don’t know society has collapsed? It is now one of the most dangerous places in the world. If you are driving on a rural road and see an ‘accident’ or fallen tree, do a U-turn now.
      Recently Venezuela briefly opened the border to Columbia so folks could buy essentials like rice. From Columbia.

      God forbid Argentina gets that bad but it’s not looking good. I have friends in next door Uruguay and rich Argies are arriving fast. Argie has already had one riot in a supermarket when the PA announced prices were now doubled.

      How did this plan turn out for Zimbabwe?

  9. Scott says:

    Seems to me if the Federal Reserve wanted to increase inflation, the government could just print money and give it to its citizens.

    • They did just that, putting 1200 in your bank account? Remember when we were worried about BAIL-INS? The stimulus seems to have worked, CPI took a bump offset by the dip in energy prices.

    • Bobber says:

      Central banks would love that idea, but it has to be implemented by legislators, who hate the idea because they and their corporate supporters are wealthy and would suffer wealth decreases as a result of that inflation.

    • Ruthless Gangbuster says:

      They can create transitory inflation or hyper inflation, the only reason CPI is up is the Dollar shorting going on to delay a stock collapse, shorting Dollar & shorting the VIX relentlessly, running out of stolen ppp money though, these times are highly deflationary, how can they create inflation?? They can’t do it, they just play games saying they will let it run hot, never gonna happen, they want people to believe that so people will run out and spend, they laughable thing is this society do not any encouragment to spend, they have no savings, no jobs, they think it’s the 60s, or 70s, maybe 80s, when people actually saved, had 7% plus inetrest & zero debts, unemployment minimum 20%, 20% of populations are no spending boomers & hiding from Covid, they have all the wealth until markets collapse, where is the inflation??, There is no inflation.

      • Lisa_Hooker says:

        You might be right. It’s deflation. My 12oz beer has deflated to 11oz, but price up just a little. My 16oz pint of ice cream deflated to 14oz, price only a bit higher. The number of square feet in the same package of TP has deflated noticeable, but it costs more. We can all go on and on with examples. There was a bit of inflation tho – my RE taxes doubled in 12 years, while the level and quality of public services deteriorated. The registration fee for my vehicle? From $50 to $150 in 10 years, same old license plate with a new tiny sticker.

        • Zantetsu says:

          Eating less is good for you, so the trend towards smaller services, more in line with serving sizes of the past, when people were generally healthier is a good thing. And when you eat less, you need less TP. So it’s all good.

  10. MonkeyBusiness says:

    “Rapid growth is no longer possible”. Only rapid growth of debt is possible.

    “And inflation is not going to be tolerated by older societies,” Most people have no say, and hei there’s always Covid to make society less old.

    This tells me that countries like India and Indonesia where the population is super young will be able to use inflation to get out of debt. Indonesia’s Government Debt to GDP is pretty low though at 30 plus percent.

  11. Helmut Beintner says:

    Pretend and extend. Somebody should do something

    • sunny129 says:

      Why do anything, when ‘extend & pretend. is working?
      So is ‘kicking the can’ down the road one more time!

  12. Lisa_Hooker says:

    4th down. Call in the kicker.

  13. Neal Woods says:

    “I think the big issue in the next decade is how to ensure that debts are sustainable,” he said. “First, it’s obvious that you can’t just keep increasing your debts.”

    You never hear any detail from these comfortable eggheads about why sovereign countries “can’t” increase their debt levels. That’s funny; they own the printing presses the debts are denominated in, but somehow “can’t” be expected to find a creative solution to the problem, ever.

    There are tons of ways out of debt and if this banker knew banking he would know that and wouldn’t be saying these things with the objective of informing the reader.

    • Wolf Richter says:

      Neal Woods,

      You can increase the debt, but the economy stops functioning properly. We’re already seeing that. Those are the consequences. It’s like yes, you can drive on the wrong side of the street for a while, and why shouldn’t you since it’s so easy and has less traffic, but there are consequences, such as getting squashed by a truck.

      • Neal Woods says:

        In the normal run of things, yes, but driving on the left side of the road is the absolute correct action to take when, for instance, fleeing a city about to undergo a disaster when the road has a traffic jam, and the authorities won’t enforce the usual rules of the road.

        High debt levels probably portend the approach of rapid adjustments, but there’s no essential connection between the level of debt and the character of the adjustments. The adjustments are always subject to control by political actors.

        This central banker is just telling us about his preferred flavor of “inevitable” adjustment.

      • Harrold says:

        Why has Japan been so successful?

        • sunny129 says:

          Japan is a creditor and surplus Nation ( USA is the largest DEBTOR Nation) and the 90% of debt is held by the Govt itself. The Debt to GDP is around 300%!

          In the long-term, the Japan GDP Growth Rate is projected to trend around 0.60 percent in 2021 and 0.50 percent in 2022, according to our econometric models.

          Demography – more social spending, decline in birth rate.

        • Lee says:

          Lots of people and companies (ex banks) have lots of money.

          The government of Japan doesn’t.

          In the USA the government doesn’t have any money and a lot of the people don’t have any money.

          In Japan they aren’t rioting, burning down buildings, or shutting down their economy either.

        • Stephen Cavaliere says:

          Serious question. Why does Japan need to grow GDP more than point 6 % when its population is declining? They live pretty good there, as they age and kick the bucket, don’t they?

        • Lee says:

          Stephen says:

          “They live pretty good there, as they age and kick the bucket, don’t they?”

          I guess it depends on a number of factors. The most important is if you were able to buy and pay off your house. Another would be if you were able to save enough for your retirement.

          There are a number of different Japanese pension systems and some are good and others are really bad.

          The national pension amount is fixed so once you retire the amount never changes. When prices go up for the things you need you are SOL.

          It also depends on where you worked. For example, the university where I worked had a good private system. When you retired from the univesity you were entitled to a lump sum payment from the university plus your retirement pay.

          At that university your lump sum payment was the numbers of years you worked there times your last monthly salary. So if you were a full Professor you were probably pulling down around at least 1 million yen a month or so. If you worked there for 40 years when you left you were handed 40 million yen. That amount was also taxed at a reduced rate too.

          (Unfortunately FOREIGN teachers at that university were NOT entilted to any retirement pay. It was just one of the huge differences of how there was blantant discrimination towards foreigners there.)

          Plus in Japan family is still important and in many cases elderly people are taken care of much better than in the USA or other western countries including Australia.

        • Happy1 says:

          Japan has not been economically successful at all the last 30 years, there has been almost no economic growth and there are vast parts of the country that are being abandoned. The saving grace is strong family bonds and confucian work ethic and homogeneous population that holds society together even during their prolonged decline.

        • Ensign_Nemo says:

          Because they somehow got everyone to agree to always drive on the left side of the road?

        • Lee says:

          Happy says:

          “Japan has not been economically successful at all the last 30 years.”

          Really?

      • topcat says:

        What has stopped functioning properly Wolf? Everyone is predicting the disasters that will come but as long as the government is prepared to send out cheques to the population the whole thing will keep on running.
        I agree entirely with Neal Wods, debt is totally misunderstood even though people like Steve Keen and Staphanie Kelton write lucidly about the subject – I can only assume that many people simply do not want to understand, for whatever reason.
        Our financial system is only one variant of many possible systems and can be replaced very easily. We are not stuck in a debt repayment crisis due to some irrevocable force of nature, it is simply because the banks do not want it. We can all decide to drive on the other side of the road, or take bikes or walk or stay at home or swim.
        Just try to open your mind to the possibility that other types of society are possible.

        • Wolf Richter says:

          Yes, Argentina beckons. Great place. Loved it there. Crappy economy though. They have printed money (debt) forever and then devalued it. Now they can’t borrow in their own currency because they’d have to pay 40% of 50% in interest a year. And so they have to borrow in foreign currency and default on it regularly. There are plenty of examples out there right now of what happens when “debt” in all its forms goes out of whack.

          So in your own words: “Just try to open your mind to the possibility that other types of society are possible.”

      • raxadian says:

        Where is the truck that will smash the United States economy? Since the moon leap their debt has just been growing and growing one way or another.

      • cb says:

        Perhaps this debt laden economy is functioning exactly as planned ………… with great concentrated wealth and a large number of debt slaves.

    • nick kelly says:

      Check the history of currencies. Most being issued NOW are not convertible, they aren’t money outside the country and are accepted only as last resort inside it. In the last days of the Italian lira they came out with a 500K note! Imagine going into Mc D with a 500 thousand US $ bill. One!
      Of course all real estate, even cars were priced in US$, (before the Euro.)

      Now go to currencies ( notes ) issued in the past. The vast majority are worthless. Argentina alone has been through a few. African countries crank them out like toilet paper.

      Funny true story: a few years before the euro a guy came into a Forex booth to change some German marks. The newbie clerk looked up the exchange and paid it. Problem: they were Reich Marks not Deutsche Marks. They were Germany’s wartime currency. And like most paper money ever printed, they were worthless.

      • nick kelly says:

        Trivia: some (most?) exceptions are mostly the English speaking countries. Any US or UK or Canadian note issued in the last hundred years is honored (by appointment) at face value.

        But when 20 yrs ago or so, the US announced a new 100$ note ( with security features) people around the world including Moscow, sh@t themselves.

        Then came the calming news: ‘No! we aren’t doing a Nigerian switcheroo. The old notes are still good.’

      • Lee says:

        Yeah, even the Swiss demonitized some of their notes from the past. The most recent ones that were given the chop were from 1956. So not so long ago.

        And what about postage stamps when countries changed over from one currency to another?

        How many hundreds of millions of dollars did people lose in each of those countries?

        Here in Oz people used to be able to pay for telephone bills with postage stamps. The government ended that.

        Then after I moved here the post office stopped the ability of people to use postage stamps to send registered letters overseas. If you want to send one you have to buy a post office registered envelope.

        Then when they introduced the goods and services tax (GST) the post office came out with new “International Stamps” for use on international mail which is not subject to the GST.

        You can still use ‘domestic’ stamps on international mail, but you have to add10% more in value to ‘cover’ the GST.

        Now, why in the world do you have to add 10% more to cover the GST when international mail is not subject to GST in the first place?

        Go figure.

  14. Lisa_Hooker says:

    Anti-gravity and point-to-point transmission of living matter will revolutionize societies. So will the Replicator. Or some other such nonsense. Almost reasonable to some lawyer-trained anti-mathematic politicians. I’m not holding my breath. “Earl Grey. Hot.”

    • Brant Lee says:

      I’ll have to think out your comment, Lisa, maybe I’m a little slow. But it sure sounds like my next motto.

      • Lynn says:

        I think it’s from Hitch Hikers Guide to the Galaxy.

        • Ensign_Nemo says:

          Star Trek: The Next Generation, and the next two series in the franchise, are the fictional universe that has replicators that make tea such as Earl Grey on command.

          BTW, the current P/E ratio of some tech stocks such as AMD are so high – for example, 154 for AMD right now – that by the time AMD is projected to earn enough to equal the share price, it will be 2174. The United Federation of Planets is scheduled to be founded in 2161, according to Star Trek lore.

        • Saltcreep says:

          The Hitch Hiker’s Guide to the Galaxy introduces us to the Infinite Improbability Drive, which permits the Heart of Gold to pass through all points in all universes simultaneously.

          Improbably, here on Earth much of our most disseminated economic thinking similarly ignores pedestrian considerations such as the laws of physics, or such mundane constraints as energy and resources, and instead targets the Perpetual Motion Machine. Another round of debt based spending, and surely we’re off to the races? Barring of course the improbable eventuality of the appearance of a Vogon Constructor Fleet…

        • Lynn says:

          Well, we are certainly living science fiction. I think we do have a Vogon Constructor Fleet of sorts. Every home I look to buy seems to be part of a schedule for localized community destruction in order to build a free way for those leaving the cities and hidden investors.

          A lot of the houses seem to be bought as “plan B” second homes which no one will live in. Sold but still vacant. Improbable “investments”.

          At this point, in order to find a home I need a replicator or the ability to wiggle my nose and have it done already.

        • Saltcreep says:

          Ah, Lynn, I suspect your misconception lies in considering the physical house sized chits we use in our ponzi system to principally be homes. The main purpose of these objects, otherwise exposed to entropy on an ongoing basis in the physical world, isn’t to provide a domicile at a reasonable cost to people who happen to need to live in their vicinity. Instead their main purpose is to function as a vehicle for increasing the relative wealth of earlier recipients of added credit at the cost of later particiants and of non participants, and for supporting financial leverage at always increasing levels.

        • Lynn says:

          Saltcreep, Yeah, I think I might be starting to get that.

          Then again, at some point it will become so ridiculous that people will just break in to those empty chits, splice the power, and live there to the detriment (or not) of the finances of what my friend calls the deadly “Lizard people”.

          Oh wait, that’s already happening.

        • Saltcreep says:

          Hey Lynn, I object to admirable and valuable members of our ecosystems, such as lizards, being drawn into such unvafourable comparisons with the sort of unsavoury behaviour and incentives that can only properly be attributed to humans. It’s a bit like how we label some actions ‘humane’ and others ‘bestial’, although actual observation of respective behaviours should lead us to believe that the use of those terms should be inverted…

  15. Paulo says:

    Workers don’t simply bend over and let inflation destroy their earnings. You tell the employer I am losing money every month/year working for you so let’s see some green. If you are union you can stop overtime, extra unspecified duties, or go on strike and withhold labour. If you are non-union you can do it one by one with the boss, and/or then move on to an employer that will pay more. Regardless, in all cases increased costs are passed on, and the vicious cycle continues and accelerates until Govt steps in and imposes a wage and price freeze. Then, people really get angry and the next election the Govt gets tossed out.

    I have lived through it, all the way to imposed price and wage controls.

    It takes leadership to reign it all in and from what I see in the news cycle these days it doesn’t look even slightly possible it will solved this time around. With inflation people just buy less of all things because they simply don’t have the money. The condition should be self-correcting but there are many more losers than winners as it plays out for sure.

    This is when workers are lucky to be working in a unionized environment. A COLA (cost of living adjustment) can be negotiated into an agreement and when layoffs do occur, (and they will), layoff and retention is based on seniority and qualifications, and not on kissing the boss’s butt.

    When belt tightening is required it helps to see the top dogs do it first. Always.

    • 2banana says:

      What you are describing is 1970s wage inflation that kinda keeps up with real inflation.

      Except you can’t have wage inflation with open borders, 30 million illegals, H1Bs and shipping millions of manufacturering jobs to China.

    • Lisa_Hooker says:

      Paulo – I agree in spirit. I can think of two events you didn’t mention. One is the CPI increases included in the UAW and Chemical & Rubber Workers (and others) union contracts in the early/mid 70’s that contributed to the 70’s inflation. It wasn’t only the oil crises. Volker stopped it with several very painful years of high interest rates. (My newly married boss got a home mortgage at 14%.) Now there is no Volker in sight. And you failed to mention that while the union can stop overtime, extra unspecified duties, or go on strike and withhold labour, the owners, if they have deep pockets, stage a lockout and/or bring in scabs (H1Bs). The way things are going I fear the power of the owners, and autonomous machine algorithms.

      • Paulo says:

        Very true Lisa. My points were from a Canadian perspective where the word union is not a swear word.

        I don’t think decline and trouble can be addressed this time around because despite inflation, the economy is decelerating in everything that does not rely on debt. Do I have stats and links? Nope. It just seems to me to be true. Govt stats appear to be bogus rose coloured nonsense, imho.

        Some above commenters mentioned land and free land. That won’t happen. Public lands have competing interests, First Nations have claims to address and will go ballistic, and current landowners will not want to see their equity diminished. I own land, arable land with adequate rainfall, a pond, and a woodlot. I also have my home on a good salmon bearing river. We produce enough for ourselves as I can’t sell anything at profit that justifies the work required to grow it. The point is we sacrificed a great deal about 20 years ago to acquire this land. We arrived in a lull; the original settlers had died out or were infirm, their kids were mostly not interested, town people laughed at us for moving away, and prices were cheap due to a downturn in forestry. We had a long work commute for many years. Now people ask us, “How did you ever get this place”? My reply is always just one word, “Luck”. In actual fact we moved away to where land was affordable and just lucked out with what we found. We looked for two years, made some offers, and finally stumbled into what we wanted. Luck.

        If I was American I would look at W Virginia, Wyoming, Montana, and maybe Idaho. However, I’m not. An old neighbour of mine lives in northern NY State and farms. Lots of snow. A new arrival won’t get the best land, but good stuff is out there. Now, how to make a living in a new location? Have a trade. It would help to have a nurse in the family like my brother’s wife. There’s work if a person can actually do stuff.

        • MCH says:

          The problem in the US is still an issue of bifurcation, in places where Unions are sorely needed, none exists. In places where the unions already have way too much power, they are unmatched power.

          Amazon, and teacher’s unions are two prime examples the problem on both sides.

        • TXRancher says:

          Luck is equal parts preparation and persistence gained by busting your butt.

        • Jos Oskam says:

          You’re too modest Paulo. Luck might have been part of it, but I’m sure there’s more to it than just that.

          “Opportunity is missed by most people because it is dressed in overalls and looks like work.”
          (Thomas A. Edison)

        • Fat Chewer. says:

          I think I would have to agree with you on that. In the 2 years before Corona, franchising was going crazy, all retirees, using a combination of pension and leverage to pay the ridiculous franchise fee.

          That has died off now. It was dying before Corona because the unscrupulous franchise would create territories so small that you couldn’t make a profit, just so they could have more franchises in a given area. Of course, all the oldies wanted something near home too, that means all the upper middle retirees clustered in their well to do localities and they killed each other’s profits that way too. Not to mention the myriad ways they were at the mercy of their Csuite masters.

          They all got burnt and they know it. They cut their losses and finally retired gracefully. Sustainable economic growth lost out to manic economic growth. Now, no one trusts franchise models any more.

        • Lisa_Hooker says:

          Paulo – I proudly doff my hat to your foresight and perseverance. Well done! Nonetheless I am curious what happened in the 90’s to precipitate your exodus?

        • Young Buck says:

          You’re too late with the Idaho comment, everything is priced out already

        • Lee says:

          “Luck is equal parts preparation and persistence gained by busting your butt.”

          You forgot being in the right place in the right time!

    • Lee says:

      “If you are non-union you can do it one by one with the boss, and/or then move on to an employer that will pay more.”

      Really?

      What world is that?

      The likely responce is the famous one: “Don’t let the door hit you in the ass when you leave.”

      And given the current employment situation around the world, the chances of finding a higher paying job are slim to none.

      • Jeremy Wolff says:

        Then there is downward pressure on wages and they should go down. That is the rule of economics and not the fault of the business owner.

        • topcat says:

          OMG you are brainwashed.

        • Fat Chewer. says:

          You really believe that, don’t you? You’re an economist right? Don’t let facts get in the way of a bullshit theory, right? What Lee and Lisa said is 100% true. You need to wake up to reality.

        • Fat Chewer. says:

          There is no union for what I do because it was destroyed. It used to be the most powerful union because it was full of WELDERS, one of the most important trades in industry. Now, no one wants to be a metal worker because both the pay and the work sucks. So we import 3rd rate welders who couldn’t get a job in their own country. Moral: don’t believe what they say about unions cos it ain’t true.

      • VintageVNvet says:

        Done it at least a dozen times in the last 50 years of my career Lee. including from early days digging ditches, etc to being a skilled ”rafter rat” framer, to a salaried field manager, to a cost analyst/ project manager employee, to a 1099 professional services contractor…
        And, yes, as you would expect, I have been unemployed more than once, almost always by choice,, including choosing not to go backward in my compensation; however, each time unemployed, I would donate time to non profits and hone my skills, any/or build/remodel something and sell it, all depending on how much I had saved while working for ”de man(d).”
        IF you are one of the 20% who do 80% of the work, it’s fairly easy to move and move up in USA, or at least it has been the last 50 years. Likely to remain so IMO.

    • Happy1 says:

      Unionized employment works great for government employees, who can’t be outsourced, not so much for things that can be (see steel and autos)

  16. Anon1970 says:

    Your chart reminds me of the hockey stick debt chart in “Bankruptcy 1995”.

  17. Gordon says:

    I’m waiting for the purge.

  18. JLS says:

    People here talk about debt, growth and inflation.

    How much and how long can the economy grow in a finite Earth?

    I don’t think that there is any solution to the debt problems. It will evolve to such extent that the whole economy will explode, maybe along with wars.

    Prepare accordingly.

    Have a community, be self-sufficient, be spiritually strong. Etc.

  19. LifeSupportSystem4aVote says:

    “The Emperor’s New Clothes” 2020 version, with Singapore’s central bank chairman proclaiming for all to hear that the emperor is naked.

    The big question is whether the others will listen…

  20. Macro Investor says:

    Back in the 80s, Greenspan warned about gov’t debt and spending levels. Since then trillions printed. Where is the inflation? According to many “experts” the US should have been in hyperinflation decades ago?

    When you are wrong over and over again, shouldn’t you try to understand and change your opinion?

    • Wolf Richter says:

      Macro Investor,

      YOU are wrong about lots of things in just these few lines, including these two things:

      1. There has been plenty of inflation over the past 30 years: 106%, to be precise. Meaning the dollar lost over half its purchasing power in 30 years. And that’s according to CPI. Actual inflation may have been even higher.

      2. You’re clueless apparently about what I said. What I have said for YEARS is that QE and low interest rates cause “asset price inflation,” not “consumer price inflation,” and not “wage inflation.” Just because you didn’t read any of my stuff doesn’t mean I didn’t write it. Quit fabricating BS to fit your narrative.

      • topcat says:

        Bit harsh Wolf, many people have been saying since the 80’s (the 1780’s that is) that govt. debt is unsustainable and that it must stop growing. Well here we are 240 years later with 10.000% more debt and still nothing has happened, and it never will.
        BTW. 106% inflation over 30 years is 2.5% per year, or basically nothing :-)
        And despite crazy asset price inflation the US is STILL not Nicaragua or Argentina. Asset prices are being pumped up by Financial markets looking for high returns, this can be stopped very easily by changing the lawss on property ownership. Then the hedge fund billionaires will just have to keo their money in a bank account and look at the balance every day. There it can do no harm. If yoou want you can tax it off them – all it takes in the political will.

      • td says:

        A government economist is someone who doesn’t eat, doesn’t heat, doesn’t travel in cars or live in a house, doesn’t send his kids to college, doesn’t pay local taxes and fees and lives entirely off cheap imported industrial goods.

    • Dan Romig says:

      Where is the inflation?

      At my grocery store.

      • topcat says:

        The change in food prices are a component of the CPI’s “all items” index and so they are part of the data set that is used in calculating inflation rates. Because food prices tend to be more volatile, however, they are stripped out when calculating core inflation rates.
        The annual inflation rate for the United States is 1.3% for the 12 months ended August 2020 as compared to 1.0% previously, according to U.S. Labor Department data published on September 11, 2020.
        Food price inflation rates:
        2015 1.8%
        2016 0.3%
        2017 0.9%
        2018 1.4%
        2019 1.9%
        2020 4.1% (pandemic anyone?)

    • Happy1 says:

      Do you own a home? Send kids to college? Visit the hospital? Buy food? Compare those costs to 1995 please and then respond

    • Fat Chewer. says:

      Man, you have conflated what was regular money printing back in the 80s to grow the supply of money which grew roughly proportionally with the economy with the overdrive QE that has happened since 2008. You know how I know the inflation rate? In the 80s the minimum order of chips at the fish and chip shop was 40c. It is now $3. It took around 25 years after oz ditched the pound for minimum chips to get to 40c. In the ensuing years it increased by $2.60! The same goes for a can of coke or a big mac. Not theory, reality.

      BTW, you get less chips in the minimum order today as well. A big mac for $8 or some such ridiculous price now looks like an inedible nightmare.

      • Lee says:

        A Big Mac (which has really gone down in size over the years) now costs A$6.60.

        I remember when we used to travel to Hawai’i years and years ago. The kid liked Burger King and we would stop to buy burgers when driving around Oahu.

        The Whoppers outside of the airport and Honolulu were actually bigger and of course cheaper than the other places.

        Here in Oz I think that a Big Mac costs the same all over the country.

        In Japan the prices will vary a little across the country.

    • Nathan Dumbrowski says:

      Burger King Whopper was $0.99 in 1990s. Now $4.

  21. Jimny says:

    Post-asset bubble Japan seems to be inevitable in the West unless we embrace, of all things, immigration to right size the labor pool. Technology productivity gains seem to be slowing down and most tech plays are just plays to go after fat and inefficient businesses (taxis, cable, advertising media, etc) It will be interesting to see what policy choice the developed countries make.

    • Happy1 says:

      I agree

    • YourProfits says:

      Hahaha exactly, all technology, innovation, and disruption is deflationary! That’s why there hasn’t been much consumer inflation, despite the FRB desperately ‘stimulating’. Of course the government is captured so there’s no hope of wage inflation. The funny thing is they’ve inflated a bubble in deflationary assets (technology). So the more you pump the assets and prop up the tech, AI, automation, and that crap, the more the real economy deflates. Robots don’t need wages and don’t spend or consume. It’s Mutually Assured Destruction! MMT/UBI are assured, wars are quite likely to address this tension.

    • Fat Chewer. says:

      No, immigration is not a magic bullet. Immigration is deliberately set to create an overabundance of workers in order to bring wages down. Immigration without wage increases destroys the fabric of society.

  22. MonkeyBusiness says:

    UOB, Singapore’s third largest bank has just freezed hiring, etc till end of 2021. They think the situation will get worse before getting better. And the second biggest bank, OCBC is also reviewing compensation of senior managers.

    Singapore is the canary in the coal mine when it comes to the global economy. The other shoe might drop soon.

  23. Robert says:

    Any plans to comment on the Federal reserve “Main Street lending program”? It appears to be a program designed to fail. Since most workers are employed at small and mid-sized firms it appears pretty bleak for the economy going forward.

    • Wolf Richter says:

      “Designed to Fail” is what Bloomberg said. These folks are big QE mongers, more QE is better. Right now, credit is looser than it should be. Interest rates are lower than they should be. There is already too much corporate debt. The Fed shouldn’t be lending at all. If companies cannot get a bank loan from a bank these days, without a Fed backstop, then the company has a real problem, and more debt is unlikely to help. Maybe a debt restructuring would be better.

      • Erle says:

        I want one of those loans to pay my employees that I don’t have to pay back. I guess that I missed out yet again.

      • gorby says:

        The FRB and the Federal Government are now either owning or backstopping the entire FIRE+ economic cancers: Finance, Insurance (Healthcare!), Real Estate, +Education. This is state capitalism, also known as Fascism. But in our case the rich oligarchs have taken political control, whereas in European Fascism it was the opposite. If we only knew a centrally planned economy worked so well, we could have done it earlier! It worked tremendously for the USSR!

  24. Bobber says:

    A small group of outsiders were saying the same things back in 2009. You can’t solve a debt problem by loading on more debt. You don’t reduce harmful financial speculation by rewarding it.

    Now, here we are, at the end of the road, with the biggest financial bubble of all time starting us in the face.

    • MonkeyBusiness says:

      Biggest financial bubble? I think the upcoming Gold bubble will make every single previous bubble look like regular markets by comparison.

      After that, we might be on a normal path for a while until the next cycle begins anew.

  25. Ruthlees Gangbuster says:

    Has that person got any solutions?? Sounds like they know what wont work but has no solutions, the solution is simple, allow free markets to work & use the money they piss away for social support until people get jobs, enough for basic shelter, utilities & food, that’s it, they belw it doing QE 2008, blew it faking growth making debt easy, making people take on more than what they can pay, buy a car and pay over 100 hundred years & dumb things like that to keep a fake growing economy going, now it’s pay back time, let people fail, some people will rise up & take over, the dumb fail to be replaced by smart people, fake people, fake society, fake markets, fake politicians, fake lives, fake accounting, fake businesses, me me me societies, terrible education, low marriage rates, low birth rates, no love, no happiness, no security, what kind of world have these idiots created. Best people start living like human beings & not slaves, rates should never ever be lower than inflation, rates should be 2% plus real inflation, inflation measure using rents/mortgage, utilities, food, entertainment, healthcare if it’s not already a social right. The US is a collapsing country I’m afraid, Rome part II :/

    • 91B20 1stCav (AUS) says:

      Ruthlees-somewhat agree with you in principle, but ‘failed’ peoples don’t simply disappear (barring mass-casualty of war/genocide/epidemic-and those casualties affect labor-values even if we leave the sheer, and just as serious, mass psychological horrors of same aside) and neither does the effect of those ‘failures’ on the world. We’ve been dealing with an expanding, and generally ‘failed’, world population since WWI (total population constantly pulse-exceeding available resources and/or the ability of contemporary technologies and governmental thinking to long-term effectively leverage those technologies and resources for the greater whole). Ineffectively purposed/repurposed populations (gawd, that sounds cold…) are an indicator of failing empire. Too often, the failed, reaching absolute numbers at a certain point, feeling naught left to lose, simply tire of the struggle and start drifting towards a decision to pull the tent down on all and sundry, including themselves.

      “…meet the new boss, same as the old boss…”.

      (not cynically or ironically, though probably hard to believe) stay safe, well,
      and-may we all find a better day.

  26. Bobber says:

    What a difference a year or so can make.

    The 10 year has gone from 3% to .7%.

    Shiller PE has gone from 29 to 31 (and will rise rapidly from here with the falloff in earnings).

    Fangs have gone from 10% of the S&P 500 to over 20%.

    The annual national debt increase has exploded from $1B to about $4T or $5T.

    I thought the Fed was boxed in last year. It looks like that box just got a lot smaller this year.

    No way out Jerome! You can go down as the person who initiated the reset, or the buffoon who didn’t see it coming.

  27. Lou Mannheim says:

    That’s it, I’m chucking my signed Milton Friedman poster in the trash.

  28. Seneca's cliff says:

    I am not sure I see much escape from this trap except to be ready to survive and perhaps thrive in a barter economy.

    • otishertz says:

      The IRS taxes all barter transactions above $100 in value.

      Question:

      Facebook, google, and other similar technocratic supra-national corporate entities aka The fab FanGmAntis 10 are continuously engaged in political censorship. Have been for years.

      The top ten stocks are all, in one way or another, surveilling the population non stop as a business model. Snitching in a thrice removed technocratic manner while being completely removed from the people they step over.

      No more corporate, more corporeal.

      • otishertz says:

        What is the dollar value of the average customer’s data to google and facebook, per capita?

        Clearly our data has value.

        The IRS has rules about barter transactions. They have to be reported above $100 in value.

        Is the intangible property value of all of our data on the books of these multinational censors somewhere?

        Is it more than $100 per capita? If so, is the personal trading of data between entities like google facebook youtube myspace aol prodigy compuserve — an actual taxable event according to the laws about barter?

    • Paulo says:

      You have machining and design skills Seneca. There will always be something to do. Many others on WS also have practical skills to build and fix. I also think there will always be a need for folks with basic medical skills.

      My cash barter crop for this year is several pounds of BC Bud. My younger relatives are quite excited about their Christmas presents this year. :-) I don’t expect to be bartering anytime soon. I think we’ll muddle along a while yet.

  29. Jdog says:

    I have not looked at the Debt Clock for a few years. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwiLxOjwmOzrAhViNn0KHZFtBNYQFjAAegQIARAC&url=https%3A%2F%2Fwww.usdebtclock.org%2F&usg=AOvVaw0X8CikYMswGF2utcB1MtTW
    I is pretty sobering… Especially the amount of debt service, and how fast it is climbing….

  30. c_heale says:

    Productivity growth after WW2 wascaused by cheap oil from the Middle East. We aren’t going to get cheap energy like that again. So no more productivity growth, ever.

  31. Citizen AllenM says:

    Comment from the aged p’a about ridiculous cd rates, pull the money out and put it where?

    So much capital to be destroyed and so little time.

    Houses only go up forever, riiight?

    Just like mall REITs, lol.

    Inflation without massive asset deflation will not happen. The amount of precious is a tiny drop in the ocean compared to dollars 😂

    So we trudge on from one tax increase to the next.

    Now, when you can’t buy food, then we have a real crisis.

    So, what currency is the cleanest dirty shirt?

    The mismatch between income and asset prices is far worse than 2008, yet they keep getting higher?

    Yeah right. Ask farmers the current value of their acres, and see what they say.

  32. T Kulp says:

    It is a shame, but inflation, or higher taxes oil the rich, or higher taxes on everyone, will not do it. Nor will higher growth because the debt is already (not including unfunded) much larger than GDP. And nothing will happen until there is a MAJOR crisis. Until then, trillions more added. Eventually there will be a default. That includes a “default” on Social Security and Medicare. The math, the hard math, allows for nothing else.

  33. joe2 says:

    Powell disagrees. If we plan for an average inflation rate of 2%, then let inflation go to 10,000% to counterbalance extraordinarily low rates for the last 10,000 years. Everything will be fine.

  34. Michael Engel says:

    1) FDR created inflation by putting gold in his pajama.
    2) During the 1930’s unions were striking, while people were starving.
    3) Healthcare & education are US inflation main culprits. They are down
    on their knees in the last 6M, for the first time.
    4) Business cannot compete with gov. Gov can pileup debt, but business can’t. They go bust.
    5) When the stock markets are down USD is rising.
    6) Commodities downhill have not reached it’s bottom.
    7) Inner cities insurrection will lead to starvation. JP will be blamed, but he cannot save them.

    • Old School says:

      We actually need a good recession with only modest safety nets to get the economy restructured. Too many parasites right now whose economic reward for the little value they create. The education system seems a good place to start. Bloated Federal agencies seem to be another. Just look at Michael Flynn case. Government is probably up to $100 million dollars and four years on legalities of a phone call. Makes me sick.

  35. FDR Capitalis says:

    US investment is sorely lacking. Capital investment is required to improve productivity with a commensurate radical reform in US tax and regulation tilting the balance to the consumer sector with relaxation to small businesses that employ a maximum of 25 to 100 employees total.

  36. DR DOOM says:

    The economy may wobble along neither completely dead nor alive. It will look like a drug company advertisement on tv where every thing is moving slow with half smiles painfully forced upon our faces. The malaise jimmy carter talked about may be close.

  37. I’m sure you’ll get tired of hearing me say this but- until the financial health of the bottom 3/4 is restored consumption will not be an adequate driver of demand.
    It’s not that we aren’t creating new wealth, we are, but it all goes into the hands of the billionaires. In a perfect world I could not get behind “redistribution” but if that doesn’t happen then the scenario described in this article is correct, provided that political forces opposed to oligarchy don’t destroy the system.
    Who could blame them?

  38. RickV says:

    “1. Rapid growth no longer possible. 2. Inflation not going to be tolerated.” If these solutions won’t work there is only one solution left. The one that enabled solutions 1. and 2. in the 1940s. They were implemented only after WWII destroyed 50 – 60 percent of world’s productive capacity (an estimate) and rendered most currencies worthless. So all we have to do is figure out how to destroy 50 – 60% of the worlds productive capacity. Any ideas?

    • Engin-ear says:

      Covid19.

      Arrived timely.

    • Stephen C. says:

      RickV, you comment makes me want to revisit the history of that period. If that much productive capacity was destroyed, it’s really amazing more people didn’t starve to death, between let’s say ’43 to ’50. Or maybe there was much more than is mentioned in the history books of the victors. I wonder if anyone has ever done that particular body count. We hear so much about the numbers of Holocaust victims and combatant casualties, and a little about civilian death by bombings (not accidental, by the way), but were those who died by malnutrition ever estimated? Or were they forgotten?

  39. Stephen Cavaliere says:

    Great comment above by 91B20 1stCav (AUS) who ended with “where is the water?”

    Sometimes I think the global banker/owners know way more about the upcoming water crisis than they are willing to discuss publicly. They see global population decline and mass migration on the horizon, and on a time scale less forgiving than the rest of us are comfortable contemplating. I wonder it is this what drives their seemingly crazy behavior these days. Are they thinking they must somehow control whole economies in an effort to mitigate the damage, and get a small percentage of us humans through to the other side of a mass die-off? I know, my tin foil hat is about to explode, but what else explains their seeming determination to continually lower expectations of the 99%. Do they think that if we are suffering just a little bit more each year we won’t be so angry when it’s finally time for “the rest of us” to die en masse?

    • 91B20 1stCav (AUS) says:

      Stephen C.: you might be getting a whiff of slowly-boiling frog…

      stay safe, well,

      and may we all find a better day.

    • Fat Chewer. says:

      Yeah, it is starting to look that way. I am not a conspiracy theorist by nature, but when the hat fits…

  40. Harvey Cotton says:

    The United States will just selectively default. They will violate the 14th Amendment and negate the I.O.U.s held by the Social Security Administration, the Fed will forgive the debts they hold to spur further inflation, and the Treasury will sanction CUSIP numbers held by China, Russia, and an ever increasing number of entities they will unilaterally accuse of tax evasion or money laundering or displeasing the Sovereign. The bet will be that the transaction costs of moving away from the dollar and crossing American military strength will override the ever diminished liquidity and reliability of Treasury markets.

    • Happy1 says:

      I don’t think explicit default is likely when sneaky inflation default leaves no fingerprints

    • MarkinSF says:

      Yep. That’s what I’ve been thinking. Then raise the rates.

    • Fat Chewer. says:

      I am not sure if you realise this, but starting a war is not cheap. If you think the US is in debt now, look what happens when war breaks out. If you lose the war, it is prohibitively expensive. Every civilian leader must understand that in war, anything is possible, even losing. Peaceful, meaningful and intelligent negotiations create lasting agreements, that is what promotes good relations between potential combatants. Also, soldiers don’t like dying in stupid wars.

    • The Bitcoin rollout will prove to be too much for the central bankers to control, without more coordinated efforts, and that will put an end to the US dollar store empire.

  41. Mark says:

    All revolutions occur because the ordinary people can no longer afford to pay for the lifestyles and debts and assets accrued by that borrowing of its nobility. France and the United States in the 18th Century, Russia , Germany and Britain in the 20th with debts accrued from wars between noble cousins…

    The seeds are being down for a revolution throughout the west. It’s the only way left to survive. As was the real Boston Teaparty and its outcome. Normal people are fast getting fed up with the 1% and their government and Fed. They voted for Trump for change but turns out he’s the ultimate King. They voted before for Democrats but turns out those bleeding hearts from fancy universities once elected cared about causes and anyone and anything else other than those ordinary people who hoped for them to be included in their concerns.

    History shows this environment does not turn out well in the short term. A complete reset becomes necessary. What replaces the old is usually better, sometimes worse, but the pain of rebirth is only about to start.

    • Fat Chewer. says:

      Well said, sir!

    • Ellie says:

      I was 17 living in East Germany when that revolution started. The one thought that stayed with me in the 30+ years since is how fast the world around you can change. So, I have to agree. Once those seeds are sown they sprout quickly.

  42. Lynn says:

    “And inflation is not going to be tolerated by older societies,” he said. “They may be tolerated when societies are young and everyone’s incomes are going up, but it’s not going to be tolerated now. So that option isn’t there.”

    Welp, TPTB in the US should probably listen. Indonesia does have experience with civil “unrest”. That by any M.O. is not pretty.

    Thanks for your blog Wolf. I learn something every time I stop here. I look forward to reading you.

  43. Just Some Random Guy says:

    I’ve been hearing these catastrophic debt predictions for as long as I can remember. Decades. Any day now I guess.

    • Fat Chewer. says:

      Yeah, true.

      What’s a googol?
      A googol is a 1 with a hundred zeroes behind it. We can write a googol using exponents by saying a googol is 10^100.

      The biggest named number that we know is googolplex, ten to the googol power, or (10)^(10^100). That’s written as a one followed by googol zeroes.

      How do we name large numbers?There’s some disagreement in the English language about how to name large numbers. There are two systems, the American and the English:

      Scientific American Number Notation:
      Thousand 1,000 10^3
      Million 1,000,000 10^6
      Billion 1,000,000,000 10^9
      Trillion 1,000,000,000,000 10^12 Quadrillion 1,000,000,000,000,000 10^15
      Quintillion 1,000,000,000,000,000,000 10^18

      English:
      Thousand 1,000 10^3
      Million 1,000,000 10^6
      Thousand Million 1,000,000,000 10^9 Billion 1,000,000,000,000 10^12 Thousand Billion 1,000,000,000,000,000 10^15
      Trillion 1,000,000,000,000,000,000 10^18.

      I didn’t know that! It has quite interesting ramifications for understanding exactly how big debts are in different countries. I don’t even know what system oz uses.

      A googol! How weird! Funny how they are named that…possibly Google’s target stock price?

      I think we’ll need to update this numbering system soon. Not enough digits in a googol. Baddabing, I’m here all week.

    • Old School says:

      Minsky moment at some time. Or quickly as a thief in the night. Or escalator up, elevator down.

    • Jdog says:

      Like the drunk driver who gets away with it for years, until he doesn’t.

  44. Raymond Rogers says:

    Wolf, now all you need is to superimpose your chart to a triple tall shotglass. Then on the opposite side you could run some bold text up the length of the glass. You could go with “Have a Much Needed Drink” or “You May Want to Sit Down For This”.

  45. Twinkytwonk says:

    sometimes i read news on other websites and i come away from their convinced that my savings will be devalued to nothing over the next six months meaning i have to spend them asap. I pop over to wolfstreet and take in some good old common sense as in this article which makes perfect sense. Older people determine who is in power so to reduce their standard of living is one sure way to to be booted out.

    Thank you Wolf

  46. YuShan says:

    “Deflating debts away”. There is a problem with this that nobody talks about.

    A highly indebted country like Japan already spends an enormous amount of their tax revenue on debt service, despite ultra-low interest rates. Suppose they were able to get their inflation rate to a massive 4% (after years of ~0%). That would still take many years to make a significant dent in their debt, but leads to instant bankruptcy because even 100% tax revenue cannot cover their debt service anymore because of rising bond yields.

    “But the central bank can buy all their bonds and keep yields down?”. Not anymore when inflation is out of control. Central bank printing money is oil on the inflation fire. The only reason that central banks get away with QE now is BECAUSE inflation expectations are low. So once investors believe that inflation has really arrived, central banks lose control. Ask Argentina, Zimbabwe, etc. You never want to get into that situation.

    If the central bank were to print money to buy ALL the bonds + interest, then you’ll get massive capital flight. So they would have to implement capital controls, ban free trade, etc, crashing the economy. Plenty of historic examples out there.

    In my opinion, the best way to keep the game going for as long as possible is to keep inflation low so debt remains serviceable for a long time. Then hope and pray that some time in the future genuine innovation comes along to raise GDP despite falling population so Debt/GDP can fall again.

    Also, they should work towards lowering debt levels where debt serves no economic goal. For example, corporations issuing debt to buy back their own stock is beyond stupid, because it does nothing for the economy but makes the system more fragile because it increases leverage and crowds out genuine investment.

    Another thing that is badly needed is better anti-trust legislation and breaking up of monopolies, because currently monopolies are a massive drag on innovation. Microsoft is a good example.

    There are historic examples of this too. James Watt held critical patents in steam engine technology that barred competitors from building them, creating a monopoly. This started a period with very little innovation. Only after the patents expired was there an renewed explosion of innovation in steam engine technology, leading to much more efficient machines.

  47. Shane says:

    It’s not debt if you print your own money Aka the USA. It’s just more money in circulation and all assets worth less in Us$ terms. Take it to the extreme and give everyone a fistful if $$$ and they will momentarily feel rich until they need to go and buy something

  48. YuShan says:

    Another question is why do we actually want GDP growth?

    GDP is simply the sum of all expenses in the economy. If we want to get serious with fighting the destruction of the environment, the only real answer is to kill half of the population or simply consume less. In both cases GDP will fall.

    I’m not in favour of killing half of the population, but I see little harm in replacing your iPhone once in 6 years instead of every 3 years, or halving meat consumption.

    Yes, less money will be made in aggregate, but we also NEED less money because we are consuming less. Most (non-poor) people who have reduced their consumption will tell you that it has improved their lives.

    Every time a crisis comes along, I always hope it will ignite a massive anti-consumerism movement, but still hasn’t taken off.

    • Lee says:

      Hey, I’m all in favour of you consuming less. The less you consume the better off Mother Earth and the rest of the world will be.

      In fact as you really beleive in all that stuff, I’d appreciate it if you actuallt stopped consuming everything as that would be the perfect situation for everybody elese: we can do with you as a consumer.

      • YuShan says:

        I’ve already been doing that for years. Just only spend money where it matters and reducing the useless crap in your life. You should try it some day, it’s enlightening.

        • Xabier says:

          Well, Yushan, I’d call that economic subversion – and soon it will be illegal I have no doubt. :)

        • VintageVNvet says:

          10-4 YS, yer absolutely correct !
          A friend who is 92, still working in computer science, has no TV, no cell phone, just land line and internet for her work; also no credit card or checking account, just a savings account(s).
          She laughs when I ask her when she’s going to retire, and replies, “As soon as I lighten all the rest of the ”stuff”…(giving it away to museums, etc.)
          SO much stuff we don’t need seems to creep silently into our home, so once a year we go through everything except the long term food cache, (which is carefully and consistently ”fronted”), and take everything we can to the local Salvation Army facility.

      • Jdog says:

        So long as the population continues to double every 50 years, you conservation means nothing. The problem is not what we consume, it is there is too many of us.

    • Old School says:

      Yes. I think a lot of people are finding out like I did at 47 that you can be happier with a smaller personal gdp. You mainly give up higher end things like new cars and remodeled kitchens that have very little to do with quality of life. Big Gov needs tax mules and if they don’t get them, the Fed has to print the dough.

  49. Engin-ear says:

    “Another question is why do we actually want GDP growth?”

    GDP is a proxy for power.

    We inherited from our tribal ancestors the need for power. At the ancient times, it was a question of physical survival.

    Kind of Darwin law applied to nations.

  50. historicus says:

    “inflation is not going to be tolerated”

    Tell it to Jerome Powell

  51. Chicago Joe says:

    How much debt is too much? 30T? 40T? 100T? so what. print more, as long as ECB, Japan, China CBs all print, it is a never ending party with no hangover. seriously: what could go wrong?

    • Wolf Richter says:

      The devaluation of a currency is not the exchange rate — that’s a result or symptom. The devaluation of a currency takes place via price inflation… the same amount of currency buys less and less, whether it’s food or houses.

      • Beardawg says:

        This is likely why housing (residential) is continually inflating – like stocks, Buyers & Sellers are pricing in future inflation now….or maybe now IS the future ?

      • cb says:

        I thought the devaluation of a currency was due to incessantly increasing it’s supply.

        • Wolf Richter says:

          No. If economic activity increases, you can increase supply in line with growth, no problem. Devaluation is defined as price increases — pay more for the same thing. But the causes of these price increases are complex, and some of them are not well understood, and are often misjudged, hence the CB’s difficulties in manipulating them.

  52. Yertrippin says:

    Getting average Joe and Jane to delude themselves into defending the absurd levels of income inequality is the greatest magic trick ever performed. Better get to work and be ready to sacrifice even more to the altar. The super rich need much, much more. It’s a dark hole that can never be filled.

    I am sure they will let you keep yours though.

    • Ed says:

      Politics that divide on non-economic issues may support economic inequality. Usually they do . . . because fears win out over sober discussion.

      As the U.S. economic results for the top 0.1%, 1%, and bottom 59% more widely diverge, we can expect other divisions to be promoted.

  53. Ed says:

    The “cancel reply” button is a great change!

    It should be really easy to not reply, while there should be a little hill to climb to reply.

  54. What solutions? says:

    “There are solutions, as Tharman Shanmugaratnam pointed out, but they’re more complex to implement and don’t involve the ever so convenient printing press.”

    What are they? I cannot find any constructive solutions, do you have a link?

  55. As long as the US can borrow with impunity at low rates the madness will continue. I don’t see that ending anytime soon.

    I’ve heard calls of the coming crash in stocks since the 2008 meltdown. Hasn’t happened, and it won’t until US and government borrowing is somehow restricted or more expensive. The central banks control the interest rates and the bond vigilantes are long dead and gone.

  56. sunny129 says:

    Powel wants the cake and eat it too!
    Today’s press interview:

    Powell has a tough task, says CEO Danielle DiMartino Booth of Quill Intelligence. Talk up the surprisingly rapid U.S. economic recovery while gesturing to Congres that they have to provide more federal aid.

    “That’s quite the tricky task — to communicate that the U.S economy is strong enough to stand on its own and at the same time so weak that it needs fiscal stimulus.”

  57. kevin says:

    To Wolf (& followers & commentators):

    Hey y’all, don’t be fooled again and again by the pied-pier songs of politicians (viz. leachers) who spout motherhood statements but has no real solutions anyhow. Any Joe or Jane with half-a-brain can also tell you the same thing – that printing money to roll-over ever increasingly levels of societal debt always comes to grief.

    In fact, from all the brilliant comments here at WS, most of you already knew YEARS back, on what these politicians are now publicly admitting, if grudgingly.

    And while you’re at it, you guys might also ask who were the ones driving the economy and general society into the ground with their policies of greed that favor the rich 0.01% in the first place?
    *Gasp*! Was it the politicians and their gang of deplorables that got fabulously rich themselves, by favoring the big corporates at the expense of the little guys, or juicing the stock market with printed money so that they can look good on stage and get standing ovations for their one-liner sound bites during every electioneering cycle?

    Wolf, I’ve never knew you to be naive, but just in case you are unaware or drinking too much from some Asian “Cool-Aid”…
    Singapore’s politicians have been the world’s most well-paid for the longest time.

    No prizes for guessing why these politicians decided to give themselves fat pay-cheques, when they can make all the rules of the financial game, in cahoots with their Bankster friends in high places. ;-)

    Just do a simple Google search and it will tell you this Singaporean politician is at No. 3 top spot with a net-worth of more than US$65 million!
    And that was back in 2018. He’s probably closer to US$100 million by now, even under a global pandemic and an economic trainwreck which he had a hand in creating. lol.

    https://www.quecie.com/top-10-richest-politicians-in-singapore-2018/8/

    • Wolf Richter says:

      kevin,

      Only “US$65 million!”??? That’s below the poverty level for long-serving US Senators and Representatives. And look how much Trump claims he is worth. You need to get your sense of magnitude straight :-]

      • kevin says:

        Fyi Wolf. US$65 million would place this Asian politician once again at the Top 3 in terms of the money-ranking of your US senators in 2020.
        Like I said, this Asian politician has probably shot way past US65 million since his last net-worth estimate in 2018.

        https://moneyinc.com/richest-senators-in-the-u-s/

        And for running a country smaller than Hong Kong yet getting a self-inflated salary that puts this Asian-politician-you-gratuitously-quoted, in the top leagues of wealthy US Senators (presumably doing a much tougher job managing the economy of a World Superpower) …
        I’d say my gauge on the magnitude of this problem is much better than most Americans who can’t even tell me where Japan is on the world map. (Not you though, cos you have a Japanese wife lol.)

        You might want to ask your wife how’s the net-worth coming along for top Japanese politicians too, despite them ruining their economy over the past few decades with more printed money again *gasp*… and then blaming it on the aging Japanese population, who had worked to their bones to create their miracle economy back in the 80s.

        The point is: Promoting or listening to the hypocrisy of these politicians, who were the same folks who ran with and actively made policies that encouraged the wanton greed of “globailization” and “financialization” of the economy, is kind of delusionary.

        Whether its Trump of Biden or Tharman or Abe makes little difference. Politicians do not have the solution.

        In fact, they are often one of the biggest problems, besides Banksters, Lawyers and used-car salesmen – and not necessarily in that order of filthiness.

  58. Juanfo says:

    Healthy economy and prosperity are the opposite of our owner’s priorities.

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