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Politics : View from the Center and Left

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To: koan who wrote (448509)	8/6/2020 2:12:53 PM
From: Jamie153	Read Replies (3) of 541091

After the market closes today we'll see where the Fed balance sheet is. It peaked above $7.16 trillion, dropped a bit and is heading back up again (as of last week). We're not sure if this massive new borrowing causes inflation but most likely not. We didn't see it after the Great Recession. The government debt under Trump is about $6.6 trillion and GDP grew by about $2.3 trillion so it's taking almost $3 of government debt to create the illusion of $1 of growth ($2.869 to be exact but the numbers change every day). Will this new debt cause inflation? Reagan, Bush 41, Bush 43, and Trump gave us record deficits and each exploded the debt. The Fed was forced to keep interest rates higher than normal to stop the inflation caused by their tax cuts and debt. There's no better proof of this than the historically high interest rates during the entire Reagan presidency even after a very deep recession killed inflation. Knowing this, the Fed will have to raise interest rates to suppress inflation. We see this in headlines such as, "The ballooning money supply may be the key to unlocking inflation in the U.S. "and "Coronavirus recovery: gold price spike shows real fear of inflation." No matter what happens the outlook is grim. With $26 trillion of debt it's unlikely the US will return to its glory days. The best we can do is destroy the rest of the global economy (tariffs, trade wars, etc.) so Americans don't see reality.

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