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Strategies & Market Trends : The Art of Investing
PICK 46.96+1.9%Nov 26 4:00 PM EST
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To: Sun Tzu who wrote (2774)11/15/2021 12:09:48 PM
From: Sun Tzu1 Recommendation

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Bocor

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A normal interest rate at this stage would be at least 4%.
The *increase* in the interest payments on that would add more than $1T shortfall to the government budget.
How would the US pay for it? By issuing even more debt? That cannot happen.

Powell is trying to inflate the US out of its national debt while at the same time preventing structural inflation. Structural inflation is when everyone expects it and builds it into their salaries and prices.

Complicating the matter is that the recovery is still fragile. The US is doing ok (not great) but the rest of the world is worse. And we are in a global economy. China just beat their sales numbers by a good margin and their stock market still fell.

Powell is hoping that there will a string of relatively rapid overshoot/undershoot in the economy and inflation. That way he can mask the longer term trend and cycle through the numbers, jawboning the businesses to delay building inflation expectations into their model. Along the way he will grudgingly raise the rates as a token offering to the hawks.

On the fiscal side of the equation, the best way out of the government's dilemma is to barrow on the cheap and spend it on infrastructure plans and just put money in the pockets of those who cannot afford dealing with the inflation. So any complaints about taxing the rich and paying off "freeloaders" is irrelevant. This is how it will be regardless of whether you have a Democrat or a Republican in charge.

This is the long game plan.
Make your investment decisions accordingly.
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