The Euro has been worth more than the Dollar for 20 years, but is now standing at a mere $0,97. The Pound has not been as low since 1985. The Yen not since 1998. The Yuan will be forced into devaluation soon. It’s already a major crisis, and it’s all going to end very badly, not long from now. The utter cluelessness of the commentators about the true damage these rate hikes are doing is astounding. “Oh, what is 3% higher rates, when you have 8% inflation? We need at least 10% interest rates!” This is a nice example by Peter Schiff spouting this ignorant nonsense.
People clamor for a new Volcker to ‘fight inflation’. Volcker raised rates to an astounding 19,39% in April 1980, to kill the inflation of the seventies, and resurrect the Dollar. But do you know what the difference is between 1980 and 2022? It’s $90 Trillion. That’s the total debt the US is now carrying around. The National Debt is now $32 Trillion, north of 130% of GDP. In 1980 it was $914 billion, with a GDP of almost $3 Trillion. It should be completely obvious to anybody with a basic grasp of economics and monetary policy that the effect of rate hikes is a function of the size of the underlying debt. The larger the debt, the larger the effect of a 1% or any rate hike will be. But clearly it isn’t, as it’s completely ignored by mostly all talking heads out there. While the debt drives EVERYTHING.
Why do people think the Stock Exchange AND the Bond Market had the worst first six months on record this year, after the Fed had raised rates only 1,25%? Because we need 10% rates? No, when total debt is $90 Trillion, even a 1,25% rate hike already takes out more than a Trillion out of the economy in interest payments. Recently, the Fed pumped up rates with another 0,75%, and its comments threatened more steep hikes in the months ahead. The Fed funds rate now is 3,25%. And we’ve been here before: in 2018, the Fed, far more cautiously, raised its funds rate to 2,5%. It immediately led to a crash in money growth (M2), leading to the Repo Crisis of September 2019, which in turn led to the Mega Bailout in the week of March 18th 2020, and us getting locked up to prevent a revolt.
https://realcurrencies.wordpress.com/2022/09/28/the-petrodollars-swan-song-and-the-rise-of-the-new-gold-standard
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