At the beginning of 2020, the U.S. was apparently giving up on the real economy growing sufficiently to balance increasing U.S. government debt financing of America’s standard of living.
(Focal Points) -- I remember reading an October 2019 issue of Forbes about how Italy was already insolvent and would never get out of its debt trap.
A debt trap occurs when economic growth and population demographics—not enough young people to take care of retired people—become grossly insufficient to finance a society’s growing debt (private and public).
At the time I wondered how international banking institutions would deal with Italy’s pending debt crisis. Then along came COVID-19, which seemed to justify a fresh round of massive money creation.
Though not as crass as Italy, the U.S. was also, at the beginning of 2020, apparently giving up on the real economy growing sufficiently to balance increasing U.S. government debt financing of America’s standard of living.
Debt is a rational instrument when it is used to increase productivity—NOT when it used to create money out of thin air and disbursed to legions of unproductive people and activities. Debt is also unproductive when it is primarily used for inflating assets such as large homes and the price-to-earnings ratio of stocks.
At the beginning of 2020, it was the clear the Federal Reserve would eventually have to raise interest rates to slow down inflation, which would raise borrowing costs to an untenable level, which would put an end to the debt-financed party that had raged since 2009.
What could possibly justify a fresh round of money-creation out of thin air?
READ: Former German defense official lays blame on West for Russia-Ukraine war
Along came COVID-19, and on March 27, 2020, the U.S. government passed the CARES Act—an instrument for bailing out the entire economy reminiscent of the Emergency Economic Stabilization Act of 2008 for bailing out Wall Street, only the amount of money created ($2.2 trillion) for the latter crisis was a much larger sum, equivalent to 10 percent of U.S. GDP.
At the time I wondered if the danger of COVID-19 to ALL of society, including young people, was being grossly exaggerated to justify this insanely extravagant money creation. About a year later I had a conversation with Ed Dowd in which he persuasively argued that this was indeed the case.
At the end of 2021, I had a conversation with New York state attorney named Beth Parlato. Beth had, during the pandemic, devoted her legal practice to suing hospitals to allow dying patients to take Ivermectin and other off-label drugs in an attempt to avoid being put to death on a ventilator.
At the end of our conversation, I asked her if she was still getting many calls from patients’ families who needed her help.
“No,” she replied. “The phone has fallen fairly silent. I think maybe the war is over.” In that instant, I had an eerie thought that another “war” would soon arrive to take the pandemic’s place.
The situation in Ukraine had been heating up that fall, and it occurred to me that the Biden administration was not doing anything to avert it from turning into a full blown crisis. My perception was confirmed when the baleful Vice President Kamala Harris was sent to address the Munich Security Conference in February 2022.
Her bizarre and contradictory speech about Ukraine and NATO struck me as yet another provocation of Russia.
Yesterday I listened to an interview with a financial analyst and former hedge fund manager named Alex Krainer about the European Union’s untenable financial condition.
Apparently because the people who run the E.U. and Germany have lost their minds, they have severely damaged Germany’s economy by taking various measures against it (which Krainer elucidates).
The stunning irrationality of British and E.U. administrators is symbolically expressed in their recent talk about using aerosols to dim the sun after these same people spent billions in erecting gigantic, ugly, and inefficient solar panels.
All of this raises a provocative question — namely, is war with Russia now the EU’s only hope for avoiding financial collapse?
Krainer mentions the parallel of Alberta, Canada’s oil reserves being used as collateral for more debt issuance during the 2008 Financial Crisis.
Have the lunatics in Washington and Brussels fantasized about using Ukrainian and Russian mineral assets to collateralize yet more debt creation?
Krainer’s recollection of the Russian situation in the 1990s—when Boris Yeltin’s administration sold Russian mineral assets for pennies on the dollar—does indeed seem relevant.
Could it be that Vladimir Putin’s biggest sin—in the eyes of the West—was putting an end to the looting party that raged under Yeltsin? It wouldn’t surprise me if this is at least partly the case.
Reprinted with permission from Focal Points.
