Gold: Why Empires Fall
The comments below are an edited and abridged synopsis of an article by John Ing
It has been a difficult few months for investors. The failure of a global bank and a few US institutions contributed to the financial crisis this year. Also the US debt ceiling negotiations, which reduced investor confidence as Congress prevented a national default. The US Treasury embarked on a $1.1 trillion borrowing binge, made more challenging by China’s absence. Following the spike in borrowing rates yields increased, affecting approximately 4,000 smaller banks now competing for limited depositors. Then the Fed raised rates to levels unseen in 22 years. The ratio of global gross debt-to-GDP is now 17% larger than it was prior to the 2008 Lehman crisis.
Nonetheless, investors have piled into the stock market for the best seven months in decades because inflation is slowing, raising hopes that the Fed will not raise rates again. However, the US economy grew at an unexpected 2.4% annual rate in the second quarter. Inflation is very much alive, and the recession is nowhere in sight.
The battle against inflation is not over. Governments are running up huge deficits and debt. Inflation psychology has set in. Wage settlements are in double-digit territory, aided by the lowest unemployment rate since the 1960s. Business has expanded margins aided by inflation. Central bankers, which underestimated the scale and persistence of inflation, have glossed over their role. Not slowing down is government spending, the financing of government deficits and the trillions in pandemic stimulus packages. That infusion of cash contributed to growth and inflated stock prices, but also resulted in the highest inflation in decades.
Up for discussion: Bidenomics’ new deal; it’s not just inflation; spending is spending; mission critical; the end of US hegemony; the China syndrome; the US and China are already at war; Realpolitiks; quid pro quo; fiat inflation in the US; guns and butter may be the tip of the debt iceberg; the US dollar’s decline is underway; remember the golden rule; and recommendations.