Very perceptive. I do think the 2024 elections - US (and Britain) will be crucial, as whoever wins will be holding the problem for the next four years. The winner will have a lot to contend with. At best though, we may just stagflate, with everything just deteriorating slowly but not so so quickly that we notice. There is much ruin in a nation, as Adam Smith said. At some point though, a recession and inability to provide welfare and healthcare will also cause serious unrest.
In line with having the ingredients for totalitarianism, this new TikTok ban lines right up. At first I supported it, cause why would we want China spying on us through it? But now that I think about it, giving the government the power to divest or shut down a social media company is a VERY bad idea. And the speed with which it went through Congress is worrying. That means it’s got support from both sides of the (elite) aisle
My training is in economics and computer science: essentially data driven financial analysis. About 18 months ago, I downloaded the US debt schedule to see how exposed we were under various interest rate scenarios. I don't have the analysis anymore (it was just for fun), but the maturity schedule is better than I thought. A rise on the 10Y T-Note from 1% to 4% wasn't actually that bad... right away. If interest rates remain at that level for 5 years+ though, we start to have problems. Gundlach’s predictions about interest consuming 100% of tax revenue are a little over the top, but not a lot.
I am currently investigating a Deutsche Bank ex-pat account to move some money out of USD. I have an Everbank World Markets account, but that's more like a set of futures than an actual foreign currency denominated account. Do you know of any other easy (and preferably legal) ways to move money offshore, Max?
I'm more interested in actions I can take now to cushion the blow. Or at least surf in the wake of the big fish who will come out on top. What are my options? Invest in foreign dividend paying stocks so my income can stay somewhat stable as our currency declines?
Move all my money into crypto? (don't make me laugh)
I think November is going to be bumpier than a lot of people think. It’s not going to be a “normal” election because neither side will accept a loss. If they lose, the democrats will do their best to prevent Trump from taking power and alternatively if they lose, the republicans will claim that the election was stolen all over again (which is indeed what happened in 2020).
Neither side will acquiesce and there will be violence all around the country.
I haven’t watched the Gundlach video but intend to later today and give my thoughts on it. I highly encourage you and others to pay £5 (whatever that translates to) to watch the Brokenomics series on Lotuseaters.com. Especially the beginning episodes, it’s a great primer on this stuff.
I graduated Auburn with a degree in Finance and a minor in Economics, hence the pseudonymous handle of the famous late Roman Republic banker Titus Pomponius Atticus. I certainly don’t have the chops of men like Gundlach, but I do have a better foundational education than the average man in understanding macro economic subjects. My interests since high school have been statecraft, and the foundation of a secure and prosperous state is her economic condition (which in my opinion is the primary physical indicator of a people’s spiritual condition, but that’s another story).
In my short time on this earth, I’ve noticed most common people when it comes to economics cannot see past the price tag on the cereal box and the number of dollars and cents in their bank account or on their credit cards. This website I always find to be a good primer for people to connect their own personal experiences to what’s going on at a macro level.
The common man, either being incapable or unwilling, to see past the number in their bank account is nearly always enchanted then by a check plopping in their account-- brings to mind the stimulus check madness of the past four years. I’m all for free money, but free money doesn’t exist. Someone must pay the piper. Either you will pay the piper or your children will.
Looks like we’re the children who’ll be paying. We’re approaching/already in a similar situation the Greeks were some decade ago, except for one very key difference. We don’t have mother hen Germany to force austerity measures upon us. Necessity and nature will be our austerity enforcers, and we all know how hard a task master the Germans can be. But, the austerity enforced by nature will be seven times as cruel.
We find ourselves in the beginning forays of a debt spiral. Essentially a debt spiral is when the cumulative interest payments on the federal debt become so large that they begin to dictate both monetary and fiscal policies over other concerns. It usually starts out as we’re seeing.
These treasuries are $10T in government debt. It’s coming due. It needs to be refinanced. Rates were likely much lower when this debt was last refinanced. I believe Dan in a recent Brokenomics episode did a rough calculation on what the annual federal interest payments would increase to if this $10T was refinanced at current rates. I think it’d touch $1.5T per annum-- an increase from the current $800B per annum.
So now that the annual inflation rate is still sniffing 4%, the Federal Reserve is “confident in the indicators that rate decreases can begin soon.” Why is this? Are the indicators really there? Have their rate increases stifled inflation enough yet? Obviously not. So now the federal government is faced with two options, borrow more to cover their ongoing deficit only exacerbated by the potential increase in interest payments or have the Fed prematurely decrease rates so the federal government can refinance the $10T in debt at lower rates those saving ~$750B per year in interest payments.
But as can be seen by several figures, even if interest payments were to remain steady, the 2024 federal deficit is on track to be well over $2T requiring additional borrowing and increased interest payments to service this debt. Another reason to decrease rates now! As the link above also indicates, foreigners are slowing dramatically on purchasing our debt.
Where does all this lead? I dunno. One distinguished economics professor at Auburn thinks that the federal government will begin to tax your assets instead of just your income. Maybe. I think they’ll get so creative in their tactics, they’ll make Draco blush.
Apologies for the rant, but I haven’t had any coffee yet. The mind dazzles when confronted with such largesse, hubris, and sickness.
Speaking of dying republics, dear Livy gives us insight, “We can endure neither our vices nor the remedies for them.”
Very perceptive. I do think the 2024 elections - US (and Britain) will be crucial, as whoever wins will be holding the problem for the next four years. The winner will have a lot to contend with. At best though, we may just stagflate, with everything just deteriorating slowly but not so so quickly that we notice. There is much ruin in a nation, as Adam Smith said. At some point though, a recession and inability to provide welfare and healthcare will also cause serious unrest.
In line with having the ingredients for totalitarianism, this new TikTok ban lines right up. At first I supported it, cause why would we want China spying on us through it? But now that I think about it, giving the government the power to divest or shut down a social media company is a VERY bad idea. And the speed with which it went through Congress is worrying. That means it’s got support from both sides of the (elite) aisle
My training is in economics and computer science: essentially data driven financial analysis. About 18 months ago, I downloaded the US debt schedule to see how exposed we were under various interest rate scenarios. I don't have the analysis anymore (it was just for fun), but the maturity schedule is better than I thought. A rise on the 10Y T-Note from 1% to 4% wasn't actually that bad... right away. If interest rates remain at that level for 5 years+ though, we start to have problems. Gundlach’s predictions about interest consuming 100% of tax revenue are a little over the top, but not a lot.
I am currently investigating a Deutsche Bank ex-pat account to move some money out of USD. I have an Everbank World Markets account, but that's more like a set of futures than an actual foreign currency denominated account. Do you know of any other easy (and preferably legal) ways to move money offshore, Max?
I'm more interested in actions I can take now to cushion the blow. Or at least surf in the wake of the big fish who will come out on top. What are my options? Invest in foreign dividend paying stocks so my income can stay somewhat stable as our currency declines?
Move all my money into crypto? (don't make me laugh)
I think November is going to be bumpier than a lot of people think. It’s not going to be a “normal” election because neither side will accept a loss. If they lose, the democrats will do their best to prevent Trump from taking power and alternatively if they lose, the republicans will claim that the election was stolen all over again (which is indeed what happened in 2020).
Neither side will acquiesce and there will be violence all around the country.
I haven’t watched the Gundlach video but intend to later today and give my thoughts on it. I highly encourage you and others to pay £5 (whatever that translates to) to watch the Brokenomics series on Lotuseaters.com. Especially the beginning episodes, it’s a great primer on this stuff.
I graduated Auburn with a degree in Finance and a minor in Economics, hence the pseudonymous handle of the famous late Roman Republic banker Titus Pomponius Atticus. I certainly don’t have the chops of men like Gundlach, but I do have a better foundational education than the average man in understanding macro economic subjects. My interests since high school have been statecraft, and the foundation of a secure and prosperous state is her economic condition (which in my opinion is the primary physical indicator of a people’s spiritual condition, but that’s another story).
In my short time on this earth, I’ve noticed most common people when it comes to economics cannot see past the price tag on the cereal box and the number of dollars and cents in their bank account or on their credit cards. This website I always find to be a good primer for people to connect their own personal experiences to what’s going on at a macro level.
https://wtfhappenedin1971.com
The common man, either being incapable or unwilling, to see past the number in their bank account is nearly always enchanted then by a check plopping in their account-- brings to mind the stimulus check madness of the past four years. I’m all for free money, but free money doesn’t exist. Someone must pay the piper. Either you will pay the piper or your children will.
Looks like we’re the children who’ll be paying. We’re approaching/already in a similar situation the Greeks were some decade ago, except for one very key difference. We don’t have mother hen Germany to force austerity measures upon us. Necessity and nature will be our austerity enforcers, and we all know how hard a task master the Germans can be. But, the austerity enforced by nature will be seven times as cruel.
We find ourselves in the beginning forays of a debt spiral. Essentially a debt spiral is when the cumulative interest payments on the federal debt become so large that they begin to dictate both monetary and fiscal policies over other concerns. It usually starts out as we’re seeing.
A not insignificant portion of the federal outstanding debt comes due this year. https://www.apolloacademy.com/10-trillion-in-us-treasuries-coming-to-the-market-in-2024/
These treasuries are $10T in government debt. It’s coming due. It needs to be refinanced. Rates were likely much lower when this debt was last refinanced. I believe Dan in a recent Brokenomics episode did a rough calculation on what the annual federal interest payments would increase to if this $10T was refinanced at current rates. I think it’d touch $1.5T per annum-- an increase from the current $800B per annum.
So now that the annual inflation rate is still sniffing 4%, the Federal Reserve is “confident in the indicators that rate decreases can begin soon.” Why is this? Are the indicators really there? Have their rate increases stifled inflation enough yet? Obviously not. So now the federal government is faced with two options, borrow more to cover their ongoing deficit only exacerbated by the potential increase in interest payments or have the Fed prematurely decrease rates so the federal government can refinance the $10T in debt at lower rates those saving ~$750B per year in interest payments.
But as can be seen by several figures, even if interest payments were to remain steady, the 2024 federal deficit is on track to be well over $2T requiring additional borrowing and increased interest payments to service this debt. Another reason to decrease rates now! As the link above also indicates, foreigners are slowing dramatically on purchasing our debt.
Where does all this lead? I dunno. One distinguished economics professor at Auburn thinks that the federal government will begin to tax your assets instead of just your income. Maybe. I think they’ll get so creative in their tactics, they’ll make Draco blush.
Apologies for the rant, but I haven’t had any coffee yet. The mind dazzles when confronted with such largesse, hubris, and sickness.
Speaking of dying republics, dear Livy gives us insight, “We can endure neither our vices nor the remedies for them.”