[Exerpts from my Oct 23, 2021 seminar at the La Jolla Marriott]

 

              “Inflate or die,” is what the great Richard Russell (1924-2015) used to say.

 

               He meant that the Fed was committed to “fighting deflation” – and when confronted with massive debts in the economy, they had but one choice:

 

                                               Crank Up the Printing Press

 

               The national debt is currently approaching $30 trillion.  The Fed knows this debt can never be paid off – especially since the Debt to GDP ratio rose from already high nose-bleed level of 100% in 2020 to an even more  deeply in debt level of 130% in 2021.

 

               That’s what a $3 trillion budget deficit did to the liability side of the U.S. balance sheet in 2020.

 

               Once there is too much debt in the system, there are only two ways to work out of it: 

 

                                                           Inflate or Die

 

               Interest on U.S. Treasury debt and pay-as-you-go entitlement obligations are now over 100% of U.S. tax receipts.  

 

               As recently as 2018, that number was 70-75%.

 

              Even with tax receipts at all-time highs – which are the result of asset prices being at all-time highs –  the Fed still has to print money just to cover the interest on the national debt and entitlement payments.

 

                         Unfortunately, these two items only compose

                                     70% of all government spending

 

              All other things the government pays for – like Defense spending at $800 B per year – account for the remaining 30% – and are not included in that greater than 100% spending number.

 

               If the government did not crank up the printing press, it would have to tell Treasury bond holders that we are not going to pay you your interest rate coupons – or it would have to tell baby-boomers that “we are not going to send you your entitlements.”

 

                                  These are both unacceptable choices –

                                     which is why it’s not gonna happen

 

               Because neither of those options are acceptable on an economic or political basis, what we are going to see in the immediate future is more money printing – and more inflation.

 

              Every investor wants to know what’s coming so they can position themselves for it. 

 

              Unless a miracle happens, now you know.