These posts have helped focus my own thoughts and I'll finish off with this one.
I feel this chart highlights the core dynamic.
Gross Federal Debt is a proxy for US currency creation. Their currency is being created at a faster rate than their economy is growing. Yes there is that one off event but the trend is not new. The chart shows the crossover date when $1 of new currency generated less than $1 of GDP. That first happened to new debt in 2008, where the yellow line begins its dip. But $1 of debt generates diminishing GDP out for a number of years, so the absolute crossover, where more debt always generates less GDP, wasn't hit until 7 yrs later in 2015.
You might say the yellow line marks the heath of the financial system, the sum of everything financial, the first order consequence. The line has refused to go up since 2008, despite the forced low interest rates. It's level now dictates how extreme the Fed's resuscitation has to be. The deeper it is, the more money must be tapped into existence at the next crisis.
It seems to me this is now a self reinforcing, point of no return problem. The Fed can tap away and halt a decline, but that "save" locks in the yellow line's new low, which becomes the high from which the next fall departs.Every save now digs a deeper hole and I can't see a way out of it. The system is semi-stable if nominal GDP grows. With that down too, they must print even more to stop the cascade from no-reserve lending contracting, which must never be allowed to gather steam.
The maths suggests to me the system was tapped out anyway and the red will overwhelm the blue. No one has experience of the US$ being printed into oblivion so the idea will be dismissed until it can't be.
Re timing, not yet. At some dramatic number the yellow line will become a public fear. Minus 3.5% pa didn't do it. Minus 25% surely? or maybe it'll take two 25%'s in a row ... the realisation that the required "saves" have become continuous.
Interesting times.
