Zone1 The bi-partisan economic roots of inflation and future recession

[Tom Paine 1949]

The largest of all the MANY factors leading to systemic inflation and destabilization of the whole advanced Western economy is long-term cheap money & credit via “zero interest rate policy” (ZIRP) and QE (Fed buying government bonds and other assets directly).

Such measures were adopted especially during and after the 2008 crisis by most Central Banks, supported and pushed by the broad “financial community” and of course by short-sighted and self-seeking politicians — in the U.S. especially by DONALD TRUMP:

***

President Donald Trump lashed out at Federal Reserve Chairman Jerome Powell on Tuesday as the central banking chief dismissed the possibility of the U.S. adopting negative interest rates….

Speaking before the House Financial Services Committee, Powell threw cold water on the notion that the Fed would send its benchmark interest rate below zero – particularly during a time of economic expansion. Trump has long pressured Powell and the Fed to reduce interest rates to juice the economy – despite criticizing former Fed Chair Janet Yellen for keeping rates low throughout much of former President Barack Obama's term….

https://www.usnews.com/news/economy...es-negative-rates-despite-pressure-from-trump

***

The blame does NOT go primarily to Trump however. His radically wrong proposals at a time when interest rates should have been dramatically RAISED were mostly rejected. Blame goes to the money expansionist Federal Reserve and its associated banks and Private Capital “partners” who (along with the extremely rich) profited so handsomely in the last 20 years under ALL administrations. If you don’t recognize this you will never get beyond political theatre to appreciate any of the fundamental problems of “boom & bust” capitalism in our era.

As long as politicians of both parties can finance their budgets (or “tax cuts”) with cheap credit and treasury bonds, with the Fed purchasing treasuries and other assets (with created money) they can and will spend freely. Why not? Almost everyone (with assets) benefits (as does the MIC) while hard labor is devalued. Meanwhile the poor get swindled with Democratic promises of “bread” and Republican “circuses.” Today inflation & resistance in Congress means Democratic “bread” offered to the poor is turning to rotten crumbs, while MAGA circus acts & clown shows seem to be entertaining primarily to poor (or very cynical) whites.

Under the two decade reign of repressed interest rates and QE, asset values skyrocketed, speculation and financialization were hugely profitable and a strong dollar allowed for cheap imports. There were immense distortions in capital and labor markets. Even many ordinary U.S. workers and middle class folk were all but forced to become speculative “investors.” Only careful “savers” lost out. They mostly felt like idiots … under QE.

NO MORE. Today, with de-globalization and Cold War, with Ukraine War - related oil & other disturbances, post-epidemic logistic bottlenecks (much of it from China) and increasingly necessary investment in more ecologically sustainable energy and industry … something HAD to give.

It took the inevitable form of WORLDWIDE INFLATION. It is really amazing that it took so long to arrive. Just a few years ago, due to globalization’s natural efficiencies, we were worried about DEFLATION. Of course the “everything bubble,” at least the part of it concentrated in ridiculous high-flying non- or low-profit stocks, is now crashing. A good thing. Of course if worldwide economic decoupling and the new Fed QT and higher interest rate policy holds we can easily see an evolution into a WORLDWIDE RECESSION in the next period.

Did anyone ever dream that “re-shoring” industry, broad international sanctions / tariffs, Cold War and ecological pressures … would cost us NOTHING?

Still, the fact is the U.S. is now and in future likely to end up suffering much less than Europe, not to mention many third world countries, from inflation, recession / depression and ecological pressure and war. Brexited England will suffer as much or more than the rest of Europe.

The idea that this is all the result of one U.S. party or the other … is preposterous.

 

[Mac1958]

The largest of all the MANY factors leading to systemic inflation and destabilization of the whole advanced Western economy is long-term cheap money & credit via “zero interest rate policy” (ZIRP) and QE (Fed buying government bonds and other assets directly).

Such measures were adopted especially during and after the 2008 crisis by most Central Banks, supported and pushed by the broad “financial community” and of course by short-sighted and self-seeking politicians — in the U.S. especially by DONALD TRUMP:

***

President Donald Trump lashed out at Federal Reserve Chairman Jerome Powell on Tuesday as the central banking chief dismissed the possibility of the U.S. adopting negative interest rates….

Speaking before the House Financial Services Committee, Powell threw cold water on the notion that the Fed would send its benchmark interest rate below zero – particularly during a time of economic expansion. Trump has long pressured Powell and the Fed to reduce interest rates to juice the economy – despite criticizing former Fed Chair Janet Yellen for keeping rates low throughout much of former President Barack Obama's term….

https://www.usnews.com/news/economy...es-negative-rates-despite-pressure-from-trump

***

The blame does NOT go primarily to Trump however. His radically wrong proposals at a time when interest rates should have been dramatically RAISED were mostly rejected. Blame goes to the money expansionist Federal Reserve and its associated banks and Private Capital “partners” who (along with the extremely rich) profited so handsomely in the last 20 years under ALL administrations. If you don’t recognize this you will never get beyond political theatre to appreciate any of the fundamental problems of “boom & bust” capitalism in our era.

As long as politicians of both parties can finance their budgets (or “tax cuts”) with cheap credit and treasury bonds, with the Fed purchasing treasuries and other assets (with created money) they can and will spend freely. Why not? Almost everyone (with assets) benefits (as does the MIC) while hard labor is devalued. Meanwhile the poor get swindled with Democratic promises of “bread” and Republican “circuses.” Today inflation & resistance in Congress means Democratic “bread” offered to the poor is turning to rotten crumbs, while MAGA circus acts & clown shows seem to be mostly only enjoyed by poor whites.

Under the two decade reign of repressed interest rates and QE, asset values skyrocketed, speculation and financialization were hugely profitable and a strong dollar allowed for cheap imports. There were immense distortions in capital and labor markets. Even many ordinary U.S. workers and middle class folk were all but forced to become speculative “investors.” Only careful “savers” lost out. They mostly felt like idiots … under QE.

NO MORE. Today, with de-globalization and Cold War, with Ukraine War - related oil & other disturbances, post-epidemic logistic bottlenecks (much of it from China) and increasingly necessary investment in more ecologically sustainable energy and industry … something HAD to give.

It took the inevitable form of WORLDWIDE INFLATION. It is really amazing that it took so long to arrive. Just a few years ago, due to globalization’s natural efficiencies, we were worried about DEFLATION. Of course the “everything bubble,” at least the part of it concentrated in ridiculous high-flying non- or low-profit stocks, is now crashing. A good thing. Of course if worldwide economic decoupling and the new Fed QT and higher interest rate policy holds we can easily see an evolution into a WORLDWIDE RECESSION in the next period.

Did anyone ever dream that “re-shoring” industry, broad international sanctions / tariffs, Cold War and ecological pressures … would cost us NOTHING?

Still, the fact is the U.S. is now and in future likely to end up suffering much less than Europe, not to mention many third world countries, from inflation, recession / depression and ecological pressure and war. Brexited England will suffer as much or more than the rest of Europe.

The idea that this is all the result of one U.S. party or the other … is preposterous.

Thank you for infiltrating USMB with some reality.

This can actually be traced back quite a ways, with plenty of blame for both parties. Why was QE even needed? Because we failed/refused to properly regulate the derivatives, banks and ratings companies that caused the Meltdown. More of that blame goes to Greenspan and the GOP.

But before that, it was Clinton stupidly letting Summers and Rubin talk him into repealing Glass Steagall, which opened the floodgates for the banks to turn real estate into a goddamn casino via derivatives. The Dems didn't put up much of a fight. That's on them.

Hell, I could start with Reagan and his push for deregulation.

This has been a true group effort, and it's clear that most of our population doesn't know the whole story. Too much work.