As I learn more about how our economy works, I am pretty amazed at the levels and depths we can push it towards without it completely collapsing. It speaks to the power of belief and the level of GDP we have created with the help of the various industrial revolutions and deflationary nature of technology.
We've unlocked a substantial amount of human and resource potential, and in doing so, we've abused it thinking that we now have minimal financial constraints.
Through money printing and manipulation of economies, governments feel they can continue to divvy up the pie and use that new money to stimulate the economy and keep it going in the direction of central planning.
Since the world still chiefly relies on dollars to manage trade and liquidity between assets, it's crucial for us to look at how the world reserve currency is managed.
The exponential growth of debt
GDP might be growing year on year, but it's only been one factor in the equation of growth. We have to look at how much debt and monetary easing is pumped into the system to generate this economic growth. Each year this drain on the economy is "hidden" by the growth in GDP.
But if we look at what governments or particular what the US government has been doing, we can see a concerning trend of exponential debt.
- The Bush Years - 8 years
President Bush added $6.1 trillion, or a 101% increase, putting him in fourth place of presidents running up a bill. Bush launched the War on Terror in response to the 9/11 attacks, which led to multi-trillion-dollar spending on the War in Afghanistan and the Iraq War. Bush also dealt with the 2001 recession and the 2008 financial crisis.
- The Obama years - 8 years
Barack Obama (2009-2017): Under President Obama, the national debt grew the most dollar-wise ($8.6 trillion) but was fifth in terms of percentage: 74%. Obama fought the Great Recession with an $831 billion economic stimulus package and added $858 billion through tax cuts.
- The Trump years - 4 Years
As of the end of FY 2020, the debt was $26.9 trillion. Trump added $6.7 trillion to the debt since Obama's last budget, a 33.1% increase due to the effects of the coronavirus pandemic. Let's not forget he still has a stimulus package on the way and his only had four years to run up that amount versus Obama who had eight years.
So the time frame is getting shorter, but the figures are getting bigger.
- The Biden years - The next 4 years
We all know Biden is a big government guy, and big spending is likely to be the name of the game, not that it would matter, but the narrative towards spending will be stronger under him. We've already seen the narrative of MMT or more money today, lol proving to be the dry power governments want to use to validate more spending.
Hey big spender
We've already seen the federal reserve openly state they have an inflation target of 2%, and they're willing to go above it to compensate of the years it was below 2%, which is absolute nonsense, but the point is the same.
Big government is gearing up to spend big, and oh boy did this pandemic give them the financial part of the recipe to trigger this massive debasement with much less backlash than it would under other circumstances.
Cash can't last
At this rate, along with the call for a new Bretton Woods, cash will continue to hold less of its purchasing power each year. If we are to protect the purchasing power we get from labour and investment, cash may not be a wise choice.
This may be good for some of us in the developing world, not being crushed by the power of the dollar, but how much fo a benefit is that really to the overall state of the world.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."
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