Fed Folds – Cheap Credit Party Continues

January 30.  Trump got his way.  After the stock market tanked in December Trump started screaming at the Federal Reserve for gradually raising interest rates.  He demanded credit remain cheap.  For a while Fed Chairperson Powell attitude was “wait and see”.  Today he basically folded his cards.  He said he would be “patient’ about new increases.  The stock market took this to mean zero increases this year and maybe even a cut.  Ka-ching for the stock market.

In more plutocratic party news Trump is going to have another trillion dollar budget debt, really 1.3 trillion.   “The Treasury’s total net new issuance in 2018 amounted to $1.34 trillion, more than double the 2017 level of about $550 billion. In 2019, it will be $1.4 trillion.” 

As is well-known the debt has skyrocketed because of the immense tax cut Trump gave to his friends.  It was all going to pay for itself, he said.  Right.  At one time Republicans worried about debt, or said they did.  They would scream day and night all during the Obama years about “out of control” spending and debt.  All forgotten now that their guy is  printing the money.

What’s wild about this debt is that that ten years after the Great Recession it should be coming down, not growing.  In fact it had declined under Obama to half a trillion.  One reason is the U.S. government has benefitted from the Feds cheap money policy  For years the new debt the U.S. took on was almost free money, that is the U.S. paid almost nothing in interest as a cost of borrowing.  So this leap in debt is quite a Trump accomplishment (sarcasm).  By the way in case you were wondering the national debt stands just short of $22 trillion or about $67,000 per citizen.

So the government goes ever more into hock (with around 1 in every 10 bucks of that debt owed to foreigners) and it makes sure banks keep money cheap so that everybody can borrow, borrow, borrow.   It will all continue swimmingly until there’s a crash here and there and investors panic.  Then capitalism’s latest house of cards will come tumbling down on the backs of the average Joe, Josephine and José.

Yet the party is only reaching new heights for the billionaires.  A penthouse in a yet to be finished building at 220 Central Park South has sold for $238 million.   It’s a record for a single U.S. dwelling.  The previous records was $137 million for a home in the Hamptons. The owner of the penthouse is Kenneth Griffin, a hedge-fund billionaire.  Wow, can you imagine how many overtime hours he must have toiled to be able to afford it?

For more about fun stuff about the national debt and interest rates click here.

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