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The Atlantis Report
Oct 1, 2021
They kicked the can down the road by bailing out banks that were “too big to fail” and pushing catastrophic monetary policies. They’re fine as long as you keep the fixes coming. How many trillions are they going to have to print this time when heavyweights like Deutsche Bank collapse? Who ends up paying for it? You do!
All of them and their big government promises keep taxes high, inflation high and unemployment high. What’s good for politics is bad for economics and what’s good for economics is bad for politics.
Recall that in the Great Recession, the stimulus of low rates was countered by a tightening of lending standards as lenders feared rising default risk. Ultimately, the collapsing system was bailed out as a consequence.
Even the rules regarding insolvency had to be changed since many financial organizations were technically insolvent, too many non-performing loans, bad derivative bets, overleveraging, etc.
This time around, rates will move downward but will have a little stimulative effect since low rates cannot force borrowing if the borrower doesn’t want to borrow. The public is already overleveraged with mortgage, auto, school, and credit card debt. Thus, the negative wealth effect of housing price declines will be magnified. The trade war is the proverbial “straw that broke the camel’s back.” This is the setup for a self-reinforcing downward spiral. When chickens come home to roost, we’ll probably get a Zero interest-rate policy. We are almost there now, possibly even Negative Interest Rate Policy, government asset purchases, an even worse exploding deficit, and a move to use infrastructure spending and other “tools” to get things moving again…..
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