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#1: Why Zero/Negative by Fed i Rates Are Massively Deflationary Author: DanLocation: USA : Tue Jun 01, 2021 8:11 am
    ----
21-06-01


The short Why is we are running a huge balance of payments deficit. We are broke.
Japan & Germany have negative i rates, but they both have large balance of
payments surpluses which enable them to use a portion of their profits to subsidize
cheap domestic interest rates and consumption.

Our banking system by law requires any loan(asset) to have an offsetting liability.
Once a lender via a Reverse Repurchase Agreement is not paid their costs
via a positive i rate; then they must sell another asset(IOU) to cover their loss.

This sale instantly comes off the Monetary Base, contracting the actual money supply
and must instantly result in an increase in interest rates.

This is actually what we are seeing today in the Dollar & Bond markets.

CONCLUSION
The Fed has panicked and Modern Monetary Theory is now revealed to be a printing press.
We are not Zimbabwe, Argentina, nor the Wiemar Republic. They did not have outside
currency holders.

Ergo, the USA is bankrupt and thinking we get to borrow 5-6 trillion dollars more this year
so we can live high off the hog and pay people NOT TO WORK is not going to happen.

There is an enormous amount of graft and corruption in present Govt spending.
Once high i rates force us to reconsider who we are subsiding, we could try
electing some people who give us an honest government and eliminate the
Federal Reserve, a private bank whose governors are now criminals.



Last edited by Dan on Tue Nov 08, 2022 8:42 pm; edited 4 times in total



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