by Egon Von Greyerz, Gold Switzerland:
You have been warned. The Biden – Yellen (BY)
nightmare dream team will fulfil our worst fears of deficit spending, debt explosion and dollar collapse.
Not that a Trump win would have been that much different since the die had already been cast long ago for the final decline of the current financial system.
And the BY duo will be the perfect team to lead the US economy and the rest of the world into perdition. Biden is already an experienced player in deficit spending and massive debt accumulation. And Yellen was there for part of the time printing whatever was required.
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BIDEN YELLEN – SEASONED MONEY PRINTERS
Biden served as Vice President from 2009 to 2017. During those 8 years US debt went from $10.7 trillion to $20t. That is a massive increase of 85% or $9.3t.
When Reagan became president in 1981, US debt was just under $930 billion. It took the combined efforts of Reagan, Bush Sr, Clinton and Bush Jr 28 years to grow the US debt by $10t whilst Obama and Biden managed to grow it by almost the same amount in 8 years.
What we must remember is that the Great Financial Crisis was supposed to have been resolved in 2009. So there should not have been the same pressure to spend money freely when Obama and Biden came to power. But as good socialists Democrats, they threw frugality to the wind and spent recklessly.
The last three years of their reign, 2014-7 they had Yellen as accomplice in her role as Chair of the Fed. So this is a team with deep experience in creating money out of thin air.
A REMARKABLE RECORD
When Trump took over in 2017 he had no intention of being outspent or outshone by any previous president. So Trump will have managed to increase the US debt by $8 trillion in just 4 years – a remarkable record!
I don’t believe that anyone back in 2017 forecasted that US debt would be $28t in January 2017, at the end of Trump’s four years. But that was very easy to forecast for anyone who studies history.
Since Reagan became president US debt has on average doubled every 8 years. Thus in an article a few years ago (US debt explosion & Weimar II) I forecasted a debt doubling to $40 trillion by early 2025 and $28t at the half way mark in January 2021. No genius is required for such a forecast nor teams of analysts or economists with supercomputers.
A brief study of history combined with a simple extrapolation is all that is required. But alas that is much too simple a method to take any notice of.
DREAM DUO WITH 150 YEARS’ EXPERIENCE
So if Yellen is appointed Treasury Secretary, we have a dream team with extensive executive experience in expanding debt and printing money. Talking about experience, has there ever been a president and treasury secretary whose ages add up to over 150 years? I doubt it and sadly their long money manufacturing experience is the wrong medicine for the US.
Ahead for the new administration lies the arduous task of keeping the sinking “SS US ECONOMY” afloat.
Certainly not an enviable task. Because the end game is virtually certain. Ships can go down very quickly or it can be a long drawn out affair.
This particular ship is already loaded with $80 trillion total US debt of which the government has issued $27 trillion and the Fed printed $7 trillion. Add to that derivatives and unfunded liabilities of at least $1/2 quadrillion. So say a total of $600 trillion in US debt including liabilities that will become debt.
DEBT WEIGHT – 150,000 747 JUMBOS
Just as an illustration, $600 trillion in $100 bills would weigh 60 million tons. This weight corresponds to 150,000 747 jumbo jets. With that amount of debt load, no wonder the ship will sink quickly.
It is obviously not surprising that governments are planning to do away with paper money in favour of CBDC (Central Bank Digital Currency). So much easier to stick the total debt of $600t on a small usb stick that weighs a few grams.
EXPONENTIAL PHASE OF QE IS HERE
And that is the way that central banks will try to fool the world, by shrinking the money supply to a binary code of Zeros and Ones in a reset. But even if that does away with paper money, creating a digital currency does not change anything. It will just become a new form of fiat that can be expanded at will but with the same problems as paper money.
What we do know is that the exponential phase of global QE has just started.
Just three central banks, the Fed, ECB and BoJ have printed $7.5 trillion since March 2020, by expanding their balance sheets by 50% from $14.5t to $22t in November.
Morgan Stanley estimates that for 2021, central banks will print a total of $300 billion per month. This seems much too low, bearing in mind that major parts of the world are in lockdown with 100s of millions of people either furloughed or redundant and with many businesses going under.
The retail and leisure/travel industries for example are haemorrhaging and unlikely to ever recover fully. Thousands of small businesses are also going under every month.
MMT COMING – DOLLAR COLLAPSE
QE in 2021 will not only be used for more support to the undeserved banking system. Also individuals and businesses will be direct beneficiaries of QE as Biden and Harris subscribe to MMT (Modern Monetary Theory).
Thus the money printing bonanza in 2021 is likely to far exceed the 2020 levels. This will not only put enormous pressure on the financial system, but will also be reflected in a collapsing dollar.