by Tom Luongo, Tom Luongo:
In my other role as a secret apologist for Russia and Vladimir Putin, I was contacted yesterday by Sputnik News to comment on the official US debt number surpassing $31 trillion. I’m always grateful for the opportunity to talk about these issues.
I am, after all, a fiscal hawk extraordinaire,.
At the same time, I’m completely hip to why Sputnik (and RT) wanted to discuss this issue. They are running their own framing campaign, propaganda if you will. I’m no one’s useful idiot when it comes to these matters.
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They may have been looking for a dissident American voice to berate the US for its reckless spending, which fits the Russian media narrative that the US cannot sustain its current pressure campaign against Russia.
This is meant to counter the West’s narrative that Russia can’t sustain its military operations in Ukraine.
Hey, everyone’s got a truth to tell. I get it, it’s a war out there. All I can do is make the best use of the opportunities in front of me and tell my version of those truths. Because talking about things truthfully may actually get us one step back on the path towards peace rather than global war. That said, if I see no upside to the opportunity, the best thing to do is turn it down politely and wait for the next one.
At the same time we all have to realize that Russian media outlets have a hard time booking guests at this point due to the massive political pressure. So, as always, I see the opportunity as a way to talk to everyone to further understanding these things, not just feed one side’s attempt to shift the Overton Window.
In this particular case the US debt is a major issue and part of my general thesis of how the gameboard maps out in real time — faction by fractious faction. So, I was happy to throw my thoughts into the mix.
In short, the US is staring at a massive fiscal decision in the coming months and years. The situation isn’t insolvable but it also isn’t going to be easy for get through. We’re staring at a global recession, at a minimum, as well as a sovereign debt crisis in the West and in some Emerging Markets. Turkey has already been blown up.
However, the US is still a major player in the global financial system and the Federal Reserve the most powerful of these institutions. Understanding the Fed’s role in fixing what is broken is something all sides need to consider.
So, while, I’m sure it pleases my Russian paymasters (sic) that I believe there’s a split at the top of the US political establishment, it may not afford them the opportunities they think that split implies.
The reality is that the Fed has charted its own path here and this week’s pathetic appeal from the United Nations to urge central banks from raising interest rates is the best evidence I can present to you that my arguments about the Fed are correct.
The UN basically asked the Fed to, “Think of the CHILDREN!” Bail out the world for the common good. Now is not the time for unilateral action. Think globally, act locally.
You know, all the usual bromides to cover the reality that a hawkish Fed gores the wrong people’s oxen.
But the not-so-subtle point I think Sputnik was trying to make is that can the Fed actually do this with the US dealing with a $31 trillion debt overhang.
It is the question of the century.
For me, it’s simple. We won’t ever know if we don’t try. And given that the alternative to a few years of global depression to burn out the excesses of the Davos-controlled Fed during the Bernanke/Yellen years or turning the West over to Klaus Von CommieSchnitzel and his Minority Report future, I don’t think the decision is a difficult one for most people to make.
Here is the full Q&A between myself and Sputnik to ponder.
According to the NYT, the breach of the threshold comes at an inopportune moment, as historically low interest rates are being replaced with higher borrowing costs as the Federal Reserve tries to combat rapid inflation. What consequences does this policy bring from a mid-term perspective?
There was so much money printed during the COVID-19 period that it’s left the Fed with a massive dilemma. It needs to flush the global economy of excess dollars and shrink its balance sheet without destroying the US economy in the process.
It’s clear that FOMC Chair Jerome Powell is acting with regards only towards the US’s needs. For the first time in decades the world is having to come to grips with the idea that the Fed will not be there to bail them out if they get into trouble.
The medium term will be a period of extreme dollar strength. Because during this loose dollar period, post-2008, the world loaded up on cheap dollar-denominated debt. That is now reversing itself hard. Emerging markets and even developed markets like the UK, Europe and China are vulnerable to this reversal of dollar outflow.
The political problem for the “Biden” administration is that this is making it very difficult for them in this mid-term election cycle. “Biden” wants inflation down but they baked far too much of it into the global economy contain it even with this aggressive rate hike cycle from the Fed.
