Inflationary Angst BY JOHN MAULDIN DECEMBER 6, 2019 Stable Prices, Sometimes Deaths of Despair…

Casual_Observer

Inflationary Angst BY JOHN MAULDIN DECEMBER 6, 2019

Stable Prices, Sometimes Deaths of Despair Radical Solutions It’s All Relative… Angst-Ridden Voters

According to the dictionary, the word angst refers to “a feeling of deep anxiety or dread, typically an unfocused one about the human condition or the state of the world in general.” It comes from a German word for “fear.”

Two weeks ago I referred back to my 2017 Angst in America series. “Deep anxiety or dread” is exactly what I described then, and it hasn’t improved for most people. For some, yes, life is good and getting better, at least financially. Not so for every American… or even most of us.

Yes, life could be even harder. “Poverty” living standards in the US are better than much of the world knows. But that doesn’t reduce the angst because we compare our conditions to what we see around us, or in the media we consume.

Today I want to bring some focus to this unfocused anxiety. We will see that much of it (though certainly not all) traces back to specific policies of a specific institution that has a specific mission it is failing to achieve.

Furthermore, that angst is going to rise up and bite us in our political derrière at some point in the future. And that gives me a great deal of personal angst, because I don’t think the results will be pleasant for anyone.

Contrary to popular opinion, the Federal Reserve System is not independent. Nor does it have to follow the president’s orders, as much as Donald Trump wishes it would. The Fed operates under a legal mandate from Congress. Its monetary policy role is “to promote maximum employment, stable prices and moderate long-term interest rates.” So how is it doing?

Long-term rates are certainly moderate. Employment is historically high, though wages and job quality aren’t always great.

As for that “stable prices” part… it depends on what you are buying. As you see below, for many goods the price is nowhere near “stable.” Unfortunately, if you are in the bottom 60–70% of the income brackets, these are some of the things you buy the most.

Comments (3)
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Casual_Observer
Casual_Observer

Angst-Ridden Voters No one should be surprised the lower 80% of the income pyramid is anxious and depressed. You would be, too, in their situation. And there’s a good chance you will be in their situation in a few years, because angst-ridden people can still vote. Economic theories aren’t relevant to them. They look at their own situations and want change.

History suggests that President Trump should win reelection unless recession strikes by next November. But even if we avoid a recession in 2020, what happens if there is one in 2021 or 2022? Democrats could gain power by 2024, if not sooner.

The already-growing annual budget deficit will soar to over $2 trillion. How do we finance that without creating more angst? I can easily imagine a populist Democrat winning the White House, followed by higher taxes and an echo recession. Then even higher deficits and the national debt spinning out of control. The Fed will give us massive quantitative easing and zero rates, but they may be in fact pushing on a string…

We don’t have much time to get our house in order, either in the US or globally. Everything I’ve said today applies, to various degrees, throughout the developed world. Thinking that 2% inflation or zero interest rates coupled with massive deficits will somehow help is beyond wishful thinking.

We can and should take steps to protect our individual families and lives, but that’s not enough. At the national level, I’m beginning to fear only an enormously stressful Great Reset will deliver the deep but necessary sacrifices. The partisan divide inhibits compromise, so nothing happens and the problems grow.

Think about the late 1930s… Hopefully with just economic turmoil, not kinetic war. It will be hard but without the kind of motivation, I really question whether we will do what it takes.

Herkie
Herkie

C-O, democrats are no longer the party of tax and spend, they have been completely outclassed in spending by the GOP and it's borrow and spend ethics. Obama inherited a $1.2 trillion deficit from Bush's last budget, and over his 8 years got that below 400 billion, only to have Trump increase the debt by $3.040 trillion in less than 3 years, almost TRIPLE the debt Obama was racking up when he left office so what I am saying is I have just about enough partisan BULLSHIT from the right that has not a single leg to stand on when it comes to fiscal rectitude.


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