This administration has proposed another 800 or so billion dollars to stimulate the economy. Not even to question where will the money come from, for US has no budget surplus and the household savings are abysmal, will foreign investors lend more hard earned cash to finance the US recoveries if any?
So in one hand, government inject huge liquidity into the system, in the other hand, the runaway inflation strips off the real purchasing power as soon as the helicopter drops of checks into each and every household.
But I bet some will benefit from this scam. Bankers, politicians, lazy people who does not work for their income, will surely gain from this inflation scam.
The end is not well. The bail out and the inflation will weaken and prolong the US’s ability to recover economically. Worse yet, it will trigger some geopolitical crisis. Great depression is a mirror we need look into and reflect. When 1929 stock bubble burst, instead of let correction take its course, FED injected huge liquidity and Roosevelt started debt spending New Deal. None worked until World War II, which happened as US took wealth from nations in the war to enrich the itself. It is called worldwide wealth redistribution.
Will we have the same fate? I do not know. But I do know that US needs wealth from some other countries, through dollar hegemony or other means in order to get through this deflationary cycle (not through monetary inflation cycle which is in the process unfolding). Or US has to tight its belt to suffer from hungers in order to pay for the debts – that is not likely to happen, at least under this administration.
With that said, USD will collapse. And US government will default on its bond. Therefore, bond investment pose a significant risk that the return will close to be zero, in a long run of 5-10 years.
