Your fellow site members, AGXIIK and Renozep, are back today with their first post of the new year. It's a fun article and I think you'll enjoy reading it.
Later this morning, I'll be sure to add some thoughts and charts to the comments section of this post. I'll have a full podcast summary for you this afternoon, too. For now, though, please take a few minutes to read this latest effort from AGXIIK and Renozep.
WIMPY ATE THE COYOTE AND THE ROAD RUNNER, by AGXIIK and Renozep
Do you spend a lot of time catching arrows with one hand and dodging Murder Hornets with the other hand just so you can stay up on current events?
At the end of the month do you feel like Wimpy, putting your hamburgers on time payments?
Bryan Lutz, editor of The Dollar Collapse, works overtime to bring interesting articles and videos for our review. Here's a link to his latest: https://dollarcollapse.com/top-ten-videos-january-1-2024/
The US debt just hit $34 trillion and the RRP stripped of $315 billion on the first business day of 2024. Why does this matter? Things will get dicey very soon.
The short video below with Michael Douville is particularly telling.
When the Fed doubled and, in some cases, tripled rates including the prime rate over the last 2 years they set the stage for 2024's substantial inflation pressure from new cost factors coming our way. As a result of 22 months of steady rate increases, the cost of these much higher rates are moving through the supply chains with a substantial increase in prices.
With between $10 to $15 trillion in new cash flooding into all US economic systems, the upwelling of inflationary pressures in 2024 cannot be staunched by rate increases. We're going to be stuck with these higher rates and attendant rising costs.
Inflation was not quelled by higher rates. The temporary drop in rising prices was caused by a lull in the waves of inflation still moving toward us. The purported inflation rate went into hiding while almost all asset classes exploded in price on a scale worse than 1979-1982, directly due to the tsunami of a 100% debt- based FIAT flush. How can inflation be 3% when everything doubled and tripled in price? Those gushers of $15 trillion plus in Fed cash and new US debt jacked up all assets classes including gold. At this rate you ain't seen nothing yet.
QE must restart as the RRP and BTFP liquidity pools are presently shrinking to zero. I bet the RRP pool is zip by end of January. Powell sees this liquidity crisis looming in Q1 2024. This will unleash another round of inflation ala the Volker Dilemma, a problem that Powell cannot fix with higher rates until it's so bad he has to boost rates in late 2024 through 2025 to save his reputation and to stop what higher rates failed to stop after the last rounds of hikes. He has to kill the economy to save it from what has always been excess money printing and higher rates. Caused by the banks, the banks will just make the problem worse. They always have and they always will.
The Banana Republic, or what I call The Weimerican Empire, now rated AA with a negative bias. This tells Powell he must act before we're AA-. The Fed will be forced to act. But by acting, Powell and others will exacerbate the various crises coming our way. More money and higher rates are incredibly toxic. More of the same doesn't solve the problems. What will solve it? Pretty much the same way hyper-monetary policies are solved. Hyper-monetary policies cause the problem. But hyper-inflation is the cure for hyper-inflation.
More money won't solve it. Higher rates won't solve it either. They'll make it far worse. These looming crises can take several forms including market crashes, bank failures, stagflation, recession and depression. Every pundit worth their airtime is talking about these looming problems yet no one will have solutions because all are short of seeing this phenomenon run its ugly unnatural course.
I see it akin to us fighting a nest of angry wasps. Every wasp is dedicated to stinging you. You might be able to defeat these nasty critters but it's going to hurt like hell. It's even worse if you're inside the nest fighting to get out.
Yet like the cartoon coyote we know so well, the Federal Reserve Bank, acting like Wiley, will still fall into this canyon. Forced to raise rates to sell the junk bonds and then trying to shovel this crisis-level liquidity cash into the chasm before he hits the bottom, Wiley hopes to land on what's a soft pile of $100 dollar bills. I doubt if anyone will see a soft landing particularly if it's cushioned by cash. It'll hurt like hell when the RRP is drained of soft pillowy paper currency.
Then rates will be wrenched hard to stop an unrelenting torrent of inflation during the last months of the POTUS election cycle when US treasury debt explodes by another $5 trillion plus another $10 trillion in roll over US Debt. And that'll be just the start of another crisis cycle.
All of this digital money will go into commodities and assets purchased by the Too Big To Fail bankers who are expected to be the ultimate recipients of these trillions. They're supposed to act as careful guardians of these gushers of green. True to course, their greed and grosser natures stops them from using this cash for anything except trading, which jacks the price of everything we desperately need to prosper or survive.
We, the common folk, will be the inflation bag holders. As the Fed and TBTF banks wallow in a mosh pit of cash, we're trying to avoid being drowned in this ocean of depreciating currency and escalating prices. It's the middle income wealth gap that grows in size as dollars are both increasingly hard to find and losing value. Formerly well off people will fall into the gap, sliding into poverty, while struggling as the last credit card- soaked cohort of consumers swims against the tide, just attempting to survive.
By the time this cycle is done everyone everywhere will be on the 4 EZ pay installment plan for their daily groceries, a phenomenon we now see at Walmart. I'll gladly pay you Tuesday for my groceries today, says Mrs Wimpy...
I kid you not, Walmart now offers up to 6 months to pay for your basic vittles. That is an incredibly sad state of affairs when the middle class has to finance dinner for the kids.
It'll look good for a while, probably through 2024, as bankers and their bought-and-paid-for politicians tell Powell to unleash the Money Kraken. We'll likely see more stimmies and welfare payments spew from the government, just to buy some time until the 2024 voting is done. But like all addicts, the last 10% of the addiction cycle is the worst and its deadliest.
What we're going to see is another iteration of this new-age Cantillion effect as Gresham's Law meets its Minsky Moment. We'll be left paying those bills from our meager storehouse of depreciated income and hoarded shards of wealth. No one at the top will take responsibility for all of this yet we're still left to clean up the mess as the last bag holders.
Given my track record, I could be wrong. Heck, I've tweaked and revised this article several times to get to the gist of what I'm try to say but something happens the next day that changes the direction of my thinking and writing.
Whether I'm 100% right, half right, half assed or dead wrong, we'll still have to use our eyes and ears to see and record the next 2 years of this cycle. It's going to be interested and dangerous at the same time. I know of not a single person who has even a few of the answers that we could rely on to protect ourselves.
Silver and gold might not save us but at least we won't be Wimpy. We'll pay for our hamburgers today and not on time payments of 31% per annum, the new Master Card rates as of 2024.