Macro
Economic Conditions
Number 1: Worldwide Boomers flooded the world with massive savings driving
down interest rates that topped at 15.84% (10 year T-Bond) on September 30,
1981 roller coasting downward until bottoming at 0.52% on August 4, 2020! But alas as with all good things this came to
an end as Boomer’s went from net savers to net spenders entering
retirement. Generation X is half the size
of Boomer thus unable to supply savings at the same level as Boomers. The Millennials have at least a decade
(buying houses, student loans, raising children) before they can take over as the new savings machine.
Number two:
China is no longer the super low cost provider of goods. They’ve soak up the bulk of their unemployed
thus wages are increasing way before any tariffs were put into place. The ever decreasing cost for Chinese goods
has reversed pushing up inflation.
Number three:
U.S. Government spending during this time exploded since financing costs
declined decade after decade until the year 2020. U.S. Federal debt to GDP is at 123%. Soon (within a few years) Congress will hit
the economic wall and will have to deal with the debt monster.
Conclusion: Congress in the years ahead will look to tax anything they can and the remainder will be inflated away by the Federal Reserve digital money printing. Expect interest rates to rise upward only in a saw tooth manner. During times of growth rates will achieve ever higher level during recessions expect higher lows.
The stock market will also roller coaster with valuations declining during its highs and most importantly its lows ending up with the Dow to Gold Ratio at 1 to 1 and the S&P 500 Shiller PE under 10! This will be a multi-year event possibly a decade to play out.
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