Fed Moves to Avoid Financial Repression, Keep Inflation Above Interest Rates
• US debt has risen by $97 billion in one week
• Finance expert Larry Mcdonald believes the spending rate will fuel an era of financial repression
• The Fed is looking to slow-walk financial repression and keep inflation above government’s average interest rate expense
US Debt Jumps $97 Billion in One Week
The total outstanding debt owed by the US government has increased dramatically since August 16th. According to Treasury’s FiscalData platform, the national debt stands at $32.759 trillion as of August 22nd, representing a jump of $97.7 billion in just one week.
Financial Repression Looms Ahead
Finance guru Larry McDonald has said that America’s “jaw-dropping” pace of spending over the last two decades is likely to result in an era of financial repression. This means that the US government would be attempting to keep real returns on savings below the rate of inflation, which could have major implications for savers.
Fed Looking To Slow-Walk Financial Repression
McDonald believes taxes increases and spending reductions are unlikely to clear Congress, meaning that the Federal Reserve must find another way to lower government debt and improve its debt-to-GDP ratio. The goal is for inflation to stay above the US government’s average interest rate expense without resulting in hyperinflation. As such, officials are looking to take a slow walk with their plan over 15 years rather than 15 months.
“Jaw Dropping” Spending
McDonald highlights that since 2020 alone, the US government has spent a whopping $25 trillion – equivalent to 68% of the entire S&P 500 market cap! With such high levels of spending comes pressure on savers who may not be able to earn enough on their investments due to inflation being higher than returns from savings accounts or bonds issued by governments or companies.
It appears that America’s current spending levels will lead it into an era of financial repression where real returns on savings remain below inflation rates for some time, making it increasingly difficult for investors and savers alike to benefit from their investments or savings accounts. While this may help reduce overall public debt levels over time, it could also mean less disposable income for individuals as they struggle with rising costs and stagnant returns on their investments or savings accounts over time.