A Black Hole In Economics: Money Creation And Its Consequences, Session Six
Uncle Sam's financial obligations cannot be paid in dollars with today's purchasing power
Continuing our course, attached is Session Six, which was delivered initially last fall to a private audience on the Ayn Rand Centre - UK network. In addition to the 90-minute video, which most will be able to enjoy at 1.25x, I’ve included PDF lecture notes for readers or those who want to check sources and references.
Today’s theme is that the U..S. government’s massive financial obligations (which include the national debt of $34 Trillion plus unfunded obligations worth many times that amount) are possible only because the Fed uses the commercial banking system to monetize much of it. Eventually, they will reach a point where the inflationary effects of monetizing will become unacceptable to the buyers of Treasury securities. At that point, the likely reaction of our monetary overlords will be to repress interest rates while letting inflation run, a condition known as financial repression.
Some viewers have told me this session is depressing because “our” debt is so hopelessly high. Don’t think of it that way. Uncle Sam’s debt is not really your problem. Your main job is to understand what the monetary mandarins are likely to do about it so you can take appropriate defensive action. That’s the ultimate payoff of this course.
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Thanks for viewing and reading.
HardmoneyJim
January 13, 2024