Written by Bryan Lutz, Editor at Dollarcollapse.com:
Powell says it’s all about tariffs.
Trump says it’s all about interest rates.
What’s really necessary is paying this down:
National debt.
And reducing the rapidly increasing cost to service that debt.
Nations tend to have the same response to every crisis.
They could technically increase taxes, but they don’t. That’s because voters get upset when politicians take too much of their money.
Instead, politicians chose to tax the future. By printing more money to pay for each crisis, they reduce your spending power in the future.
That seems harmless when done in small amounts, but it ends up working like this…
Printing more money and lowering interest rates creates a boom cycle.
Then there’s the bust cycle.
You can see how this has worked out over the past 50 years.
The Fed raises interest rates when the economy has boomed far beyond expectations into unrealistic territory. Credit expands. Too many companies, people, and projects receive credit that shouldn’t. Inflation surges past working wages.
Then people get upset.
So, the Fed raises rates until they feel they have the economy “under control.”
All that changed after the Great Financial Crisis in 2008.
The Fed’s answer was the same – print more money. Except this time they would print money to buy up bad debt.
Credit expanded without new money ever entering the economy, and…
All of a sudden this new tool called ‘Quantitative Easing’ allowed the Fed to print money for whatever they thought the economy needed.
Government spending increased too, expanding national debt.
Now, paying for the national debt is cutting into the US government budget, hacking away at the credibility of the US economy and the US dollar.
Eventually, the boom and bust cycle the Fed creates through cycles of raising and lowering interest rates creates what is called a ‘Money Bubble.’
This is when the currency itself moves into the realm of unrealistic expectations. Credit expands rapidly and so there is a bust.
To avoid this, debt must be controlled, but not without great pain.
If the US government is to do anything it needs to partner with the Fed to lower the national debt…
Think: Volker style 1980s, but worse.
It’s all pretty much inescapable now.
