Powell has no choice. We cannot afford to pay the interest on government debt at normal interest rates. His next step will be to contain longer term rates by buying more medium term US debt.
We are receiving about 50% of govt spending in taxes. Not exactly a balanced budget.
I'm honestly thinking we are screwed either way. At this point i see 2 outcomes both very bad. The Debt /GDP ratio is 150+% after the stimulus bill gets passed.
If The Fed wants to save the value of the American Dollar. they have to raise interest rates. The problem with this is the government can't afford it. a 4% interest rate is 1.2 trillion dollars on 30 trillion. Spending will have to be cut drastically. and if the government raises taxes to the point of California their will be a mass exodus of the Producers that will leave the country.
If they want to keep interest rates low they will have to keep buying bonds and be a backstop. This will cause inflation to skyrocket. imo. The cost of commodities will go through the roof and people that do have savings will get absolutely destroyed.
Either way i see a financial disaster coming in the next 3 to 6 months.
I equate this to if you ever have credit card debt and you keep buying beyond your means but you are always able to make the minimum payment with insane interest on time to the bank . Until eventually you spend so much you can not even afford that monthly minimum payment
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