​​US and Global Economy and Financial System:


 The Problem:

1) Modern Monetary Theory (MMT):

The Biden Administration is embracing the Modern Monetary Theory (MMT) which is unrestrained money printing/creation putting our nation deeper in  debt.  This is discretionary spending (in excess of the revenue taken in through our taxes).  Main Street Americans are the ones who will end up paying for this debt through our future taxes.

MMT is not free market capitalism based on fair market price discovery but a system in which the central planners try to manipulate and control the economy through interest rate manipulation and forward guidance. This results in a manipulated economy similar to what the Soviet Union tried to do resulting in their economic collapse.  With MMT our country is moving away from Free Market  Capitalism into Marxist Socialism which ultimately progresses into Communism and then an Autocratic Government.

2)The Federal Reserve Misinformation:

The Federal Reserve is not being truthful with the nation if they are telling us they can print cash and flood the main street economy with dollars.  The truth is, the Federal Government (Congress) requests money for deficit spending.  To provide the money, the US Treasury sells Treasury Bonds at open market auctions. Large World Banks, including Wall Street Banks, attend the auction and buy the Treasury Bonds. Then through Open Market Operations the banks sell the Treasury Bonds to the Federal Reserve at a profit. The Federal Reserve buys these Treasury Bonds using an account that has a zero balance. The banks take the Federal Reserve check/IOU and generate/print US Dollars.

 3)Federal Reserve Ineptitude: 

Since the Great Financial Crisis (GFC) of 2007 - 2008, the Federal Reserve QE and interest rate suppression have been ineffective in  bringing economic growth back into Main Street America and has only exacerbated the growing chasm between the wealthy elite and Main Street Americans.   Looking at the GDP trend line from the 1990s to 2007 one can see that if that trajectory had been maintained the nations GDP would be far in excess of the GDP trend line from 2008 to present. A graph of these trend lines would show the lines diverging to a greater and greater degree.   We will never have sufficient GDP growth rate to get us back on the trend line prior to 2008 as long as QE and suppressed interest rates are allowed to continue.  They only contribute to anemic GDP growth rate now and into the future.

4) The US Stock Market:

With QE and Interest Rate suppression from The Federal Reserve, the US Stock Market has become totally unhinged from the rest of the Main Street economy and financial system and is on an exponential upward trajectory.  This will ultimately end in a crash, decimating retirement accounts, pension funds, and stockholder wealth.

5) International Shadow Economy - Eurodollar:

A larger issue, is the global financial system.  It has become a complex off-shore shadow economy which includes global currencies as well as the Global Reserve Currency,  the US Dollar.  The off shore shadow economy is estimated to be in the trillions of dollars, and is increasingly showing  cracks in the system due to its growing complexity of derivatives upon derivatives and subsequent stress points.  The International Repo Market is part of this system and includes global investors primarily  in search of the Global Reserve US Dollars and high quality collateral such as Treasury Bills/Bonds. 

Obtaining US Dollars in the Repo Market is achieved when primary dealer banks and other entities lend dollars  for collateral, or collateral for dollars. This is the primary method in which other countries can obtain the Global Reserve US dollars they require for transactions. If there is a shortage of dollars, acceptable collateral, or the primary dealers do not/are not able to participate, the Repo Market can lock  up resulting in a liquidity crisis and crashing the entire system and the global economy.  The 2008 Great Financial Crisis and the liquidity scare in the overnight Repo Market in September 2019 are examples of this.

Why would there be a lack of reserve currency or collateral?  Does the future of the economy, monetary system, and financial system seem so unstable to those in possession of US dollars and collateral that they are risk adverse, preferring to retain their collateral and US Dollars?

What would make the future economic outlook stable and prosperous?


US Economy and Global Financial System