Economic America is stronger than Political America.

Inflation is dropping, albeit more slowly, but that’s expected as we get closer to the 2% goal. Unemployment is already quite low. Twice as many jobs are still available as applicants. Home prices are healthy, maybe even too healthy. Our GDP growth rate is not great, but it is still among the best in the industrialized world. Economic America is doing fine . . . in the short run.

Political America is struggling between a sick old man and a crazy old man. Except for the infrastructure bill, neither can see beyond their fingertips. Currently, we are producing a trillion dollar annual spending deficit, and our national debt is already approaching $35 TRILLION. Can you imagine those two old men agreeing . . . to fix that . . . or anything else, especially as anything as problematic as the national debt?

MMT or Modern Monetary Theory suggests that is not a problem, as the Treasury can always issue enough bonds to cover all spending needs. The Treasury could even provide enough liquidity to supply the cash needs of the entire industrialized world . . . which is true . . . for a while.

. . . tick . . . tick . . . tick . . .

Do I think the US will default on its debt payments? Not is my lifetime, but it will happen! (MMT will buy us some time.) How will I know when to “run for cover”? The dollar will tell me!

As the financial crisis develops, the rest of the world will look for safety in the dollar. If I see the dollar rising inexplicably over a short period of time (say, 4% over 90 days), it will be time to hide in cash – dollars – but not until that time.

The thoughts, opinions and emotions in this blog are solely those of the writer, Jim Flinchum, but not any human beings at Bay Capital Advisors, including its partners, officers, or employees.