US Economy on Edge: Inflation, Rates, and Debt Concerns

US Economy on Edge: Inflation, Rates, and Debt Concerns
President Joe Biden

Experts say that a simmering economic meltdown in the US could affect many economies around the globe. The inflation crisis in the US isn't over yet, and the largest consumer market is facing the perfect storm that's causing a big resurgence.

The FED mandate hasn't deviated from it at all. It's all about maximum employment and price stability. The issue we have today is unemployment. The migrants are taking all the jobs and apparently, it's great for the US economy. That's why the payroll numbers are just so fantastic. So, the big nightmare for the Fed is sticky inflation.

It can't seem to go away and the longer it lingers. This limits the odds of a rate card. Powell has signalled to the world that he's delaying the rate cards inflation has surprised to the upside. It is good to keep rates steady for as long as needed. So if inflation continues to stay at 3.5% or hits higher towards 4% We could see zero rate cuts this year. Not two cards got one card but no cards at all.

Not a fairy surprise, but we all knew inflation was going to rebound. You combine endless fiscal spending and big supply shocks in Russia and the Middle East. We have a recipe for disaster and we must listen to post language because he reveals a lot about his intentions is extremely data dependent and the inflation numbers are simply horrible.

The recent data have not given us greater confidence, and this instead indicates that it's likely to take longer than expected to achieve that confidence. In other words, the FED inflation fight has failed rates that are not restrictive enough. Given the strength of the labour market, it is appropriate to allow restrict the policy further time to work

Jobs are being added and this allows rates to stay higher for longer. The problem with zero rate cards is the receiver imposed on the economy as well as the markets. There's just one big house of cards waiting for an accident to happen. Now there are some people out there saying that higher rates are good for the economy because rates are higher. Americans holding bonds have a bigger stream of income. There's more money to spend and that's driving growth. And on the surface, the numbers seem to agree with the claims. It looked like a very fantastic story before the hype started.

According to Bloomberg, before the hike started, GDP growth was only 2.5%. After the hikes, it's now 4.2%. Corporate profits are up by $400 billion as well. And let's not forget the S &P 500. The stock market has broken past 5000 points. But this line of digging is very dangerous. If higher rates are great for the economy, Powell should hide to 10%. Tomorrow, he should hide to 10% today, but he won't. The Fed simply can't. The GDP numbers are being powered. entirely by deficit spending. The US budget deficit was 6.3% of GDP last year, and the borrowing is only going to grow into the form.

However, if rates stay persistently high, the US government will create a runaway debt crisis. Congress will have to decide now. Do you keep propping up the US economy in the short term? Or do you allow the crash to happen? In either scenario will be painful. We are at a tipping point where inflation could force the Federal Reserve to stay higher for longer and it will cause something in the system to break.

The market is starting to freak out just look at the stock market the S&P is down to nearly 5000 points is pricing near zero cards in June, one cut by September and just under two cards by December, and by the end of the year, we could still be at 5% Fed funds. The longer the cards get delayed, the more pressure gets built up in the economy and high-interest rates you would think that the market will pounce on US bonds. After all, you'll be getting a real yield today. Now if rates are near 5% and inflation is only at 3.5%. You want to buy a ton of bonds to lock in your returns today, but that isn't happening at all.

Investors are avoiding US debt because they see the beat inflation trend and they know the US will stay higher to hit higher if inflation continues to stay hot. people aren't buying bonds because bonds are still very dangerous. the highest treasury yields of the year failed to turn buyers to auction even after you search over 4.5% On the long end, there weren't many buyers, and this is a very big problem.

I will continue to fall. There's not much point if you lock in. Remember how bonds work if use continues to rise, the value of the bond will continue to fall. There's not much point if you lock in a 1% view when the value of your bond drops by 2% or even 3%. It is still a net loss and investors aren't that stupid. Within a matter of days, the 10-year yield spiked from 4.35% to over 4.6%. And that's an insane move of 200 basis points that's wiping out bondholders. And we must look at the environment and the US economy's

endless wars they're putting pressure on oil prices.

Great has risen sharply to over $90 A few days ago. He tweeted that a little bit of damage had been done. We're starting to see inflation trickle across the economy and push prices up. And because of this, the Fed can afford to cut but as Yellen continues issuing bonds, this will cause us to stay high on the long end.

The recent 20-year bond auction results are out and it shows the second-highest yield since 2020. It's on its way back to 5% or more. So, use across the curve is moving upwards. The short end is staying high because the Fed isn't cutting and the long end of the curve is heading up because Congress keeps spending more and more money. The food debt shown is a sign that the inflation search isn't over yet. Investors realize that the yields could rise further and their losses could keep piling up. And this selling this non-buying ironically pushes the cost of borrowing even higher. for the US government now.

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