We can’t afford this. I’m not sure how else to say it.
If I was worried the economy was truly in a miserable spot, I’d say, ‘hey, go for it.’ Because in that case, we wouldn’t have a choice. When the economy shut down this time last year, it was government’s responsibility to help people.
But, now? Our economy is on the mend. It’s opening up. The vaccines are being distributed. Even California is promising Disney it can open again in April!
All the employment and recent manufacturing data proves our economy is improving. So, why hand out money we don’t have now?
Instead of making the responsible choice to allow our economy to reopen and provide funding for vaccines, the Biden administration is USING the coronavirus crisis for political gain. AGAIN.
And the aftermath won’t be pretty.
Spending money you do not have does comes with consequences. In this case, the consequence will be inflation and the inevitable popping of a market bubble. Neil Grossman tells us that he believes the S&P is heading to 1776 (pun intended) because our economy can support such rich valuations in stock prices based on money printing.
Meanwhile, some economists, like the ultra left-leaning political economist Paul Krugram argue that’s it will all be just fine. The only danger Krugman warned of in a recent interview with CNN, is that government may not do enough.
Come on. A Princeton economist ought to be smarter than that. But, then again. Typical Ivy League nonsense. These woke institutions are all about spending and show no restraint when it comes to raising taxes and printing money.
I commend former Treasury Secretary Larry Summers, meanwhile, for daring to suggest the obvious — that a massive stimulus on par war time style stimulus, much like WWII.
Writing in The Washington Post, Summers argued that Biden’s plan was excessive and that it might trigger “inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability.”
He’s right, as I’ve said before and I will say again. And yet, the left is trying to brush off Summers’ concerns because no one…and I mean no one…is going to get in the way of this stimulus boondoggle.
At some point, and I’m not saying that point is now…in fact, far from it… I’d argue you WANT to be invested in these markets if only to help hedge against the coming inflation…
BUT, at some point, interest rates will go up.
We’re already seeing evidence of that in the ten-year treasury yield which has resulted in higher rates on the 30 year fixed rate mortgage. The 30 year fixed rate topped 3% last week and is heading higher.
The increase in mortgage rates to 5 or 6% (not unthinkable in the next 24 months) is bound to cause softness in real estate prices. After all, people will not be able to afford as much home. And, a downturn in real estate, where people tend to have the majority of their savings, can cause a whole other set of unintended consequences, as we all learned in 2008.
Meanwhile, let’s not forget about that debt we’re carrying as a nation; If rates keep moving higher (and they will) the interest on the the money we borrow will reach unsustainable levels, thereby creating a vicious cycle as our nation struggles to maintain our credit worthiness.
Bottomline: this is NOT the time to be spending $1.9 trillion we don’t have and rewarding states like California and New York with insane amounts of money.
Instead, we need to get our act together, OPEN OUR ECONOMY, distribute the vaccines, and hold states and their leaders accountable.
Our economy is on the mend. However, this stimulus is going to cause a whole new set of problems. Such is the law of unintended consequences.