All Aboard The DebtBall Express

Stocks are chugging along, with the Dow nudging back to nearly 26,000.

But the economy seems to be giving way beneath them. Economist Gary Shilling:

The recessionary indicators are numerous. Tighter monetary policy by the Federal Reserve that the central bank now worries it may have overdone. The near-inversion in the Treasury yield curve. The swoon in stocks at the end of last year. Weaker housing activity. Soft consumer spending. The tiny 20,000 increase in February payrolls, compared to the 223,000 monthly average gain last year. Then there are the effects of the deteriorating European economies and decelerating growth in China as well as President Donald Trump’s ongoing trade war with that country.

Recession ahead? Surely. But when?

DebtBall Express

We’ll wait to find out, along with everyone else. And then, we will find out something else – that President Trump’s budget projections are pure fantasy.

POTUS’ budget comes in at $4.7 trillion. A $750 billion increase to the military and $8.6 billion for The Wall. It also presumes a 3% annual growth rate in GDP, with no recession. Neither of those things will happen.

A half century ago, both Democrats and Republicans rolled along in good order, on the firm footing of mostly balanced budgets. They had little choice. If not, federal borrowing would drive up interest rates – “crowding out” private borrowers – and force a general correction.

Then, in order to avoid reckoning with the results of over-spending on the war in Vietnam and the Great Society, the Nixon administration switched tracks. It changed the money system.

The new dollar, not limited by gold-backing, gave the financial engineers more to work with. They could add cash and credit almost at will. Consumer price inflation went to 10%.

The whole system would have crashed by now had Paul “Casey Jones” Volcker not stuck his head out the window, seen the dangerous curve coming, and slammed on the brakes.

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