Trampoline Cliff Diving

We also have 2.2 million people that are finding gainful employment inside Zombie companies. Unfortunately, these businesses were being kept alive by record-low borrowing costs for junk debt and a reasonably good economy. However, now the cost of rolling over this debt has increased while their business models have been torpedoed by the Wuhan virus.

The major averages are struggling to get back towards all-time highs, but the underlying economic support is disintegrating quickly. Hence, the economic chasm between the rich and poor is plunging deeper into record depths. But the mirage of semi-normalcy is being perpetuated by massive and unprecedented fiscal and monetary stimuli.

Therefore, what we are witnessing now is the economic equivalent of a person's bounce off a trampoline after a 1,000-foot cliff dive. That is, a dramatically sharp ascent from the bottom but nowhere near from whence you started—and with a quick retreat back down from that much lower high. At the core of this "V"-shaped illusion is the $2.3 trillion fiscal stimulus already approved by D.C.

Now, the house has approved an additional $3 trillion package known as the HEROES Act; but the Senate Leader McConnel only wants $1 trillion. And, the President has indicated that he desires to split the difference with a $2 trillion package. Of course, all of it will be monetized courtesy of Fed Chair Jerome Powell. But here's the point, none of this new red ink is guaranteed to be passed into law, and even it is, there is no chance such budgetary lunacy can continue. The national debt is already at $26 trillion and that is 850% of annual revenue. Our fiscal deficit for 2020 is slated to come in at record-breaking $4 trillion (20% of GDP). And, total U.S. debt has soared to $72 trillion! A continued pace of this red-ink hemorrhaging would surely place our bond market in the ICU. In truth, it is already on the life support system of the Fed that has expanded its balance sheet by $6.4 trillion in the last dozen years to keep the Treasury's debt service payments low and the government appearing solvent.

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Michael Pento is the President and Founder of Pento Portfolio Strategies, produces the weekly podcast called,  more

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