Thanks for reading and saying you liked it.

It would be unfair to our subscribers to give away too much detail, but one reason is the record low equity hedging.

Thank you for the clear explanation.

"The primary cause of 70s inflation was a continuation of Fed easy money that LBJ required."

Now you switch to Nixon and the gold standard removal?

The embargo caused a shortage which caused inflation, and because energy is such a basic requirement for the economy that the shortage stopped growth in its tracks...stagflation.

Ignore the Tweets. That isn't what drives markets.

In 1963, Fed rate was 3.5%. By the time LBJ left Office in January 1969, it was7.1%.

So I don't know what " Fed easy money " you mean? That was serious tightening.

By-the-way, I agree with the the premise contained in the title. Without debt-money from either the private or the monetary sovereign, the world economy would cease to exist. The world economy would be reduced to local bartering.

Yes, the oil embargo was the proximal cause of the inflation. Inflation is always because of a shortage of something. And oil is a key ingredient in the economy, so a shortage of it is guaranteed to cause inflation and stagnation at the same time. When you have a shortage of such a key element, and increasing its production is impossible in the short-term, nothing, not even deficit spending is going to fill that hole. And there was no way of avoiding it either because, unlike today, at that time the US was not self-sufficient in oil which was controlled by one agent (cartel).

The point is, the Federal deficit is not the problem. It, in fact, is always the solution. In both 2001 and 2008, it was too much private deficit, not Federal deficit, and it was the latter that had to be increased in order to pull the markets out of the fire.

Note also, that Clinton reduced the Federal deficit for five-years, leading to a Federal government SURPLUS...and a private sector DEFICIT that became too inflated to be sustained. Again, the point is that Federal deficits aren't what historically cause the problems.

One HUGE flaw (many smaller ones) in your argument:

Federal government budget deficits and the "debt" that they lead to, is NOTHING like household or state budget deficits. In fact, the work "debt" is a misnomer, and should be called the Federal government "funding of the economy".

It has been increasing for 80-years, as has the size of the economy. The Federal government will never run out of dollars...unlike you, me, and local governments.