Ted Bauman Blog | Washington Is Creating A Perfect Economic Storm | Talkmarkets - Page 3
Editor, The Bauman Letter
Contributor's Links: Banyan Hill Publishing

Ted Bauman joined Banyan Hill Publishing in 2013 and serves as the editor of The Bauman Letter, Plan B Club and Smart Money Alert, specializing in asset protection, privacy, international migration issues and low-risk investment strategies. He lives ... more

Washington Is Creating A Perfect Economic Storm

Date: Monday, February 12, 2018 6:52 PM EST

Complicating matters is a weakening dollar. The dollar has weakened sharply, shedding about 10% of its value in 2017.

The combination of a weaker dollar and higher U.S. deficits will lure overseas investors looking to add to their stockpile of Treasurys. Those buyers will want bigger yields to compensate for inflation and the risk of higher U.S. debt. That will further drive down bond prices … raising U.S. government interest payments even more.

Finally, rising bond yields and inflation will lower the future value of anticipated corporate earnings and stock dividends. Lower future income streams mean lower prices for stocks. In that way, U.S. government deficits will deflate the U.S. stock market.

Give Me That Old-Time Conservatism

Vice President Dick Cheney famously said that the Reagan presidency proved that “deficits don’t matter.” But he was talking about politics — voters of the day simply didn’t punish the Republicans for running up deficits.

The U.S. government deficits of the Reagan era were the largest since World War II, save for the immediate aftermath of the 2008 crisis.

But the current crop of Republicans who claim to venerate Reagan are on track to create the biggest deficits this country has ever seen. In the eight years since they won control of the House, the national debt has skyrocketed from $13.5 trillion to $20.4 trillion today.

Here’s the future they’re creating: rising inflation. A declining stock market. Oh, and one other thing … your taxes will inevitably have to go up to pay for it.

President Trump calls himself the “king of debt.” His courtiers in Congress certainly seem to agree.

Kind regards,

Ted Bauman
Editor, The Bauman Letter

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