The most overrated silver coin in the world

Just days after signing the Green New Deal legislation, renamed the Inflation Reduction Act, President Joe Biden decided to completely undo his fundamental promise by pumping hundreds of billions of dollars into yet another new bailout package.

On Wednesday, Biden announced the government would forgive student loan debt for about 20 million borrowers.
This debt jubilee is expected to cost more than $300 billion.

Even an army of 86,000 new IRS agents isn’t likely to extract that much revenue from taxpayers – which means, of course, that the free rides offered to millions of borrowers will work like another debt scheme. deficit-financed stimulus.

Stimulus programs and COVID-related bailouts put in place in 2020 helped push inflation to a 40-year high in 2022. Now the Federal Reserve is raising interest rates in an attempt to contain inflation.

Even as the Fed punishes borrowers and tries to rein in money and credit growth, the Biden administration is doing the opposite.
Whatever progress the central bank has made in containing inflation could be lost due to the government’s reluctance to contain government borrowing and spending.
A budget model from the University of Pennsylvania’s Wharton School of Business predicts that canceling student loans will add $330 billion to the deficit, outstripping the deficit reduction promised to boost revenue through the application of the IRS Accumulate Inflation Reduction Act.

Economists warn that canceling student debt will also increase tuition fees, which have risen in recent years to four times the official inflation rate.

Former US Treasury Secretary Larry Summers, who was also president of Harvard University, said: “Student debt relief is an expense that increases demand and inflation. It consumes resources that could be better spent helping those who, for whatever reason, haven’t had the chance to go to college. It will also tend to be inflationary by raising tuition fees.

When college costs are artificially subsidized by the government, they have less incentive to shrink their sprawling administrative offices, identity groups, and programs of ideological indoctrination.

Universities feel less pressure to prove to students that their expensive degrees will pay off in the job market when Uncle Sam bails out those who end up with worthless degrees.

Instead of bursting the government-inflated bubble in college spending, it will continue to be artificially inflated at the expense of everyone who chose not to incur education debt.

This includes people who have worked multiple jobs to pay tuition, as well as those who have avoided college altogether and are now struggling to make ends meet in the face of ever-increasing costs of living.

Investors will also pay the price for Washington DC’s inflationary bailouts.

They should expect their money market accounts and bond holdings earning less than the rate of inflation to continue to generate negative real returns. And they shouldn’t necessarily expect to stay ahead of inflation via the stock market – especially if the economy continues on a downward trajectory.

Investors who had hoped inflation would be transient must now face the reality that the political demand for more inflation is insatiable.

Vote-buying politicians will never support serious efforts to reduce inflation. This would mean reducing the supply of borrowed money available to them.

Most lawmakers don’t even think about paying off the $31 trillion national debt. However, as interest rates rise, management fees alone may soon become fiscally unmanageable. The treasure

Ministry begs China and other governments that hold treasury bills in large quantities to grant debt forgiveness?

It probably won’t come to that. Instead, the government can cancel its own IOUs through inflationary erosion of real interest and principal due.

The largest holder of US debt is, in effect, the government itself through the Federal Reserve. Ideally, the Fed can create money and buy government bonds in unlimited amounts to avoid a formal default.

What the Fed cannot do is simultaneously monetize public debt by the trillions while fulfilling its mandate to provide price stability.

The risk is that the decline in the purchasing power of the US dollar will turn into a collapse of the dollar. Given that “cutting inflation” as touted by politicians is a total sham, investors should at least be prepared for the possibility that inflation picks up from here.

The ultimate alternative to rapidly falling fiat money is incorruptible hard currency – represented for thousands of years by gold and silver.

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