Aunty is worried about the current economic situation in the USA. Hyperinflation because of so much money printing (QE – Quantitative Easing), interest rates, unbalanced budget, the unknown for our future generations, etc. Because of this, Aunty tries to learn from financial experts.
Of the 49 (!) newsletters that Aunty currently subscribes, Aunty believes that John Mauldin is the most dedicated to reporting about current economic trends. He travels the world and meets up with other economic experts and leaders. He is super smart and usually his posts are VERY long (longer than Aunty’s, lol) and full of big words so sometimes Aunty has a hard time reading through them.
His latest post was about Janet Yellen’s confirmation and what she will probably do as the new Federal Reserve Chair. To see the entire article, you will need to subscribe. It is free, and sometimes fascinating if you are ready to use your dictionary and google search for terms. In a nutshell, Janet Yellen will continue to do what Ben Bernanke has been doing. She will probably try to keep interest rates low for a long period of time, and ease off on printing money slowly. Good or bad? The brow beaters and experts continue on their gloom and doom.
Aunty got a bit tired of it. Tired of the collapse of the US predictions, tired of no end in sight. So Aunty responded to John Mauldin and what follows is her comment to him. Not sure why but here it is:
Aunty’s response to The Unintended Consequences of ZIRP
Aloha John,
I think that you are probably one of the smartest people whom I subscribe to, and truth to tell, sometimes I do not understand all that you write. Many times it is too advanced for me.
I am definitely no financial expert, so I like to keep the perspectives of experts in my inbox, and for the last few years, most of it has been doom and gloom. I was a bit uplifted when you did a rather positive article a few months ago about the dollar’s strength, just because it is the dollar. A bit oversimplified summary, but as an American, I was glad to believe that.
The gist that I got from this current article about Janet Yellen and her policy making is that she will be maintaining low interest rates and easing off printing money, slowly, and we are still headed for a cliff.
I am very glad to think that interest rates will remain low – this bodes well for homeowners and investors, though not for savers, the ultra safe no risk people who will be hurt the most. Better to be an investor or self employed, imo.
The printing of money may or may not lead to hyperinflation or other financial disasters, so easing off of printing dollars sounds like a good move, and will be done cautiously. Too little too late? Maybe, maybe not. There are many times when expert predictions do not come true.
As a commoner, one prediction I did make was in 2000. This was just after GW Bush (not my favorite President) declared war on Iraq and then almost immediately, as if to soften the outcry, lowered everyone’s tax rates. Since I thought he was an idiot puppet anyway, the combination of the two policies scared me with its consequences, intended or unintended. A war will require much more money – $1 billion per week, and now the government is lowering its only source of revenue? If anything, I thought that our taxes should have been increased to help pay for the fabricated war.
Since then, our taxes have remained low and our expenses are still very high, now much of it going to interest on our own debt. Printing more money is making our debt grow. In very simple terms, isn’t that comparable to a person saddled with credit card debt, on a fixed income, who keeps on using their near unlimited credit card, and trying to pay this and his other household necessary expenses, but digging a deeper hole?
It seems to this simple reader that the three parts of the equation are 1) increasing debt, 2) the country’s budget, and 3) fixed income via taxes. The budget is on a political seesaw, but at least talks of reducing it are going on. The growing part of the equation is debt. If the increasing debt continues, then work on the fixed income. This would mean an increase in taxes. It doesn’t have to be a doubling or drastic increase, but it could be gradual the way someone would add a second job, get a raise in their salary, increase their income so their debt can be slowly but steadily paid off.
We personally are in the 35% tax rate. An increase to 36%, then 37%, slowly each year would not kill us. The tax code is written to help business owners deduct this or that. The pain will be felt by w-2 earners, but 1% a year will be less painful than a 3-5% jump at once.
If there were a way to “donate” to the USA, perhaps we would. Especially if it could be considered a tax deductible event for the year in which it was made. I would much rather be given an option to donate towards balancing our budget than to contributing non deductibly to a political campaign. Even if it were not deductible, I might consider donating to the USA – so make it easier for me by having that checkbox on my tax return form.
Our post offices are a government “business” that loses money every year. Is there another “business” that can be profitable? Isn’t the US Mint making money? Seems like they could be, and there also seems to be less bureaucracy involved in that venture. Gold or silver prices fluctuating? Sell “collectible” dollar bills hand signed by the current US Treasurer.
Is there something else that our government could sell and benefit our bottom line? Dinner with Warren Buffet was auctioned off – I believe the highest bidder paid over $1 million. Would our political leaders, famous or infamous Americans be willing to participate in government fundraising auctions for dinners that they provide? It can be at McDonalds and they pick up the tab.
To me, all the emphasis and focus is on the budget, printing money, and our debt. Our grandchildren will be saddled with this debt and have to pay for it. Why not focus on increasing revenue in new and fresh ways?
Your simple reader who has never been to Kansas,
Aunty