Finally... Finally...
We've received confirmation of what we already knew.
The Bank for International Settlements has blown the lid off the narrative of Treasury Secretary Janet Yellen, and Fed Chair Jerome Powell. Since 2021, both have lied about inflation. They called it "transitory." They misled mom-and-pop investors, decimated 401(k)s, and fueled bouts of volatility.
On Sunday night, Agustín Carstens, BIS general manager, released the institution's annual report - and told the truth about the global economy.
You heard it here first - this is what he said...
A Little Radical Truth-Telling Is in Order
Carstens said central banks and politicians printed too much money.
They gave away too much money...
...And they borrowed too much money.
"It's now clear that the fiscal and monetary policy support was too large, too broad-based and too long-lasting," said Carstens.
Well, no kidding.
The statement comes from a series of obvious factors that I've been discussing for at least 20 months. Here are the key things you need to know from the BIS chief's recent statement.
1) The global economy is under serious pressure. There are structural problems that require significant focus. The major thing that's critical is that central banks use monetary policy to stabilize prices. As a result, governments must stop spending at breakneck levels to stabilize prices and let economies heal.
Second, we've had the worst banking crises in 15 years. And the Federal Reserve and European Central Bank aren't done here. Rates will remain elevated - likely above 4% next March 2024. The banks will need to do more to help stabilize those banks.
BIS notes that we are seeing serious inflationary challenges at the same time that we're having deep concerns about the banking sector - and structural issues that could compound.
That brings us to monetary and fiscal policy. We can't just print another $18 trillion over the decade without accelerating our underlying problems. Monetary hawks are taking this seriously - but not being honest about the extent of the problems and how high they will need to go.
But fiscal support is a serious problem. No one is allowed to even talk about reforming Social Security without being accused of wanting to kill Grandma. The number of SNAP beneficiaries has doubled over the past few years, but no one can propose a cut to SNAP benefits without being accused of wanting to hurt schoolchildren.
The old razor is true: Once something becomes a government benefit, it never goes away.
And more debt feeds more debt. This will all continue to weigh on the productive parts of the economy. I know that it might sound heartless to demand that the government cut back on things, but it's just reality. I don't care who I offend or upset in the process.
Business-as-usual is completely unsustainable.
We have a choice. We can fix this now, and deal with the belt-tightening in the short term. Or we can simply destroy our currency, bankrupt the nation, and watch the government slash benefits anyway - or fuel massive inflation - come 2032.
I'm prepared for either scenario, and if you're following along, so are you.
But those are our choices. As I've noted, we're on a path very similar to the 1970s. Back then, the Fed raised interest rates at a time that government spending swelled on the Vietnam War, the Great Society, and expanded Social Security and cost-of-living adjustment (COLA) hikes...
Today, we pay for wars, we had an 8.5% COLA increase in 2023 despite inflation rates falling, and we've dramatically expanded government spending by a stunning 40%.
Our fiscal challenges haven't been tamed at all.
To your wealth,
Garrett Baldwin
Florida Republic Capital (Available on Substack)