2017 is the year where everything seems absurd. With Donald Trump as president, many conservatives now trust the federal government more than ever, while liberals venomously fear the orange-hued Fed and are probably out shopping for a firearm.
Not only are the cosmopolitan and traditional ideologies not on speaking terms, US representative politicians are momentarily shifting allegiances as well. The establishment republicans are against President Trump and his bots. Democrats, too, are struggling to find a unified party voice. Whether red or blue, politicians have been hard pressed to stay out of stories involving FBI investigations. And what even is fake news? I say it’s the stuff that distracts from the important developments.
The European Union has been inflicting austerity measures on the ‘sovereign nation state’ of Greece for almost a decade, which will most likely call for another round of bailouts from its German creditor.The EuroZone is currently operating at around 90% public debt to GDP, with Greece and Spain being the two highest, each at 176% and 133%, respectively. The global debt to GDP ratio is 325%, which ought to make even the least economically literate human being cringe. For context, macro-insolvency has historically brought political instability. The tyrants of the 20th century are our wonderful, infamous poster children of this point.
The condition of the US Dollar, being the world's reserve currency, is ‘the canary in the coal mine’ for the inquiry of 2017’s absurdity. In recent weeks the US Federal Reserve said there will not be another crisis in our lifetime. However, if you look at the data, it seems Janet Yellen, Chair-women of the Federal Reserve was just talking to an alter ego of hers as she seemingly spoke to the press.In the second quarter of this year, the velocity of money (ratio of GDP to currency supply) hovered around 1.4, a low never seen in more than 50 years. This is due to the Fed’s frivolous money printing to stimulate growth after each bust, most notably in 2008. Low money velocity is ironically what the Fed bases its unsustainably low interest rate on, which brings into question why they keep on printing dollars. The 30 year US treasury bond yield has yet to rise to 2005 levels since the crash in 2007-08. The yield rate is now around 2.3%, continuing its decline from an all time high of 15.21 percent in 1981. The 30 year bond return met its all time low in 2016 at 2.11 percent. There is less incentive to buy into the dollar than anytime in the millennial generation’s lifetime, or their parent’s. For context: the closer the bond yield is to zero, the more probable we see the discontinuation of US dominance as the world reserve currency. The data shows a trend towards a metamorphosis from the globalized, American la la land life of luxury and cheap thrills to the sober reality of unsustainability. Full stop.
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