"Keep an open mind or get financially repressed."
- Z. Pozsar
The other day, an explanation was offered on X/twitter describing how the US will fund its deficit now that China has stopped doing so. The long and short of it was: it would be done by making the Banks, and eventually *us* buy the bonds no-one else will buy. Here is that post:
How will the US govt fund its debt with less foreign buyers of it?— VBL’s Ghost (@Sorenthek) August 15, 2023
Key phrase: ‘rewrite the rules for banks to “take down” more treasuries’
Light a cigar for me too. https://t.co/jT1fMSWGA8 pic.twitter.com/6qLG3NPzFf
One logical follow up comment/question from someone, likely younger than I was:
How will it end up in my portfolio? They can't force me to buy that trash, I'm obviously missing something here.
Here is the reply to that inquiry with minor edits. Note: This is literally why I got into Finance.
Inflation: Choosing Lesser Evils
Authored by Vincent B. Lanci
With regard to funding the US deficit by buying crappy bonds and everything that comes with it such as Financial repression, YCC, inflation tax and so on…If you are tempted to take a principled (you are anti-gov’t or you feel cheated) stand and say: “I’ll never buy that govt crap” for good reason… read this.
The true purpose of government controlling money is they use it as a lever to force you to economically compete against your own principles1 when it suits their needs.
Uncle Angelo’s Bakery in better times…
My family stood on principle in the 1970s and were slowly impoverished, but never knew why. Nor could they tell me how to avoid it myself. They weren’t even aware of the ramifications of their decisions, through no fault of their own. Thus: I made it my business to learn what happened. How principled, honest people could get destroyed doing things correctly.
Choices Must Be Made in Inflationary Times
Deflationary crises are easily seen and felt. But inflation, a government sponsored manifestation of policy: is a cancer on your wallet, your family, and your community.
Inflation destroyed the neighborhood and eventually the bakery that continued to serve the shrinking community until the IRS shut it down...
YOUR FUTURE CHOICE
When interest rates are 7% and inflation is 10%, and for some reason you don’t see Gold going up to where it should be (market structure manipulation is real), you will either put your money in that 7% bond or you will put it in stocks and hope that it keeps up with inflation.
In forcing that choice, you have to decide. Do you…
buy the crappy bonds and minimize your future losses,
put your money in stock, and take that risk 10 years later,
leave the country, because you have the money, or
stand on your principles in cash and risk impoverishing your family financially.
In the end, either your principles or your family suffer.
Our Ignorance is Their Profit
It’s really difficult for American families, to have to make that choice not even understanding the actual choice as it has been misrepresented to us by salesmen and profiteers
These types prey on your ignorance. Libertarians when it comes to your mistakes. And communists when it comes to their own mistakes.
My family’s former Pasta store. Grandparents lived above it. Aunt lived next store. The author lived there a while…
They have no ideology except avarice. To them, principles get in the way of profits. For us, the decision is not as easily made. But it must be made sometimes.
You still have to make the choice. But now you at least know what that choice is..
Now Comes the Hard Part
Knowing this, ask yourself the following if faced with that particular choice:
If you would clean toilets to put loved ones through college, but you won’t buy a bond with a negative real yield when there’s nothing else out there to come close to keeping pace for your family’s sake… you are effectively choosing to *not* clean financial toilets.
That’s no judgment either way. Just explain to your family what drove you to do what you did if need be. You either compromise integrity, or you potentially compromise their future. It sucks either way.
The “L” in the railings still there in a Nail Salon/ Baptist Church…
The choice is now cut and dry… you can stand on principle, or you can compromise that principle. Neither path is easy, having taken both. Pray you are never in the position to have to make that choice as my parents and aunts and uncles were…. or hope your loved ones get scholarships… if College is in their future.
Hope this helps you and yours in future financial decisions.
Vincent B. Lanci
About: Vincent is Publisher of Goldfix, Adjunct Professor at a Major Uni., and 30 year Finance Professional