Oh, Dear Reader, imagine our alarm! Feel our pain!
We were like the boy who saw on the news that his school was on fire.
When we left the office on Friday… the federal government was just hours from shutting down! We crossed our fingers… and dreamt of Eden.
As St. Paul might have said, from now on, even those who have wives will be as though they had none, those who have wealth will be as paupers, and those who voted Republican will be treated as Democrats…
On Sunday morning, we rose from our bed and looked out our window, expecting to see the smoke in the distance.
But the sky was clear. The power still worked in the house. It was warm. The water worked, too.
Later in the day, we went about our business as usual — we went to church and the hardware store.
You can imagine our disappointment. Everything was as before. Ding dong, the witch was not dead.
Bigger, Deeper, Slimier
Almost all the coverage of President Trump’s first year in office —and the ‘shutdown’ — misses the point.
The Wall Street Journal, for example, headlined its lead story on Friday with: ‘The Year That Upended Washington’.
‘The Donald’ has rustled feathers. He has said things others wanted to say, but had the good sense to keep their mouths shut. He has offended and embarrassed millions… and appalled millions more.
But he has not upended much of anything. Conservatives and rabble-rousers can get an applause promising to ‘Drain the Swamp’. But who really wants to?
Even the most die-hard conservatives — if there are any left — don’t want this show to end; they’ve got front-row seats!
No, Dear Reader, the government will not shut down. The Swamp is still there — bigger, deeper, and slimier than ever — and open for business.
Mr. Trump’s $30 billion border wall will add a few inches of water. The $80 billion of additional military, industrial, and anti-terrorism boondoggles will raise the water level still more. And the tax bill — that should be good for almost a foot.
Taken together, they will bring the feds’ borrowing in 2019 to $1.2 trillion.
That’s more than President George H.W. Bush created in his entire four-year term. And he sent troops into Kuwait… oversaw the federal bailout that ended the 1989 Savings and Loan Crisis… and presided over the 1991 recession, which ate into the government’s tax take.
Imagine what will happen when trouble comes for Mr. Trump’s administration.
New Credit Crisis
Trouble is always our focus here at the Diary… and recently, we’ve been wondering how the scam ends.
Increases to federal spending… and unproductive ‘private’ spending commanded by the feds… appear to be unstoppable.
In addition to spending by the military-industrial-anti-terrorism complex, there are also the transfers to the domestic health-education-welfare complex.
About 10,000 boomers retire every day. As they do, open-ended federal programs — particularly Obamacare — spend more money.
Politically, these ‘entitlements’ are almost impossible to stop, since both the Deep State cronies and the lumpen zombies support them.
But where is the money going to come from?
Almost unnoticed in last week’s salacious news was a little item on page B1 of the Journal: ‘Treasury Yield Hits 3-Year High.’
Coming into focus is an immovable object. After falling for 30 years, bond yields are now going back up.
As you’ll see in today’s Market Insight below, the yield on a 10-year Treasury note hit a 12-month low of about 2% last September. Since then, the yield is up 29%.
Central banks all over the world are realizing that they need to tighten up so that they’ll have some ‘ammunition’ available when the next credit crisis hits. Interest rates are rising.
Ours is an economy that lives on debt.
If lenders were unable to extend more credit — or if interest rates were to spike up — the whole kit-and-caboodle would implode.
That is what a credit crisis does.
All of a sudden, the money disappears… interest rates soar… and households and corporations – whom the feds have trained to depend on cheap, plentiful credit — go broke.
And then, what can the authorities do?
Let’s see… They can admit they made a horrible mistake, actually shut down parts of the government, and let the system purge out the bad debt, inflated asset prices, and excess spending.
Or they can do as scoundrels always do: Lie, cheat, and steal.
For Markets & Money