The stock market is assuming that the damage the Biden administration and the Federal Reserve are beginning to inflict on the recovering economy will be limited. This episode of What’s Ahead examines why that happy assumption will explode.
The Fed is underestimating the massive amount of money printing it will have to do to finance the largest peacetime spending the U.S. has ever engaged in. Banks, foreign governments and U.S. agencies—chiefly Social Security, which is no longer running large surpluses—are not going to be the big buyers of bonds, as has previously been the case. That leaves the Fed doing the heavy lifting, and the scale of money creation it will need to do will fire up a sizable inflation.
Then there are the enormous tax increases that Democrats are determined to enact on capital gains, businesses, higher incomes, gasoline, car mileage, energy, inheritances and more, which will whack the nascent recovery later this year and in 2022.
The economy has real strengths coming out of the pandemic, but it won’t be able to withstand the magnitude of these abuses.
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March 23, 2021 at 05:00PM
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Stock Market Bubble Will Burst And Inflation Will Follow - Forbes
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