A little over a week ago, I did a post called Liquid Assets which was an attempt on my part to create a metaphor for what is happening with the trillions of dollars of new “money” being conjured up by Jerome Powell and dumped (virtually exclusively) on the rich.
I do not have an economics background, but I think about economic and social matters constantly. If you saw me sitting in the car at a red light, I’d be staring off into space, almost certainly thinking about these topics. Sometimes I think I’m too dim to grasp the subject matter, and other times I think that it’s just so complex, that it’s just damned hard to reason one’s way through it. Whatever the reality, I can’t leave it alone.
In my mind, I think I did a pretty good job with the metaphor, but I think I fell short in expressing myself, because it seems a lot of folks didn’t really “get” it. One fellow, a long-time reader, sent me an email and said that it was the best thing I had ever written. But, on the whole, I think it fell kind of flat.
I’m not here to resuscitate the post, nor try to re-do it. I suppose I have two purposes in creating this new post. One is to encourage you to give my original post another read. Maybe it has improved with age. The second was for me to try to embellish my point somewhat and perhaps try to clarify where my head is at on the subject matter.
(Side note: I just took the time to re-read my post, and I’m being too hard on myself. I think it’s quite good. Maybe you should try harder when reading it, right? Right?)
The question that torments me is: when, if ever, will all this debt matter?
The glib answers are commonplace. I’ve heard them a thousand times. “It will matter when it matters.” Great. Thanks, jackass. “Things will keep going up until the Fed decides not to make them go up anymore.” Jesus Christ. Is that seriously the best anyone can offer? Honestly?
At one extreme, let’s say it completely doesn’t matter. We’re $23 trillion in debt now. What if we were $230 trillion in debt, and stocks were worth ten times as much? After all, if “Debt” is “Money”, and all this debt Powell is creating is just inflating asset values, why wouldn’t $230 trillion in debt give us an S&P at 32,000, AAPL at $2800, and BRK.A in the millions?
In other words, we’d be $230 trillion in debt, but the only thing that would change is that rich people own all the same stuff which, in nominal terms, is “worth” ten times as much. Who cares, right? It just means the monstrous wealth divide is ten times more monstrous, but the poor people are still eating shit at McDonald’s and thus not dying of starvation. It’s all good in the hood, right?
I am not dismissing this possibility. Maybe Powell, as with Japan, has no upper limit. If debt is meaningless, and he can just punch up digital trillions (including the trillions needed to service the debt), nothing matters anymore, right? Someone tell me where I’m wrong.
Of course, the natural/organic part of me, which is all of me, is hoping that the above isn’t the truth. Instead, I am hoping that this farce has more than worn out its welcome and something – – I don’t know what, but something – – will suddenly force the issue that not only does debt matter, but it matters at an existential level. However, I cannot for the life of me figure out what that “something” could be, because no one at the controls of any of the world’s central banks has any incentive at all to do anything except keep all these balls juggling in the air.
So………..can someone enlighten the rest of us? When does it matter, if ever?