Pumpty Dumpty

 When they talk about MMT, it is always in the future tense.  About possibilities, consequences, etc.  No, MMT is already here.  The US has become an MMT country ever since the Trump tax cuts extended the life of a moribund economy, injecting it with more narcotics and stimulants.  And it was solidified when Powell caved to the markets and started cutting rates and then doing QE  "lite" in 2019 and now QE "heavy" in 2020.  

If the US ever tried to get back to a balanced budget like it did briefly in 1999-2000, or like what Germany had for the past several years, it would enter a Great Depression part II.  The talk about the US being a strong economy and the cleanest dirty shirt ignores the artificial pumping going on to keep things looking normal.  

Everyone talks about how great it is to have tax cuts and low taxes and keep all the same government benefits but there is no free lunch.  Short term pleasure is coming at the expense of the long term viability of the US dollar as a "stable coin" to use bitcoin language.  The US dollar has gone from a stable coin with an increasing supply coming from monetary demands from an organically growing economy (1945-2000) to the early stages of a shit coin with an increasing supply coming from desperate monetary and fiscal measures to keep H(P)umpty Dumpty together and to keep the Ponzi Scheme going.  

All the money that is kept in the pockets of the top 1% from the reduced tax rates and increasing tax loopholes is coming from the issuance of US Treasury debt.  The US is sacrificing the US dollar in order to help the rich get richer, which as a byproduct is keeping the stock market afloat at record high valuations.  

And the lack of antitrust enforcement and the growth of oligopolies and monopolies in the US has ensured fat profit margins for corporations even when growth is very low.  Usually growth needs to be high for profit margins to increase, due to the fixed nature of many corporate expenses, but when there is almost no competition, higher prices ensure higher profits.  And the US government will lie through their teeth to keep the CPI and PCE numbers low, and proclaim that there is low inflation, just so that they maintain the public trust in a rapidly increasing supply of dollars and to keep inflation expectations low.  

The US has now reached the twilight of its empire, and just like the Roman Empire, the end comes through overspending, a costly military, and the debasement of the currency and inflation.  

To me, it is an absurdity that oil is trading below $40/barrel and the sand sheiks must be besides themselves having to try to talk up the oil price with various OPEC deals and cuts, etc. while the likes of Pelosi, Mnuchin, and Trump are talking about spending another $2 trillion, just 6 months after their previous spending spree.  If there ever was an exorbitant privilege in full view, it is this year, when the US government is spending like drunken sailors and the Middle Eastern oil countries are struggling to stay solvent as oil is trading like the US dollar is still on the gold standard.  

Right now, the most overvalued asset is the US dollar.  The most undervalued asset is oil. We are in a transition phase when the end point is still unclear to a lot of investors.  But based on 2000 years of history, when politicians don't care about the nation's debt and only care about keeping power, you get massive inflation.  That is an inevitability.  Coronavirus is the only reason that the end point is being obfuscated.  And the general public still hasn't experienced the break neck inflation that will make them question their desire for more and more fiscal stimulus.  It is coming, and in the words of Ernest Hemingway: 

“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”

We have the reflexive gap up off of Trump feeling better, taking off some uncertainty risk, and now the main focus will be on if/when the fiscal stimulus deal is agreed to.  Trump seems eager to get a deal to get re-elected, so expect Mnuchin to start inching closer to what Pelosi wants, meaning the likelihood of a $2.2 trillion stimulus package is increasing by the day.  And if Biden wins the election, expect another stimulus package in early 2021. Why?  Well, because its popular, and because politicians nowadays like to spend money on the US Treasury debt credit card.   And they still have a convenient excuse in the virus.  Mo money, mo money, mo money.  

Looking for a potential move to 3400 and maybe even 3420 once the fiscal deal news hits the wires.  I plan on shorting that spike, expecting election angst to bring the market back lower later this month.  And if there is no deal before the election?  This is a very low probability scenario, but if that's what happens,  hide the women and children, you will have a widow maker and we are going to test SPX 3000.