The U.S. government has far more debt and unfunded obligations that it can play, which there means there are really only two options. Explicit default or implicit default via inflation. From Matthew Piepenburg at goldswitzerland.com:
Before I got the invite to a swank prep-school out East, I used to spend my Spring afternoons on a baseball diamond not too far from the home field of Derek Jeter, who was still playing local ball in Kalamazoo while I was harboring high-school fantasies of playing for the Detroit Tigers.
Glory Days, Simple Lessons
Those were dreamy days of young fantasy. Alas, the Tigers never called, so I hit the books rather than the minor leagues and never looked back.
But like all old men with “glory days” memories, sports taught me a lot of metaphorical lessons.
Like having a team ringer who could hit or pitch years ahead of his time (or for you football/soccer folks, a deadly striker).
Even before the first inning was over, we all knew the harsh pleasure or pain of either: 1) having a “ringer” on our team, or 2) facing one on the other team.
In short, if one team had the most obvious “heat” (or unstoppable striker), it was the team that was going to win.
It was simply the Realpolitik of sports.
Thus, if we were playing against a Derek Jeter (or a Lionel Messi), we all silently knew the game’s outcome before we bravely trotted onto the infield.
Or to put it even more realistically, if my high school baseball team ever had to play the NY Yankees, there was not a snowball’s chance in H.E. double toothpicks that we were going to win that game.
This is fairly easy to grasp. Even our coach (McKenzie) would/could admit such hard truths.
The Debt Endgame is Obvious
Oddly, however, when it comes to US debt levels, and hence the end-game for US credit markets, rates, currencies and Fed policy, almost no one wants to see or admit the obvious.
That is, if we were to compare the Fed’s war against inflation to a baseball game, Powell’s odds are about as good as my Michigan high school team (The Lakeshore Lancers) beating the NY Yankees.
And here’s a few (and otherwise obvious) reasons why.
