Equity markets remain perky, the result of global, wall to wall economic stimulus. This largesse now resembles a teenage party that’s out of control at the point when the parents return home. However, instead of calling a halt, they fetch another crate from the garage and join in.
In the US, President Biden’s pandemic relief package will cost close to $2 trillion (that’s a thousand billion or alternatively, a million million). This is a similar number to the present annual budget deficit and brings US government debt to well in excess of $25 trillion although that does not include ‘off balance sheet’ items like pensions and medical care which are already ‘promised’. There is ample evidence that once the ratio of debt/GDP breaches 90%, it becomes a serious drag on future economic growth and the US is now staring at 100% with no visible brake preventing it worsening. Not that we’re taking aim at the US. Just about everywhere is doing something similar but the US is the world’s largest economy and has the privilege of providing the planet’s reserve currency. If any country could dodge the bullet it would be America but the UK, the EU, Japan ….?
Ultimately, we prefer to leave macroeconomics to others. However, nation states are now involved in a process of mass delusion as they spend ever more money, not only fresh off the printing presses but ultimately, stolen from the future. We’d rather pin our hopes on enterprises of substance that could well prosper in spite of politicians and central bankers rather than because of them.