re: Powel just said

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Does anybody know where this is actually held in JH?

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Jackson Lake Lodge in Grand Teton National Park near Moran, WY.

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If Fiscal policy refuses to raise primary surpluses to service the higher costs of debt due to Monetary policy using higher rates to control inflation, then Monetary policy is forced to go passive and focus on stabilizing the debt.

Their instrument for doing so is lowering rates, therefore reducing the cost of servicing new debt (which is paid for with new debt at the lower rates) and allowing inflationary pressure to reduce the real value of the government's liabilities.

The Fed tried to exert itself in the face of Fiscal Dominance by raising rates to curb inflation, but the government refuses to go passive (reduce spending and raise a surplus to pay for the debt service). Both Fiscal and Monetary policy cannot remain simultaneously dominant for long before one has to give way (because they use different tools/paths). If neither wants to budge, Fiscal policy will always win out because no politician is ever going to raise taxes and cut spending/services.

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In other words, a yoyo effect:

Government creates excess liquidity through large deficit spending each year, eventually causing inflation.
The Fed has to raise rates to drain that excess liquidity to bring inflation back down.
While rates are higher, servicing cost on government debt goes up.
Higher servicing costs mean the federal government has to create more debt (via deficit spending).
The Fed has to not just raise rates but leave them high for long enough to counteract the excess liquidity.
Once inflation goes back down, rates can come down.
Although rates on debt have gone down, the sheer amount by which the debt has increased during the preceding term means servicing lowers only marginally.
Government is now spending more money on debt servicing, so it has to borrow more in order to keep funding its various agencies and programs at desired levels.

Soooooo...

Government creates excess liquidity through large deficit spending each year, eventually causing inflation.
The Fed has to raise rates to drain that excess liquidity to bring inflation back down.
While rates are higher, servicing cost on government debt goes up.
Higher servicing costs mean the federal government has to create more debt (via deficit spending).
The Fed has to not just raise rates but leave them high for long enough to counteract the excess liquidity.
Once inflation goes back down, rates can come down.
Although rates on debt have gone down, the sheer amount by which the debt has increased means servicing lowers only marginally.
Government is now spending more money on debt servicing, so it has to borrow more in order to keep funding its various agencies and programs at desired levels.

etc. repeat until currency crashes under its debt load.

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Government creates excess liquidity through large deficit spending each year, eventually causing inflation.
The Fed has to raise rates to drain that excess liquidity to bring inflation back down.
While rates are higher, servicing cost on government debt goes up.
Higher servicing costs mean the federal government has to create more debt (via deficit spending).
The Fed has to not just raise rates but leave them high for long enough to counteract the excess liquidity.
Once inflation goes back down, rates can come down.
Although rates on debt have gone down, the sheer amount by which the debt has increased during the preceding term means servicing lowers only marginally.
Government is now spending more money on debt servicing, so it has to borrow more in order to keep funding its various agencies and programs at desired levels.

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There are two main things that have to happen - manage inflation and stabilize debt.

There are two "policies" - Fiscal and Monetary.

Either one can do either one. Neither one can do both at the same time. Both can't do one or the other at the same time.

Which ever one is controlling inflation is "active" and the other is "passive" (stabilizing debt). Dominance is the policy which is actively controlling inflation.

They can't both be dominant at the same time for long because they use different mechanisms/paths, so one has to give way and go passive.

Monetary can be dominant ONLY IF Fiscal willingly goes passive.

Fiscal policy can CHOOSE to be dominant and FORCE Monetary to go passive.

In Fiscal Dominance, the government deficit spends, which drives inflation. Monetary policy must then act passively to stabilize the debt, which it does by keeping rates low and servicing debt with new debt at low rates. It willingly allows inflated prices to reduce the real value of the government's liabilities.

In Monetary Dominance, the Fed controls inflation via rates (raising them). This obviously causes the cost of debt service to increase. The government (Fiscal policy) acts passively to stabilize debt by raising surpluses to pay for the increased cost of debt service.

The problem is the government is run by politicians and they'll never raise taxes AND cut services in order to raise primary surpluses.


The fiscal limit is the point where the populace no longer allows tax hikes/service cuts. It's 2024 and we're in a time where everyone wants everything for free ("handouts" are called "entitlements") and nobody wants to pay for anything, so the fiscal limit is low and no politician is going to bust through that lest they lose popularity.

When things get out of whack, "Consolidation" is supposed to happen. That's when the government puts things back in balance by using the fiscal limit to pay down the debt. We know this ain't happening anytime soon.

The "Hamilton Rule" says that deficit spending is okay in emergencies, but a deficit should always be followed by a surplus. In other words, "spend money you don't have if you need to in an emergency, but as soon as the emergency is over, pay that shite off." We departed from that a long time ago and show no signs of following it.

So we remain in Fiscal Dominance and shite gets out of control. The Fed tries to go Active and raises rates, but the government refuses to go passive. Eventually the Fed has to give way and lower rates so debt service is manageable...meaning they give in to inflation and let it reduce the real value of their liabilities.

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repeat until currency crashes under its debt load.

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Which is what KimDotCom is warning, with a side of PetroDollar ala BRICS