Thoughts from the Frontline

One of the more fascinating and mysterious parts of watching the Federal Reserve is the ongoing dialogue between Fed leaders and Wall Street. We imagine private meetings held in great secrecy. Those may in fact occur, but I’m not sure they are even necessary. The parties exchange their requests publicly. All those speeches, interviews, and papers are available to everyone, but have a specific audience in mind.

Modern economies, even small ones, are unfathomably complex. The number of variables is far more than any human can comprehend or any model can track. It’s really no wonder so many forecasts are wrong.

In thinking about the 2020s, I often find myself looking back to the 1920s. That decade began with a deep recession/depression and ended with a stock market crash. While we now see the 1920s as a kind of “in between” period, people at the time didn’t know another depression and war were coming. They looked forward to good things and often embraced risk—hence the “Roaring Twenties” label.

“Two is better than one” is a nice saying, but it really depends on what you’re describing. Two hurricanes or earthquakes aren’t better than one. Just one disaster at a time will suffice, thank you very much.

Having now spent almost six months describing the historical cycles and massive debt that surround us, I find myself looking for an “easy” exit. Maybe one exists, but I haven’t found it yet. I think we’re stuck. The building will have to collapse around us before we can leave.

First, let me wish you the best for the new year. I look forward to exploring it with you.

Should auld acquaintance be forgot and never brought to mind? Should auld acquaintance be forgot and auld lang syne?

First, let me wish you Merry Christmas, Happy Holidays or your favorite personal form of greetings for this time of year. I realize as you read this you are more focused on Christmas and the approaching New Year and family, so this will be a shorter letter than normal, but still a topic that is seminal in our discussions on taxes and debt.

If you really want to reduce the federal debt, you don’t have to convince Congress of anything. You can just write a check. The Treasury Department gladly accepts gifts from anyone so inclined.

Don’t Tax You. Don’t Tax Me. Tax That Fellow Behind the Tree -   Attributed to Senator Russell B. Long, Louisiana ~1930s

Back in the Great Financial Crisis era, someone quipped that the federal government had become a giant hedge fund with an army attached. That wasn’t far off. Various agencies and entities were absorbing all kinds of risky assets to stabilize an overleveraged system. It was ugly but worked, more or less…. with a heavy dose of unintended consequences like the distortion of zero interest rates on the markets.

Thanksgiving brings to mind not only turkeys, family, and friends, but also should help us recall the remarkable ideas and philosophies that helped shape, and indeed were, the foundation for the United States of America as a Republic.