Last month, the IMF stated that “our forecasts point to an unforgiving combination of low growth and high debt, a difficult future,” emphasizing that “governments must work to reduce debt and rebuild buffers for the next shock, which will surely come, and maybe sooner than we expect.”This advice comes with a warning. At the current rate of spending, the US debt to GDP will reach 198% by 2050 even without expecting a recession. The G-7 public debt to GDP is expected to soar to 188%; the global figure would rise to 122%. Only one country will reduce debt. The IMF expects Germany to reduce its debt from 63.5% to 42%. In the case of Japan, the IMF expects public debt to reach a staggering 329%. The IMF’s Fiscal Monitor informs that public debt levels will reach $100

The United States 10-year government bond yield reached a low of 3.6% in September but has rapidly creeped up to 4.2%, erasing all the rate cut impact. The primary cause is the out-of-control public spending and the lack of confidence among bond investors in the government’s ability to manage its public finances. Therefore, it is logical that investors fear an inflation bounce.The United States’ government is obsessed with doping GDP with government spending and bloating job figures with public sector hires. This is the road to ruin or stagflation.U.S. debt has exploded by more than $850 billion in just three months, but the government has accelerated the insane borrowing, and almost half of that figure was an increase in borrowing in the past three weeks.Of

The insane neo-Keynesian policies implemented by the Biden-Harris administration have created persistent inflation and record levels of debt with two objectives: to bloat Gross Domestic Product and jobs with public spending and government jobs.The United States’ insane inflation is solely due to out-of-control spending and currency printing. Corporations, wars, or supply chains cannot cause aggregate prices to rise, nor can they consolidate the increase even at a slower pace. Although this can have an impact on individual prices, the only factor that causes aggregate prices to rise year after year is the decline in the value of the US dollar that the government issues.Over 20.5% accumulated inflation over the past four years, government deficit spending has

What is the Mises Institute?

The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.

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Global liquidity is expanding. In the past three months, the global money supply has soared by $4.7 trillion. This rapid increase started when the Federal Reserve panicked the first time and delayed the normalization of the balance sheet in June.Since then, we have seen a chain of fresh stimulus policies implemented by developed economies, adding to the large fiscal packages already in place. Multi-trillion-dollar investment packages like the EU Next Generation Fund now include massive deficit spending plans. However, money velocity is not rising. All these programs only lead to secular stagnation. Government projects and current expenditures are consuming money at an unprecedented rate.Developed economies cannot live without new and larger spending plans. The

The Federal Reserve decided to cut rates by 50 basis points despite what Chairman Powell considers “no risk of a recession or downturn,” a “solid economy,” and a “strong job market.”After ignoring the impact of monetary aggregates and the warning signs of inflation, the Federal Reserve has breached its price stability mandate for three consecutive years, preferring to prioritize liquidity injections, i.e., printing money, to the recovery of the currency’s purchasing power.The “higher for longer” policy only lasted eighteen months. Furthermore, the latest reading of the Chicago Fed National Financial Conditions Index indicates extremely loose conditions. In fact, the Fed has never cut rates by so much when financial conditions have been this loose.If financial

In a recent interview with CNN, Kamala Harris said that Bidenomics is working and that she is “proud of bringing inflation down.”However, the Bureau of Labor Statistics published the latest CPI at 2.9%, despite annual inflation being 1.4% when she took office. Inflation is a disguised tax and accumulated inflation since January 2021, when the Biden-Harris administration started, has increased more than 20%.Of course, Democrats blame inflation on the war, the pandemic, and the science-fantasy concept of “supply chain disruptions.” No one believed it, because most commodities have declined and supply tensions disappeared back to normality, but prices continued to rise.As a result, Harris invented the concept of greedy grocery stores and evil corporations to blame

Price controls, higher taxes, government intervention, and subsidies paid for by printing a constantly devalued currency.These are the essential pillars of “21st century socialism” and the radical left Peronism that obliterated Argentina. These are also the main elements of the economic plan presented by Kamala Harris and the Democratic Party. Undoubtedly, this is the most radical socialist economic plan ever announced by the Democrats.According to the Committee for a Responsible Federal Budget (CRFB), Harris’s proposals will cost $1.95 trillion over 10 years. However, it emphasizes that if certain measures become permanent, this figure could increase to $2.25 trillion.The Harris campaign has stated that these costs will be offset by a classic excuse of socialism

I frequently receive comments about the strength of the United States economy and the unfairness of perceiving things as less than stellar. Is it really the “strongest economy ever”? It’s evident that it’s far from being the “strongest economy ever.”The United States unemployment rate has risen to 4.1%, the highest in three years, which is also significantly higher than the level seen in 2019. In June, a 70,000 increase in government jobs boosted payroll employment by 206,000. One-third of job creation is public sector jobs paid with more debt. Both the employment-to-population ratio and the labor force participation ratio are below the pre-pandemic level, and immigrants account for all the labor force growth since the pandemic, according to the Bureau of Labor

If you read the latest OECD publication, “Employment Outlook 2024: The Net Zero Transition and the Labour Market,” you would imagine that the world has not gone through the largest monetary and fiscal stimulus in decades.The results are so poor, they are embarrassing. Furthermore, the report illustrates the impoverishment of citizens and subtly suggests that achieving the net zero goal will present an even greater challenge. Translation: You will be even poorer.According to the OECD report, 20% of the global workforce is in jobs that will expand due to the net-zero transition. The report basically tells us that the remaining 80% will face significant challenges.Furthermore, it highlights that “low-income and rural households usually spend more on goods and

Following the European elections, French credit default swaps have soared to a post-2020 record of 39 points. Many commentators blame the rise of the National Front for market turmoil, which has sent all euro area spreads higher. However, none of this would have happened if France’s debt was low, finances were strong, and the euro area economies enjoyed healthy economic growth.France is the world’s poster child for statism. The same statism that some politicians seek to impose on the United States has economically devastated France, a wonderful country with excellent human capital and outstanding entrepreneurs.France never had austerity. It has the world’s largest government relative to the size of the economy. Government spending to GDP exceeds 58%, the highest

Deficit spending is not a growth tool. It is the recipe for stagnation.The latest Congressional Budget Office (CBO) budget and economic outlook estimates show the extent of the challenges of the United States fiscal nightmare.The CBO expects a budget deficit of $1.9 trillion in 2024, a year of alleged robust economic growth and record tax receipts. They expect revenues to reach $4.9 trillion, or 17.2 percent of GDP, in 2024, which will rise to 18.0 percent by 2027 and remain at that level until 2034.This report’s main finding is alarming. Despite expecting no recession and rising tax revenues from 2024 to 2034, the budget deficit will explode from $1.9 trillion to $2.8 trillion by 2034.Estimates place the adjusted deficit at 6.9 percent of GDP by 2034, nearly

The University of Michigan Consumer Sentiment Survey plummeted to its lowest level in seven months. The index reading for June came in at 65.6, down from 69.1 in May and under the consensus expectation of 72. In the current conditions and expectations categories, the survey fell below economists’ expectations.Year-ahead inflation expectations were unchanged this month at 3.3%, but above the 2.3–3.0% range seen in the two years prior to the pandemic, according to the press release. Long-run inflation expectations rose from 3.0% last month to 3.1% in June, significantly above the 2.2-2.6% range seen in the two years pre-pandemic. This survey indicates how weak the U.S. economy is and how consumers are feeling the persistent inflation.Joe Biden posted on X “Zero.

The latest OPEC meeting conclusions show that the global economy is not as strong as headlines suggest and that industries all over the world are struggling to recover. Indeed, many manufacturing PMIs (purchasing managers’ indexes) continue to signal contraction.Oil prices have weakened in recent weeks despite the war in Gaza and rising geopolitical risk. At the close of this article, Brent is trading at $81.62 per barrel and WTI at $76.99. This is a mere 7% rise year-to-date. The average price of the OPEC basket in the latest figure of June 2024 was $83.08.OPEC+ has agreed to extend its production cuts until 2025 because the outlook for demand remains uncertain. Members of the oil production group see that copper prices have soared 72% in the past five years,

The long-term forecast for higher interest rates, according to Treasury Secretary Janet Yellen, makes it more difficult to control US borrowing needs, which emphasizes the significance of raising revenue in the forthcoming budget talks with Republican lawmakers. There is only one problem. She is wrong.According to the Congressional Budget Office (CBO) baseline, which does not assume a single year of recession and already counts with record tax revenues, the 2025 primary deficit will reach $851 billion, while net interest outlays will rise to $951 billion. Furthermore, the minimum expected primary deficit from 2025 to 2034 will be a staggering $676 billion with $1.2 trillion of net interest outlays, while the average annual deficit will likely be above $700

The money supply is rising again, and persistent price inflation is not a surprise. Price inflation occurs when the amount of currency increases significantly above private sector demand. For investors, the worst decision in this environment of monetary destruction is to invest in sovereign bonds and keep cash. The government’s destruction of the purchasing power of the currency is a policy, not a coincidence.Readers ask me why the government would be interested in eroding the purchasing power of the currency they issue. It is remarkably simple.Monetary inflation is the equivalent of an implicit default. It is a manifestation of the lack of solvency and credibility of the currency issuer.Governments know that they can disguise their fiscal imbalances through the

The money supply (M2) has bounced to March 2023 levels and has been rising almost every month since October last year. Furthermore, US government deficit spending has more than offset the decline in the Federal Reserve balance sheet. While the Fed’s balance sheet has shrunk by $1.5 trillion from its peak, the US government deficit remains above $1.5 trillion per year.The money supply (M2) in the United States has bounced above March 2023 levels, while deficit spending offsets any Fed balance sheet reduction.It is no surprise to read that the Federal Reserve has kept rates unchanged. Mr. Powell indicated that there are no rate hikes on the horizon, which was received with relief by market participants, but he also cast doubt about the expectations of rate cuts.

The weak GDP figure for the first quarter came with a double negative: poor consumer spending and exports, plus a rise in core inflation. The US administration’s enormous fiscal stimulus underscores the importance of considering the weaker-than-expected data.A deceleration in consumer spending, a decline in the personal savings ratio to 3.6%, and poor exports added to a set of figures for investment that were also negative when we looked at the details.The gross domestic product is much weaker than the headlines suggest. If we look at consumption, both durable and non-durable goods were flat or down, while the only item that increased modestly was the services factor. Residential and intellectual property boosted investment, while equipment remained weak in the

Price inflation is no coincidence. It is a policy. Governments, along with their so-called experts, attempt to persuade you that price inflation stems from anything other than the consistent, albeit slower, rise in aggregate prices year after year. Issuing more currency than the private sector demands, thus eroding its purchasing power and creating a constant annual transfer of wealth from real wages and deposit savings to the government.Oil prices are not a cause of inflation but a consequence. Prices increase as more units of the currency used to denominate the commodity shift to relatively scarce assets. Therefore, oil prices do not cause inflation; they are one of the signals of currency debasement. Furthermore, if oil prices caused inflation, we would go from

When we talk about monetary policy, people do not understand the importance of interest rates reflecting the reality of inflation and risk. Interest rates are the price of risk and manipulating them down leads to bubbles that end in financial crises, while imposing too high rates can penalize the economy. Ideally, interest rates would flow freely and there would be no central bank to fix them.A price signal as important as interest rates or the amount of money would prevent the creation of bubbles and, above all, the disproportionate accumulation of risk. The risk of fixing rates too high does not exist when central banks impose reference rates, as they will always make it easier for state borrowing—artificial currency creation—in the most convenient—what they

Thirty major central banks are expected to cut rates in the second half of 2024, a year when more than seventy nations will have elections, which often means massive increases in government spending. Additionally, the latest inflation figures show stubbornly persistent consumer price annualized growth.In the United States, headline PCE inflation in February will likely grow by 0.4%, compared with a 0.3% rise in January, and consensus expects a 2.5% annualized rate, up from 2.4% in January. This is on top of the already 20% accumulated inflation of the past four years. Core inflation will likely show a 0.3% gain, according to Bloomberg Economics, which means an annualized 2.8%, building on top of the price increases of the past years.Thirty central banks easing and

The manufacturing and consumer confidence weaknesses of the United States are deeply concerning, particularly considering that all those allegedly infallible Keynesian policies are being applied intensely.Considering the insanity of deficit spending driven by entitlement programs, the decline in the headline University of Michigan consumer sentiment index in March to 76.5 from 76.9 is even worse than expected. Let us remember that this index was at 101 in 2019 and has not recovered the brief bounce shown by the re-opening effect in March 2021. Consumer confidence is still incredibly low, and a decline in the expectations index fully explains the most recent decline. Persistent inflation, high gas prices, and declining real wages may explain the poor expectations

One of the most dangerous things that a government can do is present a glossy picture of the economy at a time when families and small businesses are suffering. Governments are always optimistic, but sending euphoric messages tends to backfire, especially when the situation for the middle class is complicated.In the United States, the Biden administration’s message of “the strongest economy in decades” is not just an exaggeration; it may anger voters who suffer the burden of negative real wage growth, accumulated inflation, and higher taxes.According to a study by the Tax Policy Center, 20 to 30 percent of middle-income households saw a tax hike in 2022 and according to the Tax Foundation, workers bear an estimated 70 percent of the corporate income tax hikes.

The relentless increase in global debt is an enormous problem for the economy. Public deficits are neither reserves for the private sector nor a tool for growth. Bloated public debt is a burden on the economy, making productivity stall, raising taxes, and crowding out financing for the private sector. With each passing year, the global debt figure climbs higher, the burdens grow heavier, and the risks loom larger. The world’s financial markets ignored the record-breaking increase in global debt levels to a staggering $313 trillion in 2023, which marked yet another worrying milestone.In the Congressional Budget Office (CBO) projections, the United States deficit will fluctuate over the next four years, averaging an insane 5.8 percent of GDP without even considering

The main central banks have been deliberating on the concept of introducing a digital currency. However, many citizens fail to grasp the rationale behind it when the majority of transactions in major global currencies are carried out electronically. Nevertheless, a central bank digital currency is much more than electronic money. I will explain why.Central banks are raising interest rates and enacting restrictive monetary policies as quickly as governmental regulations allow because they are aware that monetary factors are the primary cause of inflation. Central banks have recently lost credibility by initially disregarding the inflation danger, then attributing it to transitory factors, and finally responding belatedly and gradually.In a world where there is an

Market participants started the year with aggressive expectations of rapid and large rate cuts. However, after the latest inflation, growth, and job figures, the probability of a rate cut in March has fallen from 39 to 24%. Unfortunately for many, headline figures will support a hawkish Federal Reserve, and the latest comments from Jerome Powell suggest rate cuts may not come as fast as bond investors would like.For the Federal Reserve, the headline macro figures show a strong economy, solid job creation, a low unemployment rate, stronger GDP growth, and persistent inflation. The real economy shows a weaker picture.The latest job report is not as strong as it looks. According to the Bureau of Labor Statistics, the labor force participation rate, at 62.5 percent,

The euphoria with the fourth quarter Gross Domestic Product (GDP) figure makes no sense. The headline champions say that real GDP increased at an annual rate of 3.3% in the fourth quarter of 2023, according to the Bureau of Economic Statistics (BES). An increase in real GDP of $1.5 trillion with an increase in public debt of more than $2 trillion is not a strong economy. It is a bloated economy. Furthermore, there is nothing positive in consumption when personal saving as a percentage of disposable personal income was only 3.7% in December and disposable personal income in 2017 has basically stagnated. American consumers are buying fewer things with their salary.
We cannot forget that one of the biggest drivers of the fourth quarter increase in real GDP was an

The U.S. federal government published a December deficit of $129 billion, up 52% from the previous year. The private sector recession is clear as expenses continue to rise while tax receipts decline. If we look at the period between October and December 2023, the deficit ballooned to a staggering $510 billion.
You may remember that the Biden administration expected a significant deficit reduction from its tax increases and the expected benefits of its Inflation Reduction Act.
What Americans got was a massive deficit and persistent inflation. According to Moody’s chief economist, Mark Zandi, the entire disinflation process seen in the past years comes from exogenous factors such as “fading fallout from the global pandemic on global supply chains and labor markets,

Markets closed 2023 with the strongest rally for equities, bonds, gold, and cryptocurrencies in years. The level of complacency was obvious, registering an “extreme greed” level in the Greed and Fear Index.
2023 was also an unbelievably bad year for commodities, particularly oil and natural gas, something that very few would have predicted in the middle of two wars with relevant geopolitical impact and significant OPEC+ supply cuts. It was also a poor year for Chinese equities, despite slower-than-expected but strong economic growth and robust earnings in the large components of the Hang Seng index.
Markets rallied due to a combination of optimistic expectations for inflation and aggressive rate cuts from central banks. The question now is, what can we expect in

Although the Federal Reserve and the European Central Bank’s message regarding interest rate cuts seems clear, reiterating their commitment to reducing inflation, the market is expecting between five and six interest rate cuts, between 125 and 150 basis points, in the next twelve months.
This shows us the bubble bias of many investors. We live in a world where two generations of market participants have only seen rate cuts and massive liquidity injections. Central banks have created huge perverse incentives in markets that should have been prevented if they truly followed their mandate of stable prices. On top of it, the ECB faces another risk. It must avoid following the siren calls of interventionists if it wants the euro project to survive.
The euro is the